Independent Assurance Statement

Scope and objectives

FirstGroup plc. (First) commissioned csrnetwork to undertake an independent assurance of its 2008 corporate responsibility reporting and data.

The scope of our assurance work included all of the information included within the First 2008 Corporate Responsibility Report and website with the exception of:

• Data and claims from specific case studies at sites that were not visited by the assurance team;
• Economic performance information which is audited separately for the First Financial Accounts.

The objectives of the assurance process were to check claims and systems for collection of data, and to review the arrangements for the management and reporting of corporate responsibility issues. The assurance process was conducted with reference to the AA1000 Assurance Standard.

Responsibilities of the managers of First and the assurance providers

The managers of First have sole responsibility for the preparation of the First Corporate Responsibility Report and associated information on the First website. Our responsibility is to the management of First, however our statement represents our independent opinion and is intended to inform all of First’s stakeholders including the company management. We were not involved in the preparation of the Report. We have no other contract with First and this is the fifth year that we have acted as independent assurance providers. We adopt a balanced approach towards all First stakeholders and a Statement of Impartiality relating to our contract with First will be made available on request. The opinion expressed in this assurance statement should not be relied upon as the basis for any financial or investment decisions. The independent assurance team for this contract comprised Mark Line, Todd Cort, Louise Hawson, Katy Anderson and Jenn Rosenberg. Further information, including individual competencies relating to the team can be found at: www.csrnetwork.com

Basis of our opinion

Our work was designed to gather evidence on which to base our conclusions via the following activities:

• Interviews with selected directors and senior managers responsible for management and stakeholder relationships in Cincinnati, USA, London, UK and Aberdeen, UK to understand First’s governance arrangements and management priorities;
• Discussion of the First approach to stakeholder engagement with relevant managers at the Group level and attendance at a First Great Western Rail User Panel to test the findings from these discussions;
• Review of issues raised by external parties that could be relevant to First’s practices;
• Interviews at First Student sites in the United States and with Professor William Gould to assess performance against the First Freedom of Association Policy;
• Two operational site visits in the UK (one UK Bus and one UK Rail) with internal audit to evaluate the internal audit process for validation of data contained in the Corporate Responsibility Report;
• Review of 12-month corporate responsibility data collated at the corporate level, and claims made in the Report. We interviewed managers responsible for internal data validation, reviewed their work processes and undertook sample checks on consolidated sustainability data.

Observations:

On the basis of the method and scope of work undertaken and the information provided to us by First:

Materiality – has First provided information on material issues to enable stakeholders to make informed judgements?

Nothing came to our attention to suggest that material issues have been omitted from the scope of the Report. Specific observations with regard to Materiality follow:

• Reporting for the US businesses has improved again this year with greater coverage of material issues and more robust supporting data. As the new management initiatives and data reporting come into force, more systematic reporting of environmental targets should be provided to ensure that the company is meeting its objectives. This will be particularly relevant in benchmarking the new Laidlaw operations against the First standards of performance in areas of corporate responsibility.
• One of the most challenging areas for First and other companies in the transport sector is driver retention. We note that First has developed a number of initiatives to more effectively retain and recruit drivers throughout the business. Implementation of the FirstGroup America People Strategy will be significant in creating innovative incentives for driver retention.
• We have evaluated several mechanisms of stakeholder feedback utilised by the group. These mechanisms are successful at identifying material problems for the operating companies according to customers. However, the customer groups did not indicate ‘what good would look like’, making it difficult to match stakeholder expectations to company targets. We recommend a shift in the customer engagement approach toward more cooperative and strategic problem solving.

Completeness – does First have systems in place to understand stakeholder expectations and to provide complete and accurate information against the material issues?

We found evidence that appropriate systems are in place for monitoring and gathering information on relevant management arrangements and performance. We have observed internal audit checks of data and systems through the First Control Assessment Questionnaire (CAQ) at two sites in the UK. This process will be rolled out group-wide over the coming years. We also conducted sample checks of data that are collated at group level. On the basis of the method and scope of work undertaken and the information provided to us by First:

• The development of internal audit systems to non-financial data and questions in the CAQ is a significant step forward this year. Looking forward, First will need to develop the criteria in conjunction with Internal Audit as to when an issue will be determined to be significant enough to raise to the Audit Committee of the Board of Directors. We also note that the CAQ does not currently include questions on the controls or effectiveness of stakeholder engagement. Therefore, First should consider including questions on stakeholder engagement mechanisms and follow through within the CAQ in the coming years.
• In terms of data accuracy, nothing came to our attention to suggest that these data have not been properly collated from information reported at operational level and that the assumptions utilised for estimating values were not appropriate. We are not aware of any errors that would materially affect the group data.

Responsiveness – how does First demonstrate that it has responded to stakeholder concerns?

We reviewed evidence of a variety of mechanisms in place for responding to key stakeholders such as investors, employees and customers at group level and some examples of engagement mechanisms for additional stakeholders at the operational level. Specific observations relating to Responsiveness follow:

• We note that First Great Western has acknowledged the difficulties in meeting customer expectations over the past year. We have seen evidence of the efforts within the operating company to address these complaints although significant challenges remain.
• First has invested heavily in the development of systems and controls to ensure implementation of and compliance with the Freedom of Association Policy. In particular, we commend First for the appointment of an independent monitor– an example of good practice.
• Looking forward, we recommend setting group-wide targets around social aspects of performance, particularly with regard to employee development, community interaction and supplier standards. Setting measurable targets should help First to drive better performance group-wide.

csr network ltd
U.K. May 2008

csrnetwork is a business focused, corporate social responsibility consultancy organisation, bringing together specialists from the fields of environmental management, social accounting, and sustainable development.

www.csrnetwork.com

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