AGL Energy: Essay On Australia's Sustainable Future.

After reading your chosen company’s sustainability report, prepare a report covering the following points:

1.Discuss the level to which sustainability strategy is integrated into overall business strategy of the company.

2.Briefly explain the key stakeholders the company engages with.

3.A commentary on areas of strong sustainability performance of the company.

4.A commentary on areas of weak sustainability performance of the company.

5.Make an overall assessment of quality of the company’s sustainability report based on the following aspects:
a) Readability

b) Adoption of GRI principles or other frameworks.

Integration of Sustainability Strategy into Overall Business Strategy of AGL Energy

AGL Energy Limited is highly committed to contribute to shape the future of Australia towards sustainable energy and it has reporting about its sustainable practices since 2004. The company operates as the largest power generation portfolio across the country of which AGL is the largest ASX Listed investor in the areas of renewal energy. The company has over 3.6 million customer accounts and has the experience of more than 180 years which has allowed it to gain huge market share. The company has the responsibility of providing sustainability, secured and affordable energy products for its customers. AGL Energy is aimed at prosperity of world which is carbon-constrained and building the customer advocacy since the industry in which it is operating is transforming. Further, the company is also committed to exit the coal-fired generation by the end of 2050 and is also to continue to develop the innovative and unique energy solutions for its wide base of customers.

Integration of sustainability strategy into overall business strategy of AGL Energy:

AGL is the biggest coal-fired energy generators operating privately in Australia and the country’s largest operator of assets used in renewable energy generations in Australia. Also, the company is among the largest energy retailers in the country. Presently, the company is striving to become the personalised retailer from being the mass retailer of the energy products through the use of various innovative and smarter solutions, upgraded technologies and advanced services to serve its customers in the best possible manner. Also, AGL is transforming from being the private owner and operator of the large energy generation assets to the orchestrator of various large and small assets that allow energy generation, storage and distribution among the different individuals. Moreover, AGL is also making efforts to move towards the adoption of technologies that results in low-emission of toxic gases in the environment. As a part of this business strategy, the company has set a deadline to shut-down its coal plants and to invest significant amount of funds in renewable energy processes. The company recognises the importance of sustainability business practices for its continuous growth and success. The management of the AGL believes that the reputational standing of the company is maintained not merely by its sound economic performance but also its social and environmental performance. Therefore, it is also aiming towards formulation of such business strategies which leads to appropriate decision making and course of actions towards sustainability business practices. The sustainable business strategy of AGL has clearly outlined the material sustainability matters connecting it to the business strategy. The company has wide range of on-going projects at different phases of development which provide it a strategic depth as well as flexibility to its electricity generation business. Australia’s energy markets are highly dynamic nowadays due to the advancement of technologies and widened customer expectation, AGL is emphasising on adoption and formulation of such strategies which enables it to globally commit to reduce the greenhouse emission. The company also has an enduring as well as sustainable framework of climate change policy in place which enables it to make investments in infrastructures meant for electricity supply. Moreover, the greenhouse policy of the company is designed to contribute positively towards meeting the climate change objectives.

Key Stakeholders of AGL Energy

Key stakeholders of AGL Energy:

Stakeholders are the parties which are directly or indirectly influenced by the actions and performance of the company. A company can have a wide range of stakeholders from both its internal or external business environment. The stakeholders who belong to the internal environment of the company are called internal stakeholders. Internal stakeholders of a company are managers, owners and employees (Perrini & Tencati, 2006). On the other hand, stakeholders who belong to the external environment of the company are called its external stakeholders. The governmental agencies that regulates the business of company, suppliers or vendors, the customers, the provider of finance such as banks, financial institutions, investors, shareholders and the business community in which company operates its business are its external stakeholders.

In the present case of AGL Energy, the company has various stakeholders such as employees, creditors, customers, society in which it is operating its business, the holders of its shares and other investors such banks and financial institutions, the community in which it operates its business. The shareholders are the parties which have provided AGL Energy a financial assistance by ways of shares in return of which they hold a portion of equity (ownership) in the company (Berthelot, Coulmont & Serret, 2012). For their shareholding, the shareholders possess voting right in the company. These voting rights are utilised whenever, any significant matter is discussed in relation to the business of the company. Along with the voting rights, shareholders of AGL are also entitled to the dividend which is the part of company’s profit distributed among those stockholders. The shareholders of the company are therefore interested in knowing about the profitability position of the company. The banks and financial institutions have given large sums of funds to the company as a financial assistance in their business operations. Before and even after lending funds to AGL the banks and other financial institutions have to consistently assess the solvency position of the company (Prado?Lorenzo, Gallego?Alvarez & Garcia?Sanchez, 2009). Further, AGL presently holds around 3.6 million customer accounts and it supplies gas and electricity across Australia. The customers of the company expects from it to maintain top quality of its energy related products and services. The sustainable reporting function has helped the company in maintaining its high level of credibility and trust in the eyes of its customers in t in the market. The said report contains the policies, strategies and other initiatives that are undertaken by the company to maintain the quality in its production processes. Further, the community in which AGL Energy is operating is one of its stakeholders. As the company deploys the natural resources in the large number for its basic business operations of energy production and distribution, it is its core responsibility to conserve these valuable resources by taking up sustainable business practices. Also, the production processes of AGL Energy involves carbon gas emissions which causes the harm to the environment so the company is obligated to take environment responsive actions so as to avoid causing excessive pollution to the environment (Morsin,  Schultz, 2006).

Areas of Strong Sustainability Performance of AGL Energy

Areas of strong sustainability performance of AGL Energy:

There are various areas under which the company has outperformed its own targets which were pre-determined for the financial year 2017 before the commencement of said year. The following are the areas where the company has strongly achieved its targets:

• Energy market evolution:

The company had the aim to positively contribute towards the electricity market development. AGL had a target of publishing two leadership papers in this context but in reality it has published more than two papers which contributed to the design of sustainable market.

• Public policy engagement:

AGL was aimed at engaging itself with the Australian government so as to transparently contribute to the development of sensitive public policy. AGL has successfully engaged itself in making material submissions of public policy.

• Corporate governance:

The aim of AGL was to adopt the best practices in the areas of corporate governance. In relation to which the company has successfully published corporate governance statement which shows the details of composition of Board of AGL and their respective roles. Also, it clearly states that the corporate governance structure of the company is adequately framed that it has effectively maintained transparency in its operations so as to protect the interest of the stakeholders (AGL Energy, 2017).

• Legislative requirements:

All the compliance requirements have been strictly adhered to in the financial year 2017 and there were zero number of adverse court proceedings in relation to Australian Consumer Laws and also there is no case of penalty or fines in relation to environmental compliances. The targeted Environmental Regulatory Reportable Frequency Rate was to be kept below 1.5. However, in reality it was only 1 (AGL Sustainability Report, 2017).

• Customer experience:

AGL aimed at fulfilling the needs of the customers. It was targeted to bring improvement in the average annual NPS score in 2017 from 2016. The actual NPS in 2017 was higher than that of 2016.

• Community engagement:

At a minimum 4 events were organised at each site where the business of AGL Energy was operated with the aim of mutual development of advantageous energy projects.

Employee engagement:

The targeted talent retention was on or above 80% but actually the talent retention rate in 2017 was 93% which is quite better than that of 2016. Also, it was targeted to keep the rate of injury frequencies was kept below 3.9 but in FY 2017, actual frequency rate was merely.

• Green-house policy:

The compliance with green-house policy of the company was 100% in the areas of climate change.

Employee Engagement

Further, in the areas of renewal energy, water management, air, noise and waste management, biological diversity management, rehabilitation the ERRFR is 1 which was targeted at 1.5.

• Profitability:

The profitability position of AGL is slightly improved in 2017 as compared to 2016.

• Supply chain management:

The supplier agreements that were signed in 2017 were 100% authenticated and was in line with the supplier’s code of conduct (AGL Sustainability Report, 2017).

• Ethical conduct:

The targeted number of substantiated issues in relation to the unacceptable behaviour at the workplace was zero. However in 2017 there were 8 issues identified and reported in the said areas.

• Community investment:

The targeted employee volunteering participation rate was 35% but actual rate in this respect in 2017 was merely 16% (AGL Sustainability Report, 2017).

Readability

The quality of the sustainability reporting depends on the credibility and communicative value of the information contained in the sustainable report of the company. The sustainability report of AGL Energy contains all the relevant information about the company in the logical structured manner so as to allow the users of the report to perceive the true sense of the information contained therein (Gray & Milne, 2002). The report covers the information about the vision of the company in social economic and environmental terms. It also contains the information insights about the markets in which company is actively operating its business and the target markets where AGL would be more actively participating. From these discussions on the report, the readers could easily identify the extent to which AGL has redefined its economic role. The report shows that company is not merely a sales driver and the source of profit. Followed by the general introduction, the business strategy of AGL Industry that is integrated in the overall business strategy of the company has been discussed to allow the users of the report to understand how the objectives of sustainability are achieved in the course of achieving the overall objectives of the business. A use of scorecard has been made in the report to recognise the performance targets in financial year 2017, the results of actual performance and the targets for financial year 2018. Apart from economic performance, the performance in various material areas such as employee engagement, environment, customer relationship, sustainability business strategy, ethical conduct, corporate governance and legislative compliances has been included in the scorecard. While presenting the said scorecard, the focus is on stakeholder’s relations and the management system of the company. Further, the report also contains the strategies that the company has implemented to manage the risk its economic, environmental, social, compliance and IT related risks (Aras & Crowther, 2009). The inclusion of discussion on risk management strategies is to show the AGL’s interest towards contributing to its social as well as environment’s sustainable development. Along with qualitative information, disclosure of quantitative facts has been made by the company in its sustainability report (Daub, 2007). The report makes reference to the factual data in the form of performance indicators which are used by AGL to take responsive actions towards environment, social and economic objectives. The sustainability report of AGL Energy is prepared keeping in mind the information needs of the stakeholders of the company and all the matters are reported in the most transparent manner.

Further, the report has been prepared by following the Global Reporting Initiative Principles. GRI framework is a credible framework of sustainability reporting which can be adopted by any type of the organisation. To ensure the quality of the sustainability report various principles have been used such as balance, accuracy, timeliness, reliability and clarity of whatever information is presented in the report (Kolk, 2008). The report of AGL Energy has reflecting both positive as well as negative aspects of the performance in terms of social, economic and environmental goals and objectives so as to allow the stakeholders to understand the overall performance of the business. AGL has incorporated the performance targets for 2017 and 2018 and along with this it has also included the results of actual performance for FY 2017. This has allowed the stakeholders to make comparative analysis of the company’s performance so that they can better assess the company’s effectiveness in achieving its targets. The quality sustainable report allows the stakeholders of the company to gauge its performance over time as well in relation to the other firms belonging to the same industry. The information contained in the sustainability report of AGL Energy sufficiently accurate and detailed enough to allow the users to understand the purpose of inclusion of such information in the said report. The company has also engaged Deloitte Touche Tohmastu to provide the assurance of company’s own declaration about the compliance of GRI standards (AGL Energy, 2017).

Conclusion:

From the examination of Sustainability Report, 2017 it can be said AGL Energy has performed its business operations keeping in mind the sustainable development of the country. Thus, it has positively contributed to the development and growth in economic, social and environmental terms. However in terms of ethical conduct and employee health safety, AGL has failed to achieve the desired targets.

References:

AGL Energy, 2017. Annual Report. Available at:

https://agl2017.reportonline.com.au/sites/agl2017.reportonline.com.au/files/concise_financial_report_2017.pdf Accessed: 07.10.2018

AGL Energy, 2017. Sustainability Report. Available at: https://agl2017.reportonline.com.au/sites/agl2017.reportonline.com.au/files/sustainability_report_full_report_0.pdf Accessed: 07.10.2018

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