ACCT604 Managerial Accounting: Origin Energy and AGL Energy Ltd

Introduction

Businesses are increasingly placing emphasis on improving their sustainability performance for improving the transparency and accountability within their business operations that helps them in achieving the trust and confidence of the stakeholders. The sustainability reports are developed for measuring and communicating the economic, environmental and social impacts of an organization. The information disclosed through creation of sustainability reports helps in promoting the goodwill of an organization among its stakeholders. This is because the reports developed provide information about the measures adopted by an organization to address its social economic and environmental issues (Chen, 2015). In this context, this report is developed for providing a comparative analysis of the sustainability reports of the two companies operating in the same industrial sector. The companies selected as such are Origin Energy and AGL Energy Limited operating within the energy industry of Australia. It comparatively examines the sustainability strategy, effectiveness of reporting on key stakeholders, areas of strong and weak sustainability performance, use of GRI framework, external assurance and sustainability rating of the two selected companies.

Sustainability Strategy, Objectives or Principles

AGL Energy Company

AGL Energy Ltd is an Australian listed public company involved in the generation as well as retailing of electricity and gas for residential and commercial use. The company is involved in providing energy products such as electricity, gas, solar and renewable services to homes and businesses. The company places high importance on incorporating sustainability performance into its long-term strategic plan and mission. The company’s sustainability strategy is to undertake long-term responsibilities towards promoting the welfare of its customers, people, investors, community and the environment. The objective of the company is to provide affordable, reliable and lower-carbon energy solutions to all its customers. The long-term goal of the company is to work actively with its stakeholders and develop a sustainable energy future for the country (AGL Sustainability Report 2017, 2017). The company is highly dedicated towards incorporating sustainability into its business operations for ensuring the protection of nearby community and environment (McElroy, 2012).

Origin Energy Limited

Origin Energy is a recognized Australian listed public energy company involved in providing electricity, natural gas, solar and LPG (Liquefied Petroleum Gas). The company is involved in delivering high quality energy products to the customers in a manner so that it is able to meet their present as well as future energy needs. The sustainability strategy of the company is to explore innovative energy options to meet the future energy requirements of the customers. The company aims to produce energy in a sustainable manner by exploring it through various renewable energy sources so that the future needs of the customers can be adequately met. The objective of the company is to become one of the leading energy retailers that are recognized for producing energy products in a sustainable manner. The company is aiming to achieve this objective by exploring the range of renewable energy as well as traditional fuel energy sources such as wind, solar, coal and natural gas energy resources. The long-term goal of the company is to develop a robust supply chain that is able to deliver high quality energy products to the customers in a sustainable manner. The company is emphasizing to reduce its green house emissions and increasing the renewable power generation for achieving its objective of producing sustainable energy (Origin Sustainability Report 2017, 2017).

Stated Reasons for Adopting Sustainability Approaches

AGL Energy Company

AGL Energy has developed a sustainable business strategy mainly for developing a carbon-constrained world for creation of energy related products. The company is striving to place itself as a sustainable energy developer for Australia and as such its sustainability approaches is adopted for achieving the following objectives:

• The company is aiming to integrate the use of smarter approaches, technology and services for improving quality of energy related products
• The company is also aiming to adopt the use of lower-emission technology and as such is incurring huge investment in exploring the renewable energy options (AGL Sustainability Report 2017, 2017).

As such, it can be said that the strategic aim of the company is to reduce the negative impact of its operations on society and environment and this is causing it to adopt the use of sustainability approaches. The company places high importance on being responsible towards all its stakeholders for ensuring their growth and welfare (Brockett, 2012).

Origin Energy Limited

The company has also stated its aim to reduce the carbon emissions from its business operations by integrating the use of sustainability approaches. Origin Energy operates in the energy sector of Australia that accounts for about two-third if carbon emissions within the country and as such the company is emphasizing towards improving its sustainability performance by reducing the emission of greenhouse gases. It is taking active steps for developing smarter, cleaner and sustainable energy products that have lower costs and also have minimum negative impact on the society and environment. It is substantially investing in exploring the renewable energy resources for achieving its long-term objective of developing clean energy products for the country’s population in the future context. Thus, these all reason can be cited in the context of adoption of sustainability approaches by Origin Energy Limited (Origin Sustainability Report 2017, 2017).

Effectiveness of reporting on key stakeholders, interests and engagement approaches

AGL Energy Company

The company actively engages with all its stakeholders by reporting the significant issues for each of the stakeholder group. The company as such ahs developed a Stakeholder Advisory Council for engaging with senior management for developing effective strategies to carry out the business activities in a responsible and ethical manner. The Council works effectively on addressing the pertinent issues faced by its stakeholders and the engagement strategy adopted by the company for overcoming the issue identified. The key stakeholders as identified for the company in its sustainability report are investment community, government, regulators, suppliers, industry associations, customers and non-government organizations. The key engagement approaches as adopted by the company for establishing long-term relations with its stakeholders are engagement survey, carrying out Annual General Meeting (AGM), public policy engagement, engaging with regulator bodies and also ensuring its active participation in different industry associations (AGL Sustainability Report 2017, 2017).

Origin Energy Limited

Similarly, Origin Energy has also developed effective approaches for stakeholder engagement for ensuring that it successfully meets the needs and expectations of those who are interest in the business activities such as investors, customers, people and communities. The key stakeholders are identified in the sustainability report that is investors, customers, people and communities. The company has also identified its major commitment towards all its stakeholders in the stakeholder enragements section of the report. The key engagement approaches adopted by the company for interacting with its stakeholders for identifying the major issues faced by them are annual engagements survey, manager-led toolbox sessions, face-to-face interaction with executives, teleconferences, newsletters, updates, videos and announcements. In addition to this, the company also involves with its stakeholders through participating in industry associations such as Australian Petroleum Production Association and undertaking scientific research in partnership with communities (Origin Sustainability Report 2017, 2017).

As such, it can be said as per the stakeholder theory that both the companies are adopting the use of such actions and approaches that helps them in maximizing the welfare of the stakeholders. The company’s sustainability approaches are proving to be largely useful for achieving stakeholder satisfaction as per the views of stakeholder theory (Civelek, 2015).

Commentary on areas of strong sustainability performance of the company

AGL Energy Company

The company has largely achieved success in protecting the environment by reducing the emission of its greenhouse gases and minimizing the carbon footprint. The company has developed effective greenhouse gas and environment policy to protect the environment from the negative impact of the company’s operations. The greenhouse gas policy is developed for addressing the climate changes that can occur as a result of the business activities and to attain decarburization of its energy portfolio by the end of the year 2050. The environment policy of the company is strived for protecting the environment and reducing the impact of its footprint in the areas of its operation. In addition to this, the company has also achieved success in achieving satisfaction of its customers by driving continuous improvement in its product, service and experience offerings. It has developed innovative offerings for the customers that enable them to manage their accounts, personalize their experience and pay their bills in an effective manner. The key initiatives adopted by the company during the year 2017 for improving the customer experience includes launching self-service options of ‘My Account’ and developing a continuous improvement project names as ‘Billing Experience Enhancement (BEES). In addition to this, the company has adopted effective sustainable strategies for fostering the development of people and communities in which it live and work (AGL Sustainability Report 2017, 2017).

Origin Energy Limited

The strong sustainability performance of the company can be recognized by its efficiency to manage its energy business in a manner that enables it to achieve energy security and affordability for Australian homes and businesses. The company has achieved success n reducing its global emission of greenhouse gases and has taken strong measures for developing of clean, smart and sustainable energy products for future generations of the country. It has rapidly increased the proportion of renewable energy mix in its energy portfolio of products (Origin Sustainability Report 2017, 2017). This is done mainly by the company to protect the environment form harmful emission of greenhouse gases and putting a downward pressure on energy prices. The adoption of sustainability approaches has enabled the company to a large extent in producing reliable outcomes for its stakeholders and improving the business efficiency (Rezaee, 2017).

Commentary on areas of weak sustainability performance of the company

AGL Energy Company

The company is facing issues to effectively comply with energy regulations developed by different regulatory bodies such as Australian Energy Regulator. The key issues faced by the company include attaining reliability and affordability in energy supply by creating an efficient infrastructure. In addition to this, the company is also striving hard to comply effectively with consumer protections, environmental licensing and other legal requirements. In addition to this, it is also facing issues in relation to maintaining and improving its market share within the energy industry by responding effectively to customer queries and improving the customer service. The increasing cost of energy products and the quality of services are proving to be a major issue of concern for the company that can negatively impact its sustainability performance to a large extent (About AGL Energy Limited, 2017).

Origin Energy Limited

The company is facing issues on regulatory and technology aspects for delivering sustainable energy solutions. The continuous change in the regulatory environment is causing it largely difficult for the company to effectively comply with the energy regulations. In addition to this, the company focuses on providing innovative energy products that are able to meet future customer needs by adopting the use of new and improved technologies. The company as such ahs to incur huge investment for developing and implementing the use of technologies that fosters it to create smart and clean energy products (About Origin, 2017).

Use of sustainability reporting framework by both the selected companies

The report aims to compare the sustainability report of AGL Energy and Origin Energy and in this context it is important to evaluate on how these companies have used GRI (Global Reporting Initiative) reposting framework in preparing their sustainability reporting.

AGL Energy

It has been mentioned in the sustainability report of AGL Energy that it has been prepared in accordance with GRI Standards. As per the report, AGL Energy has made compliance with the GRI Standards 101: Foundation, 102: General Disclosures and 103: Management approach. In order to comply with the GRI Standard 415: public policy, company has engaged themselves with the government and public authorities in relation to the policies that have wide impact on the customers, communities and nature (environment) in Australia. It is policy of AGL Energy to directly engage with the government and other stakeholders in order to develop the sensible public policy. Community engagement is the most important part in sustainable development as per GRI Standard: 413. AGL Energy has policy to directly engage with the local communities to develop such energy projects that benefits both community and company. AGL Energy has serious concern over safety issues and it engages directly with this issue to have compliance with GRI Standard 403: Health and Safety (AGL Sustainability Report 2017, 2017).

Origin Energy Limited

On looking at the report of Origin Energy Limited it has been found that company make use of GRI Standards as a reference to prepare this report. In addition to this company uses AA1000: Accounting Principles to prepare the sustainability report. Similar to AGL Energy, Origin Energy uses management approach to report all the material issue related to sustainability. There were few differences related to the presentation of material issues because Origin Energy reports all the material issues separately in small reports whereas AGL Energy represents all the material issues in detail under on sustainable report. Origin Energy engages directly with all the material issues in order to have sustainable development (Origin Sustainability Report 2017, 2017).

External assurance, awards, ratings and other recognitions

External assurance refers to the audit procedure followed by the company to make assure that sustainable report has been prepared in accordance with the Australian Standard on assurance engagements ASAE 3000. External assurance has been provided by Deloitte in case of AGL Energy Limited. Deloitte has provided assurance that AGL Energy has made application of AA1000 principles to manage and report on the sustainable performance. It has been found that no assurance has been provided for the sustainability reporting by Origin Company.

AGL Energy has received 6 Star Green Star rating awards that represent excellence in environment sustainable design. AGL Energy has received Gold Employers Status award in year 2017 and same can be referred to in below image.

(AGL Sustainability Report 2017, 2017)

Origin Energy has received Corporate plus Award in year 2017 by CareerTrackers. CareerTrackers is a famous organization that supports pre-professional and Indigenous university students to provide internship for private sector employers (Origin Sustainability Report 2017, 2017). In addition to this Origin Energy has received multiple ratings and recognitions. Some of them are provided below:

(Origin Sustainability Report 2017, 2017)

Conclusion

It can be stated form the comparative analysis of both the companies sustainability reports that they are adopting GRI framework for disclosing the information about their sustainability approaches. The companies have achieved success in reducing the emission of greenhouse gases and reducing the carbon footprint of their operational activities. The companies however are facing issues in relation to complying with energy regulations developed by different regulatory bodies within energy market of Australia. It can also be stated that AGL Energy sustainability report is more assured as compared with that of Origin Energy.

References

About AGL Energy Limited. 2017. Sustainability. [Online]. Available at: https://www.agl.com.au/about-agl/sustainability [Accessed on: 14 September 2018].

About Origin. 2017. Sustainability. [Online]. Available at: https://www.originenergy.com.au/about/sustainability/sustainability-reports.html [Accessed on: 14 September 2018].

AGL Sustainability Report 2017. 2017. [Online]. Available at: https://agl2017.reportonline.com.au/sites/agl2017.reportonline.com.au/files/sustainability_report_full_report_0.pdf [Accessed on: 14 September 2018].

Brockett, A. 2012. Corporate Sustainability: Integrating Performance and Reporting. John Wiley & Sons.

Chen, L. 2015. Sustainability and company performance: Evidence from the manufacturing industry. Linköping University Electronic Press.

Civelek, M. 2015. Key Factors of Sustainable Firm Performance. Lulu.com.

McElroy, M. 2012. Corporate Sustainability Management: The Art and Science of Managing Non-financial Performance. Routledge.

Origin Sustainability Report 2017. 2017. [Online]. Available at: https://www.originenergy.com.au/content/dam/origin/about/investors-media/annual%20review%202017/FY2017%20Sustainability%20Report.pdf [Accessed on: 14 September 2018].

Rezaee, Z. 2017. Business Sustainability: Performance, Compliance, Accountability and Integrated Reporting. Routledge.