Sustainability Strategy, Objective or Principles
In today’s business world, the aspects of sustainability reporting have become equally important like the aspects of financial reporting. The process of sustainability reporting makes the companies able in taking into account different kinds of sustainability issues as results of their business operations (Subramaniam et al. 2015). A sustainability report is considered as a specific report that the companies publish about their economic, social and environmental impact due to their everyday business activities. It needs to be mentioned that the sustainability reporting assists the companies in measuring, understanding and communicating their performance in the areas of economic, environmental, social and governance so that the link between sustainability strategy and sustainability commitment can be established (Al-Shaer and Zaman 2016). In the presence of all of these reasons, it is needed for the business organisations irrespective of type, size and industry need to publish their sustainability report with the aim to provide information about their sustainability performance to the required stakeholders. The main aim of this report is the analysis as well as evaluation of different dimensions of sustainability reporting of two of the Australian companies. The names of these companies are AGL Limited and Origin Energy.
AGL: The main objective of AGL related to sustainability reporting is to create a sustainable energy future for Australia with the assistance of the actions for developing a carbon-constrained world so that they can become a more customer-centric business organisation. For this reason, AGL has adopted and implemented the lower-emission technology. In addition, the company has adopted the strategy to close their coal plants so that they can put their attention towards investigating the sources of renewable energy. In addition, another major objective of AGL for sustainability reporting is to provide the sustainability information to the stakeholders (Davis et al. 2015).
Origin Energy: The main objective of the sustainability approach of Origin Energy is the disclosure of the performance of the company on the material environmental as well as social issues. For this reason, Origin Energy has aligned the identified sustainability risks with the operating as well as financial strategies in order to achieve the sustainability objectives. At the same time, the company has adopted the strategy to engage with the stakeholders for the identification of the sustainability issues important to them (De Villiers, Rinaldi and Unerman 2014). Lastly, it needs to be mentioned that another major objective of Origin Energy related to sustainability approach is the disclosure of information about the performance in the key sustainability areas.
Every company has some specific set of reasons for the adoption of sustainability approach; and this is not any exception of this concept, in case of both Origin Energy and AGL. The following discussion shows the reasons of both of these companies for the adoption of sustainability approach.
AGL: The main reason for the adoption of sustainability approach by AGL is the desire of the company for disclosing the crucial information of the sustainability initiative for their major sustainability material issues. The major material areas in sustainability considered by the company are public policy engagement, community engagement, workplace health are safety, climate change profitability, evolution of the energy market, ethical conduct, renewable energy, distribution of the energy services along with the energy efficiency and others (Del Mar Alonso?Almeida, Llach and Marimon 2014).
Reasons for Adopting Sustainability Approach
Origin Energy: In case of Origin Energy, the main reason behind the adoption of sustainability approach by the company is the disclosure of the information about the performance of the company on the material issue of the sustainability. At the same time, the company has the intention to disclose the material information about sustainability performance to the stakeholders. Some of the material issues of Origin Energy can be seen in the areas of climate change, carbon emission, people and culture, process safety, water, waste, access to the land and coexistence, communities, supply chain, customers and the common people of the society (Depoers, Jeanjean and Jérôme 2016).
Thus, it can be seen from the above discussion that both AGL and Origin Energy has almost the same reason for the adoption of the strategy of sustainability approach.
AGL: Origin Energy has addressed the key sustainability issues of the key stakeholders by effectively engaged with them. The key issues for the people of the company are workplace safety, career development opportunity, training, remuneration and recognition; and the company has engaged with them by conducting survey ever two year to get feedback from them on these issues. The key sustainability issues of the investment community are the response of AGL to the social, environmental and governance risks and the company engages with these stakeholders through surveys, meetings, face-to-face interactions and conferences. The issues associated with the government of the organisation are energy infrastructure development, energy prices, renewable energy and climate change policies. AGL is involved in regular communication with federal, local and state governments through meetings, events and briefings (Agl2017.reportonline.com.au 2018).
Origin Energy: In order to maintain business sustainability, the organisation demonstrates the way it is fulfilling the expectations of the stakeholders interested in its business functions. The key sustainability issues for the investors include financial performance, identifying and managing risks, future energy solutions, waste along with climate change and emissions (Dienes, Sassen and Fischer 2016). For addressing these issues, Origin Energy has conducted annual general meeting, media briefings, surveys and it has provided sensitive information to the investors. Moreover, various market research programs are carried out to analyse the needs and expectations of the investors. The key sustainability issues for the employees of Origin include health and safety, land access and co-existence, effect on communities and inclusive workplace. For dealing with these issues, the organisation has carried out yearly engagement survey for obtaining the feedbacks of the staffs in shaping the overall work environment. The communities of the organisation are concerned with certain issues like social and environmental effects of business operations, public safety and economic development. Origin Energy has conducted interactions with intermediaries like regulators, government and media, communicated with communities and participated in business and industry associations (Originenergy.com.au 2018).
AGL Energy:
The considered operation process of AGL Energy is the major instance of the activities and goals of CSR-driven business operations and management process. In addition, it is necessary to mention that the sustainable business results contribute significantly to the organisation. Firstly, the management has maintained renewable and sustainable energy resources and this could be adjudged as the biggest instance of the practice related to corporate social responsibility. On the contrary, the management of the organisation concentrates on using recycled natural resources like solid waste and water for energy generation. Along with this, the organisation has always focused on the sustainability aspect of people by assuring suitable employment values for all staffs (Higgins, Stubbs and Milne 2018). Therefore, staff sustainability, economic sustainability and environmental sustainability have assured the management of AGL Energy in gaining sound business growth as well as appropriate customer support.
Effectiveness of Reporting
Origin Energy:
There are certain sustainability areas, in which Origin Energy has performed exceptionally well. As per its sustainability report in 2017, the organisation has undertaken adequate steps towards developing smarter and cleaner energy future by forming a low cost portfolio related to renewable energy. It has developed an excess of 1,200 MW big scale wind and solar energy since March 2016. Moreover, it has developed new teams for trailing and prototyping new technologies in driving greater efficiency, automation and better customer results. Along with this it has been found that Origin Energy has experienced a decline in carbon emissions from 0.82 tonnes in 2016 to 0.79 tonnes in 2017. This has definitely been a positive step towards maintaining sustainability for the organisation (Dumay 2016).
Origin Energy is effectively positioned for supporting the ongoing use of natural gas that would assist in decarbonisation of the economy of Australia while maintaining energy security. For fulfilling this objective, the organisation has declared an agreement of gas supply with Engie, which would bring 240 MW of gas-fired generation online for enhancement of energy security in South Australia. The organisation has encouraged recycling operations at the time of involvement of non-biodegradable packaging. The water usage standard has been based on stringent management resulting in efficiency and safety (Fernandez-Feijoo, Romero and Ruiz 2014). Finally, it has been identified that Origin Energy has minimised its greenhouse gas emissions with the help of trending technologies like clean and clear coal technologies.
AGL Energy:
The organisation has included a discussion of environmental footprint in its 2017 sustainability report; however, it is restricted, since it has considered only greenhouse gas emissions. As there is no contrast with any standard or footprint of another same type of organisation, there is minimal evidence of the importance of the overall footprint. Moreover, it has failed to take into account environmental investment and expenditure, while minimum consideration is provided to the effect of materials. The environmental footprint discussion of the organisation considers only absolute greenhouse gas emissions by ignoring the overall effect of material usage (Gavana, Gottardo and Moisello 2016).
However, in accordance with the guidelines of GRI, it is necessary for all business organisations to provide absolute as well as normalised measures. This would help in gaining an overview of the magnitude of usage or effect of material resources consumed by AGL Energy. In addition, GRI states that the organisations need to provide an overview of its efficiency and contrast between companies of varying sizes. On the other hand, AGL Energy reports in absolute figures only and emission intensity is gauged against an average; however, this has been one of the few indicators providing such contrast. Therefore, these are some of the areas where weaknesses could be found in sustainability reporting of AGL Energy.
Origin Energy:
As per GRI guidelines, the environmental indicators mainly include environmental inputs like water, materials and energy, environmental output like effluents, emissions and waste and other miscellaneous factors like environmental compliance, effects of goods and services, biodiversity, environmental investment and expenditure. Origin Energy covers all the areas; however, it does not take into consideration environmental investment and expenditure. This implies that the organisation does not adhere to the reporting foci laid out by GRI. Like AGL Energy, the strategy of Origin Energy is to report in absolute figures and it does not conduct adequate external benchmark. Therefore, the environmental strategies of the organisation fail to provide a complete indication of the total impact on the overall environment (Yunus, Elijido-Ten and Abhayawansa 2016).
Areas of Strong Sustainability Performance
As per the sustainability reports of AGL Energy and Origin Energy, both organisations have prepared their reports in accordance with the guidelines of GRI. The main guidelines followed by both the organisations include engagement of public policy, community involvement, health and safety, profitability and climate change.
Origin Energy:
As per the sustainability report of the organisation in 2017, the GRI guidelines are addressed to a certain extent. The nearest alignment has been on the reporting on environmental sustainability dimension, in which it has taken into account all environmental aspects leaving one aspect. The GRI is formulated as the global benchmark for corporation reporting, which implies that these reports are considered to be the global best practice (Higgins, Milne and Van Gramberg 2015). Moreover, its current sustainability reporting practices lacks efficiency in certain aspects necessary under GRI guidelines and these are stated briefly as follows:
- Operational and robust sustainability definitions are not included in the report
- No overview is provided behind the selection of strategies
- No discussion is made whether the combination of indicators is sufficient for sustainability reporting; instead, only definition is provided
- The inclusion as well as consideration of the external economic and social effects of the activities of the organisation are not adequate
AGL Energy:
In contrast to the GRI guidelines, the environmental element of AGL Energy provides a nearer resemblance to the GRI in opposition to the sustainability report of Origin Energy. This is because it provides reports of majority of the aspects recommended from the end of GRI (Kaur and K. Lodhia 2014). Similar to Origin Energy, reporting pertaining to economic aspects of the business operations constitute of the necessary components evident in GRI guidelines. However, lack of monitoring has been found related to the external economic effects of the organisational activities. Moreover, like Origin Energy, the social element of the report has not been developed adequately, as per the guidelines mentioned in GRI. Therefore, an effective insight related to the effect of corporate actions affecting the community would strengthen the sustainability reporting framework of the organisation considerably (Rao and Tilt 2016).
AGL Energy:
Moody’s has reaffirmed the credit rating of the organisation on 14th February 2017, in which it has been provided with Baa2. This rating signifies the strong retail position of AGL Energy in the market along with lower cost, operating record and scale of its generation fleet (Schaltegger, Burritt and Petersen 2017). Such credit strengths have placed the organisation in a sound position for navigating the challenges inherent in the Australian evolving energy marking. Moreover, its head office in 200 George Street, Sydney has been awarded “6-Star Green Star Rating – Interiors Certification”, as it depicts excellence in its design of environmental sustainability.
Origin Energy:
As per the 2017 sustainability report of the organisation, it has obtained the recognition from “Australian Council of Superannuation Investors Leading Rating” based on its sustainability risk disclosures starting from 2009-2011 and from 2013-2017. The credit rating of the organisation has been B-; however, it has managed to become the member of “Dow Jones Sustainability Indices” and “FTSE4 Good Index”. As it has obtained the leading rating, it denotes that the organisation is analysing, monitoring and exploring to enhance performance related to material sustainability risks measurably over particular timeframe (Sierra?García, Zorio?Grima and García?Benau 2015). This, in turn, would assist the investors would assist in significant investment decisions.
After critical observation of the sustainability reports of both AGL Energy and Origin Energy, the report is detailed in nature for AGL compared to Origin. The former provides a clear layout of the various important elements mentioned in sustainability reporting along with adherence to some elements of GRI. However, in case of Origin, the material issues related to GRI are not represented as a table, as in the case of AGL. Therefore, the report of AGL contains more narratives than Origin and the users could find more information by reviewing the sustainability report of the former. Hence, the report length is more for AGL compared to Origin Energy.
Areas of Weak Sustainability Performance
Conclusion
The above discussion makes it clear that every organisation has some specific set of reasons for the adoption of sustainability approach; and this is not any exception of this concept, in case of both Origin Energy and AGL Energy. However, there are certain areas where weaknesses are identified in the sustainability reports of both the organisations. This is further evident after comparison is made with the GRI guidelines. However, in terms of reporting, AGL Energy has adopted a better reporting structure than Origin Energy that would provide more detailed and crucial information to the various stakeholders of the organisation.
References
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