AGL Energy Limited's CSR Reporting Practice: An Essay Analysis.

This assignment requires you to undertake research in corporate social/sustainability (CSR) reporting practice of a company listed on Austrian Stock Exchange (ASX). You will use a recent CSR information of the company and conduct an in-depth examination of its CSR reporting practice to answer the assignment questions. You have been assigned a company for this purpose. You will research for CSR information using various sources, including but not limited to, recent annual reports and/or corporate sustainability reports (2015 or later), announcements, CSR policies and strategies disclosed in its website or other publicly available information domain.

Assignment questions

Question 1

Provide a descriptive analysis of company’s CSR disclosure and reporting practice.

Question 2

Present a comparative analysis of the company’s reporting practice and CSR reporting guidelines (i.e. Global Initiative Reporting).

Question 3

Critically analyse the company’s CSR reporting motivation and practice using the concept of legitimacy and stakeholder theories.

Question 4

Prepare a report comprehensively summarising your research findings from answers to questions 1 – 3 above.

Business organizations are largely emphasizing on becoming more responsible by increasing their involvement in activities that benefits the community and environment as a whole. The information related to the social, economic and environmental performance of a business entity is disclosed through development of sustainability reports. Sustainability reporting is also known as triple bottom line (TBL) reporting that emphasizes on disclosing adequate information in context of the measures adopted by an entity to promote the development of the society and the environment in which it operates. The development of sustainable reports promotes the transparency and accountability within the business operations in the eyes of stakeholders by ensuring that all business activities are carried out in an ethical manner. The businesses worldwide are adopting the use of Global Reporting Initiative’s (GRI’s) Sustainability Reporting guidelines for developing and publishing their sustainability reports.

In this context, this report is developed for undertaking a research in context of CSR or sustainability practices of a company listed on the Australian Stock Exchange (ASX). This is done by extracting the relevant information from the CSR report of the selected company and also from other reliable sources. The company selected for the purpose is AGL Energy Limited, a leading energy company of Australia. The report specifically examines its CSR disclosure and reporting practice, comparative analysis of the company’s reporting practices with GRI guidelines, analyzing the CSR reporting in context of legitimacy and stakeholder theory. At last, it provides a comprehensive summary in relation to the overall research findings gathered through the report.

1: AGL Energy Limited is recognized as a leading energy company involved in providing electricity, gas, solar and renewable energy services for both residential and commercial uses. The company has gained a dominant position within the energy market of Australia on account of its conducting its business in a sustainable manner. The company each year develops and publishes its sustainability report to provide information in relation to its social, environment and economic challenges. The sustainability report is developed to provide a brief about the various opportunities that the business is facing in context of managing its communities and environment (AGL Energy Limited, 2018). AGL has recognized the need for improving transparency across its business operations by disclosing information on the issues that are relevant to the stakeholders. The sustainability report of the company provides detailed information in relation to the material issues, sustainability framework, corporate governance and the major sustainability issues. The materiality issues that can impact the stakeholders to a large extent are disclosed by the company in form of a materiality matrix (AGL Energy Limited: Sustainability Report, 2018).

The matrix discloses the most relevant material issues that are ethical conduct, evolution of energy market, distributed energy services, satisfaction of customers, climatic change, profitability, public policy engagement, community engagement, energy prices and health and safety, renewable energy investment and energy efficiency. The company has also prepared and developed its sustainability framework that discloses targets and commitments that drives the performance across each of its identified material issues. It is followed by providing an outline of the ways through which the company conducts its business operations. AGL, in this context, has stated the ethical values that it places emphasis while carrying out its business operations. The company also has identified and disclosed the responsibilities it possesses towards all its stakeholders that are employees, customers, investors and the community. The company has adopted various sustainable policies and practices for being accountable to all its stakeholders. The ethical approaches that the company adopts for carrying out its business operations include stakeholder engagement, ethical conduct, public policy engagement, legislative compliance and corporate governance (AGL Energy Limited: Sustainability Report, 2018).

Question 2

The stakeholder engagement section of the report has provided discussion in relation to the key issues that it comes across in relation to them and the strategies adopted for overcoming them. The key issues faced by employees, communities, government, regulators, investment partners, customers and non-government organizations are discussed in detail within its sustainability report. The key measures that are adopted by the company in improving its environment performance are also discussed adequately in the sustainability report. As per the Australian Council of Superannuation Investors (ACSI), the ASX 200 listed companies have depicted an improvement towards the extent of their sustainability reporting. They are emphasizing on providing relevant information about the issues related to green-house gas (GHG) emission and climate-related policy (Ong, 2016). AGL has also provided adequate information about the emission of greenhouse gases, climate change, and renewable energy, measures adopted for minimizing water, air and noise pollution. Also, it has discussed the measures adopted by the company for ensuring the protection of biodiversity and rehabilitation of community centers. Thus, it can be stated from examination of the sustainability report of AGL Energy that the company has adequately disclosed information in relation to its sustainability performance (AGL Energy Limited: Sustainability Report, 2018). There were maximum disclosures in relation to the key categories of its sustainability performance and this has facilitated the company to achieve accountability and transparency among its business operations (Alnaimi, 2011).

Question 2: Global Reporting Initiative (GRI) is an internal framework developed for providing support to the companies for disclosing the information in relation to their sustainability performance. The guidelines are developed by the Global Sustainability Standards Board (GSSB) to enable the companies in identifying, gathering and publishing the information about the measures adopted by them for conducting their business in a responsible manner. The GRI reporting framework provides international standards to be used by business entities for reporting their sustainability framework. The firms that adopt the use of GRI reporting framework are stated to have high level of commitment to CSR. This is because it has provided adequate reporting principles, reporting guidance and standard disclosures that companies need to integrate for reporting their sustainability performance (Global Reporting Initiatives, 2013).  The GRI is an independent framework whose mission to make the sustainable reporting adopted by business entities comparable at a global level. The adoption of the guidelines enables the companies to make their sustainable information comparable and reliable in the mind of the stakeholders as it provides rigid guidelines that the business entities need to follow. As such, it helps in achieving uniformity across the sustainability reporting of businesses by promoting the use of common performance indicators. The disclosure of relevant information by a business entity through the adoption of GRI initiatives largely helps in improving their sustainable reporting practices. This is because it helps the business managers in identification and managing risks and improving the governance and stakeholder relations. As such, the compliance with the GRI guidelines supports the companies in enhancing their reputations and developing trust among all its stakeholders (Sustainability Reporting Guidelines, 2011).

There is an emerging trend among the ASX 200 companies to adopt the international reporting framework of GRI. This is because it can be said that there is a direct link between the adoption of effective sustainable reporting practices and developing trust and confidence among all its stakeholders. The compliance with the international standards will enable the company in developing quality sustainability reports and thus facilitating the shareholders in making informed decisions (Khasharmeh, 2013). In this context, the sustainability report of AGL Energy Limited has stated that it has effectively followed and adopted the GRI sustainability guidelines for reporting the information about its sustainability issues. The company has specifically referred to its compliance with the ‘G4 Sector Disclosure for the Electric Utilities Sector’ and its use as a base to publish the specific issues that impacts its sustainability performance. The company has applied the GRI guidelines in recognition of the core issues related to its sustainability performance and has applied wide range of its metrics for adequate disclosure of the matters in context of its sustainability issues. This enables the company to easily compare its performance in the sustainability issues with that of other companies operating in the same sector. The company has applied GRI guidelines in relation to identifying the material issues and mapping them against the standard benchmark (AGL Energy Limited: Sustainability Report, 2018). This is done for facilitating the stakeholders to easily identify and evaluate the gap between the expected levels of performance to that provided by the company (Wanderley, 2008).

Question 3

In comparison to the GRI guidelines, it can be stated from the analysis of CSR report of AGL Energy Limited that it has disclosed relevant information about its materiality issues. The key materiality issues were appropriately identified and compared with the standards provided by GRI framework. In addition to this, it has also reported content in accordance with the stakeholder inclusiveness which means that a reporting organization need to identify the stakeholders and explain in detail the measures adopted for meeting the expectations and interest. In this context, AGL has also adequately discussed the key issues faced by it in managing adequately its key stakeholders to make its reporting process more assurable and accountable. The content of the report as per the GRI guidelines should also disclose an organization performance in the wide context of sustainability such as in the environment filed. It needs to disclose the measures adopted by it for preventing the damage caused to environment on account of its operations. The company in context of this guidelines ahs provided adequate information about its climate change policies, waste management and strategies induced for reducing air, water and noise pollution level (AGL Energy Limited: Sustainability Report, 2018).

GRI guidelines have also stated the reporting principles that businesses need to adopt for improving the quality of their sustainability reports. This includes balance, comparability, accuracy, timeliness, clarity and reliability. The reporting principle of balance states that a business entity should disclose both positive and negative aspects of its performance in relation to social, economic and environment. As such, it can be said that the company has not effectively complied with this reporting principle as it has stated only positive information in relation to its sustainability performance (Jones & Ratnatunga, 2012). There is no disclosure of any negative impact that its operations might be having on society and environment.  The company has however followed and adopted the comparability reporting principle as which an organization need to report the sustainable performance in a constant manner. This enables the stakeholders to easily identify and analyze the changes that have occurred in its sustainable performance over time. AGL Energy Limited develops and published its sustainability report in a consistent manner by adopting the use of same reporting framework for facilitating easy comparison of information (AGL Energy Limited: Sustainability Report, 2018).

AGL Energy also effectively follows the accuracy and timeliness reporting principle stated by the GRI framework. The company provides detailed and accurate information to its stakeholders for assessing its reporting performance. Also, as per the timeliness characteristics of the GRI guidelines the company reports its sustainability information on an annual basis so that it is available in a timely manner to the stakeholders for making informed decisions. The reporting principle of clarity means that the information should be disclosed in an understandable manner so that it can be interpreted in an easy manner by the end-users (Sioshansi, 2014). The company in context of the reliability reporting principle of GRI guideline should disclose the information in such a way so that it can be verified by the use of relevant tests and examination. In this relation, the company has declared assurance over its sustainability report that ensures its preparation as per the GRI G4 guidelines. The company has obtained assurance with Deloitte Touché Tohmastu that has stated the effective compliance if the report with the Australian Standard on assurance engagement, that is, ASAE 3000 Assurance Engagements. Deloitte has provided assurance over its sustainability report in relation to effective management of sustainability performance and performance against the pre-determined sustainability targets (AGL Energy Limited: Sustainability Report, 2018).

Question 4

The GRI guidelines has also stated that business entities need to comply with standard disclosures by disclosing the information in relation to their organizational strategy, management approach and performance indicators. AGL Energy has disclosed relevant information in context of its strategy, profile and governance structure in its sustainability report. The company in context of the management approach has provided the information for addressing the performance in a given area such as that disclosed by AGL in relation to climate change policies. The company ahs provided detailed information in relation about its sustainable climate change policy framework that has provided its commitment for achieving the objectives stated by Australia’s climate change policy. The company has also adopted the use of specific performance indicators that are able to depict comparable information in relation to its social and environmental performance. Thus, it can be said that company as adequately adopted GRI framework for reporting useful and pertinent information about its sustainability matters to its stakeholders (AGL Energy Limited: Sustainability Report, 2018).

3: The motivation for development of sustainability reports by the company is largely due to increased demand among the stakeholders to examine the measures adopted for conducting the business in a socially, economically and environmentally responsible way. The different types of the company’s stakeholders often have varying needs and requirements and therefore require it to disseminate information in all aspects for satisfying their demands effectively. As such, the CSR reporting practices of AGL Energy can be adequately explained by the use of stakeholder and legitimacy theories.  The stakeholder theory has stated in this context that businesses are accountable for all the stakeholders that can be impacted by achieving the objective of an organization (Omran, 2015). On the basis of the theory, the stakeholders of a company can be categorized into primary and secondary stakeholders. Primary stakeholders are those that have a direct influence on the business operations of a company such as shareholders, customers, suppliers and employees. On the other hand, secondary stakeholders can be regarded as those that do not have a direct impact on the activities of an organization but are influenced by the business outcomes such as communities and government. It can be implied from the stakeholder theory that business managers have a major responsibility to resolve any conflict of interest among its various stakeholder groups (Wanderley, 2008).

The CSR motivation of AGL Energy as per the stakeholder theory is due to the power of stakeholder’s that causes the need for managers to disclose the relevant information. It can be stated as per the theory that different type of stakeholders of a company has a direct impact on the company’s continued viability as they provide varying critical resources required for its growth and development. For example, the shareholders of the company invest their money, employees invest their time and efforts, customers invest their trust and communities provide the relevant resources such as infrastructure and environment for carrying out the business operations (Jones & Ratnatunga, 2012). Thus, as per the theory there can be said to exit a direct relation between the power of a stakeholder group with the amount of relevant information disclosed by a company in relation to its social and environmental performance. As such, in context of the stakeholder theory it can be said that company is liable for considering the impact of its actions on the stakeholders having an interest in its operations. This provides the motivation to the business managers to develop and publish the relevant CSR information for meeting the varying needs and demands of the stakeholders (Omran, 2015).

Beside this, the legitimacy theory also provides a motivation to the business managers for developing and disclosing their sustainability results. The legitimacy theory emphasizes on the notion that there exist a social contract between an organization and the society in which it operates. The theory has cited the business entities intend to adopt the practices and procedures that help them to maximize their legitimacy in the mind of its stakeholders. Therefore, as per the theory, the business managers engage in CSR reporting for legitimizing their actions and thus gaining an approval form the social communities to continue their ongoing operations. The development of CSR reports helps the society in which a company reports to assess the legitimacy of its actions and to make informed decisions on supporting or opposing its existence. This is implied as per the social contract sated I the legitimacy theory as per which society has varying expectations and in relation to the type of methods and procedures adopted by a business entity for conducting its operational activities. The business method adopted should be within the acceptable norms of the society and thus it is essential for the company to disclose information about its sustainable performance so that society can assess whether it behaving in a socially responsible manner (Habek, 2018).  

4:The analysis of CSR reporting practices of AGL Energy and the motivation of the company behind it has inferred that disclosure of information by the company in relation to its sustainability issues is essential for promoting its long-term growth and development. Also, it is recommended to the Australia business entities for adopting the GRI framework to promote comparability and reliability in their sustainable reporting practices. The analysis of the CSR reporting practice of the company in context of stakeholder and legitimacy theory has also inferred that CSR reporting practices tend to improve the goodwill and brand reputation of the company across its various stakeholder groups. This in turn leads to improved performance of the company by gaining support from its various stakeholders promoting its continued growth and survival. This also enables the company in achieving distinctive competitive advantage in the marketplace as the company conducting its operations in a responsible manner seeks large attraction form the customers. The achievement of customer satisfaction helps in maximizing the revenue and profit generation by the company leading to its sustainable growth.

Conclusion

It can be stated from the overall discussion held in the report that Corporate Social Responsibility (CSR) can be defined as the ways that businesses adopt for maintaining a balance between their operational activities with the community and environment in which they operate. The sustainability report of AGL Energy is developed as per the GRI guidelines and has provided maximum disclosure in relation to its sustainable performance. The motivation for development of sustainability reports by the company can be adequately explained by the use of stakeholder and legitimacy theory. As per the theories, CSR reporting practices can be regarded as a key management tool that can helps the company to achieve the trust of the society and promote its sustainable growth and development.

References

AGL Energy Limited. (2018). Sustainability. Retrieved 30 September, 2018, from https://www.agl.com.au/about-agl/sustainability

AGL Energy Limited: Sustainability Report. (2018). Retrieved 30 September, 2018, from https://www.2018sustainabilityreport.agl.com.au/xmlpages/resources/TXP/agl_energy/susrep/pdf/AGL_Energy_2018_Sustainability_Report.pdf

Alnaimi, H. (2011). Corporate social responsibility reporting in Qatar: a descriptive analysis. Social Responsibility Journal 8(4), pp. 511-526.

Global Reporting Initiatives. (2013). GRI and the Sustainability Reporting Guidelines. Retrieved 30 September, 2018, from https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures.pdf

Habek, P. (2018). Comparative analysis of CSR reporting practices in Poland and Slovakia. Organization & Management 116 (95), pp. 52-62.

Jones, S. & Ratnatunga, J. (2012). Contemporary Issues in Sustainability Accounting, Assurance and Reporting. Emerald Group Publishing.

Khasharmeh, H. (2013). On-line Corporate Social Responsibility Disclosures: The Case of the Gulf Cooperation Council (GCC) Countries. Global Review of Accounting and Finance 4 (2), pp. 39-64.

Omran, A. (2015). Theoretical Perspectives on Corporate Social Responsibility Disclosure: A Critical Review. International Journal of Accounting and Financial Reporting 5(2), pp. 39-47.

Ong, S. H. (2016). Measuring the quality and identifying influencing factors of sustainability reporting: Evidence from the resources industry in Australia. Retrieved 30 September, 2018, fromhttps://ro.ecu.edu.au/cgi/viewcontent.cgi?referer=https://www.google.co.uk/&httpsredir=1&article=2923&context=theses

Sioshansi, F. (2014). Distributed Generation and its Implications for the Utility Industry. Academic Press.

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Wanderley, L. (2008). CSR information disclosure on the Web: A context-based approach analyzing the influence of country of origin and industry sector. Journal of Business Ethics 82 (2), pp. 369-378.