AGL Energy Company Case Study

Report

Table of Contents
INTRODUCTION...........................................................................................................................1
BODY OF ANALYSIS...................................................................................................................1
Company background..................................................................................................................1
Newspaper story...........................................................................................................................1
Discussion of CSR framework.....................................................................................................2
Integrated reporting......................................................................................................................3
THEORTICAL ANALYSIS............................................................................................................3
Choice of theory...........................................................................................................................3
Relevancy of the theory...............................................................................................................4
Description of theory and its predictions.....................................................................................4
Literature which covers predictions that are directly related to news story................................5
Reason behind addressing social, technical, accounting problems identified in the news..........5
Comments to existing financial framework.................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Corporate social responsibility can be defined as an approach which contributes in
sustainable development by delivering social, environmental and economic benefits for all the
stakeholders such as customers, employees, investors etc. Under this approach business entities
promise to spend a fixed percentage for welfare of society (Butler, 2014). The organisation
which is selected for this report is AGL Energy which is an Australian Listed Public company.
This report is based upon a newspaper article in which it is being mentioned that AGL Energy is
one of the largest polluters in Australia. Various topics are covered under this assignment such as
newspaper story, CSR framework, integrated reporting etc. Along with this, selection of an
accounting theory, its relevancy, predictions and reason behind addressing social, technical and
accounting problems identified in the new piece are also covered under this report. The
accounting theory which is relevant to the newspaper story is management accounting which is
also discussed under this assignment.
BODY OF ANALYSIS
Company background
AGL Energy is an Australian company which is involved in the activities of generating
and retailing electricity and gas for commercial as well as residential uses. In October 2006 two
companies were merged and created two new company which are AGL Energy Ltd. and
restructured Alinta Ltd. These organisations are Australian Gas Light Company and Alinta Ltd.
It is listed upon Australian Stock Exchange. In year 2012 AGL acquired two business entities,
Loy Yang coal mine and Loy Yang A Power station. It is a public company which operates
business under Energy Utilities sector. Its headquarters are in North Sydney, New South Wales,
Australia. CEO and MD of the organisation is Brett Redman. Relationship of AGL is very good
with its stakeholders such as customers, employees, government, investors, creditors and
shareholders. Earlier it was known as Australian Gas Light Company which was founded in year
1837. Currently the enterprise employs more than 3700 employees who execute its business
operations (Background of AGL Energy, 2019).
Newspaper story
According to a newspaper article as all the business entities are becoming green and at
the same time AGL took step to become Green to Black as its CEO Brett Redman bought a coal
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mine company which is Loy Yang. Most of companies are trying to reduce use of carbon but
AGL purchased a coal mining organisation which created various issues for it which are related
to its Corporate Social Responsibility. It has resulted in huge pollution and AGL became the part
of top ten companies in Australia which are known as polluters. According to Australian
Conservation Foundation it is one of the biggest polluters in the nation which is using outdated
and polluting techniques in order to generate huge profits. The rank of the company in the list is
third. This situation is a result in improper decision making of top executives. Its two power
stations Loy Yang and Bayswater and Liddell are making huge pollution which is the main
reason of listing AGL in biggest pollutants (AGL is a pollutant company, 2015).
Macquarie Generation coal power and mining company was bought by CEO Brett
Redman for $1.5 billion from NSW government. All these were the bad decisions which were
made by top executives of the organisation. They have not followed concept of management
accounting which has affected their decisions making process. With the help of it managers and
other members of top management get to know about actual performance of the company and
formulate decisions for betterment of company. Managers have not complied with all the
appropriate rules and regulations which affected decision making ability of Brett Redman who is
CEO and MD of AGL Energy (AGL energy fades from green to black, 2014).
Discussion of CSR framework
For all the business entities it is very important to spend a fixed percentage of their profit
for welfare of society in order to establish a positive market image. It covers different areas such
as social, environment and economy. The framework of AGL Energy have two different areas
which are covered by it. These are Internal and external environment. Both of them are described
below:
Internal environment: Under this type of environment AGL focuses on internal
corporate structures and policies which are formulated by executives in order to sustain in the
market. It is mainly concerned with providing employees such place to work where they can put
maximum efforts to accomplish all the tasks successfully. It provides good working environment
to the staff members in order to become the employer of choice for them (Chapman, McLellan
and Tezuka, 2018).
.
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External environment: Under this type of environment AGL try to fulfil all the
requirements of CSR against society and customers by following all the rules, regulations and
laws. It provides its services and products at affordable prices in order to be on the top of the
industry. In order to be environmental friendly, the company is taking strict actions to reduce its
greenhouse gas emission by offering secure and affordable energy to the clients. It is committed
to achieve excellence in environmental management and performance.
Integrated reporting
From sustainability report of AGL Energy it has been analysed that organisation has
promised and committed various things but it is not able to reduce its pollution which is affecting
the environment. It is required to find ways in which it can minimise impureness which is
created by it. Making promises is not a solution for the issues which are taking place and
affecting the environment. It is vital for AGL to focus on environment protection and reduce use
of carbon which is resulting in pollution. As analysed from new story According to Australian
Conservation Foundation it is being rated as third, worst polluter in Australia. In order to remove
name from this list it is vital to identify the causes which are resulting in this problem (Courtice,
2014).
It is essential for AGL Energy to focus on decision making process because the decision
which was made by CEO Brett Redman has resulted in the issues such as pollution and carbon
uses. In order to deal with this problem top managers can use accounting theories which can help
to form effective decisions for betterment of organisation.
THEORTICAL ANALYSIS
Choice of theory
As AGL Energy is dealing with the issue of higher carbon uses and pollution which has
taken place due to bad decisions which were made by CEO Brett Redman, of buying coal mining
and power companies. The best suitable method of dealing with this situation is using accounting
theory such as management accounting which helps top executives to formulate strategic
decisions for betterment of company. It is the theory which is being selected for AGL Energy in
order to respond the issue identified from news story (Dimitriou and Kassomenos, 2014).
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Relevancy of the theory
Management accounting theory is relevant to the news story and the issues which are
affecting AGL Energy. With the help of it social and ethical issues can be dealt effectively. Main
function of this theory is to render appropriate information of the company to the internal
stakeholders which can help them to take effective decisions for betterment of company. T plays
a vital role within the company as it helps to respond social and ethical issues properly. Its
relevancy level with the issue of carbon uses and pollution made by AGL Energy is very high
which affects its market image (Dupont and et.al., 2016). Management accounting can help CEO
and other top-level managers to find causes of problem and find ways to deal with it. As bad
decisions of Brett Redman resulted in challenges for organisation and implementation of this
theory can help to form appropriate judgements regarding steps which should be taken in future.
Implementation of management accounting can help to avoid such activities which results in
pollution and affect market image of company (Smith, 2016).
Description of theory and its predictions
Management accounting is a technique which is used by internal stakeholders to form
decisions for betterment of organisation. It guides managers and top executives to formulate such
strategies which could be implemented to deal with challenges which are affecting performance
of the company. They can get detailed information regarding business operations and activities
which are conducted by organisation. It is an accounting theory which could be used by CEO of
AGL Energy to deal with the issue which is being faced by it. Currently the organisation is rated
as third worst polluter in Australia as it is using carbon to execute business. It was a result of bad
decision making of Brett Redman who is CEO and MD of the company due to this organisation
bought coal mining companies (AGL bought coal mining company, 2019). Following are the
predictions of this accounting theory:
 Management accounting is used by business entities to predict future outcome of a step
which is taken by top executives of the company. With the help of this technique they can
analyze that their step will result positively or negatively. As CEO of AGL Energy had
taken a decision of buying coal mining companies and management accounting can help
to measure success of this decision as it provides detailed information regarding company
and its operations (Martin and Rice, 2015).
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 With the help of management accounting managers and other executives can predict cost
of all the purchase decisions or any other judgement which is made for the purpose of
enhancing operational efficiency and profitability of the organization (Li and et.al.,
2018).
 Management helps to predict future performance of the company by forecasting future
consequences which may take place and affect organizational performance. With the help
of it, managers can formulate effective strategies to deal with negative events which may
take place in future (Leary, 2016).
 Cash flow forecasting can also be done with the help of management accounting as it
helps to predict future situations in which such type of negative events can be dealt which
can result in huge losses. In such types of consequences management accounting helps to
formulate strategic decisions which helps to respond all the issues appropriately (Hinman,
2016).
Literature which covers predictions that are directly related to news story
According to Ege, (2014), management accounting is a theory of accounting which helps
business entities to make different types of predictions. It can help AGL Energy to deal with
issues such as decreasing market image due to higher involvement in the pollution and coal
mining activities. Some of its predictions include analysing result of the action which are taken
by business entities in order to achieve predetermined objectives. Business entities such as AGL
Energy can use predictions of it to deal with the challenges identified in the news story.
Management accounting can help to predict situations which may take place in future due to
decisions which are made by management and other top executives.
Reason behind addressing social, technical, accounting problems identified in the news
Integrated reporting framework is mainly used by business entities for the purpose of
accelerating adoption of integrated reporting all around the world. Main purpose of it is to
establish guiding principles and content elements which governs the overall of an integrated
report and to explain the fundamental concepts that underpin them. Mandate disclosure under
this framework are showing detailed information of all the internal activities which are
conducted by the company. Another mandatory disclosure under IR framework is that
organisations are required to disclose their actual profit and losses to the stakeholders (Green and
Newman, 2017).
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All these disclosures may benefit AGL Energy to deal with the situations which are
discussed in the news story. If company is disclosing detailed information to the stakeholders
then it can help to deal with the situation of decreasing social image due to pollution and coal
mining activities. With the help of it, CEO Redman can try to analyse possible result of actions
which were taken previously.
Comments to existing financial framework
 Existing financial framework of AGL Energy is not good because the CEO have spent
$1.5 billion for a coal mining company which was not a good decision for the company.
 Organisation is leading towards becoming the biggest polluter in the world which is
because of its subsidiaries which are involved in power and coal mining activities.
CONCLUSION
From the above project report it has been concluded that all the business entities are
required to make contribution in corporate social responsibility in order to establish a good
market image, attain long term sustainability and be the employer of choice. Sometimes
organisations fail to fulfil requirements of CSR which results in various issues such as bad
market image, reduced sales etc. At this time accounting theories could be implemented by
companies in order to deal with the challenges which are affecting operational activities. For
example, if cause of problem is bad decisions making then management accounting could be
imposed within enterprise in order to form best suitable decisions. It can result positively and
help to deal with issues appropriately.
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REFERENCES
Books and Journals:
Butler, E., 2014. The bottom line: Why Australia's energy companies are after our RET. Habitat
Australia. 42(4). p.19.
Chapman, A. J., McLellan, B. C. and Tezuka, T., 2018. Prioritizing mitigation efforts
considering co-benefits, equity and energy justice: Fossil fuel to renewable energy
transition pathways. Applied energy. 219. pp.187-198.
Courtice, B., 2014. The lies about renewable energy's cost. Green Left Weekly. (998). p.9.
Dimitriou, K. and Kassomenos, P., 2014. Decomposing the profile of PM in two low polluted
German cities–mapping of air mass residence time, focusing on potential long range
transport impacts. Environmental pollution. 190. pp.91-100.
Dupont, J. C. and et.al., 2016. Role of the boundary layer dynamics effects on an extreme air
pollution event in Paris. Atmospheric environment. 141. pp.571-579.
Green, J. and Newman, P., 2017. Disruptive innovation, stranded assets and forecasting: the rise
and rise of renewable energy. Journal of Sustainable Finance & Investment. 7(2).
pp.169-187.
Hinman, P., 2016. AGL: Australia's biggest climate polluter. Green Left Weekly. (1113). p.24.
Leary, D., 2016. The Australian Renewable Energy Target scheme: a case study of the impact of
uncertainty on a market-based mechanism. In Green Fiscal Reform for a Sustainable
Future. Edward Elgar Publishing.
Li, H. and et.al., 2018. Combined effect of boundary layer recirculation factor and stable energy
on local air quality in the Pearl River Delta over southern China. Journal of the Air &
Waste Management Association. 68(7). pp.685-699.
Martin, N. and Rice, J., 2015. Improving Australia's renewable energy project policy and
planning: A multiple stakeholder analysis. Energy Policy. 84. pp.128-141.
Smith, K., 2016. AGL admits breaking donation laws. Green Left Weekly. (1108). p.4.
Ege, M. S., 2014. Does internal audit function quality deter management misconduct?. The
Accounting Review. 90(2). pp.495-527.
Online
Background of AGL Energy. 2019. [Online]. Available through:
<https://www.agl.com.au/>
AGL energy fades from green to black. 2014. [Online]. Available through:
<https://reneweconomy.com.au/agl-energy-fades-from-green-to-black-51230/>
AGL is a pollutant company. 2015. [Online]. Available through:
<https://www.abc.net.au/news/2015-03-18/ten-companies-responsible-for-third-of-
greenhouse-gas-pollution/6330562>
AGL bought coal mining company. 2019. [Online]. Available through:
<https://www.afr.com/leadership/afr-lists/top-500-private-companies/the-pragmatic-
peacemaker-in-charge-at-agl-20190410-p51ct0>
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