AGL Company Limited Sustainability Reporting

This research discusses corporate social responsibility reporting practices of AGL Energy Company. The paper also goes ahead to present descriptive analysis of sustainability practice in the organization and critique its level of adherence to Global Initiative Reporting. The motivation behind AGL's CSR reporting is explained using legitimacy and stakeholder theories.

Running head: SUSTAINABILITY REPORTING 1
AGL Company Limited Sustainability Reporting
Professor’s Name
Institution Affiliation
Date

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Executive Summary
Sustainability involves focusing on long term objectives of an organization. Global
Initiative Reporting is a sustainability reporting organization that recommends a common format
of corporate social responsibility among organizations. Sustainability reports makes disclosures
of social, economic, and environmental responsibilities of an organization. AGL’s sustainability
reports conform to GRI standards. The report is divided in to social, economic, and
environmental disclosures. The legitimacy and stakeholder theories explains the motivational
factors that influenced AGL to disclose its sustainability information. Legitimacy theory argues
that, the company does sustainability reporting to gain acceptance from the society. The
stakeholder theory on the other hand argues that, the company is made up of many stakeholders
who have to be informed concerning the activities of the organization.

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Table of Contents Page
Executive summary.........................................................................................................................2
Introduction .....................................................................................................................................4
Question 1 Solution.........................................................................................................................5
Question 2 Solution.......................................................................................................................10
Question 3 Solution.......................................................................................................................12
Question 4 Solution.......................................................................................................................14
Conclusion.....................................................................................................................................15
References......................................................................................................................................17

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Introduction
AGL Energy Limited is an Australian energy company that operates one of the largest
electricity generation portfolio in the country. Among companies Listed in the Australian stock
exchange, AGL is the largest investor in renewable energy. Currently, the company has around
3.6 million customers having been in operation for more than 180 years (Agl, 2018). The energy
sector is a major industry that faces the risk of negative externalities. Negative externalities are
defined as costs incurred by third parties as a result of production activities.Companies should
therefore work towards achieving sustainability in their operations. Sustainability can be defined
as the practice of ensuring continuity by focusing on long term objectives (Kozlowski, Searcy, &
Bardecki, 2015). Focusing on sustainability ensures that organizations do not sacrifice the long
term impact of their operation for short term goals (Uyar, 2017). This research discusses
corporate social responsibility reporting practices of AGL Energy Company. The paper also goes
ahead to present descriptive analysis of sustainability practice in the organization and critique its
level of adherence to Global Initiative Reporting.
The world today is witnessing a paradigm shift in corporate strategies as competition
becomes tighter in business. Organizations are becoming customer-oriented and hence the need
to adopt a sustainability reporting culture that would promote society awareness on the social,
economic, and environmental impacts of companies (Maas, Schaltegger, & Crutzen, 2016). The
orientation of companies towards corporate social responsibility promotes management of
organizations’ social and environmental duties hence improving efficiency of operations and
conservation of natural resources. Firm stakeholders that include; employees, shareholders, and
local communities are interested in sustainability of organizations. Reporting makes information

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available for them and as a result builds stronger stakeholder relations. The world today is more
concerned with environmental sustainability than ever before. The duty to maintain low levels of
carbon emission is no longer the role of the government only, but also firms who are the primary
source of carbon emissions.
Question 1.
Descriptive analysis of AGL’s Disclosures and Reporting Practice
The corporate social responsibility (CSR) disclosures have attracted much attention and
research among scholars and practitioners since mid-1970 (Matten & Moon, 2014). X (2014)
argued that, the attention is triggered by expectations that the society today puts on companies.
Also, companies recognize the need to contribute to social and environmental initiatives in the
communities in which they operate from. It is because of this recognition that companies
voluntarily put their sustainability information in the public domain.AGL limited releases a
sustainability report annually and also makes it available to the public on its website.
Sustainability data that is interactive and comprehensible is also available on the website for
relevant stakeholders to view and download. In its 2018 sustainability report, the company noted
that the sustainability report presents the company’s performance in relation to social, economic,
and environmental challenges and opportunities that impact its business, the industry in general,
and the local community.
Trend analysis of CSR factors
Environmental CSR: Greenhouse gas emission

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AGL’s CSR disclosures indicate a slight decline in greenhouse gas intensity in 2018 as a
result of increased generation of renewable energy. Market intensity also declined following
increased generation of renewable sources of energy and decline in coal fired generation. This
implies that the company is making positive progress in reducing its greenhouse gas emissions.
People CSR: Employee turnover analysis
FY14 FY15 FY16 FY17 FY18
0
0.5
1
1.5
2
2.5
3
3.5
carbon emissions
AGL greenhouse gas intensity (all generating capacity) (tCO<sub>2</
sub>e/MWh)
AGL greenhouse gas intensity (fossil fuel capacity only) (tCO<sub>2</
sub>e/MWh)
Average market intensity (tCO₂e/MWh)
Figure 1

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Figure 2
CSR focused on improving employee engagement and satisfaction led to a reduction in
employee turnover indicating internal growth and increased transformation of the firm’s
organizational structure.
Community CSR: Charity fundraising contributions
Figure 3

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AGL in its community CSR makes contributions to many community and national causes. The
company has contributed most towards arts and culture through sponsorship opportunities in the
Western region of Australia.
AGL’s Accounting Policies
Accounting policies are principles, procedures, and measurement systems that form the
basis for preparation of financial statements. AGL prepares its financial statements in accordance
with the Australian Accounting Standards and the Australian corporation act 2001. The
consolidated financial statements that comprise of financial information of both the parent
company and subsidiaries all comply with the provisions of the International Financial Reporting
Standards (IFRS) which are issued by the International Accounting Standards Board. AGL’s
financial statements are prepared based on historical cost. Derivative instruments and assets that

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are available for sale are however not presented based on historical cost. Historical cost values
assets by considering the fair value. AGL measures inventories at the lower of cost and net value
basis. The inventories are valued using the first-in first-out method. Although the weighted
average basis is used in some instances. The selling price for inventories is based on the net
realizable value. AGL operates on a going concern basis and thus applies the going concern
principle while making its financial statements.
Reporting Format and Framework
International Financial Reporting Standards requires companies to release annual
financial reports. The reports contains essential company financial data including their financial
statements. The financial statements are audited by independent auditors who seek to verify
whether the reported financial statements reflect the true state of affairs of the organization. The
financial reports are released for use by management, shareholders, investors, and the general
public. Some companies combine their sustainability report with their financial reports while
others prefer to release independently. AGL releases its sustainability report independent from
the annual report.
AGL’s sustainability report follows the Global Reporting Initiative Framework (GRI).
GRI has become the most adopted sustainability reporting framework since its inception in 1997
by the GRI organization. Around 93% of the biggest companies in the world use the framework
in reporting its sustainability issues (AGL, 2018). GRI reporting enables readers AGL’s
sustainability report to understand social environmental, and economic advantages. In the 2018
sustainability report, the company appreciates that sustainability in its simple term means
thinking about business stakeholders such as shareholders, investors, and the community at large.

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The firm publishes the report so as to offer an account of organizational performance based on
social, environmental, and economic measures.
Question 2.
Comparative analysis of AGL reporting practice and Global Initiative Reporting
AGL energy limited provides an annual report of its performance with respect to social,
economic, and economic problems and opportunities impacting its business, the energy industry,
and local communities. Global initiative reporting requires organizations to make available to the
public, periodic reports stating how they are contributing to social, economic, and environmental
good (Global reporting Initiative, 2016). AGL operates in the energy sector which can release
huge amounts of greenhouse gases in to the atmosphere. However, the same energy companies
can be relied on to provide environmentally friendly sources of energy. In its 2018 annual
financial report, AGL reported that it is committed towards creating sustainable energy sources
in Australia. The company it aims to create sustainable, affordable, and cheaper energy sources.
AGL plans to help Australia exist from the relying on coal by developing better innovative
solutions for its customers.
Global Initiative Reporting emphasizes reporting of material information and
disregarding those that are immaterial. AGL also concurs with GRI in the use of materiality
concept and thus reports majorly material information and transactions. Materiality concept
ensures that information that is critical to the business are highlighted. In a sustainability report,
materiality would mean reporting of events that have an economic impact and whose omission
might mislead the users. GRI was started with the aim of promoting quality of sustainability

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reporting. The initiative received considerable support from private businesses, government
corporations, accounting bodies, and investors.
Global initiative reporting guidelines require organizations to categorize key
sustainability issues under the subjects of customers, environment, economic performance, and
stakeholders (Global Reporting, 2016). This subjects would enhance a wide coverage of
sustainability reporting and ensure comparability between organizations sustainability reports.
AGL energy Limited conforms to this guideline by presenting its CSR reports according to this
format. The 2018 AGL sustainability report highlighted AGL’s objective of providing customers
with solutions that would enable them overcome the challenges of the energy sector. This would
be possible through the adoption of innovative practices in delivery of goods and services. AGL
aims at enhancing affordability of their energy products, promoting customer experience and
promoting customer information security. The stakeholder section of the AGL sustainably
reports outline that the company engages in dialogue with customers, investors, suppliers among
other stakeholders with the objective of building strong business ties. Economic performance is
the key reason why firms do business. AGL provides a summary of its economic performance on
the sustainability report. It mentions the issues of proper financial management, capital growth,
reliable energy, taxation, and transparency. All these are essential components that underlie CSR
guidelines especially under the global initiative reporting.
The main objective of CSR is to conserve and manage the environment, promote
corporate social responsibility and promote coexistence between local communities and
organizations. AGL sustainability reporting recognizes the need for environmental conservation
through reduction of greenhouse emissions and provision of secure clean energy. The impacts of

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the company’s operations on the environment are of great concern to AGL. The firm’s
environmental policy is focused towards protection and reduction of negative environmental
consequences. In the medium term, the company aims at transitioning to energy with low carbo
emission, renewable energy among other environmental impacts (Agl Energy, 2018). AGL has a
centralized data depository center where CSR and performance data are available. For viewing
and downloading. Interested parties can visit the website and view them at their convenience.
This transparency conforms to GRI guidelines of easy access to CSR information. AGL energy
subjects its CSR reports to independent auditing to enhance legitimacy and promote acceptance
among shareholders and the general public.
Question 3 Solution.
CSR reporting motivation and practice using the concept of legitimacy and stakeholder
theories.
AGL energy is among 93% of large companies listed on the Australian stock exchange
that undertake sustainability reporting (Tim & Fiona, 2018). This implies that there are
significant motivation that influence these companies to invest in corporate social responsibility
reporting. Sustainability reporting communicates with stakeholders concerning the achievements
of the management in promoting long-run benefits such as shareholder wealth maximization and
building competitive advantage (Kim, Kim, & Qian, 2018). CSR also enables the company to co-
exist peacefully with local community because its practices are of benefit to the community.
Local communities prefer companies that get involved in solving challenges of local
communities. AGL’s people focused CSR is important in making the work place a desirable

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place. It builds a sustainable and focused workplace culture characterized by ethical practice and
desirable corporate governance.
Stakeholder Theory
The stakeholder theory of CSR reporting offers a widely accepted explanation of why
companies undertake CSR reporting. The theory argues that the firm consists of many parties
who contribute differently to the success of the firm. The decisions made by managers of the
company affects relationships between these parties. The firm is therefore not only accountable
to shareholders but also takes care of the conflicting interests of other parties including
employees (Du Plessis, Hargovan, & Harris, 2018). This implies that satisfying shareholder
interest while disregarding the interests of other parties such as might negatively affect
performance of the company. The theory states that the corporation should be operated for the
benefit of those parties that have interest in the firm. Shareholders interest is tied to the money
they pump in to the enterprise while employees contribute their time, skill, and intellect.
Customers trade with the company because of the trust they have with the company. The local
communities are also interested parties in the firm having accepted to share the natural resources
available locally with the firm. The company should therefore appreciate the local communities
through corporate social responsibility initiatives.
Legitimacy theory
Legitimacy theory argues that there exists a “social contract” between the company and
the local community. AGL energy might thus be practicing CSR reporting to legitimize its
actions so as to obtain approval from the community. Society approval would then ensure that

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the company continue existing within its locality. The “social contract” represents many
expectations that community expects from the organization. (Maroun, 2017) argues that
legitimacy theory is based on the idea that for the organization to operate successfully and
continually, it should conduct itself as per the norms and bounds of activities that the local
community believes contribute socially responsible behavior. AGL’s corporate responsibility
reporting promises customers and Australia at large a sustainable transition to lower-carbon
electricity. The community would appreciate the company’s role in finding solutions to the
society’s global warming problem.
Question 4 Solution
AGL energy Limited is one of the largest energy and electricity generating companies in
Australia. The company releases yearly sustainability reports that contain comprehensive
information and discussions on the organization’s corporate responsibility practices. The
sustainability report is then made available on the company’s website together with a database
containing sustainability data and analysis. The company’s CSR reports conform to the Global
initiative reporting format. The GIR format presents the company’s performance in relation to
social, economic, and environmental challenges and opportunities that impact its business, the
industry in general, and the local community. Global warming is a world major environmental
problem and therefore, companies should minimize their carbon emissions. According to
sustainability report (2018), the company made significant improvement in reducing emission of
greenhouse gases through increased renewable energy generation. Through improving people
focused CSR, AGL managed to reduce employee turnover hence leading to growth of talent
within the company.

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Comparing AGL’s sustainability reporting practices, it strictly adheres to global initiative
reporting. In addition to adhering to the reporting format, the company reports only material
information. The report is audited by an independent auditor in accordance to global initiative
reporting guidelines. Auditing ensures that the report reflects the true state of the company’s
state of affairs. Theories have been advanced to explain CSR reporting motivation. The
legitimacy theory argues that, there is a social contract between firms and the society established
by the society’s expectation that the company has a role to play. Since companies globally have
consented to the presence of the “social contract”, they carry out CSR reporting to win
legitimacy from the local community. The stakeholder theory argues that the firm is made up of
relationships between different stakeholders whose optimum cooperation promotes company
performance. Customers, local communities, and the general public being part of the
shareholders have vested interest in the company in different ways. Therefore, AGL performs
CSR activities such as sponsoring art and talent events, supporting fund raising in communities
and reports them appropriately.
Conclusion
Sustainability reporting enables firms to manage their environmental and social impacts.
It boosts operating efficiency and management of natural resources. CSR is recognized as a
major component of the relationship between shareholders, employees, managers, and the
society at large. AGL energy limited gets involved in several CSR activities that enable it to
improve its performance, build its reputation, and win the trust of shareholders and other
stakeholders. It engages in CSR issues such as fund raising and charity activities. The company
is also working on minimizing carbon emission by producing renewable energy sources.

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AGL’s sustainability reporting guidelines conform to Global Initiative Reporting
guidelines. The GRI format report has social, environmental, and economic sections of reporting.
Full disclosure of material CSR information under these themes would enable different
stakeholders to make their judgements concerning the company.

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