Sustainability reporting is a way of achieving trust from the stakeholders of an organization by reporting the environmental, governance and economic performance. It is a non-financial report. Sustainability report is published by the organizations that contain information about the environmental, economic and social effect of their regular business activities (Hahn & Kühnen, 2013). The values and governance model of the organizations are also documented in the sustainability reports and these help to establish the link between the corporate strategies and the commitment of the organizations towards achieving a sustainable global economy (Globalreporting.org, 2018). The importance of sustainability reporting lies in the aspect that it can help the organizations to evaluate, realize and communicate the social, environmental, economic and governance performance to the stakeholders, set goals accordingly and manage those more effectively. Hence, a sustainability report is an effective medium of communicating the sustainability goals, performance and their positive or negative impacts.
This report presents the importance of sustainability reporting to Frank Calabria, CEO of Origin Energy, Australia. It also aims to provide recommendations for the sustainability reporting and to explain the values the report would produce for the organization through the discussion on the relevant decision making, reporting, scientific and social sustainability literatures. The report will also present a critical analysis of the relevant sustainability issues faced by Origin Energy, their impact on the organization, critical study of the relevance of reporting in decision making and lastly, the identification and recommendation of the preferred or appropriate reporting strategies for Origin Energy.
Origin Energy is a major energy providing company in Australia that deals with the supply of electricity, LPG, natural gas and solar power (originenergy.com.au, 2018). This is a public sector company and listed in the Australian Stock Exchange (ASE). It was founded in February 2000, and has headquarters in Sydney. As of 2016, Origin Energy had almost 6000 employees and reported revenue of around AUD 12,174 million (originenergy.com.au, 2018). The core business of the company includes natural gas exploration and production, energy retailing, electricity generation, exploring and utilizing renewable energy. Origin Energy accounts for around 13% of Australia’s total power generation capacity, having 6010 MW (originenergy.com.au, 2018). Thus, it has one of the largest power generation portfolios in Australia. As highlighted in the company website, Origin Energy is committed to provide more sustainable, affordable, easier and smarter energy to the customers and communities (originenergy.com.au, 2018). The vision of the company is to achieve a cleaner, smarter and customer-centric energy future. The corporate strategies include priorities for accelerating towards cleaner energy, embracing digital and decentralized future, developing resources for meeting the growing demand for gas and maintaining the disciplined capital management, while the basic priority is to deliver a sustainable future (originenergy.com.au, 2018). Origin Energy has committed to reduce their carbon emissions to half by 2032 and for that it has started to implement various measures. Thus, being a publicly funded energy producing organization, Origin Energy is committed to deliver a sustainable solution to the customers and to the community for a better future.
The sustainability issues that have gained significance over the past few years include climate change, global warming, energy production and consumption, carbon emissions, land, air and water pollution, growing demand for oil and gas energy, depletion of natural resources and biodiversity, food production, water scarcity, changing demographics, geopolictical and economic instability, and inequality and poverty (terrafiniti.com, 2017). The United Nations have developed 17 sustainable development goals (SDG), which includes 17 different aspects of environment, economy and society, which need attention to achieve sustainable development (un.org, 2018). Countries and the industries are required to implement measures to address some of these goals, if not all.
Figure 1: Sustainable Development Goals by United Nations
(Source: un.org, 2018)
As stated by Waas et al. (2014), sustainability covers not only the environment and natural resources, but also the people. To provide a better future to the people and to the planet, the natural resources must be preserved and used in a sustainable manner. Along with the conservation of the natural resources, people, plants and animals should also be protected to maintain a balanced biodiversity on the planet. Hence, the key issues of sustainability include health and safety, accessibility and inclusion, equity and fairness, carbon emissions, climate change and global warming, waste and pollution. The social and environment issues arise as permanent or temporary changes to the land, water, air and overall atmosphere due to the human and organizational activities. Thus, from an organizational perspective, these sustainability issues must be evaluated and addressed accordingly.
According to the UNESCO document on the key issues of sustainable development, the focus is put on the population and human resources, food security, rapid urbanization, growing demand for energy, industrial growth, biodiversity and ecosystems, protecting the common natural resources, such as, oceans, environmental degradation and climate change (unesco.org, 2018). As per the UNESCO report, the population of the world could be more than 8 billion by 2025 and Africa, Latin America and Asia are seeing the majority population growth. At the same time, the degree and level of resource consumption per capita, along with economic and social conditions, health and education status are starkly different in the north and south of the planet. The growing population has been putting pressure on the urban regions and rapid urbanization is contributing in the depletion of natural resources, such as, forests. This is also affecting the biodiversities, as many exotic plants and animals are going extinct due to a massive environmental change. Moreover, the urbanization has also led to unemployment, poor housing infrastructure, and health issues.
Figure 2: Key sustainability issues
(Source: un.org, 2018)
Population growth results in growing demand for food, products, services and energy. Thus, there is also a rapid growth in the industries in the manufacturing and energy production. As highlighted by UNESCO, the demand for energy in terms of fossil fuel and natural gas has increased considerably after the industrial revolution in the 18th century. With growing automations and automobiles, the demand for oil and natural gas is increasing too. It is estimated that by 2025, the global energy consumption would be increased by 40% from that in 1980. The most commonly used energy sources are fossil fuels, that is, oil and natural gas, nuclear power, hydropower, and biomass fuels. The renewable energy sources, such as, wind, solar, geothermal and ethanol; account for only 21% of the total global energy consumption. The sources of fossil fuels are limited and the growing dependency is causing problems like Greenhouse Effect, that is, large scale climatic change due to carbon emission, excessive sulphur dioxide and nitrogen dioxide emissions during the combustion result in air pollution and acidification and depletion of fossil fuel resources (unesco.org, 2018). Thus, sustainability is extremely important to conserve the fossil fuel resources. Moreover, growing industrialization in also contributing in the demographic shifts, that results in urbanization. There has been increase in the occupational injuries, which threatens the community well being. Urbanization is also positing threats to the indigenous people, and thereby affecting their wellbeing and cultural heritage (firstforsustainability.org, 2018).
Apart from these, Imeson (2012) highlights that degradation of environment is also caused by over-exploitation of the land, draughts and the climatic changes, which also lead to extreme famines and poverty. Industrialization also contributed in the water pollution due to large amount of solid wastes and increasing carbon emission is causing global warming and glaciers to melt, which raises the water level in the ocean. Thus, social growth as well as unrest disturbs the environmental balance. The nuclear wars had not only destroyed the communities in the past, but also had affected the ecosystems in a massive way.
Thus, it can be stated that, sustainability issues must be identified, measured and controlled. For a better future of the communities and the planet, it is essential to protect the natural and social resources. Hence, the organizations must formulate and implement strategies to address the sustainability challenges. The sustainability report helps an organization to stay transparent to its customers and other stakeholders about their intention and initiatives towards achieving a better world to live for years to come.
As discussed above, there are multiple issues in sustainability that need to be addressed to achieve sustainable development. The social, environmental and economic issues manifest in different forms and affect the main agenda of sustainability, which includes the protection of the natural resources and offering a better future to the upcoming generations (Bell & Morse, 2012). However, depending on the nature or type of industry, the sustainability issues differ. For example, the sustainability issues for an oil and gas exploration organization will be different than those for an agricultural firm. Hence, to address the sustainability issues, an organization must emphasize first on identifying the key factors affecting the environment from their actions and then make strategies accordingly.
Origin Energy is one of the major energy providing companies in Australia. It deals with oil and gas exploration, energy production and electricity supply. Thus, it can be inferred that its actions have a severe impact on the environment, as it explores the limited resources of fossil fuel. Hence, the actions of Origin Energy affect the sustainability of the planet. Sustainability report is essential to communicate the actions of the organization and its measures to reduce the carbon footprint in the environment and community in order to achieve sustainability.
As the company has been involved in a sector that deals with energy generation from natural resources, it has the responsibility to implement measures to reduce the negative impact of its action on the society and on the environment. The company faces sustainability issues such as, depletion of the fossil fuel resources, air, water and soil pollution, solid waste, greenhouse effect, climate change and global warming and health and safety of the employees. As highlighted by Rosendahl (2012), the level of environment pollution is much greater in case of oil and gas industry. During the drilling, production, and refining of the products, an estimated 800 different type of chemicals are created through the emissions of wastewaters, solid waste, toxic gases and aerosols. These are also accompanied by greenhouse effect, acid rains, fall in water quality and high level of water and air contamination. Origin Energy also faces these sustainability challenges. Among these, carbon commitment is prioritized by the company. In 2015, Origin Energy has signed 7 carbon commitments to reduce the carbon emissions and decarbonise the natural environment. It has voluntarily participated in the annual Carbon Disclosure Project (CDP) to keep their activities transparent to the stakeholders. Along with that, it committed to undertake responsible participation in climate change policy, to adopt a scientific emission reduction target, to set carbon cost, to become a leading renewable and low-carbon energy provider in Australia, procure 100% energy from renewable sources, to reduce short lived climate pollutants and remove the deforestation from the supply chains (originenergy.com.au, 2018). Thus, the company has been addressing the carbon emission aspect to mitigate its negative impact on the society and put a step towards sustainability.
Sustainability requires the energy producing companies to commit for responsible consumption and production, clean and affordable energy for all, innovation and improved infrastructure, economic growth and decent work, ensuring the availability of good quality water, conserving the oceans and seas and protect the marine resources and diversity, and protecting the ecosystems by implementing measures of reducing deforestation and land pollution (Epstein, 2018). Thus, these factors must be identified by Origin Energy while developing the sustainability programs.
Health and safety of workforce is another important factor in achieving sustainability, as that ensures overall wellbeing of the community. The energy sector employees often work with hazardous materials and chemicals, critical equipment and in difficult or extreme locations. The risk of occupational health hazards or risks are quite high in this industry. Since, sustainability implies the long term well being for the economy, environment and society, the people of all classes should be protected and included for a better future (Markard, Raven & Truffer, 2012). Thus, philanthropic programs and health and safety programs are required to be launched by the companies in the energy sector.
However, from the sustainability report, published by Origin Energy, it is found that the company implements measures to address the sustainable development goals number 7, 12 and 13. Those are providing affordable and clean energy, practicing responsible production and consumption, and climate action respectively (originenergy.com.au., 2018). Other than these, it is also focusing on ensuring the health benefits and safe working environment for the employees. Thus, it can be said that Origin Energy should put focus on the other sustainable development goals designed by the United Nations. In other words, Origin Energy should consider expanding its sustainability programs and measures to implement benefits for the natural environment, marine resources, economic growth for the communities, ensuring clean water and improved green technology and improved infrastructure.
According to Griggs et al. (2013), sustainable development refers to the concept of achieving long term, and equitable economic, environment and social growth, balance and development, which is persistent. To achieve sustainable development, the corporate houses design their measures as per the SDGs by United Nations and implement those as per their resource capabilities. Hence, sustainable development is a strategic activity, which requires proper planning, high level of awareness among the management and employees, and planning for innovative new approaches to reduce the negative impact of the production and consumption activities of the organizations. The sustainability report is the document that exhibits the agendas of the organizations, targets, performance, aimed towards achieving sustainability. Hence, sustainability report is critical in establishing a relationship with the internal and external stakeholders regarding the sustainability issue. This report is also helpful in assessing the resource capability of the organisation to establish the sustainable practices and projects.
As stated by Wilson (2013), in the consumer goods industry, the supply chain is the aspect which can ignore sustainable practices and hence, in the USA, the consumer goods industry have implemented mandatory regulations to follow sustainable supply chain management practices. Thus, many organizations have adopted the practice of publishing sustainability report to ensure the stakeholders that they are following the sustainable supply chain management practices, which include attention to the environmental and social impacts along with maintaining the economic viability. The author also stated that publishing sustainability report and the framework to be followed is a voluntary decision and the companies have the liberty to not follow the entire UN guidelines. The organizations also have the liberty to submit or disseminate incomplete or inconsistent reports. In the consumer goods industry, supply chain practices, that is, transportation and distribution activities cause pollution through carbon emission; however it is found that these companies often under-report the carbon emission and sometimes publish inconsistent report. This does not serve the purpose of bringing transparency in the sustainability practices adopted by the companies. The author also found that the upstream supply chain partners publish more transparent reports than the downstream supply chain partners. Truthfulness is expected but cannot be forced while publishing the sustainability report by the corporate houses.
On the other hand, Leinaweaver (2015) writes on the relevance of the sustainability reporting by the corporate houses. According to the author, the organizations are wasting their money and time in creating the sustainability reports, which no one reads and are not at all effective. The strategic consultant firm, SustainAbility conducted interviews on more than 50 professional stakeholders and survey on 500 thought leaders and sustainability experts and they found that the sustainability reporting does not much relevance to the stakeholders. According to Kevin Wilhelm, CEO of Sustainability Business Consulting, lack of marketing techniques is creating obstacles in the effectiveness of the sustainability reporting. The companies publish giant reports with heavy business jargons, which the common customers cannot understand, and thus, people are not interested in reading the sustainability reports. Moreover, the author also highlighted since the stakeholders have different type of interest and thus, specific sustainability reporting is required. But that is not always for the company to publish specific different reports for these stakeholder groups. Apart from that, the social media has also reduced the effectiveness of the reports. The stakeholders now have the access to valuable information on sustainable practices in the social media and various websites and online publications. Hence, Leinaweaver (2015) suggested that the organizations find out new attractive ways to publish the reports, since the purpose of the sustainability reporting is not to increase reporting but to make the stakeholders and non-stakeholders read the report and know about the sustainable practices.
Hahn & Kühnen (2013) pointed out that to increase the value of the reporting the companies must identify the resource dependency, resource scarcity, evaluation of the risk and externalities. However, the most important thing that the stakeholders notice is that what the organizations are actually doing in the real world than whether they are truthfully reporting their sustainable activities. As per a report by Ernst and Young, sustainability reporting is becoming a mainstream practice by the corporate houses in all the sectors (ey.com, 2018). Thus, it can be said that sustainability reporting is important to establish a transparent communication with the stakeholders regarding the sustainability issues, however, the reporting should be matched by actual visible efforts and actions by the organizations.
In this regard, it can be said that, increased transparency in the sustainability report helps the organizations in better decision making (Globalreporting.org., 2018). The energy sector must make decisions that can help to achieve sustainability as well as maintain the usual business. The business decisions have direct impact on the internal and external stakeholders, such as, the employees, community, government, trade unions, creditors, shareholders etc. Hence, profitability is also required along with sustainability and hence, decision making is based on many other factors other than only on financial information. These factors include sustainability issues. The sustainability reporting ensures that the organization consider the impact of their business activities on the sustainability issues. This also helps them to be apparent about the risks, opportunities and challenges faced by them. Thus, the increased level of transparency about the business activities and their impact on the sustainability issues is beneficial for better decision making, which in turn improves the trust and relationship between the business, stakeholders and government.
A report by CPA Australia shows that sustainability reporting helps the organizations to make decisions regarding Corporate Social Responsibility (CSR), which include different types on initiatives taken by the organizations to achieve sustainability and welfare for the environment and community. Since, the companies in all types of sectors work with a profit motive, thus, short term goals get more priorities than the long term sustainability (Loftus & Purcell, 2010). However, according to the experts, sustainability includes sources of long term business success beyond their reputation. Sustainability reporting and competitive advantage are considered as significant factors for decision making. The companies need to consider the factors that contribute directly and indirectly in their financial performance and market edge strategies are designed to assess the opportunities in the new and existing markets. The sustainability reporting presents the risks and opportunities for the organizations, which are incorporated with other facets, such as, resource capability, improved efficiency and adaptability and awareness, during the decision making process. The decisions are taken to improve the business activities such that to achieve sustainability, increase profitability while adopting suitable sustainable practices and to increase its reputation among the stakeholders.
Origin Energy has adopted the strategy of publishing a PDF document for its sustainability reporting. There are various types of sustainability reporting strategies, namely, G4 Sustainability Reporting, International Integrated Reporting Framework, and Sustainability Accounting Standards Board (SASB) reporting framework.
Under the GRI guidelines for G4 Sustainability Reporting, the companies need to disclose the most vital positive or negative impacts on the society, economy and environment. The companies can generate relevant, standardized and reliable information, to be used to assess the risks and opportunities and apply them for decision making process relevant for both the stakeholders and within the business. The benefit of G4 guidelines is that it is designed such that it can be adopted by all type of firms in all type of industries and sectors, irrespective of its size and range of business activities (Globalreporting.org, 2018).
Figure 3: G4 Sustainability Reporting framework
(Source: Mathai, 2014)
International Integrated Reporting Framework <IR> enables the firms to bring greater efficiency and cohesion in the reporting process. The integration of information helps to reduce duplication in the information, and hence improves the quality of information. This is beneficial for the financial capital providers to productively and more efficiently allocate the financial capital. This reporting strategy focuses on creation of value from the capitals used by the businesses to achieve a more financially stable economy. The content of the report includes: Organizational overview and external environment, Governance, Business model, Risks and opportunities, Strategy and resource allocation, Performance, Outlook and Basis of presentation (Integratedreporting.org, 2018). The guiding principles include Strategic focus and future orientation, Connectivity of information, Stakeholder relationships, Materiality, Conciseness, Reliability and completeness, and Consistency and comparability.
Figure 4: International Integrated Reporting Framework
(Source: Integratedreporting.org, 2018)
Sustainability Accounting Standards Board (SASB) reporting framework connects the investors and the businesses on the financial effects of sustainability. This framework contains the financial material, market information and it is mostly industry specific (Sasb.org, 2018). According to the website, the mission of SASB is to assist the businesses across the world to identify, manage and report on the sustainability issues, which matter most to their investors. The SASB standards are developed on the basis of the extensive level of feedback from the investors, companies, and other participants in the market as a part of a transparent and publicly documented method. Moreover, the greater benefit of this reporting framework is that, these standards differ by different industries. This enables the investors and the companies to make comparisons on the performances from one company to another within the same industry. These standards are amended as per the public and market feedback to make its more relevant for the specific industries.
Figure 5: Sustainability Accounting Standards Board (SASB) reporting framework
(Source: Sasb.org, 2018)
Going by the above-mentioned sustainability reporting frameworks, it can be recommended that Origin Energy should adopt the SASB framework for sustainability reporting. This framework is more relevant as it is industry specific. There are multiple different sectors in the manufacturing business world and the sustainability framework and requirement are also different in different sectors. Hence, publishing an industry specific sustainability report is more beneficial for the industry as well as for the internal and external stakeholders of Origin Energy. Moreover, this report framework also focuses on the financial aspects and thereby assesses the risks and opportunities of the company regarding the sustainability issues. This will help the stakeholders assess the company’s position and capacities regarding the sustainability issues in regards to the energy sector.
Conclusion
From the above discussion it can be concluded that, being an Energy Production and Distribution Company in Australia, Origin Energy has to maintain sustainability practices to reduce its carbon footprint on the environment and mitigate the negative impacts on the community. Sustainability reporting involves the documentation of the targets of the company and the performances in the past reporting period that highlights how much the company could actually achieve. Origin Energy follows only the documentation and reporting strategy for sustainability reporting. It was recommended that Origin Energy should use the SASB reporting framework for sustainability reporting. This framework contains specific industry standard aspects, such as, it has guidelines specific to the energy sector, which includes the financial aspects of the sustainability issues, relevant for Origin Energy. Thus, using this framework will increase the value that Origin creates for its internal and external stakeholders through sustainability reporting.
References
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Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.
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Imeson, A. (2012). Desertification, land degradation and sustainability. John Wiley & Sons.
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Wilson, M. C. (2013). A critical review of environmental sustainability reporting in the consumer goods industry: Greenwashing or good business. J. Mgmt. & Sustainability, 3, 1.
Sustainability reporting is a way of achieving trust from the stakeholders of an organization by reporting the environmental, governance and economic performance. It is a non-financial report. Sustainability report is published by the organizations that contain information about the environmental, economic and social effect of their regular business activities (Hahn & Kühnen, 2013). The values and governance model of the organizations are also documented in the sustainability reports and these help to establish the link between the corporate strategies and the commitment of the organizations towards achieving a sustainable global economy (Globalreporting.org, 2018). The importance of sustainability reporting lies in the aspect that it can help the organizations to evaluate, realize and communicate the social, environmental, economic and governance performance to the stakeholders, set goals accordingly and manage those more effectively. Hence, a sustainability report is an effective medium of communicating the sustainability goals, performance and their positive or negative impacts.
This report presents the importance of sustainability reporting to Frank Calabria, CEO of Origin Energy, Australia. It also aims to provide recommendations for the sustainability reporting and to explain the values the report would produce for the organization through the discussion on the relevant decision making, reporting, scientific and social sustainability literatures. The report will also present a critical analysis of the relevant sustainability issues faced by Origin Energy, their impact on the organization, critical study of the relevance of reporting in decision making and lastly, the identification and recommendation of the preferred or appropriate reporting strategies for Origin Energy.
Origin Energy is a major energy providing company in Australia that deals with the supply of electricity, LPG, natural gas and solar power (originenergy.com.au, 2018). This is a public sector company and listed in the Australian Stock Exchange (ASE). It was founded in February 2000, and has headquarters in Sydney. As of 2016, Origin Energy had almost 6000 employees and reported revenue of around AUD 12,174 million (originenergy.com.au, 2018). The core business of the company includes natural gas exploration and production, energy retailing, electricity generation, exploring and utilizing renewable energy. Origin Energy accounts for around 13% of Australia’s total power generation capacity, having 6010 MW (originenergy.com.au, 2018). Thus, it has one of the largest power generation portfolios in Australia. As highlighted in the company website, Origin Energy is committed to provide more sustainable, affordable, easier and smarter energy to the customers and communities (originenergy.com.au, 2018). The vision of the company is to achieve a cleaner, smarter and customer-centric energy future. The corporate strategies include priorities for accelerating towards cleaner energy, embracing digital and decentralized future, developing resources for meeting the growing demand for gas and maintaining the disciplined capital management, while the basic priority is to deliver a sustainable future (originenergy.com.au, 2018). Origin Energy has committed to reduce their carbon emissions to half by 2032 and for that it has started to implement various measures. Thus, being a publicly funded energy producing organization, Origin Energy is committed to deliver a sustainable solution to the customers and to the community for a better future.
The sustainability issues that have gained significance over the past few years include climate change, global warming, energy production and consumption, carbon emissions, land, air and water pollution, growing demand for oil and gas energy, depletion of natural resources and biodiversity, food production, water scarcity, changing demographics, geopolictical and economic instability, and inequality and poverty (terrafiniti.com, 2017). The United Nations have developed 17 sustainable development goals (SDG), which includes 17 different aspects of environment, economy and society, which need attention to achieve sustainable development (un.org, 2018). Countries and the industries are required to implement measures to address some of these goals, if not all.
Figure 1: Sustainable Development Goals by United Nations
(Source: un.org, 2018)
As stated by Waas et al. (2014), sustainability covers not only the environment and natural resources, but also the people. To provide a better future to the people and to the planet, the natural resources must be preserved and used in a sustainable manner. Along with the conservation of the natural resources, people, plants and animals should also be protected to maintain a balanced biodiversity on the planet. Hence, the key issues of sustainability include health and safety, accessibility and inclusion, equity and fairness, carbon emissions, climate change and global warming, waste and pollution. The social and environment issues arise as permanent or temporary changes to the land, water, air and overall atmosphere due to the human and organizational activities. Thus, from an organizational perspective, these sustainability issues must be evaluated and addressed accordingly.
According to the UNESCO document on the key issues of sustainable development, the focus is put on the population and human resources, food security, rapid urbanization, growing demand for energy, industrial growth, biodiversity and ecosystems, protecting the common natural resources, such as, oceans, environmental degradation and climate change (unesco.org, 2018). As per the UNESCO report, the population of the world could be more than 8 billion by 2025 and Africa, Latin America and Asia are seeing the majority population growth. At the same time, the degree and level of resource consumption per capita, along with economic and social conditions, health and education status are starkly different in the north and south of the planet. The growing population has been putting pressure on the urban regions and rapid urbanization is contributing in the depletion of natural resources, such as, forests. This is also affecting the biodiversities, as many exotic plants and animals are going extinct due to a massive environmental change. Moreover, the urbanization has also led to unemployment, poor housing infrastructure, and health issues.
Figure 2: Key sustainability issues
(Source: un.org, 2018)
Population growth results in growing demand for food, products, services and energy. Thus, there is also a rapid growth in the industries in the manufacturing and energy production. As highlighted by UNESCO, the demand for energy in terms of fossil fuel and natural gas has increased considerably after the industrial revolution in the 18th century. With growing automations and automobiles, the demand for oil and natural gas is increasing too. It is estimated that by 2025, the global energy consumption would be increased by 40% from that in 1980. The most commonly used energy sources are fossil fuels, that is, oil and natural gas, nuclear power, hydropower, and biomass fuels. The renewable energy sources, such as, wind, solar, geothermal and ethanol; account for only 21% of the total global energy consumption. The sources of fossil fuels are limited and the growing dependency is causing problems like Greenhouse Effect, that is, large scale climatic change due to carbon emission, excessive sulphur dioxide and nitrogen dioxide emissions during the combustion result in air pollution and acidification and depletion of fossil fuel resources (unesco.org, 2018). Thus, sustainability is extremely important to conserve the fossil fuel resources. Moreover, growing industrialization in also contributing in the demographic shifts, that results in urbanization. There has been increase in the occupational injuries, which threatens the community well being. Urbanization is also positing threats to the indigenous people, and thereby affecting their wellbeing and cultural heritage (firstforsustainability.org, 2018).
Apart from these, Imeson (2012) highlights that degradation of environment is also caused by over-exploitation of the land, draughts and the climatic changes, which also lead to extreme famines and poverty. Industrialization also contributed in the water pollution due to large amount of solid wastes and increasing carbon emission is causing global warming and glaciers to melt, which raises the water level in the ocean. Thus, social growth as well as unrest disturbs the environmental balance. The nuclear wars had not only destroyed the communities in the past, but also had affected the ecosystems in a massive way.
Thus, it can be stated that, sustainability issues must be identified, measured and controlled. For a better future of the communities and the planet, it is essential to protect the natural and social resources. Hence, the organizations must formulate and implement strategies to address the sustainability challenges. The sustainability report helps an organization to stay transparent to its customers and other stakeholders about their intention and initiatives towards achieving a better world to live for years to come.
As discussed above, there are multiple issues in sustainability that need to be addressed to achieve sustainable development. The social, environmental and economic issues manifest in different forms and affect the main agenda of sustainability, which includes the protection of the natural resources and offering a better future to the upcoming generations (Bell & Morse, 2012). However, depending on the nature or type of industry, the sustainability issues differ. For example, the sustainability issues for an oil and gas exploration organization will be different than those for an agricultural firm. Hence, to address the sustainability issues, an organization must emphasize first on identifying the key factors affecting the environment from their actions and then make strategies accordingly.
Origin Energy is one of the major energy providing companies in Australia. It deals with oil and gas exploration, energy production and electricity supply. Thus, it can be inferred that its actions have a severe impact on the environment, as it explores the limited resources of fossil fuel. Hence, the actions of Origin Energy affect the sustainability of the planet. Sustainability report is essential to communicate the actions of the organization and its measures to reduce the carbon footprint in the environment and community in order to achieve sustainability.
As the company has been involved in a sector that deals with energy generation from natural resources, it has the responsibility to implement measures to reduce the negative impact of its action on the society and on the environment. The company faces sustainability issues such as, depletion of the fossil fuel resources, air, water and soil pollution, solid waste, greenhouse effect, climate change and global warming and health and safety of the employees. As highlighted by Rosendahl (2012), the level of environment pollution is much greater in case of oil and gas industry. During the drilling, production, and refining of the products, an estimated 800 different type of chemicals are created through the emissions of wastewaters, solid waste, toxic gases and aerosols. These are also accompanied by greenhouse effect, acid rains, fall in water quality and high level of water and air contamination. Origin Energy also faces these sustainability challenges. Among these, carbon commitment is prioritized by the company. In 2015, Origin Energy has signed 7 carbon commitments to reduce the carbon emissions and decarbonise the natural environment. It has voluntarily participated in the annual Carbon Disclosure Project (CDP) to keep their activities transparent to the stakeholders. Along with that, it committed to undertake responsible participation in climate change policy, to adopt a scientific emission reduction target, to set carbon cost, to become a leading renewable and low-carbon energy provider in Australia, procure 100% energy from renewable sources, to reduce short lived climate pollutants and remove the deforestation from the supply chains (originenergy.com.au, 2018). Thus, the company has been addressing the carbon emission aspect to mitigate its negative impact on the society and put a step towards sustainability.
Sustainability requires the energy producing companies to commit for responsible consumption and production, clean and affordable energy for all, innovation and improved infrastructure, economic growth and decent work, ensuring the availability of good quality water, conserving the oceans and seas and protect the marine resources and diversity, and protecting the ecosystems by implementing measures of reducing deforestation and land pollution (Epstein, 2018). Thus, these factors must be identified by Origin Energy while developing the sustainability programs.
Health and safety of workforce is another important factor in achieving sustainability, as that ensures overall wellbeing of the community. The energy sector employees often work with hazardous materials and chemicals, critical equipment and in difficult or extreme locations. The risk of occupational health hazards or risks are quite high in this industry. Since, sustainability implies the long term well being for the economy, environment and society, the people of all classes should be protected and included for a better future (Markard, Raven & Truffer, 2012). Thus, philanthropic programs and health and safety programs are required to be launched by the companies in the energy sector.
However, from the sustainability report, published by Origin Energy, it is found that the company implements measures to address the sustainable development goals number 7, 12 and 13. Those are providing affordable and clean energy, practicing responsible production and consumption, and climate action respectively (originenergy.com.au., 2018). Other than these, it is also focusing on ensuring the health benefits and safe working environment for the employees. Thus, it can be said that Origin Energy should put focus on the other sustainable development goals designed by the United Nations. In other words, Origin Energy should consider expanding its sustainability programs and measures to implement benefits for the natural environment, marine resources, economic growth for the communities, ensuring clean water and improved green technology and improved infrastructure.
According to Griggs et al. (2013), sustainable development refers to the concept of achieving long term, and equitable economic, environment and social growth, balance and development, which is persistent. To achieve sustainable development, the corporate houses design their measures as per the SDGs by United Nations and implement those as per their resource capabilities. Hence, sustainable development is a strategic activity, which requires proper planning, high level of awareness among the management and employees, and planning for innovative new approaches to reduce the negative impact of the production and consumption activities of the organizations. The sustainability report is the document that exhibits the agendas of the organizations, targets, performance, aimed towards achieving sustainability. Hence, sustainability report is critical in establishing a relationship with the internal and external stakeholders regarding the sustainability issue. This report is also helpful in assessing the resource capability of the organisation to establish the sustainable practices and projects.
As stated by Wilson (2013), in the consumer goods industry, the supply chain is the aspect which can ignore sustainable practices and hence, in the USA, the consumer goods industry have implemented mandatory regulations to follow sustainable supply chain management practices. Thus, many organizations have adopted the practice of publishing sustainability report to ensure the stakeholders that they are following the sustainable supply chain management practices, which include attention to the environmental and social impacts along with maintaining the economic viability. The author also stated that publishing sustainability report and the framework to be followed is a voluntary decision and the companies have the liberty to not follow the entire UN guidelines. The organizations also have the liberty to submit or disseminate incomplete or inconsistent reports. In the consumer goods industry, supply chain practices, that is, transportation and distribution activities cause pollution through carbon emission; however it is found that these companies often under-report the carbon emission and sometimes publish inconsistent report. This does not serve the purpose of bringing transparency in the sustainability practices adopted by the companies. The author also found that the upstream supply chain partners publish more transparent reports than the downstream supply chain partners. Truthfulness is expected but cannot be forced while publishing the sustainability report by the corporate houses.
On the other hand, Leinaweaver (2015) writes on the relevance of the sustainability reporting by the corporate houses. According to the author, the organizations are wasting their money and time in creating the sustainability reports, which no one reads and are not at all effective. The strategic consultant firm, SustainAbility conducted interviews on more than 50 professional stakeholders and survey on 500 thought leaders and sustainability experts and they found that the sustainability reporting does not much relevance to the stakeholders. According to Kevin Wilhelm, CEO of Sustainability Business Consulting, lack of marketing techniques is creating obstacles in the effectiveness of the sustainability reporting. The companies publish giant reports with heavy business jargons, which the common customers cannot understand, and thus, people are not interested in reading the sustainability reports. Moreover, the author also highlighted since the stakeholders have different type of interest and thus, specific sustainability reporting is required. But that is not always for the company to publish specific different reports for these stakeholder groups. Apart from that, the social media has also reduced the effectiveness of the reports. The stakeholders now have the access to valuable information on sustainable practices in the social media and various websites and online publications. Hence, Leinaweaver (2015) suggested that the organizations find out new attractive ways to publish the reports, since the purpose of the sustainability reporting is not to increase reporting but to make the stakeholders and non-stakeholders read the report and know about the sustainable practices.
Hahn & Kühnen (2013) pointed out that to increase the value of the reporting the companies must identify the resource dependency, resource scarcity, evaluation of the risk and externalities. However, the most important thing that the stakeholders notice is that what the organizations are actually doing in the real world than whether they are truthfully reporting their sustainable activities. As per a report by Ernst and Young, sustainability reporting is becoming a mainstream practice by the corporate houses in all the sectors (ey.com, 2018). Thus, it can be said that sustainability reporting is important to establish a transparent communication with the stakeholders regarding the sustainability issues, however, the reporting should be matched by actual visible efforts and actions by the organizations.
In this regard, it can be said that, increased transparency in the sustainability report helps the organizations in better decision making (Globalreporting.org., 2018). The energy sector must make decisions that can help to achieve sustainability as well as maintain the usual business. The business decisions have direct impact on the internal and external stakeholders, such as, the employees, community, government, trade unions, creditors, shareholders etc. Hence, profitability is also required along with sustainability and hence, decision making is based on many other factors other than only on financial information. These factors include sustainability issues. The sustainability reporting ensures that the organization consider the impact of their business activities on the sustainability issues. This also helps them to be apparent about the risks, opportunities and challenges faced by them. Thus, the increased level of transparency about the business activities and their impact on the sustainability issues is beneficial for better decision making, which in turn improves the trust and relationship between the business, stakeholders and government.
A report by CPA Australia shows that sustainability reporting helps the organizations to make decisions regarding Corporate Social Responsibility (CSR), which include different types on initiatives taken by the organizations to achieve sustainability and welfare for the environment and community. Since, the companies in all types of sectors work with a profit motive, thus, short term goals get more priorities than the long term sustainability (Loftus & Purcell, 2010). However, according to the experts, sustainability includes sources of long term business success beyond their reputation. Sustainability reporting and competitive advantage are considered as significant factors for decision making. The companies need to consider the factors that contribute directly and indirectly in their financial performance and market edge strategies are designed to assess the opportunities in the new and existing markets. The sustainability reporting presents the risks and opportunities for the organizations, which are incorporated with other facets, such as, resource capability, improved efficiency and adaptability and awareness, during the decision making process. The decisions are taken to improve the business activities such that to achieve sustainability, increase profitability while adopting suitable sustainable practices and to increase its reputation among the stakeholders.
Origin Energy has adopted the strategy of publishing a PDF document for its sustainability reporting. There are various types of sustainability reporting strategies, namely, G4 Sustainability Reporting, International Integrated Reporting Framework, and Sustainability Accounting Standards Board (SASB) reporting framework.
Under the GRI guidelines for G4 Sustainability Reporting, the companies need to disclose the most vital positive or negative impacts on the society, economy and environment. The companies can generate relevant, standardized and reliable information, to be used to assess the risks and opportunities and apply them for decision making process relevant for both the stakeholders and within the business. The benefit of G4 guidelines is that it is designed such that it can be adopted by all type of firms in all type of industries and sectors, irrespective of its size and range of business activities (Globalreporting.org, 2018).
Figure 3: G4 Sustainability Reporting framework
(Source: Mathai, 2014)
International Integrated Reporting Framework <IR> enables the firms to bring greater efficiency and cohesion in the reporting process. The integration of information helps to reduce duplication in the information, and hence improves the quality of information. This is beneficial for the financial capital providers to productively and more efficiently allocate the financial capital. This reporting strategy focuses on creation of value from the capitals used by the businesses to achieve a more financially stable economy. The content of the report includes: Organizational overview and external environment, Governance, Business model, Risks and opportunities, Strategy and resource allocation, Performance, Outlook and Basis of presentation (Integratedreporting.org, 2018). The guiding principles include Strategic focus and future orientation, Connectivity of information, Stakeholder relationships, Materiality, Conciseness, Reliability and completeness, and Consistency and comparability.
Figure 4: International Integrated Reporting Framework
(Source: Integratedreporting.org, 2018)
Sustainability Accounting Standards Board (SASB) reporting framework connects the investors and the businesses on the financial effects of sustainability. This framework contains the financial material, market information and it is mostly industry specific (Sasb.org, 2018). According to the website, the mission of SASB is to assist the businesses across the world to identify, manage and report on the sustainability issues, which matter most to their investors. The SASB standards are developed on the basis of the extensive level of feedback from the investors, companies, and other participants in the market as a part of a transparent and publicly documented method. Moreover, the greater benefit of this reporting framework is that, these standards differ by different industries. This enables the investors and the companies to make comparisons on the performances from one company to another within the same industry. These standards are amended as per the public and market feedback to make its more relevant for the specific industries.
Figure 5: Sustainability Accounting Standards Board (SASB) reporting framework
(Source: Sasb.org, 2018)
Going by the above-mentioned sustainability reporting frameworks, it can be recommended that Origin Energy should adopt the SASB framework for sustainability reporting. This framework is more relevant as it is industry specific. There are multiple different sectors in the manufacturing business world and the sustainability framework and requirement are also different in different sectors. Hence, publishing an industry specific sustainability report is more beneficial for the industry as well as for the internal and external stakeholders of Origin Energy. Moreover, this report framework also focuses on the financial aspects and thereby assesses the risks and opportunities of the company regarding the sustainability issues. This will help the stakeholders assess the company’s position and capacities regarding the sustainability issues in regards to the energy sector.
Conclusion
From the above discussion it can be concluded that, being an Energy Production and Distribution Company in Australia, Origin Energy has to maintain sustainability practices to reduce its carbon footprint on the environment and mitigate the negative impacts on the community. Sustainability reporting involves the documentation of the targets of the company and the performances in the past reporting period that highlights how much the company could actually achieve. Origin Energy follows only the documentation and reporting strategy for sustainability reporting. It was recommended that Origin Energy should use the SASB reporting framework for sustainability reporting. This framework contains specific industry standard aspects, such as, it has guidelines specific to the energy sector, which includes the financial aspects of the sustainability issues, relevant for Origin Energy. Thus, using this framework will increase the value that Origin creates for its internal and external stakeholders through sustainability reporting.
References
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