Integrating sustainability issues into an annual report is never easy, but the challenge is compounded for coal companies, where the entire industry teeters on a precipice between meeting current energy needs and contributing to future climate change. To make it even more complicated, they must face this challenge in the shadow of impending carbon regulation. Centennial Coal, which supplies 46% of New South Wales’ coal-fired power, is a prime example of such a company, but one might not guess at these underlying tensions from reading through Centennial’s rosy Year in Review 2010 report, entitled “Ready Power.”
Purchased by the Thai energy conglomerate Banpu in 2010, Centennial Coal is a coal mining and marketing company with 10 coal mines and approximately 1,700 employees throughout New South Wales. Like many in the coal industry, Centennial is busy emphasising its role in providing affordable energy and employment to support economic recovery, and this theme dominates much of the company’s latest report.
Ready Power doesn’t bill itself as a sustainability report, and it doesn’t read like one either. Centennial Coal lays out its priorities at the very beginning: “Our mission is to maximise Shareholder value (as a member of the Banpu Group) by acquiring, developing and operating a portfolio of coal resources.”
Although Centennial goes on to state that, “good social and environmental performance is integral to its ongoing successful performance,”
these subjects play a supporting role in the report. The first two-thirds of the glossy 36-page document are devoted to financial and operational updates, with Sustainability, Health and Safety, Our People, Environment, and Community sections sandwiched into the last third.
Hence, the main focus of the report is unapologetically on Centennial’s strong financial performance in 2010, including details of the acquisition by Banpu. There is also an in-depth discussion of how global energy demand and Centennial’s future strategy (e.g. more market based pricing over fixed contracts) will help to ensure continued profitability.
To some degree, this honesty is refreshing. Centennial is, after all, a large-scale coal company, and attempts to overplay its environmental or community contributions would inevitably ring false. Nonetheless, the document could benefit from better integration of sustainability components with the heart of the report, rather than leaving them at the end where they read like an afterthought. For example, although sustainable development is mentioned in the corporate values right up front, there are no clear linkages between these corporate values and later sections such as Environment and Community.
The report includes a section dedicated to Climate Change, which also discloses Centennial’s 2010 emissions as reported for the National Greenhouse and Energy Reporting Scheme (NGERS). However, the potential impacts of carbon regulation on the coal industry aren’t given the significance one might expect. Instead, there is a vague reference to Centennial’s participation in “numerous industry discussion and working groups to analyse and prepare for the proposed Carbon Pollution Reduction Scheme. This process has resulted in the development of valuable assessment techniques and information that can be used to analyse future proposals in this area.”
The outcomes of this participation aren’t clarified, and for a major coal company facing potentially game-changing carbon legislation down the road, the topic warrants a more in-depth discussion. For example, what kinds of risks could result from carbon legislation? What steps is Centennial taking to understand those risks and communicate them to shareholders and internal and external stakeholders?Communication:
Centennial’s latest report is clearly written and paints a strong picture of the company’s business strategy. But with 18 sub-sections and no overarching framework, the 2010 Yearly Review reads at some points more like a laundry list of operational achievements than a summary of Centennial’s performance against clearly-identified targets. There are sections on Strategy and Development and Sustainability, but these areas are not integrated with the operational or financial review, so it is challenging to get a clear picture of how various components fit into Centennial’s overall story.
Without a high level framework to help navigate the report, it is particularly difficult to objectively assess the company’s performance across non-financial areas. Not until the Sustainability Achievement Snapshot at the very end of the report (page 36) is the reader introduced to Centennial’s key focus areas for sustainability in 2010 and 2011. Outlining these metrics upfront would help identify the most material social and environmental issues along with Centennial’s response to these issues. Instead, assorted CSR initiatives are summarised under feel-good headings such as, “Good community relations makes good business sense."
Without a comparison to previous years, it is hard to contextualise these initiatives or understand how they support Centennial’s broader commitment to CSR.
At several points in the report, items are mentioned in passing but not substantiated. For example, the Chairman’s report alludes to a “working sustainability framework,”
resulting from a 2009 review of what sustainability meant to Centennial, but it’s not clear what this framework is or how it relates to the report. Similarly, although one of the corporate values touches on Centennial’s investment in “technologies and other initiatives that seek to reduce emissions”
there is no disclosure of how much is invested or any targets or timeline for emissions reduction. The discussion on Native Titles is equally high-level, revealing only that Centennial, “seeks to find mutually acceptable solutions to minimise any impacts that may arise as a result of the Group’s mining activities.”
Three Native Title agreements are listed, but no details or specific goals around Indigenous rights are provided.Credibility:
Centennial gains credibility for its honest portrayal of two negative environmental incidents in 2010: a water discharge from Newstan and a slumping incident in endangered East Wolgan swamp. Both events are described; however, only for the second incident does Centennial outline the steps it is taking to prevent similar disasters in the future.
The tone of the report is largely matter-of-fact and inspires confidence in its credibility. However, this sense of trust is undermined by the disclaimers at the end of the document. Centennial did not have its information audited by a third party, and in fact states that “this document has been prepared by Centennial Coal Company Limited for information purposes only. It may contain information (including information derived from publicly available sources) that has not been independently verified by Centennial.”
There is no explanation given as to why the report was not third-party verified.Recommendations:
1. Develop an overarching framework to organise the report and integrate financial, operational, and sustainability information into a common story
2. Align the Sustainability Achievement Snapshot with report content in these areas, and clearly identify metrics or key performance indicators
3. Enhance credibility through seeking third-party verification or assurance
Chelsea Reinhardt is an Associate at Net Balance, a sustainability advisory services firm with offices in Melbourne, Sydney, Brisbane and London. www.netbalance.com