Where it was not possible to report on activities prior to 12 October 2006 this has been duly noted. The report includes reference to AGL’s investments in Chile and PNG where stakeholders have suggested this information is material and relevant.

Sustainability and AGL

As part of our strategy to grow AGL into a world-class, customer focused energy company, we recognise that our shareholders, customers, employees and the community expect us to appropriately and transparently manage environmental, social and economic risks and opportunities that relate to our business.

AGL acknowledges that while delivering appropriate returns for our shareholders, it is imperative that we proactively manage key sustainability issues.  These issues include:

• Reducing the carbon intensity of electricity generation, while at the same time meeting customer’s expectations on energy cost.
• Providing improved service to all our customers and ensuring equitable access to energy for vulnerable customers;
• Responding to community concerns – including the impact of our development activities on local communities, and responding to broader community needs; and
• Providing a work environment that motivates, attracts and retains talented employees.

Stakeholder Consultation

Throughout the year we consulted our stakeholders, about various elements of our approach to sustainability issues. We also sought specific comment on the scope and content of this report from:

• Representatives from the AGL Customer Council including Harry Herbert, UnitingCare; Tenzin Bathgate, Centre for Credit and Consumer Law; Janine Rayner, Consumer Action Law Centre; and Gavin Dufty, St Vincent de Paul Society Victoria;

• The World Wildlife Fund – Australia; and

• Kenedex Pty Ltd, Ro Coroneos (Sustainability reporting practitioner).

Sustainability Data

Data in this report relates to the performance of AGL Energy Limited for the period 1 July 2006 to 30 June 2007.  Due to the demerger of assets during the year, data relates to “the continuing operations of AGL Energy Limited” which comprises the elements of The Australian Gas Light Company which continued to operate under AGL Energy Limited.

AGL has sought assurance about data accuracy and reliability through the following mechanisms:

• PricewaterhouseCoopers has conducted a limited assurance review over selected environmental and greenhouse data;

• George Wilkenfeld Associates has reviewed our methodology for estimating our greenhouse supply footprint; and

• Positive Outcomes has assured the value of our community contribution using the methodology established by the London Benchmarking Group (Australia).

In addition, data in the economic section of the report includes financial performance information from AGL’s audited 2006 Financial Report (accounts). The full financial report is available on www.agl.com.au.

Governance and Management

Leadership.

The AGL Board, which directs AGL’s strategic priorities and performance, believes that sustainable performance is supported by best practice corporate governance standards.  AGL’s structures and processes are consistent with ASX Corporate Governance Council Best Practice Recommendations, and AGL’s Full Annual Report includes a full statement disclosing the extent to which we have adopted and meet these recommendations.

The Board has established three standing committees of its members: the Audit & Risk Management Committee; the People & Performance Committee; and the Health, Safety & Environment Committee, which meet regularly to oversee key risks affecting our business.

At the executive level, the AGL Energy Leadership Team builds sustainability considerations into our business strategy and day-to-day operations. In the new AGL, sustainability strategy is reported directly to the CEO through the Head of Brand and External Affairs.  Reporting to the Head of Brand and External Affairs is the Manager, Sustainability Strategy.  This role has the responsibility of developing sustainability strategy and policy, liasing with the business on these policies and reporting progress on sustainability issues.

During 2007/2008, AGL will review these reporting structures to ensure that as we continue to grow and expand our business that we maintain our focus on sustainability issues.

Key Systems and Policies.

A range of formal policies, plans and management systems govern AGL’s day-to-day operations. AGL adopted a range of key systems and policies developed by The Australian Gas Light Company and also developed a number of processes.  These include:

• AGL’s Health, Safety and Environmental Management system, Life Guard, which is based on AS/NZS/ISO14001 (Environmental Management Systems) and AS/NZS4801 (Occupational Health and Safety Systems). HSE Committees monitor and drive performance improvement and compliance with Life Guard;

• AGL's Market Disclosure Policy describes our continuous disclosure obligations and how they are managed by AGL, as well as how we communicate with financial markets;
• AGL's Privacy Statement outlines our responsibilities and commitment to the privacy of people with whom we deal; and
• AGL’s Code of Conduct details expected codes of behaviour for employees and contractors, with specific guidelines relating to ethical standards, discrimination and harassment. The Code operates in conjunction with our formal legislative compliance program, and is administered by the AGL Ethics Panel.

Risk Management  

The identification, evaluation and management of risk is central to AGL’s sustainability program. AGL has a formal holistic enterprise-wide risk program based on AS/NZS 4360:2004 (Risk Management). The Risk Management Policy describes main risks in five broad categories: sustainability; strategic; financial performance; operational; and compliance. Sustainability risks include governance and leadership processes, reputation risks and major events which impact viability.

For further information on the policies, following the links below:

Stakeholder Engagement

Engaging in constructive dialogue with stakeholders keeps us responsive to issues important to our customers, regulators and the wider community. While the AGL Customer Council is our primary forum for stakeholder communication, we also work with environmental non-government organisations, government and regulators on specific issues where appropriate.

AGL published their first Annual Report in September 2007.  The Full and Concise Annual Report 2007 can be accessed on www.agl.com.au.

• Verification and Assurance
• Global Reporting Initiative (GRI) Index
• Glossary