AGL is the new Kodak
6 June 2022 at 4:27 pm
Executives preaching business as usual need to pay attention. AGL is what will happen to any business that relies on fossil fuels and fails to get out in time, writes David Ritter, chief executive officer of Greenpeace Australia Pacific.
In the foreground of the office, a dishevelled looking man is holding something that is burning, while piles of paper fly into the air, and a young woman rides past on an ostrich pumping her fist. It was the GIF used by journalist Matt Bevan to summarise the “extremely normal” day AGL was having, when it was announced that the company’s demerger was off, the CEO and board chair were stepping down, and multiple board members were gone too. This is how BAU finally ends for AGL, Australia’s number one domestic climate polluter.
AGL having an extremely normal one today I see pic.twitter.com/uZS7qNzm1u
— Matt Bevan (@MatthewBevan) May 29, 2022
AGL deserves to become a metonym. AGL is what will happen to any business that relies on fossil fuels and fails to get out in time. It is the product of years of executive group think; of leadership timidity; of a failure to innovate; of confusing the myths and BS that serve the fossil fuel status quo for independent analysis. It is also the consequence of allowing untoward political interference in corporate good governance.
Certainly, AGL had every chance to innovate in time. Indeed, back in the mid-2010s, AGL’s then CEO Andy Vesey had a plan: AGL would respond to rapidly changing business conditions, by transitioning away from generating electricity from burning dirty coal and would embrace renewable energy. But Vesey was pushed out with the connivance of then environment minister Josh Frydenberg.
With Vesey gone, AGL took the low-road and doubled down on coal. Instead of responding to emerging market signals – and the urgency of climate science – AGL increased the amount of electricity it generated from renewable energy by an average of around 0.2 per cent per year between 2016-2021.
As renewables got cheaper and cheaper, the climate science worsened and AGL’s share price declined, the warnings came thicker and faster. In August 2020, then CEO Brett Redman noted the “considerable uncertainty” of the company’s operations. The proposed demerger was first floated in 2021, after AGL’s share price hit a record 52-week low, with underlying profit dropping 27 per cent after the company posted a $2.27 billion bottom-line loss.
In late March 2021, AGL announced the proposed demerger to separate its coal-burning power stations from the company’s retail arm. Investors were immediately unimpressed. A month later, Brett Redman abruptly resigned. Shortly afterwards, Greenpeace initiated a campaign to persuade AGL to commit to closing all of the company’s coal-burning power stations by 2030, in line with what is needed to achieve the agreed Paris International climate goal.
The centre-piece of our campaign was parodying AGL’s name and logo. AGL’s response was to threaten to sue, then to actually commence litigation against Greenpeace. This communicated two things to Greenpeace, and to the world. First, that AGL’s decision-making process had already become so unhinged that someone actually thought it was a good idea for a massive polluting corporation to sue an environmental charity when the law was clearly not on their side. Second, that the decision makers at AGL appeared to care more about appearances than substance. As Mike Cannon-Brookes tweeted with irony at the time; “good to see the order of their priorities”.
It is quite amusing that AGL isn’t disputing the facts (because it is Australia’s largest climate polluter & 2x the second!)… it’s disputing the use of its logo.
Good to see the order of their priorities. https://t.co/KyfcEeTpMq
— Mike Cannon-Brookes 👨🏼💻🧢🇦🇺 (@mcannonbrookes) May 8, 2021
AGL became a corporate case-study of “the Streisand Effect” – instead of suppressing the parodying of their brand, they ensured that the accurate designation of the company as Australia’s worst domestic climate polluter was entrenched by extensive top-tier media reporting around the world.
Meanwhile, AGL pressed on with the demerger debacle. When further details were released in June 2021, the plan was met with “a humiliating reception” from commentators and investors.
AGL chair Peter Botten openly admitted that AGL’s leadership had failed to anticipate changes in the energy market. Then in September 2021 at AGL’s AGM, the company faced an unprecedented investor revolt, as 55 per cent of shareholders defied the board and supported a motion to set climate targets in line with the Paris Agreement.
And so the stage was set for the final denouement of the demerger this year. Insiders warned there was no Plan B but, to use the memorable phrase of my colleague Glenn Walker, the demerger was a “turd rolled in glitter”.
Mike Cannon-Brookes has been justly celebrated for his decisive intervention – but he was far from alone in seeing the demerger as a bad idea. Others such as HESTA Super, ESG-investment group Snowcap, Martin Currie and proxy advisor ISS were also unconvinced, with a spokesperson for the latter saying that:
“The board didn’t make its case clear. There was a lack of logic when compared to the strength of the separate entities in other demerger proposals. That goes to fiduciary duties, and there were potential conflicts of interest.”
Meanwhile, AGL’s biggest polluting coal station Loy Yang A keeps breaking down and falling apart, in the perfect physical analogue to the company’s business strategy.
Fortunately for the climate, for shareholders and for all the employees who have had to put up with this disastrous leadership, the rescue intervention is now on, spearheaded by Cannon-Brookes. New visions are emerging for how AGL can go from laggard to leader.
So what is the cautionary tale in all of this? Remember, every time you hear a coal, oil or gas executive finding convenient excuses for business as usual, or talking blah blah bollocks about “a positive future for coal”, or “gas as a transition fuel”, or libelling renewable energy in some way, then it is just a matter of time before someone saddles up the ostrich and the papers hit the sky…