Executive Summary The United Nations Sustainable Development Goals (SDGs) were adopted by all United Nations Member States in 2015 to end poverty, reduce inequality, to protect natural resources. The SDGs set a benchmark for businesses, government and society to make the right choices to improve life for future generations. Mercury takes SDGs seriously. As far as this Organization is concerned, sustainability is more than just managing and looking after natural resources it is also about sustainably running its business to ensure it's around for the long haul. That is why Sustainability at Mercury is about energy freedom built upon five pillars, which are customer, people, commercial, partnership and Kaitiakitanga, these lead to Sustainable Development Goals by providing affordable and clean energy, decent work and economic growth, and sustainable cities and communities. Its customer pillar focus areas are brand, loyalty and experience, its close connection to its customers is a demonstration of loyalty. Mercury's people pillar focus areas are highperformance teams, safety and wellbeing, capability and development. The organization allowing people to take ownership, develop capability and lead their team to safety deliver important business outcomes is a good example of this. Its commercial pillar focus areas are operational excellence, generational development and sustainable growth, to bring this into life is the ground-breaking and start of the construction announcement of the decision to extend the initial 33 turbines to the full BD-turbine build to create what will be New Zealand's largest wind farm. As far as the partnership pillar is concerned, the focus areas are industry and Research, lwi (tribe) and Government (Central and local) relationships. This organization has demonstrated this by raising awareness of the mighty Waikato River which is under pressure, water quality is declining and there is growing competition for its resources, according to Gavin Williamson, Mercury's catchment Sustainability Manager, Mercury's vision is an evolution of its relationship with the river and those that it share it with by evolving work to develop a partnership strategy with the aspirational goal of making the Waikato the world's best catchment. Its last Pillar is called Kaitakitanga. According to the Encyclopedia of New Zealand, Kaitiakitanga means guardianship, protection, and preservation of sheltering it's a way of managing the environment, based on the traditional Maori view. Hence, this pillar focuses on natural resources, climate change and assets. it has brought this to life by the refurbishment of its Whakamuru hydro station, this refurbishment reects how it balances its care for the legacy of its asset with the recognition of its place in the wider environment. Furthermore, this shows a commitment to the Maori concept of kaitiakitanga (guardianship and protection) influences its long-term purpose as an organisation, nally, it guides how this organization works with both natural resources and the power stations that were built by earlier generations of New Zealanders ( Mercury Annual Report, 2022). 1. INTRODUCTION 1.1 Assignment Background This written research assignment is based on designing a sustainability accounting for a rm chosen for this assignment group called Mercury. This group has done its research by collecting and analysing relevant data that will help in designing a sustain- ability accounting system for Mercury. This written research assignment will provide evidence reasoning for the sustainability accounting system design by designing an activity-based system to measure their cost, by using the Global Reporting Initiative (GRI) framework and develop a performance measurement matrix for managers to support its core sustainability model. Furthermore, this written research assignment will design the Balanced Scorecard (BSC) to report financial and nonfinancial matrices that support the firm's core sustainability model. Finally, it will relate the ABC, GRI, and BSC operational framework that strategically informs the firm's vision, mission and goals (ACT 302 Written Assignment Question). 2. Activity-Based Costing System 2.1 Introducing Activity-Based Costing System According to Farrukh et al (2007a), Activity-based costing was pioneered by Cooper and Kaplan.According to them, it is a different way of viewing cost allocation, unlike the traditional accounting method where there is inconsistency in providing comprehensive cost information for decision-making in today's organization. Research has shown that the full cost of manufactured parts or services includes direct labour, material, variable overhead and fixed cost. Direct labour and material are easily traceable to the cost object in an economically feasible way unlike the overhead cost which is mostly reported by the responsibility centers such as departments, plants, or subsidiaries, hence leaving an organization with the difficult decision of how to allocate overhead costs to product or services. Farrukh et al. (2007b) went further on to write that the traditional approach uses a two- step system for absorbing costs, costs are accumulated in a pool and then allocated to specific goods or services through company-wide bases such as direct hours and a machine hour used in producing good and service. Far back from the mid -1920 when cost accounting systems were being developed, indirect costs were a relatively small percentage of the total cost, the reason why managers back then found that traditional costing systems were reasonably accurate and both easy and inexpensive to run. However, in recent years with indirect cost forming a high proportion of the total cost, this increased competition and more diverse outputs and processes, broad averaging has resulted in accurate cost of output, which of course, in turn, has led to cross-subsidisation of output (Horngren et al. 2018a). Nevertheless, in recent years many companies have used and have been using activitybased costing in onetime profitability studies to enable them to know which products or customers to cut or keep. As far as ABC is concerned, it is not just a superior accounting technique that shows accurate profitability of a customer or a product rather it is integrated into a critical management system that serves as a powerful tool for continuously rethinking and dramatically improving not only products and services but also processes and market strategies (Joseph et al. 1995). 2.2 Evaluating Mercury activity-based costing system Atrill and McLaney (as cited in Emba Pro 2023) write about solving Mercury NZ's costing problem with the ABC accounting method, according to them Mercury NZ markets two types of products in the industry, to make it simple these products will be referred to as Standard Product and Custom Product, Mercury NZ produces Standard product in large batch sizes while the custom is produced in smaller batch sizes. This financial year's annual sales units of Mercury Standard product is 11500 while Mercury custom product is 13678. This assignment, however, would use different numbers, calculations and models different from Atrill and McLaney (as cited in Emba Pro 2023). Furthermore, due to the word limit in this research, it would ignore direct material cost, and direct labour cost and focus on the indirect cost by using ABC to assign the overheads and indirect costs less arbitrarily and focusing on the true relationship between costs, overhead activities and related productslservices delivered by Mercury NZ. After identifying all the support activities and associated costs & factors that drive those costs, managers at Mercury NZ can take the following steps to conductABC costing. 2.2 Calculating Overhead Recovery Rate of Indirect Costs Overhead Cost Analysis Cost Drivers Set Up Costs Special part handling cost Customer invoicing cost Material handling cost Other overheads Total overhead 64521 50423 29172 53270 207375 404761 Number of Set Ups Number of Special Parts Number of Invoices Number of Batches Labour Hours 2.3 Allocating Total Cost Associated of Activities to Relevant Pool . Set up cost driver is set up per batch, the standard driver volume is 12 while the custom driver volume is 720, and the total driver volume is 732. The total set- up cost is 64521. Thus, the driver rate = Set up cost/driver volume (645217732) =88.14. Standard cost overhead allocation = 88.14 * 12 = 1,058. Custom cost overhead location is 88.14 * 720 = 63,461 oThe special part handling cost is $50423, the driver is special part per unit. Standard driver volume (51530) and Custom driver volume (63186). Thus, the total drive volume is 114716. Driver rate (50423763186) = 0.798 Thus, standard cost overhead allocation is 0.798 * 51530 = 41,121. Custom cost overhead allocation is 0.798 * 63186 = 50,422 0 The customer invoicing cost is $29172, and the driver is the number of invoices. Standard invoices per year (50) while custom invoices per year (240). hence, the total driver volume is 290 (50+240). Driver rate is (291721290) = 101, thus custom invoicing costallocation is 101*240 = $24,240 while standard invoice cost allocation is 101*50 = 5,050 0 Material handling cost is $53270, and the cost driver is the number of batches. The standard driver volume is 11.204 while the custom driver volume is 223.6. Thus, the total driver volume is 234.804. The driver rate is $227 (532707234804). Hence, the material handling cost allocated to the standard product will be $2543.308 (11.204*227). Material handling cost allocated to custom products will be $50757 (227*223.6). - Other overhead total cost is $207375, and the cost driver is labour hours. The standard driver volume is 26458 while the Custom driver 28950. The total driver volume is 55408(26458+28950). The driver rate is 3.74 (207375/55408). The other overhead cost that will be allocated to the Standard product will be $98953 (3.74*26458). The other overhead cost that will be allocated to the Standard product will be $109273. 2.4 Integrating Transfer Pricing and Activity-Based Costing Transfer pricing is the pricing of goods and services within a multl-dlvislonal organi- zation, particularly regarding cross-bordertransactions. For instance, the production division can sell products to the marketing division or goods from a parent company to a foreign subsidiary with the choice of the transfer affecting the division ofthe total profit among the part of the company. The government has had to step in to regulate transfer pricing because some multinational enterprises tend to use transfer prices to minimize taxes, an example of this include companies would deliberately use a transfer price to get higher profit in countries with lower tax rates, companies would deliberately set a transfer price to lower their prot in a country with high tax rate (Farrukh et al. 2007c). The advantage ofABC in Mercury is that it allows Mercury to focus on the allocation of overhead costs and these costs are considerable when companies transfer components or services between different taxes jurisdictions (Weekly, as cited in Farrukh et al. 2007d). These costs can be machine overhead; set-up cost; pack ingltransportation and research and development, unlike the traditional absorption method that reports these activities to responsibility centers and allocates them to products or territories using machine hours or direct labour as a cost driver. 3. Global Reporting Initiative (GRI) 3.1 Global Reporting Initiative Framework Global Reporting Initiative (GRI) has developed and delivered to organizations the global best practice for how organizations communicate and demonstrate account- ability for their impacts on the environment, economy and people. Furthermore, for over 25 years GRI has been providing the world's most widely used sustainability reporting standards which cover topics that range from biodiversity to tax, waste to emissions, diversity and equality to health and safety. Thus, as far as GRI is concerned, it enables transparency and dialogue between companies and their stakeholders (General Reporting Initiative [ GRI] 2023). Horngren et al. (2018b, p.912) in their book provides an overview of the GRI stand- ards. According to them, GRI reporting is based on principles relating to report and quality with principles that deal with important issues like what should be reported and how it should be reported. Furthermore, according to Horngren et al. (2018c, p.912), the principle and other general matters related to disclosures and how management deals with sustainability are included in three universal standards GRI,101: Foundation GRI 102: General Disclosures and GRI 103 ManagementAp- proach. Furthermore, there are Thirty-threeSpecific standards set out for disclosure regarding economic, environmental and social matters. Mercury takes Sustainability reporting seriously, that is why along with the use of GRI guidelines, it is developing other frameworks to ensure its disclosures reflect global standards. Mercury in its current annual report provides its GRI index, thus this assignment would use the GRI index of Mercury Annual Report, 2022 to provide its GRI reporting. However, due to word count limitations in this research, this research would only analyse Topicspecific Standards of Mercury which are GRI 200 (Economic Performance) GRI 300 (Environmental) GRI 400 (Social.) 3.2 Economic 201 Economic performances Mercury Annual Report (2022, p.66-80) has its disclosure statement that provides the actual and potential climate-related risks and opportunities on the organization's business strategy, and financial planning where such information is material. It is titled a \"TCFD" report and it has been used to guide its disclosure. TCFD framework suggests dividing climate change risks into the categories of Market and technology shift, reputation, policy and legal, and physical risks. Market (Electricity & Carbon) & Technology The physical and climate-related risks could have a significant impact on the market. The effect of decarbonisation might impact the relationship between supply and demand. Secondly, the electrification of transport and the conversion of industrial process heat from thermal fuel sources to electricity will increase demand and provides financial opportunities. Reputation Risks and opportunities can arise at the organisational and sectoral levels. For instance, Mercury's reputation could be enhanced when it is recognised as a thought leader on renewable energy and the electrification of transport through partnerships for action in climate change in the Waikato catchment including carbon capture pilot. Policy 8. Legal As far as policy & legal is concerned, some risks and opportunities could come from it, this could be policy response or from the absence of policy. There could be legal risk arising in the context of proceeding against companies and directly forfailing to comply with climaterelated activity. For instance, organisations and directors could face a class action for failing to comply with climate-related activity or inactivity. Physical Risks and Opportunities The physical risk could take the form of acute, general shorter-term events, this includes, fire, flood or longer-term chronic impact, for instance, the less efficient operation of a geothermal power station could cause sustained increases in tem- perature that could lead to financial risk and opportunities as a result of the impact on Mercury's asset on how business is being done as a result of the impact in the market that it operates. 3. GRI 300 Environmental Standard Series 303 Water Mercury's GRI disclosures regarding water (Mercury Annual Report 2022, p.117) stated that Mercury does not withdraw water for a generation. However, 6,465 Mm3 were used for hydro generation in the financial year 2022. 305 Emissions Mercury produces an annual emissions inventory report following international standards and methodologies. Mercury emissions profile is dominated by scope 1 emission, namely fugitive emission from geothermal electricity generation. In this nancial year, Mercury reported that its scope 1 emissions have reduced by 60% due to decommissioning of Southdown (gas-fired power plant), this is a huge reduction in geothermal emissions. Furthermore, Mercury's wind generation base has grown due to new build and acquisitions. 307 Environmental compliances Non-compliance with environmental laws and regulations has consequences which could be fine. In the financial 2022, Mercury received one infringement notice for breaches of consent conditions (Mercury Annual Report 2022, p.117). 4 Social 401 Employment During the 2022 financial year, Mercury hired 207 new employees and the voluntary turnover rate was 21%. Benefits were provided to employees for their commitment and loyalty to the company's progress. For instance, full-time workers have the option to work with their leader and team to create the kind of flexibility that suits them and their life. Furthermore, 26 weeks of fully paid primary career leave receive a \"top up" of the IRD payments to the normal salary and 4 weeks of partner leave. 403 Occupational Health and Safety Workers have their representatives on the health and safety committee including the joint chair of the generational committee. During the 2022 nancial year, there was no serious injury at a safetysensitive site of customers through Mercury service. 405 Diversity and Equal Opportunities Mercury is keen on diversity and inclusion, which is why it has a strategic objective to lift the diversity of its workforce at all levels and to raise awareness of diversity and inclusion across the organisation. During the 2022 nancial year, it increases its percentage of female employees from 38% to 39%, however, its target of 45% was not met. Nevertheless, it will work towards meeting this target. As for pay equity, the target for the financial year was 100% equal payment between the two genders. However, 94.9% was recorded, nonetheless, Mercury will work towards meeting this target. As far as ethnicity is concerned, Mercury increased the recruitment of Maori people by 4%, however, the target was 7% for the nancial year. The Asian employee's target of 23% was met. Nevertheless, at all ethnic levels these ratios are closely aligned with Mercury's worker population demographic and are minimum (Mercury Annual Report 2022, p.99). 413 Local Communities Mercury has increased its programme of enhancing value for customers. An ap- proach to customer care was based on compassion, connection and care in its service. A targeted solution was implemented, such as payment options, a variety of pricing plans, energy monitoring tools and a customer care hub on the website. Independent facilitated feedback was sought from key groups to understand how the organization might continue to grow and work together. Furthermore, Mercury engaged with Oceania Group to undertake a review of its relationship with lwilMaori to comprehend what would continue working well in its relationships with them and what opportunities there are to deliver additional mutual value (Mercury Annual Report 2022, p.22). 4 Balanced Scorecard framework (BSC) The Balanced Scorecard, also known as BSC, is one of the most popular strategy frameworks ever created. The balanced scorecard was initially developed by busi nessman and theorist Dr. David Norton and accounting professor Dr. Robert Kaplan. It was initially published in 1992 in the Harvard Business Review article "The Balanced ScorecardMeasures That Drive Performance." Both Kaplan and Norton worked on a yearlong project involving 12 top-performing companies. Their study took previ ous performance measures and adapted them to include nonfinancial information. (Harvard business review 1992) The Balanced Scorecard is a management system that helps organizations improve their business performance. This approach is based on creating a set of internal metrics or Key Performance Indicators (KPls) that helps an organization assess its performance in four focus areas. The balanced scorecard entails tracking a company's performance in four key areas: learning and growth, internal processes, customers, and finances. Businesses can merge information into a single report using 3305, which enable information on service and quality in addition to financial performance and help businesses become more efficient. 4.1 Learning and Growth This perspective is known as learning and growth, but it is also referred to as people since businesses consider people to be the most crucial component of an enterprise's capability. This viewpoint considers the extent to which the business may develop and enhance the way it supports its objectives. Organisational capacity keeps an eye on its members, its culture, its structure, and the infrastructure that supports it. Typical metrics include attrition in the rst year, regrettable (and perhaps unwelcome) turnover, training/education acquired, and employee satisfactionlengagement. Mercury under- stands the importance of their staff and is motivated to improve employees experience atthe company. Karapiro power station is a six year 75 million refurbishment project that was an- nounced in 2019. This station will use the natural resources and power plants of the earlier generations of New Zealanders. This power stations will contribute towards the decarbonization of New Zealand's economy with the station giving a boost in annual average energy output by 32 GWH to 537 GWh, or around 4,500 additional New Zealand households, and overall peak station capacity by 17% (16.5 MW) to 112.5 MW. (Mercury Annual Report 2022, p.22). Trustpower was acquired by Mercury which has allowed for Mercury to transition their business into the telecommunications sector at a faster rate then anticipated. Along with the entry into telecommunications, Mercury has the staff from Trustpower. These employees bring in their experience in both telecommunications and multi-product bundling. There presence will improve the company, as they can assist the company in the takeover of Trustpower with giving an understanding of the industry. This will allow for the capacity of the team to grow, as this brings on more skilled employees in different eld which will expand Mercury's potential. Mercury is concentrating on developing its internal competence by expanding learning opportunities within the company and providing more internal career growth. Com pared to their goal of 60%, internal applicants only lled 51% of the open positions. Mercury is not pleased with the progress accomplished and has emphasis areas that include fostering an inclusive culture through policy environments, competence building and awareness initiatives, and support for employee network organisations (such as the Te Ao Mori Ki Mercury and the Pride Network). Mercury has focused on a strong heath and safety culture, with no serious harm injures over the period and a continued down trend of the TRIFR (total recordable incident frequency) from 0.64 to 0.60. This is mainly from the ZIP (Zero Incident process) training that has helped with reinforcing a zero-harm mindset across the business. Mercury has seen a personnel turnover rate of 20.8% throughout this time, and they expect it to continue for some time. Mercury is concentrating on this and is conscious of the importance of their employees to their success. They are concentrated on maintaining their ability to draw in and keep talent. 4.2 internal processes This viewpoint aids the company in comprehending the effectiveness and efficiency of its own internal business procedures and supporting technology. Many businesses concentrate on how long it takes to accept an order, onboard a new employee, or finish other internal operations. Companies that manufacture goods frequently monitor setup time, cycle time, first pass yield, and the time it takes to launch a new product. The percentage of paperless procedures and the quantity of self-service processes are monitored by businesses that are trying to simplify internal operations. With the Mercury purchase of the retail company Trustpower, the company saw its client connections double to 787,000 approximately. Whilst the acquisition was slightly delayed, Mercury remains on track to deliver the signalled synergy benefits. Trustpower supplied fixed and wireless internet as well as mobile phone services which will allow mercury to refine their product mix to increase consumer value. Mercury systems had a bug which led to over 2,000 customers received early termina tion fees inadvertently between 2016 and 2020. After year-end, accusations ofviolating the fair-trading act arose because of this. Mercury is committed to making amends with the customers who were harmed by repaying the early termination money and paying a tiny additional amount as an admission of guilt. They have set aside their unclaimed credit amount in the extremely few instances where they were unable to locate the affected consumer. Due to the limited circumstances across the country, spot pricing remained high. Given current estimates, the growing cost of thermal fuels, and rising carbon costs, the electricity fonNards curve suggests that this will last for some time. As a result of the prior Norske Skog volume being recontracted at a price that was more in line with the current market, there was an increase in yields from the commercial and industrial category. Mass Market yields increased as well, albeit little. This was due to a 5.2% rise in energy prices for the mass market, which was somewhat mitigated by a modest decrease in Mercury brand customers over the course of the year. 4.3 Customer From the viewpoint of the consumer, the company's service is contrasted with that of its rivals. Industryspecific indicators differ, but the majority place an emphasis on time, quality, and service standards. Customer satisfaction and business responsiveness are among the metrics shared by the majority of sectors. Some measures are more sectorspecic than others. Cellular phone providers keep track on client growth and attrition. The percentage of orders that are delivered on schedule and exactly as requested (i.e., without backorder or replacement) are tracked by manufacturing busi- nesses. Companies that produce consumer goods track the percentage of returning consumers and the percentage of revenues generated by recentintroduction products. Mercury is firmly focused on lowering their carbon impact, and which to have a pivotal role with helping New Zealand's goals lowercarbon goals. Mercury is collaborating with policy makers to ensure that the sector and industry can do everything they can to help. It's a complicated issue and with inflation reaching a 30-year high and price hikes across the board in the first half of 2022, rising living expenses are becoming a problem on a worldwide scale, putting a strain on many households' finances. According to Mercury Customer Research, there has been a noticeable rise in instances of difculty and a feeling that hardship is a bigger problem. Mercury has addressed this by putting in place several focused solutions, including online paymentalternatives, a range of pricing options, energy monitoring tools, and a customer service centre. Additionally, they have a specialised staff of specialists that are "here to help" with consumers. The termination of the LFUC (low fixed user fee) tariff. The sector mainly agrees with this call for a reassessment of power prices. This move has been accompanied with targeted assistance for those who need it the most, such as a fund established by the industry to lessen the effects of the phase-out of LFUC. (P. 20 of Mercury Annual Report 2022) In 2021, Mercury broadband partnership with NOW NZ. Mercury broadband launched to the mercury customer base, giving customers the ability to add fibre broadband to their mercury account. Going forward, Mercury will look to leverage and extend the products and solutions gained via the trust power acquisition. Mercury has ended the partnership with Airpoints and have launched a new home of rewards which enables mercury customers to earn points when they sign up, pay bills and complete app challenges. Points can be used to unlock free power days. Mercury is showing that they care for the environment and the customers. The com pany is balancing the change to renewable platforms whilst also assisting customers with their nancial issues. Mercury is having a positive impact towards their customers, and this is why the company is showing good performance considering the economic market. 4.4 Financial Any business's ability to make money is essential to its long-term existence. Revenue growth, operational income, return on equity, and other metrics of interest to owners are typical metrics employed by forprofit businesses. Mercury reported $581 million EBITDAF, an increase of $118 million over the $463 million EBITDAF of the previous year. Mercury's nett profit after taxes increased by $328 million to $469 million as a result of the $367 million nett gain on the sale of its stake in tilt renewables. On a normalised basis, Mercury is on course to surpass their three-year goal of expanding the company' value to $700 million EBITDAF, and they have raised this goal to $800 million EBITDAF. Trustpower was purchased for $360 million at retail. The overall stay-in-business capital expenditure was $68 million, while operational expenditure totalled $230 million, an increase of $40 million from the previous year. $12 million more than the previous year. The significance of the Thrive programme, which encourages a mentality shift towards continuous improvement and long-term thinking, has led to an increase in EBITDAF of $47 million as opposed to the HY21 prediction of $30 million. 12.0 cents per share have been set as the full-year dividend by the board. The regular dividend for the entire year is now 20.0 cents per share. a rise of 18%. Mercury has also increased the length of its dividend reinvestment plan to enable shareholders to contribute even more to the company's expansion. Mercury has shown a strong financial year, as there has been many things changing in the company with the acquisition of Trustpower and many important improvements from training staff to its focus on becoming environmentally friendly. 5.0 Relate the ABC, GRI, and BSC operational frameworks as informing the UN Sustajable Development: Goals framework that strategically informs the rm's Vision, 11115 51011, and goals. ABC (Activity-Based Costing), BSC (Balanced Scorecard), and GRI (Global Reporting Initiative) are operational frameworks that can strategically inform a firm's vision, mission, and goals in relation to the UN Sustainable Development Goals (SDGs). By integrating ABC, B80, and GRI frameworks, a rm can strategically align its sus- tainability efforts with the UN SDGs. The UN SDGs provide a global framework for addressing various social, economic, and environmental challenges. The combination of these frameworks allows the firm to measure its sustainability performance, set targets and initiatives aligned with the SDGs, and communicate its progress toward sustainable development to stakeholders