Environmental Defense Fund’s Green Returns team is just back from the Dow Jones Private Equity Analyst Outlook 2010 conference in New York, where we sponsored, exhibited and presented.  There is no doubt that EDF is the first environment group to do all three at a Dow Jones conference.  It was a great chance for us to connect with executives from a number of leading private equity and venture capital firms, including 3i, Apollo Management, Clayton, Dubilier & Rice, Huntsman Gay Global Capital, THL Partners and others.

Our message at the conference and for the private equity sector in the future is straightforward:

Environmental management and innovation should be one of private equity’s key strategies now and for the future.

A changing world and challenging economy is forcing companies in all industries – including private equity – to transform to remain competitive.  As a result, private equity firms are looking for new ways to lead and create value.  Taken to scale across portfolios, a creative approach to environmental issues can create value by improving due diligence, boosting portfolio company performance, presenting new growth and investment opportunities and building stronger relationships with LPs and other stakeholders.

Today’s announcement [PDF] by private equity leader Kohlberg Kravis Roberts & Co. (KKR) is proof that environmental management can help drive value creation at scale.  In fact, the release includes a quote from KKR Co-founder Henry Kravis stating that “The business case for environmental management has never been stronger.”

That’s why KKR has expanded the Green Portfolio program that we co-developed and tested at three companies in 2008 (U.S. Foodservice, PRIMEDIA and Sealy) to include twenty percent of its global private equity portfolio today.

In 2008, EDF and KKR worked with U.S. Foodservice, PRIMEDIA and Sealy to measure and improve business and environmental performance.  These pilots helped EDF to develop our Green Returns approach and the three companies to capture over $16M in annual cost savings and reduce 25,000 tons of CO2 pollution.  Based on these results KKR expanded the Green Portfolio Program in 2009 to include Accellent Inc., Biomet Inc., Dollar General Corp., SunGard Data Systems Inc. and HCA Inc. Today’s announcement adds four additional companies:  First Data, Lehigh Phoenix (a division of Visant), Oriental Brewery and Tarkett.

EDF believes that this is just the beginning.  Environmental management can play a much larger role in value creation across the broader private equity industry.   That’s why we recently released our Green Returns approach, resources and case studies to help industry leaders take advantage of this opportunity.

Green Returns is a tested and flexible approach for private equity firms to measure and improve business and environmental performance across their portfolios.  It is tailored to the strengths of the private equity sector and has quickly proven to yield significant business and environmental results, including millions of dollars in annual cost savings and thousands of tons of pollution.

Visit http://edf.org/GreenReturns to learn more and get started today.

On January 25, 2010 we talked with Charlotte Hess, Jesse Ribot and Ruth Meinzen-Dick about recent insights on governing the commons and our emerging understanding of the "New Commons."

Hess described those New Commons as shared resources for which there are no pre-existing rules or norms. Often a new commons emerges because of erosion of public goods or new opportunities brought about by technology, such as the Internet and data about the human genome. The New Commons are less about "property" than they are about the question, "how do we share and protect these resources?"

Many interesting points came up, such as the importance of visibility and the lack of one best governance model. On visibility, the starting quote was "trees are easier to manage than fish or water quality." Ironically, making a resource like water visible in a reservoir might be considerably less efficient than storing it in the aquifer, where much of it wouldn't evaporate, but it would be easier to monitor (rogue wells are hard to detect).

On governance models, the consensus is that there is no one best way. Generally, people local to a commons are the best informed to design its governance. Participation really matters, as do known rules. Our conversation continued, touching on:

• the distinction between "good" and "goods" and the need for better language to discuss these topics.
• Elinor Ostrom's Nobel Prize
• the need to establish property rights for groups or the public (not just individuals and organizations),
• lessons we can learn from the study of traditional commons and open-source projects, and
• the threat of the anti-commons and enclosure.

Resources we discussed include:

• The Struggle to Govern the Commons in Science Magazine's 
• The International Association for the Study of the Commons
• Digital Library Of The Commons Repository
• Polycentricity
• The Tragedy of the Anticommons

Listen to the full podcast to learn more.

Please join us for our next EDFix call on February 8, at 9am Pacific, on the recently announced GreenXchange.

You can also:

• Listen to or download the podcast of the full discussion (56 min)
• Get a taste by listening to or downloading Jerry Michalski's brief summary of the call (13 min)
• Find out how to participate in upcoming EDFix Conference Calls.

Emissions from fleet vehicles are down 17% from 2008 levels and 18% from 2006 levels, according to the State of Green Business 2010 annual report released today. The emissions data was provided by six of the seven largest fleet management companies.

While the sour economic condition was definitely a factor in the size of this decrease, the numbers likely also reflect – and to a significant degree – the fact that over the recent years corporate fleets have made strides to lower per vehicle emissions.

A likely leading non-economic factor in reducing emissions is the adoption of vehicle “right-sizing” practices. Abbott Labs, Infinity Insurance and Owens Corning were among the first companies to demonstrate the value of moving from moving to more efficiency vehicles on a wide-scale. The record gas prices of 2008 gave the shift real momentum. The 2009 emissions data reflects the first full year of operations by the more-efficient vehicles that were cycled into fleets in the mid-2008 buy cycle.

Read more about our work with these companies and partner PHH Arval.

The expansion of other emission reduction tactics is also likely reflected in these numbers. Over the past two years, there has been a proliferation of efforts that work with drivers to adopt fuel-smart driving practices. Here at Environmental Defense Fund (EDF), we noted the many companies entering this space in our 2009 Innovations Review and also create a suite of materials for fleets to use.

Increased use of efforts to improve routing and reduce idling likely also has contributed to the emissions decline. Leading fleets, including Carrier and Poland Spring, have leveraged telematics software to improve operational efficiency.

Read more in these case studies about Carrier [PDF] and Poland Spring [PDF].

I am optimistic that the trend in fleet emission reductions will continue as the economy recovers of the coming years.

From measuring emissions, right-sizing vehicles, improving routing, reducing idling and improving driving habitats, corporate fleets are broadly adopting strategies to reduce their emissions.

Have you ever gone shopping for a particular item, and after scanning shelf after shelf of virtually indistinguishable options, you throw the box bearing the “Energy Star” logo in your cart, even though it may be the most expensive choice?

You’ve just been nudged.

Seeing that logo made you assume that by purchasing that particular product, you would be doing your part to help the environment.  And that feels good. This is precisely the idea behind Richard Thaler and Cass Sunstein’s book, Nudge: Improving Decisions about Health, Wealth and Happiness. They touch on the environment, as well as other hot topics like money and health, and how we can be nudged – and nudge others – into making better decisions to save the planet and ourselves.

For busy readers of this blog, I would suggest reading the first part of the book that highlights the main points and establishes some of the terminology Thaler and Sunstein uses throughout (such as “choice architecture”, which refers to how the design or context of an object or place can nudge people into making certain choices and “Libertarian Paternalism,” that is, preserving the liberty to choose) and then skip ahead to chapter 12, “Saving the Planet."

This may also enable you to skip over what I found to be the most annoying part of Nudge, which is the continuous use of Homer Simpson as the model of bad decision-making. Other than that, I would recommended this book to those interested in gaining a better understanding of why humans—whether they be our customers, employees or shareholders—make poor choices and ways that we can be nudged into making better decisions for ourselves and the planet.

Last week at the World Economic Forum in Davos, Nike and Creative Commons announced their new open innovation initiative, GreenXchange. Nike explains:

Nike and Creative Commons believe in the power of open innovation and share a vision of creating a platform that promotes the creation and adoption of technologies that have the potential to solve important global or industry-wide sustainability challenges.

On Monday, February 8 we will be joined by John Wilbanks, VP for Science at Creative Commons and Kelly Lauber from Nike to talk about the status and goals of GreenXchange.

For more information about GreenXchange you can check out the nifty marketing video, a longer descriptive video, or a creative PDF brochure.

Join us on February 8, 2010 at noon ET (9am PT) for the call:

• Phone number: +1 (213) 289-0500
• Code: 267-6815

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If you'd like to get announcements about upcoming EDFix conference calls and the results with podcast releases, please sign-up here:

Like every good concept in the newish millennium, Environmental Defense Fund’s work on fleet efficiency is going multi-media.

We teamed up with stresslimitdesign to create an engaging minute-long tilt shift video about the savings potential if all US corporate fleets took some simple steps to improve efficiency.

For those of you not yet in the know, fleet efficiency is about reducing fuel consumption by taking incremental actions, including choosing better routes, avoiding idling and moving to higher MPG vehicles. These actions add up to fuel savings and emission reductions, especially when multiplied by the millions of vehicles in U.S. corporate fleets.

Looking for more information about how to do it?  Check out these tools:

• Five-Step Green Fleet Framework
• Calculate your fleet emissions
• Fuel-smart driver training module

On Wednesday, in response to petitions from investor and environmental groups (including Environmental Defense Fund), the Securities and Exchange Commission (SEC) reached a landmark decision to add climate change to the list of business factors that public companies must disclose. The SEC’s new guidance requires companies to consider the risks and opportunities that climate change may present to their business – from potential legislation to severe weather patterns.

Within EDF's Corporate Partnerships Program, we believe that this type of transparency is critical in our efforts to improve corporate environmental performance. Increased transparency around climate opportunities and risks will help firms make more informed investment decisions, and thus, reward companies that have positioned themselves to be cleaner and more competitive in the years to come.

"Investors have a right to know which companies are planning to be part of the clean energy future and which are lagging behind, " said Environmental Defense Fund President Fred Krupp.

It is vital that investors have this information as they make decisions about how to allocate capital, to ensure that funds are getting to the most efficient and innovative companies.

On Tuesday, Tom Murray, the managing director overseeing Environmental Defense Fund’s work in the private equity industry, addressed attendees at one of the most visible and well-attended industry conferences, the Dow Jones PE Analyst Outlook 2010 in New York City. Representing the only NGO at the conference, Tom added a unique environmental perspective to the insights of his fellow panelists.

In his opening remarks, Tom said that he’s seeing a universal acceptance that financial engineering alone isn’t enough anymore and that going forward, multiple tools will be needed to create value, including a growing focus on operational improvement. In fact, an article in last week’s FT online called the growing demand for operations professionals one of the most significant shifts in the PE sector last year. Co-panelist Chuck Brizius, managing director at THL Partners, said his firm had also recognized the trend and would continue to focus on operational management in 2010.

“The reason we’re here today is looking for new ways to create value. That’s where we think the environment comes in. A focus on environmental performance can create a strategic competitive advantage.”

We know the opportunity is real, because we’ve done it – with impressive results – with Kohlberg Kravis Roberts & Co. L.P. (KKR), which is now taking it to scale across US and international portfolio.

Our work with KKR is just the beginning; Environmental management can play a vital role in value creation across the industry. As a result of our work with KKR, we have developed a flexible approach for capturing environmental and financial benefits called Green Returns and hope that 2010 is the year that other PE firms adapt the Green Returns approach to their portfolios.

Taken to scale across portfolios, a creative approach to environmental issues can create value by improving due diligence, boosting portfolio company performance, presenting new growth and investment opportunities and building stronger relationships with LPs and other stakeholders.

“The opportunities are already there. What Green Returns provides is a new way to look at performance and provide metrics to help them capture environmental improvements.”

On January 11 we talked with Greg Norris and Jeff Rice about the open data requirements and effects of Life Cycle Assessment (LCA).

They are working to aggregate data across supply chains that would help anyone calculate specific sustainability footprints: think beyond carbon footprints to other footprints for the carcinogenic, water-consumption, fossil-fuel and biodiversity effects that different products and processes have. You could envision analyses for safety, living wages, child labor and community impact.

Early LCA efforts took a physicist's perspective, assessing what compounds a particular process leaves as by-products, for example. Now, using Linked Open Data methods from the semantic web, analyses can take other perspectives, such as an economist's.

The natural question to ask is: why would a corporation share openly the raw data of its supply chain? Doesn't that reveal state secrets? One of the keys to corporate collaboration is focusing on the impacts of the supply chains. Read more »

An article in Wednesday's Financial Times made the following observation about some fundamental changes afoot in the private equity industry:

"During the credit boom, private equity tended to hire financial wizards. Now, operational experts are in demand as private equity houses fix up companies they own rather than wonder about dividend recaps."

We've observed a similar trend in the private equity sector, and it's good news for both the environment and business in a tough economy.

Increasingly, private equity firms are looking for ways to run leaner and more efficient businesses through a focus on company operations. Read more »