A little over a year ago, EDF kicked off a partnership with private equity (PE) leader Kohlberg Kravis Roberts (KKR). The goal of the project is to develop and implement a system (we’re calling it the Green Portfolio Framework) for improving environmental and business performance across KKR’s portfolio companies. Through the process, we hope to create significant business benefits for KKR and its portfolio companies and a new model for the PE sector. The PE industry has a history of building lean businesses through a laser-like focus on financial and operational performance.
Our hypothesis is that environmental measurement and management can make companies even more efficient and successful. If we’re right, we expect to see environmental management adopted across the PE sector as a new best practice for operational improvement and value creation.
Based on the initial results, we’re off to a good start: Last year we piloted the Green Portfolio Framework (GPF) at three of KKR’s portfolio companies – US Foodservice, Sealy, and Primedia. Using the GPF, we helped the companies analyze their operations and identify significant business and environmental impacts, develop customized metrics and goals for tracking performance and implement action plans for meeting those goals. The process helped the companies realize approximately $16.4 million in cost savings and avoid over 25,000 tons of CO2 emissions (equivalent to taking 5,000 cars off the road), 3,000 tons of paper use (the equivalent of 40,000 trees) and 650 tons of solid waste (equivalent to 46 garbage trucks).
These three companies focused on improving the fleet efficiency, reducing manufacturing waste and moving from printed to online products. This year, five additional portfolio companies joined the project – Accellent, Biomet, Dollar General, SunGard and HCA – and will be working to reduce energy consumption, GHG emissions and waste production.
While there are specific challenges and opportunities at each company, the process for identifying and responding to them can be pretty much the same. That’s where the GPF comes in. We’ve tried to make the GPF a common-sense based approach that helps companies focus on the most significant business and environmental issues, develop metrics and goals to improve performance and track the relationship between environmental impacts and financial performance.
The slide deck below provides a working version of the GPF Handbook and includes a number of resources to help companies get started or continue tracking and improving business and environmental performance on an ongoing basis. We believe this framework is a meaningful way to improve efficiency and build value, especially in difficult economic times, and hope that you find these resources useful. EDF will continue to update this handbook as we learn more from our partnership with KKR and work throughout the PE sector.
Green Portfolio Project: Capturing Opportunities to Improve Environmental and Business Performance
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Feel free to comment on the GPF here – we look forward to your feedback and hope that you will keep us posted about your results and lessons learned.