Posts in 'Green Portfolio'

A few months ago, I was faced with an interesting situation: I had a shiny new MBA from MIT Sloan and a job offer from McKinsey, but my start date wasn’t until January.  These unusual circumstances presented a unique opportunity to pursue a personal goal of using my business background to achieve tangible environmental results.

Long an admirer of EDF’s practical approach to solving problems through corporate partnerships, I jumped at the chance to take on an externship with the Green Portfolio Project team as they worked to replicate the early success of their partnership with KKR.

As EDF and KKR’s Green Portfolio Project has proven, sound environmental management can provide a substantial source of value creation for private equity firms and their portfolio companies.  So far, that project has focused on identifying and implementing environmental initiatives at companies PE firms already own.

However, by considering environmental management during the due diligence process, private equity firms could identify similar cost saving opportunities in the companies they are looking to buy.  The current focus of environmental due diligence is aimed primarily at risk mitigation.  By considering environmental initiatives early on in the process, a PE firm might be able to identify a few million dollars in operational savings, which could influence bid prices.

For example, if the PE firm recognized an opportunity for a fleet efficiency project, the resulting decrease in operational expenses would lead to an increase in cash flow, allowing the PE firm to pay down debt more quickly and realize a higher sales price upon exit.  Once the deal is consummated, the private equity firm could add the environmental cost saving projects identified during the due diligence process to the hundred-day operational improvement plan.

By looking at environmental management as a way to add value, not just mitigate risk, PE firms can improve their due diligence process and deliver better returns to their investors.

In my last post, I identified some of the challenges and opportunities we are addressing in our work with private equity firms to adopt sound environmental management strategies across their portfolios.

In order to address these challenges while creating lasting environmental change in the PE sector, we are pursuing a three-pronged outreach strategy, consisting of:

1. Targeted outreach:  Reaching out directly to leading PE firms to demonstrate the business and reputational value of environmental management and to provide tools and resources for implementing environmental management programs.
2. Capacity building: Exploring innovative ways to engage PE sector service providers (including management consultants, accounting firms and software developers) to build the infrastructure needed for widespread adoption and implementation of environmental management as an industry best practice.
   
3. Community engagement:  Building excitement and engagement within the broader PE community (e.g., Limited Partners, trade associations, academia, media) to promote environmental management as a strategy for improving operations and building value. Read more »

The Corner Office Column¹ of last Sunday’s New York Times (10/24/09) featured an interview with Tim Brown, the chief executive and president of IDEO, titled “He Prizes Questions More than Answers.” When asked about key leadership lessons, Brown responds by saying “It’s very easy in business to get sucked into being reactive to the problems and questions that are right in front of you. And it doesn’t matter how creative you are as a leader, it doesn’t matter how good the answers you come up with. If you’re focusing on the wrong questions, you’re not really providing the leadership you should.”

The importance of asking the right questions is a valuable and timely reminder not only for business leaders but also for environmental advocates working to promote change.  It’s especially timely for me given the new collaboration that EDF just launched with IDEO and Capital C Partners to help scale up our work in the private equity (PE) sector from a few leading firms to the entire industry. Read more »

As the global recession has forced many industries to adapt from their 'business as usual' approach, the private equity sector has responded by focusing a greater portion of their attention towards improving the operational efficiencies of their portfolio companies.

Several studies published in 2008-2009 have indicated that the primary driver for creating value in the PE sector for the foreseeable future lies in improving fundamental business operations rather than financial engineering (according to Accenture, The Economist, BCG, IESE Business School, and others).  As such, many general partners (GPs) and their stakeholders are seeking new ways to drive operational efficiencies.

Environmental measurement and management can help firms find new opportunities to improve efficiency, cut operating costs and reduce their environmental impacts.  EDF’s Green Portfolio Project has several successful case studies from our work with KKR and its portfolio companies to prove it.

Now our challenge is taking these efforts to scale across the sector to make environmental management a new best practice. Read more »

As the second Geballe Fellow, I have the benefit of stepping into the Green Portfolio Project just as enthusiasm and momentum for our work with KKR and the private equity sector is beginning to take off. This spring, KKR announced that five additional portfolio companies would join the Project and I look forward to rolling up my sleeves and helping them to identify opportunities to increase business value while reducing environmental impact. Read more »

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: Read more »

This afternoon, I did a Twitterview (a mini-interview on Twitter) with Elizabeth Seeger, the inaugural Geballe Fellow, about her work over the past two years in EDF’s Corporate Partnerships Program.
This was an experiment, so please comment and let us know what you think about the format & style.  And if there are other questions we should have asked, put those in as well and hopefully we can get Elizabeth to answer them.
The transcript of the Twitterview from Twitter Search follows (since the most recent posts are at the top, start reading from the bottom). Read more »

Partnering with leading corporations to demonstrate that good environmental strategy is good business strategy is not a new concept at EDF. In fact, we’ve been doing it for 20 years. What has evolved are the partners we select, the goals we set and the scale of the impacts that we try to achieve.

We’re still learning every day about how to create even better partnerships with truly transformational impacts. Our search to find the highest leverage opportunities to create environmental and business results has recently led us to a place that may look unusual from the outside. In fact, a recent CNNMoney.com story called our partnership with private equity giant Kohlberg Kravis Roberts (KKR) “An environmental odd couple.”

We see things a little differently. Read more »

The partnership between Kohlberg Kravis Roberts & Co and Environmental Defense Fund is now officially just over a year old. Our announcement of the partnership in May of 2008 laid out our joint vision for improving the environmental and business performance of KKR’s portfolio of companies. We proved the concept with three companies in the pilot project phase. Through this effort, we identified an impressive $16.4 million in savings and reductions of 25,000 metric tons of CO2e, 3,000 tons of paper, and 650 tons of material waste collectively at US Foodservice, Sealy and PRIMEDIA. That was all with low or no-cost investments.

The response to this project has been inspiring. Other private equity firms and their investors are reaching out to EDF for information and guidance. Business school students have sought opportunities to help us. Media outlets as far away as Japan have expressed interest in writing about our efforts. We're not done yet. Read more »

What a whirlwind this conference has been – some new information, some of the same old stories – but many opportunities for interesting discussions.

One interesting discussion I followed was the Innovations Review 2009: Green Advances for a New Economy panel hosted by Gwen Ruta and Fortune's Julie Schlosser with guests from Bon Appetit, REI and Verizon (several other companies with innovations featured in the Review were in the room).

Check out my first attempt at "live tweeting" a play-by-play for highlights.    

The CEO of Bon Appetit took the prize for most illustrative quote, "We just aren't flying fish around any more," in reference to the company's sourcing of local food, per its Low Carbon Diet.

Gwen asked the panelists how innovation could spread throughout a sector, the consensus was that the people doing the work know how best to find innovations and save energy, so it's necessary to engage employees at all levels. 

That sounded a lot like the point Gwen made a few months ago in a podcast with Marc Gunther after we announced results from the companies piloting the Green Portfolio Project tools: "The drivers know what’s going on in the fleet and the guys in the production line know what’s going on there. It’s a matter of being able to capture those ideas and systematize them. We see over and over again that that’s what’s behind a lot of this environmental innovation – it’s unleashing the workforce."

Unfortunately, time ran out just as the discussion was heating up, but we hope that the discussion will continue here in the Innovation Exchange.

I'm headed back to DC tomorrow and with the time change probably won't get a chance to do another post from here, but you can follow all the EDF_InnovEx tweets from the conference – including highlights of the breakfast roundtable Gwen Ruta is hosting tomorrow on The New Lean Green here.