Before acquiring any new corporate asset, private equity firms conduct a “due diligence” process – which typically considers only environmental risks and liability (e.g., contaminated groundwater cleanup) – to assess a company’s value.  Using this new approach, Carlyle will now identify opportunities to improve operations, reduce costs, and strengthen the market position of target companies through steps like improving energy efficiency, reducing material inputs and waste generation, and developing environmental products and services before an investment decision is made.  Most importantly, the highest impact opportunities will be incorporated into the management plans for Carlyle’s portfolio companies.

This early-stage approach sets a new standard for the industry and expands the mindset on environmental due diligence from downside risks to upside opportunities.

Moving forward, EDF will work with Carlyle to implement the screen in its U.S. and Europe buyout funds (which represent about $30 billion in assets under management), make refinements as necessary, and share lessons learned with other leading firms at edf.org/duediligence.

As mentioned in the Wall Street Journal, today’s announcement builds on our pioneering work with KKR to develop the firm’s Green Portfolio Program that is currently helping to measure and manage environmental performance at 20% of KKR’s global portfolio companies.  We view these two collaborations as complementary initiatives that combine to help improve business and environmental performance at different stages of the private equity value chain. We look forward to both becoming standard practices for value creation across the industry.

To help fleets reduce their greenhouse gas emissions and harness cost savings, Environmental Defense Fund teamed up with past partner PHH Arval, a leading fleet management company, to identify and showcase a number of effective and replicable strategies to reduce emissions and costs from medium-duty trucks.

Highlights of this new whitepaper, available at http://edf.org/greenfleet, include:

• How Frito-Lay saved 10% on fuel by downsizing its urban grocery store delivery truck model from a 24-foot Class 6 straight truck to a 20-foot Class 5;
• How by reducing speeding and after hours use and deploying a telematics solution, LKQ decreased idling by 62% and saved 16 gallons of fuel per vehicle each month;
• How Staples modified the transmission control unit and installed speed governors to increased the fuel economy of its single-unit trucks by 12-16% and
• How PoolCorp improved fuel economy by 4% by making adjustments to the Engine Control Module (ECM) that limit speed and shorten engine idle intervals.

Recognizing that every fleet is different, the whitepaper showcases 14 strategies and includes options for every duty cycle to improve efficiency and cut emissions.

Look for opportunities to drive medium-duty trucks in your fleet onto the onramp of a lower-carbon future.

This content is cross-posted on Greenbiz.com

Kirk Hourdajian

Last week, I had the pleasure of speaking at the Duke Conference on Sustainable Business and Social Impact, at Duke University’s Fuqua Business School.  Keynote speakers included Chad Holliday, former CEO and current Board Chairman of DuPont; Jonathan Greenblatt, founder of Ethos Water and Dina Powell, Global Head of Corporate Engagement at Goldman Sachs.

My panel, "Cleantech, make it, fund it," was part of the Finance breakout track.  My co-panelists and I represented an interesting cross-section of the private equity/venture capital industry:

• Scott Starr, Director at groSolar – represented the early-stage investing view
• Blake Clifton, Principal at Abundant Power – represented middle market and project-financing
• Kirk Hourdajian, Project Manager at EDF – represented the later stage PE investment view

Our discussion topics ranged from cleantech investment trends to the role of government in the commercialization of new technologies and the role of non-profits in encouraging corporate involvement in environmental management.

While investment in early-stage technologies may rely on government subsidies to become cost competitive in the cleantech space, energy efficiency and other low-hanging fruit initiatives can provide tangible energy-saving opportunities in the near term.

In 2009, the cleantech industry saw a dramatic 30% decrease in venture funding, yet the energy efficiency and energy monitoring sectors saw an increase in funding during the same time period.

While government subsidies and climate change legislation would be a boon for the cleantech industry, EDF programs such as Climate Corps and Green Returns offer opportunities for corporations to save money and decrease their environmental footprint today.

The goal of Environmental Defense Fund’s Innovation Exchange is to encourage widespread adoption of innovations and best practices that lead to tangible environmental results.  To that end, we are experimenting with an energy efficiency wiki to foster commercial building energy efficiency practices.

What is it? A wiki is a website that allows the easy creation and editing of web pages and helps a community to collaborate around a topic – in this case corporate energy efficiency.

What’s it for? The purpose of the energy efficiency wiki is two-fold: 1) To serve as a starting point and reference tool for those wanting to learn how to identify, analyze and prioritize low-hanging fruit commercial building energy efficiency investments in their corporation and 2) To be a collaboration space for developing content about corporate energy efficiency.

What’s on there? The wiki includes an online version of our Climate Corps Handbook which serves as a reference manual for identifying, analyzing and prioritizing energy efficiency investments in commercial office buildings and data centers, focusing on lighting, HVAC (heating, ventilating and air conditioning), office equipment, water heating and vehicles.  Also available are FAQs and links to external resources.

Who can use it? While the current content of the wiki was created for our Climate Corps Program, it’s a useful resource for corporate sustainability, facility and green managers tasked with energy efficiency initiatives.

What can you do? Contribute your expertise by editing content and adding your own pages.

We hope the content of the wiki will help improve both your company and the planet.  Let us know what you think!

On February 4, the landmark program officially opened, and boy, were fleets ready. In the first 12 hours, about 25 percent of the program’s $20 million in vouchers had been requested.

All fleets with trucks operating in California are eligible for up to 100 vouchers each, on a first-come, first-served basis. With nearly $15 million still up for grabs, so it’s not too late to claim your share.

The program, launched last week by the California Air Resources Board and administered by CALSTART, will provide $20 million in funding assistance for fleets to replace old diesel trucks with newer, cleaner hybrid trucks.  Depending on the vehicle weight and model, the voucher amounts range from $10,000 to $45,000, including a $5,000 bonus for each participating fleet’s first purchase. Details about participating in the program, approved dealers and eligible vehicles are available on the program website at http://www.californiahvip.org/

What sets the Hybrid Voucher Incentive Program (HVIP) apart from other programs is that this is the nation’s first voucher program, meaning that fleets receive the benefit at the point of sale. There are no applications to fill out or rebates to wait for; dealers throughout California have been trained and approved to fill out the necessary paperwork, request vouchers and take the savings off the sticker price of your new hybrid truck. Environmental Defense Fund applauds CARB for taking the needs of vehicle purchasers into account and hope HVIP’s success can be a model for other states.

In addition to reducing greenhouse gas emissions and soot on California’s highways, the 800 hybrids expected to be sold through the program will boost our economy. In 2009, researchers at Duke University completed a study on the hybrid truck value chain. They found that the hybrid truck industry employs workers in at least 143 sites across the United States, in some of the cities hardest hit by the recession. HVIP will increase the total number of hybrid trucks on the road by about 50%. Now that’s what I call job creation!

For more information on hybrid trucks and other opportunities to reduce emissions from corporate vehicles, visit the Green Fleet section of EDF’s website.  There you can find a guide to incentive programs to support the purchase of hybrid trucks and track the makes and models of hybrid trucks currently available to fleets.

During my time at EDF, I have worked in-depth on two projects.  For the first two months, I scoped the landscape of corporate environmental sustainability benchmarking tools and initiatives.  Most recently, I collected sustainability best practice content around key topics such as data center energy efficiency, paper use, and commercial lighting.

After working on these projects and supporting the Green Returns team on other tasks, I realize the importance and benefit of including environmental considerations in both long-term strategy and daily operations.  The knowledge I acquired at EDF around environmental management is a new addition to my toolkit that I will use to help companies improve.  I feel that I am now better able to holistically assess a company’s risk and opportunity by incorporating their impact on the environment into my strategic analysis.  And from an operational perspective, I will be able to communicate to companies how addressing areas such as energy efficiency and waste reduction result in quick wins that save money and lessen environmental impact.  Put quite simply, when I am faced with a company needing to reduce costs, my first question will now be – do they turn off the lights and computers at the end of the day?

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.

This year, we’ve had 140 posts on a variety of topics, including what our

Climate Corps MBA fellows have learned about energy efficiency, highlights from our work in the Private Equity and fleet vehicle industries, exploring what innovation means and showcasing innovative practices at a variety of companies.

Some of this year’s top posts foreshadowed trends on which we’ll be building in 2010:

• You Set the Agenda: Green Innovation for Business Unconferences introduced the series of events affectionately known as GIBUs through which we brought together some 450 business, government and non-profit professionals to discuss what they are doing and thinking about to improve and accelerate sustainability in business.  In 2010, we’ll be expanding the program and changing the name to better reflect the results that the events are intended to produce: solutions.  This year’s Solutions Labs will support a well-informed, well-connected, rapidly-learning, network of innovators making business more sustainable in at least 10 cities around the country.  We have also launched the EDFix conference call series on the second and fourth Mondays of every month to explore topics in more depth.
• In I’ve Seen the Future… and it’s Transparent, Andrew Hutson wrote about the work we are doing with Walmart in China to assess technologies that are creating the greatest environmental impacts by identifying cleaner alternatives.  We’ll be writing more about our work in China in 2010.
• Sustainability managers can look forward to more posts in 2010 like Social Media: Is it the Sustainability Manager’s Job? and Sustainability Managers – Research Shows You’re Not Alone that address timely issues each of you face as you design and implement sustainability strategies in your companies.
• We’ll focus more on energy efficiency in 2010 and continue to highlight what our Climate Corps fellows are learning on the job – and the challenges they are overcoming – as they spend their summers running technical and financial analyses to identify energy efficiency improvements that can cut costs and reduce emissions at their host companies.

As always, we’d love to hear your thoughts on what you like, what you don’t and what other content you’d like to see, so please, let us know.

Wishing you a prosperous 2010 from all of us here at EDF!

The good news about this diversity of positions? There’s serious growth opportunity in this sector, and companies are looking for varied skill sets to meet their needs around sustainability.

The tough news? There’s no set roadmap for companies to follow in an effort to design and implement a successful sustainability strategy. In fact, many of us working in this space are hungry for clear, concise information on how to tackle the sustainability challenge in a cost- and time-effective way.

Earlier this fall, The Environmental Defense Fund worked with KRC Research to complete in-depth interviews with 25 senior professionals working day-to-day on corporate sustainability issues at Fortune 1000 companies. We had three goals for this research: to better understand the primary issues these professionals address for their companies, to hear about the challenges they face in doing their jobs, and to learn more about how sustainability information flows within leading companies and professional networks. The results of our research are summarized in a brief PowerPoint slide deck below. Feel free to share these slides with your colleagues and networks, and use them liberally in your own presentations if you find them helpful.

In brief, our research revealed seven key takeaways:

1. Making a business case for “green” is a must. Especially in this economy, the bottom line matters – a lot. Corporate sustainability projects must be able to show cost savings and a rapid ROI in order to be approved and widely supported within Fortune 1000 companies.
2. Energy usage, and how to curb it through efficiencies, is a huge priority. Of all the sustainability issues out there, the top corporate priority is how best to reduce energy use, cut costs and minimize carbon footprints. 
3. Tracking and measuring is a big challenge. Many companies are struggling with the lack of standards and definitions when it comes to measuring a carbon footprint, tracking it over time, and working systematically to reduce it. This is particularly challenging for companies with complex supply chains that span the globe.
4. Regulatory compliance is a beast. Companies are subject to multiple levels of regulation – federal, state, county and city – as well as the regulations of other countries. Understanding and navigating this complex web of regulations is something companies need help with.
5. Information flows are numerous and dispersed, and often informal. Most companies we spoke with lack a central resource for information on sustainability.  Sustainability professionals rely on emails, online articles, industry blogs and conferences to stay up to speed on developments in this space. Figuring out what other leading companies have done – and done well – is a challenge given the dispersed nature of this information.
6. Following the leader makes good sense. Sustainability professionals are in search of detailed examples and case studies outlining how other companies have successfully cracked the sustainability nut. While general information about sustainability trends and practices can be useful, best practices and cautionary tales from the field are the most valuable of all. In particular, companies want to hear how their competitors have done things right so they can avoid reinventing the wheel.
7. Partnering with others can help. Working with consultants, non-profit organizations and even reaching out to other companies can help a great deal. External expertise can bring a sound knowledge of the competitive landscape, a fresh perspective to corporate challenges, and third party validation to help companies – as well as their clients and customer s – know they are on the right track when it comes to environmental sustainability initiatives.

So what’s next? At EDF, our goal with the Innovation Exchange is to facilitate rapid, widespread adoption of environmental innovation across business. The research findings indicate that the best way to meet this goal is to provide concrete business case studies, share tools to help companies cut costs while working more sustainably, provide help navigating and understanding the regulatory landscape and act as a sounding board for companies embarking on aggressive sustainability platforms.

For help making the business case and uncovering hidden efficiencies, consider hiring a Climate Corps fellow.  Over the past two years, they’ve helped a variety of businesses uncover nearly $90 million in cost savings opportunities – projects that could also avoid over 157,000 metric tons of greenhouse gas emissions per year – equivalent to taking more than 19,000 SUVs off the road.

Check this blog often to see how we’re doing on all of these fronts. We hope that you’ll share your own ideas for best practices as well.

This content is cross-posted on Greenbiz.com

Our article titled “Environmental innovation:  The investment that keeps on paying” is featured as the “CEO Topic” in General Atlantic’s December newsletter (copied below).

Fortunately for the economy and the planet, forward thinking firms have broadened their perspectives on environmental programs in recent years.  Even in a challenging and changing economy many Fortune 500 companies, ranging from Wal-Mart (2) and GE (5) to Owens Corning (422) and SunGard (435), are continuing to move forward with significant environmental initiatives.  They have discovered that regardless of size, sector, or economic conditions, environmental innovation is an investment with a broad range of returns: cost savings, growth, and brand enhancement.

Cost savings

In the current economic crisis, it’s understandable that some executives are asking “Can we afford to go green?”  But the more appropriate question is “Can we afford to leave money on the table?”  Many recent examples confirm that improved environmental management is a powerful strategy to significantly reduce operating costs by maximizing efficiency and resource use.

In its first year, Environmental Defense Fund’s (EDF) “Green Portfolio” project helped three private equity portfolio companies – US Foodservice, PRIMEDIA, and Sealy – capture over $16 million in annual cost savings and 25,000 tons of greenhouse gas reductions. Specific steps included reducing truck fuel usage at US Foodservice, cutting paper consumption at PRIMEDIA, and improving material use at Sealy.  Additionally, this past summer EDF’s Climate Corps fellowship program helped 23 companies – including Accenture, Cisco, Dell, Genzyme, Intuit, Raytheon, and salesforce.com – uncover efficiencies in lighting, computer equipment, and heating and cooling systems that could save $54 million in net operational costs over the project lifetimes. The bottom line is that smart businesses are making environmental management a key part of their strategy to improve efficiency, cut costs, and increase profitability.

Growth

In addition to reducing risks and operating costs, environmental strategy can fuel corporate innovation and top line growth.  More and more companies, ranging from GE to smaller technology firms, are using environmental goals and metrics to unleash creativity and spur the development of new products and services.  For these companies, environmental strategy has evolved from focusing on compliance in the ‘70’s and ‘80’s, to efficiency and footprint reduction in the '90s, to innovation and growth today.

GE’s “Ecomagination” is a business initiative designed to increase operational efficiency, meet the growing demand for cleaner and more energy-efficient products, and drive profitable growth for GE.  The program combines measurable goals for both efficiency and sales growth.  The results to date have been impressive, including reducing costs by over $100 million and growing annual revenues of Ecomagination offerings by 21 percent to $17 billion in 2008.[1]

These growth opportunities are not limited to corporate giants like GE.  Many innovative technology companies, including hybrid-electric power train manufacturer Azure Dynamics, LED lighting leader Cree, Inc., lithium-ion battery systems developer EnerDel, and super-insulating window manufacturer Serious Materials are capitalizing on the growing demand for “green” technologies to drive growth and increase market share.[2]

Brand enhancement

Establishing a company as an environmental leader in the eyes of key stakeholders – including employees, customers, and investors – can significantly enhance corporate reputation and brand value.  Timely information, since a November 2009 survey by McKinsey & Company found that a majority of executives think the economic crisis has increased expectations regarding business’ role in society and that the environment remains the issue that will most likely impact shareholder value in the long-term.

Companies become market leaders by capitalizing on challenges and opportunities better and more consistently than their competitors.  Increasingly, market leadership will require environmental leadership.  Executives that take advantage of the opportunity to integrate the environment into their business strategy will generate a wide range of returns – including cost savings, growth, and brand enhancement – and position their firms to be the market leaders of the future.

We’re excited that thought private equity thought leaders, such as General Atlantic, see these opportunities as well and are helping us spread the word about the role environmental innovation can play in value creation.  We’re eager to continue and expand this conversation.  Next month, I’ll be discussing this topic on a panel at the Dow Jones Private Equity Analyst Outlook 2010 conference in New York.  Hope to see you there.