By John Schinter, Executive Director of Energy, AT&T, and Gwen Ruta, Vice President of Corporate Partnerships, Environmental Defense Fund

We live indoors, we work indoors, we shop indoors, we even often play sports indoors.  With so much of the modern American economy taking place indoors, and population centers shifting to warmer regions, the environmental and economic impact of building cooling systems is on the rise. We often hear about the energy needed to power and cool this sprawling infrastructure.

But there’s another crucial dimension that is only just starting to surface: water.

As water becomes a more expensive, and sometimes contentious, commodity in many regions like the drought-stricken southwest, managing thirsty commercial buildings is going to become an increasingly important challenge for building owners.

In most large commercial and industrial buildings, tens of thousands of gallons of water flow through a big apparatus called a cooling tower (about the size of a two-car garage, they’re usually on the roof), where it evaporates out the top.

The U.S. Geological Survey estimates that commercial, residential and industrial buildings use approximately 47 billion gallons of water each day. And the EPA found that a typical office building uses more than 25 percent of its water supply for cooling towers.

Now, with all that water adding up, leading-edge companies are starting to rethink these systems. Environmental Defense Fund (EDF) is teaming with information and communication technology (ICT) giant AT&T, which operates thousands of facilities across the country. Together, we’re looking to develop operational improvements and best practices that can cut water, chemical and energy use in these cooling systems and improve overall building efficiency.

AT&T has calculated its water footprint, discovering that just 120 of its facilities accounted for nearly half the company’s 3.4 billion gallons of water used in 2010. The company rolled out its Water Scorecard to pinpoint potential water-savings opportunities and trained facility managers in an effort to increase awareness and understanding of water usage. It was clear that cooling towers represented an opportunity to improve efficiency.

Together, EDF and AT&T will build on those learnings. We will evaluate facilities and operations for efficiencies, and explore more creative ways to drive water and cost savings. We will look at the whole cooling process and pursue ways to eliminate cooling tower water use by utilizing cool, outdoor air to cool indoor space where feasible.

Quick calculations suggest that improving operations in the cooling towers at AT&T's largest facilities could save millions of gallons of water per year. Adopted on a broad scale, these solutions could save billions of gallons of water annually.

For example, if operational improvements were adopted across all existing commercial office buildings and manufacturing facilities in the Dallas/Fort Worth area in Texas, the water savings could be over 12 billion gallons per year. That’s equal to the water use of nearly 500,000 homes or approximately 13 percent of the water use in the region. Together, EDF and AT&T  have agreed to pilot best management practices and new technology at target facilities, and we plan to share our progress as we move forward with the project. Stay tuned for more updates as we uncover opportunities to improve efficiencies at the water/energy nexus.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

InnoCentive, EMC and EDF recently announced a new Eco-Challenge seeking solutions for tracking shipments of used electronic components and subsystems and ensuring that they are disposed of responsibly. Safe, legal and transparent e-waste disposal is an ongoing concern for both industry and environmental groups, which want to make sure heavy metals and chemicals are not released as part of the recycling process.  We asked Kathrin Winkler,  Vice President and Chief Sustainability Officer for EMC Corporation to tell us more about the Challenge.

Hi Kathrin – thanks for talking with us about your Challenge.  Can you tell us why responsible e-waste disposal is such an important issue for EMC and for the electronics industry as a whole?

Certainly.  Electronic waste actually contains a lot of material of value – particularly precious minerals like gold and copper. In fact, it is often said that a ton of eWaste contains more valuable metals than an equal amount of ore! The problem is that extracting this material needs to be done responsibly to protect human health and the environment. Too often, it ends up in the hands of informal workers – usually exported (often illegally) from developed economies to those still developing, but increasingly from waste generated in-country. These workers do not have the knowledge or resources to take proper precautions to protect their health and their environment. Or it finds its way into municipal landfills where some of the manmade substances in the equipment can have long-term environmental  impacts. Another primary concern is data security. At EMC, people rely on us to set the bar in terms of protecting customer data, which includes secure disposal. Responsible disposal of eWaste helps ensure that data is secured, which benefits everyone.

Why is it so difficult to tracke-waste now?

There are really two major challenges to tracking eWaste. The first is that much of it is disposed of by the consumers or users of the equipment, and as vendors, we have no way to know what happens to it. The second challenge is that the disposal process itself involves many players, each of whom tends to break it down to smaller component parts that are mixed with material from other sources and then passed on to another processor.

How close do you think the industry can come to 100% trackable e-waste?

You know, I think it’s unlikely that we will ever be able to trace everything. Ideally, we can remove the need to trace eWaste if the proper incentives and solutions are put in place to manage it responsibly. I am a bigger fan of trying to solve the underlying problem, than simply attempting to control a process we don’t like. Unfortunately, we’re not there yet, so traceability is an important bridge until the underlying system is improved.

On the other hand, we  have such a plethora of new tools available to us – from satellite data to Big Data analytics to new materials – that we may well have a breakthrough. I do think what may well arise is a means of either tracking sample streams rather than all of the eWaste, or else an approach to better understanding where it ended up without having to track its entire path. In that case, we’d hopefully have a handle on each end of the journey and could then reverse engineer the route it took.

Where do you think a solution to this problem might come from?

It’s probably most likely to come from an iconoclast – someone who sees patterns where others don’t – recognizing an analog from a completely different problem domain.

What do you plan to do with the solution?

Hard to say, without knowing what form it takes. First analyzing feasibility, hopefully performing a test or proof-of-concept, ideally with a partner or two. After that, results will determine the course of action. One thing we do know – if it’s a breakthrough idea that is broadly applicable to the market, we will want to share it!

Is there anything else you’d like our Solvers to know about your Challenge?

Yes. We have a grand vision, and it is more than stopping eWaste from going to developing countries. What we’d really like to see is an ecosystem of parties and economic model that allows eWaste processing to both be safe, and to provide economic opportunity in areas that depend on it for subsistence. And if we can create a financially sound model for recovering the maximum value from used electronics, we can do a better job of closing the loop and reducing the extraction of raw materials. This Challenge is an important step in a re-imagining the future!

Very interesting – thanks Kathrin and good luck with your Challenge!

Thank you.

This content is cross-posted on InnoCentive's Perspectives on Innovation blog.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

April showers bring May conferences. Here are the conferences we are attending in May.

Chris Riso attended the ACEEE Energy Efficiency Finance Forum May 6-7 in Boston.

Scott Wood attended the E-Source Energy Manager’s Roundtable May 6-9 in Boulder, CO.

Jason Mathers is attending the 2012 NAEM Product Stewardship Conference in Boston May 9-10.

Michelle Harvey is attending the Green Chemistry and Commerce’s   7^th annual GC3 Innovators Roundtable in Ann Arbor, Michigan May 9-11.

On May 14, Gwen Ruta will be speaking at the EPA's 2012 Technology Market Summit in Washington, D.C.

Namrita Kapur and Jake Hiller are attending “Financing the Future of Energy Efficiency Financing” at Harvard hosted by the Sustainable Endowments Institute on May 15.

Sitar Mody is moderating a panel at the Uptime Institute Symposium May 16 in Santa Clara, CA. The panel is titled “EDF Climate Corps: Saving Money in your data center and beyond” and features panelists from EDF Climate Corps companies: Yahoo, QTS and Cisco

Victoria Mills is moderating a panel at WWF's event “2012 Corporate Climate Summit” on May 18 in Miami, FL. The panel is about influencing corporate culture and features representatives from Climate Corps companies Microsoft, Diversey (Sealed Air) and Volvo.

Andrew Hutson is a panelist at the University of Minnesota's North Star Initiative called Solutions Summit on May 22.

On May 23, Namrita Kapur heads to a Bloomberg and EDF Conference called “The Missing Link: Energy Efficiency Data and the Capital Markets” in New York City.

Look for us at these conferences – and let us know if you’ll be there so we can watch for you as well!

You can always see where we’re going to be – and what other conferences we know about– on the EDF Biz Calendar

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

With the most LEED certified factories (9), most water-efficient production process among all  packaged beverage companies in the US, and well on its way to achieving its goal of a 20% reduction in greenhouse gas emissions below 2006 levels by 2013, what more could Nestlé Waters North America possibly do to improve its energy and water footprint? This is exactly the question that faced us on our first day as EDF Climate Corps Fellows at the largest bottled water company on the continent.

We began our journey armed with a week-long, EDF-led crash course in corporate energy efficiency and the peace of mind that Nestlé is dedicated to environmental stewardship.  Walking around the brand new corporate headquarters — another candidate for LEED Certification – during our first week gave us a virtual best practices manual in office energy efficiency but did nothing to build our confidence that we would find many “easy wins.”  (Here,  occupancy sensors, fluorescent lamps, tinted windows and Energy Star equipment abound.)

Fast forward ten weeks. After countless conversations with Nestlé Waters engineers, facilities and plant managers, financiers, accountants, EH&S experts and third party vendors; visits to bottling plants in Maine and Ohio; and consultations with E-Source, EDF Staff, and our peers in the Climate Corps community – we’ve identified three themes that have largely defined our experience, and that we feel are critical to bear in mind when playing in the energy efficiency sandbox.

1. Fresh eyes bring new perspectives

As well-established as a company’s existing energy efficiency infrastructure may be in terms of staff, money, commitments and overall resources, it is important to infuse it with new blood every once in a while. This allows consideration of previously unconsidered ideas, questions long-standing assumptions, and inspires some “why not” experiments. Moreover, new eyes always have the potential to identify new varieties of low-hanging fruit or fruit that’s been growing behind the leaves.

It didn’t take us long to notice the bright blue refrigerators holding Nestlé Waters products that flank the coffee stations on each of our office’s four floors. Our early conversations with the building engineer confirmed that the fridges stay on all night, despite the fact that no one is looking for a cold, refreshing, non-perishable bottle of water at 1 AM. Recognizing that all other energy-using equipment of significance shuts down each night in “unoccupied mode,” we asked ourselves and the building engineer why the fridges couldn’t be added to the unoccupied mix with a few simple programmable timers. A few calculations and conversations later, we teased out an extremely low-cost, almost immediate payback project for which we and the building engineer are equally enthusiastic about endorsing.

2. Even when opportunities are identified, they need legs to get them moving.

Regardless of how obvious the energy savings and discounted payback may seem on an energy efficiency project, at large manufacturing corporations, energy efficiency project proposals often need multiple champions to get them off the ground for implementation. Energy-related projects are regularly initiated by the plant personnel who double as efficiency sleuths on the factory floor. But identification is just the first step in an efficiency project’s journey through a deep web of savings calculations, layers of approvals, capital allocation and technology tweaks before reaching final implementation and realizing energy savings.

To implement energy efficiency improvements at scale nationwide, a coalition of advocates must understand corporate efficiency priorities and funding criteria, appreciate the differences in production systems across plants, and most importantly, utilize an effective communication system to leverage efficiency “wins” across such a sophisticated supply chain.

While most of the low-hanging fruit was addressed across Nestlé Waters’ plants long ago, a second generation of energy-saving projects unique to the beverage industry has developed and proved  challenging to scale across  diverse production environments nationwide. Our presence at Nestlé Waters this summer has facilitated communication among engineers, efficiency experts, plant managers and corporate champions –  enabling discussion of “apples-to-apples” best practices across plants and helping Nestlé Waters standardize the energy and cost saving calculations of plant-specific innovations.

3. Just because it’s hard to quantify doesn’t mean it’s not important.

While the EDF Climate Corps program has enabled the identification of millions of kilowatt hours and operational cost savings at leading corporations over its short history, a Climate Corps fellow’s projects often go far beyond the traditional numerical calculations that make energy efficiency projects so compelling. Many fellows help companies expand their energy management strategies, to design employee engagement systems or to review the latest energy efficiency financing approaches. This work is often difficult to quantify, but the project outcomes are vitally important to the success of widespread energy efficiency project implementation, and eventually, energy and cost savings.

At Nestlé Waters, one of our projects has involved working with the energy managers to establish the efficiency strategies for two very newly acquired brands: Sweet Leaf & Tradewinds Tea, which represent NWNA’s first foray into non-water beverages. While we are not responsible for calculating NPVs of potential efficiency improvements at these new facilities at this stage, our EDF Climate Corps training has been fundamental to our contributions.

With Nestlé Waters’ prioritization of energy efficiency across its operations, it’s been no surprise to us that the company has achieved such remarkable greenhouse gas emissions reductions despite its sustained growth. Indeed, Nestlé Waters’ bottled waters have the lightest carbon-footprint in the entire U.S. packaged beverage industry. It may be difficult to place a dollar figure on such a responsible corporate energy efficiency approach, but there’s no denying its value.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

Knocking down a brick wall by yourself with your bare fists is next to impossible. But organize a team equipped with sledgehammers and a plan, and it gets a whole lot easier. In other words, when tackling tough problems, it’s not just about the tools you have, but how you marshal your assets to break through.

That’s the message to CFOs, sustainability czars, and energy managers in a new EDF report, “Breaking Down Barriers to Energy Efficiency.” The report offers effective ways to motivate employees, create accountability for success, identify investment opportunities, ensure funding for financially attractive projects, measure cost savings, and scale performance gains continuously over time. The findings were drawn from the EDF Climate Corps program, where specially trained MBA students work in corporate summer fellowships to develop customized plans for cutting energy costs and greenhouse gas emissions.

Whether a company is trying to get off the starting blocks, or taking its energy and climate initiatives to the next level, the report outlines proven strategies for getting beyond the low-hanging fruit to the really big savings that energy efficiency can deliver.

Continue reading on Fast Company.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

One of the most popular conferences in the corporate sustainability space started yesterday: Fortune Brainstorm GREEN. If you are at the event, please introduce yourself to one of our EDF Business experts:

Jon Coifman, Marketing and Communications Director

Audrey Davenport, Project Manager

Jon Coifman

Audrey Davenport

Andrew Hutson

Andrew Hutson, Project Manager

Jasper Jung

Jasper Jung, Marketing and Communications Manager

Emily Reyna

Emily Reyna, Project Manager

Elizabeth Sturcken, Managing Director

Elizabeth Sturcken

You can also follow our live Twitter feed for updates from the conference: @EDFbiz

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

Defining “sustainability” in general terms can be difficult, since definitions evolve over time with new ideas or trends.  Sustainability today encompasses contexts of natural resources and the environment, economics and social equity, but generally speaking,  to be sustainable is to use “methods, systems and materials that won’t deplete resources or harm natural cycles” (Rosenbaum, 1993) – and to “meet present needs without compromising the ability of future generations to meet their needs” (WECD, 1987).  In “Advancing Sustainability: From 1.0 to 3.0” – a white paper from GE and Wharton – experts discuss why the business case for sustainability is compelling, even in this tough economic climate.

Increasingly, companies are moving away from PR focused reputation management and reparation-based initiatives to innovative, forward thinking practices that engage stakeholders.  And, while their definitions of sustainability vary, executives agree on the reasons for undertaking such initiatives: to “create value for shareholders, customers and communities while recognizing constraints on natural resources.”  That said, many executives also feel that significant barriers exist to impede progress (i.e. high upfront capital costs and long payback periods).

Yet, value creation doesn’t have to come at a high price.  In fact, one of the easiest ways to find savings and increase employee engagement is to host Treasure Hunts – one to three day events that unite cross-functional teams of employees in an effort to identify energy savings throughout facilities.  In her blog, EDF’s Beth Trask talks about using Treasure Hunts to empower employees to find savings by tapping the diversity of their experiences and ideas.  These events are low-cost initiatives that can be replicated at companies of any size.

Embracing a proactive, future-focused sustainability effort requires a clear vision and employee engagement – driving change from the bottom with support from the top.  Ideally, companies would approach sustainability programs by setting absolute goals – tougher but more important than intensity targets, according to Gwen Ruta, VP of EDF’s Corporate Partnerships Program.  Absolute goals help maintain momentum and stimulate innovative thinking when the low hanging fruit has been picked, because to achieve an absolute goal, a company must “have the imagination to think about [its] business differently….”  Thus, we should “build into the definition of sustainability that as one natural resource is depleted, another [is] identified or developed to replace it” (Robert Giegengack, emeritus professor, U Penn).

Looking ahead, large, multi-national companies possessing leverage should work on supply chain influences, while smaller companies ought to start with in-house programs and eye supply chains to be able to keep up with regulatory requirements.  Further, consumers have the power to spur innovation, so companies would be wise to value customer feedback when evaluating their business models.  And, like financial reporting, CSR reporting should be formalized so commitments are visible and companies are held accountable.

In summary, when moving beyond PR motivated sustainability efforts to future-focused practices, companies will begin to:

1. View compliance as an opportunity
2. Make value chains sustainable
3. Design sustainable products and services
4. Develop new business models that will change the competitive landscape, and
5. Create next-practice platforms by questioning the logic behind current business practices.

(Nidumola, Prahalad & Rangaswami)

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

When it comes to sustainability strategies, collaborative distribution is the total package: improved business value proposition, sizable cost reduction and promise of significant emissions reductions.  The potential of this strategy is why EDF listed it #2 on our Five Rules for a More Carbon-Efficient Freight Supply Chain.

Under a collaborative distribution arrangement, companies in the same or similar industries share warehouse and distribution assets. Because the products from participating companies are going to the same destinations, this arrangement enables more efficient loading of trucks, more frequent deliveries and fewer truck miles, which equals lower emissions. A third party logistics firm is typically involved in these arrangements and ensures the security of proprietary data and fair treatment of the products for all participating companies.

For a great, short introduction to the topic, see a video from Kane is Able.

Others agree with our high opinion of collaborative distribution too. Capgemini and the Global Commerce Initiative highlighted the strategy in their 2016: Future Supply Chain report. The report found that collaborative supply chain logistics have the potential to slash costs by more than 30 percent and increase carbon efficiency by 25 percent. A leading freight industry publication, Inbound Logistics, has noted that collaborative distribution “warrants serious consideration” from shippers.

It’s not all smooth sailing, though, for collaboration in the logistics space. As supply chain guru Art van Bodegraven recently noted, while supply chain managers understand that collaboration is vital for survival over the coming years, “we're not very good at it.”

Why not? Well, many shippers have concerns about possible information disclosure to competitors, but several direct competitors have been able to overcome this potential obstacle.  A leading provider of collaborative distribution services has suggested that “the barrier to broad adoption is really the inertia created by years and years of implementing the current distribution model.” I’m inclined to agree with this sentiment.

In a recent EDF report, Smart Moves, we highlighted the efforts of many companies, including Best Buy, Sun-Maid Growers, Just Born and The Topps Company, Inc, that are leveraging collaborative distribution. We also pointed to the Hershey’s and Ferrero announcement about plans to collaborate on warehousing, transportation and distribution in North America. When announcing the collaboration, the companies highlighted the cost and emissions-reduction benefits of the deal.

Collaboration, of course, is not limited to warehousing and distribution. Other examples highlighted in Smart Moves include:

Back-Haul Matching

• Macy’s and trucking company Schneider National demonstrated the value of reducing empty backhauls through Empty Miles Service, an online service provided by the Voluntary Interindustry Commerce Solutions Association (VICS). This program helps participating companies expand their network of others wanting to identify matches for their empty backhauls. In the pilot project, Macy’s and Schneider found an average annual savings of $25,000 per lane (regular trucking routes) and were able to reduce per-lane carbon emissions by 150 tons. Given that Macy’s operates over eight hundred stores and likely even more lanes, the potential savings of this program are enormous.

 Co-Loading Freight

• Dal-Tile Corporation, the largest U.S. manufacturer of ceramic tile, recently increased container utilization rates by finding freight from other companies that could be loaded atop their floor tiles. Because floor tiles are heavy, Dal-Tile previously was unable to use the full cubic space of the trailers they were shipping from Mexico to distribution centers in the U.S. Lighter freight from other companies enabled Dal-Tile and its partners to cut transportation costs up to 15 percent per load.

Companies have significant opportunities to reduce freight costs and associated emissions by working with other shippers. Those leaders showing the way have demonstrated solutions to the greatest concerns shippers have about data security and allocation of cost savings. It time for more companies to embrace collaborative distribution.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

The industrial sector accounts for roughly one-third of U.S. greenhouse gas emissions. The good news is that there are huge, untapped energy-efficiency opportunities that can save manufacturing companies money (see www.lesscarbonmoreinnovation.org). Unfortunately barriers—ranging from financial, organizational and cultural—hinder companies from implementing these solutions

That’s why EDF has teamed up with the labor union IUE-CWA on a project to overcome these barriers. IUE-CWA workers are being taught to conduct energy-efficiency “Treasure Hunts,” which leverages their first-hand expertise and knowledge to identify efficiency opportunities. We recently co-presented about the project at the Good Jobs, Green Jobs regional conference in Los Angeles —a gathering of labor unions and environment organizations.

In addition to myself (to see my presentation, click here), the speakers included:

• Lauren Asplen, Assistant to the President, IUE-CWA.
• Bruce Bremer, Bremer Energy Consulting Services.
• Bill Draves, Treasure Hunt Team Leader, IUE-CWA Local 722
• Ed Derr, Lean Coordinator, IUE-CWA Local 648

Lauren Asplen spoke about how training its members to conduct energy-efficiency Treasure Hunts complements its Lean High Performance Manufacturing program.  Lauren noted that the savings identified so far have been very impressive—regardless of type or age of the plant: “We’ve identified significant savings at every plant we’ve gone to so far—including new plants or plants that had already undertaken initiatives to cut their energy savings by 50 percent.” (To see Lauren’s presentation, click here).

Bruce Bremer, an energy management consultant with over 30 years of experience, is training IUE-CWA workers on conducting energy-efficiency Treasure Hunts. Bruce spoke about and clarified how Treasure Hunts fit into an overall energy management program. Bruce also clarified the difference between an energy audit and a Treasure Hunt. “A Treasure Hunt is a three day event that involves workers at the plant as well as external experts to identify energy-efficiency opportunities. The Treasure Hunt is also aimed at changing workplace culture so that the participants bring back the key concepts from the Treasure Hunt into their day-to-day work as part of a process of continual improvement. An energy audit is typically done by an outside expert and is not aimed at engaging workers or changing work place behaviors.” (To see Bruce’s presentation, click here).

Bill Draves, who hails from IUE-CWA Local 722 at a GE lighting plant in Warren, OH, talked about the types of energy-saving opportunities that IUE-CWA”s Treasure Hunt teams have been identifying. “The small opportunities can add up to big savings.” He mentioned an example of a small gap in the seal around an oven door. Pinching his fingers close together for added emphasis, he said: “The seal around the oven door had a very small gap, but this small gap was resulting in a lot of wasted energy. With a few hundred dollar fix of new insulation to seal the door, the company could start saving over $10,000/year!”

Ed Derr, who is a Lean Coordinator at IUE-CWA Local 648 at CCL Container, which makes aluminum containers, in Hermitage, PA,  spoke about the Treasure Hunt experience at his plant. Ed talked about the enthusiasm among the workers for the Treasure Hunt—some of the workers got so excited that they started implementing the savings opportunities before the Treasure Hunt was even over. Since CCL has basically been operating 24/7 for over 15 years, the “down-time” opportunities are few and far between. One of those opportunities occurred a few weeks after the Treasure Hunt during Thanksgiving.  CCL’s workers, who are basically going to work every day of the week, came in during Thanksgiving to implement one of the efficiency projects identified. That speaks volumes about the enthusiasm of the workers and their commitment to improving efficiency at their plants. Their motivation? “A lot of manufacturing jobs have been lost around where I live. I want to do everything I can to help make this plant as competitive as possible so that I still have a job.” Ed also added that the type of energy savings that he and his co-workers are identifying help the environment, which is “important for my kids.”

”Sustainability is also about sustaining jobs,” observed Bill. That’s a critical piece of the puzzle if we’re going to succeed in unlocking the full potential of industrial energy efficiency and moving towards a low-carbon economy.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.

In our past few blog posts about our Green Returns project in the private equity industry, we’ve highlighted several environmental, social and governance (ESG) best practices that are emerging across the sector. One critical element of a successful ESG strategy that we have not yet discussed is the importance of senior level commitment and leadership. This sets the tone throughout the firm that the ESG program is a strategic priority that will be complemented with the necessary capital and resources to achieve meaningful financial and environmental results. It also empowers employees, both at the firm and portfolio companies, to spend some of their time capitalizing on ESG opportunities.

To build a robust ESG program that drives measurable results, a range of stakeholders must buy in to the value creation potential of ESG, including the employees at the firm, the management teams of the portfolio companies and the firm’s limited partners. Who better to close this sale than the firm's senior leaders by speaking publically about their firm’s ESG commitment to create a sense of urgency and signal the program is of long term strategic value?

In watching this recent Wall Street Journal interview with David Rubenstein, co-founder of The Carlyle Group, it’s clear that he understands how to navigate this sales process and is actively promoting the idea that “sustainability equals more cash flow.”  By integrating EcoValuScreen into its existing operational mindset, Carlyle has seen exactly these results at numerous portfolio companies.  In addition, Carlyle is working to improve its ESG metrics, incorporating sustainability considerations into its U.S. real estate investments and expanding efforts to focus on social impacts.  While Rubenstein indicates that limited partner pressure has helped, his commitment is also integral to the continued growth and success of this program.

Another prime example of senior leader buy-in is George Roberts’, co-founder of KKR, 2011 speech at Private Equity International's Responsible Investing Forum.  In addition to the quantitative results from the Green Portfolio program, Roberts highlights three additional reasons to incorporate environmental management into private equity; stronger business relationships, increasing limited partner demand and growing interest among top recruits of the firm in their ESG activity.

Carlyle’s recent Citizenship Report and KKR’s third year of results both highlight how adopting ESG best practices can lead to strong financial and environmental returns.

KKR and Carlyle are clearly the two U.S. leaders when it comes to integrating ESG into private equity and it’s no coincidence that founders of both firms are champions for their programs both internally and publically.  While dedicated top level buy-in is not always necessary to getting an ESG program started, we believe it is absolutely essential to ensuring the program is successful and long lasting.

Subscribe to receive our blog updates by email, like our page on Facebook and follow us on Twitter.