Hybrid Trucks: Creating Jobs, Reducing Emissions

Last Thursday, Daimler Trucks North America (DTNA) celebrated the production of its 1,000th hybrid-electric vehicle, a Freightliner Business Class M2 106. While the environmental benefits of these trucks – which can be 40% more efficient than conventional trucks – are well known, the job benefits received the most attention in the local media (see, News 14 Charlotte and WSOC).

The DTNA plant in Mount Holly, North Carolina was hit hard by the recession. 750 people were laid off. As a result of increased interest in hybrid trucks, 250 of these jobs have come back.  Going forward, Freightliner’s Chief Operating Officer Roger Nielsen noted that “if the North American economy continues to improve and our suppliers continue to keep pace, we will add jobs not only here at our Mount Holly plant, but in all of our plants here in North America.”

It’s no secret that an expanding market for hybrid trucks will be good for jobs. Manufacturing Climate Solutions, a study from Duke University's Center on Globalization, Governance & Competitiveness, found that “the rapidly growing hybrid truck market promises to maintain and expand job opportunities in the truck industry even as the market for conventional trucks has dipped in recent years.”  The report also noted that “the manufacture of hybrid medium- and heavy-duty trucks appears to be a significant competitive opportunity for the United States” and that “existing jobs related to manufacturing, assembly, and research and development of hybrid trucks are dispersed among at least 143 locations nationwide.”

Cal-Start and the Union of Concerned Scientists undertook a study on the impact of increasing the fuel economy of medium- and heavy-duty trucks. Their finding: “as many as 124,000 jobs nationwide by 2030.” This analysis found that the job benefits would be shared across the country too, noting “all states would see net job growth. California, Texas, Florida, New York, Ohio, Illinois, Pennsylvania, Indiana, and Michigan would lead the way, with each adding more than 4,000 jobs by 2030.” The secondary effects of these vehicles would be significant, “fuel and cost savings from advanced trucks would spur a $4 billion increase in annual gross domestic product by 2020 and $10 billion increase by 2030.”

Given the potential for this market, these numbers—1,000 trucks and 250 jobs—are both an indication that we are making progress and also a reminder of how far we still have to go.

The total hybrid truck population in the U.S. is likely closing in on 4,000. In the last year alone, a California program has put 650 new hybrid trucks on the road.  The Maryland Hybrid Transportation Initiative just announced an effort to deploy “143 heavy-duty hybrid electric and hydraulic trucks” by ARAMARK Uniform Services, Nestle Waters North America, Sysco Corporation, United Parcel Service (UPS) and Efficiency Enterprises. The Northeast Hybrid Truck Consortium, in which EDF has been participating, is in the process of placing 20 trucks on the road in New England, including one at Oakhurst Dairy. Of course, there are around six million medium-duty trucks on the road in the U.S.

The big barrier to the rapid deployment of medium-duty hybrid trucks remains the significant upfront cost of these vehicles, typically $25,000 to $40,000 above conventional ones. Scale matters in bringing these costs down. Government support has been critical to get the market to where it is today. To reach the job-creation and emission-reduction potential of this market, additional investment will be needed.

On the bright side, when EDF partnered with Fed Ex in 2004, there was not a single such truck on the road. Today, all major U.S. truck manufacturers offer midsize hybrids and more than 150 fleets use them. From that single hybrid truck model introduced in 2004, the offerings have grown to nearly forty models. This work has also spurred the development for all-electric medium-duty trucks.

Together, we are making progress. DTNA should be lauded for reaching the milestone of 1,000 trucks. Its partner component manufactures, such as Eaton, deserve some credit too. Now, let’s see how quickly we can get to 10,000.

REI Moves Towards Sustainability and Comes Back for Another Fellow

Guest blog by Kirk Myers, REI Corporate Social Responsibility Manager

As a member-owned co-operative, REI has had stewardship built into our DNA since our founding in 1938. And as a national retailer of high quality outdoor gear and apparel, we seek to operate our business in ways that allow us to be sustainable and successful in connecting people with nature.  The REI team is focused on formalizing the measurement and management of our environmental impacts and finding innovative solutions that combine our business minds with our passion for our mission.

Last summer, I had the opportunity to work with Sarah Will, an EDF Climate Corps fellow who brought her keen sustainable business analysis skills to an ongoing area of work for REI: energy efficiency. Before the start of her fellowship, Sarah had acquired three days of intense training from EDF on energy efficiency analysis, a strong peer-group for support and counsel, and a fresh MBA in Sustainable Business from the Bainbridge Graduate Institute.

Even with several years of successful green building experience under our belts, we here at REI still knew that we had lots of efficiency opportunities left to tackle.  Using energy wisely is an essential tool in helping us meet our goals to reduce our climate impact and lower energy costs.  Our facilities managers have been analyzing the opportunities for their buildings, but what we did not know was how these projects stacked up across our entire organization, and what other sustainable business solutions were out there.  And frankly, it takes time to vet projects for their cost, their environmental impact and financial return.

We often also find that establishing metrics for our business opportunities can prove our intuition wrong.  Sarah’s main suggestions included fairly straightforward recommendations, such as lighting sensors, but also less obvious solutions such as retrocommissioning.  In addition, some of Sarah’s best work was helping REI identify the systemic barriers that had kept us from tackling these projects.

As a result of Sarah’s interviews, facility tours, and research into utility rebates and incentives, she was able to uncover potential savings of more than 6.5 million kWh, or more than 2,700 metric tons of carbon, equaling nearly $900,000 per year.  That’s impressive.  We’re working to implement as many of her suggestions as we can.

For us energy efficiency “wonks,” we know how much opportunity is still out there, and how much potential for impact this represents.  Sarah published a blog about lighting efficiency on REI’s Facebook page, and received over 130 “likes” and comments from REI friends—among the most popular posts ever on REI’s page.  I guess that energy efficiency not only makes sense, but it is now also cool!

Even with Sarah’s great work, she still didn’t have enough time to analyze all of our opportunities in just 10 weeks.  We are excited to build on Sarah’s 2010 work with another Climate Corps fellow this summer, who will help move us closer to our greenhouse gas reduction goal.

Sign up to receive emails about EDF Climate Corps 2010, including regular blog posts by our fellows. You can also visit our Facebook page to get regular updates about this project.

Green Ops for Private Equity: A next generation offering for environmentally savvy PE firms

Over the past year, our conversations with private equity (PE) firms have definitely shifted. We are no longer talking about “why” the environment presents an opportunity for differentiation and value creation, but “how” a firm can get started down this path.  The Green Returns team at Environmental Defense Fund (EDF) quickly realized that in order to answer this question in a way that would lead to action, we were going to need reinforcements.

On Monday, we announced a new effort with Ernst & Young to bring in the manpower, resources and expertise to help make environmental management a best practice across the PE industry. Together with Ernst &Young we are piloting a new approach to help PE firms overcome the major barriers to systematic environmental management.

Green Ops for PE will offer participants a tailored assessment of the size and nature of environmental opportunities across their portfolio, and provide a clear roadmap and actionable plan for implementation. The new offering will leverage our experience and resources from working with KKR and Carlyle, along with Ernst & Young’s deep expertise in the private equity and sustainability and climate change practices.

Yesterday, the Wall Street Journal highlighted the growing trend of environment, social and governance (ESG) issues in the PE industry, pointing to Carlyle’s recent report on corporate citizenship – a first for the industry – and our new Green Ops for PE offering.  The focus on environmental strategy was also evident at the latest event in our Green Returns dinner series hosted in New York City earlier this week. We gathered leaders from across the PE industry to discuss the growing role of ESG issues, and the lively conversation revealed an enthusiasm for finding new and innovative ways to incorporate environmental thinking into strategy and value creation.

Our goal now is to translate that enthusiasm into action, and we are bullish on the prospects for Green Ops for PE to do just that.  Our work with Ernst & Young holds the potential to extend our team’s reach and impact by matching up the firms who have the scale and resources to dramatically hasten our transition to a greener, more efficient economy.  Stay tuned for the results of our pilot this spring!

What's keeping your company from signing up for savings? EDF Climate Corps clears up your concerns

Many of us have experienced gaps between knowledge and action. We may know something in theory, but have a hard time putting it into practice. Sometimes we need a little help to take the first step.

Last summer, EDF Climate Corps proved that energy efficiency is a win-win solution for businesses to cut costs, energy bills and carbon emissions.

This year, we already have an impressive list of 31 leading corporations eager to lower their emissions and energy bills in Climate Corps 2011. We welcome new participants Dunkin’ Brands, Facebook, JPMorgan Chase & Co., Microsoft, and returning companies adidas, Carnival, RBS Citizens Bank, P&G and Yahoo!

The Climate Corps program’s success is grounded in clear results: since its founding in 2008, we've found enough energy savings to power 85,000 homes at a net benefit to participating companies of $439 million. Saving money while reducing a company’s carbon footprint seems like a no-brainer. Why doesn’t every company choose to participate?

We are confident the program can add value to nearly every organization. Our conversations with hundreds of companies of all shapes and sizes have revealed some initial hesitations about hiring a Climate Corps fellow. Yet many of these companies end up participating in the program and go on to rave about their experience. Shared below are some common concerns and our solutions to encourage your company to join the energy efficiency movement.

1. My company already has an in-house teams working on energy efficiency

 Further your energy mission by hiring a fellow to serve as an extra resource.

EDF Climate Corps fellows provide a fresh perspective and an extra set of skilled hands that complement the work of an in-house team. John Schinter, executive director of energy at AT&T, hired an EDF Climate Corps fellow to work on an existing lighting project. Through the project, Jen Snook, Duke MBA, identified steps that if implemented could potentially result in an 80 percent savings in energy use across more than 100 million square feet of space.

2. My company is already a recognized “green” leader

 Look deeper that you already have to advance the sustainability work of your company

 Many of the companies that participate in Climate Corps are already quite progressive in the field of sustainability. EMC, recognized as one of Corporate Responsibility’s Magazine’s “100 Best Corporate Citizens” joined EDF Climate Corps to search for opportunities beyond the “low-hanging fruit” of energy efficiency. Ian Lavery, MIT MBA, examined initiatives for the company’s facilities that could save approximately $443,000 annually and reduce 1,900 metric tons of GHG emissions.

3.   My company already has a long – and overwhelming – list of energy projects waiting for implementation

 Hire a fellow to prioritize your energy investments

Many fellows spend their summers identifying and analyzing lighting, HVAC and computer power management investments, but a number of our fellows end up working on strategic projects to help prioritize existing initiatives. Koji Kitazume, Duke MBA, helped McDonald’s to develop a tool that quantifies the financial and environmental impact of the company's energy efficiency efforts and prioritize investments. He was able to use this tool to calculate ways that the company could cut approximately 2,993,000 kWh of electricity usage and avoid 1,799 metric tons of CO2 emissions annually.

4.  I’m stuck in a capital-constrained environment

 Identify more energy savings opportunities than it costs to find them

 Every single Climate Corps fellow to date has identified more energy saving opportunities in ten weeks than the upfront cost of hiring him/her. Jonathan Stone, NYU MBA, spent 10 weeks spearheading a lighting retrofit at the Dow Jones printing plant. In total, he identified projects that could reduce energy costs by approximately $179,524 annually and avoid 942 metric tons of GHG emissions.

5. My company is large, complex and hard to navigate

 Let your fellow use all the skills he/she has learned to make a meaningful impact within your company

 One of the added values of EDF Climate Corps is our rigorous Training for the fellows before they start their fellowships. The Training includes modules on dismantling organizational barriers, engaging employees, and deciphering the right places to look and people to talk to for information. In order to gather data and analyze energy-saving investments at Carnival, Mandy Martin, USC IMBA, worked with as many as 50 people on a day-to-day basis. The EDF Climate Corps Training helped prepare Mandy to make recommendations that could benefit Carnival not only at their headquarters in Miami, but also in other shore-side facilities and its fleet of ships.

6.  Typical interns require a lot of hand-holding

 Hire an MBA student who has been selected to participate in EDF Climate Corps as a self-starter who doesn’t require constant supervision

 In hiring the best and brightest MBA students across the county, our screening process requires that our fellows be self-starters with exceptional financial acumen and project management and consulting experience. At adidas, Elizabeth Turnbull, Yale MBA/MEM, assessed the Reebok world headquarters in Canton, MA and adidas’ distribution facility in Spartanburg, SC.  She identified many energy savings that could be captured through managing existing systems with no up-front cost. Elizabeth’s project portfolio could save adidas $336,300 annually and represents over $1.5M in net-present value.

7.  My company already hosted a Climate Corps fellow– where’s the sense in doing it again?

 Join dozens of repeat companies for additional savings

Nearly two thirds of the companies signed on for 2011 have hosted Climate Corps fellows before. For companies like Genzyme, Shorenstein, SunGard and Yahoo, 2011 will be their third year of participation. It’s clear that once a fellow has picked the initial ‘low-hanging’ fruit of energy efficiency, greater opportunities for long-term savings lie deeper within a company, calling for multiple stages of energy analyses.

To hire a Climate Corps fellow, please contact Rachel Hinchliffe for more information.

Not the U.S. or China, but the U.S., China and the Planet

By Gernot Wagner

One of the pleasures of my job is having a slew of superbly qualified prospective interns knock on our doors. Yesterday, I interviewed someone who graduated at the top of his class at Renmin University in Beijing.

There have been plenty of column inches written on "China versus the US," including when it comes to green jobs and clean tech. So,

Who's going to come out ahead, China or the United States?

It took him nary a second to nail this one:

China, relatively. Both China and the U.S. in an absolute sense.

That's the textbook answer.

The atmosphere wins

China has a lot of catching up to do. Comparatively, it will clearly gain on the U.S. But trade also has advantages for both parties involved. That's why we trade in the first place.

The planet emerges as a winner as well. It doesn't care where a ton of carbon gets emitted or where it gets reduced—just that reductions happen.

If China produces cheaper solar panels, we get fewer emissions overall. The planet wins. China wins. What about the U.S.?

What about jobs?

If you are among the 800 workers in Devens, MA, who last week found out that Evergreen Solar was moving its plant to China, you will feel very differently about free trade right about now. The textbook economic answer would say that the move can still make everyone better off: compensate the losers through portions of the gains from the winners, and everybody wins once again.

This situation, of course, is the moment when you throw out your textbook and think about the full consequences.

As a result of the move, solar panels will likely become even cheaper for everyone, enabling many more to buy them. Still, the Devens 800 will not be among the people lining up to buy cheaper solar panels.

What can they do? What should the U.S. do as a matter of policy?

First, we need to realize that the rules of trade still apply. China has lots of cheap labor. It does and will continue to manufacture many products sold in the U.S. Solar panels are no different.

But that's still not a satisfying answer, nor is it the whole story—not for manufacturing itself, and not for the clean tech industry overall.

How to keep clean tech jobs in the U.S.

To get to the bottom of this, we need to look at the full supply chain for solar panels. This, of course, oversimplifies things, but we can split the entire process into three distinct buckets: inventing, producing, and installing.

Right now, the U.S. is inventing, China is producing, and it is the one installing the resulting solar panels domestically at massive scale.

The U.S. ought to do everything to make sure it keeps inventing clean tech products. That means a concerted push to fund basic research and development. But R&D subsidies alone won't do.

Many mentions of "R&D" add a second "D" for deployment. Government support can get things going, but large-scale deployment of clean technologies won't happen through subsidies alone (at least not without bankrupting the government).

So how do you get deployment up to scale?

Deployment clearly needs to be driven by demand. That's where a cap on carbon pollution, with its resulting price on carbon, comes in. A cap helps create a more level playing field for solar and other renewable energy sources relative to fossil energy and, therefore, creates the necessary demand. (There are alternatives, like simply requiring a certain percentage of power to come from solar, but none is quite as cheap and flexible as a cap.)

Made in USA?

Moreover, cheap labor and cheaper production facilities may be a decisive factor, but they are not the only reason companies consider when choosing where to locate. There are many more, but let's focus on two: intellectual property (IP) protection and being close to where the demand is.

The U.S. has a leg up on China in terms of IP protection. That's, in part, why the U.S. (still) leads on R&D. It's also a clear draw for some companies to locate their production facilities in the U.S.

Another oft-cited reason is to be close to consumers. That's once again where the importance of the second "D"—deployment—comes in. The more demand there is for solar panels in the U.S., the more companies will locate their production plants in the U.S. as well. The case of First Solar supplying panels for Wal-Mart is a prime example. (Note that this is distinct from cheaper production leading to more demand in the first place.)

In the end, though, we must also be clear that jobs will be different in the new, cleaner economy. We will need fewer gas station attendants. Many other jobs will thrive. Underlying trade forces will mean that China may well be producing many of the solar panels sold globally. Assembling, installing, and maintaining solar panels in the U.S. will require plenty of skilled labor. And none of these jobs can be exported.

California leading

With the right policies in place, the U.S. will keep inventing. It will also create thousands of jobs dedicated to deployment. China will play a major role in producing, but even there, smart environmental policy can only help.

California is taking the lead with its Million Solar Roofs initiative, creating many a job assembling, installing, and maintaining solar panels. That initiative, though, still has to be paid for by tax dollars, and it won't go on forever.

That's where the cap on carbon kicks in. California is bound to stay ahead of the rest of the U.S. with its ambitious cap-and-trade system that starts on January 1, 2012 and the resulting market signal that says that clean tech pays in the U.S. as well.

Consider the just-released Next 10 report, Many Shades of Green, that found that in the most recent observable 12-month period (January 2008 – January 2009) jobs in the green sector grew more than three times faster than total employment in California. (Of course, all of this always comes with the warning that green sector jobs are still a small fraction of total jobs—much like IT jobs were a minuscule part of overall employment in the early 1980s.)

One of our internship spot may well end up going to a Chinese student, but that, too, can only be good for the planet—making a small contribution to help train the next generation of Chinese environmental leaders. And rest assured, there are plenty more open job positions (including one for a post-doc working with our economic team, open to anyone with a Princeton affiliation).

This content was originally published on EDF's Market Forces blog.

The Chevy Volt: Driving Towards a Healthier Planet

I absolutely love to drive. Whether cruising along highways, adventuring down a road less traveled or “dropping the hammer” on a closed course, there’s something about driving cars that puts my whole body and mind in a good place (except when I’m bogged down in traffic!).

So I noted with interest when Chevrolet — one of four remaining brands with General Motors (GM) and the mastermind behind iconic cars such as the Camaro and Corvette — announced a new initiative to invest $40 million in clean energy projects in an effort to reduce eight million metric tons of carbon dioxide emissions over the next few years. This may be a drop in the bucket for a company that sold over two million cars in 2010, but it’s encouraging to see a company that has experienced incredible tumult in past years (from bankruptcy to government control to a record-breaking IPO) align its business and environmental strategies in this way.

According to the most recent data provided by the EPA, overall greenhouse gas (GHG) emissions across U.S. economic sectors have increased by 14% since 1990, reaching a total of 6,956 million metric tons in 2008. The transportation industry has been a big part of that number, responsible for 1,886 million metric tons of GHG emissions and second only to the electric power industry. Needless to say, it’s important for leading automakers like GM to make these strides for the planet.

There are some positive signs. The EPA also reported a 2.9% decrease in GHG emissions from 2007 to 2008, which was closely associated to a decrease in demand for transportation fuels. Electric vehicles like GM’s Volt, the Nissan Leaf and the fully-electric Toyota Prius can contribute significantly to this emerging trend.

Given my line of work and my passion for cars, I was excited to have the opportunity to test drive the new Chevy Volt with some of my colleagues at Environmental Defense Fund (EDF). Greenbiz.com recently reported that The Volt was recognized as Motor Trend’s 2011 Car of the Year and one of Car and Driver’s 10 Best Cars for 2011.

Challenges for electric vehicles (EV) remain. A J.D. Power and Associates report isn’t so optimistic on EV’s. The report cites mixed consumer attitudes, the lack of  tax incentives and higher fuel economy standards as factors that could  prevent these cars from becoming mainstream. But with all of the accolades the Volt has received, along with the noted interest from both car enthusiasts and environmentalists, the potential is there. We need to figure out how to overcome concerns like range anxiety and the infrastructure to help the rubber hit the road.

So even with companies like GM taking steps toward the goal of global carbon reduction through initiatives such as the Volt and GM's $40 million clean energy commitment, a great deal of work is yet to be done. We are excited to see companies push the boundaries of innovation, and we look forward to what is still to come.

If you want to learn how to get your company started on environmental initiatives, visit us at EDFbusiness.org.

Is your company prepared for $5/ gallon gas?

In case you haven’t noticed, fuel prices are on the rise again.  Of course, it would be hard not to notice..  Even those among us that have chosen to travel exclusively on other forms of transportation likely find it hard to miss the rote commiserating from the rest of us every time we have to pay a dime more at the gas station. Multiply your sense of resignation at the gas pump by a thousand and you’d have a sense of how corporate fleet managers are feeling these days.

Resignation, however, is only for the short-term. Over the long run, we can adapt. Two colleagues in the fleet industry, Elisa Durand of ARI and Tom Sloan of Donlen, recently posted insightful commentary on the likely path of fuel prices (up – but how high is anyone’s guess) and what fleets can be doing to hedge against this increase (get more efficient and transition to lower-carbon fuels).

In a Donlen "GreenKey" post, Tom states that EIA data suggests that “pro­jected regular-grade gaso­line prices are expected to aver­age $3.17/gallon in 2011, with a peak of $3.23 in August. Relief at the gas pump is not expected in 2012, either, with aver­age gaso­line prices expected at $3.29/gallon.”

Elisa noted that a former oil-industry executive claimed that “much of the United States could see $5.00/gallon fuel prices by 2012,” but that “other industry experts were not as bleak in their predictions” with one suggesting that “15 states will see gasoline prices climb past $4.00/gallon by May.” She then posed what I agree is the key question: What are fleets willing to do to prepare for higher gas prices?

In reading her post, I was reminded of an industry event that I attend in the fall of 2006 when a fleet manager asked a leading expert what the company should assume would be the average price of gasoline over the coming year.  The answer: $2.70 per gallon provoked groans throughout the audience. It also proved to be right on.

This relatively short-term forecast was critical for companies to both budget fuelspend for the year and to project the total cost of ownership of the vehicles they were purchasing in the next by cycle.  Even if the manager asking the question chose to build his/her incoming class of vehicles based on $2.70/ gallon of gas, he/she would have still not been prepared for 2008, when fuel prices averaged $3.25 and saw national highs of $4.11. As most fleets hold on to vehicles for three to five years, they are locked into a certain amount of fuel consumption based on their past decisions. This is what makes Elisa’s question so important.

To adequately prepare for fuel prices in 2016, companies need to make decisions today.  What will the price be in 2016?  I certainly don’t know.  The upwards trend is clear, though. As Tom writes, 2012 prices are expected to be $3.29—which is higher than the average from 2008.

Companies need to plan for the long-term, both from an emissions and cost perspective. As we move into the next buying cycle for corporate fleet vehicles, companies should be asking themselves “what fleet do I want in 2014, 2015 and 2016”? Even if $5 a gallon gas is not likely. There is a risk of high and sustained prices over the coming years. I, for one, would not want to have to ask the CFO to double my fuel budget and not be able to articulate the comprehensive, multi-year plan that was already in place to mitigate our exposure to historic fuel prices.

There are many ways to prepare a fleet to use less fuel. Tom from Donlen and Elisa from ARI offer many options. EDF has long promoted best practices in this area too – many of which were developed through our partnership with PHH Arval. These steps almost always reduce greenhouse gas emissions too.  It is time for companies to prepare for higher gas prices. One way to do so is to create a long term goal that cuts fuel consumption and emissions. EDF and Donlen issued a challenge to the industry last September to cut emissions 20% by 2016. Joining us in this effort is one place that companies can start to prepare for higher fuel prices.

EDFix Call #14 Afterthoughts: Greening heavy-duty trucks: the next ten years

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With Hiroko Kawai of the Rocky Mountain Institute, we headed for the bulk of the U.S. fleet: heavy-duty trucks, which make up 80 percent of all commercial vehicles, carry 70 percent of all freight and are on the road for 100,000 to 120,000 miles every year.

One of the biggest recent initiatives is to centralize a lot of the information around greening big trucks. To that end, in January 2010 industry players launched NACFE (the North American Council for Freight Efficiency).

Although much attention is going to vehicle upgrades and modifications to increase fuel mileage, logistics can be a big win. Wal-Mart’s suppliers were heading home empty quite often. After studying the issue, the retailer changed its contracts, picked up many of the routes, optimizing them to reduce the number of “deadhead” trips — and saw a 60 percent increase in fuel efficiency. Changing highway regulations to allow for longer truck-trailer combinations is helping fuel efficiency in Canada and ten Western U.S. states.

Another big opportunity is reducing the time that trucks idle their engines, which can be all night long, to power heaters and electricity at a rest stop. Auxiliary power units are one effective answer; power at the rest stops is another. Challenges remain, like reaching the independent owner-operators who account for the bulk of heavy-duty trucks, and motivating more shippers to switch modes from truck to rail or water. Alternate modes can be much more efficient.

Laying the Foundation for ESG Value Creation

On Monday, The Carlyle Group (Carlyle) – one of Environmental Defense Fund’s (EDF) corporate partners and the world’s second largest private equity firm – released its first-ever Corporate Citizenship Report, outlining the firm’s environmental, social, and governance (ESG) efforts and plans for the future.  The report is a first of its kind by a leading global private equity firm and continues the growing trend within the private equity industry of improving ESG management practices as a critical value creation strategy.

The report and reflections on the changing attitudes towards ESG issues in the private equity sector were featured in articles by Laura Kreutzer in The Wall Street Journal Private Equity Beat and the Dow Jones PE News.  According to Kreutzer, “Private equity firms love to talk about their track records and the depth of their operational expertise, but now they are adding another item to the list:  how responsible they are. […] Although the largest buyout firms appear to have led the charge in formally addressing ESG issues, it may not be long before others follow suit, particularly as more firms head out to market new funds.”

Among the initiatives highlighted in the report is our partnership with Carlyle to create and implement EcoValuScreen, an innovative due diligence tool designed to identify value creation opportunities through improved environmental management practices at potential investments.  EcoValuScreen, which was launched in March of last year and created in conjunction with The Payne Firm, expands the traditional focus of environmental due diligence from downside risks to include upside opportunities for better environmental and financial performance.  The process is currently being used by Carlyle deal professionals to more effectively evaluate the operations of a target company, identify the most promising environmental management opportunities and incorporate them into the post-investment management, governance and reporting plans.

Two specific EcoValuScreen case studies are highlighted in the report.

  • During due diligence for the acquisition of NBTY, a manufacturer of nutrition supplements (including including Nature’s Bounty, Holland & Barrett, Vitamin World and Puritan’s Pride), Carlyle applied EcoValuScreen and identified potential opportunities to reduce packaging, raw material usage and solid waste.  These opportunities will result in financial savings as well as decrease the company’s energy usage, greenhouse gas emissions and waste output.
  • At Park Water Company, a California-based water utility, Carlyle used the EcoValuScreen process to evaluate the company’s operations and identify opportunities to build on existing environmental management and conservation programs.  Specific opportunities include expanding the use of water meters at Park Water’s Montana affiliate, replacing and repairing aging pipes, and scaling water conservation initiatives across all three of the company’s utilities.

Carlyle’s Corporate Citizenship Report and efforts to systematically embed ESG management into its investments practices are important steps for the firm and the sector.  These initiatives create a solid foundation upon which Carlyle can continue to expand its efforts to measure, manage, and report on ESG performance while creating value for investors.

Equally important, this week’s news is another reminder that global private equity firms are serious about integrating best practices for ESG management into their investment practices and management strategies.   It’s still early days, but leading indicators show that these initiatives have the potential to become a standard industry practice for creating lasting value for companies, investors, and the planet.

For more information on EDF's work with private equity, please visit edf.org/greenreturns.

Calling All Corporate Leaders: Full speed ahead on greenhouse gas reductions

By Emily Reyna and Jacob Hiller

Last October, EPA held its final Climate Leaders meeting.  While many were concerned about the sudden dissolution of the program, some saw it as inevitable.   The consensus is that the EPA Climate Leaders program has provided significant value to companies over the past eight years.  Beginning with 11 charter members in 2002, the program grew to 275 companies in 2010, with annual GHG reductions totaling 18 million metric tons of CO2 annually – enough to power over 2 million homes for one year.

The program clearly demonstrated that companies can lead the way in reducing greenhouse emissions.  But without national climate legislation in place, companies seeking to act responsibly and prepare strategically for a carbon-constrained economy face a bewildering landscape.   And with the sunset of Climate Leaders, many companies feel an unanticipated void.  To whom should emissions be reported? What defines an ambitious industry standard? Who can verify that reduction targets are met?

In this uncertain environment, companies might be tempted to alter their course for the worse—downgrading their environmental commitments or scaling back investments in technology and innovation geared towards making their operations cleaner and more efficient. Yet doing so would be a serious mistake. Like the two characters in Waiting for Godot, companies cannot afford to become trapped in a limbo of inaction, waiting for government to lead the way.

In fact, companies today have numerous tools at their disposal to leapfrog their competition in the realms of transparency, cost savings and new value creation. From international reporting protocols and national carbon registries to high-profile business partnerships and coalitions, opportunities abound for companies to become leaders in corporate sustainability within their industries.

This continuously evolving landscape has been detailed inEnvironmental Defense Fund’s newly updated “Roadmap to Corporate Greenhouse Gas Programs.” This document guides companies through the steps of measuring and disclosing emissions, setting reduction targets, implementing successful abatement programs and reporting results.  It also lists the leading registries and climate organizations that are closing the gap EPA Climate Leaders left behind. Like those companies that achieved such impressive results through Climate Leaders, the companies that start down this road – and stay on it – will shape the future of business rather than hiding on the sidelines.

Waiting in limbo benefits no one—least of all the future of our climate and the health of our planet.  Smart companies can lead the way by getting on the road to greenhouse gas reductions today.  Start your engines – your roadmap is here, and there’s no speed limit.

For more business tools around environmental innovation and sustainability, visit edfbusiness.org.

This content was originally published on Climate Progress.