Raising the Bar for Private Equity ESG Reporting

As the old management adage goes, “what gets measured gets managed.” Private equity firm Apax Partners took an important step toward embodying that concept this spring by releasing a sustainability report rich with key metrics from its portfolio companies' progress in environmental, social and governance (ESG) management.

Apax Partners logo

As last year’s Pitchbook survey showed, ESG management is increasingly a mainstream issue for private equity firms. The detailed data that Apax portfolio companies are gathering — and reporting as a group — form the foundation for companies to manage ESG issues, as well as benchmark and then measure any advances.

This is all part of an important, ongoing shift in the private equity industry: from questioning if firms can create value through ESG management, to how can firms capture the value.

Apax gathered responses from more than 80 percent its targeted portfolio companies (i.e., majority owned and not planning an exit). That pool of companies represents nearly 90 percent of Apax’s 2012 revenue, with a total of $21 billion in global revenues, $4 billion in EBITDA and 166,000 full-time employees by year-end 2012. The responding companies represented a cross section of the key Apax investment sectors: consumer, healthcare, services, technology and telecommunications.

Apax’s report offered insights into how its portfolio companies are working to address ESG issues in their operations:

  • Plantasjen increased insulation in all new built stores and installed heat pumps in six stores, with insulation saving approximately one-third of stores' energy consumption compared to the old format and heat pumps reducing energy consumption by about 20 percent.
  • Capio invested in solar panels, low-energy bulbs, green cars and automatic light switches and considers energy efficiency an important parameter in the construction of new buildings.
  • Tnuva began changing processes to reduce paper and packaging usage, including swapping hard cheese packaging from PVC to Pet, using foamed polystyrene sheets instead of just polystyrene, replacing disposable egg cartons with plastic washable packages, reducing plastic packaging weight through a new manufacturing technique and phasing out wood pallets in favor of plastic.
  • GHG hired a water savings consultancy to audit all site bills, benchmark water consumption and focus on those sites whose consumption is excessive. As a result, the company has reduced lavatory flushing, fixed failed valves and faulty equipment and is reviewing opportunities for capital investment.

This kind of data-rich report offers an example to PE firms on how to lay a foundation for solid ESG management, one that EDF would encourage other firms to learn from. We look forward to following the progress of Apax and its portfolio companies as they work to improve sustainability measurement, management and reporting.

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