In Its 5th Citizenship Report, KKR Reaches Beyond ESG

This post is part of an EDF+Business ongoing series on sustainable finance, highlighting market mechanisms and strategies that drive environmental performance by engaging private capital. EDF is actively engaging leaders with the capital and expertise needed to catalyze sector-wide changes—from accelerating investment in energy efficiency and clean energy, to protecting tropical forests, restoring depleted fisheries and saving habitats of endangered species.

Sustainability pioneer and inspiration to many of us at EDF, Ray Anderson frequently talked about his company’s efforts to scale the seven faces of Mount Sustainability and develop a more responsible company along the way. Summiting a mountain is a good analogy for a company’s journey to improve its environmental performance. To succeed you need a plan, commitment, resources, and the ability to change direction if there are obstacles in your path.

In the case of a private equity firm like KKR & Co. L.P. – with over 56 portfolio companies participating in value creation programs linked to its environment, social and governance (ESG) strategy since 2009– the journey is more akin to traversing an entire mountain range, whose contours keep evolving as companies enter and exit their portfolio.

That changing landscape is what’s driven KKR to continue to adapt how it manages ESG challenges and opportunities. KKR’s recently-released 5th annual ESG & Citizenship Report details how these programs have continued to evolve since our initial partnership in 2008.

Our work together helped drive KKR’s Green Portfolio Program which, six years later, has added a cumulative $1.2 billion to its portfolio companies’ bottom lines while avoiding more than 2.3 million metric tons of greenhouse gases and reducing waste by 6.3 million metric tons and water use by 27 million cubic meters, according to results announced last fall.

kkr_logo_13932KKR’s latest report documents the firm’s progress in advancing ongoing efforts, including measuring and improving ESG performance at key portfolio companies, rolling out a publicly available ESG policy across its global private equity staff, contributing its expertise to the Sustainable Accounting Standards Boards’ development of ESG disclosure guidelines, bringing together sustainability professionals and other experts at its first Sustainability Summit last year, and hiring a full-time energy expert and two EDF Climate Corps fellows to help its portfolio companies more systematically adopt solutions for better energy management.

In addition, something new caught our eye. KKR plans to refocus its investment efforts through one of three lenses – responsible investing, solutions investing and impact investing.

  • Responsible investing incorporates ESG metrics and analysis into investment decisions.
  • Solutions investing refers to investments made in companies that have an intentional focus on solving a societal challenge and deliver traditional returns to investors, such as providers of reusable bulk shipping containers, developers of environmentally-responsible office buildings in Korea and microfinance groups increasing access to capital for business owners in rural and semirural India.
  • Impact investing goes beyond the other two, focusing on investments in companies that put environmental and social impacts on par or even ahead of financial impacts. KKR began advising two impact businesses in 2013 by providing technical assistance, helping the companies scale their businesses and secure additional funding. Moving forward, KKR will consider investing in such businesses.

At EDF, we believe that private capital can and must be part of the solution to our biggest environmental challenges. We’re encouraged to see major investors like KKR expand their investment strategy as the next step in this journey and eager to see the environmental and financial results it delivers.

EDF Climate Corps Proves its ROI for Private Equity Firms

As summer officially gets underway, the 2015 EDF Climate Corps fellows are already off to the races seeking out energy and cost-saving opportunities for some of the world’s largest companies and organizations. Among those participating, we are pleased to place 13 fellows with private equity firms and their portfolio companies, the largest such cohort in a single summer, besting last year’s record of 12 fellows. This brings the grand total up to 57 EDF Climate Corps fellows who have worked in the private equity sector (including with portfolio companies) to date.

EDF Climate Corps fellows Yien Huang (left) and Jiamu Lu (right) collaborating at the fellow training

EDF Climate Corps fellows Yien Huang (left) and Jiamu Lu (right) collaborating at the fellow training

Since 2008, EDF has worked with the private equity sector to drive environmental results, beginning with a partnership with KKR & Co. L.P., and later with The Carlyle Group and Oak Hill Capital Partners. Resulting from this work was a suite of free tools designed to help firms identify and manage environment, social and governance (ESG) issues. EDF Climate Corps offers private equity firms a powerful resource that continues to deliver environmental benefits alongside real financial returns.

This year, as in past years, we continue to see a diverse range of participating companies and projects:

  • In 2015, we welcome new hosts Guitar Center, NBTY (vitamin/food supplement supplier), Ortho Clinical Diagnostics (medical equipment manufacturer), Pharmaceutical Product Development, and Gelson's Markets (a grocery chain in southern California).
  • Among returning companies, we’re excited to welcome back Floor & Décor, Philadelphia Energy Solutions, Avaya, and Caesars Entertainment, the last of which was featured in episode 7 of the Showtime series Years of Living Dangerously (now available on Netflix, Hulu and Amazon Prime), which profiled the efforts of EDF Climate Corps.
  • HCA Healthcare will also be returning, marking the company’s sixth straight year of participation.
  • KKR & Co. L.P., Carlyle Group, and Hellman & Friedman will have fellows working at the firm level this year.

The work that these fellows will engage in this summer ranges from energy benchmarking and efficiency upgrades to demand response assessments and green revolving loan fund design. We’ve written previously about the myriad ways that fellows can add value both at private equity firms and portfolio companies and we’re excited to see new stories unfold this summer. Watch this space as well as our Climate Corps-specific blog, where fellows across a variety of sectors will share their experiences and accomplishments.

Accelerating the Shift to More Efficient Trucks

Freight transportation is the work horse of the global economy, ensuring that the products consumers want get on the shelves where and when they want them. With 70 percent of U.S. goods being moved by truck, freight is a key source of U.S. fuel consumption and corporate greenhouse gas (GHG) emissions. Today, freight also offers companies a key opportunity to drive us toward a lower carbon future.

pepsico-logoIn a Wall Street Journal op-ed with EDF President Fred Krupp, Pepsico Chairman and CEO Indra Nooyi voiced the company’s strong support of the new fuel efficiency and GHG standards for medium and heavy duty trucks released June 19th by the U.S. Environment Protection Agency and Department of Transportation. Over the life of the program, these robust standards will cut fuel consumption in new trucks by 1.8 billion barrels of oil and reduce carbon emissions by one billion metric tons.

Leading companies like General Mills, Walmart and Anheuser-Busch have made reducing fuel use and emissions from freight a priority in setting their internal supply chain performance goals. But Pepsico’s willingness to step forward with this op-ed is a prime example of how companies can extend their leadership by aligning their public policy stances on with their sustainability goals – what EDF has been referring to as the business-policy nexus.

Freight affects all of us, but business is in the driver's seat

EDF - Building better trucksFreight transportation exists to serve companies that make or sell physical goods, from brands and manufacturers using trucks to bring in supplies and ship out final products, to technology companies needing trucks to deliver the hardware that powers their online services. While medium- and heavy-duty trucks only make up 7 percent of all vehicles on the road, they consume 25 percent of the fuel used by all U.S. vehicles.

Inefficient movement of goods wastes fuel, raises costs and increases environmental impacts. For firms like Pepsico, who maintain their own fleets, as well as those that contract out for freight moves, fuel is the single largest cost of owning and operating medium- and heavy-duty trucks. Truck fuel prices have increased 58 percent since 2009, a strong incentive for increasing the efficiency of trucks that move freight. Consumers are counting on businesses to solve this problem, as those costs are passed on to consumers. Through everyday purchases, the average U.S. household spends $1,100 a year to fuel big trucks. Strong standards can cut this expense by $150 on average a year by 2030. Read more

Consumers Deserve To Know What's In Their Products

This installment of our Pillars of Leadership series explores Informed Consumers.

Sharing ingredient information with consumers is key to business leadership on chemicals. It can build consumer confidence, trust, loyalty – and market advantage. Numerous surveys (see here and here) and advocacy campaigns (see here) reveal that people want more ingredient information than is typically available today. The key to success in cultivating an Informed Consumer is providing product ingredient information that is comprehensive, accessible, and importantly, meaningful.

Woman label blog image

Consumers want to:

  • Have easy access to consistent, reliable information
  • Feel empowered when making purchasing decisions for themselves and their families
  • Understand what they’re bringing into their homes
  • Avoid adverse health and environmental impacts
  • Trust that brands and retailers respect their interest in knowing product composition

How does a company cultivate an Informed Consumer? For starters, by sharing ingredient information on product packaging and online for products it makes or sells, with content that extends well beyond regulatory requirements. While packaging physically limits the amount of information that can be shared with consumers, online ingredient disclosure allows greater flexibility in terms of the extent and type of ingredient information, as well as how that information is accessed and presented. Read more

Campbell’s Soup Expands Fertilizer Optimization Programs

There’s a new reason to celebrate your favorite sugar cookie. The Campbell's Soup Company has committed to fertilizer optimization in its sourcing areas in Ohio and Nebraska – which provide wheat for Campbell’s subsidiary, Pepperidge Farm – and the company will enroll an additional 70,000 acres into its fertilizer optimization programs by 2020.

220px-Campbell_Soup_Company_logo.svg_Campbell's will work with EDF to create additional fertilizer optimization and soil conservation programs for farmers, and will deploy United Suppliers’ SUSTAIN platform in these sourcing areas to help ensure for farmers that changing their practices will not only reduce nitrogen runoff, but also protect yields and farm income.

With this announcement, the momentum for sustainable agriculture is higher than ever. Campbell’s is the latest company to participate in EDF’s Sustainable Sourcing Initiative, joining Walmart, Smithfield Foods, General Mills, and United Suppliers to make fertilizer efficiency and soil health the norm in U.S. grain production. Read more

Why the Food Movement is Alive and Well

silverware 2 up closeMark Bittman’s recent New York Times op-ed, “Let’s Make Food Issues Real,” is a grim assessment of the current state of the food movement – in fact, he questions whether a food movement exists at all.

Bittman states that the lack of major change to government food policies means the food movement is not winning. “I’ll believe there’s a food movement when Hillary Clinton and Jeb Bush are forced to talk directly about food issues,” Bittman writes.

I’ll take that bet. With the drought in California threatening the nation’s produce and the other impacts climate change pose to our food supply, I think it’s likely that the next group of presidential candidates will discuss food issues on the campaign trail.

But even if politicians take up the banner of the food movement, new legislation should not be the sole indicator of success. Food companies are increasingly making changes to their products, practices, and sourcing in response to consumer demand. State policies and federal agency priorities are also shifting. Read more

How Institutional Commitment Translates to Safer Products

Behind the Label_FSuccessful business outcomes require strong and continuous commitment and support from company leaders. As with any change initiative, modifying how a manufacturer selects the ingredients it uses or how a retailer selects products requires time and resources, and infrastructural and behavioral adjustments. In our previous blog in this series, we identified five 'pillars' that are critical to attaining industry leadership on safer chemicals.

The first pillar, Institutional Commitment, is essential in ensuring leadership support for business transformation.

Institutional Commitment to safer chemicals frames a company’s journey, builds internal champions, and sets accountability for the journey at every level of the organization. In a committed company, action ripples throughout the organization; company executives set top-level goals that are reinforced by middle management in a way that empowers employees in every business function to make the transformation successful through their own daily operations. It’s about true integration of the new safer chemistry philosophy into everyday business. Read more

Carlyle Sheds Light on How Sustainability Creates Value in 2015

This post is part of an EDF+Business ongoing series on sustainable finance, highlighting market mechanisms and strategies that drive environmental performance by engaging private capital. EDF is actively engaging leaders with the capital and expertise needed to catalyze sector-wide changes—from accelerating investment in energy efficiency and clean energy, to protecting tropical forests, restoring depleted fisheries and saving habitats of endangered species.


On the eve of The Carlyle Group releasing its 2015 Corporate Citizenship Report, I had the chance to catch up with Jackie Roberts, Chief Sustainability Officer at Carlyle and former EDF colleague who was one of the founders of EDF’s Corporate Partnership Program. Here are highlights from our conversation:

Jackie RobertsWhat attracted you to your current role at Carlyle?

Rather than being in an arm’s-length advisory role, I now get into more of the details of implementation. I work directly to support sustainability leads in a broad range of companies, helping them prioritize among business goals, crystallize sustainability strategies and, most importantly, execute on a lot of different ideas. Also, as Carlyle is an owner of companies in many countries and industries, I have the opportunity to understand how aspects of sustainability play out differently across the globe. In short, it is a tremendous platform for influencing corporate sustainability.

What are you and Carlyle particularly proud of in this year’s report?

This is the first year that we have designed the report to align with the types of value creation we typically see, such as customer satisfaction, brand equity, operational efficiency and workplace strength. This year’s report moves beyond operational efficiencies into these other key drivers for companies.

What does Carlyle see as the value of ESG management for its business? How do you quantify that value? What form is that taking, both for Carlyle and its portfolio companies?

We have examples across these four ways that ESG management connects to value creation (customer satisfaction, brand equity, operational efficiency and workplace strength). A great example related to both customer satisfaction and brand equity comes from a portfolio company that quantified its sales increase for greener products. Their primary customers, mainly hotels, were requesting green products, so the company invested in this area, which paid off in increased sales – a clear win-win. Read more

McDonald’s New Super-Sized Deforestation Commitment: 4 Things You Should Know

logo-mcdonalds

Just in time for Earth Day, McDonald’s has released a new global deforestation commitment. While this policy is new, the company is no stranger to the issue. In fact, McDonald’s was one of the first companies to be confronted in the 1980s as consumers began to recognize the “Hamburger Connection” between beef production and tropical forests. In response, the company established its Amazon Policy, which prohibited the sourcing of beef from the Amazon. Seventeen years later, McDonald’s was instrumental in creating the Soy Moratorium, an industry-wide effort which has effectively halted soy expansion on native vegetation in the Amazon Biome. (Soy is a major source of feed for chickens and other livestock).

Now, following a wave of commitments from agricultural giants such as Cargill and ADM, the new global policy is a first-of-its-kind in the fast food sector and, if executed correctly, could stand as a shining example for other companies in the food business to follow. As one of the world’s most recognized brands, McDonald’s knows any commitment with such a large impact on the planet – tropical forests are one of the largest contributors to, and buffers against, climate change – will be heavily scrutinized. So, what do we need to know as we watch this journey unfold? To radically simplify, four things come to mind:

Read more

Behind the Label: the Blueprint for Safer Chemicals in the Marketplace

Behind the Label - the blueprint for safer chemicals in the marketplaceIf you’re in the business of using chemicals to make consumer products – things like shampoo or baby lotions, spray cleaners or laundry soap – the last few years have likely been anything but dull. State legislatures have been passing laws restricting certain chemicals from products; consumers are demanding more transparency about product ingredients; and some of the nation’s biggest retailers, including Walmart and Target, have issued chemical policies of their own.

Having worked for years to reduce the public’s exposures to hazardous chemicals and drive incentives for safer innovations in chemistry, Environmental Defense Fund is encouraged to see the growing demand for ingredient transparency and chemical safety. But for companies impacted by these new policies, adjusting to new demands may be challenging. As a business strategy, waiting to respond to the next chemical of concern or the next regulatory action, as opposed to taking proactive steps to improve transparency and chemical safety, is an unsustainable means for addressing risk.

What if your company didn’t have to worry about the next retailer’s list of priority chemicals, the next set of state or federal policy changes or regulations, or the next chemical of concern du jour to light up social media outlets?