By Elizabeth Seeger Dec 21, 2016
Nine years ago, when I was a member of Environmental Defense Fund’s (EDF) Corporate Partnerships Program, EDF and KKR started envisioning an innovative partnership for the private equity industry. To our knowledge, no other large private equity firm was partnering with an environmental non-governmental organization to encourage eco-efficiency improvements (i.e., operational improvements that drive both environmental and business benefits) across multiple portfolio companies.
In the nine years since we sketched out this innovative approach, which we called the Green Portfolio Program, KKR has continued to build on the program, finding new and better ways to use our model, our expertise, and our network of resources to support environmental improvements at our companies. To date, KKR and EDF have promoted these efforts at 46 companies around the world, many of which are listed at http://green.kkr.com/results.
In addition to expanding to dozens of companies, we are expanding our expertise and focus. For example, after trying a number of different models to drive eco-efficiency projects, in 2014, KKR Capstone[i] – a group of operational experts that work solely with KKR portfolio companies including on KKR’s ESG-related[ii] efforts – hired an experienced energy manager to work directly with companies. It was our thesis at the time that having a dedicated resource whose sole goal was to drive value through this particular lens at portfolio companies would have a big impact, a theory which has proven true with growing energy efficiency improvements across a range of our U.S.-based portfolio companies.
In 2015, we rebranded and expanded our program to move beyond eco-efficiency to include a focus on eco-innovation and eco-solutions. Through this broader approach, which we now call the Green Solutions Platform, we are partnering with our companies to develop eco-beneficial products and services and develop ways to grow revenue through environmental improvements. As part of this effort, we communicated 31 case studies from 28 companies globally this year. Building on this momentum, we developed and launched our Eco-Innovation Award (EIA) in 2016. I admit that I was skeptical of the EIA at first. I was afraid that companies wouldn’t be interested, or that the projects wouldn’t be innovative enough, or even that we wouldn’t get the right people to participate on the judging panel. I was, happily, wrong about it all.
This summer, after launching our EIA request for submissions, we received 13 applications from around the world. Many of these projects, products, or services demonstrated that innovation was increasingly a common thread at many companies. Submission topics ranged from recycling of fuel to sustainable food products. We pulled together an expert judging panel of 10 individuals from KKR, KKR Capstone, IDEO, EDF, BSR, and Walgreens Alliance Boots. We also developed an employee voting component to take into account the opinions of KKR and KKR Capstone employees. Ultimately, we awarded Qingdao Haier Co., Ltd. in China with the inaugural EIA for its work on smart air conditioners that reduce energy consumption through innovative application of patented technologies, including by detecting people who are in the room. This is particularly important as the number of households with air conditioning and associated energy use increases over time. The amount of positive feedback we received from participating companies, employees, and external partners was great validation that we had yet again found a way to improve the program in a meaningful way.
I believe that business innovations will play a critical role in solving present and future environmental challenges. At KKR, we will continue our focus on innovation, both in our own work and in the work of the companies in which we invest, recognizing that innovation is not a destination that we reach, but a never-ending journey.
Learn more about our process and Qingdao Haier’s winning entry at www.green.kkr.com/award.
[i] KKR Capstone is an operational team of highly experienced industry executives and functional specialists. The team works exclusively for KKR and its portfolio companies on the ground in partnership with management teams to create sustainable improvements. With offices in the Americas, Asia and Europe, KKR Capstone has the capacity, capability, and scale to support complex, global businesses. KKR Capstone is not a subsidiary or affiliate of KKR.
[ii] ESG stands for Environmental, Social, and Governance issues.