May 2, 2008

KKR Partners With EDF On ‘Green Portfolio’ Project

Private equity firm Kohlberg Kravis Roberts & Company and Environmental Defense Fund announced a new partnership to help the buy-out firm improve the environmental performance of the dozens of businesses it owns.

Aimed at creating measurement tools of environmental performance across several areas across all of KKR’s businesses, the partnership is the first of its kind between a private equity firm and an environmental organization.

With more than $185 billion of annual revenue and some 825,000 employees worldwide, KKR owns 46 companies, including the Texas utility TXU, hospital giant HCA, Toys “R” Us, Dollar General and Sealy.

The partnership builds on EDF’s and KKR’s successful collaboration in the 2007 acquisition of TXU Corporation.

The decision by KKR to embrace environmental issues could have far-reaching implications for business operations and might put pressure on its top rivals to follow suit, the New York Times reports.

As part of the partnership, KKR has committed to improving the energy efficiency of its own office operations, in part by participating in EDF’s Climate Corps Program. KKR will undergo an energy audit of its offices, analyze the financial and environmental benefits of available energy efficiency improvements and implement those that are most cost-effective.

The partnership will use the power of private equity to achieve environmental goals, said Gwen Ruta, EDF’s Vice President of Corporate Partnerships. “KKR’s commitment to EDF’s Climate Corps Program indicates their willingness to ‘walk the talk’ when it comes to their own environmental footprint.”

KKR will not pay any money to EDF and whatever business tools are created as a result of the pact will be shared with other companies, including their rivals. KKR plans to pursue test programs over the next six months with several of its portfolio companies and make the results public.

Other groups have also developed corporate partnerships of their own. Coca-Cola and the World Wildlife Fund have tackled global water quality and Clorox and the Sierra Club recently workied together on the rollout of a green product line, to name just two.

Expect more of the same. As an indication of the importance companies put in connecting with environmental stakeholders, Advertising giant Publicis Groupe recently bought sustainability consultancy Act Now, renaming it Saatchi & Saatchi S. The group is headed up by Adam Werbach, a past president of the Sierra Club.

In a recent EL column, Kevin Tuerff wrote that many companies are re-thinking their stand-off approach of dealing with environmental stakeholders as a segment of their green marketing.

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