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By Lillias MacIntyre, Program Associate, Corporate Partnerships

Mcoachingmillions.comenefit is an essential characteristic of a successful relationship. At EDF – and especially within Corporate Partnerships – we continue to merge and strengthen the relationships within our networks to form alliances that work.

In May, I wrote about the increasing synergies between our Green Returns and EDF Climate Corps projects.  Both initiatives tap into important networks that make the business case for improving environmental management. To boot, in 2011, nine of the 49 companies participating in the EDF Climate Corps program were owned by private equity (PE) firms:

  • Booz Allen Hamilton (Carlyle)
  • Dunkin’ Brands (Carlyle)
  • Diversey (CD&R)
  • ServiceMaster (CD&R)
  • QTS (General Atlantic)
  • HCA (KKR)
  • SunGard (KKR)
  • Dave & Buster’s (Oak Hill)
  • ViaWest (Oak Hill)

Below are some examples of potential savings and reductions from projects identified by EDF Climate Corps fellows at PE owned companies:

Dunkin’ Brands – Tasked with identifying store-level energy efficiency projects and analyzing their financial potential, the fellow determined that a 15% reduction in electricity usage at 2,700 free-standing stores could result in collective savings of 80 million kWh, $12 million in energy costs and 47,000 MT in associated CO2 emissions annually.

Diversey – Four primary infrastructure improvements were proposed: on-demand hot water heaters, direct-fire space heaters, lighting sensors/controls, and a new compressed air system that could generate savings greater than $200,000 and 900 MT of CO2 annually over the life of each project.

Service Master – The fellow built on work from the previous year and found ways to reduce fleet fuel consumption and corporate electricity use by developing business cases for hybrid and electric vehicles in addition to identifying lighting upgrades.  These projects could reduce CO2 emissions by 143 MT, cut 114,000 kWh of electricity and save $15,500 in electricity costs annually.

QTS – With energy initiatives already in place, the fellow validated and improved those practices.  The company was enrolled in demand response programs, greenfleetmagazine.comalternate energy solutions were implemented, and recycling and e-cycling plans were developed.  If rolled out to a few facilities, these programs could cut 60 million kWh of electricity, 40,000 MT of CO2 emissions and 15 million gallons of water use annually – saving QTS $4.3 million in net operating costs over project lifetimes.  QTS plans to invest $10 million to implement the identified projects – a solid indication the company understands the value these initiative will add to its operations.

HCA – HCA participated in the program in 2010 and is also part of the KKR/EDF Green Portfolio Program, but despite this, the 2011 fellow was able to identify and evaluate two project ideas: the installation of Variable Refrigerant Volume (VRV) heating and cooling systems and modular boiler systems.  Both projects could yield reductions of 2.3 million kWh of electricity and 81.5 million kWh of natural gas, saving $2.3M in energy costs and more than 16,000 MT of CO2 emissions annually.  This could potentially save the company $16M in net operating costs over the 20 year project lifetime.

SunGard – In addition to being a part of the KKR/EDF Green Portfolio Program, this company participated in the EDF Climate Corps program last summer.  To build on current initiatives, the fellow developed a framework for establishing office Green Teams and Energy Treasure Hunt campaigns to identify additional opportunities.

ViaWest – The fellow focused on recycling, water efficiency, employee engagement and energy efficiency.  Recommended projects included corporate-wide electronic and cardboard recycling, PUE (Power Usage Effectiveness) reduction targets, energy efficiency financing and lighting maintenance projects.  These projects could help ViaWest recycle approximately 75 MT of computers and cardboards and save 7 million kWh in annual energy use – cutting roughly 4,400 MT of CO2 emissions and generating$500,000 in cost savings.

ecoinstitution.comThe entire group of 2011 EDF Climate Corps fellows (including those placed at cities and universities) identified $650M in potential net operating cost savings; potential reductions in energy use equivalent to what 38,000 homes use per year; and opportunities to avoid CO2 emissions equivalent to the emissions of 87,000 passenger vehicles annually.  (Complete results and highlights can be found on our website.)

Host companies pay fellows $1,250/week for 10-12 weeks and reimburse for travel expenses to the EDF Climate Corps training and end of summer network event.  With an 86% implementation rate for energy savings over the first three years, the IRR of an EDF Climate Corps fellow can be greater than a top quartile PE fund.  Furthermore, by hiring a fellow, firms can jumpstart their environmental management programs and generate momentum for implementing the program throughout their holdings.

After this year’s results, we expect to have even more PE firms and portfolio companies involved in 2012.  Companies are signing up now as the February 23rd deadline approaches, so I encourage you to visit our website and learn more!

EDF Climate Corps places specially-trained MBA and MPA students in companies, cities and universities to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit ourFacebook page or follow us on Twitter to get regular updates about this project.

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Today on Sequoia Lab Blog, Gwen Ruta discusses how we can spread the principles of sustainability beyond the Fortune 500.

Recently in Harvard Business Review, Michael Porter and Mark Kramer wrote about “The Big Idea” – that companies must take the lead by “creating economic value in a way that also creates value for society by addressing its needs and challenges.”   Driven by win-win success stories, by a vacuum in policy leadership, and by the embrace of thought leaders like Porter, this idea has surged into the mainstream.  Even in the grip of the recession, companies across the Fortune 500 – from Walmart (#1) and GE (#6) to Owens Corning (#431) and SunGard (#472) – are actively pursuing a sustainability agenda.

But for the companies that make up mainstream corporate America, environmental issues may still largely be seen as a cost center rather than a competitive edge.  What will it take to show these companies that environmental innovation can be an opportunity rather than a burden?  How can we spread the principles of sustainability from the Fortune 500 to the next 5,000?
  • Start with energy efficiency
Every company uses energy, and can do so more efficiently.  The consulting gurus at McKinsey & Company calculate that by deploying an array of NPV-positive efficiency measures, commercial and industrial users could generate $732 billion in energy savings by 2020 while avoiding some 660 million tons of annual greenhouse gas emissions.  In other words, we can make a lot of money and cut a lot of emissions simultaneously by using proven technologies.
But, it’s not quite as easy as it sounds.  Companies fail to reap the benefits of energy efficiency for reasons that have nothing to do with what we learned in Econ 101.  In the real world, managers are overburdened, useful information is hard to find, lease arrangements stand in the way of smart investments, and competition for corporate dollars is sharp.
Sometimes it takes “fresh eyes” to overcome the barriers to change.  Our EDF Climate Corps program uses business students to find energy savings opportunities at participating companies.  In just 10 weeks at 50 companies last summer, we found $350 million in potential operating savings.  And that’s just the tip of the iceberg.
  • Stimulate innovation
Environmental goals, combined with open networking, can be a great way to stimulate innovation that can lead to new products and greater market share.  The impetus can come from the top, because when executives set rigorous goals and metrics for measuring them, they unleash innovation throughout the company.  GE’s Ecomagination program, which generated $18 billion in revenue on $1.5 billion in investments, is a good example of this approach.
Innovation can also come from the bottom up, as illustrated by Toyota’s “Treasure Hunt” process, which uses operators, engineers and maintenance staff to find process innovations and energy savings.
And innovation can come from the outside.  Breakthrough ideas can – and often do – emerge from bringing a new and diverse perspective to a familiar problem.  Environmental Defense Fund recently teamed up with InnoCentive, a global leader in crowdsourced innovation, to work with companies to create business breakthroughs that deliver environmental results.  InnoCentive’s web-based platform gives over 250,000 entrepreneurs, inventors and scientists around the world the chance to solve them.  With the likes of Eli Lilly, NASA, and Procter & Gamble using the platform, it’s redefining the innovation process. 
  • Capture operational excellence
For most companies, including those that provide business capital, environmental issues are still thought of as a liability rather than an opportunity.  To build value, firms must think beyond compliance.  Smart companies are positioning themselves to compete in a resource-constrained world, where efficiency and innovation trump risk management.
Working with private equity giants The Carlyle Group and Kohlberg, Kravis, Roberts & Co., EDF has developed tools that are available to any company for systematically identifying opportunity and measuring improvements in environmental and business performance.  In just two years, those tools generated $160 million in operating savings for companies including Dollar General and US Foodservice.
  • Drive supply chain improvement
Companies will want to focus first on their own operations, but for many small and medium-sized businesses, their biggest impacts lie not within their own fencelines, but in the lifecycle of the products they buy and sell.  And while smaller companies may not feel that they have the clout to create supply chain mandates, they do have ability to ask pointed questions and shop around for the best prices.  Why should your company be paying for the extra energy or water or wasted raw materials embedded in products made by another company that has not yet embraced sustainability?
There are several good examples to work from. Walmart’s Supplier Sustainability Assessment questions are simple, straight-forward and a good place to start.  Procter & Gamble has a similar supplier scorecard designed to track and encourage improvement on key environmental sustainability measures in P&G’s supply chain.  The company reports that about 40% of the completed scorecards it receives have offered at least one innovation idea.
Today, we are all feeling the stress of a pinched economy, resource constraints, volatile fuel prices and global competition.  At the same time, we’re seeing examples every day of companies that have successfully turned environmental sustainability into competitive advantage.  By building capturing energy and operational efficiencies, stimulating innovation through aggressive goals and creative networking, and driving lifecycle change through the supply chain, we can bring Porter’s big idea to life.
 

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