KKR: Social and Environmental Responsibility Good for the Bottom Line

Investing
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Kohlberg Kravis Roberts is a global investment firm with concentration in private equity and the 165th largest asset manager in the world, according to a research report by Tower Watson. As of December 31, 2012, KKR has assets under management of $75.5 billion, 82 portfolio companies across the world, and 980,000 employees working for their private equity companies. KKR describes itself as a “global investor with a long-term horizon,” and believes they have a responsibility to communities around the world who are affected by the companies they choose to invest in. Therefore, KKR addresses the environmental, social, and governance issues associated with their investments through a multifaceted corporate social responsibility (CSR) program.

One of their largest programs began with a partnership in 2008 with the Environmental Defense Fund, a U.S. based nonprofit environmental advocacy group. This became the beginning of their many environmental efforts, and the launch of the “Green Portfolio Program.”

KKR’s Green Portfolio Program

The Green Portfolio Program applies KKR’s knowledge of optimizing company performance to decrease negative environmental impacts while improving the bottom line. Portfolio companies keep track of key environmental performance areas, known as “KEPAs”, which include waste, chemicals, greenhouse gas emissions, water, and forest resources. The program has been implemented in 25 portfolio companies since the programs inception, “avoiding 1.8 million metric tons of GHG emissions, 4.7 million tons of waste, and 19.5 million cubic meters of water use,” according to their website, all while achieving “$917 million in financial impact.”

In addition its own portfolio companies, KKR also has initiatives to alleviate environmental and human rights issues in their global supply chains. A series of webinars was broadcast for their private equity portfolio companies on responsible sourcing and supply chain management, and 22 of their portfolio companies have had their supply chain and sourcing procedures assessed.

Vets @ Work

KKR has had a significant impact on the hiring of veterans in their U.S. based private equity portfolio companies. Nine of their companies combined hired over 7,000 vets in 2012 alone. Why is the hiring of veterans such a priority? Strong job skills and need for more social opportunities, says Elizabeth Seeger, Principal of Business Operations and overseer of environment and social responsibility across KKR’s portfolio.

Seeger points to the Bureau of Labor and Statistics, which reported a significantly higher unemployment rate among veterans aged 18-24 than the national average. According to the 2012 BLS survey, the unemployment rate for the U.S. was around 8%, while the numbers for veterans returning from war was over 12%. The numbers for the youngest veterans were even higher, with up to 30% unemployed.

“Veterans have many of the most sought-after qualities employers look for, including a strong work ethic, a commitment to teamwork, and strong leadership skills,” says Seeger. “They have the talent and knowledge to be strong contributors to the workforce.”

Takeaways

Ultimately, KKR’s environmental and social efforts are aligned with their business and corporate culture. These values include teamwork, integrity, accountability, and excellence in a relationship driven firm, and are fundamental in how KKR recruits, evaluates, and rewards their employees. KKR enables their portfolio businesses to achieve better financial results, while achieving sustainability and a positive social impact.