By Martha Young
The University of Colorado at Denver Business School hosted an event highlighting the adoption of sustainability metrics within the investment community as an additional means of evaluating businesses. This is a new valuation model for investing that provides significant recognition that those businesses implementing sustainability metrics achieve measurable benefits, making them a more sound investment over their peers. The event participants were Kohlberg Kravis Roberts & Company (KKR) and First Data Corporation, a large Colorado employer and KKR-backed company.
KKR is a private equity investment leader that has a growing commitment to being a responsible investor. In addition to other initiatives and activities, since 2008 the company has partnered with the Environmental Defense Fund (EDF) on its Green Portfolio Program (GPP), signed on to the United Nations Principles for Responsible Investment, and published two sustainability reports. (Available for free here.)
Since the launch of GPP in 2008, 25 companies have participated in the program. In 2011, over a dozen companies provided their sustainability initiatives information. Collectively, these firms estimated they avoided 2.2 million tons of waste, reduced water usage by 300 million liters, and avoided 810,000 tons of greenhouse gas emissions. These initiatives resulted in a positive financial impact of $365 million.
Ms. Ellen Sandberg, vice president of community relations at First Data, and president of the First Data Foundation, discussed a few of the sustainability initiatives it has implemented under KKR’s guidance and support. GPP uses a structured approach to establish a company’s energy baseline, and has defined metrics for tracking, reporting, assessing and amending actions. The goal is to quickly identify the specific low hanging fruit opportunities for each firm, recognizing that a one-size-fits-all approach does not work due to the diverse nature of the KKR portfolio of private equity investments.
First Data is a global leader in payment processing, headquartered in Atlanta, Georgia. It provides electronic commerce and payment solutions including online, point of sale, mobile phone, telephone and electronic payments. For perspective, the company processes over 1800 credit payment transactions per second, and 54 billion annually.
First Data determined that its initial key environmental performance area of focus was its multiple data centers. Using KKR’s GPP metrics, First Data established its baseline measures for greenhouse gas emissions and energy used. With ongoing measuring and reporting, the company has established a continuous process improvement model.
Data center consolidation was the first major step taken by the company. It reduced its physical presence from 13 data centers to five. The next step was to implement a technology refresh that improved compute processing cycles per server while concurrently reducing the total number of servers needed to support its growing financial transaction processing business. The net result was an overall reduction in its data center footprint.
With the data center consolidation efforts, First Data implemented the new recommended standards for cooling and airflow dynamics. It increased the data center temperatures from 50 degrees to 75 degrees. The company saw significant benefits in its first full year of implementation. Comparing 2009 to 2010, the company was able to recognize:
– A four percent reduction in GHG emissions
– A 15 percent improvement in energy efficiency
– Over 15000 metric tons of avoided GHG emissions
– Savings of $1.3 million in energy costs
Since 2010, First Data has continued to take steps to drive down its energy usage and emissions and drive up its balance sheet. For example, it has replaced light fixtures with energy-efficient lighting and its Germany-based office uses hydro-based electricity.
First Data’s sustainability initiatives have leveraged KKR’s Green Portfolio Program framework. It established a measureable baseline, identified initiatives to undertake that were specific to its business, recognized first year benefits, and continued on the sustainability path with follow-on opportunities. By focusing on continuous sustainable process improvements, First Data has established itself as the market leading payment processing company.
Martha Young is principal at NovaAmber, LLC, a business strategy company based in Golden. Young has held positions as industry analyst, director of market research, competitive intelligence analyst, and sales associate. She has written books, articles, and papers regarding the intersection of technology and business for over 20 years. Young can be reached at firstname.lastname@example.org or on Twitter @myoung_vbiz.