Very nice story of the two working together, and wonderful to see smart people doing smart things, for all of us.
Partners for the Planet
How Environmental Defense builds alliances to protect the environment
By David Yarnold Summer 2007
You know the world is changing when the largest corporate buy-out in history hinges on an environmental commitment. That’s what happened in February when two top private equity firms enlisted the help of Environmental Defense, a nonprofit that finds practical solutions to environmental problems, to acquire TXU Corp., the largest utility in Texas, for $45 billion.
Last year, TXU announced an alarming plan to build 11 old-fashioned, coal-burning power plants in the Lone Star State. These inefficient plants would have spewed 78 million tons of carbon dioxide annually – more than the emissions of 21 states combined.
Not wanting to be saddled with those environmental dinosaurs, the new buyers, Texas Pacific Group and Kohlberg Kravis Roberts & Co., worked with Environmental Defense and the Natural Resources Defense Council to develop an unprecedented plan for turning TXU around. They agreed to cancel eight of the planned plants and instead to invest $400 million to boost energy efficiency and explore environmentally friendlier coal technologies. They also pledged to join the United States Climate Action Partnership (USCAP), which supports a mandatory national cap on carbon emissions.
This marks the first time an environmental organization has partnered with a financial group to change the terms of a buyout. “Every college activist should study this story, because it is the future,” wrote Thomas Friedman in The New York Times.
The turnaround of TXU may be groundbreaking, but it’s business as usual for Environmental Defense, where I serve as executive vice president. Over the past 17 years we have learned that successful partnerships flow from three steps: identifying leaders, pointing out how environmentally sound practices will help them with their own aims, and setting aggressive, yet attainable goals.
Get in Front of the Pack
It all started with a Styrofoam clamshell burger box. In 1990, Environmental Defense partnered with McDonald’s to cut the fast-food giant’s trash. Other environmental groups criticized us at the time, but eventually they were won over by the results: the elimination of 300 million pounds of unnecessary packaging, including foam-plastic sandwich boxes. In another partnership with McDonald’s, we called on the company’s meat suppliers to protect antibiotics for human medicine by curbing their use in farm animals for nonmedicinal purposes. Four of the nation’s top poultry producers soon reported ending this practice as well.
From this experience we learned to target market leaders – like McDonald’s – that value innovation. People often ask why we work with individual companies more than with trade organizations. The reason is that trade associations represent the pack. Leadership means stepping out in front of the pack. Working with trendsetters gives us maximum leverage, because the changes they make ripple through their supply chains and cause competitors to follow suit.
