Study: Large Enterprise Customer Sustainability Requirements Emerge as a Driver of ESG Management

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MSP’s Third ESG in Private Equity(SM) Study Reveals a New and Accelerating Driver of ESG Management

Today, Malk Sustainability Partners (MSP) released its study, ESG in Private Equity(SM): Issue Focus – 2014. It highlights an emerging driver of private equity ESG management, namely the increase in sustainability-related requests placed on portfolio companies by their largest customers. These large enterprise customers, such as Walmart, Unilever, and Kimberly-Clark, are paying more attention to their supply chains to more robustly manage operational and reputational risk, avoid costly remediation, and meet their own sustainability commitments. In doing so, they are establishing supplier codes of conduct, monitoring suppliers’ sustainability performance, pursuing audits to ensure code requirements are being met, and, increasingly, specifying non-compliance consequences.

MSP conducted extensive conversations with senior members of global private equity general partners (GP) to identify how this trend is affecting and will continue to affect private equity-owned middle-market companies. Noteworthy findings include:

  • Every interviewed GP holds at least one portfolio company that has received customer sustainability inquiries, though these inquiries vary significantly by sector and operation and are most common in the consumer goods, food and beverage, and technology sectors.
  • There are significant business and public relations benefits to portfolio companies working proactively with their key customers on sustainability issues. While this is an emerging issue, portfolio companies can seize a leadership position if they support attainment of supply chain goals.
  • The majority of GPs that take the initiative to ask whether companies have received customer sustainability inquiries do so in the due diligence process.
  • Though most GPs do not yet have a systematic approach to working with portfolio companies to manage customer sustainability inquiries, most recognize that such a system would be a valuable addition to their ESG management efforts.

“We are pleased to share the 2014 publication in our ESG in Private Equity(SM) series - a first look at an important issue. Our study identifies a new and accelerating driver of ESG management that has already drawn the attention of several private equity firms’ ESG officers. Based on our findings, we believe we’re in the early days of an enduring trend, and we expect ESG programs to attend to this issue over the next few years,” said Andrew Malk, MSP’s Managing Partner.

This study is MSP’s third publication of ESG in Private Equity(SM), its annual series on the private equity sector’s management of ESG issues. This year’s publication is new to the series and differs from the 2012 and 2013 complete state-of-the-market surveys by focusing on the specific issue of how large enterprise customer sustainability requirements impact private equity-owned companies. MSP will annually alternate its ESG in Private Equity(SM) publications between issue-specific assessments and complete state-of-the-market surveys. As such, in 2015 and every other year thereafter, MSP will continue publishing its complete state-of-the-market study to capture a clear view of market changes.

About Malk Sustainability Partners
MSP is a specialty management consultancy that guides private equity investors to leverage ESG management to maximize returns and thrive in an era of increasing stakeholder interest in responsible investment. MSP’s expertise lies in developing customized programs to protect and create value through ESG management. MSP drives all steps of the ESG program development process from articulating a policy and strategy through implementing initiatives to reporting, and does so in a manner that aligns to clients’ standard practices and prioritizes their portfolio company relationships.

MEDIA CONTACT:                                                                                        
Ryan Miller; (858)-412-4145; rmiller[at]malksp[dot]com

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Ryan Miller
Malk Sustainability Partners
+1 (858) 412-4145 Ext: 4421
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