A US$61 billion global investment firm, Kohlberg Kravis Roberts & Co. L.P. (KKR) has more than 60 private-equity portfolio companies that operate in 15 general industries in the United States, Europe, the Middle East, and Asia. The firm’s value-creation model includes active management of ESG issues as part of its efforts to build stronger companies.
In late 2009, KKR joined BSR, seeking a comprehensive partner for managing ESG issues within its portfolio, and looking to gain from our expertise in responsible supply chain management. KKR recognized that labor and environmental conditions in the supply chain were growing in importance for a number of its portfolio companies, and company leaders saw an opportunity to provide guidance and resources on this topic as part of the company’s management of risks across its portfolio.
Recognizing that KKR had a unique opportunity to help firms in its portfolio learn from proven practices and one another, BSR created a “Supply Chain Sustainability Resource Guide” and subsequent workshops covering best practices, international standards, industry collaborations, established certification processes, and resources to help with the implementation of supply chain efforts. The workshops included an in-person event at a Responsible Sourcing Summit and subsequent web-based programs to get buy-in from and raise awareness among portfolio companies’ general counsel and senior procurement or merchandising officers. The attendees were able to share the guide with colleagues who are responsible for developing or improving their own supply chain programs.
BSR’s approach—built on nearly two decades of experience in responsible supply chain management across industries and geographies—included the basic elements of a program as well as more innovative elements drawn from our Beyond Monitoring initiative.
This project—which helped KKR build a community of practice within its portfolio—was a valuable opportunity to leverage the partnerships that a leading investment firm has with multiple companies to highlight sustainable practices and improve ESG performance overall, on a large scale.
Since our project began, more than half of KKR’s portfolio companies have participated in one of the training events, with direct executive engagement, and KKR has followed up with its holdings to determine specific issues of interest for further education. Additionally, many companies have used the resources to initiate a responsible supply chain program or to enhance their current supplier requirements, monitoring programs, or participation in industry efforts.
BSR is now working with KKR to take the next step and assess supply chain risks across its portfolio, identify gaps, and develop specific action plans for high-priority companies. We believe that KKR’s innovative approach to creating a community of practice and identifying supply chain management as a key opportunity for value creation in its portfolio can set an important precedent for private equity more broadly.