Disclosure & Transparency Initiatives

Community Engagement

Corporate Social Responsibility: Doing Well by Doing Good
We strongly believe that responsible corporate citizenship is fundamental to the alternative asset management industry’s growth and sustainability. The freedom to operate in a global economy and to make profits entails an opportunity and a responsibility to be socially engaged. We also believe that asset management and private equity activity has a number of public benefits, such as building stronger and more competitive companies, creating employment opportunities, investing in R&D and growing economic value in its broadest sense.

While it has always been relevant, attention to stake¬holders is no longer optional. Within the current climate, the ability of our portfolio companies and investors to understand and manage increased levels of government regulation and public scrutiny around the world can materially impact our return on investment. At the same time, there will be significant opportunities for private investors to partner with government authorities in strengthening financial institutions and building infra¬structure. Recognizing both these new challenges and opportunities, we established an in-house global public affairs capability to ensure that our firm as a whole, including current investments in our portfolio and our future investments across asset classes, employs best practices in managing environmental, social and regulatory issues. Paying attention to these issues will also, in many circumstances, allow us to differentiate ourselves at the front end of a transaction.

Accordingly, we strive to establish and implement socially responsible policies and best practices for our portfolio companies. The following are a few highlights of the social value created by our portfolio companies:

  • Alliance Boots GmbH (“Alliance Boots”) is an international pharmacy-led health and beauty group headquartered in Switzerland. Alliance Boots is committed to placing excellence in environmental, social and governance principles at the centre of what it does and how it communicates. The environmental, social and governance agenda at Alliance Boots is established in consultation with government, academics, the media, suppliers, customers, employers, shareholders and non-governmental organizations. These groups outline key priorities they believe Alliance Boots should be focusing on, and it is these priorities, together with the commercial strategy and values of the business as a whole, that determine the final list of activities that will comprise the overall corporate social responsibility goals at Alliance Boots. These are then approved at Board level.
    Progress towards goals in this area are monitored and tracked through a scorecard, which is driven by annual targets segmented into four areas: community, environment, marketplace and workplace. Key objectives and priorities in these areas are embedded into the daily activities of employees at Alliance Boots. With this scorecard, corporate social responsibility is not seen as an additional activity, but instead integrated into daily routines – and thus regarded as an activity which delivers value by either reducing costs or generating new commercial opportunities. In 2008, Alliance Boots continued to achieve recognition for its corporate social responsibility agenda; in May 2008 it was awarded Gold status for its achievements in the London Sunday Times ‘Business in the Community Companies that Count’ survey, and in 2008 the Alliance Boots Spanish wholesale business was awarded the Best Initiative award in the environmental, social and governance category for its ‘Act Now’ campaign, by Correo Farmaceutico, the leading weekly Spanish pharmaceutical publication.
  • Toys “R” Us, Inc. (“Toys “R” Us”) is a global leading specialty toy and children's products retailer, selling merchandise through a worldwide network of stores as well as online. The company has been proactive in promoting toy safety, including by issuing industry-leading requirements to toy manufacturers on safety and testing standards. Toys “R” Us has enhanced high-quality assurances standards and established a detailed recall notice system, additional testing requirements for manufacturers and a zero-tolerance policy for potentially unsafe products. Toys “R” Us has also collaborated with federal legislators in the United States to advocate for more funding for the government regulator responsible for toys.

Going Green
As a member of the global business community, we take our responsibility to the environment seriously and seek to adopt and implement environmentally sound policies in our portfolio companies and internal operations.

Green Portfolio Project
Recently, we proudly partnered with the Environmental Defense Fund (“EDF”) to form a “Green Portfolio” to develop and implement best practices around environmental performance, similar to the way we drive financial improvement. This groundbreaking initiative marks the first time the EDF has partnered with a private equity firm to address today’s important environmental issues.

As partners, EDF and KKR are collaborating with the management of our portfolio companies to develop a set of analytic tools by which our companies can assess and track improvements on a series of environmental metrics. These tools enable managers to cost-effectively improve efficiency, reduce waste and address environmental impacts, such as greenhouse gas emissions, the use of toxic substances, water consumption or waste generation. In additional to their environmental impact, these metrics have been selected because each can generate significant cost savings. Our hope is that the knowledge and tools developed in this process will be replicated and implemented across our portfolio and serve as an example for other businesses worldwide. Our approach is to work with portfolio company management and, where relevant, our KKR Capstone operational team, to perform a baseline audit of a company’s environmental footprint in these areas and to identify opportunities for improvements that may also generate cost savings. Once this assessment is completed, KKR and EDF seek agreement on overall metrics to measure, goals to reach to enhance environmental performance, and targets to generate cost savings.

In the first nine months of this effort, we have launched a portfolio company-wide energy awareness campaign called Green Savings that provides companies and their employees with common sense tools to save energy and cut costs at work and at home. An intranet site is under development so that KKR portfolio companies can share best practices for reducing energy use. The goal is to develop metrics, best practices, and tools that can be shared and drive improved environmental and financial performance across KKR’s entire portfolio and, through publication, in the industries in which we invest.

Eight KKR portfolio companies are currently participating in the Green Portfolio Project with EDF. In early June 2009, KKR announced specific environmental efforts for the five newest companies participating in the Green Portfolio Project,: Accellent Inc., Biomet Inc., Dollar General Corporation, SunGard Data Systems Inc. and HCA Inc. Each of the companies evaluated their impacts on environmental performance, identified opportunities for improvement and is implementing these changes to achieve their goals for environmental sustainability. Once implemented, these changes will help managers to cost-effectively improve efficiency and reduce waste, while addressing the environmental impacts of their business.

Specific company initiatives include:

  • Accellent is one of the largest providers of fully integrated outsourced manufacturing and engineering services to the medical device industry. Accellent's 2009 goal is to reduce greenhouse gas emissions from its facilities. To do this, Accellent is:
    • Establishing a GHG baseline for its facilities
    • Measuring GHG emissions on an absolute and productivity basis (GHG emissions/dollar revenue)
    • Setting annual goals to reduce GHG emissions
  • Biomet designs and manufactures orthopedic medical devices and other products used primarily by surgeons and medical specialists. Biomet's goal for 2009 is to reduce GHG emissions from its facilities. To do this, Biomet is:
    • Establishing a GHG baseline for its facilities
    • Measuring GHG emissions on an absolute and productivity basis (GHG emissions/dollar revenue)
    • Setting annual goals to reduce GHG emissions
  • Dollar General is a general merchandise retailer, carrying everyday consumable products and other home, apparel and seasonal items. Dollar General's goals for 2009 are to reduce GHG emissions and waste from its operations (stores, distribution centers, transportation network and office space). To do this, Dollar General is:
    • Establishing GHG and waste baselines for its operations
    • Measuring GHG emissions and waste on an absolute and productivity basis (GHG emissions/dollar revenue and cubic yard of waste/dollar revenue)
    • Setting annual goals to reduce GHG emissions and waste
  • SunGard is one of the world's leading software and IT services companies with approximately 20,000 employees. SunGard's goal for 2009 is to improve efficiency and reduce GHG emissions from its facilities. To do this, SunGard is:
    •  Establishing a GHG baseline for its facilities
    • Measuring GHG emissions on an absolute and productivity basis (GHG emissions/dollar IT revenue)
    • Setting annual goals to reduce GHG emissions by improving the energy efficiency of its offices and data centers
  • HCA is one of the leading healthcare services organizations in the United States. It is comprised of 163 hospitals and various outpatient facilities in 20 states and England. HCA is in the process of developing a strategic approach to its environmental and sustainability goals.

More information about the KKR and EDF innovation is available on the EDF Partnership section of our website and our Green Savings website.

Other Environmental Achievements
Examples of recent environmental achievements by our portfolio companies include the following:

  • Energy Future Holdings (“EFH”), formerly TXU Corp., is one of the largest power companies in the United States. The buyout of EFH in 2007 was officially endorsed by many respected environmental and labor organizations including the EDF, the Natural Resources Defense Council (“NRDC”) and the Texas AFL-CIO, for our commitment to climate change. We recently announced that EFH would reduce the number of planned coal fired power plants, limit the company’s emissions of pollutants and lower rates for customers. For our cooperation with EDF and NRDC, we were recently honored with the 10th Annual Bridge Builders Award. Notably, the Chairman Emeritus of the World Wildlife Fund and former Administrator of the U.S. Environmental Protection Agency (“EPA”) now sits as a director of EFH leading an effort to make climate stewardship central to corporate policies. EFH has also established a Sustainable Energy Advisory Board that will help determine the best technologies to employ to meet the future energy demands of the state of Texas and its residents going forward.
  • As part of an environmental and ethical commitment, Maxeda B.V. (“Maxeda”) has introduced “sustainability” as a sixth core value and has launched a number of initiatives to i) achieve energy savings (-20% target by 2010), ii) reduce fuel consumption (-20% by 2010), iii) reduce packaging consumption (-20% by 2010), iv) increase recycling (100% by 2010), v) promote “green” products (5% by 2010), and vi) be fully compliant with the Business Social Compliance Initiative (for example, conducting supplier audits to prevent child labour).
  • Rockwood Holdings, Inc. (“Rockwood”) is a global specialty chemicals and advanced materials company. Rockwood is committed to the establishment of environmental management systems that effectively manage potential impacts from manufacturing, storage, distribution and disposal activities and that provide energy conservation, waste minimization and recycling opportunities. Rockwood voluntarily cooperates with government agencies to ensure environmentally sound manufacturing processes. For example, when the pesticides manufacturing industry started to phase out the use of chromated copper arsenate, the EPA praised Rockwood for developing a safer alternative: alkaline copper quat. They also develop lithium, which is key to the battery needed for the electric cell.
  • U.S. Foodservice, Inc. (“U.S. Foodservice”), one of the country’s premier foodservice distributors, implemented new driver policies, business processes and truck technologies to improve its operational efficiency and reduce emissions from its delivery fleet. During 2008, U.S. Foodservice saved $8.2 million in fuel costs and avoided 22,000 metric tons of carbon dioxide emissions (equivalent to more than 4,400 cars) by improving the efficiency of its fleet (gallons/ton of product moved) by more than 4% compared to a 2007 baseline. In 2009, U.S. Foodservice plans to further improve fleet productivity by scaling up successful initiatives, such as driver awareness programs, automatic idle shutoff, maximum speed controls and assessing and implementing new initiatives, including improved trailer cooling practices and other technology solutions.
  • PRIMEDIA, Inc. (“PRIMEDIA”) a leading provider of print, Internet and mobile solutions designed to enable consumers to find a place to live, increased online efforts and resized its publications to reduce its use of forest resources. During 2008, PRIMEDIA saved $2.9 million in material costs and reduced more than 3,000 tons of paper use (equivalent to over 40,000 trees) by improving efficiency (paper use/revenue) by 22% compared to a 2007 baseline.  In 2009, PRIMEDIA plans to reduce paper consumption an additional 20% by redesigning publications and pursuing additional online strategies and is exploring opportunities to expand publication recycling programs currently encouraged at all locations.  Also in 2009, PRIMEDIA will focus on measuring and reducing its greenhouse gas emissions 10% by improving sales and delivery routing and continuing efforts to consolidate office and warehouse space.
  • Sealy Corporation (“Sealy”), the largest bedding manufacturer in North America, recycled raw materials used for producing bedding and improved delivery fleet efficiency through improved driver policies and truck technologies to reduce waste and decrease greenhouse gas emissions. During 2008, Sealy saved $1.2 million in fuel costs and avoided more than 3,000 metric tons of CO2 emissions (equivalent to more than 600 cars) by improving the efficiency of its fleet (gallons/stop) by almost 9% compared to a 2007 baseline. In addition, Sealy saved more than $4.0 million in material costs and avoided 650 tons of solid waste (equivalent to the capacity of more than 46 garbage trucks) by reducing scrap per bed (pounds/unit) by 16% compared to a 2007 baseline.  During 2009, Sealy plans to roll out improved fleet routing software, install speed governors on its trucks, reduce idling time and incentivize drivers to improve fuel economy.  The company will continue reducing solid waste by improving manufacturing processes and reducing packaging. In addition, Sealy will focus on improving the energy efficiency of its facilities.

Economic Contribution to the United Kingdom
The UK has long been a significant focus of our business and we are proud to have contributed to the private equity industry’s positive impact on the UK economy. A study by the BVCA shows that in the United Kingdom:

  • The UK private equity industry has invested over £80 billion (over £60 billion in the UK) in around 29,500 companies since 1983.
  • In the five years up to fiscal 2007, investment in private equity-backed businesses has grown much faster than the national average, rising by 11% compared with a national increase of 3%.
  • In the five years up to fiscal 2007, private equity-backed companies increased spending on R&D by 14% a year, compared with a national increase of 1%.
  • The UK private equity industry is the largest and most dynamic in Europe, contributing significantly to the financial services industry and helping keep London a leading global financial center.
  • In the five years up to fiscal 2007, sales in private equity-backed companies rose by 8% a year compared with 6% in FTSE 100 companies and 5% in FTSE 250 companies.
  • In the five years up to fiscal 2007, exports in private equity-backed companies increased by 10% a year compared with a national increase of 4%.
  • Private equity-backed companies employ more than one million people, accounting for approximately a fifth of UK private sector employees.
  • In fiscal 2007, private equity-backed companies stimulated the UK economy by contributing nearly £35 billion in taxes.

*This report presents information with respect to our fiscal year ended December 31, 2008, and such information has not been updated to reflect facts, events, or figures after that date.