ESG & Private Equity

Third Partners is an innovative and cost-effective partner to PE firms and their portcos across the full spectrum of sustainability value creation

ESG & Private Equity

ESG & Private Equity

Know before you invest if there are sustainability risks – or opportunities – at play.

Third Partners is the innovative sustainability consulting firm that helps portcos increase business value from sustainability

We work harmoniously with PE owners and portcos to provide strategic and tactical implementation support for all sustainabilty-related needs. What makes us different:

  • We protect your time. An engagement with us is easy to manage for a Chief of Staff, CFO, CHRO or virtually any leadership sponsor in charge of sustainability performance.
  • Strongly leveraging GenAI. Helping clients streamline analysis & reporting tasks, freeing up valuable resources for more strategic and value-aligned activities.
  • Offering a “fractional CSO” role. We can embed with portco leadership teams to drive strategic progress on sustainability, without adding headcount.
  • Lightweight technology tools and resources. Energy management, climate risk assessment, carbon accounting and GHG reporting without new SaaS software contracts or lengthy integrations.
  • A competitive business-friendly mindset. Compliance is a commodity; value is created through competitive differentiation.

We provide tailored sustainability consulting solutions to PE owners and portcos in all 4 areas of the sustainability and ESG-linked value creation thesis:

1) Cost & Operations Efficiency

2) Revenue Enhancement

3) Multiple Expansion

4) Risk Mitigation (Revenue, Brand, and Physical Risk)

In the chaotic years of rapid growth and organizational change, PE-backed portcos work with an agile management consultancy like Third Partners to achieve process and performance improvement.

For many firms, successfully growing EBITDA is closely linked to sustainability performance. Activities including energy management, supply chain traceability, corporate policies, customer reporting mandates, and regulatory compliance are just some of the areas where we help management teams quickly upgrade knowledge, systems, processes, and KPIs.

Private equity firms have an interest in ESG-aligned initiatives to support intrinsic goals for risk reduction, long-term value creation and disclosure. Data and disclosure demands from varied stakeholders including investors, rating agencies, regulators and buyers are becoming especially onerous for portcos to manage. A strategic ESG and sustainability program ensures leadership teams can focus on the fundamentals without constantly putting out fires.

Benefits of a ESG Consulting for Private Equity

Manage ESG Risks Post-Acquisition

Manage ESG risks uncovered during due diligence and post-acquisition.

Unlock Value Creation Opportunities

Unlock value creation opportunities related to decarbonization, clean technology, waste reduction, and product innovation.

Stay Current with Regulatory & Stakeholder Requirements

Meet regulatory and stakeholder requirements including the underlying data management processes to fulfill comprehensive ESG & Sustainability reporting requirements.

Confidently Protect Your Brand Equity

Build and protect the brand equity you’ve proudly constructed with confidence.

What types of ESG risks and opportunities may impact an investment?

Risks

  • The physical impacts of climate change on a company’s operations, supply chain, and end-user markets and how those risks are expected to change over time.
  • The future direct or indirect financial costs of climate change on business operations, cost of goods sold, or regulation e.g. carbon pricing.
  • Direct and indirect supply chain risks including exposure to deforestation, forced labor, and pollution, especially in underregulated and developing countries.
  • Reputational risks arising from “greenwashing” — the practice of engaging in untruthful or poorly substantiated environmental impact claims.
  • Other forms of uninternalized non-financial risk are frequently uncovered during an ESG and sustainability risk assessment.

  • Inability to meet ESG and sustainability disclosure requirements from customers, buyers, retailers, raters and rankers.

  • What was once voluntary disclosure is now the law. For example, climate-related financial risk assessment is required under CA SB261 and the EU CSRD and both the EU and UK have laws requiring companies to achieve net-zero or carbon-neutral over time. Companies should reassess the regulatory landscape to ensure business continuity in regulated markets.

Opportunities

  • Measuring and reporting materially significant issues and developing an action plan to address the climate-related financial risks and opportunities at a local, regional, and global level.

  • Mitigating the company’s climate-related risks through legitimate abatement measures that have a positive long term ROI.

  • Mapping the supply chain and engaging with suppliers and sub-suppliers to better understand environmental and social risks in specific raw materials and the performance of individual suppliers and portions of the supply chain.
  • Enhancing differentiation, premium pricing power, gross margin and EBITDA through verifiable and legitimate sustainability product claims.
  • Implementation of ESG and sustainability data management practices that enable organizations to respond to constantly increasing customer and stakeholder requirements.
  • Supporting talent acquisition and retention in competitive labor markets by building ancillary cultural benefits aligned with best-in-class ESG and sustainability indicators.

ESG can support long term growth opportunities. It can also uncover risks.

Our consultants have experience implementing supportive ESG and sustainability strategies within portcos in nearly all sectors, including technology, professional engineering services, and manufacturing. When specific ESG factors are critical to investment performance and brand equity, companies and their investor owners trust Third Partners to deliver custom, hands-on performance improvement engagements working directly with portco senior leadership teams.

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Our ESG Solutions for Private Equity Firms

Third Partners helps private equity firms and portco management teams develop holistic, customized ESG & sustainability strategies that deliver long-term value and holistic risk reduction. Our unique process is compatible with and works efficiently within businesses undergoing rapid change.
Third Partners helps management teams build the right ESG infrastructure in high-growth environments.

1. Internal engagement

Our team gives company leaders clarity and peace-of-mind by navigating those initial complicated steps of defining ESG & sustainability and then deciding where to begin. We educate and engage leadership teams to create ESG Alignment.

2. Governance strategy

We put the right structure in place to embed ESG & Sustainability management into the culture and day-to-day operations of the business – from leadership to the production floor.

3. Action plans

Third Partners provides step-by-step roadmaps to make progress on all materially significant ESG & Sustainability issues, from climate action to sustainability reporting and stakeholder engagement.

4. Product & service innovation

We work closely with managers, optimizing legacy products and services to meet emerging standards from buyers and consumers on raw materials, waste, energy, and more.

ESG stands for Environment, Social, and Governance. There are hundreds of individual indicators across these three areas that comprise a non-financial performance reporting framework. The “governance” pillar is cross-cutting. It covers both general management practices and how a company manages its specific non-financial risks related to people and the natural environment.

Today, thousands of investment firms and portcos directly embrace specific requirements of sustainable finance initiatives. 25,000 companies are signatories to the United Nations Global Compact (UNGC) and 5,000 investors support the Principles for Responsible Investment (PRI). In the 2010’s Wall Street firms rapidly adopted ESG rankings and ratings as a way to standardize performance measurement related to “socially-responsible investing.” Imperatives from large institutional investors, such as European pension funds fueled demand. Prior to the boom, the concept of ESG first originated in a 2004 UN report titled “Who Cares Wins.”

Widespread confusion remains over what ESG encompasses and how it differs from sustainability. While the two concepts overlap in some areas, ESG is inherently about reporting to financial stakeholders. In 1987, the United Nations Brundtland Commission defined sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Many managers and consumers still associate sustainability more narrowly with environmental impact. However, in a business context the term sustainability is not just about environmental performance. Sustainable business is pursuit of a “triple bottom line” that consists of positive impact on people, planet and profit.

ESG can support long term growth opportunities. It can also uncover risks.

Our consultants have experience implementing supportive ESG and sustainability strategies within portcos in nearly all sectors, including technology, professional engineering services, and manufacturing. When specific ESG factors are critical to investment performance and brand equity, companies and their investor owners trust Third Partners to deliver custom, hands-on performance improvement engagements working directly with portco senior leadership teams.

ESG Private Equity Case Study: Profile Products

Q: How do you view the business return on investment of the work with Third Partners?

A: “Our investor first introduced us to Third Partners to help us develop a competitive and science-based sustainability program. Spending time with our leadership team during the scoping process, and after kicking off the program, was critical to getting everyone on the same page. In the past, we had spent the most time on sustainability messaging at a product level. It was Third Partners’ methodical process that helped bring ideas together into a cohesive, multi-year approach that we are confident in executing on a global scale as we grow. Third Partners is effective at connecting the dots between the positive environmental impacts of our core products and the ESG and sustainability indicators for the industries we operate in. Everyone from our sales and marketing team to our operations team is now more focused on specific ESG value drivers than they were at the beginning of the engagement.

In a little over a year, we have:

  • Distributed accountability for sustainability outcomes to managers, without new headcount
  • Identified margin improvement opportunities that also have a positive environmental ROI
  • Established data and proof points to enter markets where ESG data is a requirement and differentiator”

Eric R.
Chief of Staff and Project Management Officer, Profile Products (Owned by New Mountain Capital)

Contact Third Partners to learn the benefits of integrating ESG into your Private Equity investment strategies.

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Additional Clients and Work

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