Companies are increasingly partnering with environmental groups to find mutually beneficial solutions to environmental issues. For example, as mentioned in BusinessWeek this week, Greenpeace is working with companies like McDonalds and Cargill to ensure sustainable farming practices in the Amazon. For these companies, such an alliance with a green non-profit helps boost their green credentials, shape their brand image and even mitigate consumer wrath in the form of protests, boycotts or lawsuits. (“Hugging the Tree-Huggers”, March 12, 2007)
It is not surprising then that the provocateurs of the TXU takeover – Kohlberg Kravis Roberts & Co, (KKR) and Texas Pacific Group (TPG) – secured the blessing of both Environmental Defense (ED) and the National Defense Resource Council (NDRC) – two of the most respected and influential environmental non-profit organizations – before publicly announcing the buyout deal last week.
As part of the buyout, TXU agreed to scrap 8 of 11 planned coal plants plus invest in both conservation efforts and renewable energy projects in exchange for the environmental groups’ blessing. In doing so, the potential new owners of TXU are hoping to mitigate the brand (and market) risk posed by the ongoing lawsuits to stop the plants from being built; the owners also hope to avoid the associated negative press the lawsuits generate.
Yet, yesterday’s Wall Street Journal (WSJ) revealed another side to the story that may perhaps undermine the green credibility that ED and NRDC’s endorsements provide. (“Environmental Groups Feud Over the Terms of the TXU Buyout”, March 3, 2007). While seemingly a win for environmental groups and the company alike, the deal did not adhere to all the essentials that make for a winning partnership.
Marketing Green believes three underlying principles are critical for green partnerships to succeed:
- Authenticity: Businesses must have genuine intentions to be greener and back this up with clear results.
- Corporate Transparency: Ensure full disclosure to your consumers, critics and the financial community.
- Alignment with the Right Partner: Companies should make sure that the green organization that it aligns with can credibly speak on behalf of all of a company’s critics.
As the WSJ reported, the TXU deal may not have adhered to these principles.
First, according to an investor call transcript, C. John Wilder, the current TXU CEO, stated that he would restrain from building new coal plants “unless our customers face reliability issues, shortages leading to higher prices, or our competition propose plants that are expected to have a meaningful impact on market dynamics.” This statement seems to undermine the authenticity of TXU’s green strategy as, according to the WSJ, such conditions could appear as early as 2009 and give TXU the excuse to break its current pledge and build new plants.
Second, TXU’s intentions were apparently less than transparent during negotiations with the green organizations. Again, according to the WSJ, Wilder later told analysts that at the time of the buyout the company was already “reshaping [its] development program to focus on a smaller number of plants”. Such a statement reflects a lack of corporate transparency about its true intentions, while undermining the apparent environmental gains that ED and NRDC negotiated to secure.
Finally, while ED and NRDC are two of the most respected environmental organizations, it is unclear whether they represented the interests of all affected parties when they signed on to this buyout deal. For example, while plans were shelved for 8 plants, 3 in Texas are sill on the drawing board, leaving locals fuming over the deal.
For marketers, a partnership with a green organization is great way to brandish a brand’s green credentials. Yet, as TXU’s experience suggests, the success of the partnership requires corporate authenticity, transparency and partnership with the organization(s) that best represent the affected parties.