Dreaming up what tomorrow can look like takes imagination, foresight and a willingness to see the change that is possible.
Taking that next step — and actually bringing that change to the world — takes resources, the kind that big business can bring to bear.
And while many of the world’s largest companies have somewhat shied away from environmental, social and governance reforms, some of the biggest players — like Blackstone — are now leaning in.
“This is a topic that is front and center for leaders globally today and something that we talk a lot about,” said Jennifer Morgan, global head of Blackstone’s portfolio operations.
And Blackstone is well positioned to turn that talk into action that matters.
“We have well over 200 companies,” Morgan said. “We have over 700,000 employees working across those companies. And so in spending time with our leaders across the companies, there’s a lot of commonalities of what leaders are focused on, the challenges that they’re leading through as well as the opportunities.”
Morgan was interviewed by Frank Zambrelli — global managing director of retail sustainability at Accenture and vice chair of Fashion Makes Change — who pressed her on the key ESG themes that are influencing private equity in the market.
Three topics rose to the top.
- Decarbonization: “We have a real strong focus on decarbonization in our operating companies because we see this as an opportunity to help make these companies stronger. And we set some targets to reduce scope one and two emissions by 15 percent on average in our first three full calendar years of ownership,” Morgan said.
- ESG Reporting and Supply Chain Diligence: “As I look across our global portfolio, we’re definitely starting to see enhanced ESG reporting to enable better transparency into how these sustainability goals, measures and the risks impact the firm’s financial performance. Some of this is accelerated by regulatory drivers,” she said.
- Consumer Demand for Stronger ESG Performance: “It’s not just the regulations,” she said. “Many of our many customers…are asking our companies: ‘What are your net zero goals? And what are your EcoVadis scores?’ We’re seeing this customer demand payout not only in Europe, but we’re also seeing it with our Asian and U.S. companies that supply to European customers.”
Those trends are at work across the Blackstone portfolio.
By way of example, Morgan pointed to PGP Glass, which produces high-end packaging, from nail polish bottles to perfumes to spirits.
“This is a 24/7 intensive, energy using company,” she said. “And they face pressure from their customers such as LVMH [Moët Hennessy Louis Vuitton] to decrease emissions and help them meet sustainable packaging goals.
“In working with our team, the CEO and the executive team were able to really understand those customer expectations,” she said. “In addition to emissions reduction, they’ve implemented several programs to improve health and safety of their operations, improve water efficiency, create jobs for disabled workers, and all that has helped them improve their ESG ratings from no rating in 2021 when we started working with them to EcoVadis Platinum in 2023. This rating increases their right to win.”
Blackstone clearly understands the power of such ratings.
Last year, the private equity firm bought International Gemological Institute, which certifies lab grown diamonds and controls about 70 percent of certifications in that sector.
“This company is benefiting from the strong tailwinds of an increasing acceptance of these lab grown diamonds, which have had around 57 percent volume [compound annual growth rate] from ‘15 to ‘22,” Morgan said. “These lab-grown diamonds, they have all the properties and look just as beautiful as they are diamonds, but they’re made out of captured methane and it’s conflict free.”
Likewise, in 2021, Blackstone bought Sphera, which offers ESG software, data and consulting services. “This is a great example of a company that supports product lifecycle assessments, carbon footprint, and supports companies in all areas of their ESG journey,” Morgan said.
