"Doughty Hanson’s emphasis on sustainable business practices has already produced results and is helping us to generate earnings, cut costs and manage risks in areas which might otherwise have been overlooked."
Jesús López Torralba CEO, Avanza
The ESG work Doughty Hanson has been implementing alongside management at Avanza since 2007 is representative of our approach to ESG engagement across our private equity portfolio.
Doughty Hanson acquired Avanza Group in February 2007. Avanza is one of Spain’s largest bus and coach operators, employing more than 4,000 people.
Prior to the acquisition, Doughty Hanson commissioned external due diligence to investigate a wide range of ESG issues and, upon completion, the firm undertook a detailed internal review of the business. The review involved discussions with Avanza’s management and comprehensive site visits to a number of locations. It also considered the views of various key stakeholders including local municipalities, customers and regulators.
A range of ESG issues were considered from the perspective of both risk and opportunity for the business. These included fuel storage, fuel efficiency, fuel type and use, climate change impacts, water conservation, land impacts, health and safety and service efficiency.
Working in conjunction with Avanza’s management team, we developed an action plan to address the findings of the review.
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A modern and efficient fleet of vehicles. All new vehicles are now mounted on Euro V or EEV engines, which are highly efficient and can reduce emissions of pollutants such as nitrous oxide by more than 40%. In addition to more eco-efficient engines, Avanza is also piloting a range of alternative fuels and technologies including the use of electric power and biofuel-powered vehicles.
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Fuel management. This impacts both costs and emissions of climate changing gases such as carbon dioxide (CO2 ). By taking steps to reduce fuel use by 2.5% over an 18 month period the business will save up to €700,000 a year and eliminate more than 2,000 tonnes of CO2 emissions. This is being achieved through a combination of technical engineering measures, improved vehicle maintenance and driver training. Live driver-monitoring systems to track fuel usage and record individual driver behaviour across a number of routes have also been piloted, resulting in enhanced driver competence and better driving behaviour. Initiatives like this also contribute to improved driver safety as studies show that efficient drivers also drive more safely.
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Waste and water. Additional environmental improvements and cost savings were generated by improvements associated with Avanza’s property portfolio. These include plans to reduce water, energy consumption and the amount of waste generated at the company’s depots, workshops and stations. Water-recirculation systems have been installed on vehicle-wash stations at key locations, enabling Avanza to recycle between 50% and 75% of all water used for washing vehicles and save around €30,000 per site annually. The company is also saving around €100,000 a year at two pilot sites because of some initial work undertaken to address waste-management issues, and further savings of €750,000 to €1m are being targeted through further initiatives at these and 10 other sites.
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Health and safety. Doughty Hanson has introduced a group-wide framework for health and safety management. This framework, which has included the introduction of formal management processes, the undertaking of detailed audits and risk assessments, and provision of training, has so far resulted in annual savings of about €200,000.
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Monitoring sustainability. Doughty Hanson has introduced formal arrangements for reporting and tracking sustainability performance on a group-wide level. By making ESG a central business priority, Avanza’s environmental and health and safety management systems have been certified to internationally recognised standards of best practice.
Doughty Hanson’s Head of Sustainability continues to work alongside the company’s management to identify and implement ESG initiatives at Avanza. While the projects undertaken in these areas remain a work-in-progress, they have already clearly had a positive impact on Avanza’s financial performance and corporate reputation.
Meaningful engagement in the ESG arena has not only made Avanza more profitable but means it is also better placed to manage risk and better positioned to secure future transport concessions.