Fred Krupp, CEO of Environmental Defense Fund
In his 28 years as CEO of Environmental Defense Fund, Fred Krupp has been widely recognized as a pioneer in harnessing market forces for environmental ends, starting with the 1990 market-based acid rain reduction plan praised by The Economist as the decade’s “greatest green success story.” Krupp also broke new ground by engaging companies to improve environmental performance. EDF’s partnerships with FedEx, McDonald’s, Walmart and others have developed hybrid electric delivery trucks, eliminated millions of pounds of packaging waste and improved energy efficiency. EDF accepts no contributions from its corporate partners. In 2011, U.S. Energy Secretary Steven Chu appointed Krupp to the seven-member panel charged with recommending measures to reduce the environmental impact and improve the safety of natural gas production. On the panel, Krupp was a powerful voice for greater oversight and enforcement, strong regulation of air and water pollution, public disclosure of chemicals in fracking fluids and wastewater, and reduction of methane leakage. Krupp is coauthor, with Miriam Horn, of the New York Times bestseller, Earth: The Sequel – The Race to Reinvent Energy and Stop Global Warming, published by W.W. Norton. Educated at Yale and the University of Michigan Law School, Krupp lives with his family in Connecticut. Environmental Defense Fund (EDF) is a leading national nonprofit organization representing more than 700,000 members. Founded in 1967 by a group of scientists concerned about the effects of DDT on the environment, EDF’s mission is to preserve the natural systems on which all life depends EDF links science, economics, law and innovative private-sector partnerships to create innovative, equitable and economically sustainable solutions to the most serious environmental problems. EDF has 11 offices: New York City (head office), Washington, D.C., San Francisco, Sacramento, Boston, Bentonville (Arkansas), Austin, Boulder, Raleigh, Beijing, and La Paz (Mexico). EDF currently employs 318 full-time and 19 part-time staff. We also enjoy the support of a number of dedicated volunteers, including our national board of 39 members.
- What is the most important ethical lesson you have learned (either personally or professionally)?
An honest, well-managed NGO has a responsibility to steward carefully, and to act as a fiduciary with the highest standards of integrity for, donor funds. This means implementing good management practices; establishing milestones and measuring goals; and ensuring that when a strategy isn’t working as planned and we are not getting results we change course. We do have the more technical ethics practices (conflicts of interest policies and such), but above and beyond that it is our responsibility to get the most out of donor resources.
- What is the most shocking corporate ethics matter you have seen in the news recently? Non-profit sector? Why?
I think the saddest example of a corporate ethics matter is the sub-prime mortgage crisis – with the idea that companies intentionally lent money to borrowers they knew couldn’t repay and purposely failed to explain the rules to investors who were cheated by underwriters who knew they were selling worthless securities. The sheer number of victims and the broad effect these sub-prime practices had as they unraveled on the broader economy is shocking. In the non-profit sector, there was a recent scandal involving the United States Navy Veterans Association, a sham charity claiming to support US navy veterans through chapters around the country. It turns out that one person in a Florida duplex (former navy intelligence officer and Harvard Law School graduate) bilked donors out of approximately $100 million. Again the outrageous size of the financial impact on so many donors and the disgrace is shocking. 3. What do you see as the opportunities for the corporate sector and non-profit sector to collaborate in raising the bar in ethical matters? EDF needs to worry about ourselves and to hold ourselves to the highest ethical standards everywhere in the world. We look for corporate partners who do the same, and fortunately there are many. Still, on the corporate side there is room for improvement. For example, even after Hurricane Sandy, many consumers and investors remain unaware of risk to companies from climate change. As a result, EDF has petitioned the United States Securities and Exchange Commission (SEC) to ask for disclosure of corporations’ climate change risk to the SEC and to investors. The SEC has agreed to require a certain amount of additional disclosure as a result of our request. There are companies beginning to disclose, but greater transparency would be an improvement. Keeping climate change risks hidden as climate change has an increasing impact on corporations going forward will result in increasing deceptiveness.
- What are the most effective strategies for mitigating risk of unethical behaviour in your organization?
First, we put our ethics policies and requirements in writing so they are clear and not assumed. With respect to corporate donations, we have a detailed set of policies. For example we refuse donations from companies involved in litigation with us, potentially benefiting from our advocacy measures (e.g. energy efficient light bulb manufacturers), in conflict with our policies, or partnering with us. Second, because we are science based, we make all data generated publicly available. Our publications are peer-reviewed literature, so subject to vetting by other scientists. Third, our collaborators must report conflicts of interest from collaborations they have with other organizations. Finally, we also have a wide range of financial side safeguards, such as independent audits and internal checks and balances common to most well-run organizations.
- What are your strategies for ensuring ethical policies and standards flow down through all levels of the organizing and to all stakeholders?
We have an ethical culture and aim to model highest standards. We definitely have in place rigorous financial control mechanisms, and we recognize the need to be sure that everywhere in the world these controls are implemented to the same level. At EDF all employees everywhere in the world are held to our highest standards. This includes practices such as sharing our core values (integrity among others) during the interview process before hiring decisions are made, annual conflicts of interest reporting by employees, and strict prohibitions on employees globally from taking fees or honorariums from corporate entities (including partners). More generally, our ability to attract employees with a real concern for the environment and concern for future generations reinforces our ethical culture, including our strong leadership in the US and internationally. In other words, we integrate ethics into many different aspects of the human resources processes in addition to financial management and operations.
- Are there areas you think regulation should be more extensive in regulating corporate ethics? Non-profit sector ethics?
Too often those who perpetrate fraud don’t pay for their crimes. Regulation needs to be strengthened, including the enforcement of existing regulation. In addition, it is more difficult than it should be to make an effective case for some ethical violations. However, ethics is a cultural matter (organization, family…), so a change of heart is needed along with a change of laws.
- Should culture be an important contextual element in ethics analysis? What is unique about the ethical culture and environment in your country that should be taken into consideration?
One strength of the US system is little tolerance for corruption in both the public and private sectors. Certain other countries suffer a real drag on their economy due to somewhat greater tolerance for corruption. Whether a NGO or a business, in the US we never participate in bribery or other forms of corruption. This is the law, but these are also values that should be universal and that US organizations can model to strengthen resistance to bribery and corruption elsewhere.
- Do you think globally applicable ethics principles and practices are possible? Desirable?
This question is tougher than it might seem at first glance. Some aspects of ethics are almost encoded in human DNA such as recognizing bribery and corruption as unethical. However, there are many ethical standards where room for discussion, tolerance, learning, and considering how best to co-exist with other cultures is important. One example that comes to mind is Islamic banking, which as I understand it does not allow interest or late payment fees that would be acceptable to western banks. So as different cultures interact, the first priority should be to strive to understand each other’s ethical principles and remain open-minded. Uniform ethical standards may not be possible or may take a long time to consolidate. As we engage in these discussions, EDF always has to live up to its own ethical standards however.
- What is the biggest mistake people make in making decisions around ethical issues?
The biggest mistake people make is thinking that the small things don’t matter. Small things matter. To paraphrase Aristotle’s comment: ethics are not an act but a habit because we are what we repeatedly do. In addition, we must do more than obey the law. When it comes to the environment, it is a mistake to assume that if we obey the law we are ethical. To me it is unethical to pollute the air or the environment for future generations even if the law allows it.
© Copyright 2012 Susan Liautaud & Associates Limited. All rights reserved.
Leave a ReplyWant to join the discussion?
Feel free to contribute!