In Your Words: EDF President Fred Krupp on Leadership

September 22, 2011

What does the notion of redefining leadership for sustainability mean to you?

At Environmental Defense Fund (EDF), we recognize the need for businesses and entrepreneurs to lead environmental innovation, particularly while comprehensive climate policy remains sidelined in Washington. In the ebb and flow of the American environmental movement, corporations are now in the forefront.

Businesses need to create “economic value in a way that also creates value for society by addressing its needs and challenges,” wrote Michael Porter and Mark Kramer recently in Harvard Business Review. EDF has been promoting this philosophy for 20 years. Our projects range from reducing solid waste through our landmark partnership with McDonald’s, to catalyzing the hybrid truck marketplace with FedEx, to working with private equity leader the Carlyle Group to spot environmental opportunities when they consider new acquisitions.

Being a leader for sustainability can be risky, but it’s a risk companies can’t afford not to take, because of increasing constraints on natural resources. A company’s commitment to innovation and industry transformation is leadership for sustainability.

In your opinion, what are the most significant sustainable business trends of the last decade?

To become more sustainable, some corporations are going beyond what is required for strict compliance with environmental regulations.

Leading companies, including our corporate partners like Carlyle, Kohlberg Kravis & Roberts (KKR), and Walmart, are using a green lens to identify and implement better business strategies. KKR has saved more than US$160 million in operating costs for its portfolio companies, and companies participating in EDF’s Climate Corps program have identified potential energy savings worth US$439 million. A sustainable perspective leads to immediate improvements in the bottom line—through energy savings, reduced packaging, and avoided waste—as well as more satisfied employees, greater innovation and creativity, and more committed customers.

Another trend this last decade has been green supply chain management. Many Fortune 500 companies, along with governments, have developed environmental standards for their suppliers, creating a global push for greener goods and services. Walmart, for example, has pushed product and packaging redesigns, energy efficiency, and other sustainable practices through its 100,000-company supply chain.

When it comes to promising opportunities for sustainable business now and in the next five years, where are you placing your bets?

We are already seeing companies shift from asking why they should care to askinghow they can maximize the business value of environmental issues. EDF is focusing on three ways of promoting this transformation:

  1. Supply chain leverage: As companies look to reduce their footprint, they will realize that their supply chain represents large opportunities.
  2. Equity leverage: Investors are increasingly aware that an environmental lens can enhance value without affecting the core business proposition. Our work with Carlyle and KKR shows this approach is ripe for broader uptake.
  3. Network leverage: Increasingly, companies are turning to each other to find and implement environmental strategies. As we move beyond harvesting the low-hanging fruit, companies will increasingly recognize the strength in numbers and work together to solve these issues. EDF Climate Corps and our partnership with InnoCentive aim to build a massive network of change agents working to adopt sustainable business practices and willing to share their stories with their peers, customers, and policymakers.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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