Fred Krupp | environmentalist

Teaming up with the enemy.

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Other groups opposed the private sector. "Fred understood that luring people into the dance was more likely to produce results."

In the 1980s, "our informal motto was, 'Sue the bastards,' " says Fred Krupp, president of the nonprofit group Environmental Defense. Now that informal motto has evolved to something like: what bastards? When some of his staffers wanted to sue McDonald's over its use of polystyrene sandwich boxes, Krupp instead flew to Oak Brook, Ill., to meet with McDonald's President Ed Resni. "If we are trying to change opinions, we better understand what they think first," Krupp says. The two organizations teamed to find a solution. In the end, "we did not do a report to them, we did a report with them." By 1990, McDonald's had replaced its iconic clamshell with recycled paper and, based on recommendations in the report, slashed other solid waste.

Krupp didn't invent the idea of teaming with business on pollution problems, but he proved perhaps the most daring in putting the theory to work. After taking the reins of Environmental Defense in 1984 at age 30, the New Jersey native with a law degree from the University of Michigan proclaimed his intent to use profit motives to achieve environmental ends in a Wall Street Journal op-ed. He said it was a fallacy that either the economy wins or the environment wins: "The new environmentalism does not accept 'either-or' as inevitable." Back then, the notion was "revolutionary," says Dan Esty, director of the Yale Center for Environmental Law and Policy. Other green groups "thought it was their job to beat up the private sector," Esty says. "Fred understood that luring people into the dance was more likely to produce results."

Innovative. From his airy office in a Manhattan high-rise, Krupp, in crisp shirt and tie, looks more tycoon than tree-hugger. He doesn't exactly talk like a hippie, either. "Markets use greed to harness innovation," he observes. While old-fashioned regulations are sometimes necessary (like strict limits on mercury emissions), Krupp believes government policy should foster creative solutions. His successes have grown Environmental Defense from a staff of 50 with a $3 million budget to a massive advocacy and consulting firm with a $72 million budget and a staff of 300 that includes scientists, engineers, and policy experts. At its own cost, Environmental Defense has opened an office near Wal-Mart's corporate headquarters in Bentonville, Ark., to help the world's biggest retailer go green with energy efficiency and packaging reduction programs. And it has worked to persuade old-school seafarers to increase the world's seafood supply through cooperative fishing.

The signature achievement of Krupp's philosophy came out of amendments to the Clean Air Act in the George H. W. Bush administration. While other groups pushed for rigid restrictions on sulfur dioxide, an agent of acid rain, Krupp argued for a unique cap-and-trade system that would permit utilities to swap pollution credits to help bring down their emissions as an aggregate. Utilities that found ways to reduce emissions could sell their credits, at a hefty price, to dirtier plants. Utilities favored the idea, which meant that among the green community, "Fred was taking some serious risks," recalls William Reilly, Bush's EPA chief. Reilly made the deal in return for Environmental Defense's support of the legislation. "That helped us in Congress and in the eyes of the public," Reilly says. The plan achieved reductions at one-tenth the estimated cost.

Krupp's ballet with businesses put him center stage in this year's huge environmental coup: halting several proposed coal-fired power plants in Texas. The utility giant TXU had rebuffed Krupp's attempts to make a deal limiting the impact of the carbon-belching plants. So, Environmental Defense launched a media assault and sued.

Private-equity organizations KKR and Texas Pacific Group saw an opening to buy the beseiged utility, but they didn't want the public-relations nightmare. In February, Reilly, now with Texas Pacific, asked Krupp (and leaders from the Natural Resources Defense Council) to negotiate. The acquisition group agreed to scrap plans to build eight of the 11 plants. In exchange, Environmental Defense blessed the deal.