GE decides it's best to look after the greenhouse
The Observer (U.K.) Jan. 8, 2006
Perhaps the most encouraging - and surprising - news for the environment in the past 12 months has come from the giant US corporation GE. Its product line of nuclear power, aero engines, coal plant and plastics hardly seems likely to endear it to environmentalists, with whom it has also crossed swords over chemical pollution (which it is now clearing up) in the Hudson river. Moreover, some of its largest customers are utilities, traditionally among the fiercest opponents of curbs on emissions of greenhouse gases.
Yet all the more reason to take notice of the company's launch of an 'ecomagination' programme, charged with building sales of green technologies to $20bn by 2010. R&D in these areas, ranging from cleaner coal and power plants to fuel cells and wind turbines, will double to $1.5bn.
At the same time, GE says it will cut its own CO2 emissions by 1 per cent by 2012, equivalent to a reduction of 40 per cent if it continues to grow as planned. It pledges to subject its performance, and ecomagination products, to an independent audit.
True, even $20bn is relatively small beer by GE's standards: less than a seventh of last year's turnover of $152bn. Even so, the symbolic importance of the move can hardly be overestimated. Never mind what George Bush thinks, the greening of the largest (by market value) and possibly hardest-nosed company on the planet surely signals the moment when global warming became as much of a business as an activist's preoccupation. As Jeff Imelt, GE's chief executive and ecomagination champion, says: 'Green is green [ie, dollars].'
In bald terms, this means that environmental improvement now has the formidable management power of GE behind it - not to mention lobbying clout. As significant as GE's internal decision is its call, along with a number of other major US firms, for regulation to force companies to take action on carbon emissions. 'Tough regulation makes people play hard and compete hard,' notes GE international president Fernando Beccalli-Falco. 'We don't mind regulation so long as it's fair and everyone plays by it.'
Beccalli-Falco has an office in front of the European Commission in Brussels. GE is aware of European pressure for controls and has an important research centre in Munich. It is right that regulation will come in the end - at which point it will be in pole position to satisfy global demand for greener equipment. But it insists that the market is there anyway.
GE, says Beccalli-Falco, is both a technology company and a student of long-term megatrends. Combining the two, it was hardly rocket science to conclude that technologies for protecting the environment and minimising energy use could make money for both GE and its customers. Every oil-price hike and pollution scare in China just makes the reasoning more convincing.
Committing itself to cutting its own emissions was a similarly easy decision, because it helps GE meet internal targets for channelling operational savings into productive investment. In that sense, says Beccalli-Falco, putting investment, research and commitment into the environment was giving formal recognition to something that was happening anyway.
However, no one should underestimate the impetus that such formal recognition brings. On one side, managers will be held to those targets. On the other, in a call with analysts last December, Imelt spoke of the theme for 2006 as 'go big' - making sure that GE businesses got all the benefits and none of the drawbacks of the group's vast size.
Not only global reach and technology, but also cast-iron financial status and 'hardwiring' its internal best-practice sharing processes would be used to build all of the businesses.
One example of 'going big': since 2001 GE has spent $60bn rebalancing its product portfolio away from financial services. 'GE is 127 years old and aware that Darwinism is about the survival of the most adaptable, not the strongest,' says Beccalli-Falco.
Is there a conflict between GE's traditional pursuit of ruthless efficiency in delivering planned results and the requirement for inherently less predictable innovation? No, says Beccalli-Falco. On the contrary, the disciplines that GE's internal processes bring are key to its ability to spread new thinking through its constituent parts and, counterintuitively, they make good ideas more likely to yield real results.
There is a limit to what one company can achieve. It is also the case that most of its effort remains outside ecomagination. Yet the endorsement of the environment as business by the world's most formidable industrial company is worth more than all the world's corporate social responsibility programmes. To rephrase the famous quote about General Motors: what's good for GE isn't at all bad for the planet.