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Ecomagination: Inside GE's Power Play
Joel Makower, 8 May 05

Joel Makower is a widely respected writer and consultant on issues of sustainable business, clean technology and green markets. His essays on environmental business and technology are a regular feature of our Sustainability Sundays. Take it away, Joel:

Today, May 9, General Electric, the 125-year-old behemoth born out of Thomas Edison’s electric light company, is casting a bright light on sustainability. Its chairman and CEO, Jeffrey Immelt, is announcing that the $150 billion company is hitching its future to the growth of clean energy, clean water, and other clean technologies through a commitment to what GE is calling “ecomagination.”

Ecomagination, says Immelt, aims to “focus our unique energy, technology, manufacturing, and infrastructure capabilities to develop tomorrow’s solutions such as solar energy, hybrid locomotives, fuel cells, lower-emission aircraft engines, lighter and stronger materials, efficient lighting, and water purification technology.”

By almost any measure, it’s a bold move. For GE, the fifth-largest U.S. company, it represents a strategic shift that could catalyze competition among some of the world’s largest companies to accelerate the emerging clean-tech economy.

Working with my colleagues at GreenOrder, a New York-based consultancy specializing in sustainable business, I have helped GE prepare for this day over the past year or so, working at both the strategic and ground levels. Having had a front-row seat, I’ve watched “ecomagination” catch fire at GE. I thought I’d share what I learned.

First, some background. In announcing ecomagination, GE is committing itself to:


  • more than double its research investment in cleaner technologies, from $700 million in 2004 to $1.5 billion in 2010;
  • introduce more clean-tech products annually, doubling its current $10 billion in annual revenues from ecomagination products and services to at least $20 billion by 2010, “with more aggressive targets thereafter.”

GE also is pledging to improve its own environmental performance by:

  • reducing its greenhouse gas emissions 1% by 2012 and the intensity of its greenhouse gas emissions 30% by 2008, both compared to 2004 (based on the company’s projected growth, GE says its emissions would have otherwise risen 40% by 2012 without further action);
  • reporting publicly on its progress in meeting these goals.

What’s driving GE to do this? First and foremost, it’s a huge business opportunity. Clean Edge recently estimated that global markets for just three technologies -- wind power, solar photovoltaics, and fuel cells -- will grow to more than $100 billion within 10 years, from about $16 billion today. That doesn’t include clean-water technologies, in which GE has invested heavily. (A study last year predicted that the market for world water treatment technologies will reach $35 billion by 2007.) And it doesn’t include energy efficiency -- technologies that significantly reduce energy use -- which is, arguably, the biggest market of all.

Beyond that, Immelt believes the private sector needs to step up to the plate in addressing environmental challenges, and to stop viewing the environment as a no-win business proposition. Immelt doesn’t advocate abandoning government action on the environment, but he sees an alternative pathway for business, one in which the private sector embraces today’s realities of environmental, national security, and other concerns and invests in creating new markets for cleaner fuels and technologies.

True, GE still manufactures nuclear power plants (which are not part of its ecomagination goals) and is investing heavily in “cleaner coal” technologies (which are part of the goals) -- not everyone’s definition of clean technology, though Immelt firmly believes they should be part of our energy future.

Reasonable people can disagree on this, but it’s hard to argue with Immelt’s willingness to put his company out front of the debate in a very visible way. GE’s goal is not to promote one or two energy technologies above the others, but to push them all aggressively. Washington could learn a lot from that strategy.

GE seems to be doing several other things right in making ecomagination central to its strategy. In many ways, it represents a textbook approach to what a major corporate sustainability effort can look like. Here are six specific reasons I believe GE is headed in the right direction:

  1. It’s being viewed as a business opportunity. Few other large companies -- BP, Dupont, and Interface are rare exceptions -- have set their sights on making sustainability a cornerstone of topline business growth -- new products, larger markets, stronger customer ties, etc. GE sees ecomagination as an engine for creating new sources of business value for years to come. That’s likely to make it sustainable within the company, and not just the flavor of the month.

  2. It’s got solid top-level commitment. Experts always talk about the importance of having CEO buy-in to make sustainability more than just a nice-to-do company initiative. (Again, BP’s John Browne, Dupont’s Chad Holliday, and Interface’s Ray Anderson are among a handful of exemplars.) Immelt seems to be making ecomagination a personal quest, from his high-profile announcements this week all the way to his personal appearance on the ecomagination Web site. I’m guessing you’ll be hearing Immelt preach the ecomagination gospel for the foreseeable future.

  3. It’s both aspirational and specific. GE’s ecomagination pledge marries high-level strategy and vision with specific targets and timetables. Both are critical for sustainability to succeed inside a company, and having one without the other is a recipe for failure. In providing both, GE has signaled its intention to be an environmental and clean-tech leader, and has provided a road map of how they plan to get there.

  4. They’ve done their homework. GE has identified 17 products representing about $10 billion in annual sales as part of the ecomagination platform on which it plans to build. In doing so, the company undertook an intensive process to identify and qualify current ecomagination products, analyzing the environmental attributes of GE products relative to benchmarks such as competitors’ best products, the installed base of products, regulatory standards, and historical performance. (Doing this analysis was one of the key roles played by GreenOrder.) For each ecomagination product, GE created an extensive “scorecard” quantifying the product’s environmental attributes, impacts, and benefits relative to comparable products. The scorecards were used to create the product claims that can be found in GE’s printed materials, ads, and Web site.

  5. It’s being integrated with the brand. GE says the ecomagination “brand” will be integrated into its overall marketing -- at least for the products that qualify. This is no small matter. Most companies have been reluctant to play up their products’ environmental benefits (if you don’t count those feel-good image ads that come primarily from energy, chemical, and forestry companies), fearing that their green claims won’t stand up to scrutiny when weighed against the company’s overall environmental footprint. GE’s leaders seem willing to take the risk -- largely because they’re making specific claims and are willing to back them up.

  6. They’re in it for the long haul. Clearly, ecomagination -- like sustainability itself -- is not a one-off campaign or short-term proposition. GE seems determined to make ecomagination part of its identity. It plans not just to market the brand aggressively to the world, but also internally, to GE’s 300,000-employee base, to ensure that the notion of leadership through clean technology is part of everyone’s job.

Time will tell, of course, how effective this strategy will be in helping GE gain business -- and shareholder -- value. If it works, it may provide a model for how a company can strike out as an environmental leader in today’s cynical marketplace.


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Comments

Hallelujah! At last American industry figures out
how to pursue a course of action that the Chinese
can't do five times cheaper!


Posted by: Bruce Sterling on 9 May 05

Well, let's just hold up a minute here. It's all well and good that GE is charting a positive direction for the future, but this is a company with some serious baggage from its past.

GE was the preeminent manufacturer of PCBs, a particulary nasty chemical, which has contaminated a number of sites around the country, notably the Hudson River in New York and the Housatonic River in Massachusetts and Connecticut. Rather than stepping forward to clean this stuff up, the $150 billion company has plead poverty and hired a platoon of lawyers and scientists to dispute EPA's findings and rulings at every step of the way.

If these guys want to remake their image as an environmentally friendly corporation, let's see them turn over a new leaf with regards to their cleanup responsibilities.


Posted by: Eric on 9 May 05

I'm with Eric, frankly... it's all very nice, but is GE still building landmine parts?


Posted by: Julia on 9 May 05

Let us wait and see what happens. Any progress with multi-nationals should be applauded.


Posted by: Robert on 9 May 05

I think it's a great leap forward, that a company as big as GE is putting environment on the map.
I know you can't forgive those PCB scandals, but, hey they wouldn't clean them anyway! It would be positive if they did though...


Posted by: Maurice on 9 May 05

yeah, i'm a bit skeptical, but afterall you gotta do something with the assets you picked up from enron wind :D (and superconducting voltage regulators from defense contractors!) like it reminds me of british petroleum's (ahem, BP - which stands for *beyond* petroleum :) rebranding efforts... but i guess if it gets other corps to "go green" it can only be a good thing?

cheers!


Posted by: glory on 9 May 05

"Baggage from their past"? Who DOESN'T have
baggage from their past? GE was founded by
Thomas Edison in 1878!

This is a fantastic development. GE has enormous
credibility in the corporate world. They are the
byword for effective management. Other companies
scream holler and heel-drum to get GE vice-presidents
to run their empires. These are the darlings of
FORTUNE and BUSINESS WEEK. They have been
in the FORTUNE 50 forever and a day. They have
more clout within the business world than
any other company in America.

It's not about "image" and "greenwashing"
any more. It's about exactly
what Immelt says it's about: "unique energy, technology, manufacturing, and infrastructure capabilities to develop tomorrowÂ’s solutions such as solar energy, hybrid locomotives, fuel cells, lower-emission aircraft engines, lighter and stronger materials, efficient lighting, and water purification technology."

Those are all entirely necessary things. We really need those
comprehensive technical innovations. We need them yesterday.
If you want to see such things developed -- (and
you'd better, because otherwise your body and your
climate will both pay for it )-- then this is the time
to cheerily admit that GE is a force for righteousness.

Don't waste any time with dismissive scoffing over
this major player in American industrialism -- if you
want an evil megacorp to despise and harass, there's
always Exxon-Mobil.

If you want a changed world, then you have to be able
to take "Yes" for an answer. The new CEO of GEO
is literally turning green on his own public website.
That is a "YES." So take it!


Posted by: Bruce Sterling on 10 May 05

Note that the hybrid locomotive creates certain options:  anything that can supply electricity at or near battery voltage can pull the train.

Electronic power conversion is quite cheap and reliable these days.  This means that a hybrid loco could be adapted to take part of its power from overhead wires instead of diesel, wherever we should decide that we don't want the noise, pollution or fuel consumption of running on the diesels.

Places like cities, perhaps?  Mountain slopes where lots of energy is expended in a short distance?  Near stations where the train pulls hard to get up to speed?

If GE is thinking what I'm thinking, they're poising their rail product lines to be able to switch to electric propulsion whenever it suits their customers to do so.  Wind-powered trains, anyone?


Posted by: Engineer-Poet on 10 May 05

Are you wary of what GE is doing? I work at an environmental NGO that does hard science and analysis, and we were too, at first - but then our president was offered a shot to comment (no pre-censoring) after Immelt announced the initiative. Check out coverage here: http://business.wri.org/topic_content.cfm?cid=3505

For example, "I have to say, Jeff, that what you are doing is not only visionary, but in the absence of coherent national policies rewarding emissions reductions and encouraging energy efficiency and use of renewable energy, it is just plain gutsy."

Look, others can do greenwash, but Jeff Immelt is betting his tenure as CEO on the profitability of solving big environmental problems. If he's even half as successful as Jack Welch was at increasing shareholder value, then we're looking at a big win here.


Posted by: Rob Katz on 12 May 05

I think that this ia great strategy move my GE.

We need the resources which a company like GE can bring to the table. As Joel has explained they got a lot of the strategy pieces in place.

Also these $10 billion a year products will help Immenlt achieve his other goal of increasing the company's topline.

And in a way if he is successful Immenlt will make his mark on GE as the harbringer of sustainability.

All the best to him and us. Lets hope GE does succed.

Suhit


Posted by: Suhit Anantula on 12 May 05

I'm concerned about clean coal technology. Coal gasification is cleaner, but getting coal to the boilers for processing is a dirty job. Mountain top removal is ruining WV, VA and TN. If we could just clean up our acts in our use of coal, I would be more in favor.


Posted by: Rachael on 13 May 05

just wanted to comment on your "Singing in the Rain" baby elephant. best commerical i have seen this year so anything. I have told everyone about it and I appreciate GE"s ecoimigation and keep up the good work


Posted by: nancy roeben on 20 May 05



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