GE's Eco-Push Takes Off

For years now, enviros have had an antagonistic and at times high-handed approach to Corporate America. The business community has responded in kind with accusations ranging from the trite (tree-huggers) to the condescending (know-nothings). While this diatribe persisted, the strident demands for business to pay more attention to the environment resembled old placards the day after a protest rally: Get serious about climate change, cut your greenhouse gas emissions, shrink your carbon footprint, boost your energy efficiency, and invest in alternative fuels. With each new study that emerged, the demands multiplied and companies and their boards were asked to consider taking on new burdens and more painful steps to comply with environmental practices.

Then it all changed two years ago. General Electric CEO Jeffrey R. Immelt took the decisive step of turning global warming from adversary into opportunity and from defensive gesture to business strategy. In early 2005, he launched the company’s Ecomagination initiative, which combines a pledge to slash GE’s greenhouse gas emissions with a major marketing campaign aimed at selling billions of dollars of green products, technologies, and services. In style as much as substance, it was a major departure from Immelt’s much-lauded predecessors, and at the time a break from the rest of Corporate America’s position on the subject—dead silence or the hope that it would go away. Instead of resisting green demands, Immelt realized that vast new markets were opening up as foreign governments put in place new climate-change regulations, which both citizens and activists rallied around. For a company widely known for innovation, what Immelt did was to look at environment and regulations no differently than a chip manufacturer looks at a new market demand for larger and more powerful chips. The customer is king.

Other corporations are now beginning to jump on the green marketing bandwagon, too. Among the notables: Wal-Mart is peddling energy-efficient light bulbs, Ford Motor redoubled its hybrid car production (although it’s still playing catch-up to Toyota), and Home Depot launched Eco Options, a program that allows customers to identify hundreds of products that are environmentally friendly. Both Citibank and Bank of America have announced massive capital commitments to green initiatives and pledged to reduce their own corporate carbon footprints. To critics in the environmental movement, the Ecomagination campaign illustrates that eco-friendly policies can be good for shareholders as well as for the environment. “We use GE as a constant example, because it shows that there’s a market for building renewable infrastructure,” says Anne Kelley, the director of corporate governance at Ceres, a Boston-based group of investors and environmentalists that works on climate change.

Conservation Begins at Home

Of course, Immelt’s bold move would have little credibility if he hadn’t coupled it with significant emissions reductions. As part of the initiative, GE vowed to slice its greenhouse gas production by 1 percent from 2004 levels by 2012. Without the reduction, its emissions would have climbed by some 40 percent over the same period. Last year, GE held emissions flat even as revenues climbed by 10 percent. Such commitments have gone a long way toward offsetting the negative image that followed GE for its years-long court battle around the cleanup of PCBs the company had left in the Hudson River decades ago. Moreover, GE has implemented Ecomagination’s basic thinking and tenets throughout the company: “It’s got to start at home,” says GE director Ralph S. Larsen, who sits on the company’s nominating and corporate governance committees. “Are you reducing your power usage, your emissions? That’s what GE has done.”  

Immelt expects the real payoff for GE will come as markets for green products and services explode. Immelt called for sales of technologies such as highly efficient gas turbines, wind turbines, and hybrid diesel-electric locomotives to double by 2010, to $20 billion a year. But results are already materializing:  Sales of these products climbed by 20 percent in 2006 to $12 billion. “We have never had an initiative that generated better results,” Immelt told shareholders at GE’s annual meeting in April.

Some skeptics try to argue that Ecomagination is little more than a clever rebranding of products GE already sells. But Immelt seems to be putting up hard dollars to develop new offerings adapted to a carbon-constrained world. As part of the initiative, he has vowed to double the company’s R&D investments in such areas by 2010 to $1.5 billion a year. Already, it jumped to about $900 million last year, a $200-million hike from 2005’s investment.