Ecomagination: Inside GE’s Power Play

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by: Joel Makower

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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