GE's Green Awakening

By Daren Fonda

Jeff Immelt isn't your garden-variety environmental apostle. A math whiz who played football at Dartmouth, he's not apt to tramp about the wilderness or have Zen moments atop majestic mountain peaks. Immelt bestrides the summit of General Electric--a $152 billion conglomerate supplying everything from home appliances to jet engines to entertainment, via NBC Universal. When the GE CEO isn't globetrotting in his role as chief salesman, he unwinds with an activity that Earth Day types typically abhor: golf. "What gets me pumped is hitting a six-iron 160 yards on top of a hill," he says unabashedly, speaking at GE's bucolic headquarters in Fairfield, Conn.

Yet what also gets Immelt pumped is talking about the environment in a way no GE chief has before, certainly not his predecessor, "Neutron Jack" Welch, who ran the company with a brass-knuckles approach to the bottom line. Welch had a testy relationship with greens, notably over cleaning the Hudson River of PCBs, a toxic chemical GE dumped, legally, for decades before the practice was banned in 1977. Since Welch retired in 2001, however, Immelt has been remaking GE. He recently announced a restructuring, paring 11 operating divisions to six. He has pruned slow-growth businesses like insurance and loaded up on enterprises with brighter prospects, such as media and medical devices. Now, he's giving environmental products a starring role--pledging to invest in green technologies, clean up company operations and promote GE as a conglomerate even Sierra Clubbers might like.

Is Immelt responding to a guilty corporate conscience? Nope. He's seizing a blossoming opportunity: Green is where the green is. Eyeing the hot market for eco-friendly technologies like wind turbines, Immelt says he aims to double revenues in green products from $10 billion to $20 billion by 2010. He promises to improve GE's energy efficiency 30% and cut greenhouse-gas emissions 1% by 2012 as the company grows at a projected 8% average annual rate (emissions would rise 40% if left unchecked). GE will issue annual "citizenship" reports on its environmental progress. With a new ad campaign and new slogan, "ecomagination," Immelt seems intent on shedding Welch's combative stance on environmental issues. One TV ad shows alluring young women in a coal mine. Even a dirty fossil fuel, the ad suggests, can be sexy if cleaned up the GE way. "When it comes to energy efficiency, environmental technology, water solutions, I want to lead forever," says Immelt, who at 49 will probably run GE for many more years.

It's fashionable to talk a good green game. In the S&P 100 index of large firms, 39 companies issue "corporate sustainability" reports, disclosing information on their environmental and social performance and in some cases setting targets for which they may be held accountable. Pressure from activists has led Wall Street firms like J.P. Morgan Chase to assess environmental risks when deciding whether to finance projects such as gas pipelines in ecologically fragile regions. In the industrial sector, GE comes tardy to the green party, following firms such as Alcoa, BP, DuPont and Shell, which several years ago set targets for cuts in greenhouse gases and promised greater reductions than GE.

While environmentalists generally laud these efforts, corporate pledges to go green tend to be the first casualties when business gets tough, and enviros often criticize the promises as "greenwash"--really, business as usual. In 2000, Ford Motor lit up the Birkenstock crowd by promising to improve SUV fuel economy 25% by 2005; three years later, the firm reneged amid a steep sales slump and $6.4 billion in losses. Ford has started issuing reports on its environmental impact and is taking steps to address global warming. But nowhere in the publicity efforts do you hear that the firm is part of an industry group suing California to block a regulation requiring a 30% cut in greenhouse-gas emissions for new vehicles sold in the state by the 2016 model year.

Large, global companies are complex organisms, of course, with sometimes contradictory positions, and you could say Ford execs are just protecting investors, whose interests they are legally required to represent. No CEO wants to stand up at a shareholders' meeting and announce that going green hurt profits. "Guys in my job can't have hobbies," Immelt says, explaining that he's not greening GE to earn plaudits from environmentalists, eco-minded consumers or even young GE employees, who liked the idea according to internal focus groups. "You can't do things because you had a vision while you were in bed one night and someone whispered in your ear 'Go green.'"

No, for Immelt and GE--whose size, stellar earnings record and legendary management practice make it one of the world's most influential companies--it's about cashing in on cleaning up the planet. Worldwide, the market for environmental goods and services hit $600 billion last year, according to Environmental Business News. Some segments, such as renewable-energy power systems, are expanding at double-digit rates in Europe and China. Immelt needs those high-growth businesses to offset mature sectors in GE's portfolio, which aren't growing much more than the economy. The potential for fuel-saving technologies and renewable energy is also getting more compelling as oil and gas prices reach record levels. Eighteen states, including power hogs California and Texas, have set requirements or goals for renewable energy. New York, for one, aims to generate 25% of the state's energy from renewables by 2013, up from 19% today. More than 160 mayors have pledged to curb greenhouse gases in their cities according to the guidelines of the Kyoto Protocol. Indeed, now that Kyoto has kicked in--with 34 industrialized nations legally bound to cut emissions, excluding the U.S., China and Australia--multinational companies will have to cut CO2 emissions or pay to pollute at the old rate, bolstering the market for pollution-control gear.

In some ways, corporations such as GE are pulling U.S. policy into greener arenas despite the Federal Government's recalcitrance. For instance, Senate proposals to cap CO2 emissions--opposed by congressional Republicans and President Bush--failed to make it into the energy bill. The Senate bill does require utilities to generate 10% of electricity from renewable fuels like wind or solar by 2020, but Bush wants more emphasis on tax breaks for oil and gas production. Immelt is one of a growing number of chief executives, including the heads of major utilities, who think carbon caps are both inevitable and a feasible response to global warming--a condition that nearly every scientist in the world not working for the White House believes is occurring. The CEO of Duke Energy, for one, has called for an economy-wide carbon tax. Asked if he supports Kyoto, Immelt replied, "I'm not going to advocate one way or the other," although setting CO2 caps would stimulate the market for Immelt's cleaner-burning--and pricier--turbines.

Whatever Washington's agenda, GE sees eco-friendly products as a growth business, especially overseas. In the past three years, GE's wind business, snapped up from Enron for $358 million, has grown into a $2 billion enterprise, with sales up 300%. GE has been rolling out a new generation of supersized turbines for offshore wind farms, the latest one off the coast of Ireland, and announced its third contract to supply smaller windmills to mainland China--where energy demand is soaring and the government aims to spend $85 billion on pollution controls, especially in smog-choked cities like Beijing, site of the 2008 Olympics. Immelt also intends to capitalize on coal-gasification technology purchased last year from Chevron, allowing GE to sell coal-fired power plants that spew fewer greenhouse gases. (GE is in discussions with coal-rich China on various "clean coal" initiatives too). Other eco-ventures include a hybrid locomotive, due in 2007, fuel cells, solar panels, energy-efficient water desalination systems--and, of course, a greener lightbulb. All told, Immelt wants company operations to be a giant showroom for his high-tech green products. "There's this mumbo jumbo that you can't do this and be competitive," he says. "What we've tried to do is broaden our perspective about what winning is all about."

Despite Immelt's pledge that it's a new green day at GE, it would be a mistake to think the company has quit protecting its less eco-friendly interests. GE has a history of opposing environmental regulations that don't suit the firm. In 2000, superstar lawyer Laurence Tribe asked the U.S. Supreme Court, on GE's behalf, to throw out EPA standards for smog and soot (the court declined). In 2003, GE was part of an industry coalition that lobbied for revised EPA regulations allowing utilities and refineries to modernize their oldest and dirtiest facilities, in some cases without adding new pollution controls (a federal appeals court last month upheld the revised regulations). GE is currently challenging enforcement provisions of the Superfund law, also via Tribe. The company bears at least partial responsibility for 87 Superfund sites around the country--a stretch of the Hudson River being the most famous--a legacy of its industrial past. If GE wins its case, the Superfund law would be gutted, contends Kit Kennedy, a lawyer with the Natural Resources Defense Council. GE, she says, would have "infinite opportunities for legal tangles and delays before a cleanup order could be issued."

On the most incendiary environmental issue, dredging the Hudson of PCBs, GE lobbyists have been unrelenting. One of them, Roger France, is the former chief of staff to Representative Charles Taylor, who received $8,250 from GE for his 2004 re-election. At the company's request, the North Carolina Republican inserted language in a spending bill calling for the National Academy of Sciences to study PCB-contaminated sites and produce a new cost-benefit analysis of dredging, which critics say GE could use to curtail the Hudson cleanup. GE has long insisted that the prudent course of action on the Hudson is to let sleeping PCBs lie. After complaints from environmentalists and New York politicians, including Senator Hillary Clinton (who has received $45,800 from GE since 1999), the Senate Appropriations Committee voted to call off the study. The issue will be decided later this year.

Told of the Taylor amendment, Immelt remarked, "I wasn't even aware that's the case ... We are who we are." GE would continue to defend its interests, he added. GE has reserved the cash for the Hudson cleanup, estimated to cost $500 million, and is cooperating with the EPA on a project design, he says. Nonetheless, the dredging operation, ordered in 2002 and scheduled to start in 2006, was recently delayed by a year. And GE may still legally challenge an EPA order to perform the cleanup or sue the agency to recoup costs.

Ultimately, GE's contradictory behavior on the environment is completely rational. Selling green goods represents growth and profit. Spending money to comply with antipollution laws and paying for cleanups represent cost centers--and every GE exec knows you reduce cost and feed growth. No wonder, then, that Immelt dismisses the naysayers on either side of his green initiative--the environmentalists who grouse that GE is being hypocritical and the conservatives who complain that companies should not spend an extra cent on the environment since that wastes economic resources. "There are just some people you don't listen to," he says, getting animated. "I'm not gonna be burdened by stuff we did 50 years ago in terms of our strategies going forward." What's his measure of success? Profits, of course; a boost to employee morale; a little saving of the planet on the side. Call it greenwashing if you will. To Immelt, it's just good business. --With reporting by Perry Bacon Jr./Washington

With reporting by Perry Bacon Jr./Washington