GE's Green Gamble
by Amanda Griscom Little
Vanity Fair
July 10, 2006
Can General Electric help solve the world's toughest environmental problems and still turn a profit?
C.E.O. and chairman Jeffrey Immelt thinks so.
On a sun-soaked morning in early January, General Electric chairman and C.E.O. Jeffrey Immelt
mounted a stage in the West Ballroom of the Boca Raton Resort, where a floor-to-ceiling image of his
jubilant face was broadcasting live on a Jumbotron. As the lights dimmed and The Who's "Baba O'Riley"
began to play, the room had the feel of a late-night talk show. Six hundred members of the audience—all
of them General Electric brass—buzzed with collective excitement, a majority of them sporting pastel golf
shirts and new sunburns. The best and the brightest of G.E.'s 320,000 employees, they had convened to
hear Immelt kick off the annual three-day meeting of top management. Their mission: to plot out the
coming year's strategy and celebrate the privilege of piloting the second most valuable company in the
world.
At 50, Immelt has a spry and commanding presence often described by colleagues as "Clintonesque."
He's six feet four, with a puff of silver hair, vaulting confidence, and a tireless supply of enthusiasm.
Wearing khakis and a sweater vest, Immelt opened his commentary with a David Letterman riff—"Top 10
Reasons Why 2006 Will Be a Great Year at G.E."—to fire up the crowd. It's an annual tradition he began
when he inherited the chairmanship from Jack Welch in 2001, and it has come to symbolize Immelt's
affable and irreverent style of leadership. But this year's reasons were a marked departure from the past.
Nearly half of them pertained to the environment—a subject that most heavy-industry executives would
rather avoid.
Green Is Green
By any standard, G.E. is the oldest and most diverse industrial conglomerate on the planet. Founded
more than 125 years ago by Thomas Edison, it is today the biggest manufacturer of power plants, jet
engines, locomotives, and medical equipment worldwide; it owns NBC Universal and boasts enormous
health-care, plastics, commercial-finance, and venture-capital divisions.
It is also responsible for more greenhouse gases than most American cities, more toxic-waste sites than
almost any other company in the nation, and one of the highest-profile environmental controversies in
U.S. history: between 1947 and 1977, G.E. discharged 1.3 million pounds of health-threatening
polychlorinated biphenyls (PCBs) in New York's Hudson River from electrical-equipment plants in Fort
Edwards and Hudson Falls. To this day, the waterway is reputed to be the largest hazardous-waste site in
the nation.
Nonetheless, Immelt comfortably joked about matters green, including his newly announced plan to
dredge the Hudson River (he agreed to negotiate a cleanup with the E.P.A., but environmentalists still
contend that the plan is inadequate). The chairman went on to address the intensifying threat of
hurricanes (which was a factor in his decision to shed G.E.'s sizable insurance division this year) and the
prospect of federal greenhouse-gas regulations in the U.S. (which he has openly pronounced necessary
and inevitable, much to the discomfort of some of his colleagues). When addressing this latter point,
Immelt trotted out his favorite new motto—"Green is green."
This, he insists, is no laughing matter. It's the slogan for the new "Ecomagination" campaign Immelt
unveiled last year, a sweeping initiative to lighten G.E.'s environmental footprint and ramp up its
development of cleaner technologies—from billion-dollar power plants to two-dollar compact fluorescent
light bulbs. The meaning of the motto is simple: Good environmental strategy fattens the bottom line. Or,
in Immelt's own words, "My environmental agenda is not about being trendy or moral. It's about
accelerating economic growth." He predicts that this year G.E. will pull in $165 billion in revenue, up 10
percent from 2005, and an increase of earnings per share of up to 17 percent.
Immelt, to be sure, has no private intention to appease his inner tree hugger. In fact, he professes little
personal connection of any kind to the environment. The former president of Phi Delta Alpha fraternity at
Dartmouth and captain of his college football team, Immelt still has his Greek letters and lineman trophies
displayed in his office, counts Animal House as his favorite movie, navigates his suburban Connecticut
neighborhood in an S.U.V., possibly clocks more hours in a private jet than any other person in America,
and unabashedly admits that his interest in the outdoors goes no further than the golf course. He has also
contributed to the political campaigns of Republicans with shoddy environmental track records.
Not surprisingly, Immelt's green-is-green theory has provoked smirks and jabs from both conservative
and liberal critics. Fox News dismissed Ecomagination as "little more than a sales pitch." Steven Miloy of
the right-wing Free Enterprise Action Fund alleged that G.E.'s program will result in economically
menacing climate regulations: "They are going to harm their business and other businesses." Conversely,
a Green Party representative called Ecomagination "marketing doublespeak, which is just another
attempt to [disguise] years of despicable pollution." Immelt is nothing but amused. "I know I'm doing
something right when I have the left saying it's not good enough and the right saying this is Communist
corporate do-goodism bullshit," he says. "I think it's a good thing, actually."
What boggles the mind, however, is the veritable absence of criticism from leading environmental groups
(ever wary of polluters' efforts to "greenwash" their dirty track records with an eco-friendly veneer) and the
top news and financial publications (ever skeptical of conspicuous corporate philanthropy). In fact, they've
lapped it up with surprising zeal. "G.E. is deploying the biggest and most ambitious climate strategy in
corporate America," says Eileen Claussen, president of the Pew Center on Global Climate Change, "and
taking an incredibly gutsy stand in favor of greenhouse-gas regulations."
Financial Times, The Wall Street Journal, and The Washington Post have all spotlighted G.E.'s
environmental leadership, the latter calling it "the most dramatic example yet of a green revolution that is
quietly transforming global business." Immelt won plaudits from Forbes, which said Ecomagination
represents his "best chance to raise profit margins and ... stock price," and from Fortune, which recently
named G.E. the "most admired company in the world." In his Pulitzer Prize–winning New York Times
column, Thomas Friedman recommended that President Bush replace Vice President Dick Cheney with
Jeff Immelt, implying that the chairman, more than any other leader in the country, has the vision to
reshape America's energy landscape.
Baptism by Fire
After serving 25 years at G.E., Immelt became C.E.O. on September 7, 2001, just days before 9/11, and
soon after the calamitous burst of the Internet bubble. In his first two years on the job, the company that
Jack Welch had transformed from a manufacturer with $25 billion in annual sales to a $170-billion-a-year
multinational conglomerate lost a staggering 40 percent of its market value. G.E.'s stock price tumbled
from $54 to $24 per share, and its market valuation plunged over $200 billion. Immelt, an obsessive
exerciser who's also prone to overeating, packed on 70 pounds under the pressure. "We left a decade
where the world was at peace. Oil was $12 a barrel. G.D.P. growth was 5 percent, and baby boomers
were at their peak consumption—those were about the best circumstances imaginable for growing a
company. Now we're in a completely different ball game," he says, having shed the excess weight while
stabilizing the company.
In retrospect, a baptism by fire is precisely what Immelt needed to break new ground at G.E. "The first
time you get up in front of somebody to advocate doing something differently, you're almost like a 13year-old boy going through puberty," he says. "Your voice cracks a little bit. But I think because there
were thunderstorms going on all around me, it helped me get my voice—to say, let's go this direction, we
have to go there, let's get there faster than anyone else."
There's no question that today's mercurial climates—both atmospheric and geopolitical—impose entirely
different demands on global executives than the relatively tranquil conditions of the 80s and 90s. In the
last five years, the twin forces of high oil prices and escalating conflict in the Middle East have
dramatically altered the discussion around energy. Now the voices clamoring for a shift away from fossil
fuels go well beyond the environmental community, whose demand for efficient and renewable energy
technologies has long been denounced as a threat to commercial progress.
Since 9/11, Greens have been joined by a throng of new clean-energy allies—hawks who fear
dependency on foreign oil, fiscal conservatives who scorn undue military spending on wars tied to oil,
evangelicals who worry that global warming is threatening God's creation, motorists who are feeling the
price pinch at the pump, and homeowners beset with exorbitant heating bills. And slowly but surely,
another ally is coming to the table: corporate executives who see a tremendous commercial opportunity in
the technologies that can allay these concerns.
Even President Bush, who arguably rose to power on the back of the oil industry, said in his January
State of the Union address that "we have a serious problem: America is addicted to oil" and the time has
come to "break" this grievous habit. He has also acknowledged that the fast-growing clean-technology
markets could be the most powerful job-creation engine of the 21st century. The president hasn't outlined
any clear plans to cut greenhouse-gas emissions or jump-start those markets, but nevertheless he
appears to be drinking—or at least sipping—the clean-energy Kool-Aid.
He has little choice, according to former president Bill Clinton. "America can no longer deny that the
earth's temperature is rising at a rapid rate," Clinton says. "Unless we change our way of using energy,
the consequences will be profoundly negative." But Clinton is an optimist, believing that technology got us
into these problems, and in turn, technology will save us from them. "The crisis we face is also an
enormous opportunity. A clean, energy-independent future would create millions of new jobs, increase
our national security, and combat climate change. Jeffrey Immelt sees the opportunity as well as the
threat and is making climate-change technologies the center of General Electric's profit strategy. All of us
should be grateful."
Industry Giant
Here's why G.E. is in the catbird seat: the company that gave America the first lightbulb, the first
dishwasher, and its first jet engine is today the No. 1 producer of power-plant equipment, airplane
engines, and locomotives, and among the top manufacturers of plastics, home appliances, and lighting.
As energy prices soar and carbon-dioxide restrictions become all but inevitable, Immelt reasons, the
logical strategy for G.E. is to lead the development of next-generation technologies within its divisions—
wind turbines, solar power, clean-burning coal plants, high-efficiency airplane engines, hybrid-engine
locomotives, energy-saving lightbulbs and appliances, and new lightweight materials for buildings and
vehicles.
He frames these goals in the words of Thomas Edison, who said, "I never perfected an invention that I did
not think about in terms of the service it might give to others. I find out what the world needs, then I
proceed to invent." In fact, the only way a supersize company can be successful in the long term, says
Jonathan Lash, president of the World Resources Institute, a D.C.-based environmental think tank, is if it
foresees major historical changes ahead of time and capitalizes on those trends. "Immelt anticipates that
he is going to operate in a world with increasingly limited access to oil and increasingly rigid constraints
on greenhouse gasses," Lash says. "He's developing precisely the solutions that those conditions will
demand."
But, asks Patrick Michaels, an environmental fellow at the right-leaning Cato Institute, what if Immelt is
wrong about those conditions—or even the time frame during which they play out? What if concerns
about climate change subside in the next few years, or, more plausibly, new oil resources are freed up?
"Mr. Immelt is overestimating the urgency of these threats in my opinion," says Michaels. "As it is, G.E.'s
virtuous talk has had virtually no positive effect on its share price." The company's stock has declined
from about $36 per share to just over $33 since Ecomagination was launched. "What that says to me,"
adds Michaels, "is the markets aren't buying it."
Ivan Feinseth, a Wall Street analyst with Matrix USA, who has a "hold" rating on G.E. stock, raises
another concern: Can a company as vast as G.E. possibly be nimble and creative enough to meet
Immelt's goals? "You can't deny the law of diminishing returns," he says. "It's all but inevitable that
conglomerates the size of G.E. will underperform." Another market analyst who spoke on condition of
anonymity worries that it will be difficult for the company to shift its focus from a rigorously conservative
operations-and-management strategy—which, under Welch, came to be known as its core competency—
to a breakthrough innovation strategy. "That's a strategic gamble," the source says. And yet none of these
caveats seem to bother Wall Street at large: Twenty of the top 22 analysts who cover G.E. have a "buy"
or "strong buy" rating on the stock—indicating that if the markets aren't buying into G.E.'s strategy just
yet, they will soon enough.
Nature vs. Commerce
This is a story of crisis and opportunity, of the imperatives of political and environmental change and the
responsibilities they confer on industry. It's the story of the birth of a truly new kind of business strategy,
and the reconciliation of longtime foes—nature and commerce. Will technology be able to temper, and
even solve, the immense and mysterious challenge of climate change? Can it abate America's dangerous
dependence on foreign oil? Can G.E., the company historically responsible for so many environmentally
damaging technologies, now solve the world's toughest problems with planet-saving machinery? The
answers depend, in part, on Immelt and the creativity of his engineers—but equally on the rest of
America's business leaders and the federal officials whose responsibility it is to call industry to action.
Immelt, for his part, is not waiting for a nudge from Washington. He reasons that it's better to phase in
environmental improvements gradually than to face sudden, crippling requirements down the line. So he
has instituted a series of binding internal targets—first, to double G.E.'s research-and-development
investments in clean technologies from $700 million in 2004 to $1.5 billion in 2010. That exceeds the
2005 federal R&D budget for both solar and wind by a factor of 10, and roughly equals the total sum of
venture-capital investment in the clean-technology sector last year. Second, Immelt aims to double
revenues from green technologies in the next five years—from $10 billion in 2004 to at least $20 billion in
2010. He's well on his way: already G.E.'s green products have generated $10 billion in revenue, and
orders have nearly doubled to $17 billion. He has also committed G.E. to reducing company-wide
greenhouse-gas emissions by 1 percent and improving energy efficiency by 30 percent by 2012, a sizable
task given that G.E. would otherwise see a 25 percent spike in carbon output.
It's difficult to distinguish between the companies that are making real environmental progress and those
that simply want to create an eco-friendly appearance. There are plenty of corporate Goliaths—
ExxonMobil and Chevron, for instance—that are vying to paint themselves green with high-dollar ad
campaigns but with no real internal targets or meaningful environmental strategies to boast of, say critics.
But in the year since Immelt announced Ecomagination, an impressive number of fellow executives have
gone public with their green visions. Last October, Lee Scott, chairman of the world's biggest company,
Wal-Mart, announced ambitions to make his business run on "100 percent renewable energy, produce
zero waste, and sell products that sustain our resources and environment." He promised to spend at least
$500 million annually to reach these goals. Last December, BP (which has changed its name from British
Petroleum to Beyond Petroleum) established an alternative-energy unit in which it pledged to invest $8
billion over 10 years. Goldman Sachs has invested over $1 billion in clean-energy investments under the
leadership of its former chairman and current treasury secretary, Hank Paulson, and has committed to 7
percent greenhouse-gas reductions by 2012.
"There's no question that Jeff has taken a leadership role and come to be seen as a Pied Piper of
sustainability," says Wal-Mart's Lee Scott. "He has not only engaged me and other G.E. customers in the
environmental discussion, he's made it a business imperative." Adds Paulson, "Jeff Immelt is proving by
example that the world's best and strongest companies are those that have the best environmental
practices."
Another pioneer of corporate climate strategy is Chad Holliday, president of DuPont, who this year met a
target of reducing his company's greenhouse-gas emissions by a staggering 65 percent—a goal he had
set in 2000 for 2010, but reached seven years early. Now the company uses 9 percent less energy than it
did in 1990, even though it produces 30 percent more product. Along the way, it has saved $2 billion in
energy bills. According to the Pew Center, more than 30 Fortune 500 companies in the U.S. have set
targets for greenhouse-gas reductions. Of these, 11 have already met them, and not a single one has lost
money.
While for decades the energy and climate debate was polarized between the environmental do-gooders
and the corporate bad guys, that primitive rivalry no longer exists, says Fred Krupp, president of
Environmental Defense, a leading nonprofit. "There was a long-held theory that the more you penalize
business, the more you help the environment. But now it's obsolete," he says. "The environmental
community has come to accept that we can't move America forward without moving American industry
forward. And the corporate world has come to realize that there are substantial bottom-line opportunities
inherent in addressing these problems."
Toxic Legacy
Then again, the environmental community hasn't come to accept G.E.'s record on toxic dumping. More
resented than the public-health threats lurking in the river sediment has been G.E.'s refusal, until recently,
to clean up its mess. The company has spent over $122 million trying to stonewall the cleanup effort—
about a quarter of the estimated cost of the removal itself. Environmentalists are hoping that the
controversy will attract more compassion from Immelt than it did from Welch.
"For Jack Welch, fighting the Hudson River cleanup was a personal crusade of almost religious
proportions," contends Alex Matthiessen, president of Riverkeeper, an organization founded to protect the
Hudson River Valley. "One of his greatest successes as he worked his way up the G.E. ladder was his
uncanny ability to legally maneuver around this issue and avoid paying damages to those injured. We
expected Immelt to be better than Welch, but that remains to be seen."
Says Natural Resources Defense Council attorney Larry Levine, "From where I sit, G.E. is first and
foremost a giant profit-maximizing enterprise. That's a great thing for the development of clean
technology, and by extension the climate. But when it comes to cleaning up the messes they made in the
past, they lack both profit motive and, so far, environmental commitment."
The vast majority of G.E.'s toxins were dumped before 1972, when the Clean Water Act was established,
and 1977, when the E.P.A. banned PCBs. The company argued that it didn't technically break federal
law. It was well known long before then, however, that PCBs were dangerous to public health. "Setting
aside the legality question, G.E.'s moral culpability has long been obvious: The company's flagrant
dumping endangered the public, devastated the livelihoods of hundreds of local fishermen, and made the
company public enemy number one on the environment," says Matthiessen.
Critics contend that G.E.'s argument became legally moot in 1980, when Congress passed a law that
made polluters retroactively responsible for the cleanup of toxins at Superfund sites—industrialized areas
heavily contaminated with hazardous waste—that were discharged before the clean-water regulations
came into play. But G.E. fought the cleanup nevertheless, eventually waging a multi-million-dollar federal
lawsuit that challenged the E.P.A.'s power to enforce the Superfund law, claiming that it violates the
constitutional right to due process.
Even the Bush administration, notorious for its industry-friendly environmental policies, couldn't accept
G.E.'s foot-dragging on the Hudson cleanup. In 2002, Christie Todd Whitman, the former New Jersey
governor who was then the E.P.A. administrator, issued a ruling that effectively gave the company two
options—either negotiate a settlement out of court, or face the threat of fines of up to $2 billion, more than
triple the estimated cost of remediation. Environmentalists hailed it as an unqualified triumph, and Immelt
agreed to begin preparing for the cleanup.
But the story doesn't end there. Two new Bush E.P.A. administrators and years of negotiations later, G.E.
has emerged from the bowels of the Beltway with an E.P.A.-sanctioned agreement that critics say
commits to a fraction of the cleanup Whitman prescribed. Last April, the N.R.D.C. filed a lawsuit to force
the agency to make public the behind-the-scenes negotiations. "G.E. appears to have pulled some
manipulative and possibly illegal maneuvers to wriggle out of its responsibility," says N.R.D.C.'s Levine.
Company spokesperson Gary Sheffer rejects this outright, saying, "We have fully cooperated with the
E.P.A. and are moving forward with the project." But enviros raise still another concern: Welch's case
against the constitutionality of the Superfund rule is still in play. It was lost in 2004, but Immelt
immediately appealed it. "If G.E. wins this case against the E.P.A. it would enable them to challenge—
and possibly evade—not only the remainder of the Hudson cleanup," says Matthiessen, "but remediation
of all their Superfund sites, of which they have about 85."
When pressed on G.E.'s toxic-dumping controversies, Immelt is unflappable. He utters no apologies
whatsoever for G.E.'s environmental record. "When you're a legacy company like G.E.," Immelt says,
"you're always going to have things like the Hudson River [controversy] and the Superfund sites, not
because you do things wrong but because you've been around for 125 years." He also stresses that G.E.
has set aside more than enough funding to cover the Hudson River dredging and is fully committed to the
PCB removal.
Matthiessen, who met recently with G.E.'s environmental lawyers, says he thinks the Hudson controversy
may end on a positive note: "I'm cautiously optimistic that the company has undergone a change of
thinking and intends to complete the cleanup."
Keeping Score
When it comes to green-product development, environmentalists are impressed with G.E.'s emphasis on
accountability. Prior to the launch of Ecomagination, the company commissioned a third-party, the New
York City–based strategy firm GreenOrder, to evaluate the environmental performance of their
innovations with detailed "scorecards." To qualify as part of the program, a G.E. product must have
considerable benefits both for the planet and the bottom line. "It can't just perform better environmentally,
it's got to provide value directly to the customer," explains GreenOrder C.E.O. Andrew Shapiro.
Thirty-two G.E. products currently qualify, including the GEnx jet engine, which powers 300-passenger
jets with 22 percent better fuel economy, saving airlines over $350,000 per plane in fuel costs a year.
G.E.'s hybrid diesel-electric locomotive boasts 15 percent fuel savings and 50 percent lower emissions
than conventional trains. Its Harmony washing machine uses 75 percent less energy than old-school
models, its new solar panels offer a zero-emission electricity source that's integrated into rooftop shingles,
and its super-strength plastic, Lexan, can be used to make car components 40 percent lighter and has
impregnated pigments that obviate the need for toxic paint jobs. Lorraine Bolsinger, who leads G.E.'s
Ecomagination program, says she plans to have a portfolio of at least 60 such qualifying products by the
end of this year.
Wall Street analysts are as impressed with the portfolio as environmentalists. "The Ecomagination
portfolio is, above all, about high-performance products. Every one of them has commercial promise, with
or without the green angle," says Deane Dray, the G.E. specialist at Goldman Sachs.
Scorecards show not just the environmental benefits of each product, but also the financial and
operational benefits for G.E.'s customers. They show, for instance, that the compact fluorescent lightbulbs
G.E. sold in 2004 will save consumers more than $150 million in annual energy bills compared to
traditional lightbulbs, and that G.E.'s wind turbines provide enough energy annually to power 1.5 million
U.S. households while offsetting as much carbon dioxide annually as 2.8 million acres of forest.
"G.E. came to us and said, 'We need to be bulletproof,'" recounts Shapiro. "We don't want to get caught
making public promises to our customers without being accountable. We want to do our homework.'"
GreenOrder has helped create quantitative databases for more than 30 products and trained dozens of
G.E. personnel to carry out the scorecard process themselves. "That's how it gets baked into the DNA of
the company," Shapiro adds, meaning that it changes the way engineers think about product design on
the front end. "No other company has put this much effort into environmental marketing and claims
generations," Shapiro says of G.E., having worked with companies including General Motors and Office
Depot.
Little wonder, then, that Beth Comstock, G.E.'s former chief marketing officer and one of the early
pioneers of Ecomagination, said she welcomes skepticism of their environmental strategy. "I think
greenwashing should be part of everyone's filter. I think people should look at any company's green
campaign and ask, 'Are they serious?' We want to be held accountable. We want to be judged on our
results."
Constituency of One
It was by no means a minor feat to get a majority of G.E.'s senior management to green-light the
Ecomagination program. By Immelt's own account, "about 20 percent were on board, 80 percent were
against" the plan when it debuted in December 2004. He recalls, with amused self-satisfaction, the scene
when Comstock delivered the pitch in the boardroom. "From where I sit, I get a panorama of everybody's
faces," he says. "As she moved through the presentation I saw these pained expressions"—Immelt puts
on an exaggerated grimace—"one after another, people glancing at me with these looks that said, 'I hope
you're not serious.'"
Detractors had two main concerns. First, G.E.'s Environment, Health and Safety officials and its legal
team both worried that the company would take a public beating for making environmental claims. "They
had the Hudson, they had everything else. It was very much a protect-the-reputation response," says
David Slump, the chief marketing executive for G.E.'s energy division who was also an early advocate of
the program. Second, the sales force assumed that the targets would be threatening to G.E.'s many
heavy-industry clients who fear regulations. Slump adds, "They said, 'We don't want to put this in front of
our customers. We don't want to define a standard to which the government can then say [our customers]
must also comply.'"
But Immelt was already convinced of the merits of Ecomagination and was facing precisely the sort of
uphill battles he relishes. "In the beginning, change has a constituency of one," he likes to say.
Over the following months, Immelt and Comstock laid out an irrefutable argument for the program. G.E.
had already amassed the comprehensive portfolio of clean products it needed to credibly claim that they
were ahead of the curve on efficiency. "For decades we've been developing the most efficient large-scale
energy technologies on the market—aircraft engines, locomotives, power plants, you name it. These
things hardly materialize overnight," says Bolsinger. "They take years of uninterrupted R&D."
As for G.E.'s forays into renewable energy, in 2002 Immelt purchased Enron's wind division, the biggest
wind-turbine producer in the United States. In 2004 he purchased Astropower, the nation's biggest solar
producer. The same year he also invested in an advanced coal technology called IGCC—an "integrated
gasification combined-cycle" power plant that first pressurizes coal to produce a vapor, then filters carbon
dioxide and smog-causing pollutants from the gas before burning it. The captured greenhouse gases can
then be sequestered underground where they can't contribute to atmospheric warming.
Immelt's purchases—and G.E.'s long march toward efficiency—were motivated more than anything else
by the international market. While G.E. is an American company, it operates in more than 100 countries
around the globe and reaps about half of its revenues from international customers, many of whom are
signatories of the Kyoto Protocol and have far more stringent environmental policies than the United
States.
"Europe and Japan essentially set the standards vis-à-vis the environment," explains Immelt. "We're not
going to design a gas turbine for three different markets. We're only going to design one gas turbine, so
we have to shoot for the highest standards, the highest common denominator. If Europe embraces Kyoto,
that's what we're going to design products for." And now, as fuel prices are skyrocketing and the prospect
of international greenhouse-gas regulation becomes ever more inevitable, he says, even loosely
regulated customers in America and emerging markets like China and India are beginning to clamor for
efficiency.
China, for its part, is expected to invest roughly $300 billion in infrastructure in the next decade, and much
of that will go toward products and services in which G.E. specializes—energy, aviation, and locomotives.
Heavily endowed with coal resources, China is currently adding one coal plant every two weeks to its
electricity grid. It will likely add hundreds of gigawatts of electricity within a decade, says Immelt, and
more than 1,000 jets to its commercial airplane fleet.
Moreover, China has recently imposed a requirement that 10 percent of the country's electricity come
from renewable sources, along with stronger fuel-efficiency regulations than those of the United States.
"Forget the bogus assumptions that China and India don't care about the environment," says Immelt, who
has been spending several months a year in these countries for over a decade. "They are well aware that
they have some of the most polluted cities and waterways on the planet, and they're very serious about
investing in the technologies that can help them address these concerns."
Bridging the Divide
Late last year, Immelt hosted what he calls a "dreaming session" with dozens of American powercompany executives—many of them among G.E.'s biggest customers—to brainstorm about the ideal
product for their markets. Halfway through the meeting, a vote was taken: Who in the audience thought
that, come 2008, the administration that replaces Bush & Co. would stick the industry with mandatory
caps on greenhouse gases? The vast majority raised their hands.
Jim Rogers, president and C.E.O. of Duke Energy, in North Carolina, one of America's largest utilities,
was among them. "Whether they admit it publicly or not," says Rogers, "almost everyone in my industry
understands that these restrictions are coming. The longer we delay this process, in my opinion, the
bigger the restrictions will be, and the more we will get hurt. Like all things in life, we can best handle the
things that come incrementally."
Rogers is one of the few industry executives who have spoken out on the need for federal policies. "We
need policies that both push and pull technology," he says, referring to incentives and regulations,
respectively. Rogers sees promise in the possibility of a "carbon tax" on industry's climate-warming
emissions. Such a penalty would prompt Duke to replace its dirty generators, which burn millions of tons
of coal each year, with cleaner, next-gen IGCC facilities, natural gas plants, nuclear generators, and wind
farms.
And that spells cash for Immelt, which is why he expects that five years from now more than a quarter of
G.E.'s energy equipment revenue will come from alternative-energy products. In fact, Immelt admits, with
some prodding, that G.E. stands to benefit from CO2 regulations—not to mention the onset of global
warming—for the simple reason that it will push his customers to upgrade their technologies. Again, he's
unapologetic. "The role of business is to solve the world's toughest problems and make money while
we're doing it," he says.
G.E.'s David Slump is even more candid about the importance of regulations. "The only way we'll ever get
a return on our investment in these technologies is if greenhouse gases have a monetary value," he says.
Immelt alluded to this too, during his "Top 10" opener at the Boca meeting. "Reason Number 6," he said.
"In the spirit of 'Green is green,' we'll allow you to exchange your 2,000 stock options for greenhouse-gas
credits." That's a reference to a climate-change policy known as "cap-and-trade"—a market-based
system that allows companies to buy and sell the right to pollute in the form of CO2 credits. It doesn't
exist in the U.S. yet, but it is the centerpiece of the Kyoto Protocol and is already mandatory throughout
Japan and Europe, where the credits are trading at over $20 per pound of CO2. The Bush administration
has rejected it on grounds that it would, in the president's words, "cripple the American economy."
Immelt thinks just the opposite. Risking client relationships, G.E. has enjoined leaders in Washington to
regulate CO2 emissions. The irony, notes the World Resources Institute's Jonathan Lash, is that Immelt
represents precisely the kind of thinking that America should expect from George W. Bush, a president
groomed in the world of business and touted as the "C.E.O. president" when he first came to office. "The
accepted wisdom has always been that George Bush was cut from the cloth of corporate America and
would make decisions to benefit industry," Lash says. "But if he were a truly shrewd economic leader,
he'd be taking Immelt's approach and ushering American industry down a path with long-term promise."
Senator John McCain, co-author of the Climate Stewardship and Innovation Act, which seeks to impose a
cap-and-trade program on greenhouse gases in the U.S., has met repeatedly with Immelt and applauds
him for recognizing that the "nation has both an obligation and self-interest in facing head-on the serious
environmental, economic, and national-security threat posed by global warming. G.E.'s commitment
underscores not only the seriousness of the problem, but that America has so much to gain in terms of
jobs." In a way that a politician could not, adds McCain, Immelt is bridging the divide between hawks and
environmentalists, politics and global capitalism, Republicans and Democrats, the wasteful 20th century
and the sustainable 21st.
From the Shadows into the Sunlight
Six miles off the coast of Ireland in the Irish Sea are G.E. windmills that make up the largest offshore wind
installation in the world. From the shore, they look like a scattering of children's pinwheels. Closer up,
these 400-foot structures have blades the length of a football field. As Mark Little, G.E.'s new director of
global research and development, makes his way toward the magnificent specters in a fishing boat,
tossing among 14-foot swells, he marvels at the state-of-the-art blade design. "For a hundred years, G.E.
has made stuff that spins—from aircraft engines to gas turbines—so we've learned a heck of a lot about
how to shape blades aerodynamically."
He goes on to describe how the metal in the windmill structure has been derived from innovations in
G.E.'s advanced materials division, how the designs of the turbine's gearbox and controls have been
borrowed from technologies in G.E.'s transportation and energy divisions, and how the company's
experience building equipment for offshore oil rigs has helped its engineers more successfully implant
windmill towers in the underground seabed. Little's observations illustrate what Immelt calls the valuable
"technology transfers"—or "synergies"—among G.E.'s many divisions. And they explain why G.E.'s
tremendous size and breadth of knowledge could help, rather than hurt, its ambitions to become a nimble,
innovative enterprise.
"In the 26 years I have been at this company, there has never been a more exciting time to be at G.E.,"
says Little. "The kind of impact our innovations could have on the well-being of the planet is vast and
incredibly motivating—I can't tell you what that does for the morale of our engineers, marketers, financers,
and leadership team." Little goes on to project a best-case scenario in which G.E. technologies improve
the efficiency of global commerce by "a factor of four" within 10 years. It's an unthinkably optimistic
scenario, but welcome nevertheless at a time when projections into the future often involve shrinking
shorelines, mega-drought, killer hurricanes, and festering terrorist cells.
"I think Jeff made a bold move by stepping right out into the forefront, right into the light of day and talking
proudly about the need for change, even if that's an unpopular view among some in our industry. He's
taken us from the shadows into the sunlight," says Little. "These technological moves are big, they're
expensive, and they take being able to make some mistakes and being able to recover from them. This is
not for the faint of heart. It requires staying power. But the good news is that the basic framework for the
solutions to our energy problems already exists."