As noted on Map 11.

1, a recent TV ad invites viewers to “accompany” a small green frog as it

does a little globe hop- ping from one exotic location to another.1 The frog, however, doesn’t
seem intent on hitting the usual tourist spots, instead preferring stopovers at such places as a
solar farm in South Korea, a water-purification plant in Kuwait, and a wind farm in Germany. To
begin the second leg of his tour, he hops on a GE90 Aircraft engine flying over China and takes
viewers to a “clean” coal-powered facility somewhere in Florida. Then he boards a GE Evolution
locomotive in the Canadian Rockies as a voiceover explains the point of all this seemingly ordi-
nary sightseeing: “At GE, we’re combining imagination with advanced technology around the
world to make it a better place to live for everyone.” The journey’s end finds our frog in the
midst of a lush—and very green—tropical rain forest.

1. “Green Is Green”

The ad is part of a major promotional campaign by General Electric Company (GE) for its
Ecomagination Initiative. Announced in 2005 by CEO Jeffrey Immelt, Ecomagination is an
ambitious strategy designed to demonstrate that an ecologically conscious conglomerate can
cultivate the bottom line while doing its duty toward the global environment— hence, the
campaign motto “Green Is Green.” The clever promotional campaign has highlighted several
interesting Ecomagination initiatives, such as the 2011 Super Bowl ad on Biogas Technology
featuring cows at a rock concert (the accompanying endnote provides links to the YouTube ads).

The world’s second largest corporation (in terms of market capitalization), GE is based in
Fairfield, Connecticut and operates in more than 100 countries through six core businesses:
commercial finance, consumer finance, industrial manufacturing, infrastructure, healthcare, and
communi- cations. It sells, among other things, appliances, aircraft engines, consumer
electronics, energy-related products such as solar panels and wind generators, locomotive
engines, and nuclear products and services through a venture with GE Hitachi. The company’s
media division also includes 49 per- cent ownership of NBC Universal, following the completion
of its sale of the majority ownership to Comcast Corporation in the first quarter of 2011.

When the company announced its plan to launch an internal green revolution, GE surprised both
investors and industrial customers who had long seen the firm as an ally in the struggle against
environmental activists and lobbyists. But as more and more evidence piles up to support the
claim that carbon dioxide emitted from human-made sources is heating up average global
temperatures, GE has decided to take a more conciliatory stance, allying itself with a growing
number of companies that regard investor and environmental interests as intrinsically
interlocked, rather than diametrically opposed.

2. Commitments and Goals

GE’s new initiative represents five basic commitments on its part: (1) to reduce greenhouse
emissions and improve the energy efficiency of operations; (2) to double investment in the
research and development of “clean” technologies; (3) to increase revenues from those same
technologies; (4) to reduce its global water use by 20 percent; and (5) to keep the public
informed. It now evaluates business unit managers not only on profitability and return on capital
but also on success in reducing carbon dioxide emissions, the chief greenhouse gas (GHG)
attributed to global warming. Energy-intensive divisions, such as those catering to the power and
industrial sectors, are responsible for the largest cuts, but even the financial services and
communications units are required to reduce whatever emissions they produce.

The company’s overall target was a 1 percent reduction from 2004 levels by 2012. At first
glance, the goal doesn’t seem to have been overly ambitious, but that number rep- resents a
significant improvement if you account for the fact that, given GE’s projected growth, levels
would otherwise soar to 40 percent above 2004 levels. Immelt also committed the company to
reducing the intensity of GHG emissions— its level of emissions in relation to the company’s
economic activity—30 percent by 2008 and to improving energy effi- ciency 30 percent by 2012.
To ensure that these goals were met, Immelt assembled a cross-business, cross-functional team to
oversee planning and monitor progress. By 2011, the company had reduced GHG emissions by
29 percent, had improved energy intensity by 32 percent from 2004 levels.

3. A Little Consensus Seeking

In addition to instituting the internal changes necessary to curb GHG emissions, Immelt has
taken a close look at GE’s global political environment. He has enlisted the Belgian and Japanese
governments in the global ecological discussion and has allied GE with other green-minded
corporations to lobby American lawmakers on such matters as mandatory GHG reductions.
Working with the Environmental and Natural Resources Defense Council and the Pew Center on
Global Climate Change, GE has also joined the likes of BP, DuPont, and Duke Energy to form
the U.S. Climate Action Partnership, which seeks to help shape the international political debate
over global warming.

Bear in mind that neither GE nor its corporate allies claim to be acting strictly from civic-minded
motives. As to be expected, they’re pursuing their own best interests, particularly the idea that
ecologically proactive firms are fashioning a strategic advantage over companies that are still
dragging their feet. With other countries already enforcing limits stipulated by the Kyoto
Protocol, and with other jurisdictions (such as the state of California) beginning to set their own
limits, global corporations have much more to consider when it comes to developing forward-
looking strategies and making long-term investments in an increasingly fragmented regulatory
environment. With half of its markets located outside the United States, GE is already under the
jurisdiction of foreign governments that are more active than the U.S. in addressing
environmental issues.

4. Technological Tactics And Eco-Friendly Products

Under Immelt’s direction, GE has also been gearing up to double R&D investment in clean
technologies, including renewable-energy, water-purification processes, and fuel-efficient
products, from $700 mil- lion in 2005 to $1.5 billion in 2010, and $2.3 billion in 2011. In turn,
GE expects significant revenue growth. Its Ecomagination products earned $6 billion in 2004,
$12 billion in 2006, $18 billion in 2009, and $21 billion in 2011.

Back in 2005, when the Ecomagination initiative was first launched, GE marketed only 17 prod-
ucts that met its own Ecomagination criteria; by 2009, there were 90 such products, including the
Jenbacher Biogas Engine, which converts biological waste into electricity and heat, as well as all
of GE’s EnergyStar-approved consumer products. By 2011, there were 140 products and
solutions generating $105 billion in revenues. GE wind was generating $30 billion in revenues,
and there were over 20,000 wind turbines in operation.

GE’s main corporate website discusses how its other standard products—clothes washers,
refrigerators, and light bulbs—are also energy efficient. And the company intends to establish
itself as an “energy- services” consultant and to bid on contracts for maintaining water-
purification plants and wind farms, a venture that could be five times as lucrative as simply
manufacturing the products needed for such projects. The use of its website to communicate
information about its green products and the efforts to improve its own GHG emissions reduction
is an example of commitment #5, listed above: to keep the public informed.

5. “Solving Environmental Problems Is Good Business”

GE insists that the markets for such products and services are both growing and profitable, and
Immelt is convinced that taking advantage of them not only helps the environment but also
strengthens the compa- ny’s strategic position with major profit opportunities. As one GE
executive puts it, “Solving environmental problems is good business ... and constitutes a
significant growth strategy for the company.”

GE also regards its Ecomagination strategy as a necessary response to customer demand. Before
embarking on this initiative, GE spent 18 months working with industrial customers, inviting
managers to two-day “dreaming sessions” to imagine life in 2015 and to discuss the kinds of
products they’d need in such an environment. The result? Management came out of the talks
with the indelible impression that both GE’s customers and the social and political environments
in which it conducted business would be demanding more environmentally “clean” products.

“This is not just GE jamming environment down their throats,” insisted former GE vice
chairman David Calhoun. “We decided that if this is what our customers want, let’s stop putting
our heads in the sand, dodging environmental interests, and go from defense to offense.” In fact,
many of GE’s Asian and European competitors had already begun investing in cleaner
technologies, and GE knew it couldn’t risk falling behind. Currently, the company is focusing on
burgeoning markets in such developing countries as China and India, where rapid economic
growth has spurred the need for expanded infrastructures, such as water and sewage systems, and
for means of curbing appallingly high levels of pollution. China alone, which is home to no
fewer than 16 of the world’s 20 most polluted cities, has earmarked at least $85 bil- lion for
environmental spending.

6. Mixed Reactions

Not surprisingly, GE has been praised for its efforts to go green. It reached the eleventh spot on
Fortune magazine’s list of the “Most Admired Companies” for 2013, and it earned a place on the
Dow Jones Sustainability Index, which identifies the 300 firms that perform best according to
combined environmen- tal, social, and financial criteria.
At the same time, however, the company has generated a certain amount of skepticism. What
happens, for example, if the markets it’s betting on don’t materialize fast enough (or at all)? Back
in the 1980s and 1990s, for instance, a number of firms—including DuPont and the French water
company Suez—predicted double-digit growth in clean-technology markets and invested heavily
in the area, only to be forced to scale back considerably when demand didn’t take off as
expected.

Another potential risk revolves around the participation of developing nations in the clean-
technology push. In particular, will they be willing to pay prices that developed countries pay for
the technology that reaches the market? Even GE’s Calhoun admitted that, at least in the key
Chinese market, margins were already tight. And GE still faces the challenge of implementing
the internal changes entailed by its fledgling green strategy. Traditionally, the firm’s culture has
been accustomed to strategies of incremental change in time-tested products and services. In fact,
its highly touted Six Sigma program, championed by ex-CEO Jack Welch, inherently
discourages radical deviation and unnecessary risk taking. Management may have its work cut
out when it comes to persuading marketing, sales, and production teams that untested, early-
stage Ecomagination products are worth the risk.

Then, of course, there are clients and shareholders. Many of GE’s customers work out of the
utility sector, which has assumed a leadership role in disregarding warnings of climatic change
and opposing ecofriendly regulation. In 2007, GE was presented with a shareowner resolution
calling for top manage- ment to document the projected costs, benefits, and profits of the
Ecomagination initiative. Some investors seemed particularly concerned about the company’s
newfound activism and the potential of newly insti- tuted greening initiatives to alienate
industrial customers. Given the enormous growth in revenue from the Ecomagination product
line, generating more than $105 billion in revenue since 2005, it seems that GE’s management
made both a wise and profitable decision.

■ Questions

11-1. What are the major challenges GE faces in adopting a green strategy while keeping all of
its stakeholders happy?
11-2. From the standpoint of environmental impact, do you think it’s more important for GE to
reduce its carbon footprint or to develop products that fit their Ecomagination strategy of being
energy efficient?