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When Jeffrey Immelt took over General Electric Co. from the legendary Jack Welch, he had little time to think about the challenges of a new job, let alone the company's strategic direction, before his world was violently reordered. Mr. Immelt - a career GE executive - moved into the corner office on Sept. 7, 2001.

Since then, he's steered one of the world's biggest and most complex conglomerates through the economic wreckage of 9/11, a massive investment shift to Asia and a new era of high-cost oil. But quietly - at least, as quietly as can be expected from someone in Jack Welch's shoes - he's changed something more fundamental about GE by embracing environmentalism as a core growth strategy.

The Immelt bet: That the 21st-century global marketplace has been fundamentally and permanently altered from the one that existed four days before 9/11.

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The GE chairman launched the company's environmental strategy two years ago, dubbing it ecomagination after GE's slogan, "imagination at work." It's based on the conviction that oil prices will remain at historically high levels and that global governments will, sooner or later, move to constrain the emissions of greenhouse gases.

The ecomagination project is a major part of Mr. Immelt's effort to remodel the $163-billion (U.S.) company founded by Thomas Edison. He wants to take advantage of the 21st-century mega-trends of globalization, booming infrastructure needs in emerging economies, scarce commodities and growing environmental alarm.

But the stakes are even more critical than that.

Given the company's vast size and scope, from selling power turbines in India to running NBC in New York, Mr. Immelt's ecoplan is in fact a global test case for the concept that "green is green" - that environmental sustainability can mean economic opportunity, not just financial burden.

In a recent interview with the Harvard Business Review, Mr. Immelt said he initially encountered some resistance to the strategy from his executives, who were chafed at the corporate environmentalism. But he insisted the change in mindset was critical.

"Ecomagination was one way to show the organization that it's OK to stick your neck out and even to make customers a little bit uncomfortable."

If he succeeds, he may help redefine the corporate world's attitude towards capital investment by emphasizing lower operating costs through mitigated environmental risks, rather than the upfront price, said Truman Semans, director of the business environmental leadership council at the Washington-based Pew Center on Global Climate Change.

"A lot of companies in many different settings are watching GE to see how it fares with ecomagination and what lessons you can draw from out of it."

GE's ecostrategy is built on Mr. Immelt's conviction that GE's corporate customers and individual consumers will invest in efficiency and alternative energy in response to high oil and gas prices. And it rests on his belief that global political leaders - such as those attending the G8 summit in Germany this week - will impose tougher new environmental standards, including limits on greenhouse gas emissions. It's also a measure of the pressure on him to pump up GE's stock price, something his predecessor seemed to do with ease in his glory days. Since 2001, GE's share price has stagnated, leading some on Wall Street to even recommend he break up the Welch empire that spans 160 countries and dozens of billion-dollar divisions housed under six main business groups.

Mr. Immelt has countered with a plan to boost internal growth by at least 8 per cent a year, and believes that the clean-tech products have some of the best growth potential within the company's extensive portfolio of products and services.

A market niche The early returns are encouraging.

In a Hollywood news conference two weeks ago that included California Governor Arnold Schwarzenegger, Mr. Immelt issued his second annual report card on ecomagination.

Revenues from its ecoproducts and services reached $12-billion (U.S.), up 20 per cent in 2006. The order backlog has ballooned to $50-billion, promising years of future growth. The company believes ecomagination will yield $20-billion by 2010 - doubling in only five years.

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At the Hollywood press conference, Mr. Immelt said ecomagination had "evolved into a sales initiative unlike any other I have ever seen in 25 years at GE."

Even more enthusiastic words come from Lorraine Bolsinger, the GE vice-president charged with implementing this vision.

"This is a mega-trend. It is something we can own," she said, describing her chairman's conviction. "We can either be a victim of it - and say, 'Wow, we're going to have to react,' or we can say, 'Let's make this something that we're good at, let's use this changed scenario to our advantage and get in front of it.' "

The strategy emerged from GE's annual planning session three years ago, when the chairman/CEO and his top general were mapping out their responses to the post-9/11, globalizing marketplace. In session after session with the heads of the various business divisions, he heard the same message that his executives were relaying from their biggest customers.

Corporate executives were increasingly convinced that higher energy prices had become a permanent feature of the landscape, and not a temporary spike resulting from 9/11 and the invasion of Iraq. And after years of denial and resistance, businesses believed that they would be facing increasingly stringent environmental regulations, and would have to make major investments in new plants and equipment to comply.

Mr. Immelt's response, according to Ms. Bolsinger, was that GE was positioned nicely to profit in the new world order, but needed to make some adjustments. He prepared to sell GE Plastics - a division that Mr. Welch had built into a powerhouse but had stalled under the weight of high energy prices. GE announced the sale of its plastics division last month to Saudi-based Basic Industries Companies for $11-billion.

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In addition to the defensive move, Mr. Immelt launched an offensive with plans to focus the company's capital, research and sales effort in products and services that would help customers confront the challenges which he had identified in the planning sessions.

Mr. Immelt launched ecomagination a year later. To be certified under ecomagination, a product must offer customers not only environmental benefit but lower operating costs, with the average payback for the capital investment of two years.

The strategy included not just a focused sales effort, but a pledge that GE would reduce its own energy usage, and would reduce its own actual greenhouse gas emissions by 1 per cent over seven years, even as it expected to grow by at least 30 per cent.

At the Hollywood release of the report card last month, Mr. Immelt confirmed that GE is on track to more than double its research and development in ecomagination products to $1.5-billion by 2010 from $700-million in 2005.

But the product rollouts aren't always smooth. Translating the ecomagination strategy from the business-to-business environment to the consumer market has proven to be challenging.

Interviewed at GE Aviation's sprawling headquarters in Cincinnati, where she spent 15 years as head of marketing , Ms. Bolsinger concedes she has become somewhat impatient over delays in the launch of a "carbon neutral" credit card by the consumer finance division.

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She had hoped to roll out the green credit card last year, to allow customers of GE Money to use their credit accounts to finance projects that reduce greenhouse gas emissions. But the program's design has proved to be more daunting than expected. The company wants to ensure it is simple enough to be easily understood, but complex enough that customers can keep track of their "carbon footprint." And most importantly, it must be bulletproof against charges that it is simply a marketing gimmick.

GE has built a major marketing and advertising campaign around its corporate environmentalism. The last thing the company needs is a botched "green" credit card program that smacks of trendy opportunism.

"We just have to make sure we spend a little extra time and get this right," Ms. Bolsinger said. "We can't afford to ruin the reputation over it."

One piece of the GE puzzle Certainly, the company is not limiting itself to the ecotrend, though it is eager to profit from it. GE has targeted the booming economies of China and India - and their insatiable demand for new infrastructure - as crucial to the company's future growth prospects. And both countries have signalled they won't let global concerns about climate change interfere with their growth strategies.

In the oil and gas business, GE is marketing energy-efficient turbines and filtration technology that reduce the use of water and energy. But it hasn't abandoned the traditional "dirty" business.

Last week, GE's oil and gas division, based in Florence, Italy, announced it would supply $80-million in key parts for the construction of a heavy oil upgrader near Edmonton, to be built by North West Upgrader Inc.

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In fact, GE has targeted the oil sands as a major business opportunity, both for ecomagination and more traditional business. Last fall, Ms. Bolsinger participated in the "GE Day" in Alberta, visiting Calgary and Fort McMurray oil sands developments with a large team of company executives.

Elyse Allan, president of General Electric Canada Inc., was part of that mission. She and other GE executives meet regularly with oil companies and Alberta-based researchers who are working on methods of reducing the oil sands' destructive impact on both the local environment and the atmosphere.

As well, GE is researching carbon capture and storage, a process that offers some hope that companies can reduce their greenhouse gas emissions, even as they triple and quadruple production from the oil sands. In sequestration projects, carbon dioxide is captured from industrial processes like upgrading and coal-fired power plants, compressed, and then injected underground for permanent storage.

While GE can offer improved operating costs to induce companies to invest in expensive new water technologies, Ms. Allan acknowledges that the oil companies will have to face significant constraints on the CO{-2} emissions before carbon-capture-and-storage technologies offer much payback.

And in the competition for investment dollars, companies won't spend where they don't have to, or where they don't see a competitive rate of return.

"To the extent that we create a market for carbon that puts a value on it, that would put some of these projects on a more equal footing with some others," Ms. Allan said.

Given the scope of ecomagination - a $12-billion project in a $163-billion company - you have to question whether it is more about marketing than a core growth strategy.

Analysts who follow the company tend to ignore it, except as individual products contribute to the broader GE's growth plan. They see the GE story as more of an infrastructure play, or a China play.

Bob Spremulli, an analyst with TIAA-CREF, a public sector pension manager, said he regards ecomagination as essentially a hugely successful advertising campaign built around a fairly modest segment of the company's overall business.

Ms. Bolsinger rejects any suggestion that ecomagination strategy is primarily a marketing campaign - though she is less defensive about that aspect of strategy than she once was.

"Isn't marketing a declaration of purpose? Isn't it a declaration of what you make and your value-add," she said. "Yes, [ecomagination]is marketing because marketing is the culmination of who you say you are to the world, and who you say you are to investors and shareholders, and even to your own employees."

Even on a modest scale, the strategy is not without its risks. Corporate history is littered with the corpses of companies that bought into the consensus view of the 1970s and early 1980s that oil prices would climb to $80, or accepted the assurances from technology executives in the 1990s that tech bubble would never burst.

If Mr. Immelt is wrong about oil prices and carbon constraints, some future CEO could be taking billion-dollar writeoffs in the company's wind power portfolio, or its nuclear division, or its clean-coal investments.

Even if he's right, he may never achieve the kind of business-press adulation that was lavished on Mr. Welch, whose rags-to-riches life enhanced the storyline. But if Mr. Immelt does realize his goal of translating energy efficiency and environmental sustainability into core business values, his contribution will be infinitely more far-reaching.

Business strategy lessons from ecomagination

You can get out in front of politicians but not too far ahead of your customers.

GE is proceeding on the assumption that governments will eventually impose carbon restrictions and is lobbying for that to happen. But the ecomagination thrust would not be successful if customers weren't demanding green products.

Demonstrate your commitment - and your technology - by making best use yourself of the products and services you sell.

GE has adopted in-house targets to reduce its energy consumption and its emissions. It is relamping its plants worldwide, installing solar panels on its buildings and reducing energy use at its engine-testing facilities.

Build alliances to reduce risk and create momentum.

GE is partnering with other corporations on environmental technology. It merged its nuclear reactor business with Hitachi Ltd. of Japan, and is co-operating with BP PLC on a number of projects. On the political front, GE has spearheaded lobbying for greenhouse gas emission regulations.




GE is developing an Integrated Gasification Combined Cycle system that converts coal into a cleaner-burning gas to drive power plants. The IGCC system emits less than half of the sulphur oxides, nitrous oxides and other pollutants of a traditional coal plant, but is up to 20 per cent more expensive to run. It also makes it easier to capture the carbon dioxide that is produced. The company is marketing a compressor that is used to reinject the carbon dioxide back into the earth and prevent its release into the atmosphere.


NBC Universal, a unit of General Electric Co., is marketing environmental awareness with its movie, Evan Almighty, a global-warming inspired comic retelling of the Biblical story of Noah. The company offset the greenhouse gas emissions produced in the making of the film by financing projects that reduce GHGs. NBC Universal has made a further commitment to cut its greenhouse gas emissions by 3 per cent by 2012, and to finance "environmentally conscious film and TV production."


GE Energy Financial Services announced it would invest $180-million (U.S.) in the Texas Sweetwater wind farm, part of its growing wind energy portfolio. The company also manufactures 1.5-megawatt wind turbines and has more than 6,000 operating around the world. It is now developing a 2.5-megawatt turbine that is more efficient than the smaller one, and requires less land to produce the same amount of electricity.



GE Money is designing a "carbon neutral" credit card. Consumers will receive a rebate of 1 per cent on every purchase, but half of that will go to buy "carbon offsets" - projects that reduce greenhouse gas emissions. The card will also allow consumers to track their "carbon footprint" - compared to the 20 tonnes of GHG emissions the average North American accounts for each year. Credit card holders will be able to "zero out" their carbon account by purchasing GE-certified offsets. (GE is also in the business of designing and marketing those offsets.)


GE Water provides a series of technologies that improve water use in industrial processes, including a reverse osmosis membrane technology that provides ultraclean water. At a Unilever Inc. margarine plant in Toronto, the GE application has resulted in more than $400,000 (Canadian) in savings as a result of lower use of chemicals, natural gas and water. In Fort McMurray, Alta., GE is working with oil companies to reduce the water use in both mining and in-situ oil sands production. The oil sands plants have drawn considerable criticism for their voracious use of water.


GE Rail is marketing the Evolution series locomotive, a 12-cylinder diesel engine that produces the same power as its 16-cylinder predecessor. The company has also designed a hybrid locomotive that will capture and store energy displaced during breaking, and then use that energy to power the locomotive. GE Aviation's GEnx engine for Boeing's 767 aircraft offers dramatic gains in fuel efficiency and significantly lower emissions than other engines in its class. The engines will be featured on aircraft under order from Canadian carriers, including Air Canada.




(million metric tonnes of CO2)

2004 - 11.26

2005 - 11.25

2006 - 10.83*


(metric tonnes per $-million revenue)

2004 - 83.39

2005 - 76.05

2006 - 66.31*


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