GE gambling on green

"I find out what the world needs, and then I proceed to invent," said Thomas Edison, father of General Electric. On Monday afternoon in Washington DC, Jeffrey Immelt, GE's chairman and chief executive, will make a historic bet: that "what the world needs" today, as much as it once needed the light bulb, is green technology. Mr Immelt will present a company-wide initiative called Ecomagination.

Under Ecomagination, GE will "proceed to invent" green technology, doubling both green research spending and the number of green products and services it offers. It will commit itself to reducing greenhouse gases within the company and in products. Finally, GE will promise to make the environmental consequences of its work more transparent. In effect, the company is inscribing its name below all the country names on the Kyoto treaty.

GE is, in a way, like a country. So the decision to move in this way makes some sense. Even though, given the same choice (whether to sign the Kyoto treaty) the US, or at least 95 of its 100 senators, ran in the opposite direction.

At GE's Connecticut headquarters, Mr Immelt took time last week to make the case for Green GE. The world is going green and GE wants to be the one to service that transition: "We are in this to make money." Is Ecomagination about pressure from green governments? "I don't make investments based on government stuff." Is it about a personal commitment to green philosophy? No, GE is all business ("I don't have hobbies"). What about the old contradiction between making green technology and efficient technology? No longer a problem. "Technology has made it to the point that it is not such a big compromise any more."

These arguments make more sense than they would have even five years ago, and not merely because Kyoto is now international law. Demand for green product is on the rise across the world. Mr Immelt's tour of the horizon starts with Europe, where he sees giant markets for clean energy technology. In the Middle East, water purification and desalination can only increase. Even smoke-belcher China wants green technology from GE. And the national conversation in gas-guzzler America has shifted since the Gulf War. "With oil at $55 [a barrel], you have to root for me," says Mr Immelt.

There is also a theoretical argument for Green GE. It is known among the wonks as the Environmental Kuznets Curve, after Simon Kuznets, the late economist. The curve shows that poor countries tend to pollute more as they grow - until a certain, magic point. When income per capita surpasses that level, nations pollute less. And consume more green technology. Ecomagination is a way of saying that the globe is now at the magic point. In the end, pollution is waste. So the best technology will eliminate it.

Last come the politics. Nearly half a century ago, GE plants dumped polychlorinated biphenyls into the Hudson River - a practice legal at the time but one that severely damaged the water and fish. Sanctimonious regulators and activists made GE a national scapegoat for a generation. While acknowledging responsibility, GE argued hard that regulators' chosen clean-up approach - dredging - would make the river more dangerous, not less. Many scientists agreed. Nonetheless, political environmentalism won out over scientific environmentalism. GE now finds itself funding dredging.

By taking the lead with programmes such as Ecomagination, Mr Immelt may ensure other companies get the scapegoat role next time. Even if he says he does not care about "government stuff". ExxonMobil, GE's big rival for the title of world's largest company, comes to mind. Just 24 hours after the Ecomagination announcement in Washington, Ceres, an environmentalist shareholders' group, will target companies at an eco-summit at the United Nations.

But what matters most here is whether a "be green" order from the executive suite will be good for GE. And that is not entirely clear. GE is a conglomerate with numerous unrelated businesses. One reason that Jack Welch, Mr Immelt's predecessor, made a cartoon of himself as a bottom-line maniac was that the bottom-line focus justified a company that was part-bank, part-wind farm. Ecomagination may be only one of Mr Immelt's plans, but the fanfare suggests that eco-divisions may fit better into GE's future than other businesses. That in turn would undermine the logic of the group.

Worse, Ecomagination may hurt innovation. Thomas Edison's inventions were also amazingly diversified (mimeograph, megaphone). But most started in a small lab in Menlo Park. Ecomagination innovation will travel, by contrast, from the top down, with management ordering technology to serve the current demands of certain governments and certain regulators.

GE would counter that even after Ecomagination, two-thirds of its research will be outside that programme. Still, a signal made from a dais in Washington is one no sentient employee can ignore. GE has done a good job finding out what the world thinks it needs. But there may be other things the world does not yet know about. Things it needs more, things that would keep the globe even cleaner, things waiting to be discovered by GE's current Edisons. Under programmes like Ecomagination, will they still want to find them?

© Copyright 2005 Financial Times

Available for order:

To book Amity Shlaes for a speaking engagement, contact Jamie Brickhouse at the Red Brick Agency, 646.281.9041.
Recent Articles
Free Markets Can Appeal to the Working Class
National Review
December 3, 2020
Biden's Dangerous Central-Planning Ambitions
National Review
November 24, 2020
Episode 41: Coolidge Not Silent Any More
National Review
October 28, 2020