Ecomagination and the Global Greening of GE As noted on Map 5.1 , a…

CorporalSandpiperMaster737 Ecomagination and the Global Greening of GE As noted on Map 5.1 , a…Ecomagination and the Global Greening of GE As noted on Map 5.1 , a recent TV ad invites viewers to “accompany” a small green frog as it does a little globe hopping from one exotic location to another. 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 ordinary 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, green tropical rain forest. 1 Map 5.1 Global Travels of GE’s “Green Frog,” Its Symbol of Commitment to the Environment “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 world’s eighth-largest corporation (in terms of market capitalization), U.S.-based GE sells products in more than 175 countries through its industry business and GE capital. Industry is further divided into oil and gas, energy management, health care, transportation, and appliances and lighting. It sells, among other things, appliances, aircraft engines, consumer electronics, energy-related products such as solar panels and wind generators, and locomotive engines. It also operates research centers in the United States, Brazil, India, China, Germany, and Israel. In early 2016, GE announced that it was selling its appliance business to Chinese company, Haier. 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. 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. 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 represents 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 efficiency 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 2014, the company had reduced GHG emissions by 31 percent from its 2004 baseline, more than the 25 percent it had forecast. It also had improved energy intensity by 32 percent from 2004 levels. A Little Consensus Seeking In addition to instituting the internal changes necessary to curb GHG emissions, Immelt considered GE’s global political environment. He enlisted the Belgian and Japanese governments in the global ecological discussion and 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 also joined other companies to form the U.S. Climate Action Partnership to help shape the international political debate over global warming. GE and its allies want to be known for developing forwardlooking 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 United States in addressing environmental issues. Technological Tactics and EcoFriendly 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 fuelefficient products from which it expects significant revenue growth. GE had already spent $10 billion on R&D investment between 2010 and 2014. In 2006, GE announced that it would reduce water usage by 25 percent from its 2006 baseline, and it achieved a 42 percent reduction by 2014. When the Ecomagination initiative was first launched, GE marketed only 17 products that met its own Ecomagination criteria; by 2009, there were 90 such products, and by 2011, there were 140 products and solutions generating $105 billion in revenues. By 2014, revenues over the 2010-2014 period had increased to $200 billion. GE wind was generating $30 billion in revenues, and there were over 30,000 wind turbines in operation. In 2016, GE purchased the energy business of French-based Alstom, giving GE access to Alstom’s giant offshore wind turbine technology. In addition to making other products, such as appliances and light bulbs, energy efficient, GE 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. In addition, it communicates information through social media such as Twitter and Facebook. “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 company’s strategic position with major profit opportunities. 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. Many of GE’s Asian and European competitors had already begun investing in cleaner technologies, and GE knew it couldn’t risk falling behind. GE is also focusing on emerging markets such 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. Mixed Reactions Not surprisingly, GE has been praised for its efforts to go green. It reached the ninth spot on Fortune magazine’s list of the “Most Admired Companies” for 2015, and it earned a place on the Dow Jones Sustainability Index, which identifies the 300 firms that perform best according to combined environmental, 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)? 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? GE also 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 timetested 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. Some investors seemed particularly concerned about the company’s newfound Introduction In this chapter, we’ll examine how globalization affects society and managers’ judgments as they interact with different laws and cultures and try to be socially responsible. Doing business abroad is not easy. The greater the “distance” from one’s home country, the more complicated it is to do business. Distance can be described in many different ways, but one way to identify it is the acronym CAGE: cultural (also known as psychic distance), administrative (such as political and institutional policies), geographic, and economic. Given the criticisms of globalization and the challenge of companies and individuals doing business in areas of the world that are quite distant, as defined above, how can companies and individuals be successful, or at least not create serious mistakes? activism and the potential of newly instituted greening initiatives to alienate industrial customers.      1. What are the major challenges GE faces in adopting a green strategy while keeping all of its stakeholders happy? 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?BusinessBusiness – Other