But he had one reputational blemish. His concern for the environment, and for the social impact of his company’s operations, seemed somewhat lacking.
Most famously, the company fought hard – with Welch leading the charge – against any acknowledgement that the company had been responsible for polluting the Hudson river with PCBs. Whilst being the tenth anniversary of Ecomagination, it is also only now that GE’s ultimate agreement to dredge the Hudson river for PCBs is now coming to an end.
The problem was that Welch was – by all the standards of his peer group – the most fantastically successful CEO. He was revered by many, and remains so. His company made more money than it ever had, and was studied for the lessons it could teach others.
Those who felt that the companies that were careless of their impact on the environment should by all rights be demonstrably less successful than their socially responsible counterparts were constantly frustrated by this shining beacon to the contrary.
Then Jeffrey Immelt took over, and things began to go wrong. Within days of his appointment, the September 11th terrorist attacks hit GE’s aviation, power generation and reinsurance businesses hard. Later, with GE Capital providing half of the company’s profits, the financial crisis also took a major toll.
As Immelt announced Ecomagination, GE’s stock price was in the process of falling way below the level that Welch had taken it. It was a difficult time to be creating a new direction. It could easily have been that Immelt would have been abandoned midstream and his initiatives confined to the corporate scrapheap.
The truth was that Welch had carried on the balancing act for as long as could have realistically been achieved. He got out just in time, his reputation intact but his legacy a difficult one of consequences.
Immelt’s strategy – to reduce dependance on financial services and to make environmental sustainability a key part of GE’s portfolio for growth – was obviously needed only in retrospect and was never going to deliver results overnight. But the world had changed. GE had to change with it.
Immelt focused on investment in key growth areas for the company – and one of these was clean technology. The brand ‘Ecomagination’ was created as an umbrella and focus for this work, and concrete targets were set when it was launched in 2005.
The company said it would more than double its research investment in cleaner tech from $700m in 2004 to $1.5bn in 2010. It said it would introduce more clean-tech products annually, doubling its revenues from such products from $10bn at the time of launch to at least $20bn by 2010. It also pledged that, alongside this process, the company would reduce its own greenhouse gas emissions even as its activities grew.
In the event, it exceeded these initial targets and then continued to build on them. The company had made $15bn investment in cleaner tech by 2014, and had generated more than $200bn in revenue from Ecomagination products. It had also reduced its greenhouse gas emissions by 32 percent.
Since the early falls, GE’s stock price has gradually been engaged on an upward trajectory – although it still hasn’t regained the dizzy heights of the end of the Welch era.
What sort of innovations have come out of Ecomagination? Some of the highlights include:
- The GEnx aviation engine – the quietest, most energy-efficient engine of its type.
- Movement Planner software that enables trains to move freight faster and more efficiently on existing rail lines.
- The ZeeWeed ultrafiltration system for water treatment.
None of these have the public profile of consumer gadgetry, but they are all part of the process of reducing the environmental impact of everyday engineering.
It hasn’t been a journey without its controversies. Some of the Ecomagination technologies – such as those to do with clean coal or with fracking – are not considered by some to be that green.
And the fact that Immelt has spent $14 billion on companies aiding oil and gas drillers – with oil and gas accounting for a quarter of the company’s industrial revenue in 2014 – has even mainstream commentators questioning whether Immelt’s strategy is now outdated in the way that Welch’s was before him.
Whilst Ecomagination has proven, over its ten years, to be a highly successful branding and consolidation exercise, raising the profile of GE as a generator of solutions for the sustainable age, it has arguably been an incremental change on the old model, rather than a revolution.
Perhaps we have been spoilt by certain consumer-facing companies, such as Unilever, more radically setting the bar to change their business model. But at the same time, it is impossible to underestimate just how much Immelt’s actions at GE changed the mood music for what was expected of the major corporation in the 21st century.
Certainly today, the idea has gained considerable currency that – not only can a successful business achieve that success whilst being at ease with the planet, but perhaps that is much more than ever a precondition for such success.
Upcoming relevant, PowerPoint free, discussion-based business meetings from Innovation Forum:
(if you read all the above, these are where you can meet fellow executives from companies working on all these issues)