It's easy being green: big profits for GE

Australian, Page: 24
Friday, 25 May 2007

General Electric has doubled sales from environmentally friendly products to $US12 billion ($14.58 billion) over the past two years, in the strongest sign yet that corporate America ’s drive to respond to climate change is beginning to pay off Jeffrey Immelt, GE ’s chief executive, is expected to announce that the company has $US5O billion of projects in the pipeline and is on track to meet its target of $US2O billion in "green" sales by 2010.

According to GE, sales of environmentally friendly products such as wind turbines, water purification systems and energy efficient appliances rose from $US6 billion in 2004 to $US1O billion in 2005 and $US12 billion last year. Over the same period, overall sales at GE grew just more than 20 per cent to $US163 billion.

News of the sharp rise in revenues from "ecoimagination" the marketing campaign launched in 2005 to highlight GE ’s focus on green issues comes as US companies are scrambling to take advantage of opportunities presented by climate change. In recent weeks, News Corp, IBM and Citigroup announced plans to invest billions of dollars on environmental projects to gain a leading position in areas such as alternative energy, carbon emission trading and energy efficiency.

Executives at GE say its "ecoimagination" sales show that, far from being a drag on earnings, such strategies can benefit the bottom line. "I think the idea has traction now. As a business, you have got to be willing to have your own strategy (on the climate change)," Mr Immelt told the FT this week. The focus on driving revenues from greener products is a priority in Mr Immelt ’s plan to reduce GE ’s exposure to low-growth industries and reshape its portfolio towards more profitable sectors. GE will also reveal that last year it invested $US900 million of its $US3.7 billion annual research and development budget on green projects.

Mr Immelt has pledged to raise R&D spending on eco-projects to $US1.5 billion by the end of the decade. It also reduced greenhouse gas emissions by 4 per cent in 2006, ahead of its target of lowering them by 1 per cent before 2012. The company was expected overnight to showcase forthcoming products including a prototype for the world ’s first diesel-electric hybrid locomotive. The locomotive saves fuel by storing up energy when it brakes.

The choice of product is significant because GE, which dominates the US market for locomotives, has been attacked by environmental groups for opposing plans by the Environmental Protection Agency to slash smog emissions from locomotives. GE has defended its position but the criticisms highlight the reputational risk it faces as it strives to ditch its traditional image of an old-style industrial conglomerate.