GE's ecomagination achieves emissions goal, but can it achieve revenue goals?

A day after General Electric Co. (GE) CEO Immelt said growth will be "harder to come by," ecomagination released its 2008 annual report (pdf), outlining achievements and goals. Before I get to Immelt's comments, some of which seem to be at odds with each other, the ecomagination report deserves a more thorough review.

GE's ecomagination unit began operation in 2005, and made several environmental commitments. Today, it gave an update on their progress:

1. Reduce GE's greenhouse gas (GHG) emissions and improve the energy efficiency of GE's operations -- GE met its first ecomagination goal by reducing GHG intensity 41 percent compared to 2004. It also reduced its absolute GHG emissions from operations by 13 percent and its energy intensity by 37 percent, generally surpassing its own goals actually set for 2012. This helped GE reducing its costs by over $100 million (the time frame of these cost cuts weren't clear).

2. Reduce water use and improve water reuse -- GE's water use was flat in 2008 and it plans to reduce absolute water consumption by 20 percent by 2012.

3. Double investment in clean research and development -- GE's ecomagination R&D target for 2010 is $1.5 billion. Already in 2008 it invested $1.4 billion, nearly double the 2005 level. With recent initiatives such as plans to build a manufacturing plant for storage batteries that would power hybrid locomotives among others, it seems GE is on track to keep its R&D target for 2010.

4. Increase revenues from ecomagination products -- GE aims to make $25 billion in annual sales by 2010 from ecomagination products and services. In 2008, it reported $17 billion in revenues from ecomagination, an increase of 21 percent over the prior year. GE says that despite the tough economic environment it is still striving toward the $25 billion "stretch target," as it calls it. The big question, of course, is whether GE can do it. GE says that estimates peg the total green component of all global stimulus programs now at over $400 billion. Indeed, according to Cleantech Group, of the $2.6 trillion in economic stimulus G20 nations have committed, $400 billion of it is directed toward green-related initiatives. With these monies, GE believes it can meet its own target. No word on what it would mean to earnings though.

As a point of interest, over a year ago, a survey found that while 53 percent of Americans were willing to pay more for green products and only 45 percent of British respondents, 94 percent of Thai respondents and 83 percent of Brazilians were willing to pay more.

Now back to Immelt's apparent mixed messages. Only yesterday he said growth will be "harder to come by" in coming years given that the global economy may grow at a slower pace once it emerges from recession. GE would focus on R&D, globalization -- China and other emerging markets are expected to play a larger role in driving economic growth rather than the U.S -- and customer service.

Immelt's own rear-covering aside, GE's strategy actually seems sound: take advantage of the green push from stimulus money and consumer willingness, take advantage of emerging markets paving the way to global economic growth, change focus in the U.S. and other more established markets.

Disclosure: Long GE

Increase your money and finance knowledge from home

Basics of Diversification

Learn one of the fundamental concepts of building a portfolio.

View Course »

Finding Stock Ideas

Learn to do your research and find investments.

View Course »

Add a Comment

*0 / 3000 Character Maximum