The Rise of Green Corp

By Tom Benson, Deputy Editor

Rather than being merely good PR, can eco-friendly and socially responsible practices actually help a company’s bottom line? Business Management’s Tom Benson investigates.

“Ecomagination is growing beyond our expectations, evolving into a sales initiative unlike any other I’ve seen in 25 years at GE”
-Jeff Immelt, GE

They said it would never happen. When the movement towards socially and environmentally responsible business practices began over a decade ago, most wrote it off as PR fluff and dismissed fears about global warming as unfounded. But corporate America appears to be changing its mind. Can Wall Street finally have recognized that green, rather than greed, is good?

All signs point to ‘yes’. The last few years have seen a rise in corporate awareness regarding the importance of green issues, along with an acknowledgement that big business has a critical role to play in influencing the way we think about topics such as energy efficiency, eco-responsibility and carbon footprints. More importantly, a growing number of CEOs and senior business leaders have committed themselves to sustainability goals, even in profit-obsessed America. The term ‘sustainability’ – meeting humanity’s needs without harming future generations – once carried too much baggage for Wall Street’s liking. It was a cause-célèbre among economic development experts, human rights activists and conservationists, but many US business leaders believed it meant higher costs and smacked of the utopian idealism of Western Europe. Now, sustainability is right at the top of the agendas of US companies.

Green means green
Some, such as corporate megalith GE, are unashamedly out to make a profit. Launched in May 2005, the firm’s Ecomagination initiative is GE’s commitment to imagine and build innovative technologies that help customers address their environmental and financial needs while at the same time helping GE grow. “Ecomagination is GE’s commitment to address challenges such as the need for cleaner, more efficient sources of energy, reduced emissions and abundant sources of clean water,” says Chairman and CEO Jeff Immelt. “And we plan to make money doing it.”

And they are. Revenues from the company’s portfolio of energy efficient and environmentally advantageous products and services surged past $12 billion in 2006, up 20 percent from 2005, while the order backlog rose to $50 billion. It’s an expanding market of huge potential, but Immelt is (for now at least) sticking with his sales target of $20 billion by 2010. “We are on our way to $20 billion and I am convinced we can exceed that number and expand as time goes on,” he says. “These extraordinary revenues and orders are the initial payoff from directly aligning our product portfolio with our customers’ needs and evolving trends, while doubling-down on investments in leading edge technology and innovation. Ecomagination is growing beyond our expectations, evolving into a sales initiative unlike any other I’ve seen in 25 years at GE.”

Immelt’s choice of words are significant, and it’s clear that he sees Ecomagination as much more than a corporate social responsibility initiative; rather, it’s an opportunity to do some serious business. The company invested $900 million in cleaner technology research and development in 2006, drawing closer to its $1.5 billion annual Ecomagination R&D target by 2010, and has increased the number of Ecomagination-certified products by 50 percent over the last year. “Green is happening everywhere across GE,” Immelt says. “From our transportation products to renewable energy to clean water to how we make television shows and movies to home building and mortgages, green is truly universal at GE.”

And of course, amidst all this profit-making, GE has also made significant strides in reducing its environmental impact over the last few years: greenhouse gas emissions in 2006 from operations have been reduced by about four percent from the 2004 baseline, while energy intensity has been reduced by 22 percent. Roughly 5000 global projects are under way and have already generated more than 300,000 tons of GHG emissions reductions – equal to removing more than 50,000 cars from the road. Energy cost savings to the company total $70 million to date.

“Ecomagination is about the future,” Immelt says. “We will focus our unique energy, technology, manufacturing and infrastructure capabilities to develop tomorrow’s solutions such as solar energy, hybrid locomotives, fuel cells, lower-emission aircraft engines, lighter and stronger materials, efficient lighting and water purification technology. We will establish partnerships with our customers to tackle their most pressing environmental challenges and double our research spending to develop the products and services they need. And we will use these technologies to improve our own energy efficiency and environmental performance.

“Customer demand for the most advanced, most fuel-efficient and least emissive technologies is what sparked Ecomagination,” he continues. “Increasing demand from our customers is what is making it succeed beyond our expectations.”

Big Blue’s eco-action
The technology sector is another that can play a significant role in helping companies go green. IBM has been an environmental leader with demonstrated results in its own business for decades, and feels it is well placed to help clients improve their environmental credentials at the same time as it helps them solve efficiency and productivity issues. “The underlying premise is that when we help a company improve the efficiency and the effectiveness of their business processes, we’re also helping them improve their environmental footprint,” says Wayne Balta, IBM’s Vice President for Corporate Environmental Affairs.

It’s a copywriter’s dream – Big Blue does Big Green – but beyond the positive PR such a move will inevitably bring, IBM is truly committed to making a real difference. According to analyst firm IDC, roughly 50 cents is spent on energy for every dollar of computer hardware, and this is expected to increase by 54 percent to 71 cents over the next four years. Experts believe that the data center energy crisis is inhibiting business growth as companies seek to access computing power; many data centers have now reached full capacity, limiting firms’ ability to grow and make necessary capital investments.

IBM currently runs the world’s largest commercial technology infrastructure, with more than eight million square feet of data centers across six continents. By using energy efficiency initiatives, IBM expects to double the computing capacity of its data centers within the next three years without increasing power consumption or its carbon footprint. Compared to doubling the size of its data centers by building out new space, IBM expects this will help save more than five billion kilowatt hours of energy per year.

The company has already saved more than $100 million since 1998 by conserving energy, and is now setting its sights on bigger targets. It is redirecting $1 billion per year across its businesses, mobilizing the company’s resources to dramatically increase the level of energy efficiency in IT. The initiative – called Project Big Green – includes new products and services for IBM and its clients to sharply reduce data center energy consumption, transforming the world’s business and public technology infrastructures into ‘green’ data centers. The savings are expected to be substantial; for an average 25,000 square foot data center, clients should be able to achieve 42 percent energy savings. Based on the energy mix in the US, this savings equates to 7439 tons of carbon emissions saved per year.

“We’re well placed to integrate all of the necessary skills needed to succeed in reducing a datacenter’s energy consumption,” says Balta. “You’ve got to integrate everybody – from the operators of the equipment, the people whose applications are running on them, the folks who manage the overall real estate, those who manage the air conditioning in the building, to the people who decide what server technology to deploy in the building. There’s all kinds of different disciplines, and what IBM can do is help integrate them in a way that gets the job done with a lot less energy and therefore a lower environmental footprint.”

But it’s not just in the core area of datacenter infrastructures that IBM can help. “We’re helping clients in an increasing range of industries with their energy efficiency, effectiveness and green credentials,” continues Balta. “For example, we’ve been working with electric utility companies around the world on advanced technologies and electronics within their networks to help them better understand how efficient and effective they are at moving electricity around – how they can get better information, in real-time, to address everything from power outages to better routes and reduce energy waste along the way.”

Other areas of focus include working with clients in the building industry on electronic sensors and metering technologies to help them better understand energy consumption in a certain space; and with the travel and transport industry to improve the efficiency and the effectiveness of transportation systems in major metropolitan areas. “What differentiates IBM is that it’s a company with a very diverse set of experts in different industry sectors,” explains Balta. “We do research, mathematics, modeling, electronics, semiconductor fabrication, software – you name it, we can integrate our industry expertise with our technical skills, and that is how innovation happens.”

High-tech goes green
Indeed, the high-tech industry is falling over itself to further the environmental cause. Founded in February of 2007, the Green Grid is a collaborative group connecting both vendors and users in the IT industry that was formed to collectively find new ways to measure and reduce power consumption. The group aims to improve data center efficiency by defining meaningful, user-centric models and metrics; developing standards, measurement methods, processes and new technologies to improve performance against the defined metrics; and promoting the adoption of energy efficient standards, processes, measurements and technologies.

“We’re in the process of looking at the technologies that go into a data center and understanding how to measure them to create a common language, as opposed to saying one is better than the other,” says Bruce Shaw, Director of Worldwide Server Workstation Marketing at AMD and a member of The Green Grid’s board of directors. “One of the great challenges that’s faced by the industry is there won’t be a one-size-fits-all solution for data centers or for enterprise customers. It’s going to vary and that really is what drives the notion of sharing best practices. There are potentially multiple existing standards out there as well as ones that haven’t been invented yet. It is going to come down to being smart about the way that you look at the problem that you are trying to solve, and doing it in the most efficient manner possible.”

Rick Shuckle, Senior Technical Staff member in Dell’s CTO Office and another Green Grid director, agrees. “Our goal is not to endorse any particular technology but to allow customers to understand better how that technology fits into their environment,” he says. “There’s always room for improvement. Just look at the issue of power cooling. I think the message has been pretty clear across the industry that this has been a growing concern. The growing use of compute resources is also a big part of the issue; it’s become a much bigger challenge as the appetite for compute power has just gone up immensely in the last couple years.”

The encouraging thing is that people and companies are collaborating to address the issue. “While certainly there’s a lot of work to be done, the fact that you see companies that are such fierce competitors coming together to work on this problem is unprecedented in terms of its impact and scope,” says Shaw. “I think the industry as a whole has responded incredibly quickly with positive speed and energy to address this. This isn’t something that has been mandated by any one company; it’s a collaborative effort and that speaks volumes.”

Shake your moneymaker
At the end of the day, there’s no reason why environmental concerns and making money can’t co-exist – and this, ultimately, will be the reason more and more companies will sign up to green technology and energy efficiency initiatives. “There’s a couple of ways to make money,” suggests Balta. “Either increase revenue and profit, or reduce expense – and in the environmental arena there’s potential opportunity for both. In terms of its own performance, IBM has been able to demonstrate over many years that the estimated savings we accrue from environmental leadership exceed our actual expenses, sometimes by a ratio of two-to-one. So we’ve seen through our own internal business practices that good environmental management makes good business sense. For instance, when you conserve energy you save real money right away, and it also lowers your CO2 emissions and your carbon footprint. But that same thinking applies to many other examples.”

It seems that far from being an additional cost, going green is actually just sound business sense. “A project doesn’t have to be labeled ‘green’ to actually have a significant environmental benefit,” continues Balta. “And just because something is labeled as ‘business improvement’ doesn’t mean it can’t have a green benefit as well – the two go hand in hand. I think the more people who understand that, the more improvement we’ll see on a global basis.”

GE’s Immelt agrees. “Green is now becoming pervasive. It is becoming universal,” he says. “Work on energy efficiency, work on emissions reductions, conservation, clean water – it’s simply good business. In our case, it has always been about growing the company. This is no longer a fringe topic, a niche topic,” he continues. “This is a mainstream topic that is being driven across the broad economy.”

Infographic:
$1 billion
IBM’s annual commitment to increase the level of energy efficiency in IT

Infographic:
$12 billion
GE’s 2006 revenues from its Ecomagination portfolio

The Green Grid is a large industry group dedicated to driving efficiency in the data center, founded by eleven companies: AMD, APC, Dell, HP, IBM, Intel, Microsoft, Rackable Systems, SprayCool, Sun Microsystems and VMware. As the rapid rise of power and cooling costs in the data center has become a top concern across the IT industry, the global consortium seeks to open channels of communication by bringing together key IT players and competitors alike to address the problems around data center power management and cooling.