Green versus greed

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Ms ZK of Canberra, Australia wrote me asking about the motives behind GE's recent declaration that it will be greening itself, voluntarily cutting carbon dioxide emissions over the next several years and even calling for government regulation of greenhouse emissions. [The Economist; The Washington Post] The key question: why? Let us consider some possibilities.

Jeffery Immelt's immense heart

He himself is veganish. Many people are vegetarian for environmental reasons, citing abundant reasons for why meat is environmentally destructive, but in another interview, Mr. Mackey makes no effort to reconcile the fact that you can go to Whole Foods and order veal and rabbit with Whole Foods' green PR.

But there are two key differences between Mr. Mackey and Mr. Immelt (GE's CEO): the first is that Mr. Mackey actually makes a real effort to live his convictions. I invite the reader to dig something up, but I've not found anywhere that Mr. Immelt stated that he himself is trying to reduce his own automotive trips, buy a smaller house, or otherwise indicate that he is self-aware of his own ecofootprint the way that our veganish CEO tries to practice what his company preaches (and then advertises this). Now, I don't want to be too cynical: nobody wants to be a polluter, and every sane employee of every company I mention here would be happy to take steps to reduce emissions--provided the cost is low enough. Mr. Mackey has expressed interest in reducing certain (but by no means all) types of pollution even when it costs Whole Foods money; Mr. Immelt has made no such statement.

The second related difference (as noted in the Reason article above) is that Mr. Mackey explicitly indicated in the Whole Foods public offering that Whole Foods will be contributing 5% to charities, while GE has no such do-gooder mission. That means that when shareholders purchased GE shares, they did so with the usual intent of profit-maximization, and for Mr. Immelt to switch the goal to saving the planet is grounds for shareholder lawsuits.

We all loved Google's IPO for having a section entitled "Don't be evil", but as well as being nifty, it allows the CEOs a huge amount of leeway. When shareholders threaten to sue over the owners' failing to maximize profits, the managers can point to the do-no-evil clause and walk away. GE's CEO has no such escape clause. [Sorry, but I'm not going to address Google's agreement to censor China's search results today. You know as much as I do.]

Maximize shareholder value

He's got tons of rhetoric from environmentalists backing him up; we hippies have been pointing out that environmentalism is a form of efficiency, and efficiency pays off, for decades. The fact that Ford's gas-guzzling ways have cost it massive losses is certainly a nice precedent for GE's greens to point to.

The best way to really evaluate a claim of environmental friendliness is to read the Annual Report (RTFAR, or RTF10K). There are strict laws regulating the quantity of BS that can be presented to shareholders, so after the splashy editorial pages, the stats are as honest as you'll get. Here's a paragraph from page 27 of GE's 2004 annual report:

[GE's Energy division] participated in the period of unprecedented U.S. power industry demand that peaked in 2002, a period often referred to as the "U.S. power bubble". The return to normal demand levels is reflected in the lower shipments of large heavy-duty gas turbines. In 2004, we sold 122 such units, compared with 175 in 2003 and 323 in 2002. We accurately foresaw the end of the bubble and took action to reduce the effect, right-sizing the business and growing and investing in other lines of the power generation business such as product services and wind energy. We believe the Energy segment is well positioned for its markets in 2005 and beyond.

Page 51 also makes reference to “increased demand for wind turbines, locomotives, and product services, partially offset by softening demand for large gas turbines.”

So the Annual Report does indeed present the purely profit-maximizing motives: GE's executives know that demand for its fossil-fueled energy products is under half what it was a few years ago, and are placing themselves in position to accommodate future markets.

Advertising

We need to bear in mind below that both BP and GE simultaneously deal with energy on two fronts: they vend energy-generation products (BP sells fuels, GE sells fuel-consuming generators), and they themselves consume energy in the normal course of business. Their internal energy consumption is a drop in the bucket compared to the energy that their customers are going to be using. However, by talking about reductions in internal pollution, they commit a little sleight-of-mind and imply that their line of business is also greener. Of course, BP and GE are also trying to green their line of business, though BP's annual report seems to indicate that solar is still a side-affair, while GE's is directly stating that the company strategy is to focus more on wind and cleaner transportation.

Self-regulation

Vending product