ge-turbine-graph April 17, 2014

A Dialogue with Gretchen Hancock of GE on Context-Based Sustainability Goal-Setting

As with many companies, General Electric is nearing the end-date for many of its sustainability goals – such as its goal to reduce absolute greenhouse gas (GHG) emissions 25% by 2015 (from a 2004 baseline) – and so is actively gearing up for a new round of goal-setting. This process got Gretchen Hancock, GE’s Resource Optimization Manager in charge of company-wide energy and GHG emissions inventory and reduction programs, to ask herself, “How do we know what’s good enough?”

 

Echoing in her ears were the words of the GE Citizenship Advisory Panel delivered in the 2012 Sustainable Growth Report issued earlier this year:

GE’s current “approach is one of incremental change, improving the social and environmental performance of existing business models year on year [which] is important, but it is not disruptive… GE must continue to set and update global goals that are truly stretching. Moreover, both GE as a company and the sectors, value chains and national economies it is involved in need to find ways of measuring themselves routinely against a benchmark of “what is needed” to deliver sustainable prosperity for all. Governments are continuing negotiations to narrow the gap between the current targets for reducing greenhouse gas emissions and the levels that scientists tell us are needed to limit climate change to a rise of 2ºC.”

One answer to this question came when Climate Counts, a non-profit that rates corporate climate performance, announced preliminary results of its Context-Based Carbon Metric that ranked GE seventh of 100 companies. Importantly, it found that GE’s carbon emissions reductions are well in line with science-based targets – in other words, that GE’s performance when it comes to carbon is sustainable. This context-based method piqued Gretchen’s interest as a potential means for setting the next generation of GE’s goals.

As part of a series on Sustainability Goals hosted by Sustainable Brands, Addison Senior Strategist for Sustainability Communications Judy Sandford and Interactive CSR Media Consultant Bill Baue, who both work on GE’s Citizenship reporting, engaged in this wide-ranging dialogue with Gretchen.

Judy Sandford: As one of the largest companies in the world, what is GE’s philosophy on accountability for its environmental footprint?

Gretchen Hancock: The reason we feel strongly accountable for our environmental footprint is one of example-setting in the marketplace, and a signal to both peer companies and our partners in the regulatory arena, that you can be a good company and a great company (to quote Jeff Immelt) by doing the right thing for the environment and for business at the same time. And, in fact, so many of the actions that reduce our environmental footprint are great business decisions, and our great business decisions also end up reducing our environmental footprint in many situations. We find this interesting synergy between the two. So it’s very important for us to be focused on our environmental footprint, not only in our own operations, but also in our value chain, including our customers and our suppliers, to share this notion that business and the environment can live together in a mutually beneficial place.

Bill Baue: That aligns with the preliminary results of the Climate Counts Context-Based Carbon Metric, where GE ranks in the top 10 for carbon emissions reductions in line with science-based targets. And that study finds evidence of decoupling carbon contraction from business growth. So, what’s your reaction to your standing on this rating?

Gretchen Hancock: First of all, results like this in the marketplace are always fantastic to hear.  We shared the information internally and were all excited about the findings. This kind of external validation echoes so strongly these folks internal passion that has driven this progress.

Judy Sandford: What initiatives and projects have been most responsible for GE’s performance in reducing your GHG emissions?

Gretchen Hancock: Our whole initiative on enhancing the environment and business simultaneously sprung from the Ecomagination strategy that GE launched in 2005. And like any good GE project, we started out by taking a deep look into our data set, which we’ve been doing since 2004. We have carbon emissions that are driven through fuel-use and combustion, and we have carbon emissions that result from process activities in our manufacturing operations.

We’ve done a number of projects on the non-carbon side of the house associated with changes in our manufacturing operations, resulting both in material substitution in our processes, and reclaim of chemicals that have a reasonably high global warming potential, so we now reuse those instead of emitting them to the atmosphere. On the combustion side, we’ve driven projects in our largest operations, getting out of coal and going to natural gas. At some of our plants, we’ve found it more efficient and better for all involved to go from generating our own electricity to powering off the grid.

We’ve now done over 300 energy treasure hunts at GE facilities, suppliers, partners and customers around the world. This Lean process improvement tool set gives those folks a voice who know the right answer for our operation, and it aggregates projects so that the leadership team can take a look and see both the environmental and cost-saving benefits. The projects that we’ve driven through treasure hunting normally have a payback period of about a year when you aggregate them across the portfolio. So it’s been a real win for us and they continue to happen now out in the businesses.

Bill Baue: Many of your environmental targets and goals are sunsetting in the near future. So you’re starting a new round of target setting – how do you go about determining them, and in particular weighing in such factors as climate science?

Gretchen Hancock: It’s interesting you bring that up, because forums like those Sustainable Brands hosts – as well as other external NGO partners like WWF and CDP – that’s where we look to see what’s going on in the marketplace, what sort of expectations are out there, what else folks have been learning, since we’ve all been working in this space for the past decade.

Embedding climate science and context into our targets also makes a ton of sense, while also being mindful of the fact that GE is going to continue to grow. We face an interesting conundrum in that our net absolute greenhouse gas emissions have gone down dramatically, but we also set an energy intensity target which is baselined on millions of dollars of revenue. We’ve got some headwind to our final target and we’re figuring out what we can reasonably contribute to making progress at achieving a safe level of CO2 in the atmosphere according to the science.

We’re mindful that climate science and the grid are changing over time, and that our products are a big part of contributing to solutions, helping our customers achieve their own targets. Of course, GE operates across a bunch of different sectors, so we need to explore targets that are sector specific or business unit specific to motivate the right behavior internally. It’s critical that targets make economic sense to the company, so we can you know make good business decisions.

Bill Baue: So how do you know if your GHG reductions are making a real difference in the world, particularly as your business continues to grow?

Gretchen Hancock: This notion of context-based metrics that integrate market share makes a ton of sense, asking if we’re really reducing our emissions faster than we’re growing the business. For example, when we set our first absolute target, we thought it was going to be hard to achieve that 1% emissions reduction. Now, we’re at 32% absolute emissions reductions. The fact that we completely blew that initial target out of the water signals to me that we’ve got the power and the creativity and the innovation to decouple emissions reductions from economic growth.

Judy Sandford: Once you have this information, how do you tackle the challenge of accurately reporting and graphically depicting – in easily understandable ways – your performance in areas as complex as GHG emissions?

Gretchen Hancock: This is really hard! My background is as a geologist – I’ve spent my life as a scientist working for manufacturing companies, and translating complex science into a business context is something you learn over time.  But one of the things we haven’t yet harnessed is the power of data visualization to help folks wrap their heads around what we’re doing. There’s huge opportunity here to blend big data with graphical representation that depicts the science accurately. In terms of communication, simple is better, but when you think about context-based, science-based metrics, they’re not necessarily simple – that’s something we’re wrestling with, along with other companies. We don’t have an answer yet – it’s a work in progress.

Bill Baue: Our last question brings us full circle – what is GE doing to encourage and incentivize aggressive GHG reductions across your entire value chain, both upstream to suppliers and downstream to customers and consumers?

Gretchen Hancock: This is a really exciting area for us to be dealing with right now.  There are a lot of models out in the marketplace for how to do this.  Many companies send questionnaires to survey suppliers on their numbers, and we answer those when we receive them from our customers.  What we really want to do is compel action across the value chain.

First, we approached our sourcing community that interfaces directly with our supply base and asked how they’ve encouraged projects with collateral benefit, for us and for the suppliers. We wanted to identify co-benefit projects where we’ve worked together to redesign packaging, where have we done something different in terms of logistics, where have we helped our supply base reduce their value chain emissions.

I get a lot of questions around what’s GE’s Scope 3 emission base; I don’t have a single answer for that, but what I can tell you is that the reductions we’ve driven in our own operations are dwarfed by the progress we make when we partner with our suppliers. That really opened my eyes, both on the water front, on the GHG front, on waste reduction generally and on packaging waste reduction more specifically. The opportunity throughout the value chain, if you motivate people properly, is remarkable. I believe it was 7 times the benefit of the reduction projects we saw in the supply chain versus our own reductions, which aren’t inconsequential either, so it’s been exciting.

The other thing we do is look out the value chain towards our customers. We’re starting to think now about how we should articulate the aggregated benefit of our installed base more effectively. A lot of that intersects with our service platforms, which have a carbon reduction and an eco angle that we are exploring. We know transparency and accounting around our own operations is important, but we really want to turn our eyes outside of our own fence line in a way that compels action and behavior change.

The full version of this abridged article first appeared on Sustainable Brands as a two-part series here and here.