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General Electric (NYSE: GE) is one of the world's largest and most respected companies. From appliances to energy, aviation to finance, this appropriately named conglomerate is one whose reach you might have trouble escaping. The deep-rooted company is the only member of the Dow Jones Industrial Average index that remains from the original 12 in 1896, and it's practically become a symbol for American ingenuity. While many think of it as a diverse manufacturer of all sorts of products, it has constantly adapted to an evolving marketplace, and it now derives more than half of its revenue from its financial services arm.

GE has acquired its fair share of corporate accolades recently, ranking sixth on Interbrand's list of Best Global Brands and 24th on the list of Best Global Green Brands, as well as making Ethisphere's 2011 list of the world's most ethical companies. But does the company's storied history qualify it to be a socially responsible company? And how does a socially responsible investor reconcile the company's extensive history of pollution, weapons manufacture, and controversial nuclear power with a growing commitment to alternative energy?

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KEYWORDS: Energy, Environment, Reporting, Ratings & Rankings, Health and Wellness, GE, The Motley Fool, Corporate Responsibility, Ecomagination, healthymagination, GE foundation, governance

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In 2012, as part of our stakeholder engagement, GE focused on the role of technology in addressing sustainability challenges. We brought together our Citizenship Advisory Panel with technology leaders from GE’s Global Research centers for a convening with public policy, research and civil society experts. The Panel also spent time with our Chairman and CEO, Jeffrey Immelt, to discuss these issues.

Success in solving today’s tough problems is not guaranteed. As a global community, we are in a race against time, as our former ways of managing ecosystems and social and economic systems no longer suffice. We see sustainability as a technological challenge with three key dimensions. First, we need to apply technological ingenuity to the world’s toughest problems, not just to the easiest, most interesting or most immediately profitable ones. Second, the solutions we develop must not carry unacceptable financial, environmental and social costs. Finally, the benefits of such solutions need to be broadly accessible.

We need to apply the world’s smartest minds to its toughest challenges. At GE, there are 36,000 technologists and researchers, including nearly 3,000 scientists and engineers at our Global Research centers in New York, Bangalore, Shanghai, Munich and Rio de Janeiro. Their work, spanning 10 global labs, responds to both the immediate and long-term needs identified by GE businesses, and it also seeks to demonstrate possibilities that the businesses have not even thought about yet. Beyond these labs, we’ve established a global network of Local Growth Teams; collaborations with customers and joint venture partners; partnerships with national labs, universities and startups; and relationships with environmental and civil society organizations. Our ecomagination and healthymagination innovation challenges have expanded this network even further, opening the door to new ideas and new collaborations.

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KEYWORDS: sustainability, GE, GE Citizenship Advisory Panel, Ecomagination, healthymagination, Stakeholder engagement

District level hospitals—the “primary care home” for most underserved populations in the developing world—have benefited from upgrades to basic infrastructure as well as key care areas, including the operating theater, emergency department, radiology unit, and maternity and nursery wards. Included in the upgrades are much-needed equipment and supplies, installation support, and training for use and care of new equipment. This combination of provision and support, in partnership with the host ministries of health, has proven to be an effective intervention for driving significant, sustainable improvement in the public healthcare delivery system.

GE employees from the Company’s Affinity networks continue to participate in the program by serving as volunteer ambassadors to monitor hospital performance and help address local problems.

To further support the district hospitals where GE is actively involved today, increasing emphasis has been placed on supporting the maternal and infant care needs of the numerous clinics and health centers that surround each district hospital. These small, day facilities are meant to treat simple health needs at the local community level, reducing the need for travel and transport of sick patients. When functioning sufficiently, the local health centers treat a significant volume of patients, which successfully and effectively preserves district hospital capacity for more serious illnesses and acute care needs. By providing emergency obstetric care equipment and materials to these facilities, GE’s intent is to help each district improve its attended birthing rate, as well as improve overall maternal and infant morbidity and mortality rates.

In the area of skill building, the Developing Health Globally™ program has initiated partnerships with several leading global public health institutions and clinical medicine experts to build local capacity and drive improvements in primary care. Programs focusing on infection-prevention practices, biomedical repair capacity-building, trauma referral processes, and ultrasound proficiency for maternal care and trauma treatment are operating in multiple locations and increasing the impact of initial equipment donations.

GE’s partnership with the Columbia-Cornell School of Emergency Medicine has resulted in the creation and launch of a premier emergency medicine training program, sidHARTe (Systems Improvement at District Hospitals and Regional Training of Emergency Care). This initiative targets mid-level practitioners, who are often the most skilled practitioners available to deal with district hospital emergencies, and equips them with the process and clinical skills needed to make best use of scarce resources to treat emergent patients. This model program was implemented in Ghana and is now under way in Rwanda through partnerships with the ministries of health and a consortium of U.S.-based physicians supported by the GE Foundation.

Overall, DHG program efforts have raised awareness of developing-country opportunities. “Base of the Pyramid” markets have been elevated as viable future consumer bases throughout the Company, and this is now an area that the Company is actively pursuing. The recently announced partnership with Embrace came through new market initiatives that link to the resulting success of GE’s philanthropic programs.

Another product success story with philanthropic roots is the partnership with SunSpring to commercialize a small, solar-powered, water purification machine that incorporates GE’s ultra-filtration technology and runs on solar power. The idea began with GE’s disaster relief efforts on tsunami, was deployed in response to the Haiti earthquake and was recently validated as a GE healthymagination product.

GE is one of the most widely held stocks in the world. Ownership of the Company can and does benefit millions of people through flows of dividends and capital benefits, both to individual shareowners and through such intermediaries as pension funds and insurers. In fact, about half of GE’s issued shares are owned by individuals, including many of the Company’s current and past employees, who have helped to shape the Company’s success over decades and generations, and whose savings for retirement continue to create value through their investment in the Company. Historically, GE’s owners were predominantly from the U.S., but in the last four years non-U.S. ownership has grown to more than 10%, a sign of the globalization of capital markets.

GE’s responsibility, legally and ethically, is to provide the best possible return, financially and through its impact on the world today and in the years to come.

“There is a significant universe of long-term investors who want greater exposure to well-managed companies and emerging markets. GE is able to respond to these investors and produce better value over the long term.”

TREVOR SCHAUENBERG, VICE PRESIDENT, INVESTOR COMMUNICATIONS FOR GE

The Roles of Capital Markets

Capital markets facilitate the use of today’s resources to realize future benefits. Such benefits are most usually measured in financial terms, or more exactly, risk-adjusted returns to the investor. In our society, capital markets play the historic role of investing what we choose not to consume today. The objective is to provide economic opportunities strengthened by secure sources of energy, water and physical safety.

Over the past decade, capital markets have come under increased scrutiny for their effectiveness in these areas. The recent global recession, along with its destruction of economic value and jobs, has been attributed in large part to the short-termism of the capital markets, banks and investment houses. Citizenship, or the ethical pursuit of business success—achieved by delivering affordable products that help address pressing challenges—requires “patient” capital that rewards businesses whose strategies and practices align with these long-term, value-creating opportunities.

While the debate continues on the pros and cons of various approaches to financial regulation, a new breed of shareowner has emerged with a greater focus on citizenship and long-term concerns. Nearly one in eight dollars under professional management in the U.S. is already invested using some form of social responsibility criteria. Responsible investing itself is evolving beyond “negative screening” to a more positive engagement that identifies and promotes those social and environmental factors that can drive superior financial performance.

“Research shows that on average, positive, opportunity-focused application of environmental, social and governance investment criteria leads to outperformance.”

CARY KROSINSKY, SENIOR VICE PRESIDENT, TRUCOST

Such active investing has become more mainstream in recent years. The UN Principles of Responsible Investment, for example, with nearly 850 signatories, representing around $25 trillion in assets, reflect these changing criteria. Stock exchanges around the world are also taking steps to promote and require greater transparency on environmental, social and governance performance and risk factors, with the BM&FBOVESPA Exchange in Brazil, the Johannesburg Stock Exchange and The National Stock Exchange of India taking steps in this area. The London Stock Exchange, NASDAQ and NYSE Euronext all have stock market indices that focus on companies that exhibit “best in class” performance or that provide solutions to sustainability challenges.

Major institutional investors focus on such key indicators of long-term value-creation potential as governance and remuneration.

The management of social and environmental impacts is increasingly viewed as a test for effectively handling complex strategic and operational challenges. As Trevor Schauenberg, vice president, investor communications for GE, explains, “There is a significant universe of long-term investors who want greater exposure to well-managed companies and emerging markets. Because citizenship is a key component of GE’s operational excellence, GE is able to respond to these investors and produce better value over the long term.”

“I am confident that GE will continue to be successful in the years to come.”

WARREN BUFFETT

Solving Big Problems

GE’s products aim to meet many of tomorrow’s pressing needs, from clean energy to energy-efficient infrastructures and transportation to clean water and affordable healthcare.

GE is investing in technology. Over the last five years, the Company’s research and development budget has increased by more than 40%, from $2.8 billion in 2006 to $4 billion in 2010. These investments have focused increasingly on core societal challenges, such as those exemplified by two programs, ecomagination and healthymagination. These initiatives have established measurable commitments for creating products that, respectively, improve our customers’ energy, carbon and water efficiency footprints and the affordability, accessibility and quality of healthcare.

While the core of GE’s critical knowledge platform resides in the U.S., the Company has accelerated investment into “In country-for country” research in Shanghai, Bangalore, Munich and, soon, Rio de Janeiro. The idea is to effectively leverage local expertise and insights to address the evolving needs of emerging markets and their nations’ citizens.

GE’s approach is clearly aligned with the interests of long-term investors, offering exposure to a portfolio of future industries and fast-growing emerging markets, combined with the disciplined management and culture of compliance needed to manage the corresponding risk and complexity.

As GE prepares for the future, our cumulative earnings and cash flow over the last decade rank in the top 10 of all the companies in the world. In 2010, GE’s stock price grew 21%, outperforming the S&P 500 Index, which grew by 13%. And, while GE is widely acknowledged as a sustainability leader in its products and processes, the traditional “socially responsible investment” community, primarily because of its aversion to nuclear technology or defense-related activities, holds very little stock.

Valuing Citizenship

Citizenship is a critical value driver for GE, and it will continue to be an important differentiator to investors in the future. This is true for many other companies as well, as businesses adjust their products and processes to meet growing environmental challenges and the sustainability demands of customers and communities around the world.

Developing consistent methods for measuring and reporting on performance in areas such as greenhouse gas emissions and water use will be crucial to understanding and rewarding good performance. GE applauds the work of initiatives such as the Carbon Disclosure Project, the World Resources Institute and the World Business Council for Sustainable Development in creating the Greenhouse Gas Protocol. We use the GHG Protocol for our own emissions inventory and have worked with other companies in road-testing a new standard to help measure the emissions associated with products and supply chains.

Today’s capital markets are in the early stages of responding to such signals. Competencies, information flows, analytic models and remuneration approaches will continue to be reshaped in the years to come to deliver long-term financial returns. The challenge is not to measure the financial return for doing good, but rather the financial rewards from successfully addressing global challenges with profitable products and services. And GE expects to play a prominent role in this evolutionary process as it continues to generate value and solid returns for its many shareowners.

“If you are here to give me a hand-out, you are not welcome. But if you are here to help me build capacity in my people, then stay.”
–A prominent African leader

Of all the people being impacted by the United Nations’ Millennium Development Goals (MDGs), the children of the world are foremost in the minds of GE Healthcare’s employees—especially the youngest and most fragile of these children. It is no surprise, therefore, that we are focused on MDG 4, “reducing by two-thirds the under-five mortality rate by 2015.” Nor is it a surprise that we are concentrating our efforts on helping the nations that face the longest road to meeting this goal, particularly those in sub-Saharan Africa.

We agree with the quote above: As critical as philanthropy is in this environment, transformation is achievable only through local sustainability.

A Problem of Tragic Proportions

Although significant strides have been made by expanding immunisation and improving water, sanitation and nutrition, child survival remains a major public health concern in most countries in Africa.

What’s more, the first hour of life is still the most critical time of the most critical month. For infants in sub-Saharan Africa, it’s a perilous time indeed. The majority of deliveries still take place without the basics of a skilled birth attendant equipped with simple midwifery tools such as a fetoscope, basic linen to dry infants and keep them warm, and basic suction for clearing mucus, enabling babies to take their first breath. At least 50 percent of global births occur in underserved urban settings where access to affordable technology remains limited.

The results are predictable. Every minute, eight infants one month old or younger die, mostly from preventable causes; nearly as many are stillborn. In places with high infant mortality rates, newborn deaths routinely go unrecorded, and those who live are often not named until they have survived that first month. The vast majority of these deaths could be prevented if women and their babies had access to basic skilled care during pregnancy, childbirth and the first days after delivery.

Making a Real Difference

GE has taken a multi-faceted approach to addressing the problem of infant mortality.

Bob Corcoran, vice president of corporate citizenship, at Cambodia’s National Pediatric Hospital

Strategic Philanthropy:

The company’s signature program, Developing Health Globally™, is a $50 million commitment to improving healthcare delivery for some of the world’s most vulnerable people in targeted communities across the developing world.

Developing Health Globally combines GE people, processes, and technologies to deliver sustainable solutions in partnership with ministries of health in targeted countries. Employees participating in our Affinity Networks—GE’s diversity-based career-development and networking organizations—volunteer time and expertise to support the program’s success. Our Hispanic Forum in Latin America, Asian Pacific American Forum in Southeast Asia, and African American Forum in sub-Saharan Africa enable these employees to contribute to GE’s impact in unique ways.

In total, this program has already impacted nearly 5 million lives in these regions. At the same time, our employees have a first-hand opportunity to understand the needs of these non-market environments.

Commercial Development:

GE is also making major investments to develop healthcare products for the individual needs of these markets—including investments in our Maternal-Infant Care business, which is devoted exclusively to designing and delivering much-needed healthcare solutions to mothers and infants worldwide.

Among these solutions are products that have been validated for the GE healthymagination initiative—a $6 billion commitment to healthcare innovation. Launched in 2009, this initiative is designed to help deliver better care to more people at lower cost.

There are already 24 products in the healthymagination portfolio; our target is to bring to market 100 such innovations by 2015, many to meet the specific needs of developing nations.

Lullaby Warmer product demonstration

One such device is the Lullaby™ Warmer, developed by GE in Bangalore, India—a system created to address the worldwide problem of neonatal hypothermia, a contributing factor in many of the 3.1 million newborn deaths each year, particularly among low-birth-weight and pre-term infants.

The Lullaby Warmer was explicitly designed for operational ease; a simple interface and manual controls allow caregivers to concentrate on their patients instead of complex switches and settings. It allows hospitals and clinics to precisely deliver needed warmth to newborns during the critical early hours of life, often replacing make-shift heaters improvised from 60-watt light bulbs—and to do so at a significantly lower cost than its more sophisticated predecessors, while meeting all international quality and safety standards.

Ensuring Sustainability

In too many countries, equipment goes unused because there’s no one to operate it, maintain it, or replenish consumables or spare parts. In fact, equipment that can’t be used is a common sight in public hospitals and rural health clinics in developing countries.

GE is addressing this challenge in a variety of ways.

For example, to promote proper application, maintenance and repair, we make education and training available for every piece of equipment we deliver, whether through commercial contracts or philanthropic donation.

Another example: Members of our GE Healthcare Maternal-Infant Care team have been working to educate the medical community in developing nations on specific infant care processes and procedures—for instance, preventing hypothermia by keeping newborns warm. GE experts have conducted seminars on such subjects for doctors and nurses at conferences in South Africa, and have provided hands-on training in nations such as Namibia and Kenya.

Education is not just for doctors and nurses, however. As part of the Developing Health Globally program, GE is building biomedical technology training programs to enable the repair of vital, life-saving equipment, to help ensure its longevity and to optimize its utilization over its intended lifetime.

To reinforce formal training, GE is also creating a series of training videos. Caregivers and maintenance staff alike will be able to learn at their own pace about everything from using our products to ensuring that they are operating at peak performance.

The Big Picture

Much of the attention on achieving the UN’s Millennium Development Goals has focused on the delivery of proven solutions such as vaccination, contraception or mosquito nets. These approaches are attractive because they have a direct impact on urgent health challenges and can be delivered on any scale.

Building on these programs, we are partnering with a wide range of organizations to deliver comprehensive solutions that promote the safety of mother and child alike in clinics and hospitals worldwide—and especially in developing-world nations. Toward that end, we are now focusing our efforts on implementation, in order to make today’s progress part of each nation’s infrastructure, and part of each healthcare worker’s routine to bridge the “know-do” gap.

Successful organizations are great problem-solvers. At GE, we believe we have a great opportunity to help enhance each nation’s ability to solve local healthcare challenges. Through healthymagination, Developing Health Globally, innovative product development and comprehensive educational initiatives, we are committed to helping nations worldwide achieve dramatic and sustainable improvements in infant survival rates.

GE has been in India for more than a century, with our first investments being in hydro power back in 1902. Our growth here has been in the last 20 years, as we see India both as an important market and an extraordinary source of talent. With annual revenues of about $2 billion, we have a long way to grow with and in India.

How will GE contribute to India’s leadership in forging tomorrow’s green economy, and how best can that contribution be measured?

India has several development needs, but right up there in the priorities are some of the things we do, especially energy and healthcare. Energy use in India is growing rapidly, with 70% today generated through the use of coal. Clean energy development is therefore key, and our gas turbine business is currently our largest source of revenue in India. We expect both wind and solar to be growth areas going forward. Our transport business, focused in India on locomotives and fuel-efficient aviation engines, provides a significant energy and carbon-efficient contribution to India’s burgeoning requirements in this area.

But “green” is not just about the environment; it also means healthy people. Our health diagnostics products have a contribution to make here, especially with the healthymagination focus on lower cost and more mobile products suited for the rural Indian context.

India is challenged to bring more people out of poverty than any other nation: How can GE’s technological leadership and business innovation help address this challenge?

Technology is not the single answer to addressing poverty, but it can be a major contributor if developed and deployed effectively. GE does a lot of large-scale technologies, and these are and will remain a crucial part of the development mix. Increasingly, however, we complement this traditional strength with smaller-scale technologies sorely in need in India today, such as our water purification technology that can remove life-endangering arsenic, and off-grid power-generation equipment using available biomass with no need for electricity. One sign of the growing importance of this more recent technology thrust to GE is the increasing collaboration across our international R&D capabilities—especially between emerging economies such as India and China.

India has a vibrant and important civil society: How has GE engaged with this community, and how might this engagement be improved going forward?

GE’s profile in India is of a company that is a long-term player investing significantly, creating jobs and bringing leading technologies to bear on the country’s development. We partner a great deal with government, given our business focus of energy, healthcare and transportation. Our operations do not attract concern or criticism for their environmental or social footprint. Operating in India, however, means engaging with communities and NGOs concerned with community development and broader social and environmental issues. Mainly, this is achieved by contributing to communities in need, and we encourage and support employee engagement through volunteerism in education and health initiatives.

Which Indian companies do you admire most, especially for their approach to integrating sustainability into their strategies and practices?

Operating in India means being part of a broader business community that is increasingly world class in every respect. It would be wrong to single out any particular companies that impress me, but there is no doubt in my mind that Indian businesses will be among the leaders in building tomorrow’s sustainable businesses and associated practices.

GE Healthcare plays an active role in the business of health, sustainably providing transformational technologies and services that are shaping a new age of patient care. Its expertise is developing new ways to predict, diagnose, inform and treat disease, so patients can live their lives to the full.

Whether it is ensuring that employees and their families have the means and support to adopt healthy lifestyles, developing technologies that bring diagnostics to remote or low-resource communities, campaigning for innovative approaches to difficult problems in health, or promoting healthy living to the general public, GE Healthcare’s people share a common purpose and commitment: We are “at work for a healthier world.”

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