Company of the Year: General Electric
Charting the future of public relations
Holmes Report

Company of the Year: General Electric

When General Electric was named America’s Most Admired Corporation once again in February of this year, there should have been no dissent from within the ranks of the public relations profession.

Paul Holmes

The fact that a company is named America’s Most Admired Corporation by Fortune magazine does not necessarily imply that it has mastered the art of public relations. The Fortune survey measures some aspect of corporate reputation, certainly, but its respondents are drawn entirely from the business and financial worlds and their focus is understandably on traditional measures of corporate performance rather than on the so-called “soft” issues such as the strength of stakeholder relationships.

In the recent past, for example, Wal-Mart was America’s Most Admired Corporation for two consecutive years (2003 and 2004) at a time when no one would have described it as an enthusiastic or sophisticated user of public relations. In previous years, General Electric topped the list despite facing major reputational challenges.

But when GE was named America’s Most Admired Corporation once again in February of this year, there should have been no dissent from within the ranks of the public relations profession. Because under the leadership of Jeffrey Immelt, who took the reins at GE in September of 2001, the company has reinvented itself once again—and part of the transformation has involved a far greater attention to public perceptions.

Public relations has always been a valued discipline at GE. Joyce Hergenhan, vice president of corporate public relations for much of the Jack Welch era, was one of the former CEO closest and most trusted advisors. Her successor, Beth Comstock, went on to head both public relations and marketing for the company and is now president of NBC Universal’s digital media and market development, a senior operational position unusual for someone whose background is in PR.

But under Immelt, the tone of GE’s communications has shifted perceptibly. In late 2004, for example, he met with a group of 200 senior managers from the company to discuss the characteristics the organization would need to maintain its leadership position in the business world: execution, growth, and great people had been hallmarks of the GE culture for many years, but the fourth characteristic—virtue—was not one with which GE had always been associated.

To be a great company, he told Fortune a few weeks later, you have to be a good company. “The reason people come to work for GE is that they want to be about something bigger than themselves,” he says. “People want to work hard, they want to get promoted, they want stock options. But they also want to work for a company that makes a difference, a company that’s doing great things in the world.”

Great companies have an obligation to be part of the solution to global problems. “Good leaders give back. The era we live in belongs to people who believe in themselves but are focused on the needs of others.”

So 2005 was the year when GE joined the discussion over social responsibility—and it did so in a big way. The company’s first corporate citizenship report, Our Actions, details the company’s performance, progress and challenges in areas including compliance and governance; globalization; the environment, health, and safety; community investment; products and research and development; and its commitment to employees and other stakeholders.

According to Ben Heineman, the company’s senior vice president of law and public affairs, “In an increasingly global and transparent world, we have to measure our performance in a context broader than financial results and stock price. Everyday, we strive to be a responsible citizen, to perform with integrity and to serve our customers, investors and other stakeholders responsibly.”

Our Actions is an unusually long (77 pages) and detailed piece of social reporting, packed with the kind of rigorous metrics that GE famously applies to all aspects of its business, and already experts in CSR reporting are predicting that it will raise the bar for other companies at a time when citizenship activities are increasingly important to employees, customers, and shareholders. Because GE is still a role model for many companies—particularly American companies, which have been slower to embrace social reporting than their European counterparts.

Says Immelt in his introduction to the report, “We have a history of firsts in technological innovations and in management practices that have influenced the way businesses grow and lead. And we are known for a performance culture that consistently delivers results.  But these accomplishments alone will not ensure our leadership in the future. Leaders and companies that seek to continue to lead must perform with an unyielding integrity that earns the trust of our stakeholders: integrity in our relations with customers and suppliers; integrity in our disclosure to shareholders and creditors; integrity in our products; integrity in our relationships with our employees; integrity in our compliance with legal and financial rules; and integrity in our interactions with regulators, media and communities.”

Gary Sheffer, the company’s executive director of communications and public affairs, says the initial impetus for Our Actions came from the company’s employees.

“We had a class at Crotonville [GE’s management training facility in the U.S.] that cantered on citizenship,” he says. “In the wake of the scandals, we asked our senior people how they viewed citizenship and what role we should be playing, and they recommended that we start reporting on our citizenship activities and telling our story better.

“We also heard from a lot of our investors that this was something they expected.”

GE came relatively late to the citizenship reporting game, Sheffer says, because “it was not the character of the company to get up on a soap box. We felt we had good systems and good programs and we thought that was good enough. But it’s not. Stakeholders have a different set of expectations these days and we need to meet those expectations.”

It would be easy for an outside observer to make the assumption that GE’s new leadership was a major factor in the shift. The Wall Street Journal described Immelt’s personal style as “less domineering” than his predecessor’s, and he has generally projected a less prickly public persona. But Sheffer says any assumption that the CSR report results from a change of leadership styles is an oversimplification.

“Clearly Jack Welch cared about citizenship,” he says. “He established diversity forums within the company. The GE Foundation grew considerably while he was CEO. Volunteerism grew under Jack Welch. We just didn’t talk about all the things we were doing. We were more focused on other activities. But 9-11 and the corporate scandals changed a lot of things. There are different expectations today.”

So the company outlines its obligations to each of seven distinct stakeholder groups, from investors (good governance, fiscal responsibility, a sustainable business model) to NGOs (engagement in social, environmental and economic issues, consideration of alternate inputs, ethical actions beyond financial and legal requirements).

Says Sheffer, “We want to have as many metrics as we can. In the environmental, health and safety section of the report there are a lot of metrics to talk about. In other areas, real metrics just don’t exist, they don’t add value. But it was apparent when the report came out that the media and others went straight for the numbers. Anything that you put into a report like this that has hard and fast numbers will get people’s attention.”

In most cases, the company seeks to apply meaningful metrics. It provides hard numbers on its workplace injury and illness rates, greenhouse gas emissions, total energy use, and diversity activities. And it sets forward-looking targets: a 30 percent reduction in greenhouse gas intensity by the end of 2008, along with a 1 percent reduction in absolute terms by the end of 2012.

As the report hit the streets, Immelt was also presenting the company’s new $1.5bn investment in environmentally sound technology, a project called Ecomagination. Immelt says GE will double its investment in research for cleaner technologies by 2010 and double its revenue from environmentally friendly technologies to at least $20 billion by 2010 by introducing more than 30 new products, including wind turbines, solar panels, coal-gasification plants, and more energy efficient appliances.

Ecomagination products will “significantly and measurably improve customers’ environmental and operating performance,” the company says. And an independent environmental consulting company, Green Order, will verify the company’s claims.

Speaking at an environmental summit at George Washington University, Immelt admitted that “when I became chairman of General Electric in 2001, I would never have imagined that I would be standing here today giving a speech focusing on the environment—much less sharing a stage with such a distinguished environmental leader as [president of the World Resources Institute] Jonathan Lash.”

The reason for the change, Immelt told his audience: “We have taken a long look around and this is what we see: diminishing domestic oil and natural gas reserves; our continued dependence on foreign sources of energy; increasingly scarce resources like water in an ever more populated world; and the signs of global climate change. This is a convergence of forces that demands nothing less than a revolution in technology.”

Ecomagination, he said, was developed after GE talked to its customers and to leaders in the environmental movement, in government and academia.

It involves five commitments:
• “First, we commit to double our technical investment in energy efficient and environmentally friendly products by 2010…
• “Our second commitment is to make our customers true partners in the Ecomagination program. That means targeting technologies that significantly improve operating and environmental performance… [and] a concerted effort to demonstrate the value of those offerings in hard economic terms….
• Third, we commit to improve our own environmental performance…. We will do for ourselves what we want to help our customers accomplish….
• Fourth, we commit to increase our sales and profits based on this initiative. Let’s be clear about this: GE’s obligation is, first and foremost, to our shareholders… We are investing in environmentally cleaner technology because we believe it will increase our revenue, our value and our profits….
• Fifth, and finally, we pledge to inform the public of our progress. Since our progress in developing new cleaner technologies does not just affect GE, we believe that everyone has a right to know what and how we’re doing.”

While the Ecomagination initiative will require greater transparency, Sheffer says the timing of the announcement—just weeks after the release of the first citizenship report—is a coincidence. “Actually, we had hoped to get the report out earlier,” he says.

Still, the response from all stakeholders to both initiatives has been encouraging.

Lash, whose environmental think tank provided input on the various initiatives, says GE’s commitment is “a hugely important step by one of the world’s most important companies” that should be “enough to make even a gloomy environmentalist hopeful.” The Pew Center on Global Climate Change, meanwhile, invited the company to join its Business Environmental Leadership Council. And influencers such as Jeffrey Sachs of the Earth Institute have praised GE as leading the corporate community in addressing climate change.

The Ecomagination launch, which was handled by international public relations firm Edelman, received both quantity and quality earned media coverage, including a favourable editorial in the Financial Times and articles by columnists including Alan Murray of The Wall Street Journal, David Ignatius of The Washington Post and Tom Donlon of Barron’s. Feature articles ran in U.S. News & World Report, Time, Fortune and on the cover of Forbes.

And the launch of the initiative was enough to earn Immelt a place on Rolling Stone magazine’s list of 27 “climate warriors and heroes.” According to the magazine: “Immelt, whose company is one of the world’s biggest polluters, is part of a growing push by industry to cash in on the business opportunities presented by global warming.”

Inside the company, meanwhile, “the response has been very positive,” says Sheffer. “We held a webcast to talk about the report that was very well received. There have been a lot of suggestions from employees about how to improve the report next time around, especially from people who meet a lot with customers, from our sales force and our senior executives. They are the ones who get asked questions about GE from a citizenship standpoint, and we have given them the tools to answer some of those questions.”

The external response has been almost as positive, with several other companies calling GE for a copy of the report.

“The next step for us is to put together a process to go out to talk to various stakeholders and get their reactions to the report, and their input on areas where we can improve,” says Sheffer.

He admits that not everyone is going to respond positively, and says there were some within the company who worried that the publication of a citizenship report would just provide ammunition for the company’s critics.

“There are some folks who are going to beat us up whatever we do or say,” he says. “They are going to be telling their story whatever happens, so let’s at least let our investors and customers know there is another side to the story. It’s always better if we tell people why we take the positions we do, how we come to the decisions we make.”

Sheffer and the rest of GE management understand that social reporting is an ongoing concern, one that requires constant communication, and the company’s website will feature frequent updates to the report as the company seeks to keep stakeholders informed.

Says Bob Corcoran, GE’s vice president of corporate citizenship, “Our new citizenship website provides an in-depth view of the policies, procedures and practices we employ to make our commitments a reality. Links in the report allow readers to pursue topics in greater depth, and the web format allows the report to be a living document which can be supplemented and updated as developments occur.”

Notably, in the quarter immediately following the launch, GE saw a 24 percent gain in profits from a year earlier—the biggest increase since the fourth quarter of 2003.

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