Why should General Electric (NYSE:GE) be socially responsible? You could answer that question from a moral or even a legal standpoint, but in the end, GE and most other corporations need only one argument in favor of social responsibility: It makes good business sense in the long run.
Like Wal-Mart (NYSE:WMT), which is building environmentally friendly stores; Ford (NYSE:F), currently developing "green technology" for its cars and trucks; and ExxonMobil (NYSE:XOM), devoting R&D expenses to alternative energy, GE's future depends on global economic and environmental conditions. And as Foolish investors, we care about what GE and the other businesses we own do, because the long-term performance of our portfolios depends on how seriously these corporations safeguard shareholders' long-term interests. Let's review some of GE's efforts to pursue socially responsible policies.
Education is fundamental
In 2005, the GE Foundation donated $71 million to a variety of charitable purposes, including the environment and disaster relief. By far, the foundation's biggest concern is education, which was served in one way or another by more than 50% of GE's 2005 giving.
One of GE's many U.S. education initiatives is the foundation's Dialogue on Globally Competitive Standards. Since 2004, the foundation has been researching the factors that lead to lower average math scores among U.S. students, compared to many of their international peers. The foundation ultimately hopes that its findings will help school districts craft ways to reinforce key math concepts at each grade level.
The GE Foundation's non-U.S. education efforts are focused in Mexico, China, and India. In Mexico, GE has partnered with seven schools, linking disadvantaged youth with local business volunteers to help children "develop the attitudes and values of an entrepreneur." In China, GE is providing grants to fund the training of 200 teachers in 200 schools. And in Pune City, India, the foundation has partnered with another foundation to provide education to children ages 4-18.
Ecomagination
While improved education is the central aim of GE's corporate foundation, the corporation itself purses the primary commitment of "ecomagination." The company defines the term as a "commitment to imagine and build innovative solutions that benefit customers and society at large." The effort aims to benefit the environment while driving growth in GM's top and bottom lines.
Established in May 2005, "ecomagination" has four primary pledges. In R&D, the company has pledged to more than double the $700 million it spent researching cleaner technologies in 2005, to $1.5 billion by 2010. On a related note, GE also seeks to generate at least $20 billion of revenue in 2010 from products and services that "provide significant and measurable environmental performance advantages to customers."
As GE's products become more environmentally friendly, so will the corporation itself. The third "ecomagination" commitment calls on GE to improve its operations' energy efficiency 30% from 2004 levels by 2012. Finally, GE is planning to keep the public fully informed of these efforts through various means, including its website and advertising.
Bringing good things to life
The myriad ways in which GE positively contributes to society are almost staggering. Check out its 2006 Citizenship Report -- nearly 100 pages long! -- to get a better idea of how important sustainability efforts are to the company. From emerging markets, to the environment, to just about everything in between, GE is investing today for a better world tomorrow.
Socially responsible pursuits will help GE reach one of its central goals: "Strong economic performance over a sustained period of time." That's a goal welcomed by any Foolish long-term investor.
Further socially responsible Foolishness:
- Three reviews of essays on corporate responsibility: Part 1, Part 2, Part 3
- Discover Starbucks' socially responsible policies.
- Corporations: The new Santa Claus?
As part of a graduate degree at Duke University, Fool contributor Jeremy MacNealy is writing an ethics and law thesis paper on corporate social responsibility. He has no financial interest in any company mentioned. Wal-Mart is an Inside Value pick. The Motley Fool has a disclosure policy.
