Transcript: Fortune Global Forum panel on innovation

June 7, 2013: 2:55 PM ET

Fu Chengyu, Jeffrey Immelt and Ellen Kullman on building a sustainable future.

130607144234-fortune-global-forum-sustainable-panel-614xaFortune Global Forum

Innovation:  Building a Sustainable Future

Panelists:

Fu Chengyu, Chairman, Sinopec
Jeffrey Immelt, Chairman and CEO, GE
Ellen Kullman, Chair and CEO, DuPont

Moderator:

Andy Serwer, Managing Editor, Fortune

Chengdu, China

June 7, 2013

STEPHANIE MEHTA:  Thank you everyone for your patience while we get the set changed.  It's now my pleasure to introduce once again Andy Serwer, Managing Editor of Fortune Magazine.  (Applause.)

ANDY SERWER:  Thank you very much, Stephanie.

I am delighted to be up here with this group of august, is that the right word, prominent chief executives, really a great group.  And if you think about the number, I was just talking to Jeff Immelt, I'll introduce him in one second, but if you think about the combined revenues, the combined customers, the combined employees, the combined shareholders, we're talking about a lot of scale worldwide.

Jeffrey Immelt, the CEO of General Electric; Ellen Kullman, the CEO of DuPont, and Chairman Fu, the Chairman of Sinopec.  Please join me in welcoming them.  (Applause.)

Chairman Fu, by the way, has had a little bit of a sore throat, so we're glad that he's here and able to join us.

The topic of this panel is sustainable innovation, which really is incredibly salient, of course not only here in China but worldwide, and it's sort of at the core of what all businesses are doing, particularly non-service businesses, which I guess constitutes what you guys do, you have some service, obviously, but it's more manufacturing and production.  Sustainability is obviously a core part of your endeavors, especially going forward.

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So I think that I would like to just start by asking sort of a very basic 101 question of each of you, and that is what are each of you doing in terms of sustainable innovation at your companies?  And, Chairman Fu, could I start with you as the home CEO?

FU CHENGYU:  For those of you who speak in English, please use your headphone because I'm going to speak in Chinese as most of the audience here is speaking in Chinese.

ANDY SERWER:  That's fine.

FU CHENGYU:  (Via translator.)  Regarding sustainable innovation, first of all, I think it is about an innovation model from the business perspective we need to take into account that the world is changing, the industry is changing, where should we pursue in terms of our future direction?  At the same time we have to take into account the demands of the market, in particular the demand of the Chinese market.  So for a Chinese enterprise like Sinopec, we are in the energy and chemicals industry.  For our industry, we have to consider the global energy security issue.  That is to say we need to ensure sustainable energy supply in the future.  And today an unprecedented challenge is tackling climate change, as well as our challenges related to environmental protection.

So if we just focus on energy security without addressing climate change and environmental degradation, we would not be able to find the right solution, the right direction going forward.  At the same time, we have to take into account the specific requirements of China.

For example, today environmental pollution is on the top agenda of the Chinese Government, and also it is the most important issue that is followed by every Chinese citizen.  And the Chinese Government has put forward a strategy of building a beautiful country, a beautiful environment for everyone.  So environmental sustainability is a key theme when we pursue corporate or business innovation.

First and foremost when we pursue innovation, how should we improve energy efficiency and resource utilization efficiency?  Today the efficiency in utilizing all kinds of resources in China is relatively low.  Today in China we consume about three times the energy than that of Europe.  So the first solution would be improving energy efficiency, and in turn achieving greater energy savings.  To solve this problem, we need greater technology.  We need technological breakthroughs, and technological innovation.  So in which areas can we improve energy efficiency?

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First in terms of our energy structure, energy allocation, there are huge wastes.  Well, that has a lot to do with our overall energy planning of the entire nation.  Today energy is not scientifically allocated.  For example, for a coalmine, the coalmine has to transport their coal over long distances to the power generation plants.  So that's a waste of energy which I was talking about.  So how can we improve energy efficiency in the production process, including the production of coal, the generation of electricity?

In previous years such energy utilization or energy consumption in the production stage has been very low and we lag behind developed markets.  And, secondly, the energy conversion efficiency is relatively low.  That is to say we can achieve actually 30 percent energy savings in the coal to electricity conversion process.  And, thirdly ‑‑

ANDY SERWER:  I just wanted to jump in and toss it to Ellen, but go ahead.

FU CHENGYU:  (Via translator.)  Thirdly, we need to improve efficiency in energy utilization.  Today we are being a mega power grid, and we are constructing gigantic power generation plants.  But we don't have an integrated power grid.  And electricity generated from different sources, from water, from solar, and from coal is not integrated into one big grid.

And fourthly, in the product manufacturing process, how can we minimize energy consumption and maximize finished product production?

So in China we have huge potential for improving energy efficiency.  If we can improve energy efficiency, then we can achieve two-thirds of our energy savings, and deliver the same GDP growth rate.  So that's about my overall picture of innovation, and we'll need to draw upon other people's technologies.

ANDY SERWER:  Ellen some time, and Jeff some time, too.  So let me interrupt you.  We'll go back to you in a second, Chairman Fu.

Ellen, talk a little bit about what's going on in DuPont.

ELLEN KULLMAN:  The amazing thing to me is in the last decade the whole nature of innovation has changed.  And it has to be sustainable to be relevant in today's world.  And if you think about in areas ‑‑

I'll give you a couple of examples quickly, automotive, rail, airframes, lightweighting.  Lightweighting for higher fuel efficiency.  We make advanced materials that enable that.  If you look at the engines and motors today, they are operating at higher temperatures in order to be able to be more efficient, get more conversion efficiency.  But you need very different materials to operate at those temperatures than you did at the lower temperatures, and science and innovation can cross that.  Even in places like agriculture, sustainable agriculture, making sure that not only are we producing more, but you're utilizing it, nitrogen and things like that, water, in a way that creates great efficiency.

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And so I do think that today more than ever for innovation to be relevant, it has to be sustainable.

ANDY SERWER:  Great.  Thanks.

Jeff.

JEFFREY IMMELT:  So, Andy, since 2005, we've had an initiative in GE called Ecomagination.  It's really about clean energy innovation.  We did about $27 billion in those technologies in 2012.  We started at about $5 billion.  So we've always treated innovation as a way to solve problems, and this ranges from high efficiency gas turbines to wind turbines to conservation products.

And the only thing I would add to the other conversation is, we never viewed it as a green initiative.  We always viewed it as a problem solving, economic, how to do you attract growth kind of initiative.  So I think in many ways the way we can make better progress is by making these more mainstream and not elitist, high cost answers to problems.

We've had an MOU with the NDRC for a decade on clean energy investing.

ANDY SERWER:  What do those initials mean?

JEFFREY IMMELT:  This is the commission that basically would be like the Department of Commerce, Health, Energy in the United States, Transportation.

ANDY SERWER:  Okay.  Jeff, let me just stay with you for a second.  Fossil fuels still the number one energy source in industry's portfolio, maybe 80 percent.  What are you guys doing at GE specifically with regard to that?  And where do you see the portfolio, your portfolio at GE, say, five years from now?

JEFFREY IMMELT:  So you know, Andy, in power generation and energy, five years is like a second in time.  If you start a nuclear power plant today, it would be 15 years before it entered into service, or 12 years.  So you have to stay focused on what's practical and what can be done.  When I look at, let's say, the next 10 or 15 years globally, you're probably going to see more of a shift towards gas and renewables versus just coal which has been dominant for probably the last 25 or 30 years.  But hydrocarbons will still be the vast majority of power generation, let's say 10-15-20 years from now.

In our case, we've always treated energy ‑‑ the advantage a company like GE has is breadth.  So we basically have a bet on every technology.  We're in solar.  We're in wind.  We're in coal.  We're in gas.  And we're driving technology around all those.  The two biggest surprises, I would say, over the last decade are no one would have ever guessed that natural gas would be three or four dollars in the United States, but it is.  I can't look at one GE pro forma that ever predicted that.  But that is a massive game changer driven by technology.  And solar energy was 30 cents a kilowatt hour a decade ago, today it's 10.  Wind is maybe seven or six cents a kilowatt hour.  So gas and renewables will have a big advancement.

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The last thing I would say, Andy, is for Americans of my generation, we've learned energy innovation in Europe.  I think those days are over.  I think increasingly the incremental buyer of energy is here in China.  And so all of the technologies have to fit what happens here in China versus looking at other markets around the world.

ANDY SERWER:  Chairman Fu, could I go back to you and ask you about your energy portfolio, maybe people aren't quite as familiar with Sinopec as some of these other companies.  What do you produce, number one?  And then, a second question, can you talk about fracking, hydraulic fracking in China, and what you're doing in that field?

FU CHENGYU:  (Via translator.)  In terms of energy production, we primarily produce oil, and second natural gas, and thirdly biomass based energy, including biomass-based ethanol, and aviation oil, air fuel.  And we see the share of a biofuel rising in our portfolio.

For China, also for the entire world, the most important thing is to increase energy supply.  In particular, we need to increase the share of clean energy in the global energy supply.  So I agree to what Jeff has said, in the next 20 to 30 years, the main source of energy will continue to be hydrocarbons, but our responsibility is how to improve, how to make it cleaner.

And for China one thing is unique, that is over 70 percent of energy consumption is coal-based or coal-derived.  And that energy structure will remain basically unchanged in the coming 20 to 30 years.  So in this context, our responsibility is how to deliver clean coal, how can we deliver clean coal-based energy, and how to convert coal into other energy sources in a clean manner.

So as I said, the top priority for China is to improve energy efficiency.  For example, between 2005 and 2011, at Sinopec, through technological upgrading and innovation, while increasing energy supply, we have saved energy consumption that is equivalent to 1,260 tons of oil.  And we have cut CO2 emission by 34 percent, and we have achieved water savings of 127 million tons.  That is equivalent to 100 West Lakes in China.  Our CO2 carbon emissions has been reduced at a volume that is equivalent to 1,000 cars that have suspended operation for a year.

ANDY SERWER:  I'd like to get back to fracking in a little bit but let me ask you a really top of mind question, and I'll be frank.  When it comes to China, when people are looking at China today, they're looking at the air quality in Beijing, the pollution.  Is this being addressed?  I mean, that's the question on foreigner's minds, and I think maybe in Chinese people's minds.  Is the air pollution, air quality problem in Beijing being addressed?  What's being done?  What can be done?  What should be done?

FU CHENGYU:  (Via translator.)  I think it is not just an issue for Beijing.  It is an issue for the entire eastern provinces, eastern regions in China.  The first thing for China to do is environmental legislation, and increasing the bar, increasing the environmental standards.  And, secondly, every industrial enterprise should shoulder their due responsibility to environmental protection while carrying out all kinds of production processes, these industrial companies are also using energy and other materials, and also polluting the environment.  For us, while supplying oil, gas, diesel, how can we increase the environmental green standards.  The NDRC has set a clear goal for the country.  We want to achieve the Euro 4 standard by the end of this year, and the Euro 5 standard by next year.  And the local governments could set their various standards, and that's the traditional practice.

But today the government, the Central Government, has made it very clear that it is going to be mandatory for every layer of the government, for every region in China to achieve Euro 4 by this year, and Euro 5 next year.  Some CEOs are also asking me to have them achieve Euro 5 green standards by this year.

So if China were to double it's GDP without achieving energy efficiency, then we will be growing at the expense of the environment.

Andy, you have asked me a question about hydraulic fracking.  This has been going on on a massive scale in China right now.  I believe in ten years' time great progress will be achieved, but we have to be very responsible.  Every stakeholder has to be responsible.  The consumers have to change their behavior.  The producers have also to change heir production model.

ANDY SERWER:  Thank you very much for that answer, it's very interesting.  And it will be really fascinating to watch this unfold, because it's one of those issues.  So often sustainability, energy consumption is kind of a hidden thing and it's hard to see.  In terms of air quality, it's very visible, and it becomes a global issue with very big optics.

Ellen, I want to change gears a little bit and ask you we were talking a little bit about your innovation centers at DuPont, which I thought was really kind of cool that you have customers coming in and they're global centers.  Can you talk about that a little bit?

ELLEN KULLMAN:  You know it's interesting science is global, but solutions are local.  And in order to get that global science local, having large research and development centers and five or six in the world isn't going to cut it.  We had to get our 10,000 scientists and engineers connected on a much different basis and we created the concept of innovation centers.  It started in the automotive industry in Japan back decades ago, and what we learned is that when we create the opportunity to bring customers in to see everything DuPont has from a materials standpoint, from an environmental systems standpoint, to help solve their problems, they might come in with an idea that says I need an advanced polymer that can take high temperature and high corrosive in my power train and walk out with sustainable materials for headliners, decorative pieces, Nomex to insulate tough hoses and things like that, and turbo chargers.  And they walk out with solutions to many more problems.  So we have 11 of these in the world today.  We're putting up about one a year.  And it's a virtual laboratory with a lot of video conferencing capability, a lot of interactive displays.  And we bring customers in.  We have metrics, not only just how many customers we see, but in the last three years that we were actually ‑‑ so it's less than three years we've been driving this concept we have 169 projects that can deliver $400 million in sustainable revenue to the company on a risk-adjusted basis.  So we measure then how we can ‑‑ how this application of integration of the sciences can really not only help customers succeed, but help us grow our top line, as well.

ANDY SERWER:  And you have some of these centers in China, or you're opening them?

ELLEN KULLMAN:  Yes, we have a large research center in China, and we're opening two innovation centers here in China in the next couple of years.

ANDY SERWER:  Great.

Jeff, over to you, I want to ask you a little bit about fracking and solar, because I think you have some thoughts on both of those.  Those are two huge markets, but you've got fracking, solar, the United States, China, so there's four boxes, right.  That's the Harvard boxes, right, that kind of thing.  Can you talk about it?

JEFFREY IMMELT:  I don't know, it's a sophisticated area, I'll tell you.

ANDY SERWER:  All right.  Can you talk a little bit about those two markets and two businesses?

JEFFREY IMMELT:  So I'd say the first thing is gas is plentiful around the world.  I think this is a game changer.  It's going to have an impact in China, as well.  And if I were going to bet I would say that the gas penetration in China is going to grow over time, whether it's from transportation here or development here, it's extremely I think plentiful globally.  So fracking in the U.S. was really an entrepreneurial activity, driven by kind of wildcatters in the U.S.  And horizontal fracking is really what's opened up a lot of the gas in the U.S.  There are currently standards being set, but my sense is that standards will eventually take place, you know, Andy, in the U.S.  And so gas is going to be plentiful in the U.S.  The question is how we're going to use it, where the price evolves, do we export or not.

But, gas is going to be a very relevant and very big for a long time to come.  And there are similar formations in Poland, Argentina, other places around the world.  China is tougher to get to in unconventional fuel.  But, Chairman Fu is dedicated and others will innovate and so I think the gas availability will be very high as time goes on.  Solar is a different story.  Solar really has been driven by I would say the Chinese companies and the Chinese government really driving the costs down, the learning curve.  And nobody in the solar industry who is making panels basically makes money.  But, I'm not sure that really matters in the end.  I mean people around it; Ellen makes money, people that sell inverters make money.  But, people that are just in the panel business don't make money.

So they've driven the cost down and that's opened up new price points on solar.  And so I think both these things are going to increase the flexibility of the future in industry.  And gas, in the U.S. today there is no coal plants being built.  Gas will be the future for a long time to come and I think that will be true in different parts of the world.

I think, going back to the question you asked Chairman Fu, this has to be a big initiative of the government.  It's part of the ‑‑

ANDY SERWER:  This industry being?

JEFFREY IMMELT:  Clean energy, right, and pollution reduction is part of the 12th five-year plan.  Hank talked to you earlier about reforms.  I think slowing down the economy and driving reforms and pricing, getting more clean fuel in automobiles, getting the inefficient coal off the grid, getting more energy efficiency, setting standards for both water and pollution has to happen.  And the thing about China is when both the national government and the provincial governments put their mind and their focus on something, this country has the ability to move at scale.  And I think that's going to happen.  I think it has to happen.  But, it's going to try, it's going to require real change, real change on pricing, real change in standards, and that has to happen in China right now.

ANDY SERWER:  The U.S. has trouble doing things at scale.  Ellen, did you have a thought about that?

ELLEN KULLMAN:  It is.  The fact that solar in the last decade has made huge gains in efficiencies, and although Jeff is right, module manufacturers is over capacity, don't make a lot of money.  But, the modules themselves cost a lot less on a kilowatt-hour basis than they ever did before.  And you're getting to grid parity in places of the world that people didn't think would happen until like 2020.  And so the science is really delivering on the efficiency side of that.  And I never thought I'd see crystal on silicon that was approaching 20 percent efficiency.  And so the progress we're making on the effectiveness and efficiency of the renewability and the clean energies has been substantial.  And it seems to be accelerating.  And so that's why I do think that by 2020, 2025 the landscape is going to look a lot different than it does today, but regulation plays a huge part in it, in order to be able to step your way there in a very effective way.

ANDY SERWER:  Chairman Fu, you didn't talk about solar in terms of your portfolio.  I guess I'm curious why not.  And then what is your take on the solar industry, or solar power as a source in China?

FU CHENGYU:  (Via translator.)  China is now conducting the new round of industrialization with the largest population and the new round for industrialization touches about 4 billion people and compared to the last round of industrialization, which influenced only $1 billion people.  But, that round went on for 200 years.  This round of industrialization will be much faster.  In about 10 to 15 years China will finish that.  It means a lot of our energy consumption during industrialization.  And at the same time if we follow the historical pattern it's a serious pollution period.  China is now in industrialization.  In the long-term energy is always the common challenge faced by the whole world.  Plus, by 2050 the world population will increase by 2 billion.  So it will fall into the range between 7 billion to 9 billion.  So we need to secure the energy support to socioeconomic development.

At the same time we need to keep consensus about climate changes and the impact on the environment.  According to UN statistics, CO2 concentration has reached 389 ppm, while in a period from 1992 to 2001, compared to that period the temperature has increased by 0.4 temperatures.  So all these factors must be considered together with energy if we only consider the past industrialization growth pattern, China could not be successful.  That's why we have proposed a new path of industrialization in China.  It has included several highlight points:  Number one, high tech; number two cost effectiveness; and number three energy conservation; number four energy efficiency.  So China has for a long time pointed out the path of environmental conservation and an energy conserving society.

If we follow the historical path of industrialization we will have to exhaust the resources and energy in the whole world.  That's why we need to explore a new way, if in terms of energy efficiency we can reach the average of the European level in the coming years until 2050.  China may only need to increase our energy supply by 1.8 times of the current level.  But, if we take the current scenario then we need 3.2 times of the current level of energy.

As Jeff pointed out just now, the shale gas and shale oil in the United States and some other countries, we will put more reserves of fossil fuels in the society in the coming several years the economy growth is not that fast and the demand has a shrunk for energy.  So it's balanced in the short term.  In the United States shale gas has increased by 70 percent, and the production of shale oil per day is 1.8 million barrels, 37 percent of the total oil production.  So from this perspective it will bring more changes and the contribution to the development of unconventional fuels, including China.  I think China has a lot of potential in this respect, but we need technology and we should focus on the cost.  We need cooperation with Ellen.

JEFFREY IMMELT:  In 1992 the Clean Air Act passed in the United States.  And, Ellen, all of us, every CEO in the room, we don't like regulation, we don't like government intervention, we fight all those things.  You know, we're all the same, I would say.  That probably is the one common thread.  We all cried and complained about the Clean Air Act.  Today the locomotives that we make probably have 80 percent less emissions than they did in 1992.  Our margins are better.  We make more money.

And so I think this is going to have to happen in China.  The pricing system is subsidized at the wrong points.  The standards are too low.  They need to be increased.  But innovation can come in and solve these problems.  And so I just think there's a healthy give and take between government and business.  It's standards when they're raised in a reasonable way.  Business finds a way to hit the mark and make money.  Ellen talked about solar.  Nobody thought solar would do what it's done, but it has.  So I just think we need to get about this process of reform.

The big fear is what if everybody, if 1.3 billion people, if their electricity bill goes up simultaneously, that's a bad day in China.  We all have to recognize that.  But at the same time standards need to be raised.  Business innovation will solve the problem.  And I've seen that time and again in the United States and other parts of the world.

ELLEN KULLMAN:  I think it's because innovation doesn't follow a straight line.  How industries in developed countries innovated over time is not the path that China is following.  They're leaping generations of technology, and coming in at a very different point that allows that efficiency, allows that effectiveness to take place.  You look at high-speed rail in China, and you look at just the progress that's been made there.  They didn't do the incremental approach in going through all the different history that Jeff and his company have done with locomotives.  And the infrastructure is brand new, the efficiency is there.  And they're operating at a very different level than just about any place else in the world.  And so that can occur, but it needs an impetus to do it, and that's where that dialogue between government and between industry has to take place.

ANDY SERWER:  Right.  And you think about the opportunity for entrepreneurs and innovation in terms of capturing these new technologies can be brought to be bear to make this kind of progress.  I mean, there are tremendous fortunes to be made out there for people who come up with the solutions for these kinds of things.

JEFFREY IMMELT:  Ellen talked about innovation centers earlier.  We've got an energy innovation center in Harbin next to our partner Harbin Electric.  We have a healthcare innovation center in Chengdu.  I think just going back to the subject of energy, I would double down right now, put more energy innovation in China right now, I guarantee our business is going to grow here and grow dramatically working with Sinopec and the generating companies because the needs are vast, and the problems are big.  And that's the time when you want to be investing, not when everything is clear.

FU CHENGYU:  Andy, let me echo part of Jeff's comment.  (Via translator.)  Just now Jeff has been talking about price, about the issue of market, and the interactions between the government and the industries.  Actually, I would like to echo him, because the energy price in China might not be at an appropriate level for foreign invested enterprises.  They may not enjoy some advantages when making investments given the market mechanism.  Actually, it's the same for us, the Chinese local companies.

I would like to respond to Jeff's comment, the new Chinese administration has already taken as its priority of building a beautiful China and a better ecosystem as the strategy in the future.  So we need to build the environmentally-friendly society and treatment to the pollution, one of the focus areas, is not only the legislation part, but also we need to follow the market-based pricing system.  The government has already adopted measures in terms of gas, electricity, all your products, and water, and coal, et cetera.  We are fully confident that in the short period the pricing will be done based on market rules.

And I believe for your new product to launch and for your conventional business there will be good news for both you and us.  In addition, you also mentioned non-fossil fuels, wind power, solar, non-fossil fuels.  In such a large economy like China has developed so fast, but it has a very small absolute amount.  In 2005, the percentage of non-fossil fuels is 6.8 percent.  In 2011, it was 9.6 percent.  According to the current development path of wind, nuclear and solar, by 2015 this percentage might be 11.5 percent of the total energy mix.  But considering the big economy of China, 11.4 percent is not so satisfactory.  That's why we need to develop clean fuel, and non-fossil fuel, but at the same time we also need to improve the energy efficiency of the conventional fuel.

ANDY SERWER:  We have time for some questions from the audience.  I've got one over here.  We need a microphone.

QUESTION:  Hi, I'm Ming Sum of Clean Air Task Force.  Jeff, sorry that you don't like the Clean Air Act, but I think for our health we need legislation such as the Clean Air Act in the United States and they're pushing in China.

I have a specific question for Chairman Fu is that the air pollution issue you have discussed partly caused by the quality of the diesel and gasoline, black carbon is a big issue.  You have said that 50 percent, or roughly 50 percent of the gas and diesel is not supplied by the three majors in China, and small-medium companies are the ones that will bypass the laws.  What can you do to ensure, even the Chinese Government increases the regulation to make the quality stringent, but how do you ensure that they will be implemented at the local level in the small companies?

Thank you.

FU CHENGYU:  (Via translator.)  I would like to make a correction in terms of the numbers.  Actually the local refineries produce oil products accounting for 20 percent of the Chinese market, over 20 percent of the total supply.  So currently it's the issue of a standard selection.  The Chinese Government has clarified at the end of this year all of the gasoline must reach Euro 4 standards.  I believe a lot of businesses cannot live up to that standard.
And in the past, I think it's not that the Chinese government did not adopt the right standard, but the local government had the liberty, or discretion to choose which standard they would like to follow.  But now they don't have the discretion anymore.  I don't know about enforcement or implementation.

As to all your products, improving the standards from Euro 3 to Euro 5 in this process, we not only have a more stringent requirement of sulfur content, or sulfur emissions, we also have other quality standards.  We require less consumption of energy, at the same time we have to have effective enforcement.  And secondly the engine of the automobiles must live up to the standards, even if we offer the best fuel, if the automobile does not work right then it cannot be environmentally friendly.

Starting from the generator first, 2013 in Beijing all the cars, including U.S. cars, your motors must reach the Euro 5 standard.  The car population in China is 120 million cars in China.  Except for alternative energy, about 12.5 million tons of equivalent oil of alternative energy supplies, but most of the cars are burning oil.  If the automobiles cannot reach the standards, even if we make a massive investment in clean fuel we cannot really solve the problem.

QUESTION:  So for me myself alone it's difficult to achieve all the objectives.  We need to work with the government.

ANDY SERWER:  You wanted to jump in there.

JEFFREY IMMELT:  And this is something I've learned the hard way, both in terms of being a clean energy investor and spending a lot of time in China, is that words matter, and the words green and sustainability don't drive change.  Sustainability is not a catalytic word, because they have an elitist connotation.  I think when a Chinese CEO listens to sustainability they think they're about to be lectured by somebody from the United States on how to drive change in an impractical, or non-economic way.  And I think the extent to which we talk about innovation, effectiveness, efficiency, working with government in a responsible way, competitiveness, long-term change, those are the words that every CEO, every country can identify with.  And I think in the U.S. we make the same mistake, right.  We make the same mistake.  And I just think be practical, drive innovation, drive change, drive competitiveness, and that's where clean energy will win, and it will win in China and everyplace else in the world.

The U.S. is one of the few developed countries in the world that lowered emissions this year.  You know why, gas for coal, better energy efficiency, technology from Honeywell and DuPont and other great companies and a weak economy also helped.  We don't want to drive that one.  But, other things work.

ANDY SERWER:  Let me ask you something, Ellen, and it's about the competition for talent, say engineers in this area and innovation and sustainability, there are some young engineers, budding engineers over there.  But, in terms of competing on a global platform with companies like Sinopec, is it very competitive to try to find people who are at the cutting edge of this kind of knowledge base?

ELLEN KULLMAN:  You know it's interesting, because I'm an engineer by education. We were brought up very singularly in an individual science.  And today all the innovation is happening at the intersections of sciences.  I need engineers who not only understand chemistry, but can work with biologists and biotechnologists.  I need people who can work at a nano level, but understand its impact on advanced materials.  And so the war for talent in that area, in scientists and engineers is a global war.  This talent moves globally.  And it's something that we as a world have to create more of.  We need more engineers and scientists.  That's where, to Jeff's point, it's just not about sustainability, it's the economics of sustainability and creating a better world and it's real.  And we need more of our young people going into the sciences, and I'm a big believer in engineering, as the preeminent one, in order to be able to drive that productivity, that efficiency of whether it's automobiles, cleaning up power plants, stripping sulfur out of water streams and air streams, more efficient locomotives, higher efficiency photovoltaic cells.  We need the talent in the world that can deliver it.  We've seen it.  And we're not producing enough of it today.

ANDY SERWER:  Yes.

Chairman Fu, and Jeff I know your workforce is very global.

Chairman Fu, your workforce primarily Chinese, or do you have engineers from around the globe at this point?

FU CHENGYU:  (Via translator.)  Well in China most of our engineers are Chinese.  Internationally we are expanding our footprint very fast with over 600 billion in overseas investments and business activities all across 35 countries.  So we have two team structures, or two components of our team, the expats from China.  But, they account for only 5 percent, 95 percent are international employees, or talents in our overseas operations.  But, the brain drain is a serious problem in China.  My international competitors, or counterparts, are taking people away from companies like mine.

ANDY SERWER:  We're going to make Sinopec more successful.

FU CHENGYU:  (Via translator.)  It means we need a cross-equity holding structure to make it happen.

ANDY SERWER:  We're going to have to wrap it up.  We're getting a little behind schedule.

Anyway, please join me in thanking Jeff Immelt, Ellen Kullman and Chairman Fu.

Thank you guys.  (Applause.)

STEPHANIE MEHTA:  Thanks to Andy and thank you to all of the panelists this morning.  It was a really, really insightful morning thus far.  And at this point we're about to take a refreshment break.  But, I need to take a moment to acknowledge our partners.  And forgive me; I'm going to read it, because I don't want to leave anybody off.  None of this would be possible without the support of our host city, Chengdu.  We'd also like to give special thanks to our presenting partner Trilogy, and all of our partners, including Air China Limited, the Coca-Cola Company, Dev Factory, DuPont, Lenovo, PTT Group, Sichuan Shuijingfang Company Limited, Volvo Cars, Zurich Insurance Group, our education partner, the George Washington University, our knowledge partner McKinsey and Company, and our supporter International SOS.

We're going to take a short break.  Please be back here at 10:45.  We do need to have a session in this room during the break.  So if you could please exit through one of the rear doors we'll see you back in about half an hour.

Thank you.

END

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