Joseph Hogan: "Green quotient for brands is just false advertising"

Swiss engineering firm ABB's chief executive says that climate change and India are big on the company's radar

Published: Nov 10, 2009 08:20:00 AM IST

You have invested heavily in emerging markets. Now there is no growth coming from here but developed markets like the US seem to be reviving investments in power and oil and gas. So what are the short term dynamics you have to deal with there?
We have been a net exporter for years out of the developed countries and I want a balance of trade. I don’t want to be a net exporter. The trick is to make sure how do we balance our portfolio in the sense we make investments in areas like emerging economies so that we are not caught off-guard from currency standpoint, or design and engineering capabilities. I can say we are under-penetrated in the US and Brazil and we have more investments to do here in India. The problem is solved to a good extent as the growth is coming from emerging economies and that makes it easy for us to invest there. It may sound logical and simple but the trick is to do it by business unit and by geographies.

In today’s world, it appears that volatility and uncertainty have gone up making the CEO’s job tougher. How do you contend with it?
These jobs are never easy. But they are certainly enjoyable no matter what the situation is. The essence of managing a large company always is resource allocation — labour and capital. Obviously, when there is a recession, there are less resources. You then have to ask how things are going to grow. Where will the opportunities lie?

What I truly believe will grow in developed economies in business related to climate change. Power systems and grid systems that exist in developed world and generating equipment with lot of coal fires have to change.

Even if those economies are the developed one and slow on uptake, governments will continue to support infrastructure investment in renewables. If you take energy and climate change, even in the developed economies that are struggling today, energy savings and investment in renewables would be big. So for me the three major trends are climate change, growth in emerging economies and energy and process efficiency.

Talk of climate change has been going on for seven-eight years. How has it percolated deeper into you business today?
The difference from seven years ago is that people actually believe that climate change is happening. Though there are scientists who argue that it could be just CO2 dominated etc, society, no matter where you are living, seems to believe it is happening.

Within our businesses, there are now people who drive the energy efficiency equation with the process automation and power system business who directly report into me and I report to the board. They get the attention that way.

When it comes to renewables like hydro, wind and solar, it materialises itself through different products and systems. To that extent, they are already in the mainstream of our businesses today.

How serious an issue is climate change becoming for businesses globally?
The US still doesn’t have a new energy policy nor are they going to have one soon. They have too much of a problem in healthcare for that to happen. But without that, in the last three-four years, majority of energy additions in power has not been in coal power but largely in wind. Power from wind and solar put so much pressure on grids because of the variability in the way wind blows or sun shines. There is a lot of technology going into stabilising grids. How do I see it materialise? We certainly see it in my customer requests — in the US, Euorpe, China and we are beginning to see it in India.

How do you see the demand from emerging markets?
Emerging economies have two challenges — they need a lot of power and corresponding efficiency as they continue to grow fast. You don’t just have to worry about the stability of the grid but also about generating more and more power as compared to say US, where stability of the grid is the big issue. When I look at emerging economies, I see more and more of them taking responsibilities for climate change, which wasn’t there four years ago. China has announced a huge capacity in wind, I think 120 gigawatt. India looks like it is making investments in renewables.

I don’t see emerging economies walking away from this climate change issue. I think they are making the obvious point and rightful point. When the Copenhagen summit happens, emerging countries could be leading that.

How important is the green quotient for a corporate brand today?
Some companies say that 60 percent of our sales are green. I think it’s ridiculous. I can say 80 percent of our sales are. It’s convoluted. We have to develop technologies around what our customers and countries needs are. In B-to-B [business to business], just because my turbo charger uses 10 percent less energy does it mean it is green? I think that’s false advertising. I don’t want to do that.

How do you motivate employees?
It’s important for them to know what are they doing directly to help. We brought power to India villages so that children could read at night. Water had to be brought 5 km away and we helped get water pumped right into their villages.

Our employees know that. It was our project. It was our engineers. Employees feel charged when they see a community benefit. It’s not about electric motors that save 30 percent energy. It’s like a hybrid car — you may feel good about but it’s hard to see the results. I want to do more of those simple programmes around the world, somehow blending renewable energy with it and getting the employees involved.

When I grew up in 70s and 80s, big corporations were led by 3 S’s — systems, structures, and strategy. My children don’t care about the 3 S’s but they care about purpose, process and people.

(This story appears in the 20 November, 2009 issue of Forbes India. To visit our Archives, click here.)

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