Why CEOs shouldn't fear a green agenda: building more efficient equipment is actually an important key to profitability.

George David is chief executive of United Technologies, which includes Pratt & Whitney jet engines, Otis elevators and Carrier air conditioning divisions. The current CEO of the Year, David says the goal of environmental sustainability is not at odds with the goal of making a profit. Here are excerpts from a conversation:

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Q. Should American CEOs have a green agenda?

Yes, absolutely. We have to speak about direct and indirect impacts, and why reducing both is good for shareholders and other constituents like employees, governments and customers.

Q. Your company's products are a significant source of greenhouse gases, aren't they?

We account for about 2 percent of total greenhouse gas emissions worldwide every year. About 1 percent is from Pratt & Whitney engines and 1 percent from Carrier heating and air conditioning units. These are indirect impacts. The problem is that it's not unusual for this type of equipment to have a long life, usually 30 to 40 years. As a result, for example, there are some 56 million Carrier air conditioners operating in the world today. Not only does the equipment accumulate, but 30 and 40 years ago we weren't aware of greenhouse gases and their impacts. Nobody was.

Q. How do you attack the challenge?

Reducing "badness" is, by definition, "goodness." Let's go back to direct impacts, meaning those arising from a company's own operations. Every year, Corporate America reports data in defined categories to the Environmental Protection Agency. Two principal ones are hazardous waste and chemical releases to the air. At UTC, we've reduced both by 90 percent or more over 10 years. Our hazardous waste went from 37 million pounds annually in the early 1990s to 4 million pounds today. Apart from creating environmental goodness, disposing of hazardous wastes costs about $1 per pound. That's an annual savings of $33 million for us. A good deal all around.

Q. What about energy consumption?

We've reduced both energy and water consumption in our own operations by 40 percent over the last eight years, normalized for business volumes. Our energy bill then was a couple of hundred million dollars a year. We have since invested $200 million, anticipating savings of $50 million annually. The results are 6 percent fewer kilowatt hours of electricity and 41 percent fewer British thermal units of natural gas even with significantly larger business volumes.

Q. Your current products are also much more energy-efficient than they used to be. That's the indirect impact, isn't it?

UTC's products universally convert energy into useful work whether with an aircraft engine or air conditioner or elevator. So yes, a modern airplane moves a passenger about 100 miles on a gallon of jet fuel. That's three times more than 40 years ago, and the Boeing 787 promises another 20 percent improvement.

Q. How about your other products?

We've had a good, tough green agenda for 15 years. Carrier began positioning itself in the early 1990s as the "green" air conditioning company. It led its industry in converting from CFC-based refrigerants to ones with zero chlorine content and therefore no ozone impact.

Air conditioners in the U.S. are already 42 percent more energy-efficient than those of 40 years ago. The new federal Seasonal Energy Efficiency Ratio, or SEER 13 standard, to be effective on Jan. 23, 2006, will increase efficiencies another 30 percent. Carrier has led all these changes, especially the adoption of the SEER 13 standard.

Q. How are you getting gains in Otis elevators?

Our current Otis elevators use 80 percent less energy than comparable equipment even a decade ago. We do this in part with permanent magnet gearless motors. More importantly, we recapture the energy when the load comes down that we expended when the load went up.

In other words, the elevators are regenerative. This is nothing more than Sir Isaac Newton's laws of motion. If you had perfectly efficient systems, they wouldn't use energy [on a net basis] at all, but there are some losses in terms of heat, friction and minimal noise. So we're not perfect yet but are getting there just like Newton said we would.

Add this up with engines, air conditioners and elevators, and the results are large. These are just examples, and there are countless others.

The bottom line is we waste energy because it has been readily available and cheap for a century. We've wasted energy and had other environmental impacts. But we can do better, lots better. Careful, thoughtful work that optimizes processes and preserves resources can make a huge gain in environmental impact without any net badness.

Q. So the United States as a whole could tackle our energy and environmental problems simply by making equipment more efficient?

Much of the Bush Administration's current energy agenda involves protecting energy consumption by increasing production. But the first place I would look to solve the energy problem is consumption. That doesn't mean deprivation, as some people have suggested. Instead, it means higher efficiencies to achieve the same functions.

Q. Some business leaders seem to resist an environmental agenda because they fear it will add to costs and hurt their bottom lines. Are they right or are they wrong?

In most cases, they're wrong. Doing more with less is usually a good plan.

Q. Why have some other industries not come to the same conclusion you have?

Here's one conclusion they're coming to, ever so slowly. The same laws of motion apply to a car. If you accelerate and decelerate a car at the same altitude, it will use zero energy if you can recapture the energy, except for the system losses. People have experimented with that for years. The hybrids coming out of Japan have, in fact, started using breaking energy to recharge the vehicle's battery.

Q. In view of where energy prices are today, do you think we're on the brink of having more CEOs of manufacturing companies try to become more efficient?

Yes, I do. I think this is something that's so simple.

Q. Will it be driven by business and economic realities or by government programs?

Markets are usually more powerful even than governments. Governments can help with leadership and resolve, like with a bully pulpit, but markets will ultimately govern. We like markets in America and should always work to protect them.

Q. So you don't think "sustainability" is necessarily at odds with the goal of making profits?

No. Profitability is the excess of what someone will pay for something they want over the costs to design and produce it. In other words, better functions come "out" and fewer costs and resources go "in." Sustainability is the same principle but with a different connotation. We make money out of sustainability--we make money out of lower resource consumption.