Megatrends: The power behind Eaton's global green growth


Megatrends: The power behind Eaton's global green growth

Image courtesy of Eaton.

Cleveland has been a major manufacturing hub since John D. Rockefeller founded Standard Oil there in 1870, but the decline in domestic production has left the region's economy on shaky ground.

Yet, just as the infamous fire on the city's Cuyahoga River helped establish the Clean Water Act and the U.S. Environmental Protection Agency, the negligence of suppliers in developing nations is inadvertently giving American manufacturing a second chance. In fact, a growing taste for "Made in the USA" products, coupled with the sustainable reincarnation of Eaton Corp., one of Cleveland's largest companies, has the potential to spark a green renaissance in the Rust Belt.

Eaton Corp. (NYSE: ETN), a $21.8 billion global diversified power management company, may not enjoy the name recognition of consumer brands, but it wields considerable international influence. A leader in electrical products, systems for power distribution, and hydraulics and aerospace equipment, Eaton employs 103,000 people around the world and sells its products in more than 175 countries. If you have entered a building, boarded an aircraft, operated machinery or driven a car or truck, chances are you are among the half of the world's citizens who benefit from Eaton's technology.

Although the 99-year-old company first moved its home base to Cleveland in 1914, Eaton relocated its global headquarters to Dublin, Ireland, in 2012 following its acquisition of Cooper Industries. But the global powerhouse remains true it its roots. Eaton has more than 1,000 Northeast Ohio suppliers that meet the needs of the company and its various businesses. In 2012, Eaton purchased $275 million in goods and services from statewide suppliers, totaling nearly $550 million. Preparing for more growth locally, the company recently moved into a 600,000-square-foot campus on a 53-acre site in Chagrin Highlands, east of downtown Cleveland.

Situated on Cuyahoga County's second-highest elevation point at 1,255 feet above sea level, the 10-story tower is exceptionally prominent. Consistent with Eaton's commitment to sustainability, the new building was designed to consume 40 percent less energy and 40 percent less water than a conventional building of smaller scale. The rainwater reuse system is expected to significantly cut water consumption, and a high-efficiency glass-curtain wall system maximizes the use of daylight while optimizing thermal comfort within interior spaces. Eaton Center eventually will accommodate more than 1,000 of the 1,800 Cleveland-area employees, and is expected to earn its LEED certification within the next few months.

The company is focused on energy, which CEO Sandy Cutler calls a megatrend.  

"One of the biggest that affects us and our customers is the ever-increasing cost of energy," Cutler told Eaton World. "Our focus on this megatrend brings drive and urgency to our work as we develop innovations that help our customers find ways to use power more efficiently, reliably, safely and sustainably."

Image courtesy of Eaton.

Such megatrends are embodied in the entry gallery of Eaton Center, where four 65-inch interactive tables provide visitors with a unique and collaborative way to learn about Eaton's response to some of the world's greatest challenges. The tables, combined with the LED curtain and chandelier, comprise the Eaton Experience Center (EEC). Such EECs now exist in offices from Cleveland and Houston to Moscow and Shanghai, and are used to communicate to stakeholders Eaton's commitment to innovation, research and development.

A peek behind the curtain

I visited the Eaton campus for a corporate roundtable convened by the Center for Sustainable Business Practices at Cleveland State University's Monte Ahuja College of Business and the Corporate Sustainability Network.

"This is a pivotal point in time," said Barry Doggett, Eaton's senior vice president of public and community affairs. "The population is growing, demand for natural resources is increasing, and technology is having an enormous impact."

The middle class will grow from 2 billion to 5 billion by 2040, according to research shared by Doggett. Chinese electricity demand alone is expected to rise by 400 percent during this period. To manage the resources necessary to accommodate rampant growth, governments are mandating improvements in energy efficiency. China's current 5-year plan sets aggressive sustainability targets by 2015 and strives to lower emissions per unit GDP by 17 percent, reduce energy consumption per unit GDP by 16 percent and fulfill 11.4 percent of energy needs from renewables.  

The European Union also aims to reduce emissions by 20 to 30 percent by 2020, recycle 50 percent of household waste by 2020 and meet 20 percent of energy needs from renewables by 2020. The United States plans to reduce vehicle fleet fuel use by 30 percent by 2020 and improve water efficiency 26 percent by 2020.  

In light of these trends, Cutler believes that "as a diversified power management company, Eaton is positioned to address one of the most important challenges of our times -- reducing the rising cost and environmental impact of the world's insatiable energy demands."

To accomplish this, Eaton is achieving sustainable growth through the responsible use of resources, aiming to create new industries and recreate old ones. Eaton is connected to alternative energy, including solar, wind, wave and bioenergy power; water use through desalinization, rain harvesting, wastewater treatment and water recycling; fuel-efficient transportation, including hybrid and electric vehicles, charging stations and more efficient aircraft; and financial markets through carbon trading protocols and socially responsible investing.

To help bridge the gap between rapidly rising demand for energy and naturally constrained sources of supply with sustainable solutions, Eaton is working to increase energy efficiency in buildings, data centers, transportation, infrastructure, utilities and industry.

Doing so also provides an opportunity to capitalize on megatrends. For example, Eaton projects a:

• 60 percent increase in global demand for energy in buildings projected by 2050
• 600 percent increase in the global LED lighting market projected by 2020
• 70 percent increase in food production by 2050 necessary to feed a global population of 9.1 billion people
• 150 percent increase in annual distances traveled by commercial aviation expected by 2030
• 25 percent increase in fuel economy necessary by model year 2018 to meet the first U.S. emissions standards for heavy-duty trucks

"Companies that do not adapt often perish," Doggett said, noting the life span of a successful Fortune 500 company is about 40 years, while 98 percent of small American companies disappear within 11 years. "Given this reality, the stakes have never been higher to pursue sustainability. It's a way to manage litigation risk, reputation impact, social challenges and missed opportunities."

Eaton's many distinctions are proof that its green growth strategy is working. Eaton was named as one of Thomson Reuters Top 100 Global Innovators (2011-2012); ranked among the world's top sustainability performers in the NASDAQ Global Sustainability 50 Index; listed as one of Corporate Responsibility Magazine's 100 Best Corporate Citizens, 2008-2013 (ranking No. 4 for 2013); and ranked among Fortune magazine's World's Most Admired Companies.

Cleveland is home to well-preserved art deco architecture, an urban ballpark and the Rock and Roll Hall of Fame, all of which are outstanding monuments to the 20th century. But in order to maintain cultural and economic vitality, Cleveland and similar American cities also must support local manufacturing and sustainable development. Eaton not only proves that these goals can be accomplished profitably, but celebrates sustainable innovation as both a competitive advantage and an opportunity.