The problem is clear. With China's urban population growing and its citizens consuming and driving more, the nation's already poor air quality will get even worse if nothing is done. That was one of the main themes during 'Building a Sustainable Future,' a session of Fortune's Global Forum in Chengdu where three of the world's top CEOs put their heads together today to parse this problem.
Fu Chengyu, chairman of the Chinese oil, gas and chemical giant Sinopec, believes that while renewables like solar and wind are important, at least in the short term, they will play a minor role in solving China's air quality problem. He says that China can gain much more by pursuing energy efficiency. "We consume three times more energy than Europe per dollar of GDP," he says. "We need great technological innovation to solve our energy efficiency challenges. We can cut our energy needs by two-thirds through efficiency."
The challenge is daunting. Fu said that if China follows the historical path of industrial development, it will eventually exhaust the world's supply of energy. So what can drive change? General Electric CEO Jeff Immelt, Dupont CEO Ellen Kullman, and Fu all agreed that China needs tougher environmental standards and ones that are enforced. Already, Fu says, the Chinese government is working on ways to cut emissions from coal plants and to raise environmental standards to Euro 4 and Euro 5 levels. Another thing he says will help: Beijing is already moving away from energy subsidies toward free-market pricing, which would encourage more foreign corporations to bring clean tech to China.
Jeff Immelt, the CEO of GE (GE) agreed that China was serious about cleaning up its environment and said he would "double down his clean energy investments there." So far GE's record in investing in clean technology has been impressive. Immelt says that since focusing his company—which makes everything from hybrid locomotives to wind and gas turbines—on innovation in the energy space with his Ecomagination program five years ago, revenues from energy efficient products have risen from $5 billion to $27 billion annually. In other words, innovation in energy makes good business sense.
Immelt worries, however, that western CEOs who throw around terms like green and sustainability are hurting their own cause. "Words matter and the words 'green' and 'sustainability' don't drive change because they are elitist," he said. "When a Chinese CEO hears the word sustainability he thinks they're being lectured to by the U.S. on how to do things in an uneconomical way."
Dupont (DD) CEO Ellen Kullman said that innovation in the energy sector can be spurred by listening more to your customers. In addition to its large R&D centers around the world, Dupont has set up 11 smaller innovation centers globally, including two in China. "What we've learned," she said, "is that science is global but solutions are local." Kullman says that when her customers visit these innovation centers they bring ideas that often lead to winning products. Over the last three years the innovation centers have led to 165 new products that will deliver $400 million in sustainable revenues.
How soon will China be able to clean up its air? No one was willing to venture a guess, but Chairman Fu was optimistic: "The central government has made the environment its top priority." If that turns out to be true, the Chinese will be able to breathe a big sigh of relief.