Managing Automation- July 2008

SUSTAINABILITY AN ENGINE OF SUSTAINABLE DEVELOPMENT James W. Owens has transformed Caterpillar into a model of manufacturing sustainability, despite harsh criticism from conservative groups. BY JEFF MOAD Y ou wouldn’t expect a CEO whose company depends on the worldwide expansion of the mining and energy industries to stake out a leadership position on sustainable manufacturing. Neither did the 82 representatives of mostly conservative think tanks and lobbying groups who in June 2007 signed a sternly worded letter scolding James W. Owens, CEO of Caterpillar Inc., after his company became one the first corporate members of the high-profile United States Climate Action Partnership (USCAP). “It’s outrageous that a CEO would harm his key customers without doing any due diligence to determine the impact on his customers and shareholders,” asserted the widely read letter that, among other things, criticized USCAP and Caterpillar for their support of cap-and-trade approaches to reducing carbon emissions. Owens, however, has remained firm, refusing calls for Caterpillar to quit the USCAP, which also includes environmental groups such as the National Resources Defense Council and the Nature Conservancy. Certainly Owens is no wild-eyed tree hugger. In fact, the 62-year-old executive’s conservative credentials are solid. A consistent contributor to Republican politicians, Owens has held positions on President Bush’s Manufacturing Council as well as the president’s Advisory Committee for Trade Policy and Negotiations. A trained economist, Owens has been a strong advocate of global free trade. But, since stepping into the CEO role at the world’s largest manufacturer of con- struction and mining equipment machinery four years ago, Owens has set an example for CEOs of other large manufacturing enterprises by authorizing investment in sustainability-focused new product development, setting aggressive and public goals for improving Caterpillar’s performance on sustainable development, and investing in remanufacturing, an effort that reduces energy consumption and carbon emissions — while making Caterpillar money. In 2005, for example, customers from around the world returned 135 million pounds of equipment components to Caterpillar Remanufacturing Services. Seventy percent of those units were turned into remanufactured products, and the rest of the material was recycled. Caterpillar has been a member of the Dow Jones Sustainability Index for six consecutive years. Currently, the company is investing in a project that will convert end-of-life diesel engines from around the world into generators that can turn methane gas from animal waste into usable energy. Under Owens, Caterpillar has invested heavily in new products that are more fuel-efficient and kinder to the environment. Caterpillar has reengineered its heavy equipment engines to signifi- cantly reduce the amount of particulate matter they spew. The average CAT heavy vehicle traveling 120,000 miles put out 78.4 pounds of particulate matter in 1994. Today, Caterpillar says, the same type of vehicle traveling the same distance puts out 7.8 pounds. Caterpillar is investing in the development of a new engine, the C9, which will move 25% more material per gallon of fuel than the company’s current engines while cutting greenhouse gas emissions by 25%. “CAT has spent billions over the past 10 years to develop technologies that promote cleaner engines, and they grew their remanufacturing business 67% from 2001 to 2006,” says John Davies, vice president of the Sustainability Forum at AMR Research. “Whenever I tell people what Caterpillar is doing, they perk up. It’s not a well-known story, but what they’ve done under Owens and before him should be an example for others.” But, analysts say, Owens’ focus on sustainable development isn’t only about setting an example for others; it’s also about good business. As the U.S. economy slows, Caterpillar is increasingly looking to customers in the developing world to sustain its growth. In its most recent fiscal quarter, for example, Caterpillar’s revenue from North American operations grew only 4%. That was more than offset by 37% revenue growth from Asia and 30% growth from Europe and the Middle East. And as Caterpillar continues to seek new business outside the United States, its reputation as a company that is willing to invest in sustainable development can only help. James W. Owens AGE: 62 POSITION: Chairman, chief executive officer, Caterpillar Inc. CHIEF ACCOMPLISHMENT: In the four years since Owens took over as chairman and CEO, Caterpillar has rapidly grown revenue — particularly in developing regions — while making significant investments in sustainability, including remanufacturing and making its products more efficient and cleaner. AWARDS: Named a member of the Dow Jones Sustainability Index for six consecutive years July 2008 23

Table of Contents Feed for the Digital Edition of Managing Automation- July 2008

Managing Automation- July 2008 Contents Take 1 HP's Acquisition of EDS May Face Integration, Global Delivery Challenges Rimini Plans to Woo SAP Support Users Rockwell Steps Up Its Activities in Software Microsoft Targets the Process of Innovation Supply Chain Standouts Honored by AMR Notes Who Are Today's Influential Thinkers? The Robot Revolution Is the Price Right? Without a Trace Harvesting the Suggestion Box Product Scan Advertiser Index Next

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