Cummins CEO says innovation, sustainability, and regulations are good for business

At Environmental Defense Fund, we believe that environmental progress and economic growth can and must go hand in hand. EDF+Business works with leading companies and investors to raise the bar for corporate sustainability leadership by setting aggressive, science-based goals; collaborating for scale across industries and global supply chains; publicly supporting smart environmental safeguards; and, accelerating environmental innovation.

This is the sixth in a series of interviews exploring trends in sustainability leadership as part of our effort to pave the way to a thriving economy and a healthy environment.

I’ve worked with many business leaders over the course of my career, and there are few more forward-thinking on sustainability and environmental innovation than Tom Linebarger, Chairman and CEO of Cummins, Inc.

As head of the largest independent maker of diesel engines and related products in the world, Tom has set lofty environmental goals for Cummins, including cutting energy intensity from company facilities by a third by 2020.

Under Tom’s leadership, sustainability and community engagement have become core parts of company culture including efforts to establish technical education programs around the world to lift youth out of poverty and publicly favoring tough, science-based and enforceable environmental regulations.

I recently had a chance to catch up with Tom and learn more about the formation of Cummins’ sustainability goals and the importance of long-term protective standards in the trucking industry.

Here’s an edited transcript of our conversation.

Tom Linebarger, Chairman and CEO of Cummins, Inc.

You recently committed to set a science-based target for reducing greenhouse gas emissions across your supply chain. How did you come to that decision?

There are two long-standing and important elements of our culture that drove us towards sustainability.

First, it’s our stakeholder model. We think that the communities in which we live and work and operate need to be stronger and more prosperous as a result of us being there. Therefore, we can’t just take and use resources we need to be people who, while we create wealth, also sustain and contribute to those communities.

The second part is innovation. We’ve been an innovator since the very beginning: on the diesel engine, natural gas engines, and on emissions controls. We see customer and environmental challenges as opportunities to demonstrate leadership and innovation.

The biggest environmental impact of Cummins occurs when your products are used, and a lot of emissions factors are beyond your control, such as maintenance and driver behavior. How do you address this complex web in order to encourage optimal performance?

If we’re going to make a difference in our communities, we have to understand the impact we make with our products, facilities, and supply chain. Our products help to drive the basic foundations of the economy: moving food to store shelves; moving energy so that we can operate in our buildings, etc. But products do impact the environment, that’s a really important thing for us to acknowledge.

That’s why we’re constantly asking what the opportunities are for us to innovate, so that we can drive wealth creation for our shareholders and for our customers while reducing the impact we have on the environment. Step one is that we push for strong, clear, and enforceable regulations.

Why, from a business perspective, have you been so vocal in pushing for strong regulations?

Fred Krupp, President, Environmental Defense Fund

Regulations play an important role in protecting the environment, and we’ve worked hard to make sure that we’re a positive contributor to that effort. There’s also no question that Cummins has benefited because of environmental regulations. By investing to meet tough environmental standards, we were able to develop businesses associated with meeting emissions.

The regulations not only helped me as a citizen breathe cleaner air and drink cleaner water, they also helped Cummins build a business that’s sustainable, profitable, and growing globally.

We also push a lot of our peers and suppliers to support tough, clear, and enforceable regulations because we recognize that they’re good for our industry. If our end customers and our communities see us as adding to the world, not just taking from it, we’ll have a longer and more sustainable future.

What’s your perspective on the role for long-term protective emission standards?

Looking at the long-term, we first we want regulations to be science-based, to take advantage of all the technology that’s available and to not be just political tools. Secondly, the regulations should be tough, because these are tough problems to solve and require us to find new technologies, and new ways of operating.

We also want them to be clear, and therefore not subject to interpretation, such that the courts don’t have to be involved in every regulation. Lastly, they need to be enforceable. If they’re not enforced properly, then only the people that comply lose.

You’ve made sustainability a core part of Cummins’ operating philosophy. What did it take to implement such a dramatic shift in your culture, and what benefits have you realized as a result?

Cummins QSK95 engines were used to power the new diesel-electric Charger Locomotives built by Siemens.

From our point of view, emphasizing environmental sustainability is the right thing to do, but we also think its good business.

By investing in technologies related to environmental sustainability for our products, we are meeting tough U.S. regulations like the Clean Air Act. This means we can sell in other countries that are implementing similar environmental standards.

There’s no question that our focus on environmental innovation and leadership has caused our company to grow, to become more profitable, and to increase our appeal with big companies that would like to partner with us because of our leading technologies.

At our own facilities, we’ve installed environmentally sustainable technologies that offer a win-win: less environmental impact and cost-reduction benefits.

Lastly, sustainability brings employee engagement benefits. People want to join a company that is engaged in solving the biggest problem of our time, and so when Cummins says, “we’re in” that makes potential hires more interested in us, and makes employees more attached to the company because they’re working for something important. This translates into more thinking, more innovation, and more energy from our employees.

Your company recently unveiled its E-class 7 electric truck. What led you to invest in that technology, and what role do you see for electrification in trucking a decade from now?

We see electrified powertrains as a really exciting opportunity they could play a pretty significant role in areas like urban transportation, where distances tend to be shorter, and stop-and-go traffic is higher.

The reason for investing in electrification goes back to our DNA in how we see change as an opportunity for innovation, not as a threat.

We’re not really wedded to one technology versus another; what we’re wedded to is solving customer problems with innovation and dependability and doing so with fewer resources every year.

In my nearly 25 years at the company, there’s never been a time where more technology change is happening in our industry, and many technologies that we’ve been talking about for a decade or more look like they’re going to be economically viable in the next five or 10 years.

What do you think leadership means in the context of sustainability?

I think everybody now recognizes that sustainability is part of the responsibility as a leader of a large organization. It’s not the government’s responsibility and it’s not the environmental nonprofits’ responsibility. Businesses should be part of the environmental solution, or we will not exist.

Environmental leadership means you need to understand the relationship between the regulatory environment, your technology and your strategy. But you also need to ask yourself: do you want to be pushing and leading upfront and what reputational benefits does that give you, how does that attract people, how does that help you build a sustainable future?

Your people really want to work for companies that are thinking about solutions for major environmental problems. So if we are not leading here, not only will our company suffer, people will not come to work for us.

One last question for you, given that you’re on the board of Harley-Davidson. What’s your favorite model?

I love the Sportster model it’s a bike that was modeled after an old Flat Track bicycle, when they used to do flat-track racing. The company knows how to connect feelings like freedom or associations you have with cool people like James Dean or Steve McQueen and put it all into a motorcycle. I don’t know how they do it, but it’s powerful.

The motorcycle that I’m most excited about, though, is the electric motorcycle. They did a pre-release about a year ago, and they had it in one of The Avengers movies it’s the coolest motorcycle you’ve ever seen. When you start it up, it weighs very little, and sounds like an airplane taking off. It’s remarkably cool and really, really fast.

Follow Fred on Twitter, @FredKrupp