Green Spot: Johnson Controls: A Legacy of Efficiency

According to Clay Nesler, vice president of global energy and sustainability at Johnson Controls, Inc., the leading edge of efficiency is the only place to be for a company that was built off the back of the invention of the first electric thermostat back in 1883. Since its start nearly 125 years ago, Johnson Controls, Inc. has grown and diversified into its present incarnation as a player in the automotive, construction and power solutions markets, while at the same time continuing to hold onto Professor Warren Johnson's original ideal of using the power of technology to drive efficiency.

IW: How are you addressing energy efficiency?

Nesler: Johnson Controls has made significant progress reducing its energy intensity even as the company has grown substantially over the past five years. In 2003, Johnson Controls joined the U.S. Environmental Protection Agency (EPA) Climate Leaders program, thereby committing to:

1. Develop a corporate-wide GHG inventory of the 6 major greenhouse gases and report progress annually based on detailed EPA protocols and guidance;
2. Develop a corporate GHG Inventory Management Plan based on a detailed EPA checklist to institutionalize the inventory process; and
3. Establish an aggressive corporate-wide GHG emissions reduction goal.

After a comprehensive EPA audit, completed in September 2007, the Climate Leaders program approved the company's GHG baseline (2002), Inventory Management Plan, and the protocols used to calculate emissions for emission sources. Johnson Controls will announce specific intensity reduction goals in December as part of the EPA Climate Leaders meeting in Denver.

Johnson Controls also participates in the Global Reporting Initiative, providing a consistent format by which companies can report and track their carbon footprint and energy efficiency efforts.

Johnson Controls anticipates more demand for its products and services as more customers understand the value of energy efficiency and its importance for reducing GHG emissions.

IW: Have you evaluated renewable energy, either in on-site production or through green power purchases?

Nesler: Johnson Controls is working on major renovations to its corporate headquarters campus in Glendale, Wisc., including a photovoltaic solar installation and green building enhancements designed to help the company earn a LEED Green Building rating at the Platinum level for the facility. In response to increasing global demand for renewable energy from its customers, Johnson Controls entered the renewable energy business in 2007. Johnson Controls now offers its customers on-site renewable energy services including those for solar, biomass, wind, landfill gas to energy, geothermal, and combined heat and power projects.

We firmly believe the marketplace is ready to commit to renewables. The investment we are now making positions the company to take advantage of the significant growth that the renewable energy industry is experiencing. We also have already implemented several renewable projects for our customers.

IW: How are you addressing facilities and equipment management?

Nesler: Overall, much of the success Johnson Controls has had at reducing GHGs can be attributed to the company's 120 year commitment and focus to energy efficiency. Johnson Controls has also made significant investments in new technologies applying them to its own facilities, which has already achieved impressive reductions in energy consumption and will lead to further reductions in the future.

Johnson Controls optimizes and modernizes its own facilities and those of its customers by introducing proven technologies and process improvements that lower energy, operating and capital costs. At the same time these technologies help improve indoor environments and ensure that the impact these facilities have on the outdoor environment is minimized. The company aligns facilities with core business objectives and evaluates them using a wide array of systems, equipment and processes to identify energy and operational efficiency opportunities that will improve overall facility performance.

The company begins by addressing the two most common root causes of excessive costs:

1. aging, inefficient or misapplied building technologies; and,
2. undefined or poorly aligned service levels.

Typical improvements include enhancements to heating, ventilating and air-conditioning systems, lighting and electrical systems, control systems, motors and pumps, and eliminating leaks and waste. Features of the program include: investment-grade audits of resource consuming systems, benchmarking of a facilities' energy usage and equipment efficiency, identifying solutions based on best practices and various key performance indicators to prioritize specific energy and cost-saving projects, installing equipment and processes needed to meet the overall business objectives.

The Johnson Controls Building Efficiency headquarters -- the Brengel Technology Center -- was one of the first LEED-certified green buildings in the world, and was the first to be re-certified under the LEED for Existing Buildings rating. The company's corporate headquarters in Glendale, Wisc. is on target to receive a LEED-EB Platinum certification -- the highest designation available.

Johnson Controls has a far reaching depth to its sustainable offerings, especially as the company continues to position itself as an energy savings expert. When a Johnson Controls customer saves energy, the customer is also saving money, helping the environment and enhancing their communities.

Johnson Controls HVAC equipment and control systems deliver comfortable conditions in tens of thousands of buildings around the world, and the company provides full-time onsite staff to operate a portfolio of more than one billion square feet of customer facilities. The company is continually expanding its technical capabilities, applying ingenuity, and creating new ways to serve customer needs by improving the energy efficiency, comfort and safety of their buildings.

Johnson Controls global workplace solutions capabilities include portfolio management, property acquisition and divestiture consulting, design and construction services and information management solutions.

The company's global workplace solutions business grew in 2007 through contracts with new customers as well as expanded relationships with existing customers. For example, Motorola turned to Johnson Controls to operate its office complex in China, where the company will also provide project management services and fire-safety responsibilities. With the addition of this site, Johnson Controls now manages close to four million square feet of Motorola facilities across Asia.

IW: How are you addressing waste reduction?

Nesler: We are dedicated to using natural resources responsibly, and in compliance with environmental regulations. This is especially true in the initial development stages of new products, when the company develops product assembly processes that focus on easy-to-disassemble structures using recyclable and reusable materials. The expertise of our materials specialists enables the company to achieve existing internal and external environmental standards and legal requirements, while remaining focused on helping customers meet their environmental performance goals.

One specific example of the company's waste reduction efforts involves batteries. Lead-acid automotive batteries are one of most highly recycled consumer products, with U.S. return rates frequently exceeding 95%.

The battery recycling process works as follows: A Johnson Controls truck leaves one of the company's battery manufacturing plants with a load of new batteries. Those batteries are dropped off at a customer site, and the same truck then picks up the old, spent batteries. The unusable batteries are delivered to a smelter, where the plastic cases are ground down for re-use as new battery cases. The lead plates are also removed and melted down.

Through this recycling process, the company is able to optimize production capacities - utilizing product at both ends of its life cycle.

IW: How are you addressing pollution prevention?

Nesler: Here's some examples of some of the commonly used Johnson Controls practices used to reduce pollution:

1. Substituting water-based materials for solvent-based materials.
2. Using aqueous parts washes instead of solvent-based washes.
3. Eliminating ozone-damaging chlorofluorocarbon (CFC) and hydrochlorofluorocarbon (HCFC) cleaning and degreasing agents.
4. Installing building automation systems to optimize energy use.
5. Installing power management systems.
6. Retrofitting electronic lighting ballasts and lamps.
7. Using computerized maintenance programs to optimize equipment efficiency.

During the product development process, Johnson Controls analyzes the materials used to ensure that a minimum of hazardous chemicals are used. Using sophisticated software, we collect and analyze data from hundreds of parts suppliers. These analyses help ensure compliance with customer specifications and also with worldwide government safety initiatives.

As part of our waste reduction efforts, Johnson Controls also analyzes by-products for possible recycling or for sale as raw materials. The company developed a recycling process for glass-fiber-reinforced plastics used in automotive instrument panels. The waste from the instrument panel is ground and the different fractions segregated. The fiber-reinforced plastic component is then used to produce the air duct for the same vehicle. This reprocessing currently reduces scrap waste by more than 200 tons per year.

Johnson Controls also utilizes Product Life Cycle (PLC) reviews to help in developing environmental, health, safety, and economic benefits. For example, the company has numerous initiatives underway in support of the European End-of-Life (ELV) directive, which calls for progressively higher rates of material recycling and recovery by 2015.

Also in Europe, a Green Team of Johnson Controls experts has developed ELV goals that include recycling waste when economical (or using it as an energy source), using recyclables to make interior components, eliminating materials that contain heavy metals, and reducing emissions from car interior materials (targeting zero). The team also focuses on waste stream reduction and environmentally-friendly product design.

IW: How are you addressing supply chain management?

Nesler: Johnson Controls maintains contracts with hundreds of suppliers worldwide. The company is in constant contact with several non-governmental organizations (NGOs) to improve any oversight of suppliers' social and environmental performance. As a result, the company has incorporated requirements into its Suppliers Standard Manual posted on our public Web site: https://portal.covisint.com/portal/public/_l:en/tp/jci. The standard includes provisions consistent with the Ten UN Global Compact Principles and key International Labour Organization (ILO) Conventions, and mandates regulatory compliance and promotes good social and environmental stewardship by employees and suppliers. As the supplier oversight program matures, Johnson Controls plant to investigate additional methods by which to best incorporate energy and GHG monitoring into a program that will ultimately lead to more business opportunities.

IW: Out of all these, which is your company's priority?

Nesler: Our most important strategy is to promote energy efficiency as the smartest approach to reducing GHG emissions. This strategy includes developing new tools to credibility track GHG emissions and offering/developing cost effective products and services to reduce energy consumption and GHG emissions. This strategy applies to internal and customer-based activities.

IW: Are there any partnerships/programs you participate in? Have you received any grants/incentives?

Nesler: Johnson Controls continues to initiate efforts to bring innovations in energy efficiency into the marketplace. The company has a long standing commitment to improving the indoor and outdoor environment which has led it to assume active roles in a number of environmental groups, associations and government-sponsored programs in which there is a sharing and learning of new and innovative ideas. Examples of alliances, education programs, etc are presented in the following paragraphs.

• U.S. Green Building Council (USGBC) -- Johnson Controls is an active participant in this nonprofit organization and is currently represented on its board of directors. The USGBC theme and mission are very similar to our core values: to promote the design, construction, and operation of buildings that are environmentally responsible, profitable and healthy places to live and work.
• The Alliance for Sustainable Built Environments (ASBE) -- In 2003, Johnson Controls and five other international building industry manufacturers banded together to form ASBE, with an aggressive, coordinated commitment to inform other companies on how to make their facilities economically and environmentally sustainable. The alliance serves to inform and demonstrate that sustainability is a viable and profitable business strategy.
• Supplier Partnership for the Environment (SP) -- Johnson Controls is a founding member of this innovative partnership between automobile original equipment manufacturers, their suppliers, and the Environmental Protection Agency (EPA). SP addresses the goals of the membership by creating new and innovative business-centered approaches to environmental protection that improve the environment while providing value throughout the automobile supply chain.
• Energy Smart Schools -- Johnson Controls is a supporter of the DOE's EnergySmart Schools program, a Rebuild America campaign to help schools save on energy costs and reinvest in needed building improvements. The EnergySmart Schools program strives to improve the learning environment of schools through day lighting, better temperature control, improved air quality and other elements related to buildings and bus fleets; and to increase student, teacher, and community awareness of energy and related issues including financial management, air quality, climate change, and new technologies.
• Academy of Energy Education -- The Academy, a joint effort between Johnson Controls and the National Energy Foundation, functions as a partnership between a local Johnson Controls office and the local school district, providing K-12 curriculum-enhancing programs that combine the study of science, energy, and math with real-world experience.
• ENERGY STAR -- This voluntary energy efficiency program for buildings throughout the United States provides building owners with a proven, cost effective strategy to save money by reducing building energy consumption. In 1995, the efforts and dedication of Johnson Controls gained the company recognition as a Charter ENERGY STAR Buildings Showcase Facility, and in 1999 the designation ENERGY STAR Buildings Ally of the Year.
• Energy Efficiency Forum -- This annual event, sponsored by Johnson Controls, provides EPA and others the opportunity to discuss and introduce new programs to more than 300 industry professionals and other government policy makers. In 2006, Senator Hillary Clinton was keynote speaker and presented her perspective. In 2007, Johnson Controls was host to keynote speaker U.S. Energy Secretary Samuel W. Brodman
• Igniting Creative Energy Challenge -- Since we first introduced it in 2001, this Johnson Controls sponsored educational program has touched the lives of more than 10,000 K-12 student participants in the U.S. and Canada, who have submitted essays, stories, artwork, photographs, music, video, websites, or science project ideas that pertain to energy usage in the home, school or community.

Employee Involvement

IW: Have you seen impetus for these types of initiatives from the shop floor?

Nesler: Johnson Controls has seen excellent examples of manufacturing plant employees taking the initiative to improve energy efficiency at their own plants. In Wichita, Kansas, for instance, a group of employees involved in a continuous improvement team suggested updating the facility's lighting to improve the plant environment while reducing energy use. The result was a savings of over $1 million in electrical costs in the first year and a payback of just over a year. The local utility was so impressed with the savings that they produced an improvements video presentation at the plant, and intend to share it with other large industrial users to demonstrate the possibilities.

This is just one example to showcase the quality and involvement of Johnson Controls employees. The company understands that its employees and potential employees have choices of where to work, and that there is competition for the best talent. Johnson Controls makes significant investments in being an employer of choice, and has developed a system to promote people's careers and personal development while seeking their engagement in the company's vision, values and objectives.

Johnson Controls ensures that its work environments promote excellent performance, teamwork, inclusion, leadership, safety and growth. The company encourages community involvement and volunteerism in social service and environmentally related causes.

At work, individual facility managers are responsible for meeting profit goals milestones that can be affected by operational costs, such as energy use. Company managers are keenly aware that reducing energy costs enhances profits, and that GHG emissions are the result of energy consumption. Although existing incentives do not specify GHG reductions, the system still effectively promotes reducing by encouraging energy efficiency. Nevertheless, the company is in the process of developing a measurement program that will include additional insight into facility-specific GHG emissions.

Much of the success Johnson Controls has had at reducing GHGs can be attributed to the company's 120 year commitment and focus to energy efficiency as well as an understanding that employees are the real key to success. With the help of its employees, Johnson Controls has developed and invested in new technologies, applying them to company facilities, and helping the company achieve measurable reductions in energy consumption that are expected to lead to future reductions.

Greenhouse gas emissions related to employee travel is also monitored within Johnson Controls. The company utilizes videoconferencing facilities worldwide in an effort to reduce employee travel.

Johnson Controls is also studying ways to acquire reliable data and to reduce emissions related to employee commuting, supplier emissions, waste disposal, and services such as shipping, courier delivery, printing and other outsourced services.

The company recently implemented a "Smart Travel" program that focuses on making the employee travel experience "greener." Johnson Controls also works with other major corporations to promote more green choices when employees travel, and has begun offering products and services to travel-related corporations, encouraging them to be greener. Additionally, the company has instituted new approval processes that require approval by the Vice-President in the employee's organizational hierarchy to ensure that travel is necessary.

IW: Have your programs received executive sponsorship from the C-suite?

Nesler: Executive sponsorship of sustainability throughout Johnson Controls has been remarkable and mostly attributed to managements' recognition of the benefits and opportunities that it brings. Perhaps best summarized in a recent statement by company CEO, Steve Roell:

"For nearly 125 years, Johnson Controls has grown by focusing on helping our customers be more successful and by continually changing to meet their emerging needs. As we look to the future, we see new ways of responding to those needs. Rapid advances in technology are driving demand and affecting consumer choices. In addition, an understanding of how everything we do affects the planet and its future is becoming more critical every day. People want surroundings that are "smarter" -- environments that are more comfortable, safe and sustainable. Johnson Controls is uniquely qualified to deliver solutions to meet these expectations. This is why we've adopted our new Vision: a more comfortable, safe and sustainable world. Our new Vision better defines the value our company delivers globally as well as the essence of what will enable us to grow in the future. Our Vision of making the world more comfortable, safe and sustainable provides limitless opportunities for growth. We'll deliver through ingenuity -- by finding unique and innovative ways to deliver new value and new solutions.

In every place we do business, you'll find clean manufacturing processes, investments in pollution reduction, attention to waste reduction and recycling and the safe, healthy work practices. Our employees and the world expect and deserve nothing less. Our growth and competitive advantage is increasingly driven by our ability to integrate our ideas and technologies in ingenious ways to develop unique, practical solutions that improve the relationships between people and their surroundings. By collaborating across the businesses on common technologies and competencies, we're leveraging our best-in-class methods, processes and programming. These efforts could serve as an early step in the integration of homes, vehicles and workplaces, enabling higher degrees of smart environments."

IW: Are you getting buy-in from either/both?

Nesler: Johnson Controls management is committed to reducing energy use and GHG emissions for both cost control and branding purposes. Numerous internal employee award and recognition programs are in place to encourage such efforts. Progress is tracked at all management levels.

Business Value

IW: How do you see sustainability fitting into core business strategy?

Nesler: Energy efficiency and sustainability are at the core of the Johnson Controls business strategy. The company's Building Efficiency business promotes energy efficiency as the smart approach for reducing GHG emissions. This strategy includes developing new tools to credibility track GHG emissions and offering/developing cost effective products and services to reduce energy consumption and GHG emissions. That same strategy applies to internal activities and those of the company's customers.

IW: How, if at all, do you see the regulatory environment changing, and how will it impact your business?

Nesler: In general, Johnson Controls views most mandates, regulations and incentives that promote energy efficiency and conservation as positive steps for long term growth and also for reducing greenhouse gas (GHG) emissions globally. The company anticipates increased demand for its products and services as the demand for energy efficiency grows -- this as a result of both cost activities and enactment of new regulations. Johnson Controls is taking steps to meet this demand by investing in new products and services that improve energy efficiency and reduce GHG emissions.

Overall, Johnson Controls supports market-based approaches to reducing GHG emissions and increasing demand for energy efficiency improvements. The company believes such measures will help the environment and provide many opportunities both internally and for customers. Although it supports local and state initiatives to reduce GHG emissions, the company looks forward to having more consistent GHG regulations to simplify and coordinate overall implementation and management of GHG programs.

IW: How about the environment itself -- is climate change being factored into risk models?

Nesler: The implications of global warming are well documented. As a global leader in providing energy efficiency products and services, Johnson Controls foresees increasing demand for efficiency products and services as customers more fully recognize that smarter energy use is the most cost effective way to reduce GHG emissions. Therefore, we see the potential for tremendous opportunities, rather than risks, as consumer attitude and demand continues to focus on the environment.

IW: How important is corporate branding in this day and age?

Nesler: Even though many Johnson Controls products and services are provided indirectly to the public, the company understands the value of good corporate branding. Stakeholder dialogue is key to understanding the marketplace, to strengthening the company's reputation, and to growing the business.

Johnson Controls connects with its stakeholders through open dialogue, forums and meetings, advisory councils, written correspondence, surveys, etc. Some of the many benefits that result from attention to stakeholder engagement include:

• Enhancing best practices particularly in the social arena
• Improving data benchmarking so it is more easily understood
• Learning about new marketing opportunities and gaining a balanced perspective of activities and potential consequences
• Establishing more efficient processes for tracking progress on several new sustainability related goals
• Gaining a deeper appreciation of what others see as Johnson Controls' global responsibility

Johnson Controls also believes in being transparent with it stakeholders. Information is available at the company's public Web site: http://www.johnsoncontrols.com/publish/us/en.html

There is also a section on the Web site dedicated to sustainability in which successes and challenges are reported: http://www.johnsoncontrols.com/publish/us/en/sustainability.html

As a result of this openness, Johnson Controls' sustainability performance has been recognized by its inclusion on several of the most respected corporate social responsibility and sustainability investment indices, including:

• DJSI World
• FTSE4Good
• Domini 400 Social Index
• KLD Dividend Achievers
• KLD Global Climate 100
• KLD Broad Market Social Index
• KLD Large Cap Social Index
• KLD Select Social Index

Johnson Controls recently introduced a new logo, revised values statements, and a new image on its Web sites and literature -- all designed to support and enhance a leadership image in energy efficiency and sustainability. The new corporate phrase being applied to many external communication efforts is: A more comfortable, safe and sustainable world.

Big Picture

IW: What are you the most proud of that you've accomplished so far, and why?

Nesler: The Johnson Controls Building Efficiency headquarters, located in the Brengel Center in Milwaukee, Wisconsin, was one of the first LEED certified GREEN buildings when it opened in 2000, and the company has continually made improvements to enhance its energy and environmental performance. Today, the Brengel Center serves as a proof site to show customers and members of the community the ways in which a building can be comfortable and productive, yet still energy and resource efficient.

Johnson Controls applies energy efficiency expertise to its own manufacturing facilities as well. We implemented energy efficiency upgrades at 46 manufacturing plants, generating millions of dollars of savings each year in reduced utility bills and reducing greenhouse gas emissions by 17,000 metric tons annually.

In 2007, Johnson Controls was selected to expand its performance contracting expertise to key cities globally under a new program created by the Clinton Climate Initiative. The Initiative is dedicated to working with cities and governments worldwide to positively impact climate change by reducing carbon emissions. In targeting large cities for its efforts, the Initiative is looking to make the most impact with concentrated resources. Under the program, Johnson Controls will work with municipalities to select candidates for energy efficiency performance contracts. It is expected that private and public buildings in 40 cities will take advantage of the program. Participation in the Clinton Climate Initiative is an excellent platform for educating developers, owners and managers of large facilities on ways to reduce greenhouse gas emissions and contribute to a more comfortable, safe, sustainable and efficient world.

IW: What's the best piece of advice you can give to companies considering "getting with the program"?

Nesler: Get started... and call Johnson Controls for help.