Steve Thompson, VP Enterprise Application Solutions & Alliances, Johnson Controls Inc. From the 2010 Responsible Supply Chains Conference at Stanford Graduate School of Business: http://www.gsb.stanford.edu/scforum/ser/conference For more resources from previous years: http://www.gsb.stanford.edu/scforum/ser/conference/resources.html

1. Responsible Supply Chain
Creating the smarter, leaner, & greener workplace of the future
Stephen Thompson
Vice President, Enterprise Applications & Alliances
April 29, 2010

2. Agenda
• Johnson Controls overview
• Operational challenges in the current facility environment
• Shortcomings of the existing facility build – operate – retrofit process
• An emerging better way – focus on the building life cycle from the start
• Case Study – JCI Corporate HQ
2 Johnson Controls

3. Three global businesses focused on sustainability
across the supply chain
140,000 Employees Fortune 100 Multi-Industry Company
Building Efficiency Power Solutions Automotive Experience
Creating quality indoor Providing the highest quality, Delivering world-class
environments that are lowest cost automotive technologies that differentiate
comfortable, safe, energy batteries to power vehicles vehicle interiors and increase
efficient, and sustainable of today and tomorrow consumer demand
 200 million vehicles
 12 million homes
 1 million commercial buildings
3 Johnson Controls

4. JCI’s suite of offerings help customers achieve sustainability goals
across the real estate portfolio
PRODUCTS & ENERGY
TECHNOLOGY ENERGY EFFICIENT ENERGY EFFICIENCY SOLUTIONS
EQUIPMENT RETROFITS
BUILDING ON-SITE
AUTOMATION RENEWABLE
SYSTEMS ENERGY
People who design, build, own
BUILDING and operate buildings need to: DISTRIBUTED
SYSTEMS HEAT & POWER
INTEGRATION GENERATION
Manage energy & lifecycle costs
Reduce environmental impact
ENERGY & FACILITY
Increase building value MANAGEMENT
EMISSIONS
MANAGEMENT Enhance image and reputation & OPERATIONS
WORKSPACE & EQUIPMENT
PORTFOLIO MAINTENANCE
OPTIMIZATION & REPAIR
GREEN BUILDING BUILDING SYSTEM
DESIGN & CERTIFICATION RETRO-COMMISSIONING
ADVISORY TECHNICAL
SERVICES SERVICES
4 Johnson Controls

5. We provide a mix of these services to over 1 million
customers in 150+ countries across the globe
Apartment units Lodging Schools Colleges & Universities Hospitals High Technology
Homes Retail Shopping Malls Government Life Sciences Airports
High-rise Apartments Medical Clinics Small Commercial Large Commercial Arenas/Convention Centers Industrial Plants
Residential Mid Market Complex
5 Johnson Controls

6. Sustainable supply chain principles guide Johnson Controls
$26B in annual 3rd party spend
ENVIRONMENTAL SOCIAL ECONOMIC
STEWARDSHIP RESPONSIBILITY PROSPERITY
• Achieve competitive • Increase minority business development & • Ensure the ongoing
edge from supplier diversity financial viability of the
environmentally business through
• Strive to attain a high performance work
responsible products & strategic investments
environment free of workplace diseases
services and management of risk
and that is physically and emotionally safe
World Environment Center JCI has a long history of commitment to a diverse supply chain
Gold Medal for International
Corporate Achievement in  Johnson Controls spends $1.7 billion annually with ~340 diverse suppliers
Sustainable Development
 One of only 13 companies in the Billion-Dollar Roundtable
 Member of Dow Jones Sustainability World Index
6 Johnson Controls

7. Agenda
• Johnson Controls overview
• Operational challenges in the current facility environment
• Shortcomings of the existing facility build – operate – retrofit process
• An emerging better way – focus on the building life cycle from the start
• Case Study – JCI Corporate HQ
7 Johnson Controls

8. Commercial buildings have a major energy & environmental
impact consuming nearly 50% of the electricity in the U.S.
Buildings use 40% • Building sector represents 40% of the
world’s energy consumption
of U.S. primary energy
• 1/3rd of energy-related global GHG
emissions (~8 gigatons/year)
Residential
Industrial Buildings • Buildings responsible for 30% of raw
22% materials use, 25% of solid waste, 25%
32%
water use, and 12% of land use.
Commercial
Buildings • Commercial buildings provide much more
18% concentrated targets for energy and
Transportation
sustainability programs
28%
Sources: International Energy Agency; U.S. Energy Information Administration (2009) Annual
8 Energy Review; U.S. Dept of Energy (2009) Building Energy Data Book; World Resources Institute;
United Nationa Environment Program –Sustainable Buildings & Climate Initiative

9. Global changes in energy and climate legislation / regulation
increasing scope and immediacy of the challenge
Passed Passed Passed
- Stimulus funds - Energy Performance in - National energy goals
- EE retrofit tax deduction Buildings Directive recast - Local/regional carbon
- RE tax credits - Emissions trading system trading (Australia, Tokyo)
- Greenhouse gas reporting rule - UK Climate reduction - Japan revised Energy
Proposed commitment (CRC): 32% Conservation Law requires
- Prescriptive rebates (Jobs Bill) reduction by 2020 company-wide energy
- EE/RE resource Standard - HCFC Phase-out mgmt
- PACE loan guarantees Proposed - Energy codes (JP, CN, IN)
- Utility decoupling - Binding 30% energy reduction - Stimulus funds / Tax
- Dynamic utility rates targets (from voluntary 20% incentives
- CFC Chiller replacement goal) Proposed
incentives - Building retrofit Initiative - Energy savings certificate
- 30-50% more stringent building - Energy services legislation trading (Australia, India)
energy efficiency codes - Mandatory energy audits - India ESCO risk guarantee
- Mandatory building energy - GWP Refrigerant phase down facility
labeling - Energy Tax revisions - Singapore Government
- Carbon cap and trade system Bldg Green Mark 2030 Goal
9

10. Productive response to rising global demand for energy &
sustainability requires rethinking approaches to buildings
What is your company's top strategy going forward to meet
its carbon reduction goal?
0% 10% 20% 30% 40% 50%
Onsite renewable energy 12%
Renewable power purchases 10%
Energy efficiency in buildings 45%
Energy efficiency in transportation 6%
Use of alternative transportation fuels 1%
Carbon emission offset purchases 7%
No prioritization amongst strategies 14%
Other/Don't know 7%
Building efficiency is largest and most cost effective
strategy for reducing greenhouse gas emissions
10
Source: Johnson Controls/ IFMA (2009) Energy Efficiency Indicator

11. Agenda
• Johnson Controls overview
• Operational challenges in the current facility environment
• Shortcomings of the existing facility build – operate – retrofit process
• An emerging better way – focus on the building life cycle from the start
• Case Study – JCI Corporate HQ
11 Johnson Controls

12. Gaps in motivations, tools, and goals leads to high levels of
disconnect across the existing building lifecycle
Building Lifecycle
Plan / Acquire or Operate /
Construct
Assess Design Maintain
Lead Owner facilities team Architects / Designers General Contractors Facility Manager,
Occupant groups
Focus Balancing capital Create a memorable First cost; risk mitigation; Facility as a tool to support
availability with time- building; Design delivery; Deliver on time on budget their efforts to deliver core
line and growth plans Manage safety risk mission of enterprise
Process Incomplete Limited insight into details Minimal concern about Minimal engagement prior
Gaps knowledge of of intended use leads to operating cost. to occupancy = poor life-
intended use / capacity for peak demand cycle performance
operation
12 Johnson Controls Minimal interaction across lifecycle

13. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Design team focused on conceptual
performance with insufficient regard for the actual use of the facilities
Challenges Impact
• Difficult to translate conceptual design • Designs generally built to deliver
to actual performance requirements capacity for peaks
• Each sub-component designed to cover
• Challenged to tie together disparate
unknowns in other systems
components to create a unified system
• Life-cycle cost, performance, and
• Analytic / design tools focused on safety factors excluded
component initial performance
• Real estate portfolio doesn’t optimize
support core missions of individual
• Insufficient insight from cross – section
department and overall organization
of end users
• Construction process takes longer and
• Poor hand-off to construct phase costs more for same delivered value
(general contractor)
13

14. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Traditional construction model amplifies disconnects
between key constituents across the building life-cycle
Traditional Contracting Model Traditional Model - Disconnected
Architect /
Owner
Engineer End
Building
User
General Systems
Contractor Systems
Mechanical Electrical
Contractor Contractor
Electrical High Voltage
Water Systems Piping
Equipment Distribution
Access Voicemail
Internet
HVAC Control
Air Systems
Building Emergency Power Medium Voltage Access
Automation Generation Distribution
Technology
Fire Protection Fire Alarm System
Lighting Control Fire/Life
Installation System Safety Patient
Monitoring
Mechanical Special Mechanical Integrated Business
IT Network
Equipment Systems Security System Systems
Facilities Support
Special Technology Power Management
Specialty Healthcare Department
Systems & Assurance Services
Other Specialty
Technology Systems Time &
Attendance
Traditional Contracting Limitations
POS
• Silo mentality with limited integration between subsystems;
creating operating inefficiencies Finance
• Fragmented subsystem approach that creates cost
inefficiencies (labor & materials), and increases project risk IT Department
• Difficult to determine contractor accountability
14

15. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Current process ignores / sub-optimizes operational
performance leading to significant decline in performance over time
Intended
Traditional Construction Process Performance
(Opportunity)
Auto
Commission Optimum “As Built”
Peak Performance
First Occupancy
Design Service Live
Performance
Existing Practices
Minimum Acceptable
Performance
Actual Service Live
Time
15

16. Agenda
• Johnson Controls overview
• Operational challenges in the current facility environment
• Shortcomings of the existing facility build – operate – retrofit process
• An emerging better way – focus on the building life cycle from the start
• Case Study – JCI Corporate HQ
16 Johnson Controls

17. An emerging facility approach brings together constituents to build /
remodel more efficient and productive real estate investments
Building Lifecycle
Plan / Acquire & Construct Operate /
Assess Design Maintain
Key Action Impact
• Involve all key constituents as • Improved project quality with reduced
early as possible in process cost and schedule variability
• Decisions based on total life- • Projects deliver facilities that are
cycle cost optimized to perform, impacting 100%
of life-cycle cost rather than the 25%
that is first cost
17 Johnson Controls

18. Building life-cycle focus enables business objectives by driving
efficiencies across the entire real estate budget …
Fortune 1000
Typical Corporate Real Estate Spend
Enterprise Challenges (illustrative)
Example:
Pharmaceuticals • Capital constraints
Houskeeping
6%
• Uncertain / declining real estate
Maintenance
18% markets
• Accelerated shift to global v multi-
Fixed Asset - national
Rent,
Depreciation,
etc.
53% Utilities
• Volatile utility prices
11%
• Increasing regulatory / government
Security
6%
investment in sustainability
Other
6%
… impacting all elements including rent / depreciation (>50% of total spend)
18 Johnson Controls

19. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Using sensing technology to evaluate / improve workplace
utilization while maintaining worker safety, comfort, and productivity
Green & Agile @ BBC, Media Village W12
 18% reduction in workstations – release of Woodlands
 Average utilisation improved from 46.8% to 62.2%
 Move to a more agile and sustainable way of working – churned over 2500 people
 Average share ratio of 1.2:1 (equates to 12 people sharing 10 desks)
19 A Discussion on Corporate Environmental Sustainability

20. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Major construction consumers showing
increased preference for the benefits of the design – build process
Growth trajectory Key accelerators
60%
• Increased collaboration
54%
50% 50% between owner and
50% 45% contractor
• Single-point of contact
40% throughout process
40% 40%
35%
30%
• Realization of operational
vision
20%
• Reduced schedule variability
and increased cost visibility
10% Trad Design Bid Build
Design Build • Flexibility in construct process
0% to adapt design
2000 2005 2010 2015
20 Johnson Controls

21. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Intelligent buildings require new construction model to deliver highly
integrated projects … engages operators early
Technology Contracting Model Integrated Model – Converged Systems
Architect /
Owner
Engineer
Building End User
General Systems Systems
Contractor
Mechanical Low Voltage
Technology Electrical
Contractor Contractor
Contractor Contractor
Facilities Support
Special Mechanical High Voltage
Water Systems Fire Protection
Systems Distribution Department Services
Building Special Technology Medium Voltage
Piping
Automation Systems Distribution
Technology Electrical
Air Systems Fire Alarm System
Installation Equipment
Mechanical Lighting Control Integrated Emergency Power
Equipment System Security System Generation
IT Department
Specialty Healthcare
IT Network
Systems
Business
Power Management Other Specialty Systems
& Assurance Technology Systems
Technology Contracting Advantages
• Holistic approach that enhances technology convergence;
Engage operations teams during
• Eliminates waste from system and infrastructure duplication. Balances
first and lifecycle costs and reduces risk construction process to ensure design /
• Owner / GC has a single source of accountability; minimizing delays in build to optimize life cycle performance
construction schedule
21
Tech contracting is the logical evolution of the design – build
Johnson Controls
process … increased focus on engaging system users in design

22. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Emerging construction models focus on building life-cycle cost
… improving facility performance while mitigating risk and cost
Key drivers of waste in Estimated waste
the traditional model Percent of total technology spend Common cabling and wiring
for all low voltage systems,
reducing amount of material
Redundant materials 3-4
Integrated project
management and minimized
Duplicate labor 2-3 integration efforts after
implementation reducing labor
Potential delays in
Upfront integration and issue
building completion due TBD resolution, prior to
to integration errors implementation reduces
sources of errors and change
Change orders to integrate orders
2-3
disparate systems
Leveraging JCI volume and
Loss of procurement benefits 1-2 competitive bid process helps
procure these systems for
lower prices
Total Waste in process 8 - 13
22 Johnson Controls
SOURCE: JCI Internal analysis

23. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Facility owners / operators can optimize / maintain their capital
investment through real time data analysis and improvement projects
Intended
Integrated Design, Build, Operate Performance
(Opportunity)
Auto
Commission Optimum “As Built”
Peak Performance
First Occupancy
Perpetual
Design Service Live
Commissioning
Performance
Existing Practices
Minimum Acceptable
Performance
Actual Service Live
Time
23
SOURCE: NIST 2004; JCI analysis

24. Plan / Acquire Operate /
Construct
Assess & Design Maintain
The new, smarter buildings utilize technology to drive performance
improvement across the building life-cycle
Info technology platform that integrates disparate real
Sustainability Command Center
estate and building management systems into a single
portal for improved real-time management
Case Study: State of Missouri
Issues
• Spends $300M annually to operate/maintain 1,000
buildings
• Launched plan to reduce statewide energy consumption
by 15% by 2010
• State had little visibility of building performance
JCI Offering
• $24M performance contract to integrate individual
Energy Square Building Equipment General Scheduling Capital systems and buildings to common user interface
Use Feet Conditions, Condition & Ledger Systems Planning
Data Controls Maintenance Data • Created dashboard that provides real-time information on
utility usage, maintenance spending, and capital
investments
Outcome
Sequentra®
• $35M annual savings from reduced energy usage
• State can calculate its carbon footprint, and better
control energy, maintenance, and real estate costs
We are continuing to develop this offering as more
customers request this kind of solution.
24

25. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Future buildings must be prepared to
deal with multiple elements of the smart grid
Benefits to Owner/Tenant
• Lower real estate spend (energy, O&M, capital)
• Smaller GHG footprint
• Improved energy security Today’s challenge…
• Enhanced comfort and productivity
• Green recognition
Traditional
Benefits to Utilities/ISO supply-side
• Flattened load profile solutions to
• Reduced peak energy
demand
problems
• Cleaner energy profile
• Compliance with
cannot meet
RPS/EERS Smart net-zero
• Least cost ancillary Buildings energy goals
services alone
Benefits to Society
• Reduce climate risk
• More reliable and secure electric system
• Lower energy costs
Without smarter building operations on the customer side of the meter,
25 Confidential the full potential of the smart grid cannot be unlocked

26. Plan / Acquire Operate /
Construct
Assess & Design Maintain
Agenda
• Johnson Controls overview
• Operational challenges in the current facility environment
• Shortcomings of the existing facility build – operate – retrofit process
• An emerging better way – focus on the building life cycle from the start
• Case Study – JCI Corporate HQ
26 Johnson Controls

27. Johnson Controls has used this approach to redesign its global HQ,
creating a high performing, more comfortable, and sustainable campus
34 acre site, 500,000 sf total building footprint
 4 LEED-NC v2.2 Platinum buildings
 1 LEED-EBOM v2.0 Platinum building
 >90th percentile EnergyStar ratings
27 Johnson Controls

28. Johnson Controls had several goals for its corporate
campus expansion
Construction Goals Operational Goals
• Safety–our primary concern • High performance workplace
• Five secondary (equally weighted)
project goals • Sustainability from a community
perspective
• Budget: Bid / Buy / Deliver /
Respond to Changes
• Energy and resource conservation
• Quality: Attention to detail
(Create a world class facility)
• LEED Platinum
• Schedule: Completion date is
predictable – make necessary
adjustments
• Platinum LEED Submission:
Campus submission to create all
high performance buildings
• Diverse Supplier Goal: 20% Minimum
28 Johnson Controls

29. Johnson Controls Corporate Headquarters combines the best of the
new practices in a significant retrofit / new build
 Targeting highest concentration
Solar Thermal Geothermal
of LEED Platinum certified
buildings (4 NC, 1 EB) in world
 >90th %tile Energy Star ratings
Gray Water
Recycling  272 wells for ground-source heat
pumps reduce energy by 29%
 Extensive daylight harvesting and
shade control
 385 kW combined ground and
roof mounted photovoltaic arrays
(Wisconsin’s largest PV system)
 1,330 sf solar thermal collectors
used to heat hot water in building
Solar Photovoltaics  BMS integration to IT monitoring
system in data center
29 Johnson Controls

30. Design / construction process utilized advanced HVAC /
controls to deliver energy and asset performance targets
 Under floor air distribution system
that can be easily reconfigured
 Daylight harvesting and shade
controls
 Personal environment modules
 Semi-automated demand response Bi-Directional
Communications
 BMS ↔ IT asset mgmt system
integration in data center
 BMS ↔ Work order management
system
30 Johnson Controls

31. Actual performance significantly better than comparable JCI facilities
Total Electrical Demand
(Watts /square foot)
York, PA Campus
Building Efficiency HQ
31 Johnson Controls
Milwaukee Building B1
Corporate HQ

32. Construction process incorporated LEED checklist as part of
achieving LEED platinum certification for new and existing buildings
Sustainable design in the LEED process – specific local content requirements

33. Future Vision
Example: Strategic Alliance with IBM
Press Release 22 Feb.
IBM and Johnson Controls Join Forces to Make
Buildings Smarter
Combined Offering to Enhance Energy and Operational
Efficiencies
• IBM’s Maximo is the core of Connect MX
• IBM’s Lotus Mash-up tools will deliver
client dashboard’s
• Integrating our building technlogies and
enterprise applications brings a richness
of information that enables dynamic
operation of buildings ……FM 2.0
FM 2.0 will deliver significant competitive advantage and enhanced client retention
• Energy Savings through continous commissioning - 10% to 20%
• Operating cost savings through reduction of labor and and auto despatch of technicians – 10% to 20%
• Space optimization through building occupancy tracking …..
33