Reginald K. Layton Supplier Diversity & Business Development Director 1 Pg 1
Our Vision: A more comfortable, safe, and sustainable world. 2 Pg 2
Business Profile: A global $38 B diversified multi-industrial company Leadership positions in growth markets worldwide Building Efficiency Creating quality indoor environments that are energy efficient, safe and comfortable 3 Power Solutions Providing the highest quality, lowest cost automotive batteries to help customers grow their market shares Automotive Experience Delivering world-class technologies that differentiate vehicle interiors and increase consumer demand Johnson Controls Pg 3
Company Highlights n Founded in 1885 n Listed on the New York Stock Exchange since 1965 Net sales (in billion USD) 38. 1 Employees (in thousands) n $38. 1 billion in 2008 sales n Revenues more than doubled in the last decade n 140, 000 employees in more than 1, 300 locations serving customers in 125 countries 4 Johnson Controls Pg 4
Supplier Diversity & Business Development at Johnson Controls Alignment of resources and sustainable construction processes to leverage diverse business involvement on Projects § More than $1 Billion in First Tier Diverse Purchases each year since 2002 § More than 420 diverse suppliers covering 50 purchasing categories § Two Minority Equity Joint Ventures Generating More than $1 Billion in Revenue and Employing More than 1500 § First Tier Suppliers Spend Another $200 Million with Diverse Suppliers § Diverse Suppliers Support Operations in Canada, Mexico, Brazil, South Africa, Czech Republic and Spain § Corporate Member of National Minority Supplier Development Council and Woman Business Enterprise National Council Pg 5
Today’s Discussion Alignment of resources and sustainable construction processes to leverage diverse business involvement on Projects • The Business Case for Diverse Business Engagement § Demographics § Economics § Competitive Advantage • External Environment • Internal Environment at Johnson Controls § Organization & Governance § Our Approach — Processes — Systems — Capacity Building • Path to Sustainability Pg 6
Today’s Discussion Alignment of resources and sustainable construction processes to leverage diverse business involvement on Projects • The Business Case for Diverse Business Engagement § Demographics § Economics § Competitive Advantage • External Environment • Internal Environment at Johnson Controls § Organization & Governance § Our Approach — Processes — Systems — Capacity Building • Path to Sustainability Pg 7
The Business Case Long-term competitiveness of a corporation lies in developing business models which create both shareholder and stakeholder value n Supplier diversity & business development initiatives create value for both shareholders and key stakeholders n For several vertical markets, minority consumers will account for significant share of future revenues (Automotive, Telecommunications, State & Local Governments, K-12 Education, Energy and others) Three Drivers n Demographics n Economics n Competitive Advantage Source: Asaba Group; US Dept. of Commerce/MBDA Pg 8
Demographics In 48 of America’s 100 largest cities, minorities are now the majority. This was true in 30 of America’s largest cities in 1990. Latino populations in 32 cities doubled between 1990 and 2000. California is now 50. 2% people of color. The largest consumer markets in the U. S. are located in regions with the highest representation of minorities. Less than 15% to 24. 9% 25% to 49. 9% 50+% 1995 2025 Pg 9
Demographics Fact: Minority group members are almost half the population in this age group Fact: Older generations experienced less diversity with customers and co-workers Source: Diversity. Inc. com Pg 10
Business Case Deep Dive Economics of the Marketplace $ External Purchases Corporations Suppliers/Employers $ Wages & Salaries Individual Households $ Revenues Products/Services $ Consumer Purchases Pg 11
Business Case Deep Dive Economics of the Marketplace *Minority firms hire minority workers to a greater extent than majority firms, Northwestern University, Dr. Steven Rogers $ External Purchases $ Revenues Corporations Minority Business Enterprises Products/Services $ Consumer Purchases $ Wages & Salaries Supplier diversity equips rapidly growing population segments so they can purchase products/services Pg 12
Company-wide Competitive Advantage Supplier Diversity Expands Our Revenue Johnson Controls has received $6 billion in new business by offering diverse business solutions to customers Market Access Increases sales revenue from customers that embrace supplier diversity n Enhancing customer satisfaction n Facilitating proactive responses to diversity subcontracting requirements n Enhancing government relations in municipal, academic, health care markets Customer Loyalty Develops stronger barriers against competitors with weak supplier diversity initiatives n Augmenting brand building strategy n Proactively differentiate ourselves from competitors n Proactively position ourselves as industry leaders Stakeholder Satisfaction Enhances Sustainability Image n Meets needs of special interest consumer advocacy groups n Leverages purchasing decision makers who are increasingly minorities Enhances ability to meet government mandates/compliance without sacrificing profits or increasing cost n Assists customers with government contract/sourcing requirements n Enhances relationship with government entities Pg 13
Company-wide Competitive Advantage Supplier Diversity Expands Our Revenue Supplier Diversity Reporting for Sustainability Indexes Organization Common usage Considered the “most recognized sustainability index; total assets under management in DJSIbased investments amount to over $5 billion Greatly influences the decisions of investors and asset mgrs; financially oriented World-renowned global brand leader in the financial services industry with more than 100, 000 equity, bond and hedge fund indices; all fund licensing revenues go to UNICEF Provides a benchmark index for investors to measure the performance of responsible businesses Launched in 1990 and modeled on the S&P 500 Index; first benchmark for equity portfolios subject to multiple social screens Contributes to investor benchmarking and research; used to develop list of 100 Best Corporate Citizens Includes top 100 companies from 15 countries that KLD expects will provide near-term solutions to global warming. Johnson Controls added September 2005 Summary Highlights leading companies that are finding sustainable and profitable solutions to climate change Johnson Controls added 2004 Johnson Controls added July 2003 Johnson Controls added July 2006 Nearly $2. 3 trillion was held in socially responsible accounts used by individuals and institutions at the end of 2007, up from $639 billion in 1995. Pg 14
Company-wide Competitive Advantage Supplier Diversity Expands Our Revenue Building Efficiency Business Diverse Supplier Participation by Vertical Market All Lines of Business – Closed Amount (March 2009 YTD) Pg 15
Company-wide Competitive Advantage Supplier Diversity Strengthens the Supply Base Can include managing key suppliers’ suppliers ie, 2 nd tier diverse content Suppliers’ suppliers Can include “Go-to-Market” relationships, ie, JVs, Alliances, Teaming Partners Order/Cash Flow Johnson Controls Suppliers Customers Purchasing Domain Customers’ Customers Sales Domain Product & Services Flow Supplier Diversity & Business Development: Supports Purchasing Teams n Assists departments in identifying and qualifying diverse supplier candidates n Maintains database of certified diverse suppliers n Maintains supplier diversity certification records n Develops programs to accelerate growth of diverse suppliers Supports Sales Teams n Acts as subject matter expert for customer strategies n Develops strategies to win business using portfolio of diverse-owned firms 16 n Reports diversity purchasing performance quarterly internally and externally Pg 16
Company-wide Competitive Advantage Supplier Diversity Strengthens the Supply Base Diverse-owned firms are a resource to replace incumbent suppliers when the incumbents: n Have poor performance n Refuse to follow Johnson Controls’ business processes Value Chain Flexibility n Lack engineering/design capability n Refuse to participate in cost reduction strategies n Are located in unfavorable locations relative to our facilities Strengthens relationships with a new class of suppliers n Larger firms but privately held n Fortune 500 trained management teams n Many have same customers as Johnson Controls n Highly visible in their communities One strategy to value creation in the chain is to expand the scope/scale of offerings, providing integration and efficiency, or even expanding diverse business’ role in the chain. Pg 17
The Business Case • Demographics • Economics • Competitive Advantage Pg 18
Today’s Discussion Alignment of resources and sustainable construction processes to leverage diverse business involvement on Projects • The Business Case for Diverse Business Engagement § Demographics § Economics § Competitive Advantage • External Environment • Internal Environment at Johnson Controls § Organization & Governance § Our Approach — Processes — Systems — Capacity Building • Path to Sustainability Pg 19
External Environment Government/Public Sector Zone Local contract compliance and minority business development departments n U. S. Government, SBA, State Agencies Community Action Groups Zone n Urban League n NAACP n Hispanic Chamber of Commerce Corporate Associations Zone n National Minority Supplier Development Council (NMSDC) n Women Business Enterprise National Council (WBENC) n The Billion Controls’ customers Inc. Most of Johnson Dollar Roundtable are aligned with corporate certification organizations Pg 20
External Environment § National Minority Supplier Development Council (www. nmsdc. org) § NMSDC is headquartered in New York City and has 39 regional offices around the country. NMSDC has more than 4, 000 corporations as members and has certified more than 15, 000 minority businesses as owned, operated and controlled by ethnic minority management teams § NMSDC – Certifies that a firm is owned operated and controlled by minority management team – Maintains an diverse supplier data base for corporate members – Facilitates relationships between corporations and minority firms – Educates and trains practitioners and corporations – Lobbies government agencies – Tracks diversity business trends and corporate performance – Publishes best practices § MBE- Minority Business Enterprise is a company that has been certified that it is owned, operated and controlled by minority management team § Women Business Enterprise National Council (www. wbenc. org) § WBENC is headquartered in Washington DC and has offices around the country and certifies that businesses are owned, operated and controlled by woman management teams – Certifies that a firm is owned operated and controlled by woman management team – Maintains a diverse supplier data base for corporate members – Facilitates relationships between corporations and minority firms – Educates and trains practitioners and corporations – Lobbies government agencies – Tracks diversity business trends and corporate performance – Publishes best practices § WBE- Woman Business Enterprise is a company that has been certified that it is owned, operated and controlled by woman management teams Pg 21
External Environment The Billion Dollar Roundtable Inc. (www. bdrusa. org) § The BDR is headquartered in Alabama and is comprised of only 16 U. S. corporations that spend more than $1 billion annually with minority- and women-owned businesses. § The BDR seeks to lead, influence, and shape supplier diversity excellence globally. § The BDR’s mission is to drive supplier diversity excellence through best practice sharing and thought leadership. BDR only accepts spend from NMSDC and WBENC because of the stability of NMSDC/WBENC certification rules * * * Lockheed Martin and Boeing are major Federal Contractors Pg 22
Johnson Controls has world-class processes • Linked into Corporate Procurement and • Sales/Marketing Processes Johnson Controls Diverse Spend • Innovative Specific Development Initiatives • Communications Strategy • Accountability Systems • Require Certification • Outreach • Prime Contractor Initiative • Local and National Diverse Business • Association Membership • CEO/Senior Management Involvement • and Policy Statement • Dedicated Resource Deployment Supplier Diversity Process Implementation 2003 Corporation of the Year 2008 Corporation of the Year National Minority Supplier Development Council Pg 23
Today’s Discussion Alignment of resources and sustainable construction processes to leverage diverse business involvement on Projects • The Business Case for Diverse Business Engagement § Demographics § Economics § Competitive Advantage • External Environment • Internal Environment at Johnson Controls § Organization & Governance § Our Approach — Processes — Systems — Capacity Building • Path to Sustainability Pg 24
Global Purchasing Council Organization and Reporting Relationships Steve Roell CEO Global Purchasing Council Charles Harvey VP Diversity & Public Affairs Reginald Layton Diversity Business Development Director Companywide Commercial (customers/ associations) Activity Carolyn Woznicki BE VP Global Procurement Kenneth Gardner Diverse Supplier Development Manager of South Africa Companywide Erin Henry Associate Supplier Diversity Specialist Corporate Zone Lozenzo Bell Supplier Diversity Manager Bldg. Efficiency Albert Louis Supplier Diversity Manager Automotive Experience Rodger Hall PS VP Global Procurement of the Brazil Empowerdex Operations (buyer /supplier) Activity Michael Bartchant AE VP Global Procurement Shelly Brown Manager Power Solutions of the United Kingdom International Zone Bldg Efficiency Zone Automotive Power Solutions Experience Zone Pg 25
International Initiatives United Kingdom – Minority Supplier Development UK n British Blacks, Chinese, Asian Indians, Pakistanis and Bangladeshis n Johnson Controls is a member of the United Kingdom Brazil-Center for Business Integration (INTEGRARE) n Afro-Brazilians, Amerindians and disabled n Johnson Controls is a member Canada-Canadian Aboriginal and Minority Supplier Council (CAMSC) n Canadian Aboriginals and Visible Minorities n Johnson Controls is a member China - Minority Supplier Development China Chinese citizens who belong to one of the following 55 ethnic minority groups: n Zhuang, Manchu, Mongolian, Hui, Tibetan, Uygur, Miao, Yi, Bouyei, Korean, Dong, Yao, Bai, Tujia, Hani, Kazak, Dai, Lisu, Va, Lahu, Shui, Dongxiang, Naxi, Jingpo, Kirgiz, Tu, Daur, Mulao, Qiang, Salar, Maonan, Gelo, Xibe, Gaoshan, Blang, Achang, Pumi, Tajik, Nu, Uzbek, Russian, Ewenki, De’ang, Bonan, Yugur, Jing, Jino, Tatar, Dulong, Oroquen, Hezhe, Lhoba, Moinba. n Johnson Controls is a member South Africa-Corporate SMME Development Forum (CSDF/Emplowerdex) n Black South Africans African, Asian Indian and Colored South African Citizens n Council is in formation stage n Johnson Controls has diverse suppliers identified Empowerdex Pg 26
Today’s Discussion Alignment of resources and sustainable construction processes to leverage diverse business involvement on Projects • The Business Case for Diverse Business Engagement § Demographics § Economics § Competitive Advantage • External Environment • Internal Environment at Johnson Controls § Organization & Governance § Our Approach — Processes — Systems — Capacity Building • Path to Sustainability Pg 27
Path to Sustainability doesn’t require sacrifice; it requires a new frame of mind 28 Pg 28
Path to Sustainability Economic Benefits + Environmental Impacts + Social Responsibility Economic Benefits Environmental Stewardship Social Responsibility • Energy Savings • Emissions Savings • Water Savings • Operations & Maintenance (O&M) Savings • Improved Productivity and Health Value • Emission reduction • Environmental Health • Improved Quality of Life • Community workforce participation • Local MWBE participation • Workforce development • Job creation • Economic development 29 Pg 29
Johnson Controls’ Strategies Despite the Economy Management Focus: n Spend with diverse suppliers automated for review each month, discussed in operations meetings n JCI leaders serve on regional council committees (Executive, Certification, Fund-raising) Active Supplier Measurement: n 300 location scorecard metric requires at least 5 diverse active vendors n Quarterly review of supplier diversity roadmap actions with owners, actions, dates Leverage Scale: n Suppliers already in use at one location with breadth to go to neighboring branches/regions are pursued (grow existing suppliers!) Engagement Enhancement: n Supplier mentoring relationships led by local personnel. n Locations compete for Diversity Business Award recognition n Branch/region engagement with local NMSDC council. n Use 2 nd tier as a diverse supplier recruiting strategy Training: n Branch led training of suppliers to increase supplier capability (or done at HQ with field location endorsement of suppliers) n HQ led training for broad JCI organization understanding of diverse sourcing and opportunities n JCI Leadership Institute led training on strategic plan development and regional council board development. 30 Pg 30
2008 Summary of Impact Leadership n n n Purchased the operations of our largest MBE out of bankruptcy, saving more than 7000 jobs Produced and distributed a DVD to 3000 corporations showcasing NMSDC best practices Johnson Controls employees served as officer s on the boards of directors of five NMSDC regional councils Leadership Procurement n Spent $1. 23 billion with 284 CERTIFIED NMSDC MBEs on a first tier basis in 2008. Engagement Procurement Economics n The $1. 23 billion spent with CERTIFIED NMSDC MBEs supported more than 9, 000 jobs at MBE firms and generated more than $243 million in wages and salaries. Development n Seventy-nine CERTIFIED NMSDC MBEs participated in capacity building activities with Johnson Controls. n Nine CERTIFIED NMSDC MBE owners attended executive education programs at Tuck and University of Wisconsin. n Five CERTIFIED NMSDC MBEs competed with 400 non-minority firms and won supplier performance awards from Johnson Controls in 2008. Development Economics Engagement n n 31 Johnson Controls supported more than 223 NMSDC/NMSDC regional council events. More than fifteen Johnson Controls teams were recognized with diversity business leadership awards for doing deals with CERTIFIED NMSDC MBEs Pg 31
Walking the Talk We’ve committed to a 30% reduction in carbon intensity by 2012 32 Pg 32
Glendale Campus Building/ Renovation Project Our newly renovated facility is the first Platinum-certified LEED® campus in the world 33 Pg 33
Johnson Controls Corporate Headquarters Campus • 33 -acre site • Gutting and renovating two buildings with a combined 134, 000 square feet (Corporate and Power Solutions HQs); more than 75% of demolition “waste” from existing buildings was recycled) • New construction: --94, 700 -square-foot Power Solutions HQ --29, 700 -square-foot Amenities building (cafeteria, meeting rooms, fitness center) --Four-level parking structure for 400 vehicles with hookups for “plug and drive” electric vehicles • Total 258, 000 square feet of new and completely renovated office space • Locally harvested and manufactured materials account for more than 25% of project materials, including drywall, concrete, steel and stone • New construction waste recycling is at 89% vs. 75% target • Participation by women- and minority-owned contractors is over our goal of 20 percent 34 Pg 34
Johnson Controls “Walks the Talk” Our global headquarters boasts: • Solar thermal on roof of new Power Solutions HQ; 1, 330 square feet produces 2837 therms annually. • Ground-mounted solar photovoltaic array; at 31, 115 square feet, 250 kva, Wisconsin’s largest. • Laminated solar on roof of Corporate North building, 14, 355 square feet. • Solar generation will produce the electricity needed in Corporate North • Reducing greenhouse gas emissions by 1. 1 million pounds/year; • NOx emissions reduced by 2000 pounds/year. 35 Pg 35
Geothermal § 272 wells at 300 feet deep that use subsurface temperatures for warming or cooling the water supply. § Heat pumps vs. current natural gas boilers will reduce winter heating costs by about 29%. § Geothermal for removing condenser heat in summer will reduce chiller operating costs by 23%; heat pumps’ operating costs about 57% lower than natural gas. 36 Pg 36
Other Sustainable Features: • “Green” (growing) section of the Amenities Building roof. • 30, 000 gallon cistern to capture rainwater -reducing water consumption by 77%, a savings of 595, 000 gallons annually. • 3 -acre parking lot surfaced with permeable pavers • Day Light harvesting and shade controls • Under floor HVAC system with personal 37 Pg 37
Diverse Participation in the Corporate Campus Project Environmental Economic Healthy Communities 38 Pg 38
Diverse Participation in the Corporate Campus Project Environmental Economic Healthy Communities 39 Pg 39
RESULT: Increased participation in Green Construction 40 Pg 40
Thank You for Attending! Any Questions? Reginald K. Layton Johnson Controls, Inc. Phone: 414 524 -2041 Email: reginald. k. layton@jci. com This concludes the American Institute of Architects Continuing Education Systems Program. Pg 41
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