Sustainability Risk Management

Johnson Controls, Inc.John F. Vargo

Director, Risk Management

Agenda

Company Overview

The Path to Sustainability

Sustainability at Johnson Controls

Risks and Rewards

Results

Johnson Controls Overview

Founded in 1885

HQ: Milwaukee, Wisconsin

67th Fortune 500 - 2007

136,000 employees

500 locations in 52 countries

Credo: 5 Core Values

Building21%

Europe41%

ROW19%

Power11%

4

Interior Experience

Global provider of seating, overhead, electronics, door and cockpit systems

More than 50% of revenues generated outside of North America

Leading presence in China through joint ventures

NorthAmerica

44%Europe48%

Asia 8%

2006 sales: $18.3 billion$165 billion market275 locations in 30 countries

Customer Diversity (2007 sales*, includes unconsolidated)

North America Europe Asia

Delivering world-class technologies that differentiate vehicle interiors and increase consumer demand

North American

52%

Asian & European

OEs48% European

OEs69%

Asian & NA31% Asian

OEs 66%

European & NA34%

*projected

5

36%

Power Solutions

80% of sales to aftermarket– Hundreds of customers and dozens of brands

Geographic diversity– 25 manufacturing plants on five continents

Wide range of automotive battery technologies– Lead-acid– Nickel metal hydride, lithium-ion

Providing the highest quality, lowest cost automotive batteries to help customers grow their market shares

2006 Sales:$3.7 billionJCI Global Market Share 30% 9%

Asia

36%

Americas63%

Europe31%

6%Asia

6

*HVAC/fire/security only

Building Efficiency

2006 sales: $10.2 billion

$200+ billion non-residential global market*

Creating quality indoor environmentsthat are energy efficient, comfortableand safe

Non-residential buildings– Tens of thousands of customers– 125 countries– Revenues 75% aftermarket; 25% new construction– Systems, products, services and solutions offerings

Residential– Home air conditioning and heating,

65% replacement

Europe29%

Asia17%

NorthAmerica

54%

7

What is Sustainability?

“Sustainable development meets the needs of the present generation without compromising the ability of future generations to meet their needs."

- 1987 United Nations Brundtland Report

“A business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.”

- Dow Jones Sustainability Index

Measuring the triple bottom line

Environmental

Econom

ic SocialJohnson Controls

provides products and services that

address risks and opportunities

in order to contribute to an organization's long-term

social, financial and environmental success.

What is Sustainability?

Sustainability: Before 2000 Sustainability a new concept

Social investing immature

Johnson Controls:– Strong commitment to Core Values and

Ethics – Outstanding governance, social and

environmental track record– Little press or NGO attention– Rapidly growing and not a Fortune 100

All seemed well...

Sustainability: After 2000

Social investing:– Over 230 social mutual funds in U.S. today– Influence trillions of investment dollars– Growing about 30% annually

NGOs:– More and better organized– Target big companies– Current focus:

• Climate change• Governance • Supply chain management

Customers:– Demand less risks

Sustainability

Define it

Measure it

Report it (transparency)

Use it (to find value)• New products and services• Branding

Defining Sustainability

External

• Numerous definitions depending on stakeholder’s agenda• AKA: Sustainable Development, Corporate Social Responsibility

(CSR), Environmental, Social & Corporate Governance (ESG)• “Triple Bottom Line” most accepted externally and consistent with

internal policies/practices

• Core Values

• Ethics Policy

• ESH Policies

• Committed management

• Performance metrics

Internal

Environmental Stewardship

Social Responsibilit

y

AnIntegrated,BalancedStrategicApproach

Economic Prosperity

Integrity – Through annual reporting and a commitment to transparency, we demonstrate our integrity and ethics.

Customer Satisfaction – By helping our customers meet their sustainability goals we demonstrate our commitment to their success.

Our Employees – Through leadership development, and commitment to diversity and community involvement we strive to be an employer of choice.

Improvement and Innovation – Commitment to sustainability drives innovation.

Safety and the Environment – Our participation in USGBC, EPA Climate Leaders and other organizations demonstrates our leadership on meeting today’s challenges and planning for tomorrow’s.

Our Values = Sustainability

15

The Johnson Controls Path to Sustainability

Commit To

Understanding Sustainability

Assess &Prioritize

Your Risks and Opportunities

Communicate Intent & Results

ImplementTechnologies and Strategies

Johnson Controls/Others

Culture of Sustainability

Addressing risks and opportunities that contribute to an organization's long-term social, financial and environmental success

16

Johnson ControlsCorporate Commitment

Risk/Opportunity

Social

Financial

Environment

Strategies

How we operate

Facility Optimization

Manufacturing Processes

Employee Involvement

Supply Chain Management

Intent & Results

Internal

External

Certification

Technologies

What we sell

Building Efficiency

Interior Experience

Power Solutions

Commit Assess &Prioritize

CommunicateImplement

UnderstandSustainability

Executive Leadership

Business Group Accountability

Culture of Sustainability

Asset Management

- Real Estate- Transportation- Physical Assets

Continuous Improvement

Supply Chain Management

Marketing & Public/Community

Relations

Employee Education & Involvement

Products/ Services/ Programs

Manufacturing & Operations

Executive/ Leadership

Developing a Culture of Sustainability

Culture of Culture of SustainabilitySustainability

Sustainability @ Johnson Controls

Transparency: Reporting Before 2000 published only an Annual

Financial Report

2003: published ESH Report and a Financial Report

2004:Sustainability Report and kept Financial Report

2005 combined Financial & Sustainability Report and post additional details on Web.

2006 and beyond:

– Using programs to simplify reporting to multiple stakeholders

– More NGO dialogue

Sustainability Metrics—(GRI)

ECONOMIC

Direct Economic Impacts

Customers

Suppliers

Employees

Providers of capital

Public sector

Governance

ENVIRONMENTAL

Environment Materials

Energy

Water

Biodiversity

Emissions

Effluents

Waste

Suppliers

Products and services

Compliance

Transport

Overall

SOCIAL

Labor Practices Employment

Labor/management relations

Health and safety

Training and education

Diversity and opportunity

Human Rights Strategy and management

Non-discrimination

Freedom of association

Child labor

Forced labor

Disciplinary practices

Security practices

Indigenous rights

Society Community

Bribery

Political contributions

Competition and pricing

Product Responsibility Product safety

Advertising

Respect for privacy

Managing the Risk – Economics

Protect our employees

Protect our physical assets

Work with our suppliers to ensure they understand the risks and act appropriately

Ensure that our vendors adhere to JCI’s ethic’s policy or equivalent

Ensure the ongoing financial viability of the business through the management of risk

Managing the Risk – Environment

Accountability and Responsibility

Reduce Waste

Minimize Environmental Impact

Minimize Hazardous Substances – Mercury-Free Products– End-of-Life Regulations

Commitment to the environment impacts our approach to risk management programs

Managing the Risk – Social

Establish written employee policies and follow them

Make employee safety an emphasis

Design safe products and monitor any issues

Support supplier diversity

Act within the law in every country we operate

Commitment to the social responsibility

What’s the Payoff?

2004 WEC Gold Medal Award

FTSE4Good Index

President Bush visits Johnson Controls Advanced Battery Lab 2/2006

2006 EPA Climate Protection Award

2005 EPA Clean Air Excellence Award

Business Ethics Magazine 100 Best Corporate Citizens

The TOP RANKED AUTOMOTIVE SUPPLIER in Fortune magazine’s 2006 Most-Admired Companies survey.

Finding Value for our Customers

Maturity

Val

ue

Ch

ain

Regulatory Compliance: Address “end of pipe” issues Safety, permitting, auditing, pollution prevention

Reduce Costs: Waste management Energy management

Competitive Advantage: Provide customers GHG tracking tools Provide sustainability training Closer supplier monitoring Market green buildings Design products for Sustainability

Must Do

Gro

w B

usin

ess

26

Marketplace Factors

Technology has improved

Accountability has improved

Global access and communications have improved

Government and the marketplace are both driving change

Managing Risks & Embracing Opportunity

Risk

• Mandates/regulations• Air pollution• GHG emissions• Water quality

Risk

• High energy bills• High operating

costs• Outdated

equipment• No capital project

fundingOpportunity

• Lower energy bills• Reduced

O&M/deferred maintenance

• Stable energy supply

• Funds capital Improvements

Opportunity

• Streamlined approvals• Reduced air pollution• Reduced GHG emissions• Reduced water use

Risk

• Health care issues• Poor indoor air• Productivity• Community

concerns

Opportunity

• Public Health• Worker productivity• Socially

responsible investorsEnvironmental

Econ

omic Social

28

The Path to Sustainability:Building Efficiency Offerings

Risk/Opportunity• Overall Goals

– Social– Financial– Environment

• Project Scope– Infrastructure– Facility– Service/FM

• Project Approach– Funding– Timetable– Implementation

Team– Technologies/

Strategies

Strategies• Funding• Energy & Water

Services• Renewables• Design/Build • Lifecycle

Program Mgmt.• Operations &

Maintenance• Facility

Management• Service • Supply Chain• GHG tracking

and reporting

Intent & Results• Internal

– Evaluation– Communication– Education

• External – Public Relations– Community Rel– GHG Reports– Corp Soc Resp

• Certification – LEED– ENERGY STAR– GRI– MBE/DBE etc.

Technologies• Infrastructure

– Energy Supply– Water Supply– Wireless

• Facility– Automation– Technology

Systems– Energy– Water– HVAC/R– Lighting

• Environmental Products

Commit Assess &Prioritize

CommunicateImplement(JCI / Third Party)

UnderstandSustainability

• Business Case Dev’t

– Financial– Environment

Issues– Social

• Employee• Community

• Life Cycle Approach

• Flexible

• Scalable

Culture of Sustainability

Sustainable Success

Measuring the triple bottom line

Environmental

Econom

ic SocialJohnson Controls

provides products and services that

address risks and opportunities

in order to contribute to an organization's long-term

social, financial and environmental success.

Thank you for your time