Mark Reinbold is Vice President, Sustainable Infrastructure at Johnson Controls, the global leader for smart, healthy, and sustainable buildings. He and his diverse, global team of innovators are transforming buildings and infrastructure to enable mission-critical activities and achieve net zero and sustainability goals for a better planet. These programs and projects reduce millions in emissions each year while increasing asset value for public and private sector partners.
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John: Welcome to another edition of The Impact Podcast. I’m John Shegerian, and I’m so excited to have with us today. Mark Reinbold. He’s the Vice President of Global Sustainable Infrastructure at Johnson Controls. Welcome to the Impact Podcast, Mark.
Mark Reinbold: Thank you, John. I couldn’t be more thrilled to be here with you and your listeners, so it’s a real privilege. Appreciate having me.
John: Oh, yeah. We’re happy to have you on, and this is going to be a great show. We’re going to be talking about something that we typically don’t talk about, but it’s a very, very important topic because it makes the world a better place, a greener place, and it makes us all more comfortable when we have to go to our offices, but before we get into everything you’re doing with your colleagues at Johnson Controls, Mark, talk a little bit about the Mark Reinbold story, where you grow up, how you even get on this journey, who inspired you, share a little bit of your background.
Mark: Well, okay. This’ll be an interesting story, so I’m currently based in Nashville. I live here with my wife Ivy, and my 3 kids, Anna, Amelia, and Guss. I had to give them a shout out because…
John: I love it.
Mark: None of them were going to believe that I’m doing a podcast, so I’m originally from St. Louis, though John, so grew up in St. Louis, Missouri, in the suburbs, spent a ton of time on the summers, weekends at a farm that we had in middle Missouri, so my grandmother ran a cattle farm out in central Missouri. It shaped a heck of a lot of who I am, and it teaches, you’ve probably had other people talk about this, but you grow up out in that space. You learn about problem solving. You learn about hard work, getting things done, how to fix things, how to make things last, and you got to love the outdoors, and you got to love the environment, and you got to love conservation and sustainability, and that’s part of who shaped me and what shaped me.
John: I’m so glad you brought that up because I don’t talk about it often, but most people know with via my accent and other things I’ve said along the way. I grew up in New York City, went to high school and College of Manhattan work, but we had a farm in Southern New Jersey, a horse farm, and talk about like you just said, getting close to nature and the environment and animals and just barn life and livestock life. It leaves an indelible print on you forever and for an appreciation of this great world we live in.
Mark: Yep. Absolutely. For sure, and I think it’s,…
John: Where’d you go to school?
Mark: I went to school in St. Louis, private university there called Maryville University, got my degree in Marketing and business, and ended up even going back there for my MBA, they asked me to come back, had an absolutely fabulous experience there with executives from Monsanto, Anheuser-Busch, St. Louis Cardinals, my favorite team, and Anheuser-Busch, so it was just absolutely great experience, and while I was getting my MBA, I worked for a company called Novartis Pharmaceuticals. I was actually in the pharmaceutical business, was a district manager for them and one of the youngest district managers in the company, and then it was around 2003, finished with my MBA, my regional manager at Novartis, she was a Milwaukee native, and she left Novartis, went to Johnson Controls to lead their healthcare business, and it wasn’t more than a month or 2 afterwards, I got a phone call from her and said, “Hey, Mark, I got the place for you, this Johnson Controls place. There are a bunch of gearhead over here, you’re going to love them, you’re going to fit in, they love to get stuff done.” She pulled me over in 2003, and I’ve absolutely loved the place. I found a bunch of people here that love solving problems. They love making buildings in the world a better place, and the thing that I love about my team here too, is they just hate waste and they hate inefficiency, and when you put all that stuff together, you got the recipe for a sustainability team.
John: I love it. I love it. Let’s do a little overview for our listeners and viewers who are not familiar with Johnson Controls, and to find Mark and his colleagues at Johnson Controls, please go to www.johnsoncontrols.com. How big is the company? Not in terms of revenue, but in terms of size, employees and also how many continents do you cover, etcetera? Just I want people to understand who Johnson Controls is.
Mark: No. Awesome, awesome question, and Johnson Controls is about over a hundred thousand employees. We have two thousand locations. A hundred and fifty companies, or hundred and fifty countries.
John: Countries. Wow.
Mark:Yeah. About 25 billion, dollar company, so we’re up there and we are where our customers are at, right, and our global footprint is what makes us sort of uniquely, able to serve large organizations across the globe, especially in their decarbonization journey.
John: The mission of Johnson Controls is… what’s the core business of Johnson Controls? How was it started and how did it evolve?
Mark: Well, sure, yeah, so this is this young 140 year old company that started in the thermostat space, the thermostat, Warren Johnson and we’ve largely been a buildings company since then, and buildings are our focus, we’ve been committed to making buildings, smart buildings, smart spaces, creating safe, healthy and sustainable environments, so if I give you just a little bit about sort of what we make and do. We manufacture HVAC equipment, so some of your listeners may recognize York as being one of our brands.
Mark: HVAC Controls, fire and security products, and you’ll find as I talk about this, you’ll start to look around in buildings, you’re going to see Johnsons Controls almost everywhere. 90% of the world’s most iconic buildings have Johnsons Controls products in them. Yeah, so it’s a big operation. What we’re really proud of is the massive delivery organization that we have, that does installation work and service. We have one of the largest service fleets in the US and around the world, so we are where customers are. We can put, install our technology, we can service our technology, and then I’ll talk a little bit about what my team does in delivering outcomes.
The big thing though now is we’re making a huge transition, and we’re transitioning from being this manufacturing and industrial organization to moving into digital, and I know that you’ve probably had tons of guests on that talk about this. The absolute need to move digital and to get data out of these buildings, and then data that we can make decisions with and then go drive outcomes with, is the genesis of what we call OpenBlue, so OpenBlue is our digital platform that really takes the data out of buildings and allows us to start to go make decisions with it, drive sustainability outcomes, drive energy efficiency, and just make buildings a better place for people inside them.
John: I want to go back to OpenBlue, but before we go there, I want you to brag a little bit. I want you to bring reality to our listeners and viewers so they understand the buildings. Give just a couple of examples of the customers that Johnson Controls, and the sustainable infrastructure team works with around the world.
Mark: Sure. Sure, so I’ll give you one that was in your old backyard. Being a New Yorker, so Empire State Building, this is a little bit of an older project. I love one that I know you’d relate to. Empire State Building. We did an energy efficiency project for that entire building where we rebuilt all of the windows in the Empire State Building. We built a manufacturing shop in the basement and actually rebuilt historic windows to make that building energy efficient, so that’s just one of the many things that we do, but I’ll give you another one that we’re super proud of. We did a project with University of North Dakota, so university of North Dakota is in an environment, as you can imagine where it’s cold almost all the time, so the heating system there is the lifeblood of that university.
Well, the heating system was fired by a 1930s era coal plant. Coal in the middle of the campus, so imagine the branding problem that gives a university, so we talked with the president of the university, and he said, “Look, we got to get rid of this thing. It’s right in the middle of my campus. It’s the first thing people see in the middle of the school, but I don’t have the $100 million it’s going to take to rebuild this thing.” We put together a solution where we made the buildings more efficient, use less heating. Then we rebuilt the steam plant and moved it off campus, and then converted it over to natural gas and did all of that without him laying out any capital.
Turned it into an as a service model, and basically, we are selling back the utility of steam to the University of North Dakota for the next 30 years, on an as a service basis, so they’ve been a customer of ours since 1918. We actually had invoices in the branch office where they had done work with us back as far as 1918, and they couldn’t have been more thrilled. The state legislature, the Governor, everybody was excited about this project, because not only did it take them on a… not a full path to decarbonization, but the next step of getting off a coal, but cleaned up the campus, gave them reliable source. We took the risk of managing the plant and did it all out of their current operating budget.
John: You create specific solutions and meet clients where they’re at, no matter where they’re at. You try to come up with specific solutions that meet their needs, and the journey that they’re on.
Mark: That’s right.
John: The goals that they have, so talk about that, so let’s just talk about potential client base, real estate developers are your client, property managers are your clients, and current building owners, however, they got to control the property. They come to you and say, “Okay, you put in the original infrastructure, but here’s where we want to go given the times we live in.” You’re dealing with all sorts of different types of structures and clients client base along the way here.
Mark: That’s right. Our client base, it ranges from the big university that I just described. Real estate like Empire State Building that we talked about, but goes all the way into Fortune 500 companies that have a portfolio of buildings all across the world.
John: Such as hospitality or hotel chains. Wow, awesome.
Mark: Absolutely. Yeah, we’re working with hotel chains right now, which is an amazingly complex opportunity because if you think about, hotels and think about like Hilton brand or Marriott flag, they have made very, very detailed and strong commitments to decarbonization and sustainability, but what’s interesting is they don’t own their properties. You’re in an asset management group that owns those properties, so what we have to do is work with their constituents to build business cases, and to build projects that improve the valuation of the assets over the long term, guarantee the outcomes. Then also decarbonize and take them on the next step to Net Zero, so to do that, we’ve started to step back and look at this, and it’s like, “Man, this is for most customers, it’s very complicated, what’s keeping them from taking the next step?”
And we said we got to make this easier. We have to make this process easier, and we came up with what we call Net Zero buildings as a service, and Net Zero Building as a service allows them to sort of transfer that responsibility of taking that journey to Net Zero in their buildings over to Johns Controls. I’ll come in, help them do their assessment, their greenhouse gas assessment. We’ll help them get their buildings safe and healthy, make sure that they’re properly ventilated. Make sure that all of your safety systems are up to code, fire life safety, and then we’ll digitally enable those environments, put OpenBlue, start to get data out of the buildings so that we can lay out what’s the journey to get to the next step. Then we do what we do best, which is make those buildings more efficient and actually replace, repair equipment, change operational set points, do all the things that we can do to squeeze as much energy consumption out of the building as we possibly can.
Then on that same journey, on Net Zero buildings as a service, we start to look at how do you operate the building? Do you want to outsource the operations? Do you really even want to be in the operations of buildings business? Then the final couple steps is whatever we can’t squeeze out from an efficiency standpoint, we start to then look and say, “Can we build onsite renewable energy?” Maybe there’s a solar opportunity, solar on the roof, solar on the campus, and then whatever’s left, and in certain places, you’re never going to get all the way to Net Zero in the footprint of a facility. Then we’ve built a partner ecosystem that allows us to bring renewable energy partners to the table, where you can source green energy and get yourself all the way to Net Zero. What I’m hearing, Mark, is you’re dealing, first of all, as you pointed out the hospitality industry example, you’re dealing with multiple stakeholders, so first is aligning them.
Secondarily, you’re now becoming the outsource integrated management services expert for these buildings when it comes to sustainability, so instead of me having fifteen or twenty executives managing forty five vendors, which are trying to create some sort of best case practice solution in my properties, I go to you because you are dealing with so many properties around the world, that you have a pattern recognition expertise that nobody else really has. That’s your secret sauce and proprietary part of your business, that you can truly pick the best vendors to meet my needs, and you’re a one-stop shop. I don’t have to carry the burden of all that infrastructure and SG and a overhead. I just go to you, and then you deliver the deliverables and the reports that I can then use with my board of directors, Wall Street analysts, and with my clients and constituents that use my properties, etcetera.
Mark: That’s right. You kind of described our role as a sustainability integrator.
John: Got it.
Mark: The key and what makes what we do different and what I’m very, very proud of our sustainable infrastructure team, is we will actually do that work for you, so John you’ll find a lot of organizations that are going to build the plan. You have great, great skill sets out there with the likes of like our partners at KPMG or our partners at Accenture, that’ll help you lay out your plan in Net Zero challenge always comes into who’s going to do the work?
Who’s going to execute it, and how are you going to finance it? And that’s where we step in, and we contract for outcomes, so if your outcome is that you want me to deliver you a Net Zero building, tell me and we’ll put the team to work, and that’s exactly what we’ll go do, so we’ve guaranteed, right now in our business, we have about $7 billion worth of open guarantees where we have made commitments to customers around Net Zero, energy efficiency, operational efficiency, and we put our money where our mouth is. We say what we’re going to do, we contract for it, and if we don’t achieve the outcome, then we either make it right or we make them whole from a monetary standpoint.
John: If you’ve just showing us, we’ve got Mark Reinbold with us today, he’s the Vice President of Global Sustainable Infrastructure at Johnson Controls. To find Mark and his colleagues in all the important work they’re doing in sustainability, please go to www.johnsoncontrols.com, so Mark, I’m not choosing anybody for any particular reason, but I’m the chairman of Marriott Hotels, and I bring you in to do this great work at all my properties around the world, because my clients now care about it. Wall Street now cares about it, etcetera, so then you as you say, you contract for outcomes, which is such a fascinating way to put it, and then at the end of the year, you put together a goals and outcomes report for me, which I then put into my ESG and impact report, which then shows our real true bonafide[?] of what we’re really doing. We’re not just talking about Net Zero decarbonization goals and other circular economy goals. We’re actually showing through the real information, the real data that you’re sharing with us and writing up for us, what we’re really accomplishing.
Mark: Yeah, absolutely. Maybe even take it a step further when we apply our OpenBlue platform, yeah. You’re going to have a digital version of that journey, so the OpenBlue platform, what we call Net Zero advisor. Lets you kind of take a look at your building, your building portfolio, how it’s performing from a GHG emission standpoint. Then we have bolt on applications that we bolt onto the open blue platform that allows you to start planning out those projects, and showing you the impact of each project as you do it, to get all the way to Net Zero. It becomes not so much the old Excel paper pushing exercise that it’s been in the past, but much more of a digital journey.
John: Talk about some major trends that we’re all living through, and assessing and taking action on. 1, it seems as though when you tell me you’ve been doing this a long time, you’ve been at Johnson Controls 20 or so years, it seems like this push for the linear to circular economy and this push for ESG and radical transparency to not only talking the talk, but walking the walk is now unstoppable, comparatively speaking to where we were in 2007 and 2008 or something like that.
Mark: That’s right. The foundation of our sustainable infrastructure business was energy performance contracting, so we’ve been doing that work for the better part of almost 35 years. That portfolio of built up guarantee portfolio is largely the result of doing energy efficiency projects on an outcome basis. Now, what you’re pointing out and what we’re all seeing in the Marketplace is that as it relates to buildings, the compelling event has changed. It’s not just about energy efficiency any longer, it’s about decarbonization, and what is the lowest combination of things that I can do that can abate my carbon, so I know one of your previous guests from McKinsey talked about the Mac curve, and something that we use every single day, what’s the lowest possible way that we can change your building environment, to get you the best return and the most carbon out? Now, that’s one compelling event. We all know that decarbonization and the commitments that organizations have made, the SEC rules that are going into effect, we know that that’s going to drive, but there’s also a couple others that are out there.
There’s massive energy price volatility. When you look at Europe right now, John, we have people in Europe that are making the choice between food and energy because of the energy crisis there. I recently traveled over to Ireland. I got off the plane. I couldn’t believe how cold it was in the airport, and when you peel it back, it’s because they’re turning the heat down. They can’t afford to heat that airport to seventy degrees that we’re used to, so the energy crisis that we’re seeing in Europe is real. The need to move away from fossil fuels there, is not only decarbonization based, but it’s resiliency based, and it’s economically based. The big thing that we’re seeing with customers in Europe is just an unbelievable demand for heat pumps, so think about you have your airport, your building, you heat it with a boiler natural gas fueled, you got a decarbonization goal that you want to hit. Boy, your scope one emissions are out of control, if you’re still using gas on site, you also want to move to renewable, and you also want to move to something that’s more predictable, what better way to do that than to get rid of burning natural gas on site, move to electric, electrify your building, and put a heat pp in place of that natural gas boiler.
We’re seeing a tremendous amount of opportunity there, and then we’re also seeing, a lot of customers that I’d say this is probably more of a US phenomenon that are coming to us because they want resiliency from the grid, and sometimes that flies a little bit in the face of their decarbonization goals. However, if you’re in Texas, you’re in California, and not so proud to say it happened to us in Tennessee over the winter. You’ve experienced what it feels like when the grid is at its maxim capacity, and you start to experience rolling blackouts for you and me at home, it’s an inconvenience, it’s a pain. If you’re running a business that relies on the grid, this is the difference between profitability and not.
John: Or a hospital which still relies on the grid for life and death, so you’re absolutely. [inaudible]
Mark: For sure, so the resiliency driver that we’re seeing with customers is a real driver, and they want fuel options, is probably the best way to say that. If you can generate onsite with onsite renewables, you can use battery storage, you can electrify your buildings and have the opportunity to use that power or use the grid, that certainly puts you in a much, much better, better spot.
John: Mark, do we need to change our way of thinking when it comes to sustainability in the built environment? In terms of, I always thought it was a great thing when I would see that a building that I walked into or had something to do in, was lead platinum certified. Is that a vanity thing, or is that a real thing that ties into what you are doing with regards to creating and managing sustainable buildings?
Mark: No, well’s certainly real. This has been on the journey when I started, back in 2003. Some of the first projects I worked on were cutting edge lead certified buildings, and it was absolutely the right thing to do, but it’s so much easier to deal with lead certification or decarbonization when you build new. When you get to the built environment, that’s when things get a little more complicated and they get harder to do, and you asked me the question, what do we need to do think differently about this? We got to think about how do we make this easier and how do we move faster, so the business that I operate, we’ve been doing, doing this for like I said 35 years. We have a process where we go in, send engineers into the building, we find out where all the inefficiencies are.
We engineer a project, we put all that project together, we go find the right people to execute it, the right product to go drive the results we want, and then we’ll guarantee the outcomes. What’s the problem with that? It takes too long. It’s too long, it’s too slow, so the answer is digital, so if we can start to change that process, and instead of using so much manual effort upfront, and we start to use data out of the building, use AI and ML to start to understand how the building operates, how it compares to its peers, make some very, very tight decisions about what needs to happen in the building, and then move more quickly to contract and start executing work and getting the project done now that’s going to deliver the results. Then all of a sudden, this process gets a lot faster, and we can scale as an industry.
This is not just a Johnson Controls thing, this is our entire industry has to start to look at how do we move faster, and you’ve had a number of guests on that have talked about the shortage of talent and the talent pool that’s available in the sustainability space. Think about every building that we look at when you drive down the street, it has to be electrified and it’s got to be decarbonized. Where are we going to get the labor to go do all of that in the current way that we execute? That’s where we’ve got to start to look at it differently, move fast, make digital decisions, and then partner and not use these, sort of legacy procurement practices that we’re accustomed to using that just takes too much time for the value that they drive.
John: Let’s talk about two major trends, first of a as you point out, you’ve been there for 20 years, so when did that crossover happen, where the aha moment came to you said, faster’s better, we got to think differently, we got to act differently, and now we got to leverage these AI robotics, and all the other great new technologies that are coming online. When did that happen in the journey? And how is that accelerating now that it seems as though we can’t even turn on CNBC, or Bloomberg without hearing another amazing AI development or evolvement? What’s your thoughts on that?
Mark: I’ll tell you, I think that this really started to evolve when it’s really been a matter of about 2 to 3 years ago, where the switch was turned on, and that’s when you started to see the sustainability, decarbonization movement start to come together, and it wasn’t just a novelty item anymore. This wasn’t just a differentiator. It was an existential threat to folks’ business, and when that happened, and you start to see the economic and the financial institutions making the moves that they’ve made. CEOs making commitments, then you put all that together. The private industry space had to act differently, and we’re seeing, now organizations that have made the commitments to be Net Zero by 2030, and the clock is ticking, and they’re saying, ‘How do I go get this done? How do I move fast enough?”
And if you look and say, what’s going to be the obstacle there? It’s how do they operate today? And how do they make decisions? Did they really lay out that goal at the top.. Or did they drive it all the way down to the plant manager? Because one of the biggest challenges I think that we see right now is, the goals at the top don’t match the goals at the operator level, or at the plant level and that’s a product of the question that you asked. We’re moving so quickly that those goals were committed before people’s goals worksheets, and their financial plan and their incentive plans could even be revised, and that’s the product of sort of seeing this evolve in the past few years, and we’re building our team to go respond to that and to execute, but at the same time, we’re watching our customers try to build their internal team, and build their internal priorities and goals so they can execute. Again, what’s the right answer? You can digitalize this process and start to give everybody very clear data, clear goals, and a clear way to measure their progress. This becomes so much easier and so much faster.
John: Where are we in that journey? You talked about OpenBlue, explain what OpenBlue is again, and then walk us through if we need to digitalize and do it faster and leverage more technology to help your clients meet their goals. Where are we in that journey? Bottom of the first inning, top of the fifth? Where is that journey right now?
Mark: That is a great question, and so OpenBlue again, is our platform, that allows us to take data out of buildings, bring it back, make decisions, drive outcomes, just that simple, and the building environment, the built environment is rich with data. We can get data from the HVACA sets. We can get building from the centers that are part of the security system. We can get data from even the fire and life safety systems in a building. All of that data though, exists in disparate sort of different systems that don’t talk to one another, use different languages. Were never intended to be integrated. OpenBlue is the platform that starts to sit on top of that, make all of that data come together in a way that you can then see on a dashboard, how is my building performing? Where do I have opportunities for improvement?
And then the ML and AI component to that is going to be where it starts to see that there’s inefficiency, can it go make those improvements automatically on behalf of the owner? When you asked me, so where are we at in the journey? Let’s say, we’re at the point where we’re starting to figure out the most efficient and cost effective ways to get data out of the buildings, get it into the platform, and we’re probably in the third or fourth inning in that respect. Now, as it relates to, can we take that data and make decisions with it and drive automated outcomes? We’re still in probably the second inning there. It’s coming along and it’s going to become, more and more advanced over the next couple years. What we’re able to do, I’m going to give you one example on this. We’re working on a product right now called Grid interactive optimization.
Call it GIO, so think about you’re a building owner, you’ve got your solar assets, you’ve got your battery storage system, you probably have EV charging stations. All of that is a integrated system that can operate either as a standalone or in conjunction with the grid. When we deploy what we call grid interactive optimization, we’re going to be able to monetize that relationship between the building, the generation assets, and the grid, so we talked about the unreliability of certain parts of the grid. As buildings electrify, as EVs become more predominant, more and more stress on the grid, the choice is going to be do we build more generation assets as a country?
Do we build more transmission lines, or can we reduce load? We believe that the best idea is to reduce load and to make buildings more efficient, and more interactive with the grid, so that day in California, Tennessee, where you hit the peak load and you need more generation or more capacity, the best way to answer that question is the utility telling the building I need capacity. Free it up, reduce your load, lower the set points, lower the chillers, turn off the unnecessary lights, respond right back to the grid, and imagine being the owner and getting paid to do that. That’s where we start to really work together, and then take your EV charging stations, reverse those, feed that back into the grid, and become a power generating asset. That automation is when we start to make buildings and the grid work together as part of the entire decarbonization ecosystem.
John: With OpenBlue, as you add more and more buildings into OpenBlue in the United States and around the world, and all the countries you service, which is massive, and the footprint you have is massive. How does then that become one of your advantages over your competition in that I assume then, the information gathered from each building is through AI and other machine learning technologies starts cross comparing buildings, and you get to see pattern recognition in certain areas, in certain areas, so now you have better solutions for your prospective clients than any of your competition ever have, because you have such a dense amount of information that is now loaded and being cross-checked in OpenBlue.
Mark: You hit it, you hit the nail on the head. It’s absolutely going to be about who has the best data, who can train the system to know how the building is going to perform in every scenario, and once you have that sort of built out algorithm and database, that’s when we can start to make those automated recommendations and automated decisions about what is going to be the best energy efficiency, and decarbonization projects and assets to deploy.
John: Got it.
Mark: With the large amount of assets that we have under control of our customers and then linked into OpenBlue, I can envision a day too where it’s a massive, massive, opportunity for that grid interactive optimization and becomes a way for the grid to be stabilized and becomes an energy producing asset.
John: Stabilized and optimized.
Mark: Optimized. It’s the power is going to be like you said, John, it’s going to be in scale. Can you scale it? And then I can’t ignore, the power of OpenBlue when we start to talk about our service offering as well. Right now, who wants to be the customer that has to wait for something to break and then have to phone somebody up and have a technician come out and repair it? The idea would be, we’re going to start to get to a point where we can predict those type of failures, predict those kind of challenges inside of the building, and automatically and seamlessly deploy our service fleet to take care of the problem before the customer even knows it’s an issue, and save energy and save carbon in the same process.
John: Mark, let’s complicate matters a little bit more, because this is just a trend that’s happening and you’re having to deal with real time. How does the trend post COVID, of all the great work you’re doing with OpenBlue and all these technologies and Net Zero building, driving the Net Zero buildings initiative, get more interesting, complicated and become a problem, but an opportunity for you since post COVID. A, our working patterns of massively changed for sure, having people in any office building at any given time and commercial office buildings. Our travel has also changed, and now when people walk into any public structure, hotel, office building, airport, what we’re thinking about also is this building being run in a healthy way in terms of air quality, cleanliness and things of that such, so if you take those 2 massive trends that have come out of COVID, how does that become both an opportunity for Johnson Controls, but also create new challenges with everything you’re trying to accomplish with OpenBlue?
Mark: Well, it’s just the perfect opportunity for deploying both Net Zero buildings as a service, and it’s the perfect opportunity to go look and say healthy buildings. How is my building performing in the new world that we live in. We have an entire or part of our organization focused and dedicated on delivering healthy buildings, and that’s all about deploying sensors in this space. Nnowing sort of what particulate matter looks like, knowing what the ventilation rates look like. It’s an amazing suite of technologies enabled by OpenBlue, that will ensure that we’re sorta ready for that whatever comes next. Let’s hope that it never ever comes again looking anything like COVID, but I think it was a wake up call by the way for the building industry and for building owners, that a number of things that they have done over the years have made buildings sort of less well equipped, and less favorable for the type of things that we saw with an airborne virus like COVID was.
John: What we’re really saying is, it creates an opportunity for OpenBlue to further shine.
Mark: For sure, not only OpenBlue, but all of the HVAC technologies and Controls that Johnson Controls and the industry, both can deploy.
John: Now, this is such a compelling reason that property managers and building owners, and other real estate portfolio companies should be using Johnson Controls for all these great things we’ve talked about in the last hour or so, so talk about obstacles. Where do the biggest obstacles come for customers in terms of reaching their decarbonization goals? Is it fear of taking the journey, or are there other obstacles that have become more apparent to you that you always need to help the clients or potential clients get through?
Mark: Well, John, I’d say that probably the biggest thing that we’ve seen in getting this journey off the ground, is the complexity that it takes to make the decisions on what you’re going to do to decarbonize. For those of us who have used or been exposed to a Mac curve, it requires an unbelievable amount of research and data, to really lay out all of the options that you have, to move from where you are today in your journey to fully decarbonized and Net Zero. We’ve built our ecosystem and our partner ecosystem to make that easier. We’ve built OpenBlue to make that easier, but the third piece of that is, there’s a big financial component to this as well, and most organizations, when they start to see what it’s going to take to take that full journey from where they are today to decarbonization, it’s really easy to do all the low cost, no cost, and high payback energy efficiency, like lighting retrofits for example.
It’s a no-brainer. It’s almost if you haven’t already done a lighting retrofit, I’d be shocked, but when you get into the hard assets of starting to replace chillers, HVAC assets like air handlers, motors, pumps, those get very, very expensive, and it’s a big project that can be very disruptive, so building owners tend to start to shy away from those projects, and they look at the paybacks and the returns on just an energy basis and say, “Man, I don’t know, I think I’m going to wait.” When you start to look at that though on a marginal abatement cost of carbon, and then you start to couple it with unique financing mechanisms that we bring as part of Net Zero buildings as a service, we can turn those big capital expenditures that no one wants to make into an operating expense. We can defer some of the pain that comes along with replacing big assets, or taking care of deferred maintenance that you’ve let go over the years. We can make that easier by making that an ongoing long-term operational expense.
Rather than looking at a hundred million dollars of capital outlay to go replace things that are non-revenue generating, so our job and my team’s mission is to make that easier for our clients to take that journey wherever they are. Doesn’t matter if they’ve already started to build renewables, doesn’t matter if they’re buying VPPA and sort of offsetting what their emissions are. It doesn’t matter where they start. We can bring the right resources, we can bring the right partners to get them all the way to Net Zero and bring the financing that will make it simpler and easier.
John: Well, whether it’s on the public or private side, you have the ability to toggle between public private opportunities as well.
Mark: That’s right. Our legacy and our history is in the public sector. We’ve built an amazing portfolio and just tremendous amount of reference projects that we’re very, very proud of in the private sector, you look at how many of the buildings in the world Johnson Controls already has a presence. It’s just now, with this compelling need to decarbonize, the compelling event for them to go engage and for building owners to engage in things like Net Zero, or Buildings as a service has completely revolutionized where we were in the past couple years.
John: Mark, you’re on a sustainability OG, you’ve been at Johnson Control since 2003. You’ve seen a lot of things come and go and also trends, and fits and starts when it comes to inconvenient truth, sustainability, the arguing over do we really have climate change? Do we don’t? It seems as though we’ve passed a tipping point with regards to these trends of the rush to decarbonization and Net Zero, like you said, most groups have said 2030, and also the shift from the linear to circular economy. Where do you see us in terms of again, going back to the baseball analogy, where are we now and what gets you super excited now that AI and digital opportunities have now become some great opportunities and tools that we could leverage? Where are we on the journey and what gets you really super excited for the months and years to come?
Mark: I’m super excited about just the opportunity in the Marketplace, and building the talent pool and bringing the capability to go serve that need right now, and John, you’re right. We’ve seen fits and starts. We’ve seen this go from lead was a cool plaque to have on the building. Maybe you could get higher rents to now it’s an absolute need, and it’s an absolute, driver and I’m just terribly excited about just the potential that we have to sort of transform the building stock across the world. This is not just a Johnson Controls thing. This is a complete shift for the entire industry. You’re not talking here just purely about a regulatory force that changed the regulation and required a massive retrofit of equipment to meet the regulatory requirement.
You’re talking about a fundamental shift in the way which our customers buy. You’re talking about a fundamental shift in how we evaluate these type of projects. You’re talking about a fundamental shift in how we build building stock going forward, and the thing that gets me most excited about all of this is, we can bring all the existing buildings up to a much better place than where they are today if we leverage all the, the power of JCI the industry digital, but it’s also going to change the way that we build new buildings, and if you think about it, I wouldn’t have a business if buildings were built right the first time. Think about that for a second.
John: Right. Sure.
Mark: We’ve started to get into that space as well, and we’ve taken what we call buildings as a service, and in the public space it’s called public-private partnerships, and we’re actually guaranteeing the same sort of outcomes on a new build and operating buildings for up to 50 years with guaranteed outcomes, guaranteed key performance indicators, and availability, requirements, so when you think about the shift, the shift is going to be technology, what’s the compelling event? And then how do we procure these building assets, both retrofit and new? Can we change all of that so that we make the right decisions the first time, and we don’t have to keep going back and redoing things over and over again. I believe in buying things that last and I love things that from a sustainability standpoint that you can keep for 20 years, and that they’re going to work. Buildings should be in that category as well, and if we do it right, we can make it happen.
John: Well, with Johnson Controls, we know you’re doing it right, and Mark we want to have you back on the show in the future to continue and to share the journey of Johnson Controls, to find Mark and his great colleagues at Johnson Controls and all the important work they’re doing in sustainability and creating greener, better, healthier buildings that are better managed and better operationally speaking, please go to www.johnsoncontrols.com.
Thank you Mark, for making the world a better place, and thank you for joining the Impact Podcast today.
Mark: John. Thank you. I appreciate you having me on, and thank you to all of my team members that make what you just said happen.
John: This edition of The Impact Podcast is brought to you by ERI. ERI has a mission to protect people, the planet and your privacy, and is the largest fully integrated IT and electronics asset disposition provider and cybersecurity focused hardware destruction company in the United States, and maybe even the world. For more information on how ERI can help your business properly dispose of outdated electronic hardware devices, please visit eridirect.com. This episode of the Impact Podcast is brought to you by Closed Loop Partners. Closed Loop Partners is a leading circular economy investor in the United States with an extensive network of Fortune 500 corporate investors, family offices, institutional investors, industry experts and impact partners. Closed Loops platform spans the arc of capital, from venture capital to private equity, bridging gaps and fostering synergies to scale the circular economy. To find Closed Loop Partners, please go to www.closedlooppartners.com.
Visit johnsoncontrols.com to learn more about how Johnson Controls can help public and private organizations take the next step in their net zero journey.