Learning from Leaders - Johnson Controls: Evolving to capture sustainability-driven new growth

25 Aug 2022
The sustainability transition is accelerating around the globe. Governments and large companies have set net-zero targets, driving sustainability-oriented innovations not only within companies, but throughout supply chains and industries. Companies will have to adopt, either to comply with requirements from regulators and customers, or because of the enormous new growth opportunity that a future of sustainable production and consumption presents. In our ‘Learning from Leaders’ series of interviews, we speak to some of the most pioneering leaders around the world, to learn how they are preparing their organizations to capture the opportunities the sustainability transition brings.  
Johnson Controls: Evolving to capture sustainability-driven new growth
Insights from a recent interview with Adam Savitz, Sustainability Director EMEALA at Johnson Controls With revenues of €30 billion in 2021, Johnson Controls has 100,000 employees in over 150 countries, selling energy management systems, heat pumps, HVAC systems and solutions to optimise energy efficiency of hundreds of thousands of buildings around the world. The company is continuing to evolve to accelerate and capture the opportunities emerging from the global need to decarbonize energy and other industries. What can SE Asian companies learn from a global leader like Johnson Controls when it comes to preparing to benefit from the sustainability transition, especially considering the business case? The transition is accelerating – Thousands of large commercial and public organizations have committed to net-zero by 2030-40-50. They have strategic targets and are now focusing on how to get there, what investments to make and how to benefit from it. With and without business case – Many investments in technology make commercial sense and enormous amounts of innovative private and public funding are coming available for the energy transition, through internal carbon prices, green bonds, government subsidies, but even if it doesn’t have immediate payback, companies are looking at how to comply with targets set by governments, supply chain partners or committed to by the companies themselves. The price of carbon offsets is going through the roof, so the option of investing in real solutions is becoming more attractive. Business models are evolving – Johnson Controls has 100+ years of experience around the world with products and services that reduce energy use in buildings or facilitate transition to renewable energy. There is an important strategic opportunity in accelerating adoption through transitioning from a product-based to a service-based organization: offering net-zero as a service through outcome-based finance solutions can help overcome customers’ investment barriers. What are some of the priorities to consider in this situation of potentially huge opportunity? Invest in sustainability skills and talent – ESG is one of the hottest careers, but also representing a challenge for companies. Organizations all over the world are looking for sustainability people to lead teams and organizations from an integration perspective, drawing the various strings and initiatives that already exist in the organization together at the top. Much attention is now on disclosure, because of customer and regulatory demands on big companies and institutional investors to publicly showcase their net zero transition, strategy, costs, etc, as a pre-requisite to access more funds. The move from a product organization to a solution, outcome-based organization requires quite a different skill- and mindset. Upskilling of the talent pool at the client-facing level is a crucial challenge. At execution level, a skilled staff shortage is looming, as demand for energy auditors and ‘green professionals’ is rising faster than the supply of qualified staff. We have the solutions, we have the money, how can we avoid bottle necks in practical execution? Step up innovation – The opportunity to develop new business models and industries around the ability to decarbonise is giving rise to a huge amount of new digital tools. This is confusing at the moment, but companies that get it right can certainly accelerate new growth. Johnson Controls have committed to investing 75% of their R&D in climate, working with incubators to help start-ups accelerate to solve corporate and societal needs, as well as working with universities to capture early stage ideas, that all feed into venture and M&A activity. Move early – Those with 2030 commitments can’t wait until 2029. It takes time to do due diligence, put the finance together, install, build out solutions, for example invest in energy demand reduction first, then on-site solar, then battery storage. The systematic approach is going to take years, so if you haven’t started already, you’re already behind. Sustainability is an all-in strategy, requiring leaders who can see longer term beyond the next financial cycle and say, actually I’m investing not only for this cycle, but for the future of this organization. You want to get on the bus now or are you going to get on the bus when the cost of that getting on the bus is lot higher?  
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