The Provocateurs:

Stuart Crainer:

Hello and welcome to the Provocateurs Podcast. I’m Stuart Crainer, co-founder of Thinkers50. At Provocateurs, we explore the experiences, insights, and perspectives of inspiring leaders. Our aim is to provoke you to think and act differently through conversations with some fantastic people. Provocateurs is a collaboration between Thinkers50 and Deloitte. So my co-host today is Geoff Tuff. Geoff leads Deloitte’s sustainability work globally in the energy and industrial sectors. Geoff is also the author along with Steve Goldbach of two best-selling books, Detonate, which came out in 2018 and Provoke, which inspired this podcast series. Geoff, great to see you, and can you please tell us more about today’s guest?

Geoff Tuff:

I’d be happy to, Stuart. Always great to see you, and I always seem to be in the position where I get to do the introduction of our guests, which is fantastic. We have a wide-ranging executive with us today who has, as far as I can tell, a fascinating life story, a fascinating business history. Her name is Katie McGinty, and I’ll cover a little bit of her background here, but I’m sure we’ll get into much more detail behind the various stories as we get into our conversation. So Katie is a distinguished leader in environmental policy and sustainability, currently serving as vice president and chief sustainability and external relations officer at Johnson Controls. I think I got that all right. She’s got over 25 years of experience in both the public and the private sectors, and she’s really been a trailblazer in clean energy and environmental protection in this country. She was the first woman to chair the White House Council on Environmental Quality under President Bill Clinton, and she later served as Pennsylvania’s Secretary of Environmental Protection. Katie’s career is marked by her innovative approaches to tackling climate change, to promoting smart buildings, which I’m sure we’ll hear a lot more about and driving impactful net-zero carbon strategies. So welcome Katie. Thank you for being on here.

Katie McGinty:

It’s great to join you. Thanks for having me.

Geoff Tuff:

And I hope I got all that background right. There’s a lot of it.

Katie McGinty:

Yes. But now we have to wake up the audience. Come on.

Geoff Tuff:

Right. Okay. So as a starting place, let’s try to get a sense for the ark of this amazing career. You’ve worked in public service, you’ve worked in law, you’ve worked in corporate governance and senior executive levels. As an undergrad, you studied chemistry, I believe. Is there something that serves as a golden thread through that whole career? When you look back at that massive activity, how do you make sense of it?

Katie McGinty:

Well, as I think about my career and the work that I’ve had the privilege of doing, I often say it wasn’t a plan, but it’s been a pleasure and a privilege. And there are some through lines; that early encounter with chemistry coming from a big family and saying, “Hey, I’m going to college.” It was no nonsense. You’re studying something where I know you’re going to get a good job. But it has served me well because it’s given me a fascination for how we move beyond tradeoffs, how we find the approaches to challenging problems that open more opportunities as we get creative and we come together with different perspectives. And technology is often the difference between win-lose and win-win. As I’ve had the opportunity then to take that early experience in chemistry into things environment, which was definitely not a plan more often than not, I’ve seen the transformation of an issue from something that was very divisive to something that catalyzed incredible creativity, originality of thought and became a differentiator or a competitive advantage or something at the very least that pulled people together rather than pulled them apart.

Stuart Crainer:

And you’re the ninth of 10 children, Katie. You come from a-

Geoff Tuff:

We got to that very quickly, Stuart.

Stuart Crainer:

I think it’s so interesting. It must’ve occurred to Katie if you were the first or second, how would it change your life and perspective? But I wonder how much did that form your career from those very early experiences. Getting things done in a big family, dealing with the internal-

Breaking down the myths around sustainability

Katie McGinty:

Yeah. That actually is part of how I do see the opportunity every day to take something that’s been a problem and be a solver. My dear mother, God rest her soul, if you came up to her with a look on your face like you were going to complain, she’d put up her hand and she’d say to you, tell your troubles to Jesus. And so the expectation was that you were leaning in to solve problems and not to create yet more to do’s around the house. Now, how does that play out I guess through the course of this career? One of the things that I take special fun, I will say, and feel a sense of pride about is trying to break down some myths. The myth being that, hey, if it’s good for the environment, it’s by definition bad for the bottom line. So many iterations we’ve seen of that, I think it still very much limits our thinking and the speed of our action against environmental challenges today.

Now, what’s the connectivity of that? With the rootedness in a big Irish Catholic family, it really is about refusing to take a ‘there’s no happy answer to this challenge’ as the answer. And I guess early on in my career it became imperative and then it became a blessing to bring a diverse group of people with different skill sets to the table. And when you do, you find ways that … Again, you catalyze growth, you catalyze opportunity instead of being just the, hey, you’re losing today and the other person’s winning. From a sustainability point of view, it’s not likely to be lasting in any real or measurable way unless and until a pretty broad array of people can see themselves in a solution and feel a sense of ownership to it, so that then you have troops who are totally bought in when the going gets tough. And every once in a while the going does get tough.

Geoff Tuff:

It does indeed. And so we have a fascinating array of topics I think to dive into. But as a starting place, where did the environmental focus or the interest in sustainability come in your career? When I look back at the roles you’ve had, it looks like it’s always been there, but you said it wasn’t necessarily the plan. When did it become the plan?

A career path from chemistry and law to environmentalism

Katie McGinty:

No. It really was not the plan. So with this background in chemistry and then in law, it was at a time when the United States was at a position of leadership in inventing some basic and core technologies like semiconductors and like the early days of biotechnology. However, it was also a time when we had moved past a driving interest in making things. And so Peter Drucker, for example, talked about the poor prestige of production, and we had said, maybe that’s not where we, as the United States anyway, are interested in playing. But coming back to my family with six brothers and three sisters, most of whom went right into the workforce from high school. It was very important to me the idea that there would be good jobs available where people could put their skills to work and then translate this amazing basic science into commercial products. So I had written a thesis about how to re-onshore that manufacturing, and I won a congressional fellowship, which brings me to the environmental piece, not being a plan. I simply looked up who chairs the relevant subcommittee in the United Senate on technology, and it was one, then Senator, Al Gore. And so that-

Geoff Tuff:

And hence the environmentalism. Now it all makes sense. Now it all makes sense. But please continue-

Katie McGinty:

That was the deep dive. That was the dive in the deep end of that pool. And so then having the privilege to serve as his senior environmental legislative assistant before joining President Clinton in the White House and serving as deputy assistant to the president.

Stuart Crainer:

What surprised me about that, Katie, was in 1995, I was a bit surprised actually there was a council on environmental quality.

Katie McGinty:

Indeed. In fact-

Stuart Crainer:

It wasn’t talked about then really. And I was also surprised you were only 30 at the time. That must have been a hell of a baptism.

Katie McGinty:

Well, Stuart, if we’re going to be technical about it, I was actually 29.

Stuart Crainer:

Excuse me.

Katie McGinty:

The Council on Environmental Quality actually was the foundational organization in things environmental protection in the United States. Established in 1969 with the National Environmental Policy Act. So people have become quite familiar with NEPA, and it was the original statute that looked expansively at federal government actions calling upon federal agencies to stop, look, and listen. Stop and assess what the environmental impact of a federal action might be, consider the alternatives, engage the community, and then proceed only on the basis of that additional consideration and input. And it was on top of that foundation then in 1970 and the early 1970s that we had, as we call the media specific environmental laws that came about. The Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, etc. But NEPA is that foundational statute, and I still think there’s incredible wisdom in it for the flip side of what I just said in terms of those media specific statutes. They are critical, but sometimes we can get very rigid in our thinking if we’re only looking at one piece of the puzzle.

Well, I’m solving for air quality today. Did I think about the water quality impact? I may or may not have done so. But NEPA almost forces you to put all the puzzle pieces together. And again, it’s just my experience when you do that, you create many more options for solving and tackling the challenge than in a more narrow cast approach.

Geoff Tuff:

So I hear some really important themes from you, Katie, which is Stuart talked about my day-to-day job is out there doing similar type of work in the energy sector, and I couldn’t agree with you more on both your description of really systems being part of the solution here, understanding how an action in one place will have an impact on another, and then also the importance of getting the economics right and making sure that there is a long-term sustainable economic solution even as you may be doing something good for the environment. Where on your journey did you really get to learn that? And you can comment on either the systems component or the economics component. Was it when you shifted to the private sector or when you were still working in the public sector or somewhere in between?

Katie McGinty:

Really I would say early days and interesting different roles of the different branches of government. Starting my public service in the legislative branch of government, working again with Senator Gore in a different role. Especially for thought leaders in the United States Senate like Senator Gore, the mission was to be a provocateur. To be able to inject new ideas into the conversation. To be a spotlight on new issues or trends that might be emerging. However quickly then moving to the executive branch of government execution, making things work is different than just proposing an idea. Plus at the time, this was 1993, the country was in a mild old recession, but a recession nonetheless, which also then underscored the importance that federal government policy, the policies of the newly elected President Clinton had to be stimulative of economic opportunity and growth. And so an example, one of the big initial efforts that we undertook in the President’s first budget was all about clean water. While there’s a lot that we could have done in that regard, what we chose to do was to stand up some of the first investment funds in driving the infrastructure piece that enables clean water and therein had a double shot cleaning up our water resources while stimulating expansive job creation in the building trades as the infrastructure was laid to enable us, in fact to protect and preserve those water resources.

Geoff Tuff:

So it sounds like a lot of the lessons that you then took into the private sector really were learned when you were deep doing this work in government.

Katie McGinty:

I think the key roots, yes. In moving then from Washington to Pennsylvania and serving as a secretary there again, a really important need in a state like Pennsylvania to be able to show that proper stewardship of our natural resources would also drive new economic opportunity was critical in terms of people’s buy-in, the willingness to lean in. And so for example, at that time it was still early days of renewable energy taking off in this country, so 2003, 2004. Pennsylvania has deep rootedness in the energy space. The world’s first commercial oil well not in the Middle East, not in Texas, but Titusville, Pennsylvania, some of the early and expansive natural gas development in Pennsylvania. So it felt to me that there was an opportunity to tap in to the pride, the culture, the spirit of the people of Pennsylvania to say, hey, the next generation of things energy is upon us and what other state should lead, but Pennsylvania.

And so our approach to renewable energy was not in the first instance to just mandate it, although the state rallied. And we did put a portfolio standard in place in just two years of being in office. But it was to attract and recruit some of the biggest renewable energy companies in the world so that Pennsylvanians would build the big wind machinery and solar machinery. And in a couple of years, we became one of the leading states in terms of jobs related to and factories built around the hardware that enables renewable energy to be an actual thing.

Stuart Crainer:

I also saw in 1999, Katie, you were involved with the Tata Energy research initiative in India. That must have offered a very different perspective from what you received previously.

Katie McGinty:

Well, it was a dynamic time, as is today, but in a slightly different way where it became clear that there were new and emerging powers and voices and forces that were going to be heard on the world stage. So my move to India was preceded in 1997 by our having negotiated the Kyoto Climate Change Treaty. From a decade earlier than that when I first became involved, I saw the transition from a time in the late 1980s, early 1990s when global environmental treaties were essentially negotiated between the United States and Europe. And then Russia and Japan would be invited to the table and they maybe were able to make some modest tweaks to the deal. It was only after that the Chinas and the Indias and the Brazils would be brought into the room to be told the deal. However, by the mid-1990s we sold in the World Trade Organization negotiations.

India, for example, had emerged as a very strong voice in the Doha round of negotiations. And it was clear that the geopolitical scales were tilting and changing in profound ways. So in the course of the negotiation of the Kyoto Treaty, I, at any rate, had a burning desire to not just fly into countries on Air Force One or come in with diplomatic contingents, but to go and spend some time in a part of the world that clearly was going to be absolutely impactful to the future trajectory of the world in many different dimensions, geopolitically, economically, environmentally. And so I did have the privilege to leave the White House and then go and work at a really renowned institution in India now called TERI, then called the Todd Energy Research Institute. By the way, the former head of which was the co-Nobel Peace Prize winner with Al Gore for action and leadership around climate, then also leading the IPCC. So it was a privilege to be there, and the idea again was to work with government leaders, business leaders, and civil society in India to say, look, the path to faster growth for this incredible country is to be one of the pioneers in putting climate smart energy and technology to work.

The trifecta solution of efficiency, electrification, and digitalization

Geoff Tuff:

Which clearly you continue to do today. So let’s actually fast-forward to the present and talk a little bit about the work that you do at Johnson Controls. I’m sure many of our listeners know Johnson Controls and some of the markets you play in. But can you talk just a little bit about the company and the markets you operate in and some of just examples of how scaled and high impact the organization is?

Katie McGinty:

Yeah. You bet. So this year actually is the 140th anniversary of Johnson Controls, which originated in  1883 with the invention by Warren Johnson of the first electric thermostat for buildings. Some say before Edison invented the light bulb. Not that it’s a competition.

Geoff Tuff:

Great anticipation though.

Katie McGinty:

And the company was founded in 1885 and ever since then it has been a journey of innovation to make buildings smarter, healthier, and more sustainable. And that’s the mission we’re still on. And if anything, I think we’re even just more intensified in that mission to look at one piece of that equation of smart, healthy, and sustainable. Part of the reason for our drive to continue to innovate is a challenging statistic. And that statistic is that some 40% of all global greenhouse gas emissions are about and from buildings. Coming even closer to Johnson Controls in terms of our scale and scope, by the way, we are a hundred thousand people strong in about 150 countries. So that gives us the privilege of bringing some creativity and solution sets to every part of the globe.

Within that 40% of emissions, 75% of the 40% is exactly where we live because it is about the lifetime operation of the building. And so that’s the big challenge. Question is apropos to the theme we’ve had here, well, heck, that’s a daunting set of numbers. Where could there possibly be an opportunity in that? And the opportunity really is the flip side of that challenging number. Because if you’re 40% of the problem, you have to have a whole heck of a lot of inefficiency going on, which means you have to have a whole heck of a lot of dollars and cents you’re just burning and not dropping to your bottom line and not putting to work for your growth. And it turns out in fact, exactly that. And so the good news, the trifecta technology solution is about efficiency, electrification, and digitalization. And when we put those technologies to work, the building goes from one of the biggest parts of the climate problem to net-zero, net energy positive, a revenue raiser for the building owner, even as it is a climate calmer for the planet.

Stuart Crainer:

Is it an easy message to communicate? Because basically you are saying that we need to reinvent how we perceive buildings and our relationship with buildings.

Katie McGinty:

Stuart, it’s such a good question because when people say to me, well, what’s your biggest challenge when I tell them stories like for example, Hey, let’s start right at home. So we’re pleased and proud to be well along our journey with our science-based targets and our own very substantial emission reduction. So we’ve already met our scope three science-based target, for example. Scopes one and two, our own operations, Stuart, to just tee up one example. So a factory of ours in Oklahoma absolutely must run factory, huge backlog. And the second-biggest energy consumer in our 80 plus factory fleet. You might think, holy mackerel, how can we turn a big beast like that around to be a green machine? And the first looks at what our course and path might be not dissimilar to many other big manufacturing companies. You walk in and you find a lot of deferred maintenance.

So now you’re thinking, well, this looks like it’s going to be a big cost to achieve the climate objective. Except for when you put that trifecta of efficiency, electrification, and digitalization to work, our result, 43% reduction in carbon, but we’re saving $960,000 a year in operating expenses. So for this critical must run factory by leaning into decarbonizing it, we liberated the cash and capital that enabled us to upgrade that factory significantly to support its throughput even as we took a huge dent in the emissions. Back to your question, Stuart. So how challenging is it? The challenge is about mind share. It’s not often that the C suite is inspired to be really thinking about their bricks and mortar and they’re not so much thinking about when they get on the elevator, the B, they’re thinking a boardroom, they’re not thinking of the basement. And so for us, it is breaking through that and establishing the critical business strategy significance of giving some mind share to a sustainability play around your physical assets.

The economic case for sustainability

Geoff Tuff:

And I would assume that part of the … And Stuart, you look like you may have a follow-up question. But I think part of the way you do that is exactly what you just described. Not talk about it necessarily as a sustainability play, but as an economic play because those are pretty compelling economics in the example you just gave.

Katie McGinty:

Exactly. And when we look at a variety of different sectors, key pieces of the economy, key players in the market, these days every single sector is very capital conscious, very much in a capital conservation mode. 

To share just one example … In Denmark, they took time to understand what their thermal energy was looking like, and they realized the great expense that was involved in meeting the space heating, the hot water, the sterilization needs in a hospital. What they didn’t realize was that they had the lottery sitting right next to them in terms of thermal energy and it was a big quarry. And so as we got to work with them putting heat pumps to work to extract that free thermal energy in the quarry, we wound up now with an end result that they have cut their natural gas and heating bills by 80%, even as they have cut their carbon emission between 80 and 90%. But you can’t achieve that kind of result unless, back to Stuart’s question, you can break through the typical break-fix mindset. Where this kind of equipment, you just run it till it breaks and you’re not then liberating the business opportunity in optimizing that equipment and machinery.

Stuart Crainer:

Isn’t one of the issues around this, the word sustainability. In fact, we should be talking about efficiency because efficiency is a much easier sell than sustainability. In fact, sustainability is efficiency. If you pursue efficiency, you’ll get to the sustainable solution.

Katie McGinty:

Language communication I think is often our big challenge. And maybe the Yogi Berra. Among the wise sayings of Yogi Berra, what gets me into trouble isn’t what I don’t know, but it’s what I know for sure that just ain’t so. I think we know for sure that sustainability is nice and it might be the right thing to do, but we don’t necessarily think it’s business critical, business essential and smart.

Geoff Tuff:

So as we think about how you’re looking at the opportunity to have impact as Johnson Controls today, Katie, I could imagine there’s a lot of the existing infrastructure, existing building base that needs to be somehow be made more efficient, decarbonize, whatever you want to call it. There’s also a whole lot of new infrastructure coming online and especially you made reference before the importance of digitalization. And I’m sure many of our listeners then go to thinking about AI and all of the power needs that are required by AI. How do you think about the job of Johnson Controls as relates to either making the existing building base more efficient versus building more efficiently into the future? And is there any trade-off there as we try to digitize and think about the power needs that are required for AI?

Katie McGinty:

There’s huge opportunity in both arenas. As you can imagine, some of this operating equipment, it’s built to last and so it’s 30 years old, it’s 40 years old, it’s 50 years old. And so the opportunity in the installed base, as we call it, to dramatically improve efficiency is just vast. And this is important from a climate point of view because some 70% of the buildings that are standing today in the US, in Europe, for example, are going to be standing in that critical year of 2050. So what can we do to get to work in those buildings? And it’s almost without exception that again, this trifecta of efficiency, electrification, digitalization can drive home 30, 40% reductions in energy use. In new buildings it’s equally the case.

Now, taking a page out of the book of renewable portfolio standards, there are some interesting new policies that get referred to sometimes as building performance standards that are driving in the same direction. Every X number of years let’s compare the operation of your building with like buildings, let’s set a baseline and let’s achieve a 5% reduction in energy intensity per square foot, in carbon intensity per square foot. So there’s some new policy frameworks that are helping to drive that attention and action.

Where does a digital platform come in? We had an experience just recently with one of our longstanding customers in Canada where we had the opportunity in a new build, a relatively new build, a building that had the highest level of green certification. It is among the best of the best buildings. And we at Johnson Controls know that because we not only have our operating equipment in the building, but one of the ways we are unique as a company is we don’t just sell it and say, “Call us if anything goes wrong.” We are also the install and the service partner, whereas many companies just make the hardware. And so we were operating this building as well. But we put ourselves to the test. We said we know that this is one of the greenest buildings. It was exceeding any of the performance standards that were required. We believe if we put our digital platform to work, if we put our AI capability to work, this building can still perform better. And almost immediately, even in the best of the best, we achieved an additional 25% improvement efficiency reduction in operating costs.

And you might say, well, my goodness, how can that be? And the reason is … Well, among the reasons, is the opportunity for what we call continuous commissioning. And so instead of operating against a set point that made sense last year when the switch was flipped, turning the building on, or a set point that made sense 25 years ago when the building was up and running. That digital platform is optimizing every minute of every day against real world conditions.

And so the kind of outcomes, for example … a different building in New York. This was a life sciences company, incredibly important to them that they ensured the health and well-being as a health sciences company of their colleagues and employees. This is core brand, core value. Well that building, again in New York City … You remember the Canadian wildfires. What does a digital platform have to do with that? Well, our digital platform literally was processing a million data points a minute and knew that massive wildfires had broken out in Canada, knew wind speed, knew wind direction, knew all of the parameters, temperature, humidity, et cetera, that were going to determine when that cloud of pollution arrived in New York and immediately switched the building from ventilation to filtration, ensuring that the occupants of that building were safe, happy, and healthy. This is the kind of dynamic capability of buildings now where they become part of the intelligence of your business itself.

Geoff Tuff:

That’s a great story, and I’ll tell you, I was visiting Manhattan the day that cloud descended on the place and it was eerie. But over to you, Stuart.

Sustainability is “strategy essential”

Stuart Crainer:

Like earthquake warnings in Japanese buildings. They can tell you when the earthquake’s coming, 20 seconds ahead of it actually arriving, which gives some help. You’re a chief sustainability officer Katie. Will that job hopefully be redundant in five years, 10 years, 15 years? Where does that role go do you think in organizations now in the next few years?

Katie McGinty:

Two different thoughts about that. So one, there’s some brass tacks, which I have to say I welcome thoroughly, although some of my fellow CSOs find it a less exhilarating part of their job. And that is that things sustainability has finally made it to the big table of the chief financial officer, of an expectation that the data is of investment grade and the realization that this is investor critical information. And so there’s one piece of the job that will provide the stewardship of the QA, the QC, the controls, the proper management of sustainability related data so that there is proper reporting of that data. And again, while some of that is difficult to slog through, it represents such a great maturation of the space that we now definitively understand climate sustainability as investor essential information. So that’s a piece of it. But I think the other piece of it is that sustainability is strategy centric and strategy essential.

And so I think whenever you can bring that edge of I can do it leaner, I can do it meaner, I can be more productive with less, I can drive innovation that enables us to drive a business forward faster. That’s a critical skillset. That skillset also in the broader understanding of sustainability, that puts value … Coming back to one of our original themes. Puts value on inclusiveness. Breaking down the silos in an organization and enabling that inclusiveness, that cross functionality in an organization, that’s where the action is. That’s what unlocks the creativity of an organization. And we all know that our people are our greatest asset. And when those people are inspired and on fire and feel themselves connected to something larger than themselves every day, that’s a team that’s going to be very hard to beat.

Geoff Tuff:

Well, that is about as effective a last word as I think we could have possibly hoped for on this Katie. And I recognize that we’re coming up against our target time here. I would like to first of all thank you, but also applaud the work that you’re doing. I think it’s a fantastic mission that you’ve been on over all these years. And I love the orientation that you’re bringing to the space because I couldn’t agree with you more around the power of economics and just good old-fashioned strategy. A lot of what you just talked about is good strategy for most organizations and it happens to intersect very nicely with sustainability. So thank you for your time, Katie. We have been provocateurs, Stuart Crainer and Geoff Tuff, and we look forward to the next time we can all get back together.

Katie McGinty:

Thanks for the opportunity and thanks for what you’re doing, putting a spotlight on interesting ideas.

Stuart Crainer:

Thanks very much Katie.