Lockheed Martin employees discussing a product.

Supplier Conduct


Objective

Help suppliers strengthen management and disclosure on ethical, labor, human rights and environmental issues.

Management

Lockheed Martin’s commitment to upholding business integrity extends to our supplier relationships. Our Supplier Code of Conduct establishes a set of business principles that we expect our suppliers to adhere to, including in areas such as anti-corruption, human rights, non-discrimination, conflict minerals and others. We communicate these expectations to all suppliers when they receive purchase orders from Lockheed Martin.

We expect our suppliers to operate in a manner that actively manages risk, conserves natural resources, prevents pollution and protects the environment. We require our suppliers to apply environmental management system principles in order to establish a systematic approach to the management of risks/hazards and opportunities. An annual voluntary survey conducted with suppliers allows them to report on their environment, social and governance management systems and performance. The survey provides insight on the sustainability landscape of our supply chain. After analyzing the results, we develop action plans for supplier engagement and our own sustainability performance.

To provide current and potential suppliers with resources to understand and meet our expectations of effective ethics programs, we host and share information on our Supplier Wire website. The website helps keep our business partners up-to-date on issues such as cybersecurity best practices, managing for sustainability performance and avoiding counterfeit parts. For example, through Supplier Wire we provide resources guiding suppliers to reduce waste generation and proactively manage conflict minerals risks. We also send annual ethics reminders and links to related webinars via email to educate suppliers on emerging supply chain concerns and mitigation strategies.

On our external ethics website, we dedicate a section specifically for our suppliers. There we have identified twelve key elements that make up an effective ethics program and we work with suppliers to help them address each element within their business. The twelve elements include: company values; program and structure oversight; risk assessment; policies and procedures; code of conduct; training; communication; leadership commitment; inquiry and reporting mechanisms; investigations and disclosures; disciplines and incentives; and program evaluation. For each element, we developed a video and infographic to provide suppliers with an overview of the topic, why it is important, additional resources and suggested steps for effective implementation.

To further empower our suppliers, we offer a Supplier Mentoring Program through which a supplier can apply to work one-on-one with a Lockheed Martin Ethics Officer who provides guidance on ethics programs. Since the program’s inception, 86 companies have completed the Supplier Mentoring Program. In 2020, eleven suppliers participated in our Supplier Mentoring Program and over 400 companies participated in our webinars or minicourses. Both our online minicourses and self-assessment toolkit were new resources that we introduced in 2020. We also connect our suppliers with a resource called the Small Business Toolkit, which was developed by the Defense Industry Initiative on Business Ethics and Conduct. The Toolkit provides guidance for setting up an ethics program, template policies, procedures and compliance training.

In 2020, we began hosting focus groups for small business suppliers. The goal of these engagements is to better understand what guidance and tools our small business suppliers need to build and maintain strong ethics programs. In 2020, we also released an updated Supplier Sustainability brochure. This resource was revised to focus on actionable environmental, social and governance (ESG) topics that can apply regardless of supplier size.

2020 SMP Goals

Increase participation in our ethics supplier mentoring program.

Achievement

Success: Companies participating in our Ethics Supplier Mentoring Program increased in 2020 by ~52% compared to 2017. The program includes webinars and web-based training, added in 2020.

Supplier Conduct
Assessing Human Trafficking Risks in our Supply Chain

Our Global Supply Chain Operation’s team conducted its first-ever Human Trafficking Supply Chain Assessment based on the U.S. Department of State Trafficking in Persons Report in 2019. Since then, we expanded the input sources and have developed a visual dashboard that maps Lockheed Martin’s human trafficking risk across its supply chain. We will continue monitoring emerging global legislation as we advance our preventative approaches, and are working to integrate Transparency International’s Corruption Perception Index and Conflict Mineral data from our annual due diligence process to provide additional perspectives.

Supplier Conduct
Supporting Suppliers During COVID-19

At the onset of the COVID-19 pandemic, Lockheed Martin began close collaboration with the DoD to identify ways to provide critical financial and operational support to small business suppliers. One solution identified was for the DoD to increase the rate of progress payments to contractors, including Lockheed Martin, so that contractors could in turn flow these additional payments to their supply chain. After the increase went into effect, we flowed down all of the increased progress payments received in 2020, giving priority to small and vulnerable suppliers. The objective was to get cash in the hands of the businesses to provide stability and security in a time of uncertainty due to the pandemic. Throughout the pandemic, we helped ensure a healthy supply base, accelerating payments to more than 10,100 suppliers, including nearly 6,200 small businesses across all 50 states, the District of Columbia, Puerto Rico and 47 nations. In addition to flowing down the increased progress payments, Lockheed Martin accelerated cash to supply chain partners by paying invoices ahead of the negotiated payment terms.

For Lockheed Martin small business suppliers, we leveraged our insights and industry-wide network to rapidly make resources available and spotlight actionable sources of support during the COVID-19 pandemic. Through webinars and email publications, we provided small business suppliers ways to leverage valuable information, access options for COVID-19 relief and connect them with customer-led efforts to discover new opportunities. Those resources are geared towards assisting suppliers during these unprecedented times.

Supplier Conduct
Preparing Suppliers for Compliance with New Cyber DFARS Rules

Lockheed Martin depends on a shared commitment with our suppliers to protect the sensitive information that supports delivering on critical customer missions. Three new regulations in the Defense Federal Acquisition Regulation Supplement (DFARS) will further define contractor obligations to protect DoD Controlled Unclassified Information. In response, Lockheed Martin hosted training webinars on the new rule attended by more than 1,500 suppliers. From the webinars and a dedicated resource account initiated in October 2020, we have fielded hundreds of questions and published a supplier Frequently Asked Questions (FAQs) document. In addition, Lockheed Martin surveyed our suppliers to assess risk and preparedness, which resulted in insights on when needed suppliers will be Cybersecurity Maturity Model Certification (CMMC) Level 3 ready.

Business Integrity

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