Lockheed Martin 2100 Satellite Bus System.

Sustainability Governance and Management

A Message from Leo S. Mackay, Jr., Senior Vice President, Ethics and Enterprise Assurance

Overview

The mission of Lockheed Martin’s sustainability program is to foster innovation, integrity and security to protect the environment, strengthen communities and propel responsible growth. We integrate sustainability throughout our business, including operations and product and service innovation. At Lockheed Martin, Sustainability is aligned with Enterprise Risk Management (ERM) under one department, managed by the Director of Enterprise Risk and Sustainability. This integrated approach helps deliver value for our customers, stockholders, employees and local communities. Please visit Lockheed Martin’s ESG Portal to find sustainability related reports, policies and disclosures.

How Sustainability and Risk Management Work Together

At Lockheed Martin, we see the strong connection between risk management and sustainability, both of which help us mitigate risk and position our business for success in the short-, medium- and long-term. Aligning our ERM and Sustainability functions under one department allows us to better identify and categorize human capital and operational risks, and to implement controls such as corporate policies and resource allocation. Enterprise risk and sustainability are mutually reinforced through internal risk identification, assessment and mitigation processes.

Sustainability Governance

Lockheed Martin's Sustainability Governance. The Board of Directors monitors the corporation’s adherence to our Code of Ethics and Business Conduct and oversees performance in corporate sustainability,employee safety and health, ethical business practices and diversity and inclusion. The Executive Leadership Team guides and governs corporate-wide sustainability objectives and initiatives. The Sustainability Working Group Drives performance of our sustainability agenda, facilitates sustainability initiatives and coordinates stakeholder engagement.The Lockheed Martin sustainability governance structure comprises the Nominating and Corporate Governance Committee (Governance Committee) chartered by the Board of Directors, the Executive Leadership Team and the Sustainability Working Group. All sustainability programs fall under the purview of the Senior Vice President (SVP), Ethics and Enterprise Assurance, who reports to the Chairman, President and Chief Executive Officer (CEO). The SVP of Ethics and Enterprise Assurance also chairs our cross-functional Sustainability Working Group. We choose to link incentive compensation for Lockheed Martin Executives[1] to performance on certain sustainability factors such as diversity and talent management. See our 2021 Proxy Statement for more information.

Our Corporate Sustainability Policy establishes a standard approach to integrating sustainability across Lockheed Martin. We develop a five-year Sustainability Management Plan (SMP) to set goals and drive progress in our priority sustainability areas. The Governance Committee of the Board oversees topics including ethical conduct, environmental stewardship, corporate culture, philanthropy, workforce diversity and health and safety—all of which are inextricably linked to our sustainability commitments and performance. Annually, the members of the Governance Committee review company performance against the SMP.

Addressing Global Megatrends

For the past several years, Lockheed Martin has tracked relevant global trends to explore how they might impact the way we do business and provide opportunities for new solutions that address emerging needs. In 2020, the core megatrends identified include:

 

Reimagining Work

The global workforce is rapidly changing and technology is transforming the ways in which businesses operate. This includes the changing human-machine interface, workplace demographics shifting to more Millennial and Generation Z employees, a rapid increase in remote work as a result of the COVID-19 pandemic and enhanced efforts towards digital transformation.

 

Climate Resiliency 

A changing global climate is causing an increase in intense weather events, longer droughts, changes in precipitation patterns and rising sea levels. The impacts of these changes provide both climate risks and opportunities for society. In response, governments and businesses including Lockheed Martin are implementing climate adaptation and mitigation strategies to prepare for the resulting impacts.

 

Reinforcing Confidence
in Institutions
 

A range of stakeholders including investors, insurance providers, debt holders, employees and consumers want assurance that companies are operating with discipline, rigorous Board oversight and with an eye to emerging risks. Lockheed Martin is committed to doing our part to reinforce confidence in institutions, not only by investors, but by all our stakeholders.

Examples of how Lockheed Martin is addressing these core megatrends within our sustainability strategy can be found throughout this report.

The Sustainability Management Plan

The  Sustainability Management Plan (SMP) is a key component of Lockheed Martin’s sustainability strategy. To create the SMP, we first develop sustainability core issues through extensive engagement with internal and external stakeholders as well as analysis of industry trends. The core issues ultimately selected for the SMP represent those most material to our stakeholders and to our business. After the core issues are established, we work with our internal stakeholders to create specific sustainability goals for which we track our performance. SMP goals can be retired and/or updated if necessary based on our progress and the changing needs of our business. We also continually monitor ESG risks and opportunities to stay informed on shifting and emerging trends.

This year marked the completion of our 2020 SMP, which is composed of the Core Issues of Business Integrity, Product Impact, Employee Wellbeing, Resource Efficiency and Information Security. This report highlights our final achievements on the 2020 SMP goals and associated sustainability efforts throughout our Business Areas. In 2020, we developed our new 2025 SMP and associated goals, which will guide our sustainability efforts over the next five years. An introduction to the 2025 SMP sustainability priorities, core issues and goals can be found in this report.

 

[1] Executive is defined as director-level (one level below vice president) or higher.

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