Our commitment to sustainability includes a responsibility to operate our facilities efficiently and to proactively manage our business and our supply chain to reduce carbon emissions, mitigate risk and safeguard valuable resources.
Mission success depends on providing products and services that have trusted reliability, performance and safety. Preventing counterfeit parts from entering Lockheed Martin’s supply chain is one way we uphold this commitment to our customers.
The Vice President, Global Supply Chain Operations provides oversight of the counterfeit prevention program. Our corporate policy, Counterfeit Prevention, guides the prevention, detection and mitigation of counterfeit work across our company. Business areas can have additional procedures specific to their unique operations. Additionally, we have a Corporate Counterfeits integrated product team that includes quality assurance representatives from each business area to provide subject matter expertise and guide day-to-day prevention management.
Lockheed Martin purchase orders contain terms and conditions on counterfeit mitigation provisions, and we require all acquisitions to begin with original equipment manufacturers and authorized distributors. Please see our Supplier Code of Conduct for a summary of these counterfeit parts expectations. Counterfeit prevention is included in contract purchasing system reviews conducted annually at rotating facilities and during need-based customer quality audits.
As the dynamic global landscape evolves and our adversaries continue to insert new counterfeit parts into supply chains, Lockheed Martin is championing a preventative approach. Through our new sustainability management plan goal to achieve a 100% completion rate of applicable training on the identification and reporting of counterfeit parts by 2025, we not only build awareness of the topic, but equip our employees with the tools needed to identify counterfeit parts and take appropriate action if a suspect part is detected. Appropriate actions may include notification, quarantining of parts and investigations.
Our customers depend on our mission-critical products and services. Including counterfeit parts prevention in our sustainability management plan gives our customers confidence in our efforts to prevent substandard and unreliable parts from entering our supply chain and helps us retain their business now and into the future. Please visit the Frequently Asked Questions section of our Supplier Wire website for supplier resources on preventing counterfeit parts from entering our supply chain.
Our Go Green program drives operational improvements by reducing carbon emissions through energy efficiency and use of renewable energy.
Investing in capital and operational projects that improve resource efficiency is key to reducing emissions. This work is sanctioned by our Board of Directors, which receives performance updates at least twice per year from our Senior Vice President, Ethics and Enterprise Assurance and our Vice President, Environment, Safety and Health. Multiple corporate policies guide our approach to green building standards, energy efficiency, strategic energy procurement and use of renewable energy.
Our ISO 14001-certified Environment, Safety and Health Management System drives continuous improvement and commits all business areas to operating in a manner that protects the environment, conserves natural resources, prevents pollution and reduces and actively manages associated risks.
For more information on our Go Green program, please visit our Environment, Safety and Health website and review our annual environment, safety and health performance reports located on the ESG Portal.
To achieve emissions targets, the Environment, Safety and Health and facilities teams conduct on-and off-site engineering assessments to identify renewable energy and efficiency projects. Findings are used to develop annual tactical plans and an iterative strategic plan with a three-year outlook, against which actual progress is measured and compared. This is called our Go Green gated capital cycle. In 2021, the Environment, Safety and Health and facilities teams completed 64 energy efficiency projects that resulted in annual savings of 40.0 million kilowatt-hours of electricity and 17,200 MMBTU of natural gas, and the avoidance of $3.8 million in utility and maintenance costs. This Go Green gated capital cycle is a centerpiece of our energy reduction and renewable energy strategy whereby projects that meet certain performance and financial thresholds are added to each business area’s overall capital plan. To encourage ideas and actions that reduce emissions, we educate employees about Go Green through internal and external communications, educational webinars and Earth Day and Energy Action Month celebrations. We recognize employee projects that contribute to our reduced impact on the environment through awards programs, including our Environment, Safety and Health Excellence Awards and Facilities Leadership Awards. We also seek external recognition through partner organizations, such as the U.S. Environmental Protection Agency’s ENERGY STAR program and the U.S. Department of Energy’s Better Plants program.
Our smart buildings initiative was recognized by peer ENERGY STAR partners as a 2021 Top Project. Smart buildings is a data analytics effort that integrates heating, ventilation and air conditioning equipment, sensors and software to enable predictive maintenance and continuous commissioning. This, in turn, delivers energy use and cost savings, and greater asset reliability and occupant comfort. Our data-driven approach aligns with our broader digital transformation strategy and improves the efficiency of cooling and heating infrastructure, which represents a significant portion of our energy use. Thirteen Lockheed Martin facilities are currently implementing smart buildings at different levels of completion. At the first four facilities to implement smart buildings within our Rotary and Mission Systems business area, over 150 no- and low-cost projects that avoid approximately $250,000 in maintenance and energy costs annually have been discovered. These projects were identified by sensors that provide 3.6 million data analytics transactions daily.
The Lockheed Martin Sikorsky Stratford, CT, facility garnered an internal Facilities Excellence Award along with external awards from the U.S. Department of Energy’s Better Plants Program and Energy + Environmental Leader for improved operational performance of its cogeneration system and its central utility plant. The site installed new steam turbine-driven equipment and electrical infrastructure and can now export electricity back to the grid, thanks to a newly established interconnection agreement with the utility. The project avoids approximately 10.3 million kilowatt-hours, or the equivalent of the electricity needed to power more than 1,200 homes for one year, and yields cost savings of approximately $1.5 million annually, achieving a payback in just over two years.
Renewable energy strengthens the resiliency of our facilities, our relationship with our customers and our engagement with employees. In 2021, we ranked at number 28 on the U.S. Environmental Protection Agency Green Power Partnership’s list of Top 30 on-site generators and at number 51 on their National Top 100 list for total renewable energy use. Since 2008, we have installed 13 on-site solar systems and one biomass facility, for a total of 10.3 megawatts of capacity.
Construction on a 20-megawatt, on-site, single-axis photovoltaic system at our Palmdale, CA, facility began in late 2021 and is expected to be completed in 2022. This project will be one of the largest privately-owned, ground-mounted, behind-the-meter solar farms in California. Additionally, the Titan Solar Project at our Fort Worth, TX, facility started in December 2021. We expect this 15-year power purchase agreement to provide approximately 22% of the facility’s annual electricity needs. Lockheed Martin also installed its third solar carport at a Missiles and Fire Control facility in Orlando, FL. This two megawatt on-site project eliminates approximately $581,000 in utility costs annually and reduces our carbon footprint over 2,500 metric tons.
Green buildings reduce our impact on the natural environment, lower lifecycle operating costs and enhance occupant well-being. Lockheed Martin’s corporate policy on green buildings requires the United States Green Building Council’s Leadership in Energy and Environmental Design (LEED)® Silver certification as the minimum standard for new construction and major renovations. Where LEED isn’t available internationally, Building Research Establishment Environmental Assessment Method (BREEAM) or Green Globes is required. For existing buildings, we seek ENERGY STAR certification to demonstrate operational energy efficiency. Currently, we have 25 LEED-certified, one BREEAM-certified and nine ENERGY STAR-certified buildings.
Lockheed Martin is renewing our approach to climate risk with a focus on carbon removal and carbon offsets. We are committed to building a strong foundation now to support forward-thinking carbon-related projects in the future.
Lockheed Martin’s Senior Vice President, Ethics and Enterprise Assurance has leadership oversight for these efforts and provides performance reporting to the Executive Leadership Team. Our corporate Sustainability policy provides overarching guidance, and is supported by our Task Force on Climate-Related Financial Disclosures Report published on our ESG Portal.
The Corporate Sustainability Office has recently partnered with the Lockheed Martin Ventures team to analyze new technology investment opportunities through a sustainability lens. Lockheed Martin Ventures makes strategic investments in companies that are developing cutting edge technologies in core businesses and new markets important to Lockheed Martin. The Corporate Sustainability Office reviews opportunities against sustainability criteria and Lockheed Martin strategy elements to identify climate technology that aligns with our sustainability priorities, such as carbon removal. The goal is to integrate sustainability into the standard evaluation process of Lockheed Martin’s potential investments to enhance value creation and climate innovation within our programs and operations. Additionally, the Corporate Sustainability Office is partnering with our Social Impact team to identify charitable donation opportunities that align with our sustainability strategy to increase carbon removal support, as well as ways to engage employees and enhance community resilience in locations where we operate.
Lockheed Martin is actively taking steps to increase visibility of and to develop a reduction strategy for our Scope 3 emissions. We are taking the initial step of addressing Scope 3 emissions that are within our control at this time. Our travel management partners provide us with our total business travel-related emissions annually, including emissions associated with flights and rental vehicles. We plan to offset these emissions through projects that meet robust internal quality and credibility requirements in addition to quality criteria from third-party market participants, such as the World Resources Institute and relevant certification bodies. Priority will be given to projects that align with one of the following technology areas: methane capture and combustion, energy efficiency, fuel switching or projects with co-benefits related to communities and the environment.
In September 2021, Lockheed Martin Sikorsky approved the use of sustainable aviation fuel for the S-92 helicopter. The flight was carried out by the CHC Helikopter Service of Norway using synthetic paraffinic kerosene, which is a sustainable aviation fuel produced from waste and residual feedstock. This significant milestone supports the reduction of carbon emissions and the aviation industry’s transition to sustainable aviation fuels. To learn more about the S-92, please visit our website.
In 2021, Lockheed Martin committed $2 million to a three-year partnership with The Nature Conservancy in support of a project that will protect 4,000 acres of land along Maryland’s Eastern Shore. The area contains the restricted airspace of the Atlantic Testing Range and the Naval Air Station at Patuxent River. It also includes more than 75% of Maryland’s remaining tidal wetlands, which provide defense against coastal hazards stemming from climate impacts. The project is part of the Department of Defense’s Readiness and Environmental Protection Integration Challenge, which aims to strengthen the resiliency of the Department of Defense’s vital U.S. infrastructure.
In the summer of 2021, Lockheed Martin hosted its first Climate Tech Summit. This internal meeting brought together technical leaders from across the corporation with the latitude to explore how we could apply our current product capabilities to a changing environment. The end result surpassed expectations, as the team presented Lockheed Martin-unique solutions based on existing technology reimagined for climate action. Applications related to topics including natural disasters, greenhouse gases, land cover change, geospatial data and climate intelligence. The Climate Tech Summit demonstrated the potential value Lockheed Martin can bring to climate conversations, and how collaboration between stakeholders can generate innovative solutions for positive impact and for new customers. Lockheed Martin plans to continue this effort in 2022 with additional events.
Reducing hazardous chemicals in our products helps Lockheed Martin stay ahead of increasing global chemical regulations and restrictions. Through proactive management of hazardous chemicals in our products and manufacturing processes, we are reducing regulatory risks and protecting our employees, customers and the environment. We are also upholding commitments to our customers and maintaining a competitive position for future opportunities.
Lockheed Martin has two internal corporate policies, Restrictions on the Use of Chemical Substances in Products and Processes and Global Product Chemistry Regulations, that guide our chemical stewardship and chemical regulatory compliance efforts. The first policy includes lists of prohibited and targeted chemicals that are updated annually based on risk assessments, current use and regulations. Lockheed Martin Global Supply Chain Operations, Engineering & Technology, program management and Environment, Safety and Health organizations have roles in leading and managing these procedures across the enterprise. We also have three main employee engagement groups that drive the strategy and implementation of efforts to ensure compliance and reduce risk. These working groups include the Chemical Stewardship integrated process team, the Registration, Evaluation, Authorization and Restriction of Chemicals/Global Product Chemistry Regulations integrated process team and the Design for Sustainability working group.
A chemical stewardship focus area continues to be the establishment of a standardized process for collecting chemical data from suppliers on their parts and materials. In 2021, we implemented processes that align with the IPC-1754 Materials and Substances Declaration for Aerospace and Defense Standard, including incorporating the standard into our internal policies and subcontract flow-downs. The IPC-1754 standard includes requirements for aerospace and defense companies to collect chemical data in products and processes from suppliers. This facilitates improved data quality and comprehensiveness. Lockheed Martin is engaging members of our supply chain and collaborating with the International Aerospace Environmental Group on training and resources for this effort.
Additionally, we actively look to identify hazardous material replacement projects within our business areas and work with our customers to implement the resulting alternatives within our programs. We recently joined the International Aerospace Environmental Group Replacement Project working group and our engineers are participating in industry efforts to address identifying less hazardous alternatives to replace chromated bond primers and fuel tank coatings. These applications were selected as priorities by International Aerospace Environmental Group member companies due to regulatory restrictions on hexavalent chromium and the need to find alternatives that meet performance requirements.
The Design for Sustainability working group, led by employees from Engineering & Technology, collaborates across business areas and functions to develop capabilities that inform product design engineers about restricted chemicals during the product design phase. This effort is being funded as an emerging technology under the model-based engineering research portfolio. In 2021, the working group developed a prototype for a new restricted chemicals avoidance tool that will interface with product design tools. This tool enables engineers to evaluate parts and materials for new and revised designs in order to reduce the use of hazardous chemicals by building early awareness into Lockheed Martin’s product design processes. This approach will help us meet regulatory and customer requirements, reduce risk and costs associated with redesign and increase the sustainability of our products. The restricted chemicals avoidance tool pilot efforts will continue through 2022 with Rotary and Mission Systems Sikorsky. We plan to expand the tool to other business areas following this pilot phase.
The objective of sustainable supply chain management at Lockheed Martin is to ensure alignment of our supplier’s social, ethical, environmental and safety and health responsibilities with our own sustainability commitments. We focus on topics such as conflict minerals, chemical stewardship, environmental impact and counterfeit parts.
At a minimum of every three years, we conduct a supplier sustainability voluntary assessment to gain insight into our suppliers’ environmental, social and governance programs to better understand risks and opportunities. In the off-years, we conduct various focus activities, such as our 2020 cybersecurity risk assessment and our 2021 model-based enterprise assessment.
In 2021, we elevated the importance of visibility into our complex supply chain. Our new sustainability management plan goal is dedicated to enhancing the tracking and traceability of critical mineral resources. As a downstream user of critical mineral resources, it is challenging to trace the upstream origins of all our product components—from raw material extraction to manufacturers and suppliers to final integration into products at our facilities. Through knowledge of where the raw materials we depend on originate, we can make active purchasing decisions to reduce environmental and social risks in our value chain. This strengthens the long-term viability of our supplier base both domestically and globally. Ultimately, this helps us make sustainability-focused supplier decisions and mitigate the lifecycle impacts of our products.
We also focused on building internal awareness, identifying the teams required to provide and analyze resource data and defining our roadmap. We also started a pilot project with one of our signature programs. This pilot program consists of mapping out a selected set of critical mineral resources to their associated product components. We aim to gather lessons learned and expand the effort to other programs throughout the business areas by the end of 2022.
Additional information on sustainability within our supply chain can be found on our Supplier Wire website. Our Conflict Minerals Reports, U.K. Gender Pay Gap Reports, U.K. Modern Slavery Act Reports and supporting corporate policies can be found on our ESG Portal. Please visit the Human Rights page of this report for more information on how Lockheed Martin addresses human rights.
Maintaining product and service affordability for our customers is crucial to the longevity of our programs. With approximately 60% to 70% of product cost living within our supply chain, tracking and improvement of savings by our supply chain team contributes to competitive positioning for Lockheed Martin’s future procurement efforts.
We have a Supply Chain Council that meets monthly to guide affordability initiatives. The Supply Chain Council provides updates on enterprise-wide performance to our Chief Operating Officer, who reports periodically on Lockheed Martin’s competitive position in the market to the Board of Directors. Furthermore, the business areas come together quarterly to collaborate and leverage skills to advance affordability efforts. Business areas have specific affordability guidelines unique to their customers and programs, and our supply chain negotiators complete training on affordability objectives/tools.
To engage our workforce, a monthly newsletter that includes affordability topics, such as lessons learned, best practices and analytic insights, is sent to supply chain, engineering and technology, program management, manufacturing engineering and finance teams to advance negotiation results. Program management training is offered to our domestic and international managers and includes sessions from supply chain strategy leadership on tools and techniques to drive affordability results.
Looking to the future, Lockheed Martin plans to release additional user-friendly digital tools that assist with opportunity capture for each program, including opportunities for increased affordability.
Our annual savings goal is comprised of two classes of savings: customer value savings and Lockheed Martin program value savings. At the end of each year, the business areas review their business plans and anticipated contracts to project savings, which are used by leadership to define the respective business area targets. The enterprise Global Supply Chain Operations team analyzes and consolidates these goals to report performance for sustainability and other corporate requirements.
“The Lockheed Martin supply chain team has continued to evolve their best-in-class affordability techniques and practices over the last several years across the corporation, which has enabled us to achieve customer and corporate savings objectives while mitigating, where feasible, supply network cost challenges.”
—George Sanders, Corporate Affordability Sub-Council Lead
Our employees are the primary source of innovation for cost reduction opportunities throughout our programs and operations. Recognition, through our NextGen Recognition program, is given to teams from all disciplines who come forward with impactful and validated ideas that support our affordability objectives. For example, in 2021, a large technology procurement initiative that was not part of our original Supply Chain Council milestone plan resulted in more than $10 million in savings. We recognized this accomplishment and communicated the initiative’s success to our Executive Leadership Team and Chairman, President and Chief Executive Officer. We believe that celebrating our successes contributes to a culture of innovative thinking and encourages our teams to drive affordability.