Our Performance

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Objective

We will partner with our extended supply chain to minimize adverse environmental impacts and promote human rights, health, safety and ethical behavior, driving responsible growth, raising standards and building sustainable supplier capabilities.

Complying with European chemicals phase-out
In 2007, the Registration, Evaluation, Authorisation and Restriction of Chemicals regulation, better known as REACH, became law in the European Union, and is also followed by the non-EU countries of Iceland, Liechtenstein and Norway. REACH set a rolling timetable for phasing out chemicals “of very high concern”. We comply with all applicable laws, including REACH, in our European operations and business relationships.

Our Global Supply Chain Operations organization has developed a stringent implementation process to ensure compliance throughout Lockheed Martin and our supply chain. In 2012, we created an internal obsolescence repository, where employees can post chemical obsolescence notices, and all users are alerted when a new notice is entered.

We also issued a REACH authorization letter to effected suppliers, creating awareness of future enforcement actions by regulators.

In addition, we co-chair the U.S. Aerospace Industries Association’s REACH Working Group, which discusses concerns and advocates for the continued availability of needed industry chemicals.


Rare Earth Elements
Rare Earth Elements make up 17 elements of the periodic table and are used in a vast array of materials in commercial and aerospace and defense applications. Recent export limitations and price increases by China, which produces 97 percent of all rare earth elements, have caused global concern especially in the U.S. and Japan, where demand is highest.

In response, we performed a high level risk analysis of the rare earth elements we use: Neodymium, Samarium, Yttrium, Erbium and Cerium. While we found some vulnerability, we have accepted the risk of potential shortages and short-term price increases, based on our understanding of the industrial marketplace and U.S. government analysis of the situation.

Toward a Sustainable Supply Chain
In 2012, we developed a governance model, vision, strategy and performance indicators to measure our success in environmental and social supply chain performance. We included guidance and requirements for suppliers in the following areas. 

Human Trafficking
In 2012, we expanded disclosure on our efforts to eradicate human trafficking and slavery throughout our global supply chain. We also posted company information that addresses the intent of the California Supply Chain Transparency Act. We will not knowingly do business with suppliers who engage in human rights violations or use child or forced labor.  Our Eradicate Human Trafficking web page has more information.

Conflict Minerals
In August 2012, the U.S. Securities and Exchange Commission adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to require companies to publicly disclose their use of conflict minerals originating in the Democratic Republic of Congo or a neighboring country. Named minerals included tin, tantalum, tungsten and gold. Some of our products contain these minerals. To comply with the rule, we monitor relevant suppliers through assessment, assurance and stakeholder engagement. A company-wide working group leads this effort and includes representatives from Global Supply Chain Operations; Legal; Washington Operations; Corporate Sustainability; Communications; Corporate Engineering and Technology; Energy; Environment; Safety & Health and Internal Audit.

Working group plans include:

Assessment

• Developing a corporate-wide conflict minerals policy addressing supply chain due diligence and reporting requirements

• Educating our suppliers and our Global Supply Chain Operations professionals about conflict minerals

• Implementing contract language for subcontracts and purchase orders to address supplier requirements for due diligence on conflict minerals

• Working with the Organization for Economic Cooperation and Development (OECD) Pilot Program to implement its Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High-Risk Areas

• Engaging with our industry through trade associations to share strategy and best practices

• Coordinating with the Office of Corporate Sustainability to ensure our conflict minerals policy is compatible with other aspects of supplier conduct assessments and reporting

Assurance

  • Requesting key suppliers identify products in their supply chain that contain tin, tantalum, tungsten and/or gold and validate the country of origin of these minerals
  • Partnering with third-party auditors on establishment of common supplier expectations; from 2016, seek independent audits to prove company compliance

Stakeholder Engagement

  • Benchmarking and sharing with aerospace and other industry manufacturers
  • Coordinating with upstream materials suppliers that are implementing due diligence processes for conflict minerals

Greener, Leaner Operations
What do sustainable operations mean at Lockheed Martin? Put simply, leaner and greener. We are seeking to increase productivity, while implementing safer practices, improving quality, reducing harmful emissions and waste, preserving natural resources and meeting delivery schedules. Our suppliers have a big part to play in this. In 2012, we conducted two pilot programs that produced both environmental benefits and operational efficiencies. We are now exploring ways to expand these programs across our business.

One such business case study showed bright prospects for achieving ergonomic and process efficiency benefits by using a custom-designed flight control lift tool. At our Greenville, S.C. site aircraft flight controls are frequently lifted, flipped and carried by hand for transportation, storage, inspection and repair work. Our research found that injury risks to employees during the flight control maintenance process could be significantly reduced by using a custom flight control lift tool.

Suppliers and Cyber Security
Cyber security attacks continue to increase in frequency and sophistication for the aerospace and defense industry. Adversaries are targeting anyone who possesses sensitive information including the government, prime contractors and suppliers. It is imperative that our suppliers understand what’s at stake and recognize our shared role in protecting sensitive information and intellectual property. We address this issue by:

  • Understanding the cyber security posture of our suppliers
  • Building awareness of the threat within our supply chain community
  • Working with our suppliers to ensure that the appropriate risk mitigations are in place to protect sensitive information

Where We Are Going

By the end of 2013, we aim to release a Supplier Code of Conduct to all of our suppliers. Preferred suppliers who account for approximately 50 percent of our supply chain expenditures will also be requested to complete a sustainability assessment. The assessment will help us:

  • Set clear expectations for our suppliers regarding environmental and social practices
  • Evaluate suppliers’ sustainability performance against our expectations
  • Build capacity to help suppliers meet these expectations
  • Gather data on key performance indicators from suppliers to evaluate and share with stakeholders
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Sustainability at Lockheed Martin


Preferred Supplier Program

Providing the best possible products to our customers and creating innovations depends on working with first-class suppliers. We will seek to expand our successful Preferred Supplier Program (PSP) and the benefits it brings.

Our Missiles and Fire Control (MFC) established the PSP in 1998 to recognize the “best of the best” suppliers who have contributed significantly to our business and our customers through outstanding performance and to promote their use across the company.

The Preferred Supplier Team performs Supplier Assessment and Surveillance Audits (SASA) and Risk Based Assessment Tool (RBAT) assessments on each Preferred Supplier to ensure consistent performance. We promote their use by heightening their visibility on internal websites and identifying their commodities to procurement representatives and other key Lockheed Martin program personnel. We also host trade shows, production line reviews and technical meetings for Preferred Suppliers and facilitate activities that foster continuous improvement, innovation and affordability in their operations.

Using our best suppliers brings comprehensive benefits. Companies that participated in our MFC PSP events realized a 54 percent increase in 2012 purchase order dollars equating to $24 million. For Lockheed Martin, our Preferred Suppliers increase affordability by collaborating on cost saving ideas, provide exemplary customer service, embrace continuous improvement, eliminate risk through flawless performance and deliver defect-free products on time to the end user.

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