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  • AEROSPACE & DEFENSE Research Brief

    Sustainable Industry Classification System™ (SICS™) #RT0201

    Research Briefing Prepared by the

    Sustainability Accounting Standards Board®

    MARCH 2015

    www.sasb.org© 2015 SASB™

  • I N D U S T RY B R I E F | A E R O S PA C E & D E F E N S E

    SASB’s Industry Brief provides evidence for the material sustainability issues in the Aerospace &

    Defense industry. The brief opens with a summary of the industry, including relevant legislative

    and regulatory trends and sustainability risks and opportunities. Following this, evidence for each

    material sustainability issue (in the categories of Environment, Social Capital, Human Capital,

    Business Model and Innovation, and Leadership and Governance) is presented. SASB’s Industry

    Brief can be used to understand the data underlying SASB Sustainability Accounting Standards.

    For accounting metrics and disclosure guidance, please see SASB’s Sustainability Accounting

    Standards. For information about the legal basis for SASB and SASB’s standards development

    process, please see the Conceptual Framework.

    SASB identifies the minimum set of sustainability issues likely to be material for companies within

    a given industry. However, the final determination of materiality is the onus of the company.

    Related Documents

    • Aerospace & Defense Sustainability Accounting Standard

    • Industry Working Group Participants

    • SASB Conceptual Framework

    INDUSTRY LEAD

    Darcie Renn

    CONTRIBUTORS

    Andrew Collins

    Henrik Cotran

    Stephanie Glazer

    Anton Gorodniuk

    Jerome Lavigne-Delville

    Himani Phadke

    AEROSPACE & DEFENSE Research Brief

    SASB, Sustainability Accounting Standards Board, the SASB logo, SICS, Sustainable Industry Classification System, Accounting for a Sustainable Future, and Materiality Map are trademarks and service marks of the Sustainability Accounting Standards Board.

    Darcie Renn

    Arturo Rodriguez

    Jean Rogers

    Levi Stewart

    Evan Tylenda

    http://www.sasb.org/sectors/resource-transformation/ http://www.sasb.org/approach/conceptual-framework/ http://www.sasb.org/sectors/resource-transformation/

  • Table of Contents

    Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

    Industry Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

    Legislative and Regulatory Trends in the Aerospace & Defense Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

    Sustainability-Related Risks and Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

    Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

    Energy Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

    Hazardous Waste Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

    Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

    Data Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

    Product Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

    Business Model and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

    Fuel Economy & Emissions in Use-phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

    Leadership and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

    Business Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

    Supply Chain Management & Materials Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

    SASB Industry Watch List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

    Appendix

    Representative Companies : Appendix I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

    Evidence for Sustainability Disclosure Topics : Appendix IIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

    Evidence of Financial Impact for Sustainability Disclosure : Appendix IIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

    Sustainability Accounting Metrics : Appendix III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

    Analysis of SEC Disclosures : Appendix IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

    References

    I N D U S T RY B R I E F | A E R O S PA C E & D E F E N S E

  • pital

    INTRODUCTION

    Aerospace and defense companies are part of a

    high-tech industry that produces components

    and equipment that enable air and space

    transport and advanced military defense

    systems. The largest customers for these

    products are often government entities; in the

    U.S. these include the Department of Defense

    and the National Aeronautics and Space

    Administration (NASA), in addition to the

    commercial airline industry. Product innovations

    in this industry have helped develop unmanned

    aerial systems, improve threat detection, and

    achieve greater fuel efficiencies for aircraft,

    marine, and terrestrial vehicles.

    However, there has been an emergence of new

    global threats, such as climate change, resource

    constraints, and safety and security issues

    arising from state and non-state actors.

    Together with greater customer and public

    concern about the environmental and health

    impacts of industrial production and scrutiny of

    business ethics, these threats are intensifying

    regulatory action and the need for improved

    business practices related to companies’

    sustainability performance around the world. In

    a time of changing geopolitical environments,

    decreasing government spending, and pricing

    pressures, companies in this industry therefore

    need to continue to innovate and optimize

    product and cost choices to focus on meeting

    market demands while reducing environmental

    and social externalities.

    Management (or mismanagement) of material

    sustainability issues has the potential to affect

    company valuation through impacts on profits,

    assets, liabilities, and cost of capital.

    Investors would obtain a more holistic and

    comparable view of performance with

    aerospace and defense companies reporting

    metrics on the material sustainability risks and

    opportunities that could affect value in the

    near- and long-term in their regulatory filings.

    This would include both positive and negative

    externalities, and the non-financial forms of

    capital that the industry relies on for value

    creation. Specifically, performance on the

    following sustainability issues will drive

    SUSTAINABILITY DISCLOSURE TOPICS

    ENVIRONMENT

    • Energy Management