Evaluating a company's impact (the case of Lockheed Martin)

This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

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THIS WEEK’S COMPANY

Lockheed Martin

This week we dive deep into Lockheed Martin’s environmental and social impact.

Lockheed Martin is one of the largest aerospace, military support, security, and defense companies.

Some interesting facts:

• Lockheed Martin is the world's largest defense contractor by revenue. Most of the company’s business is with the US Department of Defense and US federal government agencies.

• In the late 1990s, Lockheed Martin was involved in building the Mars Climate Orbiter. The mission failed due to a navigation error caused by a mismatch between metric and imperial units—Lockheed Martin’s team used imperial units, while NASA’s team used metric. This $125 million loss highlighted the critical importance of standardized measurements in aerospace projects.

COMPANY’S IMPACT

Lockheed Martin’s overall impact score

Lockheed Martin has a general impact score of -0.78 (on a scale from -5 to +5). Its impact is spread across 10 UN Sustainable Development Goals (SDGs) and 9 topics, split between positive and negative analyses.

In the socio-economic sphere,

Lockheed Martin is a global leader in aerospace, defense, and advanced technologies, with a legacy of pioneering innovations that shape national security, space exploration, and technological advancements. The company’s products enhance national defense capabilities, propel space research, and advance technologies that benefit industries and communities in over 50 countries worldwide. Beyond defense, Lockheed Martin’s satellites provide critical, real-time weather data, empowering forecasters to monitor severe storms, hurricanes, and wildfires, enhancing disaster response, and aiding in life-saving search and rescue efforts.

However, the company supplies a considerable amount of weapons to conflict zones, including regions in the Middle East and North Africa. These arms have fueled ongoing violence, worsening the humanitarian crisis in the Israeli-Palestinian conflict, where over 44,000 people have lost their lives since October 7, 2023. Lockheed Martin’s weapons were also used in the Saudi-led intervention in Yemen’s civil war, where over 150,000 people have lost their lives since 2015. Additionally, the company’s 3TG mineral supply chain—sourced partially from conflict-prone areas like the Democratic Republic of Congo—indirectly supports armed groups that control mining sites and profit from this resource extraction.

Environmentally,

Lockheed Martin emits over 28 million tonnes of CO₂ equivalent annually, equal to the emissions of over 5.5 million homes’ electricity use for a year. The company also uses more than 4.5 million m³ of water annually, 38% in medium-high, high, or extremely high water-stressed areas. Additionally, it generates approximately 26,000 tonnes of waste and recycles 52% of it.

_{*The impact score is current as of November 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Lockheed Martin’s ESG rating?

For comparison, Lockheed Martin has an AA rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Lockheed Martin’s impact scores by SDG

Positively (and by weight), the company scores the highest in the Partnership for the Goals SDG (+2.50), followed by Decent Work and Economic Growth (+0.18), and No Poverty (+3.54).

Negatively, the company scores the worst in the Peace, Justice, and Strong Institutions SDG (-1.07), followed by Climate Action (-3.17), and Responsible Consumption and Production (-2.50).

*the analysis takes into account the weight of the SDGs

Lockheed Martin’s operations have both positive and negative impacts on SDG 16 – Peace, Justice, and Strong Institutions. On the positive side, its advanced defense technologies and aerospace capabilities support national security and protect institutions, helping governments safeguard citizens and maintain peace. However, the company’s products are also deployed in conflict zones, contributing to violence and civilian casualties. This dual impact highlights the complex role Lockheed Martin plays in both promoting stability and, conversely, in fueling humanitarian crises.

CONCLUSION

Materiality Map & Final Words

So, Lockheed Martin’s key social and environmental impact lies in …

its key role as a global leader in aerospace, defense, and advanced technology. The company enhances national security, supports space exploration, and provides crucial weather and disaster response data through its satellites, benefiting communities and industries worldwide.

However, Lockheed Martin’s defense products also contribute significantly to global conflicts. Its weapons have been deployed in regions like the Middle East and North Africa, intensifying humanitarian crises. Environmentally, the company’s operations generate substantial CO₂ emissions, extensive water usage, and considerable waste, highlighting the environmental challenges associated with its production activities.

Lockheed Martin’s overall impact score of -0.78 underscores the balance between its critical contributions to security and technological advancement while emphasizing the complex ethical and environmental issues it must address in its global operations.

If you’d like to delve deeper into Lockheed Martin’s impact, you can explore it here.

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

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