sustainability management challenges in defense industry

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SUSTAINABILITY MANAGEMENT CHALLENGES IN THE DEFENSE INDUSTRY

Presented by:- Pilla svssn Parameswararao,MBA III

Sem Piyush Thakur, MBA III Sem

Acharya Bangalore Business School

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• INTRODUCTION

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“SUSTAIN”, means - being to “maintain", "support", or

"endure”.

Sustain for future

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SustainabilityDefinition: -

"sustainability is improving the quality of human life while living within the carrying capacity of supporting eco-systems“

Sustainability is

“journey”.

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The sustainability goal• is to raise the global standard of living without increasing the

use of resources beyond globally sustainable levels

that is, to not exceed "one planet" consumption.

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“Three Pillars" of Sustainability• the economy is a subsystem of human society, which

is itself a subsystem of the biosphere and a gain in one sector is a loss from another

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Sustainable Development

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• Sustain development is to ensure that a resource use is not leading to decline of it.

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• the word sustainability is applied not only to human sustainability on Earth, but to many situations and contexts like balance of production and consumption.

– It can also apply to a : "sustainable Business"

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Six Essential Principals of Sustainable Business:

1. Triple top-line value production2. Nature-based knowledge and technology3. Products of service to products of consumption4. Solar, wind, geothermal and ocean energy5. Local-based organizations and economies6. Continuous improvement process

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1. Triple top-line value production

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Sustainable management takes the concepts from sustainability and synthesizes them with the concepts of management.

defined as - the application of sustainable practices in the categories of businesses, agriculture, society, environment, and personal life by managing them in a way that will benefit current generations and future generations.

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Sustainable Management

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Measurement

• They include indicators, benchmarks, audits, indexes and accounting, as well as assessment, appraisal and other reporting systems. – They are applied over a wide range of spatial and

temporal scales.

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1. Corporate sustainability reporting, 2. Triple Bottom Line accounting,

3. Environmental Sustainability Index(ESI) & Environmental Performance Index(EPI)

as being used by World Sustainability Society and as Estimates of the quality of sustainability governance for individual countries respectively.

Some of the best known measures include:

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• To be among the sustainability leaders in its sector a company typically needs to have a good score, but not necessarily outperform, on all three dimensions of sustainability.

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Armaments companies comes under the DJSI INDEXES .

The following issues are considered for awarding :1.Transparency 2.Human Rights3.Business Practice4.Weapons of mass destruction

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EXAMPLE

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• Structure and Context of Industry

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IndustryThe industrialization process affects the environment in several ways at:

The input preparation and makeup stage: Through the depletion, destruction or transformation of the natural resource base, lands, and soils to obtain its

raw materials;

The manufacturing (processing) stage: Through environmental pollution by environmentally unsound technologies;

The product use stage: Maintenance and repair;

The product after-use stage: Through generating waste with its attendant problems of its disposal (re-use, recycling, etc.).

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Defence Industry1. Defence contractors:

business organizations or individuals that provide products or services to a defence department of a government.

2. The Arms industry:

which produces guns, ammunition, missiles, military aircraft, and their associated consumables and systems

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DEFENSE INDUSTRY PRODUCTS

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The sector is mainly dependent on a single customer —i.e. government.

Any company can’t increase government spending on Defence but only market share.

In the Defence industry, revenue is limited by politics and Government budgets.

Structure of Defence Industry

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In any country, the activities of Defence forces include the following:

Administration, supervision and operation of

Military defence affairs and. Land, sea, air and space defence forces.

Defence Forces

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The idea that the outlook for the defence sector depends on three factors – ◦ Threats to nation, ◦ Politics and ◦ Economics

No threat, no defence industry -- it's almost that simple.

Military Threats Drive the Defence Sector

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Environmental Factors

Given the nature of the industry, environmental concerns are little discussed, but some drivers affect the sector:

Clean-up of facilities

Waste and emissions

Environmental effects of weapons

Eco problems due to usage of aviation fuel.

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Technological Factors

Technology is extremely important for the defence sector, influencing the sector’s development in several crucial ways.

Changing lead positions: Growth of dual-use technologies: Cooperation:

‘

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During 2005, the relationship with the customer has changed, and different contractors have taken different approaches.

• Boeing does pure outsourcing and integration. • Northrop Grumman and Lockheed martin keep deeper expertise in house. • Raytheon seeks vertical integration, growth from the bottom up. • Bae has tried to carve out a role as global integrator but technology

transfer laws make this difficult. • The market and the government (the buyer) are sorting out what model is

best.

Changes/Trends in Major Defence Players

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Key Highlights of Sustainability in Defence Industry

• Cost savings, attracting new customers and managing corporate

reputation are major drivers influencing sustainability efforts in the defense industry.

• Post recession some 62% of industry players around the globe

are looking to increase their sustainability budget over the next 12 months, with only 10% looking to decrease it during 2010-12.

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• What does sustainability mean to defence industry ???

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For that The question the MOD and defence industry has to answer is:

“How can we continue to improve the quality of life for a growing and demanding population, whilst not failing in our responsibilities to future generations???”

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To answer it.• Steps can be made to address this question by looking at

the challenges industry will face in attaining sustainability.

• In practice, this means that appropriate policies, procedures, tools and skills must be developed to ensure that future resources and opportunities are realised.

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• Interpreting what being “sustainable” means to a specific organisation will facilitate the identification and prioritisation of improvements aligned with the three pillars.

• Acknowledging any current imbalance of these pillars should be considered the first step by any organisation on the journey towards a sustainable future.

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The practical side• Balancing the three pillars will help Defence

Industry move to a more sustainable standing. • However, – this is something although we to strive for it

may never actually be fully attained.

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• Sustainability Management in USA Defence Industry

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The general characteristics of defence production especially in USA are: – An emphasis on performance of high-technology weaponry

rather than on cost;

– Risk borne by government, which often finances R&D and, in some cases, provides investment in capital and infrastructure;

– Elaborate rules and regulations on contracts, to compensate for the absence of any form of competitive market and to assure public accountability;

– The prevalence, outside the US, of companies that are national monopolies or close to it.

USA Defence Industry

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• F-22 – The fighter aircraft. -A sustainability model for Defense industry

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Integration of three pillars

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• Air Dominance Reduces Aircraft & Resources.

– It Covers 3 times area in same time in which a normal aircraft do. • Supercruise - Mach 1.5 @ Military Power.

– It consumes 60% less fuel than F-15C @ same speed.

• Engine Efficiency Reduces Footprint.

– It Saves 93% Fuel, Emissions, Cost of Engine Runs.

The following characteristics make F-22 a sustainability model for Defense industry:

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• EAFB Threatened Species Study successful

– Its Sonic booms not impact Desert Tortoise survival • F-22 Hazardous Material Program.

– It proactively Integrates Hazardous Material, Environmental & Health Requirements Throughout the F-22 Weapon System Life Cycle

• F-22 Design for Environment

– It earned Stratospheric Ozone Protection Award for Leadership in Ozone Layer Protection

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• Pilot & maintainer safety

– It has reduced hazardous material exposure. So pilot and maintainer safe

• Reduced maintainer noise exposure

– It has eliminated many engine high noise tasks and decreases sound pollution

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• Reclaimed Parts & Disposal Reduce Cost & Resource Footprint– 61% metals of old F-22 can be recycled to make spare parts for a new

fleet of aircrafts.

– 24% composites to undergo investigation for carbon recovery.

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F-22 sustainability program• The F-22 Sustainability reduces F-22 total program ownership costs, by

proactively reducing the lifecycle environment, health and community footprint.

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Their Assembly line

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Sustainable Business practice employed in F-22 Production

The following sustainability practices are followed in the production of F-22 by lockheed Martin company, USA:Action: Integrate Requirements Throughout Lifecycle.

Team: Customer & Contractor, Integrated Product Teams. Balance: Performance & Hazardous Materials. Funding: Qualify & Implement New Materials. Multiplier: Share Lessons Learned & Accomplishments.

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Sustainability in Europe Defense Industry.

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UK • The UK is the first country in the world to adopt a legally

binding target to reduce greenhouse gas emissions by 80% by 2050.

• The MOD, because of its purchasing power and scope of its

business, has an important part to play in achieving this target and tackling resource depletion.

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Its Aim

• The Sustainability concept has recently gained

prominence in the UK and the government has set its departments ambitious targets to become sustainability leaders in Europe

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Existing Good Practices @UK

• It should be noted that below are relevant good practices exist in , that are not necessarily branded as sustainability. but not limited to:

– Financial, quality and environmental management systems;– Efficiency targets;– Apprenticeship schemes;– Investors in people;– Training and re-training;– Industry bodies and forums.

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Their Sustainable procurement.

• Sustainable procurement is built into UK government policy.

•HOW THEY DO IT

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• The UK Government Buying Standards simplify sustainable procurement by:

– Providing minimum and best practice standards for around 50 different products;

– Giving you straightforward specifications you can insert directly into tenders;

– Asking suppliers to prove their compliance with these standards;– Enabling more suppliers to develop products that meet the

standards – so increasing competitiveness.

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Their Sustainable Procurement Team.

• The Sustainable Procurement Team is responsible for both :

– Ensuring Defence capability and operational sustainability in the long-term.

– Addressing the implications of resource depletion & climate change, and embedding sustainability within the MOD’s acquisition processes.

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Sustainability greenticks

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• Sustainability Management Challenges

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Major Challenges

• Defining Sustainability in the MOD and the Defence Industry is a big challenge.

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The Main challenges are:

A defense product which is sustainable should be – Fit for the challenge of today;– Ready for the tasks of tomorrow;– Capable of building for the future.

The MOD primary concerns are capability and Affordability

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• More than 78% of suppliers agree that only a minority of defense

ministries consider reduction of carbon emissions as a criterion for supplier selection.

• During the cold war, defense firms invested 4% of their revenue in

research and development. Today the figure is 1.5%. Some of this shift is explained by business shifts; for example, it has lower R&D costs. – The question is who will do the research and development if industry will

not???

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• Six sigma, lean manufacturing may not fully apply in the defense industry(USA).

• Due to dis-investment process in underperforming

projects by USA Govt, the companies lost revenue which make them weaker in the sight of investors who think Apple & BMW is a better bet.

• Transfer of technology is difficult among different countries.

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Suggestions

• Eco-friendly Arms to be our future dream– Cluster Bombs– Destroy Target not the environment

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Finally Sustainable management as an economic opportunity

• The idea of sustainability as a business opportunity has led to job creation through the introduction of green-collar workers.– Green-collar worker is a worker who is employed in the environmental

sectors of the economy. Environmental green-collar workers (or Green Jobs) satisfy the demand for green development .

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• Dematerialization is being encouraged through the ideas of industrial ecology, eco-design and eco-labelling in addition to the well-established “reduce, reuse and recycle,”

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An electric wire reel reused as a center table in a Rio de Janeiro decoration fair(BELOW fig.). The reuse of materials is a sustainable practice that is rapidly

growing among designers in Brazil.

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Conclusion

• Companies should keep in their view that environmental problems are the consequence of Industrialization processes involved in manufacturing and usage of sophisticated arms and machines.

• Equity, development, care for nature and natural resources are factors so intertwined that they can only be analyzed and managed in an integrated manner.

• Transparency, resource efficiency and stakeholder development – should be the ways for sustainable development for defense industry.

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• Defence Organisations require a fundamental shift in the traditional focus of projects and programmes from a single

• Defense industries were always in an assumption that environmental laws are not apply to it and sustainability management is not workable to a industry which is a producer of killer machines.

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Sustainability management as competitive advantage- a real case

• Keeping the nature of industry which mostly produces hazardous matter , still sustainability management is a feasible practice for defense industry in many cases in improving productivity and efficiency to save cost and improve margins while being eco-friendly and socially responsible .

• sustainability management allows an defense organisation to effectively utilize its resources to gain competitive advantage over other global competitors through reputation in terms of compliances with regulatory standards, environmental and legal laws.

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Competing in sustainability management for competitive advantage

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END LESSON• Defence organizations can improve their

sustainability performance by measuring, monitoring and reporting on it and can have a positive impact on society, the economy, and a sustainable future through continuous improvement.

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Thank You