Relevant Issues (7 of 26)
- GHG Emissions
- Air Quality
- Energy Management The category addresses environmental impacts associated with energy consumption. It addresses the company’s management of energy in manufacturing and/or for provision of products and services derived from utility providers (grid energy) not owned or controlled by the company. More specifically, it includes management of energy efficiency and intensity, energy mix, as well as grid reliance. Upstream (e.g., suppliers) and downstream (e.g., product use) energy use is not included in the scope.
- Water & Wastewater Management
- Waste & Hazardous Materials Management The category addresses environmental issues associated with hazardous and non-hazardous waste generated by companies. It addresses a company’s management of solid wastes in manufacturing, agriculture, and other industrial processes. It covers treatment, handling, storage, disposal, and regulatory compliance. The category does not cover emissions to air or wastewater nor does it cover waste from end-of-life of products, which are addressed in separate categories.
- Ecological Impacts
- Human Rights & Community Relations
- Customer Privacy
- Data Security The category addresses management of risks related to collection, retention, and use of sensitive, confidential, and/or proprietary customer or user data. It includes social issues that may arise from incidents such as data breaches in which personally identifiable information (PII) and other user or customer data may be exposed. It addresses a company’s strategy, policies, and practices related to IT infrastructure, staff training, record keeping, cooperation with law enforcement, and other mechanisms used to ensure security of customer or user data.
- Access & Affordability
- Product Quality & Safety The category addresses issues involving unintended characteristics of products sold or services provided that may create health or safety risks to end-users. It addresses a company’s ability to offer manufactured products and/or services that meet customer expectations with respect to their health and safety characteristics. It includes, but is not limited to, issues involving liability, management of recalls and market withdrawals, product testing, and chemicals/content/ingredient management in products.
- Customer Welfare
- Selling Practices & Product Labeling
- Labor Practices
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion
Business Model & Innovation
- Product Design & Lifecycle Management The category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
- Business Model Resilience
- Supply Chain Management
- Materials Sourcing & Efficiency The category addresses issues related to the resilience of materials supply chains to impacts of climate change and other external environmental and social factors. It captures the impacts of such external factors on operational activity of suppliers, which can further affect availability and pricing of key resources. It addresses a company’s ability to manage these risks through product design, manufacturing, and end-of-life management, such as by using of recycled and renewable materials, reducing the use of key materials (dematerialization), maximizing resource efficiency in manufacturing, and making R&D investments in substitute materials. Additionally, companies can manage these issues by screening, selection, monitoring, and engagement with suppliers to ensure their resilience to external risks. It does not address issues associated with environmental and social externalities created by operational activity of individual suppliers, which is covered in a separate category.
- Physical Impacts of Climate Change
Leadership & Governance
- Business Ethics The category addresses the company’s approach to managing risks and opportunities surrounding ethical conduct of business, including fraud, corruption, bribery and facilitation payments, fiduciary responsibilities, and other behavior that may have an ethical component. This includes sensitivity to business norms and standards as they shift over time, jurisdiction, and culture. It addresses the company’s ability to provide services that satisfy the highest professional and ethical standards of the industry, which means to avoid conflicts of interest, misrepresentation, bias, and negligence through training employees adequately and implementing policies and procedures to ensure employees provide services free from bias and error.
- Competitive Behavior
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
- Systemic Risk Management
Disclosure Topics (Industry specific) for:
Aerospace & Defense
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Energy is a critical input to the manufacturing processes of aerospace and defense companies. Purchased electricity represents the largest share of energy expenditures in the industry, followed by purchased fuels. The type of energy used, magnitude of consumption, and energy management strategies depends on the type of products manufactured. A company’s energy mix, including the use of electricity generated on-site, grid-sourced electricity, and the use of alternative energy, can play an important role in influencing the cost and reliability of energy supply, and ultimately affect the company’s cost structure and regulatory risk.
Waste & Hazardous Materials Management
Hazardous Waste Management
Aerospace and defense product manufacturing may generate hazardous process waste, including, but not limited to, heavy metals and wastewater treatment sludge. Companies face regulatory and operational challenges in managing waste, as some wastes are subject to regulations pertaining to their transport, treatment, storage, and disposal. Waste management strategies include reduced generation, effective treatment and disposal, and recycling and recovery, where possible. Such activities, while requiring initial investment or operating costs, can lower companies’ long-term cost structure and mitigate the risk of remediation liabilities or regulatory penalties.
Companies in the Aerospace & Defense industry may develop sensitive military and advanced aviation products, and companies in this industry may therefore be at a high risk for cyber attacks. A data security breach can be costly for a company and its clients when information systems are compromised. Ensuring data security may require aerospace and defense companies to invest in research and development and increase capital expenditures in the short to medium term to improve the security of their systems and their products. Significant or frequent disruptions or security breaches may result in regulatory action, legal action, or adversely impact revenues and brand value.
Product Quality & Safety
Product safety is an important consideration for aerospace and defense companies given the industry’s key role in commercial aviation and military operations. Product safety incidents could result in financial impacts, including increased costs, regulatory penalties, or brand-value impacts that could adversely affect market share. Additionally, counterfeit components have been found in the aerospace and defense supply chain, increasing the risk of safety incidents due to low product quality. Through product design, supplier vetting, and ongoing customer engagement involving maintenance and accident investigations, companies in this industry can ensure the safety of their products over the long term, mitigating potential financial consequences such as revenue loss due to repeated safety incidents or recalls.
Product Design & Lifecycle Management
Fuel Economy & Emissions in Use-phase
Customer preferences and regulatory drivers are increasing the demand for energy-efficient and reduced-emissions products in the Aerospace & Defense industry. Many of the industry’s products are powered by fossil fuels and release greenhouse gases (GHGs) and other air emissions during use. As the designers and manufacturers of most of the global aerospace and defense transportation fleet, companies in this industry have a unique opportunity to support many industries and government agencies that are striving to meet GHG emissions and fuel-management goals and imperatives. Products with higher fuel economy and lower use-phase emissions may be well positioned to capture expanding market share and adapt to changing customer preferences and regulations around fuel economy and emissions.
Materials Sourcing & Efficiency
Aerospace and defense companies are exposed to supply chain risks when critical materials are used in products. Companies in the industry manufacture products using critical materials with few or no available substitutes, many of which are sourced from deposits concentrated in only a few countries which are subject to geopolitical uncertainty. Companies in this industry also face competition due to increasing global demand for these materials from other sectors, which can result in price increases and supply risks. Companies that are able to limit the use of critical materials through use of alternatives, as well as secure their supply, can mitigate the potential for financial impacts stemming from supply disruptions and volatile input prices.
Aerospace and defense companies may be vulnerable to regulatory scrutiny of business ethics because of their operations in regions with weaker government enforcement of business ethics laws. Companies in this industry have been found in violation of corruption and anti-bribery laws such as the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act. Unethical practices may jeopardize future revenue growth due to reputational risks and can result in significant legal costs and a higher risk profile. As such, strong governance practices can mitigate the risk of violations of business ethics laws and resulting regulatory penalties or brand-value impacts.
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