4
LOCKHEED MARTIN CORPORATION'S PERSPECTIVE ON EMSS AND ISO 14001

Stephen Evanoff

Manager, External Affairs

and

Norman Varney

Associate Legal Counsel

Lockheed Martin Electronics

At Lockheed Martin, it took two years of consensus building and negotiation to get to the point where everyone recognized the value of the ISO 14001 management system that is being implemented companywide.

Lockheed Martin, like federal agencies, conducts a range of activities and operates both large and small facility complexes. It is a Fortune 20 corporation, with about $37 billion in annual sales. It has operations in all 50 states and all regions of the world, with about 15,000 of its 230,000 employees located outside the United States. It is a major contractor to the Department of Defense (DOD), the Department of Energy (DOE), and the National Aeronautics and Space Administration (NASA); it also has contracts with the United States Postal Service (USPS) and the Environmental Protection Agency (EPA). The company has an interesting mix of customers and, as a corporation, it has a unique relationship with the government, in that it is both regulated by it, and is a major service provider to it.

The Lockheed Martin corporation is best known for its work in defense, electronics, and space technologies. It also manufactures launch systems, satellites, and military aircraft. The corporation provides major information services to federal, state, and local governments and is a supplier of aircraft, space, environmental, and engineering services. In addition to operating three major DOE labs, it provides environmental remediation services internationally for DOE and also some other contract service work for EPA.

Lockheed Martin is beginning to handle rocket launches in China and Russia. It is an interesting set of relationships in which former adversaries are now business partners. The idea of transferring our knowledge about environmental, safety, and health systems (ESH) internationally to countries



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Environmental Management Systems and ISO 14001: Summary Report 4 LOCKHEED MARTIN CORPORATION'S PERSPECTIVE ON EMSS AND ISO 14001 Stephen Evanoff Manager, External Affairs and Norman Varney Associate Legal Counsel Lockheed Martin Electronics At Lockheed Martin, it took two years of consensus building and negotiation to get to the point where everyone recognized the value of the ISO 14001 management system that is being implemented companywide. Lockheed Martin, like federal agencies, conducts a range of activities and operates both large and small facility complexes. It is a Fortune 20 corporation, with about $37 billion in annual sales. It has operations in all 50 states and all regions of the world, with about 15,000 of its 230,000 employees located outside the United States. It is a major contractor to the Department of Defense (DOD), the Department of Energy (DOE), and the National Aeronautics and Space Administration (NASA); it also has contracts with the United States Postal Service (USPS) and the Environmental Protection Agency (EPA). The company has an interesting mix of customers and, as a corporation, it has a unique relationship with the government, in that it is both regulated by it, and is a major service provider to it. The Lockheed Martin corporation is best known for its work in defense, electronics, and space technologies. It also manufactures launch systems, satellites, and military aircraft. The corporation provides major information services to federal, state, and local governments and is a supplier of aircraft, space, environmental, and engineering services. In addition to operating three major DOE labs, it provides environmental remediation services internationally for DOE and also some other contract service work for EPA. Lockheed Martin is beginning to handle rocket launches in China and Russia. It is an interesting set of relationships in which former adversaries are now business partners. The idea of transferring our knowledge about environmental, safety, and health systems (ESH) internationally to countries

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Environmental Management Systems and ISO 14001: Summary Report that do not have a strong infrastructure of such regulations is another driver for implementing the EMS companywide. Maturity Is the Key for Large Organizations For large corporations to understand where they need to go with ESH management systems, they must have a certain maturity and level of performance. Over the past decade, Lockheed Martin has established many systems, procedures, and pollution prevention technologies that have significantly reduced its environmental emissions. It also has corporatewide goals to further improve its safety performance. Lockheed Martin has received a good deal of recognition from local and federal stakeholders, and some sites that have received that recognition see the value of good customer, regulator, and community relations. All that is a component of the management system that ISO 14001 embodies. Many of the company's larger and more sophisticated sites — as in the electronics sector — have many of these elements in place, which gave the company the basis to start moving toward a corporatewide structure. The ESH vision that has been established has three elements. One is business unit self-governance. The concept is that if the business units have an integrated ESH management system in place that is rigorous and comprehensive, they will be in compliance with regulations. Compliance issues will never be out of focus; they will be managed effectively, like any other part of the unit's business. The core business operations then will take ownership of ESH responsibilities. The need for external oversight from sector or corporate people who audit their programs will diminish. Thus, one goal is for people to see EMS as the next step in the evolution toward self-governance and cost-effective operations. The second element of the vision is business unit performance such that the corporation has superior safety performance and continually decreasing environmental impact. That is the best way of complying — to prevent pollution in the first place. Last, because of Lockheed Martin's size, diversity, and customer base, it must be viewed as an industry leader. The ISO 14001 system ensures that Lockheed Martin is among the companies in the forefront of this area, and ultimately that translates into a business opportunity to differentiate itself from the competition. ISO 14001: A Rational Response There are a number of important trends that make ISO 14001 a rational response. First, company demographics moved Lockheed Martin in the

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Environmental Management Systems and ISO 14001: Summary Report direction of having a management system that creates a common architecture across the corporation but leaves the implementation and the details to the business units. As a large corporation, Lockheed Martin has over 600 locations in the United States that have ESH significance. Over half of those facilities have fewer than 100 people on staff. Several hundred sites are so small that they do not have the dedicated staff resources to handle ESH, but they still have the requirements. How do staff in smaller offices comply and where do they go for information? The company is creating a web-based information management system in which the corporate people can provide guidance and support information in easy-to-find and easy-to-use formats. Second, Lockheed Martin is under continuous pressure to reduce costs and improve performance, and it became evident that putting the management system into place would help to achieve that goal. Third, the continuing enforcement emphasis at the federal level translated into a greater need for more effective compliance programs. Fourth, the federal regulatory framework was becoming stable enough so that the company was not constantly dealing with major new regulations. Fifth, Lockheed Martin's federal government customers are becoming more knowledgeable about and sensitive to ESH issues, which are being worked into contract performance requirements. DOE contracts, for example, have numerical safety goals and performance-based contracting whereby the company can earn a bonus if its safety performance is at a specified level. Last, the majority of Lockheed Martin's future business growth, building on its core businesses in the United States, is going to be international. Many international business opportunities that Lockheed Martin foresees in the future likely will require ISO 14001 registration. Corporatewide Initiatives The management system initiative is nearing completion. Lockheed Martin has revised corporate policy and procedure documents essentially to reflect the core elements of ISO 14001. An ESH management system that follows the ISO 14001 architecture is a corporatewide requirement. The corporation has put in a management system model, a gap analysis tool (called a self-assessment or management system assessment protocol) and a risk assessment methodology. All are critical components of a web-based guidance module to assist business units in putting the management system in place. The corporate leaders feel strongly that ESH should be treated like all other business elements, where resources are allocated on the basis of risk. Oil and gas, pharmaceuticals, and electronics firms are probably leading all industry sectors in their ESH sophistication. They are addressing ESH — quality and customer satisfaction and all other important functions — as

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Environmental Management Systems and ISO 14001: Summary Report part of their overall business planning and operational risk assessment, so that the high-risk projects take priority. Lockheed Martin is working to ensure that everyone on staff does that for ESH, with the recognition that compliance is paramount. The company is distributing a brochure summarizing the management system to all senior managers and ESH staff around the corporation. It is a less prescriptive way to persuade people of the value of an ESH management system. The system that Lockheed Martin is putting in place is what might be called ''ISO-like.'' It is designed to be flexible enough, like ISO 14001, to fit small, medium, and large enterprises. There is an audit program in which the company periodically reviews compliance at the shop floor level for all facilities. A risk ranking of all sites is completed annually and the company audits are performed at facilities that are viewed as having the highest risk. Before the Lockheed Martin merger, traditional audits focused on work area compliance. Now, compliance audits are conducted, but the company is looking at things more programmatically and from a management systems standpoint. With the implementation of the corporatewide management system, the company's vision is essentially that, within the next several years, facilities will self-govern — they will audit their own compliance. External auditors, in the case of the ISO 14001 registered sites, come in every six months. Corporate management is expected to evolve to a point where it can audit the audit program (management system reviews). In other words, the company will have an external management system assessment and the goal will be to perform audits much less frequently than is currently done through compliance-based auditing. There will be less corporate involvement, fewer overhead costs, and improved emphasis on compliance, self-assessment, auditing, and self-governance at the facility level. The company has an initiative to reduce the number of days missed due to injuries by 64 percent by the year 2000. This could save up to $40 million per year. Within the framework of a management system, it is much easier to implement these kinds of corporatewide initiatives in a large, decentralized corporation with a diverse product mix. The ISO-like model gives Lockheed Martin a common language and a common way of addressing these issues, helping people to understand the importance of this issue in the operations arena. Lockheed Martin has a number of ISO 14001 registered facilities and two pending registrations, all within the electronics sector. Customers in Taiwan and South Korea have either directly required or inquired about Lockheed Martin's ISO 14001 and ISO 9001 registration status, which highlighted the desirability, of registration when conducting business internationally.

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Environmental Management Systems and ISO 14001: Summary Report Lockheed Martin Electronics Sector: A Case Study Lockheed Martin Electronics is a provider of sophisticated electronics for a variety of platforms and applications. Of approximately $8 billion in sales last year, about two-thirds was to the U.S. government. Two factors made the electronics sector pursue ISO 14001 registration. The first factor was the very mixed constituency within the sector. The sector has 20 different corporate ancestries, such as Fairchild, Vought, General Electric. RCA, IBM, Martin Marietta, and Lockheed. They have combined into 12 domestic business units and 24 facilities with diverse approaches toward environmental aspects of the business. The second factor was the high level of senior management sophistication about ESH issues. These individuals tend to come from large commercial enterprises such as General Electric and IBM, which have had substantial, long-term experience with Superfund, toxic tort, and media program issues. From this perspective, they see that compliance is not enough; a company can be in full compliance and still can face Superfund and toxic tort challenges. They also recognize that environmental performance is integral to business performance. There is a real appreciation of cost, productivity, and other elements of business performance of which environmental matters are an essential part. Senior management realizes, moreover, that there is a real need for individual responsibility and accountability; environmental matters of an entire business cannot be managed by a small environmental staff alone. Lockheed Martin Electronics needed to integrate environment into overall business management. It needed a comprehensive, standard management system, something that would address compliance and pollution prevention and would also facilitate continual improvement in overall environmental performance. Achieving Registration Under ISO 14001 After some debate. Lockheed Martin Electronics decided to have all of its business units achieve registration under ISO 14001. It had the following expectations about ISO 14001:  It would be adaptable. It would provide a baseline approach that was nonetheless open to a variety of cultures, processes, and businesses. Those business units that already had sound EMSs would be able to step into ISO 14001 relatively easily.  It would provide a globally recognized, if not the globally dominant, environmental management standard.

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Environmental Management Systems and ISO 14001: Summary Report  It would facilitate the exercise and demonstration of due diligence in environmental affairs, especially compliance, in a variety of regulatory and transactional contexts.  It would distribute responsibility and ownership down to the employee level. Everyone would be responsible for the environmental aspects or elements of his or her job.  It would allow the company to be proactive and systematic in addressing environmental matters, as opposed to being simply reactive and operating in a piecemeal fashion.  It would help the company to reduce emissions.  It would to reduce chemical use, waste disposal needs, and the number and scope of permits, all of which would go toward reducing costs and enhancing productivity. The business units were allowed to choose whatever registrar they wanted, as long as it was an accredited EMS registrar. ISO 14001 Experience In Lockheed Martin Electronics sector's experience, ISO 14001 did prove adaptable. Regardless of corporate heritage or line of business, from making specialized chips to multiple rocket launchers to avionics repairs, ISO 14001 had the flexibility to fit every business unit. In terms of customer preference, the company has received customer questionnaires and requests for proposals that require ISO 14001 certification, or asked for information about a business unit's EMS. Ownership of ESH by line management and employees is growing, as responsibility for environmental management is distributed through the ranks. Business units are moving from total reliance on environmental specialists, to all personnel taking responsibility for the environmental aspects of their jobs. ISO 14001 has proven relatively inexpensive. Larger, more sophisticated businesses were further along in developing EMSs; although these systems often were relatively informal, it took a comparatively minor effort to get ISO 14001 registration. Smaller facilities tended to be further behind in development of EMSs of any kind. For them, registration was somewhat more expensive. Early evidence indicates that internal compliance audits show a 30 to 60 percent improvement following ISO 14001 registration. Environmental performance has improved, some business units are seeing reductions in the number and the scope of permits, and cost reductions are being observed in association with reduced regulatory applicability. It appears that productivity will be enhanced due to reduced energy, water, and material expenditures.

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Environmental Management Systems and ISO 14001: Summary Report Although Lockheed Martin Electronics has not received any regulatory relief as a quid pro quo for ISO 14001 registration, it anticipates realizing reduced regulatory exposure through the reduction or elimination of regulated activities as a result of setting and realizing objectives and targets under ISO 14001. Lessons Learned Among the lessons learned from this experience is the importance of looking at the big picture. One of the benefits of ISO 14001 is that it tells an organization to survey all of its environmental aspects, to look at what is being emitted, but also at the resources being used: Is the organization using too much water, too much energy, too many materials, or too much of certain kinds of materials? It also asks that the organization pay attention not just to the environmental aspects of its manufacturing operations, but also to the environmental aspects of all services and other operations. Another lesson learned is that ISO 14001 is a comprehensive toolbox. But, like a toolbox, it is not useful unless the organization has the appropriate tools (programs) in it and uses them. ISO 14001 requires good faith to effectuate change. This is one of the positive aspects of having surveillance audits every six months or so: They support the exercise of such good faith. ISO 14001 is a catalyst. It creates sensitivity to the environmental ramifications of what people do. Engineers are looking at the environmental aspects of design and being more innovative because there is greater overall sensitivity to the environmental implications of what people do. Procurement groups are asking what they can do to improve chemical management through chemical acquisition. The overall lesson learned is to give the system time. It is too soon to say whether ISO 14001 is a success or not. It will take a couple of years to see how things develop, but from the early, often anecdotal, evidence, it appears to say positive move.