Managing environmental risk

The environment and climate change
Our approach to identifying and assessing environmental risks is embedded within our approach to risk management.
Environmental risks may present as financial or non-financial risks depending on the extent to which their impacts can be quantified, and how they have been classified.

The Group operates in a highly regulated environment across many jurisdictions and is subject to regulations relating to environmental factors including but not limited to climate change, therefore consideration of current and emerging regulation within our environmental management system is key to mitigating risk. Identified regulatory risks include energy-related taxes and the increased costs of compliance with energy-related schemes.
 
Understanding how the business may be impacted by its environmental factors is also a key component of mitigating emerging, medium- and longer-term risk. Water scarcity is an example of an environmental factor that has the potential to impact our operations, for example, if a site extracts water for process use.

Extreme weather events are another key environmental factor. These weather events, primarily flood risks, have the potential to directly impact our operations and, in turn, programme schedules. BAE Systems uses analytical tools to apply natural catastrophe classifications to each of its sites worldwide. This has informed our strategy as to where to target a programme of specific flood, windstorm and earthquake assessments of our sites and implement the subsequent risk reduction recommendations. The relocation of our Fort Wayne site is a good example of where we have worked to mitigate the risk of future river flood events. In 2020, we conducted a refresh of this data and during 2021 we will be modelling climate scenarios for 2030, 2050 and 2085.
 
Other direct environmental risks include:
  • breaches of environmental requirements resulting in fines and/or the termination of permits;
  • advancing technology and innovation;
  • changes in regulatory requirements; and
  • social and political change, differing legislation and policy in our various markets. 
Indirect environmental risk includes the impact of use of products by customers and supply chain risk.
 
Risks associated with the transition towards net zero are also identified and these will be further assessed as part of our net zero programme via the phased approach outlined above. We also continue to take into account opportunities associated with climate change, including the ways in which we can use our advanced engineering capabilities to develop new products and services that support low carbon or reduced emissions requirements.
 

Environmental strategy

We recognise that all of our operations have an impact on the environment, from the energy and resources we use, to the products we manufacture and the waste we generate. We are committed to high standards of environmental management and undertake activities with the aim of reducing the environmental impact of our operations, products and supply chain. 
 
To do this, we have taken a business-led approach to setting reduction targets and driving improvement programmes and activities to reduce our environmental impacts.
Activities have included installing a solar array on company land, moving to LED lighting systems, decommissioning carbon intensive coal fired boilers, installing a reed bed to clean effluent, designing buildings to meet BREEAM standards, re-using heat in a maritime platform and installing a Combined Heat and Power plant at the Portsmouth Naval Base and changing behaviours through implementing energy management systems.
 

Our approach to environmental targets

Due to the differences in geography and stage of manufacture of platforms and programmes, each business implements its own environmental targets and initiatives. Businesses set objectives to improve the performance of their operations and reduce energy used and the generation of waste, emissions and other discharges, such as effluents. Our businesses also set targets to reduce water consumption.
 
During 2020 we have implemented energy efficiency measures at a number of sites across multiple business units and geographies. The most notable include the continuation of a steam rationalisation project to reduce energy consumption associated with steam, LED lighting replacements at several sites, replacement of current single panel windows with double glazed units and improvements to HVAC controls. Additionally, several sites continue to implement ISO1 50001 which demonstrates their commitment to energy management and energy efficiency best practices. We purchased 173,502 MWh of renewable energy attributes under the Renewable Energy Guarantees of Origin scheme during 2020.
 
Across the Group, we aim for the efficient use of resources and a reduction in waste across the full lifecycle of our products, from design through to manufacturing, use and end-of-life.
 
Footnote:
1. International Organization for Standardization.
 
2020 key environment data