Northrop Grumman Corporation. (NYSE:NOC) Jefferies Virtual ESG Summit June 14, 2022 10:00 AM ET
Company Participants
Todd Ernst – Corporate VP, Treasurer and Investor Relations
Mike Witt – Vice-President and Chief Sustainability Officer
Conference Call Participants
Sheila Kahyaoglu – Jefferies aerospace and defense analyst
Sheila Kahyaoglu
Good morning everyone. This is Sheila Kahyaoglu with the Jefferies aerospace, defense and airlines equity research team and thank you for joining us for our first ever our ESG Summit. And we have a great line up here today. We have Northrop Grumman, and I’m so glad — time this up with us. Todd Ernst is here with us who is Corporate VP, Treasurer and Investor Relations, as well as introducing Mike Witt, who’s Vice-President and CSO, Chief Sustainability Officer.
A little bit about Mike. Mike was appointed VP and CSO in July 2021 with responsibilities and overseeing Northrop’s carbon reduction, resource efficiency and other sustainability efforts. He formerly worked at Dow overseeing its remediation and Regulatory Affairs for Europe and AsiaPac, and its energy and climate unit. Todd, of course, joined Northrop in 2019, after serving as IR at General Electric Well, thank you both for being here. Todd I’m going to hand it over to you to read the Safe Harbor agreement please or disclaimer.
Todd Ernst
Great, thanks, Sheila. Today, we’re going to make forward-looking statements. And those statements involve risks and uncertainties, and the information about these risks and uncertainties can be found in our SEC filings. So with those formalities out of the way, I’ll turn it over to Mike for some opening comments.
Mike Witt
Great, thank you, Todd. And Sheila, really, it’s a big pleasure to be here with you, and the Jeffries team to speak on a topic that is of significant interest. I don’t think you can open up a newspaper or your favorite social media outlet and not have some reference to ESG and sustainability and its role in the business place. We’ve had a lot going on here at Northrop Grumman over the last year plus, starting with earlier this year; we published our sustainability report, where we outline some of the key achievements that we’ve made. We also kind of lead into the announcement of our next generation sustainability goals, which I’ll talk about in a second. But we also that same month, we published our very first edition of our version of the task force on climate related financial disclosures, where we, I think, in very clear fashion and in detailed fashion outline our understanding of our climate related risks. I mentioned our next generation sustainability goals, something we’re really proud of. So on Earth Day of this year, April 22, we announced that next generation of sustainability goals really building upon the foundation that this company has had in place for well over a decade, and in building upon it in a way that capitalizes on our strengths and then really leans into some areas where Northrop Grumman can continue to exert influence and leadership and really demonstrate leadership across the aerospace and defense industry. And really, not even just the aerospace and defense industry, but across all of manufacturing and industry. So a lot to talk about that we want to share with you today. And again, very proud to be here with you, Sheila and your colleagues at Jeffries.
Sheila Kahyaoglu
Thanks so much, Mike. Well, maybe to start you teased us with these six sustainability initiatives. So what are they and what got you focused on them nine months into the job to say these are what Northrop should focus on?
Mike Witt
Sure. And so it starts with a credible foundation. Going back to the early 20 teens, when, when our company developed its 2020 sustainability goals focused in three key areas greenhouse gas emissions, water use, and water use reduction and diversion of waste from landfills. And one may ask why diversion of waste from landfills because when you put waste into a landfill, you’re really losing the value of it. And so there are things that you can do, processes that you can employ in order to recover the value. And so over that time period, up to 2020, the company was, was very keenly focused in these three areas. We came very close to achieving the waste diversion goal, became the goal for the company was a 70% diversion of waste from the landfill and we came in at 69.7%. So you round up, you’re close enough. The other two goals, we passed with flying colors. And so we focused on a water use reduction target of 20%. And we passed that. And then our greenhouse gas emissions reduction target was set at 30% by 2020, from a 2010 baseline. And our company blew through that one we actually hit a 44% greenhouse gas emissions reduction achieved over that time period.
And so what that did is it really gave us the credibility to go above and beyond what we were already able to demonstrate to ourselves and to our stakeholders how sustainability is at the core of everything that we do and how it can drive business value. And so coming into the role of last summer, as you as you have already described for our audience, one of the things I wanted to do was better understand what makes this company so strong. And first and foremost, it’s setting a target, I mean, this company has set target, in the financial space and in the non-financial space and in the space that we’re talking about environmental sustainability. And, and part of our values as we describe them is we do what we promise. And this was a commitment we made to our stakeholders. And so I thought, what a great platform from which we can build, and this very strong foundation, that we’ve been able to demonstrate, again to all of our stakeholders, this is what we said we’re going to do, and this is what we achieved.
And so launching beyond that going forward, and in this greenhouse gas emission space, it was really important for us to recognize what the intergovernmental panel on climate change, and other authorities and in leading voices around the world say is important. And that is achieve, to in order to achieve a less than 1.5 degree temperature increase between now and 2050. This concept of net zero greenhouse gas emissions is important for all facets of society to engage and embrace. And so we’re doing our part. And so we’ve put a stake in the ground. And we’ve said by 2035 as it relates to our operations were going to be net zero as it relates to greenhouse gas emissions.
So that was the first outlay that we made as it relates to our goals and targets. And then we followed that up with additional commitments on water and waste. And then we’re going further, we’re going beyond what we would call our footprint goals, who what I would call our handprint goals, how do we touch up and down the value chain? How do we work collaboratively with our suppliers? And how do we work in a partnership fashion with our customers in order to make the broader supply chain and broader value chain, the most sustainable value chain.
And so we have a supply chain focused goal. And this is really redefining and helping our suppliers to understand our expectations around that supplier code of conduct. And then on the downstream side working with our customers to develop and implement an innovative product stewardship program, a product stewardship program that’s focused on product design. And really, when you step back and take the lifecycle assessment approach, you kind of deconstruct the various components of the product design, product development, and implementation, product delivery and the end of life components of your product lifecycle. And so that’s what we’re, what our commitment is around product stewardship.
And then our final commitment is how is it that we can work with partners in the NGO community, in the government community, in the academic community, and in addition to that, partners that are up and down our own value chain, to develop and to implement solutions that help to drive environmental protection and environmental sustainability. So we call that our blueprint goal. So we’re working on this through this lens of developing a blueprint for how society can do a better job of engaging in these partnerships for broader impact. And so our technology for Conservation Program is one such example there.
So that gives you a sense of where we’re going as it relates to our next generation goals. Well, I get where we started, where we’re going, what our commitments are, and our commitment to follow up on an annual basis through reporting through our sustainability report, updating our TCFD report, and other communications, because we believe, I guess the final component of my response will be around transparency, and our commitment to reporting. Because this is where again, we feel it’s we owe it to our stakeholders, our investor community, like yourself, our employees who are have such a strong enthusiasm and energy in this space, they want to get involved, and they want to know how we’re doing. And so our commitment to that reporting is really going to be important as we continue to make those gains and share that with the world.
Sheila Kahyaoglu
Just on that, Mike, you clearly have a lot of pride in being a leader in sustainability. And I think you’re one of the only defense companies in the Dow Jones Sustainability Index. So can you talk about the mission of what that implies for the rest of the industry? Do you work with others? How does that work?
Mike Witt
Yes, collaboration is a key component of, of my personal history, our company’s history. And so working within our industry trade association, the aerospace industry association, in addition to kind of having, I’ll say, loosely defined, but very robust and value delivering engagements with my counterparts at some of the other organizations. I know you’re having a conversation this afternoon with another one. I’ve Chris Raymond and I are very close, good friends, and we talk a lot about what is it that we can do in our industry to make our industry the most sustainable industry. And so collaboration is a key component of what we think is and should be a robust strategy around ESG and sustainability.
As I mentioned, our blueprint goal, this is why we’ve created a component of our next generation sustainability goals around blueprint because of the value of collaboration. We think we can take things far, but that old African adage around if you want to go fast, go alone, if you want to go far, you go together. And I think that’s an opportunity for our industry to again, collaborate, not just within our industry as prime contractors but work collaboratively with our customers who again, have reached out and said we want to work with you, we want to work alongside you, as you develop the products that preserve and promote to the protection of our interest as a country, but do so in the most sustainable way possible. And that’s the direction that we’ve been going in, that’s where these collaborations are going to take us.
Todd Ernst
And I think along with the DJSI the efforts that we’ve made and the progress we’ve made along these a variety of fronts and ESG space has been recognized by organizations like or metrics like the DJSI, MSCI and CDP, where we have a leading ranking within the industry. And so this is this goes to that desire for us to have that leadership position, maintain it and to push forward on it and along the goals that Mike has talked about. So it is being recognized by the external community as they look at our progress in this area.
Sheila Kahyaoglu
Thanks for that, guys. And then you talked about part of your six new goals, you have this technology for conservation program, where you send Northrop engineers to partner on projects like monitoring Ocean Reef health or tracking sea turtles, it’s got sort of interesting applications there. Maybe if you could elaborate on what, what put that inspiration forward?
Mike Witt
Sure, again. And this concept or leveraging and utilizing this concept of collaboration, and marrying that with the enthusiasm and the energy that we have within and across our company. I’ve had the good fortune in the 10 short months that I’ve been here to meet with individuals across the company, many of which have just joined. I’m very active in the recruiting space as well. And just last week, I was out at our Palmdale, California facility. And it was very interesting to learn and to understand why individuals have made decisions to join either as an intern or now as full time. And a lot of this goes back to and this was really reinforced from person to person. With this one group that in particular that I was speaking with. It was it was shared with them, whether it was in high school or earlier in their college career, some of the things that Northrop Grumman has done.
And then one individual spoke to a seeing in a local newspaper a comment and a very short story about Northrop Grumman’s technology for conservation program, because the way it was described or at least interpreted by this individual was, here’s a company that is very technology rich and known for its collaboration with the Department of Defense and NASA and NOAA and other customers to bring technology to the forefront and deliver value, but to do so in a way that also meet some of the needs and the evolving needs of society. And this particular individual picked up on a story because it was important to Chesapeake Bay. And it was a partnership that was highlighted between Northrop Grumman and the Chesapeake Bay Foundation where the Chesapeake Bay Foundation had described, what we’re seeing an erosion of the quality of the oyster reefs here in the Chesapeake Bay region. And we’re just having trouble finding technology that can help us to monitor the situation. And these are this is an environment where there’s low light, high turbidity. And we know a little bit of something about technology in low light conditions, and certainly below the surface of the water.
So it was a collaboration that has delivered tremendous value. But that’s not where we’ve stopped this technology for conservation program, which now gets to the essence of your question, Sheila. This technology for conservation program really marries the interest and enthusiasm that our employees have. And it gives them the opportunity to develop skills by working in partnership fashion, with scientists from other organizations, scientists who have a very common interest in wanting to deliver environmental protection opportunities and capitalize on those, and then and then move forward and find the next opportunity.
And we’ve been able to do that. We have many such projects that are kind of on the docket right now. And this is a program again, as you’ve seen outlined in our blueprint goal. This is a program that I think is certainly going to stand the test of time and we’re going to see it grow simply because of the enthusiasm that we’ve seen behind it.
Sheila Kahyaoglu
And you mentioned TCFD, a measure many know what that is, so can you talk about your involvement in the task force on climate related financial disclosures?
Mike Witt
Yes, the task force on climate related financial disclosures was, or is, it’s a structure that Mayor Michael Bloomberg and a number of others, a number of years ago, developed an approach, whereby companies and organizations can describe and articulate a solid understanding. And of course, that understanding has evolved to be a very robust understanding of that organization’s risks and opportunities related to climate and in a warming world.
And so we published our very first report of the task force on climate related financial disclosures, which outlines understanding of physical risks and transition risks, risks associated with rising sea levels. And so if you’re a company or an organization that has facilities located near coastlines, and shorelines, well, then that would be a risk that you would want to articulate describe how is your firm or organization going to be impacted. But there’s also transition risks related, say to regulations and policy. We do not live in a regime here in the United States, yet where there’s a price on carbon, perhaps there will be in the future. There are regulatory regimes around the world where there is a price on carbon. And so that is a there are policy implications for companies like ours, that’s a global entity. And we have many partners, within and outside of our borders here in the United States, where a price on carbon is going to be relevant.
And so as we think about and describe those, our understanding of those risks, it’s done so in a in a relatively straightforward fashion, as has been defined by this taskforce. And this is a report that we update every year, and each and every year we’ll provide additional level of detail and further understanding as it relates to how we perceive our risks and how maybe more importantly, how we’re mitigating those risks as a as an industry leader.
Todd Ernst
And also, Sheila I’ll just add that this is a report that’s been increasingly asked for, from our largest investors to as they try to look at their investment University, what companies are managing and mitigating this risk. And so it’s we’ve got it important that we provide that information to them. And so it’s just one component of an increasingly increase increasing asked for disclosure on how we and other companies are managing climate risks.
Sheila Kahyaoglu
And switching gears, can you can you talk about the social aspect of ESG a little bit and your broader diversity initiatives? Where are you today from an employee base standpoint, management and the board and a breakdown of where you plan to go?
Mike Witt
Yes, so from our board, we basically, when we look for board members, we look for board members that have a diversity of background and experiences that they can bring value to the discussion in the boardroom. We’ve made a number of we’ve had a number of additions to the board since 2015. I think we have seven new board members since then; our board right now is comprised about 13 members. It’s a diverse board. And we, as we look forward, we are increasingly looking for board members that have certain experiences like ESG, for example, or cyber experience. And so the governance committee is always looking for bringing in different perspectives that help us enhance the oversight of the company and as we manage a variety of different risks and opportunities.
Sheila Kahyaoglu
And what about from an employee base and perspective in terms of diversity efforts? And I think you recently appointed a chief diversity officer Kenny Robinson as well. So how does he help in fulfilling those roles?
Mike Witt
Yes, Kenny and I, Kenny Robinson, great individual, he and I are literally and figuratively joined at the hip. There’s so much of what we do to build that the strong foundation and to help our employee base really understand the roles that individuals can play in order to make us even better going forward. And so Kenny Robinson joined. He had been with a company for a number of years, but he was very recently named our chief inclusion officer, and he replaces someone who has just really made an imprint, not just in Northrop Grumman, but across our industry and across, in my humble opinion, all of society. So, a shout out to Sandra Evers-Manly, who retired just last week after 40 plus years here at Northrop Grumman really made some amazing headway for the company and for the industry.
And Kenny comes in decades of experience. And Kenny and I are working and again building from this very strong product foundation. We’re very proud of what we’ve been able to achieve thus far. But we know there’s much more work that is going forward. And so this really underscores the importance that Kathy Warden, our chair, Chief Executive Officer and President has placed on sustainability and ESG. Because both Kenny and I are direct reports to Kathy and we meet with her routinely to talk about our view and vision of what the opportunities are and where we can help to take the company help to guide the company and really harness in a very positive way, this enthusiasm that we’re seeing from employees. And it really starts with how can we incentivize the right behaviors, our non-financial metrics, for instance. We have targets on diversity; we have targets on environmental sustainability. And we’ve been able to demonstrate, I think, with very with clarity, how these particular targets really drive a behavior that that we want to see demonstrated in the company. And we see it being reflected by our employees, as they talk about what it is they appreciate about working at Northrop Grumman, and how our fellow employees are talking about their experience at Northrop Grumman.
And then finally on this diversity piece, there’s there has been a lot of focus, especially as of late on the on the social components. Within our company, we have made significant headway on women in leadership positions, people of color in leadership positions. It’s not just about attracting and retaining, that’s really important, but it’s also about development and the development opportunities that individuals have here, again, that have a built in enthusiasm for aerospace and defense, and a built in enthusiasm to want to do so very sustainably. But you also need to demonstrate that there are opportunities for continued development and advancement, additional influence, and that is really what makes me proud. And an individual like Kenny, if he were here, I think he would say the same thing. It was it’s really a source of pride for him to be part of an organization that recognizes the value of that. And we have the commitment from the highest levels of the company, and the enthusiasm from those who have just joined the company and everywhere in between that really makes us work.
Sheila Kahyaoglu
That’s great. And I think this is reflected in compensation for management with your compensation program, taking into account non-financial metrics, including environmental and diversity, equity and inclusion programs. So how are these incorporated, and how are they measured?
Todd Ernst
Well, just jumping in just to highlight that we recently made a change to compensation program. Prior to this year, the non-financial metrics that we’re referring to were a negative modifier to compensation only and in 2022 going forward, we’ve incorporated that now into the annual incentive plan as a 10% weighting of the metrics of that plan. So that just highlights the alignment and the incentives in alignment that our management team has in making sure that people are working toward many of the goals that Mike has already talked about.
Sheila Kahyaoglu
Do you guys want to how are they measured? And when we think about compensation, are they not disclosed?
Mike Witt
So what we do share is that we have, we have a very keen focus on diversity, we have a very keen focus on environmental sustainability. And there are other components. But in the in the context of this conversation, again, we’re targeting, how is it that we attract and retain populations that we think are really important to have representation, and that can lead very strong and successful careers here at Northrop Grumman.
And so I’ve already mentioned two of the areas of focus, and that is women representation at all levels in the company, especially at the leadership levels, and then also people of color. And, again, I mentioned recruiting before, really, really proud that we are a company that was able to achieve last year, almost half of our hires in the company where people of color. And that doesn’t happen by mistake, that doesn’t happen unless we are very deliberate. And again, reflecting on our values, we see something we want to pioneer and we promise on what we commit to delivering. And this is something that again, reflected in the leadership that Kathy Warden has, has shared, in addition to Kenny and others who have talked about this.
This is part of our strategy that that helps us to bring a diversity of thinking into diversity of approach into everything that we do, because we are delivering we’re developing and delivering products and products solutions for a multitude of customers across all the domains and all the services including space force, that that require different types of thinking. And it’s that diverse thinking that I am convinced, and others who are close to Northrop Grumman, I think see it as well, that this is this is part of what makes us special is that diversity of thinking. And if we didn’t have that intentional approach as to how we recruit, how we attract and retain and that development pace then we wouldn’t be as successful as we are but thankfully this is this is something that makes our company strong. And it’s the non-financial metric component that I won’t repeat. But it’s that non-financial metric component that I think really serves to motivate and incentivize the right behaviors. And then it helps individuals to see that value and in achievement for the company, when were recognized, as Todd said, by organizations like CDP, Dow Jones Sustainability Index, and others like MSCI, who are looking very closely and trying to discern who within all these industries are really walking the walk instead of talking to talk. And thankfully, I think our scores reflect that.
Sheila Kahyaoglu
And, every time I go marketing in Europe, half the investor base doesn’t want to see me so how do you think, you coming into this role? And really, this is one of the items I’ve talked to Chris Freeman, about last time we spoke is defense industry, and how it aligns with general ESG principles. And I think that’s coming to a head right now with everything that’s going on. So can you talk a little bit about that?
Mike Witt
Yes. Yes, so certainly the situation in Ukraine most unfortunate, and I think that’s what you’re referencing Sheila. It really has placed an emphasis on really what’s important for society and the freedoms that we all enjoy as again, as a freedom loving American as I’m wearing this today’s Flag Day. I’m a very patriotic person, why am I patriotic, because I love our country. And I love what our country provides for us. And a company such as where we are today and Northrop Grumman helps to preserve and to promote those freedoms. I think we’re seeing examples in the world where, where those freedoms are being impeded. And when those freedoms are being impeded, we cannot do what we think we can and should do in the environmental arena in the social arena, and in the governance arena. And there, we could speak for hours on examples, where, where those freedoms are being impeded.
So that’s where our industry is, is continues to contribute to the development and in the preservation of those freedoms. And I think a recognition of that, in the ESG space is evolving, I think we’re seeing examples of that there was a Swedish bank, that had a very prominent story a number of months ago, were almost 180 degree turn, looking at the aerospace and defense industry, because they were looking down, further south from where they are geographically located, and seeing certain things happen. And there were some significant infringement upon the freedoms of people that, that were being challenged.
And so I think that’s just the start of what is a has been a continuing evolution of, of thought and consideration around the role of aerospace and defense, and, and how it serves to preserve so much of what we appreciate in the social arena, freedom of speech, freedom of, of everything that we again, want and enjoy, about our lives that that could go away in an instant, such as the example we’re seeing in Ukraine.
Todd Ernst
Yes. And I think when you look at our portfolio, one of the main focuses that we have here is that the idea of deterrence of deterring conflict, preventing conflict from broadening, for example, and allowing the freedoms that that Mike referenced. And so, I think that the recent events has opened up a debate among with many investors about the place of defense in the ESG for world and I think people are rightfully thinking about that, and, and we’re happy to discuss with any investor that is interested in what we’re doing, as Mike just said, we’re doing a lot to make sure that we are maintaining a leadership position in ESG. And I know that a lot of the ESG funds, specific funds are currently underweight defense. But as they think through or as folks think, through the, their different investment opportunities, we’re happy to engage with those investors to share with them more about what we’re doing.
And quite frankly, there’s also the performance aspect where the, there, the defense stocks have done relatively well, versus the broader indices. And so, there’s a point here where pragmatism may meet dogma, and those folks need to consider overall performance as well. And look for companies like Northrop Grumman that are doing the right things in this areas, and good investment opportunities.
Sheila Kahyaoglu
In terms of the portfolio, how has ESG sort of altered the portfolio? Are there areas where he will not invest or thought about divesting, given that they might not be ESG sensible?
Mike Witt
Yes, we’ve spent a lot of time talking about this and taking action, taking action on the portfolio to again, make sure that we’re well positioned from an investor’s perspective. And we’ve made a number of changes to what’s in the portfolio. We’ve made a number of changes to, to what’s in the portfolio. We’ve divested or we’ve exited small cluster munitions contract that we picked up through the Orbital ATK acquisition, we announced that we were going to do that last year. And we completed that by the end of by the end of the year. We’re in the process now of transitioning out of the depleted uranium, ammunition business. We announced that earlier this year, and the goal is to have exited that over the next couple of years, it does take a little bit of time there because we want to make sure that the transition that we have there is make that the customer who relies on those kind of capabilities, so that the smooth transition for them and that there’s not a gap. And so that’s what’s going to take a little bit of time to do. But our goal is then to make sure that within a couple of years that we have transitioned out of that business.
We’ve also exited small cal commercial ammunition. And through our divestiture last year, we exited a contract for apartment homeless security that had been controversial with some of our shareholders, as evidenced in the Human Rights proposal that we’ve had had, that we no longer have in our in our proxy. And so there’s been a number of changes within the portfolio to make sure that we’re well aligned going forward. And, and that investors are as they look at possible investments in the defense industry that investors look at Northrop Grumman and see us as a responsible corporate citizen, that is, again doing the right things.
Sheila Kahyaoglu
So clearly, investors placed a lot of pressure on you guys. When we think about Northrop Grumman, and its supply chain as a lead manufacturer, what sort of processes do you put in place for your supply chain and sort of assuring that they’re aligned with your ESG initiatives?
Mike Witt
Yes, and this has been a, this has been a topic of conversation since the day I set foot in the in the company. And of course, it would certainly preceded me. But this is how it evolved to be a key component of our next generation sustainability goals I mentioned, talked about our footprint and our handprint goals, looking both up and down the value chain and in the supply chain, working collaboratively with our supply chain, and raw material suppliers. And in this is where this the Code of Business Conduct and really, us establishing a set of expectations and refining a set of expectations. So that we have the confidence that the suppliers that we’re working with reflect the values that we hold so dear, and perform business in a way that we think is the right way to do business. And we have, we have choice. And we have, we’re working with some amazing suppliers in our supply chain that have helped us to reflect that view. They do with their stakeholders, just like we do with our stakeholders. And we felt it important enough to reflect this in a goal, which, which again, is going to be an articulation of our commitment to the partnership that we can create, and the collaboration that we will enable with the supply chain.
The other thing to mention about supply chain is how we can work together to not just influence how we do work here with an aerospace and defense. But I think there are opportunities to show and demonstrate how these partnerships can add value to others that are looking for best practices around doing business. This has been recognized and some of the ratings that we’ve gotten through some of the organizations that I mentioned already, in addition to others. And I think that’s again, it’s a key. It’s a key proof point of what you’re doing and you being on the right track. But we’re also not saying that we’re going to be complacent because we think we can always be doing better. And that’s why we’ve placed such emphasis on that important component in our next generation sustainability goals.
Sheila Kahyaoglu
I wanted to get a little bit more specific with some of the things you’ve set up a renewable electricity projects and are running an electric vehicle charging program at work. How successful have these projects been? And if there are other examples, please feel free to share.
Mike Witt
Resoundingly successful is the term that I’ll use. Just last year, we had a 32% increase in utilization by employees of, of these electric vehicle chargers. We are implementing these electric vehicle charging stations at more and more locations around the north of Grumman world. This is something that I think reflects the type of individuals that we have here at Northrop Grumman. They’re looking for opportunities to make themselves and how they carry their own, how they execute their tasks in daily life in the most sustainable fashion. And many are purchasing electric vehicles and they’re looking for ways for the company to support how that in some cases a lifestyle change because you’re not filling your automobile now with gasoline or diesel fuel anymore. It’s now you’re plugging it in. And so we have those capabilities to the tune of many many more hundreds more using that capability in 2021 than in previous years.
On the renewable energy front and this is, again, an exciting part of our sustainability goal progression. I mentioned, our desire, and our focus on being net zero with relates to our operational emissions by 2035. As part of that goal, one of the sub goals is we’re going to employ the use of renewable energy. And so one of our sub goals is by 2030 50% of our energy needs will be supplied by renewable energy sources. And so we’re working now very diligently with partners like Dominion energy here in the Virginian area, Virginia area. And we’re entering into power purchase agreements, virtual power purchase agreements, and other ways that we are developing our clarity around how we’re going to achieve that 50% renewable energy use by 2030. This is a key component of how we’re going to achieve that net zero greenhouse gas emissions in our operations by 2035 given in the vernacular of scope, one, scope two and scope three emissions given the prominence of scope two emissions and the fact that we have hundreds of 1000s of pounds of CO2 emissions, hundreds of 1000s of tons of CO2 emissions in that category. This is where the renewable energy strategy is going to help us to mitigate those emissions through the deployment of some of these contracts and partnerships with others who are like Dominion Energy who are helping us to deliver.
Sheila Kahyaoglu
And then can you touch upon your other environmental strategy as it relates to water waste, diversion and remediation?
Mike Witt
Yes. And so I mentioned our footprint goals. And so we’ve talked a little bit about maybe more than a little bit about our greenhouse gas emissions target, so I don’t need to reference that anymore. But in the water, and waste components of that, we have operations in a number of water stressed areas, we have significant operations in Southern California, in the Phoenix area and in Utah. And those are just to name a few. Those aren’t the only water stressed areas in this country or around the world. But there are areas where we have significant operations. And so we’re already working with partners in the area, business partners and collaborators, both on the upstream side with suppliers and on the downstream side with our customer in order to identify opportunities for us through process improvement, through utilization of specific technologies. Sometimes it’s as simple as replacing valves that might be leaking, which can amazingly add up to some significant savings as it relates to water.
On the waste side, again, it’s our focus on how can we recover and recapture the value of waste and keeping it out of the landfill where it’s essentially gone forever, and you lose the value of that are there ways that certainly practice energy, waste management and waste efficiency, but the waste that does have to get produced is there other things that we can do with that that might be a value, not in our own process, not just in our own processes, but perhaps in other processes as well.
And then the final point about remediation. We are in the process right now defining what our commitment is going to be around sustainable remediation, I spent a lot of time in my educational career focused on sustainable remediation and how we can take today’s techniques and make them more water efficient utilization of other types of chemicals and inputs that can add to output costs, such as waste management, and in other types of costs that you wouldn’t want to have to incur at the back end of your project. And so we’re looking at how we can optimize around water efficiency and waste efficiency in the remedial and the remediation landscape. And in addition to working with some of our strategic partners to bring some of the most innovative technologies to bear so that so that we can convincingly we can convince ourselves that we have taken this to the forefront. And what we’re doing from an environmental remediation standpoint, and in managing these, these environmental risks, we’re doing so with the most forward looking and the and the most advanced remediation technologies that are available to companies like us.
Sheila Kahyaoglu
Maybe putting it all together, Mike, at the end of the day, you’re a defense contractor. So how does all — how do all your ESG initiatives intersect with how the government wants you to bid on contracts? Or how security intersects into all this as well? Are the — are ESG initiatives being placed in RFPs yet or are that some time to go?
Mike Witt
Yes, they’re not yet but it’s but it’s forthcoming. I’ve had numerous conversations with my counterpart at the Department of Defense, the Chief Sustainability Officer over there in addition to other Chief Sustainability Officers and likeminded at other defense contracting firms. And so in working with our customer and better understanding what their needs and what their wants are. I’ve already mentioned it at least once, how they’ve described this through the Department of Defense’s climate adaptation plan. Subsequent to that, with that was published last fall, earlier this year, the Army and the Navy and then soon to be the Air Force will have all published their climate action plans, these get at a at a much deeper level, and describe very specifically what they’re looking for.
For instance, the Army and I found some of these goals to be, they’re aggressive. But if you don’t have aggressive goals, then I think you’re probably selling yourself short. But the Army is looking at all non-tactical light duty vehicles, by 2027, to be to be EVs, and then by 2032, all non-tactical vehicles will be EV.
And so that’s put putting a stake out there and saying, this is the direction we’re going. We want to work with partners like Northrop Grumman, and like others that can help us to deploy the technology that they need in order to achieve installation efficiency and then of course, in the technologies and technology solutions that we are developing and creating for our customer doing that through the same lens of maximizing efficiency and delivering a sustainable product solution that helps them to meet some of the targets that they’ve described through some of these recent communications.
Sheila Kahyaoglu
Oh, thanks for that, Mike, and Todd, as well, for putting it all together for us. We appreciate you joining and everybody who’s tuned in. That concludes our fireside chat. Thank you.
Mike Witt
Thanks, Sheila. Thank you for being here.
Sheila Kahyaoglu
Thank you.
Question-and-Answer Session
End of Q&A
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