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The intersection of supply chain management and sustainability is evolving rapidly, driven by a mix of voluntary and mandatory actions from stakeholders including investors, governments (federal, state, and international), customers, suppliers, and communities. Beyond the traditional considerations of price, quality, and delivery, companies face increasing pressure to address challenges associated with environmental, social, and governance (ESG) impacts. In the mil/aero industry, this complexity can be particularly pronounced when stakeholders don’t seek ESG performance as a critical requirement for programs and aren’t consistently providing financial incentives for the industry to proceed in a direction to more holistically address the issues.
Unique Challenges in the Mil/Aero Industry
While supply chain management and sustainability are common concerns across industries, the mil/aero sector faces distinct challenges. This article delves into three critical areas where these challenges are exemplified: regulatory disclosure and reporting, value chain resilience, and resource efficiency and waste management. Recommended actions for companies supporting the industry are also included.
1. Regulatory disclosure and reporting
ESG-focused regulations are proliferating globally, as evidenced by a growing trend requiring disclosures on climate and environmental impacts, such as the European Union Corporate Sustainability Reporting Directive (CSRD), European Union Corporate Sustainability Due Diligence (CSDDD), U.S. Securities and Exchange Commission Climate Rule, and California SB 253-Climate Corporate Data Accountability Act, and SB 261-Climate-Related Financial Risk Act. Capability and expectations are also increasing with respect to reporting on the traceability of chemicals and materials throughout supply chains to address issues like greenhouse gases (GHG), per- and poly-fluoroalkyl substances (PFAS), and other materials that may potentially put a nation at risk. There are many challenges in the mil/aero industry with respect to ESG regulatory disclosure and reporting. Some reporting is exempt [Kyoto Protocol 1997] primarily based on national security concerns. Many systems required to collect and maintain assurance-based data are manual, if they exist at all. Additionally, the move from proposed regulations to final regulations often creates delays in company actions because timelines are not fixed enough to drive the desired actions for disclosure and reporting.
Read the rest of this article in the Fall 2024 issue of IPC Community.
