Environmental CSR reporting by the arms industry

Overview

Militaries are a significant source of carbon emissions, yet we have little understanding of the true extent of these as countries are not currently required to report them, let alone reduce them. Pressure is growing on governments to include military emissions on the agenda at COP27 in 2022, but what of emissions from the military industry that supports them – can what we find out about these feed into the knowledge gap that exists for states? In this report, Leonie Nimmo and Hana Manjusak present research into the environmental CSR reporting of some of the world’s biggest arms companies, and discover that it’s far more useful than you might expect.

Key findings

• Environmental Corporate Social Responsibility reporting in the military sector is relatively progressive.
• Reporting of Greenhouse Gas emissions from the Use of sold products by some arms companies hints at the scale of emissions from military aviation over its lifecycle.
• However, industry-specific issues, such as high altitude and space impacts, are not properly addressed, and environmental problems associated with the raw materials in supply chains are not mentioned.
• The lack of a consistent reporting framework for energy, water and waste makes it difficult to compare between arms companies.
• Claims over the potential of synthetic aviation fuels for military use ignore their huge financial and energy costs.
• Both militaries and military companies are relying on the unproven assertion that a “zero-carbon” military aerospace is achievable, which serves to support the idea that continued growth is possible within planetary boundaries.
• The scale of military industrial sector emissions reporting challenges the claims by militaries that they cannot track or report their Scope 3 indirect Greenhouse Gas emissions.

Contents

1. Responsible arms companies?

2. The data

3. GHG emissions reporting

4. Energy, water and waste

5. High altitude and space

6. Conclusion

1. Responsible arms companies?

It seems antithetical for arms companies to implement corporate social responsibility (CSR) policies, as these companies profit from a trade that has fatal consequences. Amnesty International highlights the scale of the global arms trade, with weapons being sold to states committing human rights abuses, and armed conflicts resulting in millions of deaths within the past 30 years.

The fatal consequences also reach the environment. In addition to the destruction caused by war, creating and sustaining military equipment generates greenhouse gas (GHG) emissions. In terms of total direct emissions, Scientists for Global Responsibility have estimated that the UK arms industry alone emitted approximately 1.46 million tonnes of carbon dioxide equivalent (MtCO2e) in 2017-2018, an amount similar to the total emissions of all UK domestic flights.

Governments, companies and individuals are under pressure to reduce emissions, meanwhile the arms industry grows, year on year. In December 2021 the Stockholm International Peace Research Institute (SIPRI) announced arms sales by the Top 100 companies had grown to $531 billion in 2020, an amount similar to the GDP of Sweden.

Arms companies are not immune to pressure over their conduct and activities, however. According to recent reports, they have been feeling this globally, both in the investment sphere – with the president of the trade association ASD claiming that banks and investors are cutting ties with the industry – and the regulatory sphere, where in the US, proposals for the Department of Defense to consider emissions in its procurement decisions have got at least one right-wing thinktank squealing. This would be in addition to existing requirements for GHG reporting, which differ between jurisdictions.

This research has found that military companies have positioned themselves well to respond to environmental concerns. Though it may seem ludicrous to some, many produce glossy CSR reports, are regarded as progressive by projects such as the Transition Pathway Initiative and have engaged with various climate action initiatives.¹  This report explores the scope, quality and credibility of environmental reporting by the arms industry. It is focused purely on environmental reporting and as such does not include a review of other social, human rights or governance issues, although we touch on some in the corporate profiles pasted throughout.

We found that some companies’ environmental reporting was relatively progressive. Indeed, often more progressive than the environmental reporting of many of the militaries that rely on their products. This finding could place much-needed additional pressure on militaries to report the GHG emissions and environmental impact of their supply chains.

2. The data

The environmental reporting of 15 major arms companies, along with their submissions to the Carbon Disclosure Project,² were analysed for this report. The results are summarised in the table below, with the detail behind the table available online, on this Google Sheet Environmental CSR reporting by the arms industry – data 2021. The companies have been ranked on the table according to turnover.

We looked in-depth at the scope of GHG reporting, along with company reporting of energy and water use, and waste generation. For each impact area we assessed whether a company had quantified future targets for reducing its impacts and whether it reported absolute volumes or quantities. We also looked for whether the company engaged a third party to provide verification of its environmental data.

We found that a number of the companies studied had a relatively progressive approach to environmental reporting. It should be stressed that this does not necessarily translate into progressive environmental performance – it is perhaps more of an indication of a company’s ability to manage risks, including investor risks and horizon-scanning. Indeed, the sheer scale of the climate impacts of the companies on the table is noteworthy.

Of the 15 companies examined, only one company, KNDS, failed to provide any disclosure at all, and one company, MBDA, only reported very limited emissions data. Ten companies reported absolute volumes or quantities in all four impact areas. Three companies had dated, quantified targets to reduce their impacts in all four areas, and three more had targets in three areas.

The companies studied had varying proportions of non-military sales. In the GHG reporting columns in the table below, we have applied a basic calculation to estimate the emissions associated with military sales only, by applying the percentage of military sales to the emissions reported. This does not consider the varying climate impacts of activities associated with different sectors.

A further caveat to the GHG data provided in the table: higher reported emissions of a company does not necessarily mean that it is more carbon intensive than its competitors, rather, it could be better at reporting its emissions. Where there is a very significant difference between the scope 1 and 2 column, and the total reported emissions column, this indicates that the company reports Use of sold products emissions. Further discussion on this below. We have put an asterisk by companies that report this category to help make sense of the figures, as reporting in this category distorts the data set.

Clearly the size of the company and nature of its activities will also affect the absolute volumes of its emissions.

Notes

* Company discloses Scope 3: Use of Sold Products
1) Source: Defence News Top 100 for 2021 (https://people.defensenews.com/top-100/). Except for Leonardo (2020 Annual Report); MBDA, assumed 100%.
2) Scope 3 reporting: Limited – up to 4 categories disclosed; Reasonable – 5 categories disclosed; Extensive – 6-9 categories disclosed, must include use of sold products.
3) C4ISR: Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance.
4) Thales ownership: 26% owned by French state; 25% Dassault Aviation; 3% employees; 46% others.
5) Naval group ownership: 62.25% French State; 35% by Thales; 1.82% by the Group’s employees and former employees through the company employee mutual fund and 0.93% self-managed.

3. GHG emissions reporting

Regulatory requirements

The requirements on companies to provide GHG emissions disclosures differ according to their jurisdiction of registration. In the UK and Europe, company size and type are the determining factors.³ In the US, only companies with high levels of GHG emissions,⁴ and those from polluting industries such as oil and gas, are required to report. Furthermore, in the US they are only required to disclose direct emissions, which illustrates a further complicating factor: the scope of mandatory reporting also differs between jurisdictions (see below).

The trend, however, is towards increasing levels of disclosure. In April 2021 the EU announced new rules that are set to triple the number of companies required to report emissions data (to around 49,000) and include a requirement for independent data verification. There are signals in the US that companies may need to disclose the emissions of other companies in their supply chain, though in a sense this would supplement the absence of mandatory indirect emissions reporting.

What’s in scope?

The GHG reporting standards to which most engaged companies adhere are those developed by the GHG Protocol.⁵ Emissions are broken down into three categories.

• Scope 1 – the direct emissions generated by a company, for example, at their own plants or by their vehicle fleet.
• Scope 2 – the emissions that are indirectly generated through a company’s purchase of energy. These can be calculated using two different methodologies.
  1. Location-based – this method reflects the average emissions intensity of the grids on which energy consumption occurs.
  2. Market-based – this method takes into account the specific contractual conditions attached to the electricity purchased. It could include requirements for renewable fuel generation, information on fuel mix, or energy attribute certificates.⁶

It is interesting to note that two of the companies studied (Raytheon and BAE Systems) report the emissions calculated using the market-based method as higher than when applying the location-based method. This indicates that the chosen energy supply is more carbon intensive than the average emissions of the local national grids – something to consider when assessing how committed a company is to low-carbon operations.

• Scope 3 – any other indirect emissions that occur in a company’s value chain. Under the GHG protocol, there are 15 categories of Scope 3 emissions, covering sources including purchased goods and services, the use of sold products, business travel, waste and investments.

Some Scope 3 disclosure is mandatory for some companies in some jurisdictions. For example, large and unquoted companies in the UK are currently mandated to disclose some business travel emissions. It seems somewhat of an anomaly that companies listed on stock exchanges – quoted companies – are not required to do so. The supplementary spreadsheet to this report shows that there is more extensive reporting of business travel emissions than any other Scope 3 category. This may indicate either similar mandatory requirements in other jurisdictions, or the general direction of travel of carbon disclosure – it makes sense for business travel to be included because this is operational.

Findings

The business travel example above suggests that regulation may influence the type of emissions that are disclosed beyond the companies directly impacted by the regulation. There is also considerable differentiation between the level of GHG disclosure provided by the companies on the table, which does not correlate to the regulatory requirements of their jurisdictions of origin. Furthermore, a number of the companies we assessed are partially state-owned, and again, this does not appear to have a deciding impact on the scope of GHG reporting.

Lockheed Martin, Thales, Safran and Leonardo provide extensive reporting of scope 1, 2 and 3 emissions. Lockheed Martin is based in the US whilst the other three are based in Europe. And, whilst these European companies are all partially owned by the French state, two other companies that have more significant holdings by the French state are amongst the worst performers on the table – KNDS and Naval Group. France positioned itself as a global leader in carbon reporting with its 2015 introduction of mandatory carbon reporting for investors, so the poor performance of these majority state-owned companies is another apparent anomaly.

Further analysis of company ownership is available as a tab in the more detailed spreadsheet online, which provides details of the ten largest institutional investors for the five biggest companies. This reveals a significant number of common shareholdings: of the 27 investors, five hold shares in four of the companies. These are the biggest US companies on the table: Lockheed Martin, Raytheon, Boeing and Northrop Grumman. Once again, the similarities in institutional investors does not appear to influence the quality of environmental reporting. With regard to the extent of carbon disclosure, the former two companies provide extensive disclosure whilst the latter two only limited.

Use of sold products

There is one category of emissions sources which, when disclosed, is so large that it throws all of the other figures out, and that is the Scope 3 category Use of sold products. In the emissions data spreadsheet we have included the UK’s 2020 emissions, and the 2020 emissions reported by oil giant BP, for comparison.

The most striking figure on the table is Airbus’ Use of sold products disclosure: 443 million MtCO₂e, which includes non-military sales. This is of a similar order of magnitude to the total reported UK emissions for 2020: 480 million MtCO₂e. It is also higher than BP’s equivalent figure, which is an estimate of all the emissions that will be released from the oil produced by the company in 2020 (328 million MtCO₂e). This is despite Airbus’ Scope 1 emissions being around one hundred times lower than BP’s, and its Scope 2 emissions around a thousand times lower.

The Use of sold products figure is an estimate of the total GHGs that will be emitted from the products that are manufactured by the company in one year, over the course of their product lifecycle. Aeroplanes have around a thirty-year life span. Unlike most, if not all, of the other categories, this one represents emissions that have not yet been released – in a sense a carbon debt that will be paid in the future.

On the one hand, due to the difference in the temporal scope of the emissions, caution should be exercised in comparing these figures to those in the other categories. On the other hand, however, it is a sobering thought to consider that each year the industry produces many high climate change impact products, the emissions from which will be generated for years to come.

The military (supply chain) emissions gap

Very few states report on their military GHG emissions, and for those that do the data is “poorly done and inadequate,” according to Dr Benjamin Neimark, speaking at the launch of the www.militaryemissions.org website at COP26 in Glasgow 2021. The project, of which CEOBS is a founding partner, seeks to improve government reporting of military GHG emissions.

The CDP has estimated that on average, companies’ supply chains produce more than five times the emissions of their direct operations. CEOBS’ Linsey Cottrell argues that a similar ratio could be in play in the military sector. “The extent of carbon reporting by the companies studied is encouraging,” she says, “because states can’t claim that collating their military supply chain emissions is too complex. A lot of the data is already there.”⁷

The supply chain emissions of states are the flip side of the same coin of the Use of sold products emissions of companies. In the absence of comprehensive reporting by all parties, consideration should be applied as to how information provided from one sector could be used to plug knowledge gaps that exist elsewhere. Furthermore, whether the data provided by those companies with extensive reporting could be used as a basis for estimating emissions by companies with very limited disclosure. This could be useful in terms of estimating a country’s military emissions, and also in estimating the climate impacts of the military industry as a whole.

Zero carbon flight of fancy

The majority of companies on the table are involved in aviation, many also in activities in space. This is a particularly high climate impact sector: according to the European Commission, if global aviation were a country, it would rank in the top 10 emitters. But unlikely as it may seem, the aerospace and military sectors have hopped on the ‘Net Zero’ carbon emission bandwagon, as promoted by the UN and increasingly adopted by states.

Many of the CSR reports examined for this study contain commitments that reflect those made by the industry as a whole.⁸ In October 2021, in the lead up to COP26, the Air Transport Action Group, an industry association whose 11 funding members include four of those covered in this report,⁹ announced a “long-term climate goal of net-zero carbon emissions by 2050”. The UK Royal Air Force (RAF)’s goal was set a decade earlier – 2040 – by its top commander Air Chief Marshal Sir Mike Wigston, in May 2021.

There is a significant amount of crossover between commercial and military aerospace companies, and the challenges faced by the two sectors in achieving massive carbon emissions reductions are similar. Aircraft fuel is key: it is estimated to account for “up to three quarters of the RAF’s carbon footprint, which in turn is just under half of the Ministry of Defence’s carbon footprint, which in turn is just under half of the whole Government’s footprint,” according to Sir Wigston.

Commitments to carbon reductions in aviation, therefore, rely heavily on the advent of low or no-carbon fuels. There are two types: ‘Sustainable Aviation Fuel’, derived from biofuels (from crops or waste vegetable oil or animal fat) and ‘synthetic fuel’, or e-fuel, which is produced by synthesising hydrogen from water with carbon from the atmosphere. There are big problems with both of these fuel types.

The quantity of biofuel that would be required to power global aviation is simply not available, nor could its production be scaled up sustainably. Significant land use conversion to biofuels would not only produce huge carbon emissions, it would compete with other demands on resources such as land, water and labour, which are required for the production of food. Even Sir Wigston recognises that there is “little immediate prospect of ability to scale it upwards; and its spot price remains steadfastly around ten times that of conventional kerosene.”

The problems with synthetic fuels are less readily acknowledged by proponents. “Yes, we are making fuel from air and water,” declares Sir Wigston. “It is alchemy, and the Royal Air Force and Zero Petroleum have proved it can be done.” What isn’t mentioned is the massive amount of electricity required to make synthetic fuel – electricity that would be better spent decarbonising other areas of the economy. Research published by the UK government’s Climate Change Committee in 2020 shows the emissions that could be saved with 1 MWh of renewable electricity when applied across different sectors. The production of synthetic jet fuel would save 0.1 tonne of CO₂ equivalent, whereas powering an electric vehicle could save 0.7 tCO₂e and displacing coal generation would save more than 0.9 tCO₂e. In short, other activities would have nearly ten times the climate-saving impact as the production of synthetic jet fuel.¹⁰ In addition to the fact that it would not make sense environmentally, there is clearly a financial disincentive to direct renewable energy finance towards jet fuel production over any of the other decarbonising activities identified in the Climate Change Committee’s report.

This is aside from the fact that the embedded carbon costs in the materials used to manufacture products are entirely ignored in the Net Zero aviation rhetoric – presumably it is assumed that they can be bought with offsets, but ‘offsetting’ GHG emissions is another hugely contentious issue.¹¹

Finlay Asher is a former aerospace engineer who quit his job in order to lead a group for climate-concerned aviation workers called Safe Landing. “Whilst the other [carbon intensive] activities still exist, it is madness to use the electricity to produce synthetic jet fuel,” he says. “The term “Net Zero” is a dangerous distraction across all-sectors. It targets the insignificant idea of a balance of carbon in-and-out, at a specific date, usually 2050, that is located long after we will have completely blown our remaining carbon budget for keeping climate change within 1.5^oC. We have less than 10 years on our current emissions trajectory and policy landscape, so whether we are “Net zero” in 2050 or not is almost irrelevant – it’s cumulative emissions every year that is important.”¹²

Airbus makes great efforts to push its sustainability criteria, claiming to be “leading the journey towards climate-neutral aerospace.” Improved air traffic management, new engine and aircraft technologies, “sustainable” aviation fuels and market-based measures are supposedly the mechanisms that will achieve this feat. The RAF list additional measures, including “spreading the ‘reduce, reuse and recycle’ message; minimising work travel and reducing single-use plastics.”

The claim that measures such as these will result in a climate neutral aviation industry is thrown into perspective by the massive carbon emissions disclosed in Airbus’ Use of sold products category. The Net Zero aviation framework does not include a commitment to decommission or stop producing the types of products that are coming off production lines today.

Emissions from war

If states were to report their military GHG emissions in full, these would be unlikely to include the emissions from most wars, as they occur extraterritorially. Nevertheless, it could be argued that they are ‘a carbon cost of doing business’ for militaries. While this remains an understudied area, it is likely that the majority of emissions from conflicts will result from sources such as major land use changes, weakened governance and the carbon costs of recovery. Nevertheless, for long-running conflicts with a major military presence, the Use of sold products category could be another piece of the puzzle in estimating the climate costs of war; for example, complementing the limited data that governments release on fuel consumption in combat operations.

For many militaries, the bulk of their emissions will result from peacetime, rather than combat activities. These include those from training exercises, their day to day existence, or perversely, the protection of fossil fuel supplies, as highlighted in research by Greenpeace in December 2021.

4. Energy, water and waste

While energy and GHG emissions dominate the conversations surrounding climate mitigation, water and waste should not be ignored. Water conservation is not only important for the protection of increasingly scarce resources, but also for energy conservation, by lowering the energy used to treat, pump, and heat water. The reduction of waste has similar benefits, reducing demand on resources and pressures on waste management services; besides air pollution, both hazardous and non-hazardous waste can cause great harm to habitats and humans, if not appropriately managed.

The majority of companies studied reported water usage and waste in absolute terms, which is a relatively progressive approach: many companies discuss their environmental performance in relative terms – for example, in percentages or changes over time – but this can hide or obfuscate the true extent of impacts.

Nevertheless, the lack of standardised reporting frameworks is very apparent, and makes comparisons between companies difficult. This can be seen in tab three of the the supplementary online spreadsheet to this report, where we have not attempted to standardise the vast majority of entries, so there are differences in terms of units and substance in the energy, water and waste columns. The reporting of pollution incidents was also not found to have been reported systematically.

Drilling down into the absolute numbers provided by companies can sometimes raise more questions than it answers. BAE Systems report that its water use decreased by 94% between 2019 and 2020, an improbable claim that is unexplained. It may be the result of the company’s reporting parameters changing, reflecting little reduction in real-world water use. For the same period the company reported a cut by more than a third in its production of waste.

Companies can submit an annual water security report to the CDP, and reports from 2020 are available for a few of the companies studied. However, only one, Raytheon, provided data on all three requested metrics: withdrawals, discharges and consumption. This CDP mechanism is likely to push companies towards a standardised reporting framework in future and is a welcome development.

Only one company, Leonardo, provided details on its water withdrawal from areas of water stress. Lockheed Martin states that it identifies its sites in the highest water-stressed regions and those predicted to be in stressed regions by 2040. “That data is used to prioritize and execute site water balances and associated water conservation activities,” according to the company.

5. High altitude and space

Donald Trump’s 2019 declaration that space represents “the next warfighting domain” heralded his re-establishment of the US Space Command. The private sector plays a vital role in today’s space races and many of the companies profiled here are involved. The degree of involvement and associated environmental impacts vary considerably, from the production of parts for vehicles to active involvement in government programmes, such as satellite launches and space-based missile systems.

The environmental impacts of activities in high altitudes and space are little understood and there are no specific requirements or even guidelines in relation to space-related environmental reporting. Alongside carbon dioxide emissions are the non-CO₂ climate impacts of aviation. That is, through the high-altitude release of nitrogen oxides, water vapour, and sulphate and soot particles. A November 2020 study by the European Aviation Safety Agency confirmed that the significance of combined non-CO₂ climate impacts from aviation activities were at least as important as those of CO₂ alone.

None of the companies studied addressed their non-CO₂ climate impacts, nor did they report the environmental impacts of their high altitude and space activities separately. Indeed, Raytheon explicitly states that emissions related to space are not included in their overall emissions calculations. Lockheed Martin’s space programmes are worth $11.9 billion, or 18% of its business. These are massive programmes, yet very little is known about their environmental impacts. Pressure needs to be exerted on companies to begin to break out their high altitude and space activities in their CSR and Environmental, Social and Governance reporting.¹³ Currently they represent a significant reporting and regulatory void.

One of the biggest issues of concern is the generation of space junk – debris that is orbiting the Earth indefinitely. This problem is set to increase with a rapid growth in satellite launches. The European Space Agency’s 2021 Space Environment Report states that “our current behaviour in space is unsustainable” and that more than half of operators flying in low-earth orbit “make no attempt to sustainably dispose of their missions”.

The World Economic Forum has responded to this problem with a Space Sustainability Rating, to encourage responsible behaviour in space through “increasing the transparency of organizations’ debris mitigation efforts.” The SSR is expected to go live in early 2022, meaning that spacecraft operators will be able to “apply for sustainability rating… to prove their satellites don’t present unnecessary risk in the orbital environment.” Airbus and Lockheed Martin are involved. Airbus also states that it conducts debris tracking, capturing and deorbiting.

Improvements need to be made in the transparency of reporting for this sector, as it is clear that we are missing critical information about the companies’ environmental impacts.

6. Conclusion

There is considerable differentiation between the quality and extent of environmental reporting of the arms companies studied. This cannot be explained by either regulatory regimes – many companies go above and beyond requirements – or what has been established with regard to ownership.

Taken as a whole, and when compared to retail companies, the sector is relatively progressive: carbon disclosure is advanced, and most companies report their energy, water and waste impacts in absolute terms. Many set goals for reducing impacts in a range of impact areas, and external verification of environmental data – albeit to a limited degree of assurance – is standard.

However, what this analysis fails to recognise is that these companies’ products and activities have a particular, and often huge, impact on the environment, most notably on the atmosphere. Therefore, the standard reporting parameters that have been developed for CSR reporting in other sectors, such as clothing and food, are simply not adequate. In particular, the regulatory and reporting void that has been identified in the aerospace sector needs to be addressed.

In the example of Airbus, one company in one year produces products whose lifecycle emissions will be more than those of an industrialised country in one year, yet there are no binding requirements on companies to curb the emissions of products produced.

A company could not claim to be on the path towards “carbon neutrality” without knowing – and being able to state – what its carbon emissions are. This may be the reason for the level of carbon disclosure that is documented in this report, the prime driver being the promotion of the unrealistic concept of “decarbonised aerospace”.

But while the motives for the surprisingly extensive carbon disclosure that we have uncovered may not be benevolent, that does not mean that it could not be useful. There is an imperative for humanity to understand the true climate costs of our activities, so that we can address them. Military GHG emissions form a significant part of those impacts and we do not know anywhere near enough about them. This research indicates, however, that we may be able to discover a little more than we thought.

Leonie Nimmo is CEOBS’ Project Co-ordinator and Research Associate. Hana Manjusak is a Masters student of International Affairs at the Georgia Institute of Technology. With thanks to Ethical Consumer Research Association, whose work informed the methodology behind this research, and to the Carbon Disclosure Project, without whose reporting mechanism, and open-access data, this research would not have been possible.