It’s tough to judge the sustainability of defense contractors–after all, they deal in wartime equipment, which isn’t exactly friendly to the planet or the people living on it. But two of the biggest contractors, Raytheon and Lockheed Martin, actually have a a lot going for them in the sustainability arena. In the new book The HIP Investor, author and investment adviser R. Paul Herman compares the two. We do the same here.
Raytheon relies heavily on weapons to keep its business going–91% of the company’s total sales in 2008 came from arms sales (compared to Lockheed’s 70%). And the company has also made some missteps in recent years. In 2006, Raytheon CEO William H. Swanson admitted that he plagiarized his booklet entitled “Swanson’s Unwritten Rules of Management,” and earlier this year, Raytheon was accused before the Senate Armed Services Committee of asking Blackwater to create a shell company in charge of getting a $25 million subcontract to train troops in Afghanistan.
But Raytheon isn’t all bad. The company has cut its solid waste per billion dollar of revenue by 50% and reduced hazardous waste by 85% per billion dollar of revenue since 1998. Raytheon also provides weather, water, and climate prediction systems to the National Weather Service. The company offers a safe workplace, too–Raytheon has reduced its Occupational
Safety and Health Administration (OSHA) recordable injury rate by 75% and its lost workday injury rate by 66% since 1998.
Like Raytheon, Lockheed Martin has its fair share of issues. The company almost bought defense contractor
Titan Corp. in 2004 despite employees’ rumored links to
prisoner abuse in Iraq (the agreement was later terminated), and in 2009, Lockheed Martin was sued by a former employee who claimed that the company intentionally applied inadequate stealth
coatings to its F-22 Raptor stealth jet. And while only 70% of the company’s total sales in 2008 came from arms sales, Lockheed is the world’s largest arms exporter.
The company could also stand to do better on the payment front–Lockheed’s CEO earns 360 times the average worker’s salary. In comparison, Raytheon’s CEO earns 271 times what the average employee makes. But Lockheed maintains a fair workplace. In 2010, the company received the top rating of 100 on the Human Rights Campaign’s Corporate Equality Index for its inclusive policies related to lesbian, gay, bisexual, and transgender employees (note: Raytheon also achieved a perfect score). Since 2002, over 50% of entry-level hires have been women and minorities.
Lockheed has also succeeded on the environmental front. Eight Lockheed Martin buildings have achieved
the U.S. Green Building Council’s Leadership in Energy and
Environmental Design (LEED) certification, and in 2009, the company bought 98,063,334
kilowatt-hours of green power–5% of its total electricity usage. Lockheed is also partnering with Ocean Power Technologies Inc. on a utility-scale wave-power generation project, and last year the company entered into $1.2 million cooperative agreement contract with the U.S. Department
of Energy to research ocean thermal energy conversion. Just last month, Lockheed announced that it plans to provide a long-range air surveillance radar system to the U.K. Ministry of Defense. The system will help with sensor performance issues caused by rotating wind turbine blades.
And while Raytheon appears to be making strides in renewable energy and workers rights, we still have to give this round to Lockheed Martin (note: this is FastCompany.com’s opinion. It does not reflect The HIP Investor‘s judgment). The company realizes that renewable energy will be a big market in the coming years, and we applaud its decision to look into advanced energy technologies. Raytheon would be wise to diversify and do the same.
Excerpted from The HIP Investor: Make Bigger Profits by Building a Better World by R. Paul Herman Copyright (c) Published by John Wiley & Sons. Used with permission.