Case study: How Northrop Grumman promotes ethical business conduct
Northrop Grumman is a leading global security company providing innovative systems, products and solutions to customers worldwide, participating in many high-priority defence and government programmes in the United States and abroad. Northrop Grumman has a strong ethical reputation in its industry, and seeks to promote a culture where leaders create and encourage an open and ethical work climate, leading by example.
This case study is based on the 2018 Corporate Responsibility Report by Northrop Grumman published on the Global Reporting Initiative Sustainability Disclosure Database that can be found at this link. Through all case studies we aim to demonstrate what CSR/ ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Abstract
Northrop Grumman implements mandatory training related to ethics and compliance Tweet This! to help develop a workforce that takes ownership of Northrop Grumman’s ethical culture, conducts itself with integrity and lives Northrop Grumman’s company values. In order to promote ethical business conduct Northrop Grumman took action to:
- provide ethics and compliance training
- encourage employees to raise concerns
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With this case study you will see:
- Which are the most important impacts (material issues) Northrop Grumman has identified;
- How Northrop Grumman proceeded with stakeholder engagement, and
- What actions were taken by Northrop Grumman to promote ethical business conduct
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What are the material issues the company has identified?
In its 2018 Corporate Responsibility Report Northrop Grumman identified a range of material issues, such as financial performance, customer satisfaction, data privacy, product and service quality, talent management. Among these, promoting ethical business conduct stands out as a key material issue for Northrop Grumman.
Stakeholder engagement in accordance with the GRI Standards
The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:
Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.
Key stakeholder groups Northrop Grumman engages with:
| Stakeholder Group | Method of engagement |
| Customers
| · Engage with customers on establishing goals and priorities · Pilot “Joint Quality Council” quarterly meetings with Defence Contracts Management Agency (DCMA) representatives. Invited DCMA members as keynote speakers at the 2018 Quality Symposia. |
| Suppliers | · Host supplier outreach events, offer mentoring programmes and sponsor academic, customer and industry activities that support small business growth and development · Collaborate with government and industry partners to develop and drive common strategies and standards in order to reduce supply chain risk |
| Shareholders | · Bi-annual engagement with the governance leads of the largest shareholders, as well as ongoing engagement with the investment leads at actively managed shareholders |
| Employees
| · Host Leadership Council Meetings and Sector Diversity and Inclusion Council Meetings · Consult and collaborate with the 12 Employee Resource Groups, Global and Sector Diversity & Inclusion Committees, and the Veterans Inclusion Committee on numerous issues · Charter the Technical Talent Working Group to address the development needs of the technical staff across the enterprise |
| Industry Organisations
| · Engage with governmental agencies and industry groups on workplace accommodations and equal employment opportunity · Engage with and represent the company on industry working groups addressing security stakeholder topics such as critical technology protection, controlled unclassified information, insider threat and personnel security clearances · Host industry compliance meetings with various nonprofit and government organisations |
| Community
| · Meet and collaborate with leadership to develop community outreach plans and review programmes and initiatives · Engage with community partners at nonprofit organisations to facilitate funding and grant requests · Collaborate with educational thought leaders to develop and provide relevant professional development programming to middle school science, technology, engineering and mathematics (STEM) teachers · Collaborate with organisations focused on military and veterans and diversity and inclusion to understand key issues and needs |
How stakeholder engagement was made to identify material issues
To identify and prioritise material topics Northrop Grumman carried out a materiality assessment survey in 2017 with employees across different levels and business units, asking employees to rate the importance of each potentially material topic to four different stakeholder groups: customers, investors, employees and society.
What actions were taken by Northrop Grumman to promote ethical business conduct?
In its 2018 Corporate Responsibility Report Northrop Grumman reports that it took the following actions for promoting ethical business conduct:
- Providing ethics and compliance training
- All Northrop Grumman employees participate in mandatory annual ethics and compliance training and, in 2018, approximately 84,000 employees received such training (including online and in-person training sessions). Northrop Grumman provided enterprise training on Northrop Grumman’s Values, building the best culture, information security, export awareness, property awareness, and for U.S. employees, the importance of time and labour charging accuracy. For international employees, Northrop Grumman included a module on Anti-Corruption and translated training content into German, French, Italian, Dutch, Flemish, Chinese and Arabic. Additionally, U.S. employees are required to annually disclose any conflicts of interest and certify that they have read, understand and will comply with the Northrop Grumman Standards of Business Conduct. Northrop Grumman’s Standards of Business Conduct brochure is published in 12 different languages.
- Encouraging employees to raise concerns
- Northrop Grumman operates OpenLine, a valuable resource where employees, business partners, suppliers and other stakeholders can seek guidance on ethics questions and report suspected violations of laws, regulations and company policy. The toll-free 24/7 number, administered by a third-party service provider, is communicated on brochures, posters, the company intranet and internet sites and there are dedicated OpenLine numbers at most of Northrop Grumman’s international locations, so employees in those countries can speak to a representative in their native language. In addition, an online web-based reporting system is available to employees. In 2018, Northrop Grumman extended OpenLine to Singapore and Hong Kong and revamped its global OpenLine intake process to make it easier and more employee friendly, and there were 2,573 OpenLine contacts, including phone and web entries, as well as input from Northrop Grumman’s business conduct officers and human resources business partners. The number of allegations were about the same from the previous year, but inquiries decreased by 3.4%, possibly due to targeted training and enhanced communications. Most inquiries relate to business courtesies and conflicts of interest and are generally a one-time contact with a response based on policy or procedures. They are documented for evaluation and guidance on training and communication content. Callers may choose to remain anonymous if permitted by local law and Northrop Grumman’s non-retaliation policy, prominently posted online and in brochures, clearly states zero tolerance of direct or indirect retaliation against any individual who reports a concern in good faith. Allegations are investigated by dedicated teams of full-time professionals trained to conduct interviews in a manner that respects the reporting individual and the trust they have placed with Northrop Grumman. Examples of allegations include misuse of company resources, violations of employment, harassment or retaliation practices and policy or security concerns; however, most raise issues involving employee behavioural misconduct and time reporting. In 2018, 33% of these allegations were substantiated, up 3% from the previous year, and there were 94 terminations due to substantiated OpenLine allegations.
Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?
The GRI Standard addressed in this case is: Disclosure 205-2 Communication and training about anti-corruption policies and procedures
Disclosure 205-2 Communication and training about anti-corruption policies and procedures corresponds to
- Sustainable Development Goal (SDG) 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
- Business theme: Anti-corruption
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References:
1) This case study is based on published information by Northrop Grumman, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original, please revert to the original on the Global Reporting Initiative’s Sustainability Disclosure Database at the link:
http://database.globalreporting.org/
2) https://www.globalreporting.org/standards/gri-standards-download-center/
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