Total Cost of Ownership SUSTAINABILITY MANAGEMENT PLAN GOAL All business areas meet or exceed annual customer savings goals as defined in business area executive vice president scorecards. 2021 PROGRESS The Supply Chain Council met both customer and Lockheed Martin program savings goals for 2021. Maintaining product and service affordability for our customers is crucial to the longevity of our programs. With approximately 60% to 70% of product cost living within our supply chain, tracking and improvement of savings by our supply chain team contributes to competitive positioning for Lockheed Martin’s future procurement efforts. We have a Supply Chain Council that meets monthly to guide affordability initiatives. The Supply Chain Council provides updates on enterprise-wide performance to our Chief Operating Officer, who reports periodically on Lockheed Martin’s competitive position in the market to the Board of Directors. Furthermore, the business areas come together quarterly to collaborate and leverage skills to advance affordability efforts. Business areas have specific affordability guidelines unique to their customers and programs, and our supply chain negotiators complete training on affordability objectives/tools. To engage our workforce, a monthly newsletter that includes affordability topics, such as lessons learned, best practices and analytic insights, is sent to supply chain, engineering and technology, program management, manufacturing engineering and finance teams to advance negotiation results. Program management training is offered to our domestic and international managers and includes sessions from supply chain strategy leadership on tools and techniques to drive affordability results. Looking to the future, Lockheed Martin plans to release additional user-friendly digital tools that assist with opportunity capture for each program, including opportunities for increased affordability. Our annual savings goal is comprised of two classes of savings: customer value savings and Lockheed Martin program value savings. At the end of each year, the business areas review their business plans and anticipated contracts to project savings, which are used by leadership to define the respective business area targets. The enterprise Global Supply Chain Operations team analyzes and consolidates these goals to report performance for sustainability and other corporate requirements. “The Lockheed Martin supply chain team has continued to evolve their best-in-class affordability techniques and practices over the last several years across the corporation, which has enabled us to achieve customer and corporate savings objectives while mitigating, where feasible, supply network cost challenges.” —George Sanders, Corporate Affordability Sub-Council Lead RECOGNIZING EMPLOYEE SUCCESS Our employees are the primary source of innovation for cost reduction opportunities throughout our programs and operations. Recognition, through our NextGen Recognition program, is given to teams from all disciplines who come forward with impactful and validated ideas that support our affordability objectives. For example, in 2021, a large technology procurement initiative that was not part of our original Supply Chain Council milestone plan resulted in more than $10 million in savings. We recognized this accomplishment and communicated the initiative’s success to our Executive Leadership Team and Chairman, President and Chief Executive Officer. We believe that celebrating our successes contributes to a culture of innovative thinking and encourages our teams to drive affordability. About this Report Our Company Our Sustainability Approach Our Sustainability Priorities Beyond the SMP ESG Performance Index www.lockheedmartin.com 2021 Sustainability Report 24