CORPORATE RESPONSIBILITY REPORT

Transcription

1 2012 CORPORATE RESPONSIBILITY REPORT 1

2 OUR VALUES We, the women nd men of NORTHROP GRUMMAN, re guided by the following Vlues. They describe our compny s we wnt it to be. We wnt our decisions nd ctions to demonstrte these Vlues. We believe tht putting our Vlues into prctice cretes long-term benefits for shreholders, customers, employees, suppliers nd the communities we serve. We tke responsibility for QUALITY Our products nd services will be best-in-clss in terms of vlue received for dollrs pid. We will deliver excellence, strive for continuous improvement nd respond vigorously to chnge. Ech of us is responsible for the qulity of whtever we do. We deliver CUSTOMER stisfction We re dedicted to stisfying our customers. We believe in respecting our customers, listening to their requests nd understnding their expecttions. We strive to exceed their expecttions in ffordbility, qulity nd on-time delivery. We provide LEADERSHIP s compny nd s individuls Northrop Grummn s ledership is founded on tlented employees effectively pplying dvnced technology, innovtive mnufcturing nd sound business mngement. We dd more vlue t lower cost with fster response. We ech led through our competence, cretivity nd temwork. We ct with INTEGRITY in ll we do We re ech personlly ccountble for the highest stndrds of behvior, including honesty nd firness in ll spects of our work. We fulfill our commitments s responsible citizens nd employees. We consistently tret customers nd compny resources with the respect they deserve. We vlue Northrop Grummn PEOPLE We tret one nother with respect nd tke pride in the significnt contributions tht come from the diversity of individuls nd ides. Our continued success requires us to provide the eduction nd development needed to help our people grow. We re committed to openness nd trust in ll reltionships. We regrd our SUPPLIERS s essentil tem members We owe our suppliers the sme type of respect we show to our customers. Our suppliers deserve fir nd equitble tretment, cler greements nd honest feedbck on performnce. We consider our suppliers needs in conducting ll spects of our business.

3 TABLE OF CONTENTS 1 INTRODUCTION CEO Messge 2 3 OUR COMPANY Our Business 3 Our Ethics 6 Our Governnce OUR OPERATIONS IN FOCUS 30 OUR COMMUNITY INVESTMENT Eduction 31 Volunteerism 34 Disster Relief 34 Supporting Militry nd Veterns GLOBAL REPORTING GRI Content Index 36 GRI Appliction Level Check 38 Building Diversity nd Inclusion 12 Supplier Diversity nd Responsibility 15 Environmentl, Helth nd Sfety 18

4 INTRODUCTION We published our first Northrop Grummn Corporte Responsibility This report will be submitted for GRI Level Check, which evlutes Report in 2008, which highlighted our environmentl nd socil the extent to which the GRI guidelines re used in the report. performnce in Our reporting continues to focus on the Further, for the second consecutive yer we re ssembling nd environmentl nd socil responsibilities criticl to our key engging n independent Externl Review Pnel to evlute our stkeholders, including shreholders, customers, employees, reporting processes nd level of trnsprency. Bsed on feedbck locl communities, cdemic institutions, medi, governments nd from the Pnel on our 2011 Corporte Responsibility Report, this suppliers. edition fetures Gol-to-Performnce structure to reflect better ccountbility, long with other suggested enhncements. We report consistent with the Globl Reporting Inititive (GRI), third-prty orgniztion tht hs developed widely used To support our environmentl nd socil performnce, we work with environmentl, socil nd governnce reporting frmework. To severl third-prty orgniztions, including Conservtion Interntionl, enhnce technicl qulity, credibility nd relevnce of our reporting, of which we re member of their Business nd Sustinbility Council the GRI reporting frmework we follow is developed through nd prtner on ECO Clssroom. consensus-seeking process with prticipnts drwn globlly from business, civil society, lbor nd professionl institutions. This is nother step in our ongoing efforts to improve trnsprency nd ccountbility in ll we do. 1

5 INTRODUCTION WE MUST CONTINUE TO HOLD OURSELVES TO THE HIGHEST STANDARDS AT ALL TIMES; IT TAKES YEARS TO BUILD A REPUTATION, AND ONLY A MOMENT TO TEAR IT DOWN. OUR PATH FORWARD COMPRISES TWO IMPORTANT DIMENSIONS: 1) VALUES, INCLUDING INTEGRITY, AND 2) SUSTAINABLE PERFORMANCE. OUR VALUES DEFINE HOW WE OPERATE AS A COMPANY, AND SUSTAINABLE PERFORMANCE REFLECTS WHAT WE ARE ABLE TO ACHIEVE. Wes Bush, Chirmn, CEO nd President Corporte Responsibility Report 2012 The 2012 Corporte Responsibility Report once gin demonstrtes our commitment to our vlues nd mintining the highest ethicl stndrds, embrcing diversity nd inclusion, striving for qulity through complince nd innovtion nd continuing to enhnce our environmentl sustinbility. Northrop Grummn is dedicted to improving our environmentl nd socil responsibility to contribute further to the well-being of the communities where we live nd operte. It is the right thing to do nd it mkes good business sense. Activities mentioned in this report highlight our commitment to chieving sustined top performnce while conducting our business in ccordnce with high stndrds nd vlues. Opertion IMPACT the Injured Militry Pursuing Assisted Creer Trnsition progrm we strted in 2005 is but one exmple. It finds opportunities for wounded veterns to gin meningful post-militry employment, provides ccommodtions nd trining to help the veterns succeed in their new jobs, nd provides us with gret tlent pool. This yer the Northrop Grummn Foundtion is gin collborting with Conservtion Interntionl on ECO Clssroom. The progrm tkes middle school nd high school science techers to centrl Cost Ric for two weeks of environmentl science field work giving them resources nd ides they cn bring bck to the clssroom to get our young people excited bout pursuing science, technology, engineering nd mthemtics (STEM). Generting interest in STEM is criticl for our ntion s economic future nd ntionl security nd vitl for the Northrop Grummn workforce of the future. In the pst yers we hve redoubled our efforts on performnce, innovtion nd driving ffordbility for our customers. The results hve been excellent. As we continue to pply tht sme focus to socil nd environmentl responsibility, we continue to experience similr outcomes. Wes Bush Chirmn, CEO nd President 2

6 OUR COMPANY OUR BUSINESS 2012 Highlights Delivering solutions: In 2012, we generted $25.2 billion in sles by providing innovtive systems, products nd solutions to our customers in res such s cyber security; unmnned systems; commnd, control, communictions, computers, intelligence, surveillnce nd reconnissnce (C4ISR); nd logistics nd moderniztion. (Plese see Our Vlues on the inside front cover of this report.) Risks nd opportunities: The risks nd opportunities during 2012 continued to focus round the chllenging budget environment for our U.S. government customers, s well s uncertin globl economic conditions. While budgets re tighter, our customers missions hve not been reduced. They continue to count on Northrop Grummn to be both innovtive nd more ffordble in providing products nd services. As the demnds on customers increse, we re tking the ctions necessry to ensure we re best prepred to continue to serve them well nd sustinbly. Our focus on delivering top performnce, ensuring the highest level of qulity, mintining close communiction with our customers nd pplying innovtive pproches to deliver more ffordble products nd services contributes to our customers bility to ddress their globl security missions. Defense Industry Inititive: In 2012, Wes Bush, our chirmn, chief executive officer, nd president completed his term s the chir of the Defense Industry Inititive (DII) on Business Ethics nd Conduct steering committee, nd Sndr Evers-Mnly, vice president of corporte responsibility, stepped down s chir of the DII Working Group. We re plesed tht during 2012, we sw greter involvement from executive leders in the signtory compnies nd DII expnded its progrms for smll nd mid-sized compnies. 3

7 OUR COMPANY WHO WE ARE Northrop Grummn is publicly trded compny. Our stock is listed on the New York Stock Exchnge under the symbol NOC. We re leding globl security compny providing innovtive systems, nd its wholly owned subsidiries, wherever locted. WE HAVE FOUR OPERATING SECTORS: Aerospce Systems: Provides unmnned systems, mnned ircrft, process tht emphsizes our compny-wide focus on qulity, innovtion nd superior progrm performnce Mjor Corporte Responsibility Report Gols products nd solutions in unmnned systems, cyber security, C4ISR, nd logistics nd moderniztion to government nd commercil customers worldwide. We pply our core competencies nd innovtive cpbilities to ddress the diverse nd complex issues fcing our customers including the defense of our ntion nd llies, cyber security, homelnd security, expnding the scientific frontiers of spce, environmentl nd climte chnge nd lrge-scle civil informtion systems tht enhnce government services. As prime contrctor, principl subcontrctor, prtner, or preferred supplier, we prticipte in mny high-priority ntionl security technology progrms in the United Sttes nd cross the globe. We conduct most of our business with the U.S. government nd principlly the Deprtment of Defense (DoD) nd intelligence community. We lso conduct business with locl, stte nd interntionl governments, nd domestic nd interntionl commercil customers. Revenue from the U.S. government, which includes foreign militry sles, ccounted for pproximtely 90 percent of totl revenues from 2010 to spce systems nd dvnced enbling technologies for customers worldwide. Electronic Systems: Provides irborne rdr, nvigtion systems, electronic countermesures, precision wepons, irspce mngement systems, spce pylods, mrine nd nvl systems, communictions systems nd government systems. Informtion Systems: Provides dvnced informtion solutions for defense, intelligence, civil gency nd commercil customers, including cyber security solutions, commnd nd control systems, network communictions solutions, nd intelligence, surveillnce nd reconnissnce systems. Technicl Services: Provides lifecycle solutions nd long-term services for globl customers. Key cpbilities include pltform sustinment nd moderniztion, dvnced trining solutions, high technology engineering services nd opertionlly responsive systems. CUSTOMERS At Northrop Grummn, we re ccountble to our customers. We tke very seriously our commitment to globl security nd the We work ech dy to serve our customers; nd we work proctively with our business prtners to be good stewrds of the communities in which we work nd live. To report on how we perform responsibly s we go bout our work, we highlight below our mjor Corporte Responsibility Report's Gols for Gol Provide high-impct, innovtive nd ffordble products nd systems in support of the U.S. militry nd our llies in their mission to operte successfully nywhere on the globe. This involves confronting irregulr wrfre including terrorism nd ddressing globl security chllenges, with focus in four primry ctegories: Unmnned Systems Cyber security Commnd, Control, Communictions, Computers, Intelligence, Surveillnce nd Reconnissnce (C4ISR) Logistics nd Moderniztion Performnce Our efforts in 2012 met or exceeded finncil performnce gols s corportion nd in ech of our four sectors. In totl, our new business wrds in 2012 were $26.5 billion compred to $25.3 billion in We operte in 25 countries round the world. While the mjority of our fcilities re in the United Sttes, we lso hve significnt opertions in the United Kingdom, Itly, Germny nd Frnce. The dt contined in this report reltes to Northrop Grummn tremendous responsibilities inherent in tht duty. We recognize tht the work we do mtters to our world tody nd in the future. We embrce our prtnership with U.S. nd llied defense nd security leders to provide high-impct, ffordble products nd systems through robust mission-ssurnce We re consistently working to improve our performnce in everything we do. We strive to be the top performing compny in our industry, providing our customers with unique cpbilities to continue to pursue their missions ffordbly. 4

8 OUR COMPANY Gol In our worldwide opertions, focus on doing business consistent with our vlues nd commitment to sustinbility. Incorporte socil responsibility nd customer support into decision-mking, including in the products we develop nd mnufcture nd, in the mrkets we prticipte. Performnce We currently do not mnufcture or develop ntipersonnel mines, cluster munitions, depleted urnium munitions, chemicl or biologicl wepons. We lso do not operte in business or country tht would require us to compromise our compny vlues nd commitment to sustinbility. Gol Generte high levels of customer stisfction. Performnce Throughout 2012, s prt of our compny s focus on sustinbility, we pursued series of coordinted inititives to improve our customer stisfction including our gility in responding to their needs. These inititives strengthen our customer prtnerships nd mke our delivery of solutions more semless. The result: n improved bility to tem with our customers, understnd their globl security objectives, nd provide effective, ffordble products nd services. We rigorously ssess nd document customer stisfction s objectively s possible so tht we cn tke the necessry steps to improve. In 2012, our compny nd our customers continued to operte in chllenging environment with incresed pressure on the U.S. federl budget nd evolving threts. Moving into 2013, we remin committed to providing high-qulity nd ffordble products. Mesuring Performnce: Our Approch To ensure we re meeting our gols, we mesure both customer stisfction nd qulity performnce. Our customer stisfction metrics include customer-generted performnce scores such s the Contrctor Performnce Assessment Reporting System (CPARS) used by the Deprtment of Defense nd the Deprtment of Energy, nd the Customer Performnce Systems (CPS) used by other U.S. government gencies. We lso rely on wrd-fee scores on our contrcts, nd orl nd written customer feedbck. Mission Assurnce Gol Ensure mission success for our customers, strong progrm performnce for our shreholders, nd sustined focus on performnce improvement. Performnce In 2012, we mintined our focus on qulity s one of our key strtegic priorities to ensure strong performnce outcomes for our customers nd improved vlue for our shreholders. We continued using qulity mesures compny-wide tht reflect the performnce of our key progrms ginst qulity expecttions cross the progrm life cycle, including engineering, mnufcturing nd supply chin. We recognize tht holistic view of our qulity performnce, engging ll key stkeholders, drives successful performnce outcomes for our customers. To identify nd prioritize res for continuous qulity improvement, we implement rigorous selfssessment process t both the business-unit nd corporte level. We lso trget qulity improvement inititives to enhnce the vlue we deliver to our customers. We continue to foster the connectivity between the work of our individul employees nd the success of our customers criticl missions, which we believe is foundtionl to sustined performnce improvement nd ffordble globl security solutions. We do this in prt by instilling in our employees the concept tht Qulity is Personl. From there, we encourge our employees to identify key qulity issues in their work nd strive continuously to improve in those res. We ctegorize our qulity performnce s strong. From time to time, however, we experience isolted progrm-specific qulity issues tht do not meet the performnce expecttions of Northrop Grummn or our customers. To minimize the potentil for qulity issues, we focus on: Improving the connection between the work of the individul nd qulity outcomes for our customers Using robust focus on root-cuse ssessment Integrting focus on qulity erly in progrm life cycle to help void qulity issues s progrms mture Prtnering with our suppliers to ensure cler understnding of qulity expecttions. Our focus on qulity is bsed on fundmentl tenet of continuous improvement; tht is, we integrte lessons lerned from the pst. 5

9 OUR COMPANY OUR ETHICS 2012 Highlights Developed How to Chllenge How to Support, n inititive to provide employees nd mngers helpful guidnce on effectively bringing issues forwrd nd ddressing them. Awrded 10 High Rod wrds in 2012 to individuls who excelled in inspiring integrity nd ethicl behvior. Deployed the Defense Industry Benchmrk Survey s n dditionl mesure of the impct of our ethics progrm on behvior, which helped us focus on res tht my need further improvement. Re-trnslted our revised Stndrds of Business Conduct to Germn, Itlin, French, Spnish, Flemish, Norwegin, Chinese nd Jpnese. TOP PERFORMANCE THROUGH ETHICS, INTEGRITY AND COMPLIANCE At Northrop Grummn, we strive not only to deliver high qulity products nd services, but to do so using ctions tht demonstrte our commitment to ethics, integrity nd complince. We hve comprehensive vlues-bsed progrm to promote strong ethicl culture throughout the compny. During 2012, Northrop Grummn employees received ongoing ethics communictions from mngers nd compny leders, including n nnul messge from our CEO, Chirmn nd President Wes Bush. These regulr communictions set high expecttions for ethicl conduct with ll of our employees. We keep brest of regultory chnges nd deploy focused nd timely trining to our employees on complince obligtions criticl to their job responsibilities. Key elements of our ethics nd complince progrm include: Trining nd communiction Comprehensive complince policies nd procedures including nti-corruption policies Business conduct officers 24/7 OpenLine Strong enforcement of our policy ginst retlition 2012 Mjor Gols Gol Receive green rting on our nnul internl ethics udit. Performnce We conduct n nnul internl udit of our Ethics progrm in We received clen bill of helth for the corporte ethics office nd ll sectors, with no findings or recommendtions noted. In 2012 we prticipted in the Defense Industry Benchmrk survey conducted by the Ethics Resource Center. This is the fourth time we prticipted in the survey, which provides tool for ssessing the progress of our ethics progrm yer over yer, nd lso benchmrks our progrm ginst our peers. We re encourged to find tht fewer employees re observing misconduct nd those who do observe trnsgressions re more likely to report the questionble ctions thn in pst yers. Also, over the lst severl yers, employees pper to hve gined more confidence in our reporting process nd report less fer of retlition. Despite these positive findings, we still hve severl opportunities for improvement including building more trust between employees nd their ledership nd incresing confidence tht reports of problems by employees re kept confidentil to the gretest extent prcticble. Gol Trin 100 percent of our employee popultion on ethics nd complince topics. Performnce Globlly, Northrop Grummn employees were provided ethics nd complince trining in We conduct vrious risk ssessments throughout the yer relted to our ethics nd complince progrms. In ddition, we provide our employees with robust complince trining tilored to their roles nd the ssocited risks. Our complince trining spns numerous res nd includes trining on corruption, nti-competitive behvior, export/import nd insider trding lws nd regultions. 6

10 OUR COMPANY In 2012 our employees received ethics nd complince trining through in-person sessions, computer-bsed tutorils nd printed mteril. Trining content in 2012 included progrms trgeted to employee job responsibilities nd brodly pplicble topics such s: How to Chllenge How to Support (newly relesed) Time nd Lbor Chrging Export Complince Qulity Preventing Workplce Hrssment Employees lso received The High Rod, compny-wide ethics newsletter feturing rticles bout Northrop Grummn OpenLine, nti-corruption, procurement integrity, intellectul property nd employee enggement. The newsletter lso reports nd highlights our OpenLine sttistics nd spects of corrective ctions to provide trnsprency to our employees. ENSURING ETHICS: POLICIES AND PROCEDURES We prohibit nyone conducting business on behlf of Northrop Grummn, including directors, officers, employees, consultnts, representtives, distributors, suppliers nd other third prties, from offering or mking ny improper pyments of money or nything of vlue to ny of our business ssocites including government officils, politicl prties, prty officils, cndidtes for public office nd commercil suppliers nd customers. We mintin robust complince progrm tht implements n internl system of reviews nd pprovls governing the retention of third prties tht support the compny s business opertions. We prohibit fcilitting pyments (those mde to expedite or secure performnce of routine governmentl ction such s obtining vis or customs clernce), except in cses where there is n imminent thret to n individul s life, helth or sfety. We remind our employees to void situtions tht would result in, or give the ppernce of, conflict between personl interests nd the interests of the compny. Employees re required to complete n nnul conflict of interest disclosure form to ensure job performnce is not improperly influenced by outside fctors. BUSINESS CONDUCT OFFICERS To support our high ethicl stndrds, we utilize Business Conduct Officer (BCO) network. As of 2012, the network consisted of pproximtely 125 full-time nd prt-time officers round the globe who promote visibility of the ethics progrm, nswer mngement nd employee questions regrding ethics nd elevte the progrm t the site level. Throughout the yer, these officers conduct meet nd greet events to rise the wreness of the ethics progrm. We encourge our employees to prticipte in vriety of on-site nd online wreness ctivities nd contests to ensure ethicl vlues re n integrl prt of their every-dy behvior. REPORTING STRUCTURE: BUSINESS CONDUCT OFFICERS The ethics office, led by the vice president of corporte responsibility, reports qurterly to the Audit Committee of the Bord of Directors nd nnully to the Policy Committee of the Bord of Directors. Ech of our business sectors, long with the corporte office, hs led business conduct officer who typiclly reports s follows: Chief executive officer p Vice president of Corporte Responsibility p Corporte director of Ethics nd Business Conduct p Led business conduct officer p Business conduct officers (pproximtely 125 positioned throughout the compny) We orgnize nnul workshops for both our U.S. nd interntionl business conduct officers. These workshops include shring best prctices, progrm updtes, complince nd skill trining nd networking. We hold monthly webinr series to ensure our business conduct officers re knowledgeble on key topics such s globl ethics, lbor reltions, Srbnes-Oxley nd ethicl ledership. 7

11 OUR COMPANY EMPLOYEE RESOURCES: OPENLINE 24/7 Wht: The Corporte Office of Ethics nd Business Conduct opertes toll-free phone number ( ) for both employees nd third prties seeking guidnce on ethics nd business conduct, nd for reporting suspected violtions of lw, regultion or compny policy. Administered in most cses by third-prty compny, this service offers 24/7 ccessibility to trined specilists nd the bility to report nonymously. In ddition, n online reporting system is vilble to employees long with OpenLine phone numbers in Europe nd Asi. How: The OpenLine system llows us to trck clls by totl number nd type of contcts, by sector, by llegtions (with nd without merit) nd by disciplinry ction rendered. Reports nd metrics provide trending dt to help us trget trining nd communictions. We publish ongoing results in our employee ethics newsletter OPENLINE CONTACTS CATEGORY 1 - Inquiry CATEGORY 2 - Wrkpl. Allegtions CATEGORY 3 - Bus. Allegtions 23% 48% 29% 2011/2012 Compred Dt /-% Ctegory 1 1,097 1,148 +5% Ctegory % Ctegory % TOTAL 2,347 2,379 +1% Almost Hlf of Contcts re Inquiries Result: We hd totl of 2,379 OpenLine contcts in 2012, including 1,148 questions on policies nd procedures. The 2012 contcts included 684 workplce llegtions nd 547 business llegtions, mny of which required substntil investigtion. In these investigtions, we took vrious disciplinry ctions including termintion of 76 employees for their ethics nd business conduct violtions. This dt does not include reports of llegtions nd concerns mde through other chnnels. Commitment We re fully committed to complying with nti-corruption lws in every country in which we operte. We mintin zero tolernce for corruption. We hve long been committed to responsible corporte citizenship. At Northrop Grummn, we regulrly evlute the bredth nd strength of our internl nti-corruption progrm using externl experts. We ssess our progrm nd performnce ginst stndrds nd benchmrks set by the U.S. government in Foreign Corrupt Prctices Act (FCPA) settlement ctions, the U.S. Federl Sentencing Commission, the Orgniztion for Economic Coopertion nd Development nd the U.K. Ministry of Justice. We re proud to support the missions' study nd review nd in some cses contribute to the work of vrious inititives nd orgniztions, including: Defense Industry Inititive (DII) on Business Ethics nd Conduct Interntionl Forum for Business Ethicl Conduct (IFBEC) TRACE Interntionl Trnsprency Interntionl USA These stndrds cover wide vriety of governnce mtters including internl policies nd procedures, business risk ssessment, business courtesies, due diligence of third prties nd prtners, trining nd communiction, monitoring, enforcement nd continul process improvement. A Step Above Abiding by the pplicble nti-corruption lws of the countries in which we operte, nd dhering to internl policies nd procedures, is only the beginning. We continue to work to ensure culture of ethicl behvior tht further reduces the risk of corrupt behvior. We re ctive leders nd supporters of numerous inititives nd orgniztions with the primry purpose of elevting good corporte governnce nd eliminting corruption ltogether. 8

12 OUR COMPANY OUR GOVERNANCE The Bord of Directors hs dopted Principles of Corporte Governnce tht re ligned with nd reinforce our vlues nd strong commitment to ethics nd integrity. Our commitment ensures tht integrity is t the center of ll our ctions, from our Bord of Directors to compny leders nd ech employee. The Bord's commitment to its shreholders is evident in the re of corporte responsibility Mjor Gols Gol Foster the long-term success of the compny, promoting the interests of stockholders, through best-in-clss corporte governnce. Performnce We nnully provide n overview of our corporte governnce policies nd procedures to our shreholders in our proxy sttement. The Bord hs dopted Principles of Corporte Governnce tht reinforce the compny's vlues nd provide for effective nd responsible business prctices. These principles, long with our Certificte of Incorportion nd Bylws nd chrters of the committees of the Bord, provide n overll frmework for the compny s governnce. S02-S08 STANDARDS OF BUSINESS CONDUCT We hve n OpenLine operted by n independent third prty tht is vilble 24 hours dy, seven dys week. Allegtions of violtions of lw or compny policy re investigted nd pproprite discipline, up to nd including dischrge, is dministered if the llegtions re found to hve merit. We prticipte in the politicl process t the federl, stte nd locl level in the United Sttes consistent with ll legl requirements. We provide informtion regrding federl politicl contributions mde by the Employees of Northrop Grummn Politicl Action Committee (ENGPAC), our policy regrding independent politicl expenditures nd our trde Assocition memberships on the Northrop Grummn website, where informtion is quickly nd esily ccessible to our shreholders nd the public. As reported on the Northrop Grummn website, the ENGPAC contributed $1,475,250 to federl elections in clendr yer All of ENGPAC s contributions to politicl prties, politicl cndidtes nd relted institutions were mde within the United Sttes. We disclose mteril issues relted to litigtion, investigtions nd penlties for non-complince with lws nd regultions s pproprite in our public filings. The dy-to-dy business nd ffirs of the compny re conducted by our officers nd employees under the direction of the Chirmn nd CEO, with oversight by the Bord. For full listing of Globl Reporting Inititive Performnce Indictors, see pges

13 OUR COMPANY GOVERNANCE OVERVIEW The Bord reviews the Principles of Corporte Governnce t lest nnully to determine whether they should be modified in response to chnged circumstnces or legl or other requirements, or otherwise to be mde more effective. Over the yers, the Bord hs modified these principles nd will continue to do so if the directors believe tht chnges will dvnce the interests of the compny s stockholders. You cn find these principles in their entirety on our compny website t com. They lso re vilble in print to ny stockholder by request. The Bord of Directors crefully considers ll Bord cndidtes for service on the Bord on the bsis of severl fctors, including personl integrity, professionl reputtion, eduction, professionl bckground nd prticulr skills, willingness to submit to bckground check necessry for top secret clernce nd experience most beneficil to serve on the Bord of Directors. Diversity is key criterion for Bord composition. Although the Bord does not hve forml policy outlining the diversity stndrds to be considered when evluting director cndidtes, its objective is to foster diversity, including of thought, experience nd contribution mong our Directors. To ccomplish tht objective, the Bord seeks to chieve rnge of diversity including rce, gender nd ntionl origin s well s perspective. The Bord considers diversity mongst other importnt criteri for Bord membership. All Bord members re expected to ct with integrity nd to mintin high ethicl stndrds t ll times. The compny s Stndrds of Business Conduct pply to ll directors. One of the independent Bord members hs been designted s the Led Independent Director. In tht role, the Led Independent Director presides t meetings of the Bord of Directors t which the Chirmn of the Bord is not present, including executive sessions of the independent directors; pproves the Bord clendr nd meeting gends, interviews cndidtes for the Bord of Directors; nd hs uthority to cll meetings of the independent directors. Ech yer the Bord nd Bord committees conduct n ssessment of their performnce. The Bord nd committees will consider nd discuss with mngement s pproprite how they hve operted nd performed. The Led Independent Director lso will discuss with ech director on n individul bsis n ssessment of director performnce. Interested prties my communicte with ny of the directors by writing to them, c/o Secretry of the Corportion, 2980 Firview Prk Drive, Flls Church, VA, For full listing of Globl Reporting Inititive Performnce Indictors, see pges

14 OUR COMPANY BOARD OF DIRECTORS 2012 Note: In My 2012, the Bord designted Donld E. Felsinger the led independent director, replcing Lewis W. Colemn who resigned from the Northrop Grummn Bord of Directors effective November 30, As of December 31, 2012, the Bord hd 12 members, 11 of whom re independent non-employee directors. As of December 31, 2012, 25 percent of the Northrop Grummn Bord is mde up of women nd people of color. The directors re: Wes Bush Chirmn, Chief Executive Officer nd President, Northrop Grummn Krl J. Krpek Retired President nd Chief Operting Officer, United Technologies Corportion Victor H. Fzio Senior Advisor, Akin Gump Struss Huer & Feld LLP Richrd B. Myers Generl, United Sttes Air Force (Ret.) nd Former Chirmn of the Joint Chiefs of Stff Donld E. Felsinger Led Independent Director, Northrop Grummn, Former Chirmn nd Chief Executive Officer, Sempr Energy Auln Peters Former Prtner, Gibson, Dunn & Crutcher Stephen E. Frnk Former Chirmn, President nd Chief Executive Officer, Southern Cliforni Edison Gry Roughed Admirl, United Sttes Nvy (Ret.) nd Former Chief of Nvl Opertions Bruce S. Gordon Former President nd CEO, NAACP nd Former President, Retil Mrkets Group, Verizon Communictions Inc. Mdeleine Kleiner Former Executive Vice President nd Generl Counsel, Hilton Hotels Corportion Director Independence: The Bord hs estblished n objective tht t lest 75 percent of the directors be independent directors s defined by the NYSE rules nd the compny s principles of corporte governnce. As of December 31, 2012, the Bord of Directors is pproximtely 92 percent independent. Thoms M. Schoewee Former Executive Vice President nd Chief Finncil Officer, Wl-mrt Stores, Inc. Kevin W. Shrer Former Chirmn nd Chief Executive Officer, Amgen, Inc. Bord Protocol: The Bord of Directors hs pproved Principles of Corporte Governnce, which re well ligned with nd support the compny s vlues. The Bord of Directors review the governnce principles nnully nd seeks wys to enhnce the principles bsed on evolving circumstnces. The Principles of Corporte Governnce were lst revised on My 16, 2012 nd re posted on Northrop Grummn s website. BUILDING DIVERSITY AND INCLUSION 11

15 OUR OPERATIONS IN FOCUS At Northrop Grummn, we believe tht creting workplce tht vlues diversity nd inclusion is pivotl to fostering innovtion, improving productivity, enhncing enggement nd boosting profitbility. Our gol is to continully nurture pproximtely 68,000 men nd women cross the compny whose bckgrounds, chrcteristics nd perspectives re s diverse s the globl communities in which we work nd reside. The collective diversity of our people in terms of culture, bckground, experience, thoughts, ides nd work styles llows us to design nd build some of the most sophisticted products nd services for our customers. We continue to support nd develop prtnerships with the Ntionl Society of Blck Engineers, the Society of Hispnic Professionl Engineers, the Society of Women Engineers, the Americn Indin Science nd Engineering Society nd other diversity-bsed professionl ssocitions including those for people with disbilities, veterns nd LGBT. Additionlly, we hire college grdutes who reflect the diversity of college nd university students ntionlly: hlf of our college new hires in the pst four yers hve been women nd people of color. And we will continue to recruit tlented individuls through our prtnerships with leding eductionl institutions nd ssocitions. Enhncing Diversity nd Ledership We held our first Employee Resource Group Summit nd Diversity nd Ledership Conference in June in Flls Church, Virgini. More thn 200 employees ttended including compny officers, middle mngers, employee resource group (ERGs) leders nd humn resources professionls. The successful event fetured best prctices nd furthered our commitment to crete diverse nd inclusive work environment. Employee Resource Groups shine bright Bsed on recommendtion by the LGBT (lesbin/gy/ bisexul/ trnsgender) employee resource group, PrIDA, we mended our helth cre pln to include trnsgender benefits. Our Hispnic, Africn Americn, nd Asin Pcific Islnders employee resource groups initited STEM (science, technology, engineering, mth) projects with locl middle schools to encourge nd excite students bout technicl disciplines. Our employee resource group for people with disbilities, The Voice, worked with our humn resources nd fcilities deprtments to build web-bsed ccessibility inititives Highlights 12

16 OUR OPERATIONS IN FOCUS 2012 Mjor Gols Gol For senior ledership positions, crete diverse pipeline of tlented professionls. Performnce In 2012, we continued work on our Orgniztionl Ledership Review process to better identify high-potentil women nd people of color. We re lso revising tlent cquisition progrms, including the implementtion of process to deliver diverse slte of interview cndidtes for senior nd middle mngement positions. We re plesed to report tht Northrop Grummn mde progress ginst externl benchmrks t the executive level. We will continue to focus our efforts on other res of mngement representtion inlcuding continuing to ensure people with disbilities nd veterns nd service-disbled veterns re integrted into the pipeline. Gol Improve the compny s women nd people of color representtion. Performnce For 2012, our workforce ws comprised of 28 percent women nd 29 percent people of color. We monitor our workforce representtion nd compre ourselves to externl benchmrks. A POWERFUL FORCE: EMPLOYEE RESOURCE GROUPS Throughout 2012 more thn 13,000 Northrop Grummn employees engged in Employee Resource Groups (ERGs), which ply key role in our diversity nd inclusion strtegy, ssimilting nd developing our workforce nd leding community outrech efforts. These groups re open to ll employees. We promote nd encourge these groups by providing funding to support events nd development progrms. Executive sponsors nd humn resources dvisers lso ply key role in the groups success. Groups cross the compny include Africn Americns, Asin-Pcific Islnders, Hispnics, women, people with disbilities, veterns, lesbin/gy/bisexul/ trnsgender employees nd new hires. Hundreds of employees hve become ctive in the compny s sustinbility inititives through the greeng ERGs. These groups provide synergistic eduction nd enggement opportunities tht benefit employees, the compny, the community nd the environment. Employees re provided opportunities to lern bout recycling, composting nd green grdening, energy efficiency t home nd locl environmentl issues. OUR DIVERSITY COMMITMENT The compny hs implemented ccountbility mesures tied to our nnul incentive pln to ensure we re meeting nnul objectives to increse the representtion of women nd people of color where we re underrepresented in senior ledership. Executive compenstion is tied to our performnce in this re WORKFORCE DATA Job Ctegory TOTAL % MEN % WOMEN % WHITE % BLACK/ AFRICAN AMERICAN % HISPANIC/ LATINO % ASIAN % OTHER Executive % 28.26% 89.13% 6.52% 0.00% 3.26% 1.09% First/Middle Mngers 11, % 22.56% 81.47% 5.49% 4.97% 6.77% 1.30% Professionls 40, % 26.88% 71.94% 7.46% 6.31% 12.16% 2.12% Technicins 5, % 17.54% 65.03% 10.28% 11.94% 10.20% 2.55% Administrtive 5, % 68.95% 62.68% 15.01% 14.20% 5.54% 2.57% Crft Workers 3, % 7.99% 60.76% 12.62% 19.52% 5.22% 1.88% Opertives 1, % 33.09% 55.34% 14.41% 13.99% 12.84% 3.42% Lborers % 22.50% 39.38% 17.50% 33.13% 1.88% 8.13% Service Workers % 24.15% 50.24% 26.34% 18.05% 2.93% 2.44% Totl Workforce 69, % 27.83% 71.07% 8.54% 8.20% 10.11% 2.09% WOMEN PEOPLE OF COLOR 28% 29% * Dt s of August

17 OUR OPERATIONS IN FOCUS 2012 Diversity Highlights Scored 95 percent for creting friendly work environment for lesbin, gy, bisexul nd trnsgender (LGBT) employees by the Humn Rights Cmpign. Rnked #42 mong Top 50 Compnies in Diversity by DiversityInc. Mgzine. Rnked #2 mong Top 50 Employers by Minority Engineer mgzine. Rnked Top 3 Most Admired Compnies for minority engineers by Blck Engineer mgzine. Our Forml EEO/AAP Policy At Northrop Grummn, strong commitment to diversity nd inclusion is founded in written policies nd procedures tht mndte nondiscrimintory workplce supported by senior ledership. We dhere to Equl Employment Opportunity (EEO) nd Affirmtive Action (AA) principles nd policies nd build them into our opertions cross the compny. We publish nnul AA plns tht document specific ctions to improve the representtion of minorities nd women nd to integrte veterns nd people with disbilities. As of 2012, our AA plns meet the requirements of the U.S. Government's Executive Order These AA plns lso reflect our commitment to ensure equl employment opportunities for qulified pplicnts nd employees without regrd to rce, color, religion, sex or ntionl origin/ncestry. We dhere to policy of nondiscrimintion nd no hrssment consistent with pplicble, federl, stte, or locl lws, including rce/ethnicity, color, ntionl origin, ncestry, sex/ gender, gender identity/expression, sexul orienttion, mritl/prentl sttus, pregnncy/childbirth or relted conditions, religion, creed, ge, disbility, genetic informtion, militry service/vetern sttus, disbled vetern, recently seprted vetern, other protected vetern, Armed Forces service medl vetern, or ny other protected sttus. All such discrimintion will not be tolerted. We re committed to tking ll resonble steps to prevent discrimintion from occurring. LA1-LA5, LA10-12, HR1, HR3-5, HR8 HUMAN RIGHTS INCLUDING LABOR AND MANAGEMENT RELATIONS, NON-DISCRIMINATION, TRAINING AND EDUCATION, SECURITY AND INDIGENOUS RIGHTS. At Northrop Grummn, developing our people goes beyond fulfilling strtegic priority our vlues-bsed focus provides the frmework to help ech individul employee mximize their potentil. Diversity nd inclusion re fundmentl for our business, nd we tke pride in recognizing tht ech individul s development needs re unique. Employment: Our employees who work 20 or more hours per week re eligible for helth nd welfre benefits under the Northrop Grummn pln. Qulified full-time nd prt-time employees re eligible for the 401(k) pln nd pension pln. Temporry employees on the Northrop Grummn pyroll re generlly eligible only for svings benefits. Agency Complints: In 2012, Northrop Grummn received 48 new externl gency complints of discrimintion cross the compny. We investigte ll complints nd tke pproprite ction. Of the investigtions, 19 were closed nd 29 re still open/pending. Performnce Reviews: As of 2012, 80 percent or more of Northrop Grummn s employees receive performnce nd creer development review every months. Bsed on scheduling, these reviews my not occur within ech clendr yer for every employee. Humn Rights Trining: Ech yer, our employees collectively receive hundreds of thousnds of hours of trining covering vriety of topics. Trining on our Stndrds of Business Conduct emphsizes our culture, integrity, ethicl behvior nd treting ll people firly nd with respect nd dignity. Collective Brgining: Currently 5 percent of Northrop Grummn employees re covered by collective brgining greements. There re no Northrop Grummn opertions tody where employees re t risk of not being ble to exercise freedom of ssocition nd collective brgining. Security: All Northrop Grummn security personnel receive comprehensive trining on our policies nd procedures nd Stndrds of Business Conduct. For full listing of Globl Reporting Inititive Performnce Indictors, see pges

18 OUR OPERATIONS IN FOCUS SUPPLIER RESPONSIBILITY AND DIVERSITY In 2012, we subcontrcted $7.9 billion to brod bse of pproximtely 9,500 suppliers. Collborting with suppliers on better environmentl nd socil performnce is n importnt element of our responsibility efforts. A key strting point is the One Northrop Grummn chrter we instill throughout the compny nd the procurement orgniztion. The gol: to estblish single, consistent opertionl focus with the supplier bse nd customers. Our On-line Automted Supplier Informtion System (OASIS) supplier portl is one mens of providing this focus. Suppliers to our compny re vlued tem members, so ech one is expected to understnd the need for top performnce in ll res, including diversity, qulity, occuptionl helth nd sfety, humn rights nd lbor, nd environmentl responsibility. Every Northrop Grummn supplier receives n nnul letter outlining our ethics policies nd code of conduct. Additionlly, our employees with procurement uthority re required to nnully complete dditionl specilized ethics trining nd complete the C-196 Disclosure of Conflicts of Interest Certificte of Stndrds of Business Conduct certifying to their complince nd disclosing possible conflicts of interest Highlights Brod Bse: In 2012, we wrded $7.9 billion to pproximtely 9,500 suppliers. We utilize locl smll businesses within the communities surrounding our operting fcilities. Mentor-Protégé: We mnged 16 Mentor-Protégé greements nd subcontrcted more thn $8 million to these protégé orgniztions during Four smll business firms grduted from the Northrop Grummn Mentor Protégé Progrm in 2012, nd we currently hve one pending Missile Defense Agency greement tht is witing contrct modifiction nd funding Mjor Gols Gol Improve the performnce of the lrgest nd most criticl suppliers to Northrop Grummn. Ech of these criticl suppliers undergoes seminnul performnce evlution bsed on procurement dollrs, number of compny business units impcted nd number of progrms. We use the industry-stndrd Cost Performnce Index, the Schedule Performnce Index nd vrious qulittive mesures to trck progrm performnce. Performnce For 2012, we evluted the cost, schedule, qulity nd progrm mngement performnce of our top 11 suppliers who supported progrms on more thn 300 subcontrcts with vlue of more thn $8.7 billion. We cn report tht in 2012 only 1.8 percent of our subcontrcts performed unstisfctorily. This is 50 percent reduction from 2011 to For those criticl suppliers with lgging performnce, we initited process to correct problems nd implement joint improvement inititives. Risk Mngement Our customers hve expressed wreness nd concern regrding the defense industril supply bse becuse the supply chin impcts progrm cost nd innovtion nd lso serves s growth pipeline for future prime contrctors. The supply chin is vulnerble in times of budget reductions with mgnified impct on smll businesses. We re monitoring the pproximtely 9,500 firms tht serve s Northrop Grummn suppliers to understnd the helth of our supply bse. We hve corporte procedures governing Northrop Grummn supplier risk identifiction, mngement nd mitigtion. As prt of our corporte risk nlysis process, we mintin supplier wtch list ddressing supplier finncil helth risk. We seek to mnge supplier performnce with robust improvement process nd risk mitigtion exchnge with suppliers. Incresingly, pst performnce by supplier is n importnt element in sourcing decisions with dded considertion given to outstnding performing suppliers. 15 We monitor criticl supplier risk when it is single source with prticulr focus on the risks ssocited from single-source smll nd foreign businesses. We ddress single-source risk mitigtion with supplier mngement tems, in-sourcing or lternte design solutions, mong others.

19 OUR OPERATIONS IN FOCUS Sensitive to the finncil stresses of smll businesses in the current economic environment, we continued in 2012 to monitor finncil risk of those tht re most vulnerble to ctstrophic finncil impct nd to consider n rry of mitigtion mesures. Our Northrop Grummn Corporte counterfeit mteril prevention policy prescribes preventive mesures, trining, communiction, counterfeit lert mngement nd procedures for comprehensive mteril ssurnce. Our Enterprise Mteril Authenticity tem, chrtered by our Corporte Qulity Council nd composed of members from qulity, engineering, supply chin, contrcts nd the lw deprtment, tkes the led on counterfeit prts protection efforts. This level of focus strengthens prctices cross the compny to mitigte risk. Supply Chin Diversity We prticipte with nd sponsor industry, customer, cdemic nd vrious other orgniztionl ctivities tht support the growth nd development of the smll business community. To tht end, we seek collbortion with select universities through the Smll Business Innovtive Reserch nd the Smll Business Technology Trnsfer progrms. To further enhnce opportunities with vrious orgniztions, we ctively support Advncing Minorities Interest in Engineering (AMIE), WE SUPPORT NATIONAL DIVERSITY TRADE ASSOCIATIONS BY SPONSORING TARGETED OUTREACH THROUGH: Ability-One (nonprofit gencies tht employ the physiclly chllenged) Asin Business Assocition Blck Business Assocition Cpitl Are Gy nd Lesbin Chmber of Commerce Ltin Business Assocition Ntionl Assocition of Women Business Owners Ntionl Center for Americn Indin Enterprise Development United Sttes Hispnic Chmber of Commerce U.S. Deprtment of Veterns Affirs Center for Veterns Enterprise which consists of the Schools of Engineering t 13 ABET-ccredited Historiclly Blck Colleges nd Universities (HBCU)/MIs (ABET is nonprofit nd non-government ccrediting gency for cdemic progrms in pplied science, computing, engineering nd technology. Northrop Grummn employees prticipte on the bords of dvisors of severl universities including Pririe View A&M, Bowie Stte University, Albm Stte University nd Cliforni Stte University, Los Angeles. We hve provided pproximtely $50,000, collectively, to these universities in support of technicl reserch projects. In ddition, we support the nnul Fyetteville Stte HBCUs Technicl Chllenge convened by dens nd professors from vrious HBCUs. We lso contributed $10,000 to the Minority On-line Informtion Service (MOLIS), which supports some 268 minority institutions. The service llows institutions to updte nd provide relevnt informtion on university cpbilities for use by personnel t government gencies nd privte-sector compnies. The Northrop Grummn Socioeconomic Business Progrms (SEBP) Office cts s the liison with smll nd disdvntged businesses interested in working with Northrop Grummn. We hve received ntionl recognition for our efforts to increse the number of successful minority nd women-owned subcontrctors by providing outrech nd mentorship. During the 2012 White House conference celebrting Ntionl Historiclly Blck Colleges nd Universities Week in Wshington, D.C., Northrop Grummn ws n event sponsor with employee presenters wrding $5,000 scholrships to two students prticipting in the 105 Voices of History choir performnce t the Andrew Mellon Stge. This choir consists of one student from ech of 105 HBCUs throughout the United Sttes. 16

20 OUR OPERATIONS IN FOCUS AT NORTHROP GRUMMAN, OUR PROCUREMENT EMPLOYEES' RESPONSIBILITIES INCLUDE: Annully review the procurement integrity policy nd sign certifiction specifying tht they will never ccept supplier gifts, bribes or kickbcks. Identify ny conflicts of interest with current nd potentil suppliers. Perform due diligence ssessing whether suppliers or potentil suppliers hve been debrred or suspended or nd whether they hve ties to terrorist orgniztions. ENSURING HIGH STANDARDS INTEGRATED STRATEGY We hve estblished n integrted supply chin mngement strtegy throughout Northrop Grummn to ddress key success fctors of the supply chin cquisition cycle. We continue to mture the strtegy ech yer. We enhnced our Integrted Supply Chin Hndbook series in 2012 with the publiction of the Supply Chin Affordbility Hndbook. In ddition, we developed trining progrms for our Protecting the Bseline Effective Chnge Mngement nd Executbility nd Strt-Up hndbooks. This hndbook series helps lower risk nd leverge supplier innovtion. EC6, HR1-2, HR6, HR7 & HR9 LOCAL SOURCING AND HUMAN RIGHTS INCLUDING CHILD AND FORCED LABOR AND INDIGENOUS RIGHTS Northrop Grummn stndrd terms nd conditions require complince with the Fir Lbor Stndrds Act of 1938 (29 U.S. Code ), s mended, nd re consistent with the regultions nd orders of the United Sttes Deprtment of Lbor under Section 14. We estblished n orgnized pproch to ddressing the complince requirements of Section 1502 of the Dodd-Frnk Act, Conflict Minerls. We re on trck to meet the due diligence nd reporting requirements of the Act. Northrop Grummn hs n integrted globl supply chin. Ech progrm nd procurement ctivity ggressively sources from customer countries nd regions. Our pproximtely 9,500 suppliers to Northrop Grummn receive n nnul letter stting, Strict dherence to ethicl prctices is Northrop Grummn priority nd is n essentil element of ll of our supplier reltionships. The letter links the supplier to the Northrop Grummn Associte brochure, which outlines our vlues nd compny stndrds for ethicl behvior for employees nd suppliers like. It sttes: Our compny stndrds pply to nyone who represents or is ffilited with Northrop Grummn. Violting rules relting to our reltionships with the U.S. Government or to our commercil customers my result in serious consequences up to nd including termintion of one s reltionship with the compny. We will not knowingly do business with suppliers tht engge in humn rights violtions or use child or forced lbor. No remedil mesures were required in 2012 to eliminte forced or compulsory lbor. For full listing of Globl Reporting Inititive Performnce Indictors, see pges

21 OUR OPERATIONS IN FOCUS ENVIRONMENTAL, HEALTH AND SAFETY INTRODUCTION We re committed to protecting our environment s well s our employees, customers nd people in the communities in which we operte. Our objectives re simple: reduce injuries nd illnesses cross the compny, ensure environmentl complince nd estblish environmentl sustinbility s the wy we do business. POLICY It is our policy to conduct our opertions in mnner tht is both sfe nd environmentlly responsible in ccordnce with pplicble lws nd regultions. To fulfill the intent of this policy, we seek to: Prevent injuries, illnesses nd environmentl impct to the extent prcticl. Develop nd implement mngement systems to mitigte potentil helth, sfety nd environmentl risks. Integrte sfety nd environmentl requirements into plnning, design, procurement, mnufcturing nd internl mngement ctivities throughout the compny. Strive for continul improvement. EHS LEADERSHIP To guide nd oversee the compny s Environmentl, Helth nd Sfety (EHS) progrm, we rely on the EHS Ledership Council, comprised of senior leders from the corporte office nd ech operting sector. The Ledership Council s key strtegic inititives re to develop EHS strtegies, gols nd plns; monitor nd report on EHS nd environmentl sustinbility performnce; promote mngement ownership of these efforts t ll levels; engge employees in helth, sfety nd environmentl sustinbility progrms; nd develop progrms tht support continul improvement. We believe so strongly in these res of performnce tht two sfety nd three environmentl sustinbility metrics re tied to our compny s performnce scorecrd: Totl Cse Rte (TCR) Improvement Lost Work Dy Rte (LWDR) Improvement Greenhouse Gs (GHG) Emissions Reduction/Avoidnce in Metric Tonnes of Crbon Dioxide Equivlent (MTCO2e) Solid Wste Best Mngement Prctices Implementtion Wter Mngement Best Mngement Prctices Implementtion These non-finncil metrics impct overll corporte performnce ssessments, which receive high level visibility within the compny Highlights Awrded the 2012 Cool Plnet Awrd from The Climte Registry s Cool Plnet Project nd Southern Cliforni Edison for excellence in energy efficiency in the erospce nd defense ctegory. Received Resonble Assurnce for our 2010 nd 2011 greenhouse gs inventories by Lloyd s Register Qulity Assurnce (LRQA), the highest level of ssurnce. Nmed to the Crbon Performnce Ledership Index, by CDP, the top 10 percent of prticipting compnies for exemplry performnce relted to climte chnge mitigtion, dpttion nd trnsprency. Identified s Leder in the Mplecroft Climte Innovtion Indexes, rnking 30 of 360 publicly listed compnies. Received the Aerospce Industries Associtions (AIA) 2012 Sfety Awrd for ircrft mnufcturing for our Aerospce Systems opertion. EHS Opertions: Complince nd Mngement We hve diverse opertions with rnge of mterils nd equipment, mny of which require specil hndling. Our EHS Opertions progrm provides guidnce nd support to ensure the sfety nd helth of our employees, nd the environment, during use of these mterils nd equipment. Through written progrm guidnce nd procedures, trining, periodic inspections nd regultory support, our EHS Opertions progrm guides EHS progrms nd processes nd supports our EHS professionls cross the compny. With responsibilities tht include monitoring nd implementing regultory requirements nd identifying nd completing corrective ctions, our EHS professionls support EHS complince ctivities cross diverse rry of opertions nd ctivities. To fcilitte efficient nd effective mngement of the pplicble complince requirements, we lso implement environmentl nd sfety mngement systems. Consistent with our commitment to complince nd continul improvement, we conduct periodic internl udits of our opertions to confirm we re performing t or bove the required environmentl, occuptionl helth nd sfety stndrds. In ddition, our EHS professionls often liise with third-prty orgniztions including regultory gencies for on-site inspections nd opertionl evlutions. The Internl Audit Process Our EHS professionls conduct internl udits on regulr bsis nd promptly nd systemticlly ddress deficiencies found. We use the udits s opportunities to shre innovtive nd proven best prctices nd the results s lerning experiences. Ech yer the Northrop Grummn Bord of Directors reviews our progrm gols, chievements nd overll performnce. 18

22 OUR OPERATIONS IN FOCUS Environmentl, Helth & Sfety Audit Results number of udits Ech udited site receives score (100 is the best), bsed on complince nd the mturity of the mngement system, long with n overll ssessment rting: GREEN: stisfctory progrm YELLOW: mrginl progrm RED: unstisfctory progrm The Externl Audit Process Like ll businesses, we re subject to review nd udits from regultory gencies nd other uthorities, including Federl nd stte environmentl nd sfety gencies, building inspectors nd fire mrshls. These reviews by externl orgniztions provide n importnt perspective of opertionl complince nd effectiveness of our progrms nd procedures. In 2012, regultory gency representtives for occuptionl helth nd sfety nd environmentl complince visited nd/ or contcted Northrop Grummn sites 178 times, resulting in 18 enforcement ctions. None of the enforcement ctions resulted in significnt fines. The scope of EHS internl udits ssesses complince progress ginst gols nd use of the compny s EHS mngement systems criteri. We udit pproximtely one-third of our qulifying sites ech yer, process tht drives continul improvement through the prompt nd systemtic review nd correction of deficiencies nd opportunities for improvement s well s shring of successful prctices cross sites nd opertions. At the conclusion of ech udit, we implement nd trck corrective ction pln bsed on udit findings nd recommendtions. Sites tht receive n overll rting of yellow or red re re-udited the following yer to ensure tht progrm deficiencies hve been corrected. For dded ssurnce, we hve process to review our udit progrm nd policies. In ddition to evluting opertionl controls nd risk mngement protocols, our corporte internl udit progrm is designed to provide n objective evlution of our performnce. ISO Environmentl Mngement Systems Number of ISO Registered Sites We encourge conformnce to the Interntionl Orgniztion for Stndrdiztion (ISO) registrtion for Environmentl Mngement Systems. Attining nd mintining this designtion is representtive of our commitment to environmentl mngement nd continul improvement. Performnce As prt of the internl udit process, we evlute nd score ech site on mngement systems progrm mturity, with 100 percent being the highest chievble score. In 2012, our overll score ws 93.1 percent. 19

23 OUR OPERATIONS IN FOCUS CASE STUDY: THE VALUE OF TEAMWORK Employees t our Bufflo, New York fcility hd no recordble injuries in This strong record resulted from prtnership mong workers, supervisors nd site mngement, with every member of the sfety tem mking commitment to increse wreness of sfety issues nd providing suggestions for improvements. Employees t our Huntsville, Albm cmpus chieved more thn three million hours worked without recordble injury. The cmpus hs n employee-driven process, with senior mngement directly involved in leding EHS inititives nd cross-functionl councils comprised of employees from ll levels. EHS professionls nd process engineers t our Norwlk, Connecticut site collborted to review job processes for ergonomics to reduce the risk of musculoskeletl stress nd injuries to employees. The result: Rpid Upper Limb Assessment for trgeted group of tsks, which dropped the number of musculoskeletl disorders from high of four incidents per yer to zero over the lst five yers. Likewise, there were zero sprins nd strins in these sme focused improvement res. THE 2012 EHS FORUM We held the 2012 EHS Forum t the corporte office, bringing together more thn 75 EHS professionls from cross the compny for professionl development nd best prctice shring. The full-dy gthering offered severl workshops nd seminrs led by both internl nd externl environmentl, helth nd sfety experts. OCCUPATIONAL HEALTH AND SAFETY Protecting employee helth nd sfety is prmount to our mission nd performnce. We continue to emphsize nd invest in progrms nd enhncements to reduce the number nd severity of injuries nd illnesses. We tke ccident prevention seriously; since 2010, sfety performnce hs been incorported into executive compenstion metrics. Gol Our gol is to hve n ccident-free nd sfe workplce. We lso im to provide employees with the tools nd resources to led by exmple nd tke ownership of sfety in the workplce. We monitor nd report the following indictors to guge the effectiveness of our occuptionl helth nd sfety progrm: Totl Cse Rte (TCR): the totl number of OSHA (Occuptionl Sfety nd Helth Administrtion)-recordble occuptionl injuries nd illnesses, i.e., cses requiring medicl tretment beyond first id, per 100 full-time workers Lost Work Dy Rte (LWDR): the totl number of lost work dys per 100 full-time workers Dys Awy Cse Rte (DACR): the totl number of cses, per 100 full-time workers, tht resulted in dys wy from work Performnce TCR nd LWDR ech ccount for 50 percent of the overll compny sfety performnce metric. Through focused helth nd sfety inititives, such s regulr equipment inspections, workplce helth nd sfety evlutions, slips, trips nd flls wreness trining nd behviorl risk improvement inititives, we hve chieved positive sfety trends within our workplces. There were no work-relted ftlities in 2012 t Northrop Grummn. Sfety Metrics nd Performnce Chnge Totl Cse Rte (TCR) % Lost Work Dy Rte (LWDR) % Dys Awy Cse Rte (DACR) % Northrop Grummn is committed to reducing the frequency nd severity of occuptionl injuries. Working with loss prevention consultnts, we re implementing preventive mesures to reduce repetitive motion injuries nd slips, trips nd flls, the most frequent cuses of serious injuries. 20

24 OUR OPERATIONS IN FOCUS SPOTLIGHT ON REMEDIATION: The Full Story The process of site remedition culmintes in the return of impcted property to productive use. From erly investigtive phses through pplying technicl remedies nd finl long-term site monitoring, remedition consumes nd impcts nturl resources, creting its own environmentl footprint nd incresing costs. A remedition site cn tke decdes to restore, with finncil nd environmentl costs. Our experience tells us tht the remedition process cn, for some sites, be successfully ccelerted s technologies nd site conditions evolve. Through our remedition progrms, we review nd evlute new nd updted techniques tht could effectively ccelerte the overll site remedition process. Opportunities for Improvement An ongoing chllenge we fce is to mintin our downwrd trend in injuries. While we strive for zero injuries, we understnd tht ccidents sometimes hppen. Our priority for ech employee is to prevent ccidents through trining, wreness nd promoting ownership of sfety in every lbortory, design room, office nd shop floor. This requires trining, equipment, nd stff to ensure workers re provided with the resources needed to work sfely. In response to the 2012 publiction of OSHA s Globlly Hrmonized System, we re ddressing the chllenge of updting our sfety dt sheets nd trining employees on the new chemicl lbeling elements. We re tking dvntge of this opportunity to engge employees bout workplce hzrds nd further their sfety wreness. THE ENVIRONMENT REMEDIATION Gol Our gol is to effectively ddress environmentlly impcted property in complince with pplicble regultory requirements nd return these sites to productive use. We pursue this outcome by working coopertively with vrious governmentl gencies, conservtion groups, citizen groups nd other stkeholders to ddress the impcts t our remedition sites in mnner tht protects humn helth nd the environment, nd is cost-effective nd efficient. Performnce In 2012, we were involved in more thn 170 environmentl remedition projects with n pproximte nnul budget of $37 million. From 2004 to 2012, we successfully completed ctive remedition t 84 sites nd removed them from the compny s portfolio of impcted properties either by chieving regultion-bsed remedition objectives (subject to the pprovl of the relevnt regultory gencies) or through third-prty settlements. LA6-7, LA9 SAFETY STEWARDSHIP OSHA VOLUNTARY PROTECTION PROGRAM We prticipte in the OSHA Voluntry Protection Progrm (VPP), n effort bsed on coopertive reltionships mong mngement, employees nd OSHA. Under the progrm, prticipnts provide mentoring to other compnies striving to chieve VPP sttus. In 2012, our New Town, North Dkot fcility ws officilly pproved s VPP Merit prticipnt, bringing our totl number of VPP sites to nine in OHSAS Occuptionl Helth nd Sfety Assessment Series (OHSAS) is n interntionl helth nd sfety mngement system tht helps orgniztions mnge occuptionl risks nd improve helth nd sfety performnce. Three Northrop Grummn sites hve implemented OHSAS 18001: During the sme time period, we ccomplished life-cycle cost reductions totling $55 million through vriety of ctivities, including innovtive engineering pproches to investigtion methodologies nd improvements in the ppliction of remedition technologies. Moss Point, Mississippi New Town, North Dkot Rncho Bernrdo, Cliforni For full listing of Globl Reporting Inititive Performnce Indictors, see pges

25 OUR OPERATIONS IN FOCUS Opportunities for Improvement We recognize tht ech phse of the remedition process cn present opportunities for improvement. We monitor site conditions nd test innovtive technology to evlute the effectiveness of such technology in improving site recovery time nd minimizing ncillry environmentl impcts. We evlute the fesibility of vrious technologies for use t our sites nd implement them where pproprite; however, chllenges remin becuse of the unique nd dynmic nture of ech site. ENVIRONMENTAL SNAPSHOT: Innovtive Remedition techniques In 2012, we continued to seek cost-effective lterntives to trditionl resource- nd impct-intensive remedition prctices. Our experience hs demonstrted tht for certin site conditions, replcing trditionl remedition prctices, such s excvtion nd lnd disposl, with in-plce enzyme nd/or bcteril tretment, cn reduce environmentl disturbnce nd energy use while promoting ecosystem recovery. Highlights of innovtive remedition techniques include: Electrodes to het soil nd groundwter in plce of mechnicl methods such s excvtion. Permeble, underground brriers to destroy contminnts, eliminting the need for energy-intensive recovery wells nd crbon tretment systems. Nturlly occurring mterils, including emulsified vegetble oil, chitin nd cheese whey, to promote degrdtion of contminnts through bioremedition. EHS MANAGEMENT AND POLLUTION PREVENTION Gol Our gol is to comply with pplicble regultions nd reduce frontend sources of pollution rther thn seeking post-process solutions. Exmples of our pollution prevention progrms include source reduction, buy-s-needed strtegies, mteril substitution nd procurement of environmentlly preferble products nd services. Performnce In 2011 (the most recent dt vilble), we diverted 18.6 million out of totl of 35.7 million pounds generted - pproximtely 52 percent of our totl wste - from lndfills, through recycling nd reuse progrms. Across the compny, we recycled pper, crdbord, scrp metl, wood, construction mterils, computers nd relted equipment, btteries, tires, fluorescent light tubes, mercury thermometers, cbles nd other items. We fund internl environmentl technology ctivity tems who use multi-disciplinry engineering pproch to reserch nd develop solutions nd support our commitment to reducing pollution. Exmples of solutions implemented in 2012 include: Dicing Sw Wter Svings: Our lbortory scientists evluted wter-intensive process within the silicon wfer production line for reduction opportunities nd modified the wfer dicing sw to re-circulte cooling wter insted of dischrging it. The lbortory is reducing wter use by pproximtely 280,000 gllons per yer. F-35 Right-Sizes Solvent Use: Our F-35 Integrted Assembly Line introduced pre-sturted wipes for wipe-clening, reducing voltile orgnic compound emissions nd hzrdous wste. By using presturted wipes, employees no longer pply bulk solvent to cloths or directly to prts, thereby eliminting solvent overuse nd reducing employee exposure to solvent emissions. In ddition, this switch hs improved qulity, primrily becuse of lint-free wipes, which eliminte the tedious tsk of inspecting for lint stringers tht the previously used cloths sometimes left on rough or tcky surfces. Environmentlly Preferble Chemicl Use: Tems t severl of our Cliforni sites initited their trnsition to environmentlly preferble chemicls in mnufcturing processes in support of the Cliforni Green Chemistry Inititive. Opportunities for Improvement We hve mde chnges throughout the compny to reduce our wste strems nd the hzrds of the mterils used in our products. We seek to improve our processes nd environmentl performnce, nd lso to blnce short- nd long-term business interests, regultory requirements nd resource vilbility when evluting options nd opportunities. Our customers re providing ledership in this re by dvocting life-cycle ccounting to include evlution of the costs, environmentl impcts nd vlue of products from crdle-to-grve. 22

26 OUR OPERATIONS IN FOCUS Production-relted Hzrdous Wste nd Reported EPA Toxics Relese Inventory (TRI) Hzordous Wste (Tons) Hzordous Wste Tons/100FTE TRI (Tons) TRI Tons/100FTE , , , , , , , We continue to reduce the toxic nd hzrdous mterils used in our mnufcturing opertions, for the benefit of our employees nd the environment. As the figures illustrte, we re relizing positive effects in the overll reductions in our hzrdous wste disposl mounts nd TRI dischrges. We understnd tht pollution prevention is n ongoing opportunity for improvement, s our products nd services diversify nd the types nd intensity of product nd service lines fluctute in ccordnce with demnd nd other externl fctors. Professionl Associtions To mintin currency with industry trends nd inititives nd engge with peers on common EHS chllenges, we re members of relevnt professionl ssocitions. Our roles rnge from membership to ledership, where we fully engge in discussions work groups nd committees relevnt to our customer nd progrm needs. The Auditing Roundtble Mercer Occuptionl Sfety nd Helth Group Aerospce Industries Assocition Interntionl Aerospce Environmentl Group Corporte EcoForum Conservtion Interntionl s Business nd Sustinbility Council ENVIRONMENTAL SUSTAINABILITY greeng With the inception of our environmentl sustinbility progrm, greeng, in 2009, we sought to better understnd nd define wht sustinbility mens to Northrop Grummn nd our customers, shreholders nd employees. It hs become cler tht environmentl sustinbility is n objective tht is both supportive of, nd supported by, our core vlues qulity, customer stisfction, ledership, integrity, people nd suppliers. Allowing these core vlues to guide us on this journey is enbling us to chieve strtegic integrtion of sustinbility objectives throughout the orgniztion. vlue chin. This poses chllenges nd opportunities for us, but hving estblished this solid foundtion internlly, we believe we cn leverge our experience nd chievements to implement strtegic inititives tht require robust collbortion with diverse stkeholders. We re firm in our commitment to mintin blnced, vlue-driven strtegy for performnce. Our Strtegy Our strtegic elements include: Internl Collbortion Mesurement nd Reporting Fcilities Mngement Green IT Engineering nd Mnufcturing Procurement nd Supply Chin To successfully integrte environmentl sustinbility into our orgniztionl culture, we developed our strtegy to drive performnce from the inside out. We use environmentl metrics (performnce to gol) for reducing greenhouse gses nd implementing solid wste nd wter best mngement prctices (BMPs) s mesure of performnce. These environmentl sustinbility metrics hve been tied to executive compenstion metrics, demonstrting the strong support from our Bord of Directors nd reinforcing support throughout the orgniztion. This commitment is criticl element of our success. Gol The greeng progrm estblishes specific gols for reducing greenhouse gses (GHGs) nd solid wste genertion nd wter use. By yer-end 2014, we re committed to: Externl Collbortion Trnsprency Green Lesing Renewble nd Alterntive Energy Business Process Optimiztion Customers Stkeholder Enggement Reduce our combined Scope 1 nd 2 greenhouse gs intensity (metric tonnes of crbon dioxide equivlent [MTCO2e], normlized to sles) by 25 percent reltive to the 2008 bseline. Implement t lest 75 percent of our best mngement prctices t ll lrge owned nd lesed buildings (100,000 squre feet nd lrger). 23 With the support of our executive ledership, we lunched greeng with blnced strtegic pln tht clls on employees to identify opportunities for efficiency nd improvement focusing first inside our own wlls before instituting requirements on our

27 EN16, EN17, EN19 GREENHOUSE GAS REDUCTION PERFORMANCE Crbon Intensity (MTCO2e/$M Sles) Absolute GHG Emissions (Million MTCO2e) 2008 Bseline Performnce from Bseline % % In ccordnce with the GHG protocol, we disclose our most up-to-dte figures including mergers, cquisitions nd divestitures. We disclose our nnul environmentl performnce vi CDP. GREENHOUSE GAS PROGRAM PERFORMANCE Bseline Percent (%) Reduction -5% -10% -15% -20% -25% GHG Intensity Absolute GHG Footprint Intensity Gol For full listing of Globl Reporting Inititive Performnce Indictors, see pges Performnce Our GHG emissions reduction performnce is on trck nd remins primry objective of our sustinbility strtegy. In 2011, the most recent yer for which dt is vilble, we chieved 14.9 percent reduction in our crbon intensity compred to our bseline yer. We hve progressed well ginst our GHG intensity reduction pln nd re committed to chieving our gol of 25 percent GHG intensity reduction by the end of In 2012, the projects we executed exceeded our pln, nticipting n estimted greenhouse gs reduction of 43,098 MTCO2e. We expect tht the impct of these projects will be reflected in our 2012 mesurement, scheduled for relese in the 2013 CDP response. We re on trck to chieve our compnywide best mngement prctice implementtion gol of 75 percent by yer-end In 2012, we chieved 63.3 percent implementtion of wter best mngement prctices nd 76.6 percent implementtion level for solid wste best mngement prctices. Exmples of best mngement prctices implemented in 2012 include: Expnding our recycling progrms to include more products for diversion from our wste strems nd lndfills; Upgrding to energy - nd wter-efficient pplinces; Expnded use of preventive mintennce prctices to fix problems before they wste vluble resources; nd Closing cooling system loops to reuse vluble potble wter. Scope 3 Emissions Reduction Highlights We continued our Scope 3 emissions reduction inititives in 2012 to reduce the impct nd emissions from our vlue chin ctivities, including: Business Trvel: In 2012, we implemented our green hotel inititive to reduce the environmentl impct of our business trvel. We identified hotels with environmentl sustinbility progrms nd policies in our trvel dtbse to lert our employees to these "green" hotel options. Employee Commuting: We instlled electric vehicle chrging sttions t severl sites long with promoting employee use of electric vehicles. We continued to encourge employees to use crpools, ride-shring, public trnsporttion nd bicycles in their commutes while lso continuing to support tele-working nd expnsion of vnpools. Shipping: We continued support of the EPA SmrtWy Progrm, using EPA-certified shippers, to minimize the environmentl impct of ground shipping our products. Note: Scope 3 emissions reduction inititives nd performnce re lso included in our nnul CDP response. EN10, EN21 Wter use t Northrop Grummn is neither significnt component of our mnufcturing opertions nor key element in our product lines. However, we hve dopted wter stewrdship prctices to upgrde nd improve our infrstructure to chieve immedite reductions in our wter use. For full listing of Globl Reporting Inititive Performnce Indictors, see pges

28 OUR OPERATIONS IN FOCUS Our commitment to trnsprency, ethics, qulity processes nd ccurte disclosure ws reviewed through third-prty verifiction of our greenhouse gs inventory by Lloyd s Register Group (LRQA) for 2010 nd We received resonble ssurnce, the highest level of ssurnce issued within the erospce nd defense industry. Mesurement nd Reporting For the greeng progrm, we use quntittive nlyses to identify opportunities nd priorities to chieve our gols. We hve robust dt collection, mesurement nd reporting process for our greenhouse gs (GHG) inventory, bsed on the Greenhouse Gs Protocol. Our strtegic pln is sufficiently gile to enble us to incorporte elements relted to emerging trends, customer needs nd technologicl dvncements while mintining focus on core inititives. In 2012, we rised the br on our commitment to dt qulity by implementing two inititives: 1) Third-prty verifiction of our GHG inventory for our two most recent yers of dt, 2010 nd 2011, nd 2) A comprehensive energy mngement system tht fcilittes utility bill processing, dt mngement, nd energy use optimiztion. With this system, we hve dt vilble on monthly bsis, enbling detiled nlyses of our energy use, which will ssist us in identifying inefficiencies nd opportunities for improvement. Trnsprency Integrl to our blnced, vlue-driven strtegy is our commitment to provide ccurte informtion regrding our environmentl sustinbility performnce. Our trnsprency efforts llow stkeholders nd the generl public to better understnd our environmentl sustinbility progrm, gols nd progress. The results hve been very positive. Respected, world-clss thirdprty stkeholders hve reviewed our environmentl sustinbility progrm nd performnce nd issued positive ssessments. In 2012, we chieved the following public recognition from smpling of these externl orgniztions: CDP. Rnked in the Crbon Performnce Ledership Index includes compnies in the highest performnce bnd (A) with rnge nd qulity of emissions reduction ctivites tht re considered to be more fundmentl to progress on combting climte chnge. In 2012, we erned disclosure score of 90 (100 is highest) nd performnce level A (A is highest). Mplecroft Climte Innovtion Indexes. Rnked #30 out of 360 prticipting compnies nd received Leder distinction for our technologicl innovtion nd new working prctices to mitigte nd dpt to climte chnge impcts. Newsweek Green Rnkings. Rnked #73 mong the 500 lrgest public compnies in the U.S., representing reltive drop in our rnking, despite n increse in our rw totl score (Green Score) over our 2011 stnding. CDP SCORES Disclosure Performnce N/A C C A Assurnce N/A N/A N/A* Resonble *Resonble Assurnce received in 2012 for 2011 nd 2012 dt NEWSWEEK GREEN RANKINGS Rnking Green Score MAPLECROFT CLIMATE INNOVATION INDEXES Rnking TBD 25

29 OUR OPERATIONS IN FOCUS Fcilities Mngement We re reducing the resource intensity of our physicl footprint by emphsizing efficiencies nd systems enhncements throughout our fcilities. We re further optimizing our rel estte portfolio to eliminte excess fcilities nd reduce our overll footprint. In 2012, we hd opertions in seven buildings tht re LEED (Ledership in Energy nd Environmentl Design) certified nd five dditionl buildings tht meet the Environmentl Protection Agency s ENERGY STAR Building stndrds. As our rel estte portfolio chnges, we continue to explore new opportunities to reduce our environmentl footprint by evluting building envelopes nd performnce to meet these, or similr, energy efficiency stndrds. In 2012, we chieved further resource efficiencies in our fcilities by implementing the following improvements: Instlltion of low-flow fixtures nd closed-looped systems to conserve wter in our opertions nd fulfill our wter conservtion best mngement prctice implementtion gol. Replcing potble wter use for select industril processes with treted groundwter, reducing potble wter use by 185,000 gllons per yer. Instlling high-efficiency prking lot lighting, reducing energy use nd costs by 10 percent. Replcing fleet vehicles with more fuel efficient models, reducing more thn 280 MTCO2e per yer. Green Lesing With our success reducing resource intensity in our owned fcilities, we re working to chieve similr results in our lesed spces through collbortive efforts with our lndlords. In 2012, we mde progress in our inititive to incorporte green lesing lnguge into lese contrcts to encourge our lndlords to support our sustinbility gols. The green lesing lnguge requires lndlords to: Provide monthly utility dt to support our comprehensive energy mngement system. Implement pplicble solid wste nd wter best mngement prctices. Require use of environmentlly preferble clening products in jnitoril service contrcts. Green IT Our expertise with informtion systems mkes greening our informtion technology (IT) infrstructure logicl strtegic focus. By rethinking the stndrd IT infrstructure, we successfully reduced our energy consumption through these fundmentl improvements: Dt center consolidtion: To dte, we hve consolidted 18 of our 19 mjor dt centers to three strtegiclly locted dt centers. Dt center design: Using hot nd cold lnes to improve efficiency by directing cooler ir closer to equipment inlets, we hve enbled higher temperture set points in the dt center itself. Power mngement: We crefully mnge the blnce of computing power with non-computing power needs to optimize fcility use. We trnsitioned smller server-hosting sites to non-it opertions, reducing energy demnds in those fcilities. We deployed power mngement tool to desktops cross the compny to perform fter-hours power sttus checks tht power down (into sleep mode) those computers not lredy shut down. Renewble nd Alterntive Energy The greeng progrm strtegy includes the use of renewble energy nd ddresses our role in encourging green power to be produced s prt of the ntionl grid. We support the development nd sustinment of renewble energy, s well s smrt nd micro grids tht enhnce the stbility of our energy infrstructure. Our enggement in the renewble energy mrket, primrily vi renewble energy certifictes, is limited, s we prioritize decresing our own emissions. We vlue the blnce of diversified energy mrket provides to society. In 2012, working with internl stkeholders, we developed green power purchsing protocol to specify purchsing stndrds enhnce the integrity nd qulity of purchsed green power. For exmple, to blnce strtegic considertions, the protocol requires renewble energy certifictes to be purchsed for minimum of eight yers. We piloted the protocol nd purchsed renewble energy certifictes in conjunction with trditionl power nd through vendors pproved through our corporte procurement process. This industry leding pproch llows us to formlly collborte with our lndlords to chieve our greeng progrm sustinbility gols. 26

30 OUR OPERATIONS IN FOCUS 27 Engineering nd Mnufcturing Our engineering nd mnufcturing opertions present unique chllenges nd significnt opportunities. The physicl spces, mterils nd processes used in these opertions offer opportunities for energy nd mteril use reduction, yet implementtion is not lwys esy. As experts in Six Sigm, len mnufcturing principles nd mission ssurnce, our engineering nd mnufcturing orgniztions hve proven expertise in optimizing efficiency nd qulity while eliminting wste. Our chllenge opportunity s we see it is to expnd these core prctices of optimiztion to incorporte nd lessen environmentl impcts nd resource use. In 2012, through innovtions spurred by the need nd opportunity to mke mteril substitutions nd process improvements, our engineering tems generted ides to stremline processes nd reduce environmentl impcts. The following exmples highlight how our engineers improved processes nd systems: Sulfur Hexfluoride Abtement System: Sulfur hexfluoride (SF6) is greenhouse gs with significnt globl wrming potentil: one pound of SF6 equtes to 23,900 pounds of crbon dioxide. The SF6 gs used in our lser sw systems for silicon wfer production cnnot be replced by n lterntive gs. In 2012, we instlled n btement system tht btes SF6 emissions t rte of 95 percent, chieving n estimted reduction of 3,500 metric tonne crbon dioxide equivlent (MTCO2e) per yer. Lek Check for Composite Bonded Assemblies: We revised the Lek Check tnk line process, which reduced run time from 24/7 to 12 hours on, 12 hours off. This modifiction reduced our consumption of deioninzed wter nd energy use nd overll costs, for n estimted GHG emissions reduction of 173 MTCO2e per yer nd pproximtely 87,000 gllons of deionized wter per yer. Quicker Cure Topcot: Using mteril substitution for fster cure topcot for the F-35 skins, doors nd ducts improved cycle time, reduced energy costs nd GHG emissions n estimted 162 MTCO2e per yer. Honeycomb Core Clening Oven: We modified bonding opertion tht previously rn 24/7 t 220 degrees Fhrenheit to run s needed while mintining product qulity nd integrity, nd reducing run time by more thn 18 hours per dy. This modifiction is estimted to reduce GHG emissions by 158 MTCO2e per yer. Thermocouple (temperture sensors) Upgrde: By replcing K thermocouple with J thermocouple, we reduced the run-time of het tretment furnce from 24/7 to just few hours dy. This replcement is estimted to reduce GHG emissions by 509 MTCO2e per yer. Aerosol Impct Mitigtion (AIM): The AIM progrm ws developed to reduce greenhouse gs emissions ssocited with commonly used erosol products. Ech product ws rnked ccording to its globl wrming potentil. Of the 27 products identified, our tem replced nine with non-erosol lterntives, reducing GHG emissions by n estimted 31 MTCO2e per yer.

31 OUR OPERATIONS IN FOCUS Innovtive Solutions Ntionl security is complex nd criticl ren in our incresingly interconnected world. Northrop Grummn understnds these complexities, including the role of environmentl nd energy security in providing solutions to ssure security on lnd, t se, in the ir nd in cyberspce. We pply our expertise to strengthen environmentl nd energy security, which lso supports climte chnge dpttion plnning. We re dedicted to providing scientists nd decision mkers worldwide with dt nd knowledge they need to understnd climte trends nd impcts so they cn inform policy mkers to mitigte risk nd develop dpttion plns. The following re few exmples: Globl monitoring sensors nd stellites tht provide dt on topicl issues, such s wether, dissters, climte, wter, ecosystems, griculture, biodiversity nd energy to decision mkers for improved impct ssessments nd prepredness nd response. Web-bsed decision tools tht nlyze trditionl nd lterntive energy sources for cost effectiveness nd relibility optimiztion. Site optimiztion models tht evlute renewble energy options, including wind turbines nd solr pnel instlltions, to mximize relibility of energy genertion, reduce risk, nd minimize energy costs. CASE STUDY: Trsh to Tresure A whet strch wste strem generted from stripping B-2 Spirit bombers yields precious metls. Stripping B-2 Spirit ircrft cotings cretes wste strem tht, until this yer, hd been disposed s hzrdous wste. The tem implemented progrm to ship the wste to recovery fcility where precious metls re reclimed, reducing hzrdous wste disposl quntities nd costs nd generting economic vlue. Stkeholder Enggement Underpinning our greeng strtegy is stkeholder enggement, which spns externl nd internl udiences rnging from customers nd shreholders to prtner orgniztions nd employees. With the diverse interests of ech udience, we re fced with the chllenge nd opportunity to engge in vried wys to ensure ll of our stkeholders receive the support nd informtion they need. Customers In the simplest terms, our customers gols re our gols, nd our customers understnd the vlue of environmentl sustinbility. They re encourging our support. To lign with our customers gols, we hve estblished complementry environmentl performnce gols nd strive to implement their recommended nd required environmentl sustinbility prctices. For exmple, we continued our support of the Generl Services Administrtion (GSA) nd their efforts to identify effective methods for federl gencies to evlute nd incentivize environmentl sustinbility performnce from their primry suppliers. We prticipted in brod nd focused discussions regrding fesibility ssessments of processes through which federl contrctor emissions my be reduced nd quntified. Shreholders As public compny, providing vlue to our shreholders is driving force in our decision-mking processes. We t Northrop Grummn understnd tht vlue is defined in finncil terms s well s the performnce nd sustinment of the business. The integrtion of environmentl sustinbility into our dy-to-dy opertions strengthens our competitive performnce tody nd in the future. We prticipte in the CDP nd Mplecroft Climte Innovtion Indexes to communicte our environmentl performnce to the investor community, highlighting our strtegic inititives tht bridge environmentl sustinbility nd business objectives. Industry Our network of erospce nd defense compnies, s well s public nd privte orgniztions, provides invluble forums through which we trck trends nd lessons lerned. In 2012, we prticipted in severl conferences nd forums ttended by peer compnies nd thought leders on topics rnging from meningful integrtion of environmentl sustinbility into business opertions, the criticlity of wter mngement, nd energy security. EC2 CLIMATE CHANGE RISK We incorporte predictive climte modeling into our risk mngement processes. We used this enhnced risk process nd performed n nlysis of mjor informtion systems nd opertions to identify those ner voltile-wether loctions. As result of these nlyses, high-risk dt centers were identified nd moved to lower risk loctions. For full listing of Globl Reporting Inititive Performnce Indictors, see pges

32 OUR OPERATIONS IN FOCUS Our loctions in mny communities cross the United Sttes llows Northrop Grummn employees to support diverse nd importnt environmentl nd eductionl inititives ntionwide. Exmples of our 2012 volunteer inititives include: Bech nd Costl Clenups: Volunteers prticipted in bech clenup events on ll three costs (Est, West nd Gulf), collecting trsh nd debris nd restoring protective snd dunes nd hbitt. 29 Employees Engging our employees in environmentl inititives nd expnding environmentl wreness is essentil to the success of our greeng progrm. Mny employees demonstrte pssion for nd commitment to environmentl sustinbility in the workplce nd in their personl lives. Our enggement efforts focus on providing opportunities so employees re ble to further their pssion nd lern new ides, improve their communities nd promote environmentl sustinbility in the workplce. This is primrily ccomplished through employee-led, employee resource groups (ERGs). The greeng ERGs hve expnded over the yers nd with them, our network of employee eco-chmpions. The ERGs provide these individuls nd other interested employees medium to support nd prticipte in the compny s sustinbility inititives. The focus of the greeng ERGs is to engge employees through ctivities, discussions nd inititives tht benefit employees, the compny, the community nd the environment. Employees re offered diverse opportunities to lern more bout topics such s recycling, composting, ntive grdening energy nd wter efficiency t home. Erth Hour We continued our commitment to rise wreness of globl climte chnge by prticipting in the globl Erth Hour. Coordinted by our fcilities deprtments, we turned off unnecessry building nd signge lighting nd encourged employees to prticipte t home. Erth Dy We celebrted Erth Dy 2012 cross the compny with the theme of Wter: Conserve, Protect, Restore, emphsizing wter security nd conservtion. As one of the three tenets of the greeng progrm, the theme of wter is consistent with the focus res of our corporte inititives. We held Erth Dy firs cross the compny, with locl suppliers nd stte gencies providing informtion to employees on environmentl inititives, green products, commuter services nd wter conservtion equipment nd techniques for use in lndscping nd round the house. Community Connection: Community Investment In 2012, we funded environmentl protection projects nd wter-focused inititives led by the following orgniztions: Chespeke By Foundtion Hel the By Ntionl Fish nd Wildlife Foundtion Wter Wells for Afric To support wter vilbility nd security, we sponsored the construction of drinking wter well for rurl community in Mlwi, Afric through Wter Wells for Afric, n orgniztion committed to providing sfe nd clen drinking wter to rurl Africn communities. Community Investment Another meningful wy in which our employees demonstrte their commitment to environmentl protection is through volunteer ctivities. Reforesting: Northrop Grummn employees celebrted Arbor Dy by plnting trees with the Youth Environmentl Leders Tree Musketeers. L.A. WORKs: Volunteers overhuled n outdoor lerning clssroom nd updted demonstrtion grden with ntive plnts to represent the vrious microhbitts within ntive scrub nd grsslnd communities. Ntionl Public Lnds Dy: Across the compny, employees supported this one dy ntionl event by plnting ntive trees nd plnts t the Tijun River Estury nd restoring the demonstrtion grdens, trils, signge nd plnt life t the White Point Nture Preserve in Cliforni. In Mrylnd, employees removed debris from the Fort McHenry Ntionl Monument mrsh nd enhnced the re with beneficil ntive plnt grdens. The tem helped to collect more thn 80 bgs of debris, totling nerly 4.5 tons from round the prk. Other volunteers clered out vines, clened up tree nd flower beds nd cut bck old plnts t Kenilworth Aqutic Grdens in the District of Columbi.

33 OUR OPERATIONS IN FOCUS 2012 Highlights OUR COMMUNITY INVESTMENT The min focus of our corporte philnthropy is expnding nd bettering the pipeline of tlented mthemtics, science, technology nd engineering students ntionwide. We bolstered this effort through our Cyber Summer Cmp, prticiption in Deprtment of Homelnd Security Cyber security Criticl Skills Tsk Force nd the Ntionl Youth Science Foundtion Cmp. We engged in collbortion with university stff nd expnded our public-privte prtnerships ll with the gol of filling the ntion s pipeline with diverse, qulified cyber tlent through progrms such s the Cyber Scholrs progrm t the University of Mrylnd Bltimore County. One of our eduction efforts, sponsorship of the CyberPtriot progrm, succinctly cptures the spirit nd performnce of ll our 2012 community efforts. In 2012 through CyberPtriot, one of the ntion s lrgest nd fstest-growing high school competition designed to excite nd drw students to technology, we hired 28 former prticipnts of the progrm. This result demonstrtes our multi-yer commitment to be leder in cyber security, especilly in the res of workforce development, eduction nd outrech (see below for further detils on CyberPtriot 2012). This is just one exmple of our compny-wide pproch to community investment: We im to invest in nd implement progrms tht re comprehensive in scope, brod-bsed in rech nd ongoing for the long term. We contributed $22,790,486 in philnthropic dontions (which included $10 million gift from Northrop Grummn to our chritble trust, the Northrop Grummn Foundtion) through our Northrop Grummn chritble giving progrm. Funding from the Northrop Grummn Foundtion dded n dditionl $10,674,380. Employees, through ECHO, our employees chrity orgniztion, contributed $2,388,252 to multitude of community-bsed nd ntionl nonprofit orgniztions. Throughout the yer, we continued to refine techer professionl development endevors under our compnywide umbrell progrm Techers nd Engineers for Acdemic Achievement (TEAACH). From July 8 to 21, Conservtion Interntionl stff, s prt of the ECO Clssroom progrm, hosted 16 middle nd high school life sciences techers t L Selv Biologicl Sttion in Cost Ric. As prt of our CyberPtriot progrm we hired 28 former prticipnts, up from 11 in 2011, who re now performing criticl functions in Northrop Grummn progrms cross the United Sttes. Through Northrop Grummn Foundtion funding, we incresed our support of the VEX Robotics progrm, helping tems in severl different communities nd supported the world chmpionship event. Nerly 1,000 Northrop Grummn employees volunteered to ssemble more thn 30,000 cre pckges for ctive troops overses. Our corporte citizenship tem developed n interntionl enggement strtegy tht we begn to implement in

34 OUR COMMUNITY INVESTMENT 2012 Mjor Gols Gol Support wide rry of progrms nd services for eduction, militry nd veterns, the environment nd helth nd humn services through brod-bsed philnthropy. Performnce In 2012 we directed community spending with the following trget percentges: 50% on eduction: Focus on science, technology, engineering nd mth progrmming 20% on militry nd veterns 20% on helth nd humn services 5% environment 5% ll other 30m 24m 18m 12m 6m m 22.8m 4 m TOTAL 2012 GIVING Totl philnthropic dontions* Totl to STEM eduction From employees through vehicles such s gifts to eduction, the utonomous nonprofit Employees Chrity Orgniztion (ECHO) of Northrop Grummn, holidy giving progrms, the USO nd disster relief *Totl = $22,790,486 million through Northrop Grummn chritble giving progrm, $10,674,380 from the Northrop Grummn Foundtion. In 2012, we contributed $22,790,486 in philnthropic dontions tht included $10 million gift from Northrop Grummn to our chritble trust, the Northrop Grummn Foundtion, through our Northrop Grummn chritble giving progrm. Funding from the Northrop Grummn Foundtion dded n dditionl $10,674,380. Mtching Gift for Eduction progrm The Northrop Grummn Foundtion will mtch the first $1,000 per employee for gifts mde to eduction ech yer. Our totl compny outly on mtching gifts during 2012 ws $752,870 with 1,407 employees utilizing the resource. Of tht totl, $374,415 went to K-12 progrmming nd $378,455 to higher eduction. Gol Improve eduction t ll levels, ntionwide, with focus on science, technology, engineering nd mth proficiency. Performnce We support progrms nd services for STEM eduction, militry nd veterns, the environment nd helth nd humn services through strtegic, trgeted philnthropy progrm. Our key priority is to dd to the pipeline of diverse tlent for our future workforce ntionwide. To tht end, we focused 2012 efforts on improving the qulity of science, technology, engineering nd mthemtics (STEM) eduction from erly grdes through the university level, nd on developing interest, understnding nd tlent in those res. To ccomplish this corporte citizenship mission, in 2012 we continued to implement the Northrop Grummn Eduction Strtegy cross the compny. We detil our performnce results below. While we re strting to increse involvement with diversity progrms such s Gret Minds in STEM, Viv Technology nd Summer Engineering Experience for Kids (SEEK), we re ctively serching for more progrms tht focus specificlly on young women. During 2012, we mde strides towrds identifying progrmming specificlly for students of color, but we were not s successful with progrm for femle students. Performnce Highlighted Progrms: ECO Clssroom CyberPtriot VEX Robotics Wolf Trp Erly Childhood STEM Lerning Through the Arts High School Involvement Prtnership Diversity Eduction Progrms Higher Eduction Our spending trgets in ech re re rough percentges. To tht end, we were over nd under our trgets in vrious res s might be expected. In the interest of trnsprency, here re the ctul percentges for 2012: Eduction (54%), militry nd veterns (16%), helth nd humn services (8%) nd environment (3%). The remining percentge of our giving fell into res outside of these brod ctegories. 31

35 OUR COMMUNITY INVESTMENT WE ARE VERY EXCITED ABOUT THIS PROGRAM AND WE ARE THRILLED TO HAVE THESE VERY IMPRESSIVE SCIENCE TEACHERS AS OUR FIRST GROUP TO PARTICIPATE IN THE HANDS-ON ENVIRONMENTAL EXPERIENCE OF ECO CLASSROOM. THIS PROGRAM WILL GIVE THESE 16 TEACHERS THE INSIGHT AND INSPIRATION TO PASS ON REAL SCIENTIFIC OBSERVATION AND DISCOVERY DIRECTLY TO THEIR STUDENTS AND COMMUNITIES. THROUGH THE NORTHROP GRUMMAN FOUNDATION, WE HAVE BEEN PIONEERING PROGRAMS TO INSPIRE SCIENCE TEACHERS FOR MANY YEARS, AND HAVE ADDED ENVIRONMENTAL SCIENCE TO OUR PORTFOLIO, IN RECOGNITION OF THE IMPORTANCE OF INTERNATIONAL ENVIRONMENTAL SUSTAINABILITY TO THE HEALTH AND SECURITY OF FUTURE GENERATIONS. Sndr Evers-Mnly, president of the Northrop Grummn Foundtion ECO Clssroom With the gol of providing techers with resources nd lerning opportunities in environmentl science, we collborted in 2012 with Conservtion Interntionl to lunch the ECO Clssroom progrm. This unique, ntionwide techer professionl development progrm equips techers with knowledge nd inspirtion to imprt to students. As with our other efforts, the focus is encourging students t ll levels to pursue science nd technicl creers nd, eventully, become our next genertion of environmentl stewrds nd innovtors. Performnce From July 8 to 21, 2012, Conservtion Interntionl stff hosted 16 middle nd high school life sciences techers biology, ecology, environmentl nd erth systems science t the Conservtion Interntionl s Tropicl Ecology Assessment nd Monitoring (TEAM) Network s field site t L Selv Biologicl Sttion in Cost Ric for n intensive field experience. The techer tems trveled from Bltimore nd Annpolis, Mrylnd; Long Islnd, New York; Chicgo, Illinois; nd Sn Fernndo Vlley, Los Angeles, Cliforni. The techers returned to their schools with more in-depth understnding of the interreltionship between biodiversity, climte chnge nd humn ctivities, nd re equipped with new techniques nd resources to enhnce teching. On survey, we sked How pplicble will your group project be in your clssroom? The group collectively rted the pplicbility 4.9 on scle of 1 to 5 (5 being extremely pplicble ). We re plnning dditionl techer trips for 2013 nd CyberPtriot IV: High School Competition We continued in 2012, through Northrop Grummn Foundtion, s presenting sponsor for this Air Force Assocition effort. CyberPtriot, which completed its fourth yer in 2012, is one of the ntion s lrgest nd fstest growing high school cyber security defense competitions designed to excite, educte nd motivte the next genertion of cyber-defenders. Students competed t the CyberPtriot IV finls in conjunction with the Air Force Assocition CyberFutures Conference on Mrch 23, 2012, in Wshington, D.C. Performnce We hired 28 CyberPtriots, up from 11 in 2011, who re now performing criticl functions within Northrop Grummn progrms cross the United Sttes. In ddition, we mintin communiction with mny more CyberPtriot competitors s they consider creers in STEM disciplines. Well beyond our gol of 50, we hd 128 volunteers from cross the corportion mentor students nd provide technicl ssistnce to tems. CyberPtriot offered n opportunity for our employees to support criticl need for our ntion s continued security nd economic prosperity. Through robust communictions cmpign by both Air Force Assocition nd Northrop Grummn volunteers, we incresed the number of tems to 1,014 in CyberPtriot IV, up from 661 in CyberPtriot III. Enrollment for CyberPtriot V hit 1,225 tems, representing n 85 percent increse since our Northrop Grummn Foundtion sponsorship begn. We provided $54,000 in scholrship funds to students from the top three tems per division, enbling mny students to relize their drem of erning college eduction in technicl disciplines. VEX Robotics In 2012, through Northrop Grummn Foundtion funding, we incresed our support of the VEX Robotics progrm, helped tems in severl different communities nd supported the world chmpionship event. 32

36 OUR COMMUNITY INVESTMENT Performnce More thn 6,000 students from 20-plus countries competed on 600 tems. In totl, 87 new tems strted t 62 new schools serving n estimted 870 students throughout the U.S. from schools in Cliforni, Mrylnd, Mississippi nd Wshington, D.C. 33 Wolf Trp: Erly Childhood STEM Lerning Through the Arts This unique progrm bsed t the Wolf Trp Center for the Arts outside Wshington D.C. integrtes elements of the performing rts into existing school curriculum to tech science nd mthemtics to young children. The progrm fetures multi-session clssroom residencies; professionl development workshops for dministrtors, techers, nd specilists; nd fmily involvement workshops for prents nd cregivers. In ech of these sessions, Wolf Trp teching rtists provide instruction nd collborte with prticipnts on wys to engge children in ctive lerning. Performnce Our Northrop Grummn prtnership with Wolf Trp served 840 children nd 384 eductors. We estimte n dditionl 380 prents nd cregivers benefited from the progrm. High School Involvement Prtnership This intern progrm ssists high school students with setting creer nd development gols nd provides student internships, grdution incentives, summer enrichment progrm nd potentil scholrships. Performnce In 2012, we connected Northrop Grummn mentors with 354 high school students from 78 schools. Additionlly, Northrop Grummn Foundtion funding combined with nerly 100 orgniztions, compnies nd federl gencies enbled the White House s Summer Jobs+ inititive. This progrm provided summer jobs nd other employment opportunities for low-income nd disconnected youth. Through this effort, more thn 20 nonprofit gencies received funding to support 94 intern positions. HIGHER EDUCATION College Scholrships: Funding from the Northrop Grummn Foundtion provided more thn 35 ntionl diversity ssocition nd college fund scholrships (totling more thn $248,000) to vrious orgniztions including the Americn Indin Science nd Engineering Society, Ntionl Society of Blck Engineers, Society of Women Engineers nd Society of Hispnic Professionl Engineers (SHPE). Additionlly, the Northrop Grummn Foundtion funded SHPE s Ntionl Institute for Ledership Advncement, Hispnic Scholrship Fund, United Negro College Fund nd completed multi-yer commitment to the Ntionl Action Council for Minorities in Engineering in support of scholrships nd pre-engineering progrms. Eduction Grnts: Funding from the Northrop Grummn Foundtion provided grnts to 16 colleges nd universities totling nerly $2.1 million to support diverse nd cdemic student orgniztions nd progrms such s Women in Engineering, Computer Science Women s Network, Assocition of Computing Mchinery nd University of Mrylnd Bltimore County s Cyber Scholrs Progrm. Eduction grnts lso included support for the STEM higher eduction workforce project nd enhncing the STEM pipeline progrm. University nd College Prtnerships: Northrop Grummn Corportion provided more thn $1.6 million in higher eduction grnts to more thn 80 colleges nd universities. Recipients included engineering nd computer science progrms, cdemic nd diversity student orgniztions, design projects, lb nd eduction centers, creer development nd ledership progrms nd mny others. Some of these progrms included dvncing Ntive Americn youth towrds STEM creers, the trnsfer llince progrm, cyber security student projects nd the Ntionl Center for Women in Computing Awrd for Aspirtions in Computing.

37 OUR COMMUNITY INVESTMENT FOCUSING ON DIVERSITY EDUCATION Gret Minds in STEM nd VIVA Technology As step in continuing efforts to introduce middle school students to science, technology, engineering nd mth creers (STEM),employees t Northrop Grummn, including the Hispnic employee resource group One Adelnte, prtnered to bring the ntionlly cclimed Viv Technology Progrm to Rogers Middle School in Lwndle, Cliforni, nd Prklnd Mgnet Middle School in Rockville, Mrylnd. Viv Technology is ntionl K-12 eductionl progrm sponsored by Gret Minds in STEM tht is designed to engge students, prents nd techers in technology-relted ctivities tht stimulte mthemtics nd science studies. The progrm consists of techer workshop, prent session nd student progrm. Northrop Grummn volunteers supported the event s spekers nd tem leders while college students from cmpuses ner the schools ssisted. Ntionl Society of Blck Engineers nd SEEK In 2012, we provided support to the Ntionl Society of Blck Engineers, Summer Engineering Experience for Kids progrm. This three-week progrm provides lerning to Africn Americn students, in science nd mthemtics, for grdes three to 12. The progrm volunteers nd mentors re young, Africn Americn college students mjoring in engineering-relted fields. VOLUNTEERISM: A STRONG TRADITION AT NORTHROP GRUMMAN Northrop Grummn employees contributed t lest 25,320 volunteer hours nd qulified orgniztions, in turn, received $126,600 in community service grnts from Northrop Grummn. Further, employees generously supported multitude of nonprofits through inkind giving such s bck-to-school supply drives, dopt militry fmily, winter cot drives nd holidy giving. Promoting eduction nd prticipting in volunteerism go hnd-in-hnd t Northrop Grummn. During Ntionl Engineers Week hundreds of our employees volunteer ntionwide in schools. To prepre for these Connecting Eductors to Engineering events, we provide volunteers with tools nd mterils to ssist with clssroom demonstrtions. Recognizing Excellence We recognize employees who hve demonstrted volunteer dediction through our Northrop Grummn volunteer recognition progrm. In August 2012, through Northrop Grummn s office of corporte citizenship, we nnounced the 10 Excellence in Volunteerism winners chosen from 647 nomintions by n independent review pnel (compred to 220 nomintions in 2011). Ech wrd winner's chosen orgniztion received $5,000 grnt tht, collectively, helps students, those in need nd fmilies. Performnce The volunteer mngement system is n internl Northrop Grummn progrm tht connects employees to community volunteer opportunities in their locl res nd llows them to log their volunteer hours. The Volunteer1NG site logged 1,510 individul employees who registered for volunteer events in The volunteers contributed 4,002 hours. The community impct of our employee volunteer hours for 2012 ws more thn $40,000.* Since inception, we vlue our volunteer totl community impct t more thn $2.2 million. *Bsed on independent 2012 estimted vlue of volunteer time t $10/hour. DISASTER RELIEF We re members of the Americn Red Cross Annul Disster Giving Progrm. This progrm helps secure relible funding bse for disster relief services nd enbles Red Cross personnel to respond immeditely to the needs of individuls nd fmilies ffected by disster. Two mjor nturl dissters, the Colordo wildfires nd Hurricne Sndy, ffected severl communities with strong presence of Northrop Grummn employees. Performnce Affected people will be ble to receive food, shelter, emotionl support nd other essentil ssistnce with less dely. Northrop Grummn employees donted $100,492 in support of Hurricne Sndy victims. One hundred percent of those contributions ws mtched by the Northrop Grummn Foundtion. Employees lso contributed nerly $20,000 through seprte online support progrm. The Northrop Grummn Foundtion provided grnts to orgniztions providing support to the Colordo wildfires nd the Auror, Colordo, theter shooting. 34

38 OUR COMMUNITY INVESTMENT SUPPORTING MILITARY AND VETERANS We re proud to offer continuing troop nd vetern support through vrious progrms. In 2012, the Corporte Citizenship Council developed troops nd veterns strtegy tht defines specific res of focus. We pln to implement the strtegy in Performnce In 2012, for exmple, nerly 1,000 employees volunteered their time to ssemble more thn 30,000 cre pckges to send to ctive troops overses. Since 2003, Northrop Grummn employee giving hs rised $1.25 million for the USO, including $293,650 in Opertion IMPACT Proposed by Northrop Grummn employee in 2004, Opertion IMPACT (Injured Militry Pursuing Assisted Creer Trnsition) provides personlized creer trnsition ssistnce by identifying creer opportunities within the compny for returning service members who hve been severely injured in combt. If the service member is unble to work, the progrm offers creer support to member of the individul s immedite fmily who will become the primry wge erner s well s to the widow or widower of fllen service members. EC1 Although we do not trck dt for this specific metric t Northrop Grummn, the direct economic vlue generted through our vrious dontions nd community investments is significnt. Collectively, for 2012, when totling revenues, operting costs, employee compenstion, retined ernings, compny philnthropic contributions, employee giving nd the vlue of totl employee volunteerism hours, we provide substntil direct economic vlue to our communities. For full listing of Globl Reporting Inititive Performnce Indictors, see pges Performnce To dte, the progrm hs helped 108 returning service personnel nd their fmily members join the compny. Since 2009 we hve operted the Network of Chmpions, group of more thn 131 corportions nd orgniztions s well s the federl government, following our exmple in the hiring of wounded wrriors. The purpose of this network is to expnd job plcement opportunities for qulified cndidtes. Executives from the Deprtment of Defense, Deprtment of Lbor nd Deprtment of Veterns Affirs recognize Opertion IMPACT s n industry best prctice, nd the progrm hs received severl wrds. To lern more click Opertion Impct. 35

39 GRI CONTENT INDEX This 2012 Corporte Responsibility Report reflects the G3 Sustinbility Reporting Guidelines of the Globl Reporting Inititive (GRI). The Stndrd Disclosures nd the degree to which we hve been ble to report on ech re detiled on this pge. GRI STANDARD DISCLOSURE PAGE REFERENCE STATUS GRI STANDARD DISCLOSURE PAGE REFERENCE STATUS STRATEGY AND ANALYSIS ECONOMIC PERFORMANCE INDICATORS 1.1 Sttement from CEO Key impcts, risks nd opportunities. 2-5 ORGANIZATIONAL PROFILE 2.1 Orgniztion nme Primry products nd services Opertionl structure of the orgniztion Loction of hedqurters Countries with mjor opertions Ownership nd legl form. 3-5, Mrkets served Scle of orgniztion Significnt opertionl chnges. 3-5, Awrds received. 33 REPORTING PARAMETERS Forthcoming 3.1 Reporting period defined Dte of most recent previous report Reporting cycle defined Contct informtion. 7, WB 3.5 Process for defining report content Boundry of the report Specific limittions on scope or boundry Reporting defined for joint ventures, etc. NA 3.9 Dt mesurement techniques defined. 1, Explntion of ny re-sttements from erlier reports Significnt chnges from previous 1, 3-6, 8-9, 14-18, 20-21, 25, reporting periods Stndrd Disclosures tble provided Externl ssurnce process defined. 1 GOVERNANCE, COMMITMENT AND ENGAGEMENT 4.1 Governnce structure Indicte whether Bord Chir is lso n executive officer Number of independent nd/or nonexecutive Bord members Mechnisms for providing recommendtions to Bord Linkge between compenstion nd performnce Processes for eliminting conflicts of interest Process for determining Bord member qulifictions Sttement of vlues nd codes of conduct. 37, WB 4.9 Procedures for complince with stndrds, codes nd principles Processes for evluting the Bord's performnce Precutionry pproch explntion Externl inititives endorsed. 1-2, 7,9,11,12,14-18, 20-21, Memberships in ssocitions nd 1,6,9,14,15,17,20,21,22, dvoccy orgniztions , Stkeholder groups identified. 1-12, 14-24, Selection of stkeholders with whom to engge Approches to stkeholder enggement. 1-2, 3-5, 9-11,14,16, 17,19, EC01 Direct economic vlue generted. 32 Forthcoming EC02 Finncil implictions due to climte chnge. 24 EC03 Defined benefit pln coverge. Dt not vilble EC04 Government finncil ssistnce. Dt not vilble EC05 Wges compred to locl minimum wge. Dt not vilble EC06 Spending on loclly bsed suppliers EC07 Senior mngers hired from the locl community. Dt not vilble EC08 Investments for public benefit through in-kind/pro bono. EC09 Indirect economic impcts, including the extent of impcts. ENVIRONMENTAL PERFORMANCE INDICATORS EN01 Mterils used by weight or volume. 18,23 EN02 Percentge of recycled mterils. 18,23 EN03 Direct energy consumption. 23 EN04 Indirect energy consumption. 23 EN05 Energy sved through conservtion EN06 Energy-efficient bsed products nd reductions in energy requirements EN07 Inititives to reduce indirect energy consumption EN08 Totl wter withdrwl by source. Dt Not Avilble EN09 Wter sources ffected by withdrwl of wter. NA EN10 Percentge nd totl volume of wter recycled nd reused. 21 EN11 Lnd ownership nd opertions in protected res of high biodiversity vlue. NA EN12 Impcts on biodiversity in protected res. NA EN13 Hbitts protected or restored. 17, EN14 Mnging impcts on biodiversity. 17, EN15 Hbitts (Red List species) ffected by opertions. NA EN16 Totl direct nd indirect greenhouse gs emissions EN17 Other relevnt indirect greenhouse gs emissions EN18 Inititives nd results of reducing greenhouse gs emissions EN19 Emissions of ozone-depleting substnces. 18, EN20 NOx, SOx, nd other significnt ir emissions. 18, EN21 Totl wter dischrge by qulity nd destintion. 23 EN22 Totl weight of wste by type nd disposl method EN23 Totl number nd volume of significnt spills. 23 EN24 Wste deemed hzrdous under Bsel Convention Annex I, II, III nd VIII EN25 Biodiversity vlue of wter bodies nd hbitts ffected. NA EN26 Inititives to mitigte environmentl impcts EN27 Pckging mterils reclimed by ctegory. 18 EN28 Significnt fines nd non-monetry snctions for non-complince. 14 EN29 Environmentl impcts of trnsporting products nd mterils. 23 EN30 Totl Environmentl protection expenditures. Dt not vilble Sttus: fully reported prtilly reported not reported AR= Annul Report WB= Northrop Grummn website 36

40 GRI CONTENT INDEX This 2012 Corporte Responsibility Report uses the G3 Sustinbility Reporting Guidelines of the Globl Reporting Inititive (GRI). All of the Stndrd Disclosures nd the degree to which we hve been ble to report on ech re detiled on this pge. GRI STANDARD DISCLOSURE PAGE REFERENCE STATUS SOCIAL PERFORMANCE INDICATORS: LABOR PRACTICE AND DECENT WORK LA01 Totl workforce by employment type. 9,12 Forthcoming LA02 Employee turnover by ge group, gender, nd region. 9,12 LA03 Benefit coverge for full-time vs. prt-time employees LA04 Percentge of employees covered by collective brgining greements. 12 LA05 Minimum notice period(s) for termintion. 12 LA06 Description of mngement-worker helth nd sfety committees LA07 Rtes of injury, lost dys nd ftlities. 16 LA08 Inititives relted to serious diseses LA09 Helth nd sfety topics covered in forml greements with trde unions. 16 LA10 Averge hours of employee trining per yer. 12 LA11 Skills mngement progrms for employees LA12 Percentge of employees receiving regulr performnce nd creer development reviews. LA13 Composition of governnce bodies nd employees by diversity indictors. LA14 Rtio of bsic slry of men to women by employee ctegory. HR01 Investment greements tht include humn rights cluses nd screening. HR02 Suppliers nd contrctors tht hve undergone humn rights screening. HR03 Policies nd procedures concerning humn rights. HR04 Totl number of incidents of discrimintion nd ctions tken. Opertions identified where freedom of HR05 ssocition nd collective brgining my be t risk. HR06 Opertions identified for incidents of child lbor. HR07 Opertions identified for incidents of forced or compulsory lbor. HR08 Percentge of security personnel trined humn rights spects. HR09 Violtions involving rights of indigenous people. SOCIAL PERFORMANCE INDICATORS: SOCIETY SO01 SO02 SO03 SO04 SO05 SO06 SO07 SO08 Inititives tht ssess nd mnge the impcts of opertions on communities. Percentge nd totl number of business units nlyzed for corruption risks. Percentge of employees trined in orgniztion s nti-corruption policies nd procedures. Actions tken in response to incidents of corruption. Public policy positions nd prticiption in public policy development nd lobbying. Totl vlue of finncil nd in-kind contributions to politicl ctivities. Legl ctions for nti-competitive behvior, nti-trust nd monopoly prctices. Significnt fines nd non-monetry snctions for non-complince with lws nd regultions. Sttus: fully reported prtilly reported not reported Dt not vilble ,14, 16-24, ,14 AR= Annul Report WB= Northrop Grummn website 37

41 GRI Appliction Level Check Currently in Process. 38