ESG & Risk Oversight
Sustainability is a critical business imperative. Accountability for our performance starts with our Board and CEO, who provide governance and oversight over our strategy, operations and management. As illustrated below, the Executive Leadership Team and the Sustainability Working Group ("SWG") oversee ESG programs and aim to strengthen ESG practices across the enterprise to promote responsible and sustainable growth. The SWG is comprised of senior leaders from across Leidos, including customer-facing sustainability experts.
The Board of Directors Role in ESG and Risk
Our Board of Directors and its Corporate Governance and Ethics Committee ("CGEC") regularly review with management ESG issues that may significantly impact our business operations, reputation or relations with employees, customers, supplier partners, stockholders and other stakeholders, at least quarterly. The Board and the CGEC are also responsible for reviewing practices and policies in the areas of corporate responsibility, including environmental safety, protection, risk, and other environmental issues that affect the business, operations, performance, business continuity planning, and public image or reputation. The CGEC reviews and recommends policies and procedures to maintain a business environment committed to high standards of ethics, integrity and legal compliance.
In addition, our Board and its Human Resources and Compensation Committee regularly review with management our diversity and inclusion initiatives, including recruitment, training and development efforts, as well as employee benefits and resources, and discuss metrics relating to such initiatives at least quarterly.
In 2021, the world faced unprecedented challenges, including the evolving COVID-19 pandemic, racial and social injustice and numerous natural disasters, among others. Leidos is guided by a conviction to do what is right every day, especially during challenging times. While navigating these challenges, we prioritize the health and mental well-being of our global workforce, delivering critical environmental and sustainability-driven support to customers, and creating an inclusive environment where employees are respected, valued and heard. We expect our management and employees to share a common understanding of our commitment and, accordingly, have established teams within the enterprise to address our ESG goals.
Transparency and Accountability
The Board believes that transparency and accountability are a critical part of our ESG strategy. Leidos publishes reports annually in accordance with the latest GRI™ Sustainability Reporting Standards and strives for continuous improvement, alignment with industry best practices and leadership in corporate sustainability and responsibility. As a result, Leidos periodically re-evaluates and updates its sustainability and corporate responsibility programs and how it shares progress with stakeholders.
- In 2019, Leidos produced its first Sustainability Accounting Standards Board (“SASB”) Disclosure Supplement.
- In 2021, Leidos released its 12th Annual Report covering the calendar year 2020, integrating its GRI™ Index and SASB Standards into one document to provide a comprehensive view of corporate performance in this area.
- In 2021, Leidos partnered with outside experts to conduct a formal ESG assessment, including a stakeholder engagement initiative. This engagement, alongside an analysis of internal and external trends and aligned with business priorities, helped us develop our “Next Level Leidos” ESG Goals. The goals will form the basis of our Sustainability Management Plan and drive progress in priority areas.
- In 2022, for the first time, Leidos published its annual EEO-1 report, which includes information regarding its workforce diversity.
As part of its oversight function, the Board and its committees monitor risk as part of their regular deliberations throughout the year. When granting authority to management, approving strategies, making decisions and receiving management reports, the Board considers, among other things, the risks facing the Company. The Board also oversees risk in particular areas through its committee structure:
- The Audit and Finance Committee evaluates the Company’s guidelines and policies regarding risk assessment and risk management, including risks related to internal control over financial reporting, the Company’s major financial risk exposures, including financial, capital investment and insurance risks, and the steps management has taken to monitor and control such exposures.
- The Human Resources and Compensation Committee evaluates risks potentially arising from the company’s human resources and compensation policies and practices.
- The Corporate Governance and Ethics Committee oversees risks associated with governance and other ESG risks, including unethical conduct and political, social, environmental and reputational risks.
- The Technology and Information Security Committee assists the Board in overseeing the company’s risk posture as it relates to technology development and application activities and information security and related exposures.
The committees coordinate among each other as necessary to support optimal oversight of risks; each Committee reports its activities to the Board and facilitates discussions among directors. Company management also maintains an Enterprise Risk Management Committee, comprised of the Chief Executive Officer and senior executives that, among other things, establishes the overall corporate risk strategy and reviews policies, systems, processes and training with the goal of identifying and addressing appropriate risk matters within the company. This management committee reports regularly to the Audit and Finance Committee and annually to the full Board on its activities and findings, highlighting the key risks we face and management’s actions to address those risks.
Cybersecurity and Related Risks
Information security is critical to maintaining the trust of our customers and business partners, and we are committed to mitigating risks and protecting our data and systems. As a government contractor and a provider of information technology services, we are entrusted with highly sensitive information, and we are continuously exposed to unauthorized attempts to compromise this information through cyberattacks, the risk of insider threats and other information security risks. Management provides our Board and the Technology and Information Security Committee with regular updates about our cybersecurity and related risk exposures, our policies and procedures to mitigate such exposures and the status of projects to strengthen our information security infrastructure and defend against and respond to threats at least quarterly. In addition, we require our employees to take annual training on information security, including cybersecurity and global data privacy requirements and compliance measures. We also conduct periodic internal and third-party assessments to test our cybersecurity controls, perform cyber simulations and annual tabletop exercises, and continually evaluate our privacy notices, policies and procedures regarding our handling and control of personal data and the systems we have in place to help protect us from cybersecurity or personal data breaches. Leidos has rigorous controls in place to monitor personal and confidential information distributed electronically by its employees.
We have established a management-level SWG, comprised of senior leaders from across the Company, including customer-facing sustainability experts. The SWG is actively engaged in overseeing ESG programs and strengthening ESG practices to support responsible and sustainable growth. The SWG conducts biannual reviews of climate-related risks in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) best practices. The SWG also conducts scenario analysis into the Leidos climate-related risk assessment process, alongside members of the Company’s enterprise risk management team. Climate-related operational opportunities are reviewed biannually and managed by the SWG in parallel with outside experts. Climate-related business opportunities are generally managed by the business lines at least at the business group-level and are reviewed quarterly. Between 2021-2022, the SWG and Enterprise Risk team engaged outside experts to conduct a detailed, holistic review of sustainability and climate risk across the Enterprise. The results were presented to the Executive Leadership Team and Board of Directors.