2015 Corporate Responsibility Report

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Environmental

Environmental Sustainability

Our Strategy greeNG: A Catalyst for Performance
We are integrating environmental sustainability into our organizational culture, applying a multifaceted strategy that supports our corporate values and drives value and performance. To increase and maintain focus on performance, our executives are accountable for achieving sustainability goals. Environmental sustainability is one of six non-financial corporate performance metrics.

The link between environmental sustainability and executive compensation demonstrates the level of commitment from our Board of Directors and reinforces the role of leadership and engagement throughout Northrop Grumman.

Alternative and Renewable Energy The first Northrop Grumman on-site solar power systems were activated in 2015 in St. Augustine and Melbourne, Florida. The systems generate 0.56 MW of clean power for the two sites.

We continue to evaluate options for alternative and renewable energy at our owned sites and maintain our multi-year purchase commitment for renewable energy certificates (RECs) purchased in 2012 that support renewable energy installations directly linked to the electricity grid. Through utility providers and the energy market, our REC purchases support solar, wind and geothermal energy installations. We intentionally selected Virginia-based RECs derived from wind power due to our business presence in Virginia, including our corporate office.

Green Buildings Seven Northrop Grumman operating facilities are certified to the U.S. Green Building Council’s "Leadership in Energy and Environmental Design" (LEED) standards, and two are certified under the U.S. Environmental Protection Agency’s ENERGY STAR® program for energy-efficient equipment and building systems design.

Ecosystem Conservation We support protection, conservation and restoration of critical ecosystems through numerous volunteer cleanup efforts nationwide and financial support of conservation-based carbon offset projects. In 2015, we purchased 11,000 MTCO2e of American Carbon Registry-certified carbon offsets generated in association with the Mississippi Valley Reforestation Project in the southeastern United States and certified by the American Carbon Registry. The project objective is to re-forest 1 million acres of the Lower Mississippi Alluvial Valley, regarded as one of the most important ecosystems in North America.

The sunshield of NASA's James Webb Space Telescope is the size of a tennis court and constructed of five individual layers of Kapton, a polyimide film that can withstand the harshest of conditions. Deployed sunshield models undergo testing at our Space Park facility in Redondo Beach, California.
Environmental Sustainment Highlights

Electric Vehicle Charging Stations Our electric vehicle Workplace Charging Program continues to grow, supporting employees who use low/no emission vehicles to commute. We currently have 40 "Level 2" charging connections at nine sites, including Southern California; Cincinnati, Ohio; Melbourne, Florida; and our Corporate Office in Falls Church, Virginia.

Transparency & Disclosure We scored a perfect 100 on the 2015 CDP Climate Change Investor Response, earning our fourth consecutive disclosure leadership distinction and third consecutive year on the Carbon Disclosure Leadership Index for the S&P 500. Northrop Grumman is among a distinguished group of public companies with greenhouse gas emissions reduction performance using financially and environmentally beneficial business strategies. Our sustained performance and leadership recognition by CDP signals to shareholders and the investor community that we are taking proactive measures to address the interrelationship between environmental risks (e.g., resource availability), operational growth and business sustainment.

2020 Environmental Sustainability Goals

By year-end 2020, Northrop Grumman has committed to:
• Reduce absolute greenhouse gas (GHG) emissions by 30 percent from 2010 levels
• Reduce absolute potable water use by 20 percent from 2014 levels
• Achieve a 70 percent solid waste diversion rate (percentage of total solid waste that is diverted from landfill)

Environmental Performance Summary

PERFORMANCE We maintained strong environmental sustainability performance in 2015:

Greenhouse Gas Emissions >> Our 2015 performance was driven by our continued focus on building efficiencies and systems, information technology infrastructure, and engineering and manufacturing process modifications. Initiatives implemented in these areas in 2015 were estimated to reduce approximately 11,327 MTCO2e.

For a fifth consecutive year, we received “reasonable assurance” for our GHG inventory (2014 data), the highest level of third-party verification in accordance with ISO 14064-3. For the second consecutive year, we received “limited assurance” via third-party verification of our Scope 3 Business Travel GHG inventory. This performance reflects industry-leading levels of assurance.

We disclose our complete GHG inventory, including our market-based emissions inventory and Scope 3 emissions, in the annual CDP Climate Change Investor Response, which is publicly available via the CDP.

Water Use Reduction >> We are committed to conserving this precious resource, emphasizing action in regions where water stress is a reality, including California, the southwestern U.S. and Australia.

In response to the unprecedented drought conditions and the California governor’s executive order B-29-15, we prioritized water conservation at our sites in the state. Specifically, we:
• Completed water use assessments at our large California sites to evaluate operational conservation and source alternatives to reduce potable water use.
• Established the Northrop Grumman Water Council, comprised of facilities, engineering and EHS professionals, to recommend water conservation project priorities that balance cost, water use reduction and local water risk.
• Implemented water conservation projects in California that are estimated to save approximately 86 million gallons of water annually.

Solid Waste Diversion >> Consistent with the principles of lean manufacturing and Six Sigma, elimination of waste is a proven objective that drives cost savings. Likewise, diverting solid waste from landfills through reduction, reuse and recycling initiatives makes good business sense.

In 2015, we conducted comprehensive solid waste assessments at four representative sites to evaluate the sources of waste generation and identify opportunities for waste generation reduction and end-of-life diversion.

Common solid waste diversion opportunities include:
• Strengthen supplier requirements and materials specifications to minimize packaging waste and establish take-back programs.
• Promote and harness employee engagement and empowerment to solicit and respond to opportunities across operations and business units.
• Right-size disposal services to avoid unnecessary costs and improve disposal data accuracy.