This information is in our 2013 Annual Report: Overview - Chairman s letter Strategic Report - Chief Executive s review

(1)

Global Reporting Initiative Index

We do not base Corporate Responsibility (CR) information in our integrated Annual Report on the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines 3.0 & 3.1, but we have produced a GRI index below to show which elements of the guidelines are covered in the report and on our website to aid comparison with other company reports. Information below is based on the 2013 reporting period.

Key:

STANDARD DISCLOURES PART I: PROFILE DISCLOSURES 1. STRATEGY AND ANALYSIS

1.1 Statement from the most senior decision maker of the organisation (e.g., CEO, chair, or equivalent senior position) about the relevance of sustainability to the organisation and its strategy

This information is in our 2013 Annual Report:  Overview - Chairman’s letter

 Strategic Report - Chief Executive’s review

1.2 Description of key impacts,

risks, and opportunities. This information is in our 2013 Annual Report:  Strategic Report – Group Strategic

Framework, Our Business model, and Key Performance Indicators

 Strategic Report - Segmental

Performance, Risk Management and Principal Risk Summary

 Directors’ Report – Sustainability and Principal Risks

 Governance - Corporate Governance Report

Also see our website. 2. ORGANISATIONAL PROFILE

2.1 Name of the organisation. BAE Systems plc.

2.2 Primary brands, products, and/or services. The reporting organisation should indicate the nature of its role in providing these products and services, and

This information is in our 2013 Annual Report:  Strategic Report – Group Strategic

Framework and Our Business Model

(2)

the degree to which it utilises

outsourcing.  Strategic Report - Segmental Performance

Information is also included on our website. 2.3 Operational structure of the

organisation, including main divisions, operating companies, subsidiaries, and joint ventures.

This information is in our 2013 Annual Report:  Financial Statements - Notes to Group

accounts – Income Statement 1.

Segmental Analysis, 7.Assets held for sale and discontinued operations; Notes to Group accounts – Balance Sheet 14. Equity Accounted Investments; Notes to Group accounts – Other Information 26. Acquisition and disposal of subsidiaries, 32. Group Entities.

Information is also included on our website. 2.4 Location of organisation’s

headquarters. London, UK.

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

This information is in our 2013 Annual Report:  Strategic Report - Multiple Markets  Our Business Model – Outstanding

Capabilities

 Strategic Report - Segmental performance  Financial Statements - Notes to Group

accounts – Balance Sheet 20. Geographical analysis of assets. Information is also included on our website. 2.6 Nature of ownership and legal

form. This information is in our 2013 Annual Report:

 Directors’ Report – Other statutory and regulatory information.

2.7 Markets served (including geographic breakdown, sectors served, and types of customers/ beneficiaries).

This information is in our 2013 Annual Report:  Strategic Review – Chief Executive’s

Review and Our Business Model

 Strategic Report - Segmental Performance 2.8 Scale of the reporting

organisation This information is in our 2013 Annual Report:

 Strategic Report and Our Business model  Strategic Report - Segmental Performance  Financial Statements

(3)

2.9 Significant changes during the reporting period regarding size, structure, or ownership including.

This information is in our 2013 Annual Report:  Overview - Chairman’s letter

 Strategic Report –, Chief Executive’s review, Key Performance Indicators and Our Business Model,

 Strategic Report - Segmental Performance  Financial Statements – Notes to Group

Segmental Analysis, 7. Assets held for sale and discontinued operations; Notes to Group accounts – Balance Sheet 14. Equity Accounted Investments; Notes to Group accounts – Other Information 26. Acquisition and disposal of subsidiaries.

2.10 Awards received in the

reporting period. This information is in our 2013 Annual Report:  Directors’ Report - Sustainability 3. REPORT PARAMETERS

3.1 Reporting period (e.g., fiscal/calendar year) for information provided.

Calendar year - 2013.

3.2 Date of most recent previous

report (if any). Calendar year - 2012.

3.3 Reporting cycle (annual,

biennial, etc.) Annual.

3.4 Contact point for questions regarding the report or its contents.

2013 Annual Report - Investor Relations e-mail: investors@baesystems.com

3.5 Process for defining report content, including:

• Determining materiality; • Prioritising topics within the report; and

• Identifying stakeholders the organisation expects to use the report.

Information on CR priorities for the business are included in our 2013 Annual Report:

 Strategic Report – Sustainability Summary

 Directors’ Report – Sustainability Our Corporate Responsibility (CR) strategy focuses on the issues that could have the biggest impact on our reputation and our ability to

(4)

operate. All are important to the long-term success of our business.

See ‘stakeholder engagement’ section of our CR website.

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers).

This information is in our 2013 Annual Report:  Strategic Report – Our Business Model  Notes to Group Accounts – Balance Sheet

14 Equity Accounted Investments; Notes to Group Accounts – Other information 32 Group Entities.

Also, see ‘basis of reporting’ on our CR website for 2013 CR data.

3.7 State any specific limitations on the scope or boundary of the report.

This information is in our 2013 Annual Report:  Strategic Report – Sustainability

Summary

 Directors’ Report - Sustainability

Also, see ‘basis of reporting’ on our CR website for 2013 CR data.

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organisations.

This information is in our 2013 Annual Report:  Strategic Report - Segmental Performance  Financial Statements – Notes to Group

Segmental Analysis, 7.Assets held for sale and discontinued operations; Notes to Group accounts – Balance Sheet 14. Equity Accounted Investments; Notes to Group accounts – Other Information 26. Acquisition and disposal of subsidiaries; 32. Group Entities

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report.

This information is in our 2013 Annual Report:  Notes to the Company accounts 1.

Accounting Policies.

Also, see ‘basis of reporting’ on our CR website for 2013 CR data.

3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers/ acquisitions,

2012 figures were restated on adoption of the

revised International Accounting Standard

19, Employee benefits. The impact on the

financial statements is explained in the

Preparation note to the Group accounts on

(5)

change of base years/periods, nature of business, measurement methods).

pages 126 and 127 of our 2013 Annual Report.

Data was re-presented on classification of the

Regional Aircraft line of business as a

continuing operation (see note 7 to the Group

accounts on page 139 of our 2013 Annual

Report). In 2012 the business was treated as

held for sale.

3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.

This information is in our 2013 Annual Report. Also, see ‘basis of reporting’ on our CR website for 2013 CR data

3.12 Table identifying the location of the Standard Disclosures in the report.

This table.

3.13 Policy and current practice with regard to seeking external assurance for the report. If not included in the assurance report accompanying the sustainability report, explain the scope and basis of any external assurance provided. Also explain the relationship between the reporting organisation and the assurance provider(s).

Assurance statement for 2013 Annual Report:  Financial statements–Independent

auditor’s report to the members of BAE Systems plc.

Also review role of CR Committee and Audit Committee within assurance process within their respective statements.

For Corporate Responsibility assurance see our 2013 Annual Report, Directors’ Report -

Sustainability and assurance statement online at www.baesystems.com/deloitteassurancestatement 4. GOVERNANCE, COMMITMENTS, AND ENGAGEMENT

4.1 Governance structure of the organisation, including

committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight.

This information is in our 2013 Annual Report:  Strategic Report – Governance Summary  Governance – Corporate Governance

Report and Board of Directors

4.2 Indicate whether the Chair of the highest governance body is also an executive officer (and, if so, their function within the organisation’s management and the reasons for this arrangement).

This information is in our 2013 Annual Report:  Governance – Corporate Governance

(6)

4.3 For organisations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.

This information is in our 2013 Annual Report:  Governance – Board of Directors and

Corporate Governance Report

4.4 Mechanisms for shareholders and employees to provide

recommendations or direction to the highest governance body.

This information is in our 2013 Annual Report:  Directors’ Report – Sustainability  Governance – Corporate Governance

Report and Other statutory and regulatory information

Also, see the ‘investing in our people’ section of our CR website.

4.5 Linkage between

compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organisation’s performance (including social and

environmental performance).

This information is in our 2013 Annual Report:  Strategic Review - Key Performance

Indicators

 Governance – Corporate Governance Report and Remuneration report

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided.

Report

4.7 Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity.

Report

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic,

environmental, and social performance and the status of their implementation.

This information is in our 2013 Annual Report:  Strategic Report – Sustainability

Summary

 Directors’ Report - Sustainability  Governance – Corporate Governance

Report and Corporate Responsibility Committee Report

(7)

See also ‘code of conduct’ on our website. 4.9 Procedures of the highest

governance body for overseeing the organisation’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.

Report, Corporate Responsibility Committee Report

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic,

environmental, and social performance.

Report

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation. Article 15 of the Rio Principles introduced the

precautionary approach. A response to 4.11 could address the organisation’s approach to risk management in operational planning or the development and introduction of new products.

BAE Systems supports the application of the European Commission’s framework for a precautionary approach. For examples of our approach see the ‘environmental sustainability’ and ‘product stewardship’ sections of our CR website.

For BAE systems approach to risk management see our 2013 Annual Report:

 Strategic Report – Risk Management  Directors’ Report – Principal Risks 4.12 Externally developed

economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses.

This information is included in our 2013 Annual Report:

See also the ‘environmental sustainability’ section of our CR website.

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations in which the organisation:

• Has positions in governance

We are a member of a number of associations including Aerospace Industries Association of America and the Aerospace and Defence

Industries Association of Europe. We are also the Chair and Task Force member of International Forum of Business Ethical Conduct (IFBEC) for

(8)

bodies;

• Participates in projects or committees;

• Provides substantive funding beyond routine membership dues; or

• Views membership as strategic.

the Aerospace and Defence Industry.

This information is also included in our 2013 Annual Report:

 Directors’ Report - Sustainability Also, see our CR website.

4.14 List of stakeholder groups

engaged by the organisation This information is in our 2013 Annual Report:  Governance – Corporate Governance

Report – Relations with shareholders  Directors’ Report - Sustainability See ‘stakeholder engagement’ section of our CR website.

4.15 Basis for identification and selection of stakeholders with whom to engage.

This includes the organisation’s process for defining its

stakeholder groups, and for determining the groups with which to engage and not to engage.

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.

This could include surveys, focus groups, community panels, corporate advisory panels, written communication, management/union structures, and other vehicles. The

organisation should indicate whether any of the engagement was undertaken specifically as part of the report preparation process.

4.17 Key topics and concerns that have been raised through

stakeholder engagement, and how the organisation has

responded to those key topics and concerns, including through its reporting.

See ‘stakeholder engagement’ section of our CR website and AGM 2014 – FAQS online.

(9)

ECONOMIC

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments

This information is in our 2013 Annual Report:  Overview and Outlook for 2014

 Strategic Report – Business Model and Key Performance Indicators

 Directors’ Report - Political Donations  Directors’ Report – Sustainability –

Charitable Contributions

 Financial Statements – Consolidated Income Statement and Notes to the Group Accounts – Income statement.

EC2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change

We have reviewed the impacts that climate change could have on our business from availability of water to energy costs, from supply of raw materials to increase in external policy and regulation. Impacts of climate change are

mitigated across our business via our approach to Risk Management included in our 2013 Annual Report:

 Strategic Report – Sustainability Summary and Risk Management  Directors’ Report – Principal Risks and

Sustainability

For more information on our approach to environmental sustainability see our CR website. EC3 Coverage of the

organisation's defined benefit plan obligations

This information is in our 2013 Annual Report:  Chief Executive’s Review

 Governance – Corporate Governance Report and Remuneration Committee report.

 Financial Statements – Notes to Group Accounts - balance sheet 23 Retirement Benefit Obligations.

(10)

EC4 Significant financial assistance received from government

The Company receives no significant financial assistance from government.

In the UK, the Secretary of State for Business, Innovation and Skills holds a Special Share in the company on behalf of the UK Government for national security purposes. Please see 2013 Annual Report:

 Directors’ Report - Other Statutory and Regulatory Information – Rights and obligations of the Special Share.

 Financial Statements - Notes to the Group Accounts – balance sheet - 25. Share Capital and Other Reserves.

For information on tax expense please see 2013 Annual Report:

 Group Financial Performance – section on taxation

 Financial Statements – Notes to Group Accounts – income statement 6. Taxation Expense

For information on tax strategy, please see 2013 Annual Report

 Directors’ Report - Other statutory and regulatory information - Taxation

Market presence

EC5 Range of ratios of standard entry level wage compared to local minimum wage at

significant locations of operation

We do not collate global data on this area.

EC6 Policy, practices and

proportion of spending on locally based suppliers at significant locations of operation

This information is reviewed and managed locally and we do not collate global data on it.

EC7 Procedures for local hiring and proportion of senior

management hired from the local community at significant

locations of operation

The Group adopted a diversity and inclusion strategy in 2010 to support the recruitment, engagement and retention of talented employees from all backgrounds. This has helped us to build a workforce that more closely reflects the diversity of the local population in each of our markets and will underpin the future sustainability of our business.

(11)

Data and specific procedures are reviewed and managed locally and we do not collate global data on it.

Information on our Diversity & Inclusion Strategy is included within our 2013 Annual Report:

 Strategic Report – Segmental Performance

Also see the ‘investing in our people’ section of our CR website.

Indirect economic impacts EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through

commercial, in-kind, or pro bono engagement

See ‘offset’ and ‘community’ pages on our CR website.

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts

In 2013, the Group’s UK businesses spent an estimated £4bn on procurement of equipment, components, raw materials, rent, energy and services from its suppliers. It is estimated that some £3.7bn of this was spent in the UK. This is

based on BAE Systems internal analysis.

ENVIRONMENTAL

Materials

EN1 Materials used by weight or

volume Materials used are dependent on the stage of the _{lifecycle the product is at, for example, use of} specific materials will increase during the build or upgrade phase of a product and will reduce considerably during the maintenance phase. This information is reviewed and managed locally and we do not collate global data on it.

For more information on our approach to environmental sustainability see our CR website.

EN2 Percentage of materials used We recognise the impacts of our products and ensure that environmental sustainability is

(12)

that are recycled input materials considered throughout the Lifecycle of the product. This includes reviewing the use of recycled materials used within products.

This information is reviewed and managed locally and we do not collate global data on it.

Energy

EN3 Direct energy consumption by primary energy source

We collect global information on the following direct energy consumption sources:

Natural Gas: 957278 MWh Gas Oil: 27681 MWh Coal: 1030539 MWh LPG: 3084 MWh Fuel Oil: 2275 MWh Aviation Fuel: 88815 MWh Petrol: 27150 MWh Acetylene: 1015 MWh

For more information see our 2013 Annual Report:

Also see the ‘environmental sustainability’ section of our CR website for examples of local initiatives to manage energy use and our 2013 Carbon Footprint.

EN4 Indirect energy consumption by primary source

We collect information on the following indirect energy consumption sources:

Purchased Electricity: 1239368 MWh Purchased Steam: 227248 MWh

Also see the ‘environmental sustainability’ section of our CR website for examples of local initiatives to manage energy use and our 2013 Carbon Footprint.

(13)

conservation and efficiency

improvements We only collate qualitative information on these activities globally including energy saving initiatives and construction and building projects incorporate green design features.

EN6 Initiatives to provide efficient or renewable energy-based products and services, and reductions in energy

requirements as a result of these initiatives

We recognise the impacts of our products and ensure that environmental sustainability is considered throughout the Lifecycle of the product from design to development, from manufacture to product upgrade. This is key for the company, as product lifecycles can last as long as 40 years, so we need to manage environmental impacts as they change over time. Environmental considerations include identifying alternative materials for products, monitoring hazardous chemicals, reducing waste and decreasing fuel consumption.

Examples of product developments that have supported both our customers and the

environment include fuel cell technology to reduce fuel consumption, technology to address the impact wind turbines have on radar and development of a diagnostic system to support wave energy.

EN7 Initiatives to reduce indirect energy consumption and

reductions achieved

We are a large and diverse company where lots of activity takes place to reduce our environmental impact. In each individual business this could be from primarily the investment of time (e.g. energy awareness campaigns), to large capital

investments (e.g. a Combined Heat and Power plant at Samlesbury in the UK). Individual businesses set targets for energy reduction and report quarterly against them. Individual initiatives are not tracked globally.

Progress against energy targets can be found in our 2013 Annual Report.

Water

EN8 Total water withdrawal by source

This information is more relevant locally and we do not collate global data on it.

Businesses have set local targets to reduce water use to be achieved during 2014.

(14)

 Strategic Report- Sustainability Summary  Directors’ Report - Sustainability

Also see the ‘environmental sustainability’ section of our CR website.

EN9 Water sources significantly

affected by withdrawal of water This information is more relevant locally and we do not collate global data on it.

EN10 Percentage and total volume of water recycled and reused

Biodiversity

EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

Our global Real Estate Policy and Global Environment Policy require all businesses to assess and manage environmental impacts around their sites.

This information is reviewed and managed locally. We only collate qualitative information on these activities globally.

EN12 Description of significant impacts of activities, products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

EN13 Habitats protected or restored

For more examples of our approach to site

remediation see the ‘environmental sustainability’ section of our CR website.

(15)

and future plans for managing

impacts on biodiversity businesses to assess and manage environmental impacts around their sites. This information is reviewed and managed locally. We only collate qualitative information on these activities globally.

EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations by level of extinction risk

This metric is not applicable for BAE Systems.

Emissions, effluents and waste

EN16 Total direct and indirect greenhouse gas emissions by weight

We use The GHG Protocol categories for emission sources by ‘Scope’.

Scope 1

For scope 1 emissions we report the following - Natural Gas, Aviation Fuel, Coal, Gas Oil, Fuel Oil, LPG, Petrol and Acetylene

2013 tCO2e - 535,370 Scope 2

For scope 2 emissions we report the following – Purchased Electricity, Purchased Steam

2013 tCO2e - 679,750

EN17 Other relevant indirect greenhouse gas emissions by weight

We use The GHG Protocol categories for emission sources by ‘Scope’.

Scope 3

For scope 3 emissions we report the following - Flights, Hire Cars, Executive Cars, Rail, Hotel Stays

2013 tCO2e - 243,710

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved

We are a large and diverse company where lots of activity takes place to reduce our environmental impact. In each individual business this could be from primarily the investment of time (e.g. energy awareness campaigns), to large capital

investments (e.g. a Combined Heat and Power plant at Samlesbury in the UK). Individual

(16)

businesses set targets for energy reduction and report quarterly against them. These

improvements will have an impact on our greenhouse gas emissions. Individual initiatives are not tracked globally.

Progress against energy targets can be found in our 2013 Annual Report.

Please see the ‘environmental sustainability’ section of our CR website to read about our energy saving initiatives.

EN19 Emissions of

ozone-depleting substances by weight We do not currently report information, as this is not collected at a global level.

EN20 NOx, SOx and other significant air emissions by type and weight

EN21 Total water discharge by

quality and destination This information is more relevant locally and we do not collate global data on it.

EN22 Total weight of waste by

type and disposal method We do not currently report information as it is not collected at a global level.

EN23 Total number and volume of significant spills

We collate global information about reportable environmental incidents. In 2013 there were 37 incidents reported to the relevant local authority, some of which related to spills, but none were deemed significant.

EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally

We do not currently report this information as it is not collected at a global level.

EN25 Identity, size, protected status and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and runoff

(17)

EN26 Initiatives to mitigate environmental impacts of

products and services, and extent of impact mitigation

For more information on our approach to environmental sustainability, including product impacts, see our CR website.

EN27 Percentage of products sold and their packaging materials that are reclaimed by category

This is not material for our business.

Compliance

EN28 Monetary value of

significant fines and total number of non-monetary sanctions for non-compliance with

environmental laws and regulations

There have been two environmental prosecutions reported in 2013. These both occurred in the US but were not significant and resulted in fines of under $1000.

Transport

EN29 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce

We do not currently report this information as it is not collected at a global level.

Overall

EN30 Total environmental protection expenditures and investments by type

We do not currently report this information.

SOCIAL: LABOUR PRACTICES AND DECENT WORK Employment

LA1 Total workforce by

employment type, employment contract and region

The total number of people employed by the Company at the end of 2013 (including share of equity accounted investments) was 84,600. We do not collate global data on employment type or contract.

More information is in our 2013 Annual Report:  Outlook for 2014

LA2 Total number and rate of employee turnover by age group, gender and region

We do not currently report this information as we do not collate global data on it.

(18)

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations

We do not collate global data on this area. The Remuneration Committee is responsible for making sure that we offer competitive, fair and compelling rewards for the most senior executives in the company. Legislation in some parts of the world place restrictions on or limit the structuring of benefits. See our 2013 Annual Report:

 Governance – Remuneration Report. Our workforce is diverse and operates in many countries with unique local markets and economies which are taken into account in shaping remuneration packages at the local level. Salary reviews take into account the broader economic and business environment, affordability and our competitive positioning in relation to the market.

LA4 Percentage of employees covered by collective bargaining agreements

LA5 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements

Where operational changes occur, discussions will take place with employees and/or their

representatives, dependent on the nature and extent of changes, and subject to applicable collective bargaining provisions, local requirements and laws.

See the ‘investing in our people’ section of our CR website for more information.

Occupational health and safety

LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on

occupational health and safety programmes

LA7 Rates of injury, occupational diseases, lost days, absenteeism and total number of work-related fatalities

The data on major injuries, recordable accidents and total number of work-related fatalities is reported in our 2013 Annual Report:

 Strategic Report – Key Performance Indicators

(19)

We do not collect global data on absenteeism or occupational diseases. This information is more relevant locally.

LA8 Education, training, counseling, prevention and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases

We do not collate global data on this area. Different health and wellbeing issues arise across the differing countries and environments in which the business operates. Information on employee health and wellbeing can be found in our 2013 Annual Report:

 Directors’ Report - Sustainability LA9 Health and safety topics

covered in formal agreements with trade unions

LA10 Average hours of training per year per employee by employee category

Training and education

LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

We have focussed training and development programmes to help to ensure that employees have the skills and technical know-how to meet our customers' changing needs. A strategic approach to training helps us to map our employees' skills against changing business requirements and identify re-training priorities. Flexible training and development programmes encourage a culture of lifelong learning, helping employees to reach their potential.

Parts of the Group also have transition assistance programmes in place which include

Redeployment and Relocation programmes during periods of downsizing to limit the number of compulsory redundancies. Re-skilling of employees is a key part of our programme to avoid compulsory redundancies. Within certain parts of the Group, employees can potentially receive re-training of up to 6 months to help them learn new skills to transition into a new role.

Parts of the Group also offer continued support to those employees leaving the business via access to funded training, provided by the Company to develop trade and professional skills to enable them to change career. Parts of the Group also provide such employees with access to

outplacement to develop job search skills to assist them in securing new employment opportunities.

(20)

LA12 Percentage of employees receiving regular performance and career development reviews

All professional level (non-manual labour) employees undergo a mid-year and end-of-year Personal Development Review (PDR), where development needs are determined and

performance is assessed. All other employees (e.g. manufacturing) undergo capability reviews and are provided with relevant training opportunities where it is deemed appropriate.

Diversity and equal opportunity

LA13 Composition of governance bodies and breakdown of

employees per category according to gender, age group, minority group membership, and other indicators of diversity

Data on employees by gender and age is available in our 2013 Annual Report:

 Directors’ Report - Sustainability The Group adopted a Diversity and Inclusion (D&I) strategy in 2010 to support the recruitment, engagement and retention of talented employees from all backgrounds. It helps us to build a workforce that more closely reflects the diversity of the local population in each of our markets and will underpin the future sustainability of our business.

More information on our D&I Strategy is available in the ‘investing in our people’ section of our CR website.

LA14 Ratio of basic salary of men to women by employee category

SOCIAL: HUMAN RIGHTS

Investment and procurement practices

HR1 Percentage and total number of significant investment

agreements that include human rights clauses or that underwent human rights screening

Our mandated Mergers, Acquisitions & Disposal Process includes the assessment of non-financial risk, with appropriate reference to the Product Trading Policy, which contains an assessment of potential violations of human rights.

Our due diligence process for suppliers includes criteria on human rights.

See the ‘meeting high ethical standards’ and ‘working with suppliers’ sections of our CR

(21)

website for more information. HR2 Percentage of significant

suppliers and contractors that have undergone screening on human rights and actions taken

Our due diligence process for suppliers includes criteria on human rights.

See the ‘working with suppliers’ section of our CR website for more information.

HR3 Total hours of employee training on policies and

procedures concerning aspects of human rights that are relevant to operations, including the

percentage of employees trained

All employees are required to complete training on our Code of Conduct, which includes aspects of human rights. For more information on employee training see our CR website and 2013 Annual Report:

Non-discrimination

HR4 Total number of incidents of

discrimination and actions taken We do not tolerate harassment of any kind, _{including sexual, verbal, non-verbal and physical.} Abusive, humiliating or intimidating behaviour is never acceptable.

Globally we review the total number of dismissals for reasons relating to unethical behaviour and total number of enquiries to our ethics helpline. Both data sets include ‘employee relations and conduct’ which includes discrimination. Dismissals and ethics helpline information is reported in our 2013 Annual Report:

Our Code of Conduct and supporting policies and training outline our commitment to creating an inclusive work environment where individuals are respected and the value of a diverse workforce is recognised.Diversity and inclusion are included in the performance objectives of senior leaders See the ‘investing in our people’ section of our CR website for more information on diversity and inclusion.

Freedom of association and collective bargaining

HR5 Operations identified in which the right to exercise freedom of association or collective bargaining may be at significant risk, and actions taken to support these rights

We have agreements with trade unions and similar external representative organisations in a number of countries where collective bargaining is customary practice and in accordance with local laws, and subject to those laws, honour

employees' rights to join such unions and other organisations.

(22)

HR6 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour

The Company runs its operations in compliance with such applicable local laws.

Forced and compulsory labour

HR7 Operations identified as having significant risk for

incidents of forced or compulsory labour, and measures taken to contribute to the elimination of forced or compulsory labour

The Company runs its operations in compliance with such applicable local laws.

Security practices

HR8 Percentage of security personnel trained in the organisation's policies or

procedures concerning aspects of human rights that are relevant to operations

Our security staff are obliged to comply with all applicable legislation (including in relation to human rights) in the particular jurisdictions in which they work.

Indigenous rights

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken

No data available.

SOCIAL: SOCIETY Community

SO1 Nature, scope and

effectiveness of any programmes and practices that assess and manage the impacts of operations on communities, including entering, operating and exiting

The Group supports charities that make a positive contribution to the communities in which the Company operates.

The Group’s Community Investment programme, is underpinned by a Community Investment Policy, which includes donations, sponsorships and other support for local, national and international charities and not-for-profit organisations. The Group focuses on four areas

(23)

that are relevant to the Group’s business:  the Group’s customers, including the

armed forces and their families;  education, with a focus on science,

technology, engineering and maths education;

 local communities; and

 employee fundraising and volunteering. The programme is implemented locally to reflect the different needs of the communities in which the Group operates.

During 2013, the Group and its employees

contributed over £10 million to local, national and international charities and not-for-profit

organisations.

 Directors’ Report - Sustainability See the ‘supporting communities’ section of our CR website for more information.

Corruption

SO2 Percentage and total number of business units analysed for risks related to corruption

The Company analyses risk related to corruption, via our Operational Assurance Statement (OAS) process. Line leaders and functional directors report compliance against each part of the Operational Framework, our central governance system, to the Chief Executive twice a year through our OAS, which assures compliance with mandated policies and processes.

At a business level compliance is also viewed through the businesses Quarterly Business Review process.

Ethical and reputational risks are included in our formal risk assessment process and the

management and mitigation of these risks is embedded into our core business policies and procedures. Policies relating to responsible business conduct are now integrated into every section of our Operational Framework, the set of mandated policies, charters and processes that guide everything we do.

Financial and non-financial risk is managed as part of our Risk Management Framework. For more information see our CR website and 2013 Annual Report:

(24)

 Strategic Report – Principal Risk Summary

 Governance – Corporate Governance Report.

SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures

Employees complete training on our Code of Conduct and ethical standards, see our 2013 Annual Report:

 Governance – Corporate Governance Report

 Directors’ Report – Sustainability For more information see the ‘investing in our people’ section of our CR website.

SO4 Actions taken to incidents of corruption

Any employee found to be in breach of the

Company’s Code of Conduct, or any other relevant policies, is subject to appropriate disciplinary action. In 2013, 265employees were dismissed for reasons relating to breaches of the Group’s standards and policies, primarily for personnel and workplace issues.

Public policy

SO5 Public policy positions and participation in public policy development and lobbying

We lobby on issues specifically relevant to our business and the defence and security industry, either directly or through trade associations. Our Lobbying and Political Support Policy sets out the standards to be followed by anyone engaged in lobbying or other political engagement on behalf of BAE Systems, including those from outside the business. For more information see our 2013 Annual Report:

 Directors’ Report – Sustainability

For more information on Lobbying see the ‘how our business works’ section of our CR website. SO6 Total value of financial and

in-kind contributions to political parties, politicians, and related institutions by country

We do not make corporate contributions or donations to political parties. Nor do we engage in activity which favours one political party or group over another.

In the US, the BAE Systems USA Political Action Committee (PAC) enables employees to make bi-partisan contributions to candidates for

Congressional seats and to party organisations that support Congressional races. Eligible

(25)

the PAC, which is managed in compliance with the requirements of the Federal Election Commission. For information on Lobbying see the ‘how our business works’ section of our CR website.

Anti-competitive behaviour

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes

No significant legal actions for anti-competitive behaviour, anti-trust and monopoly practices during 2013.

Compliance

SO8 Monetary value of significant fines and total number of monetary sanctions for non-compliance with laws and regulations

There were no significant fines for

non-compliance with laws and regulations issued in 2013 against the BAE Systems group concerning the provision and use of products and services. See the ‘meeting high ethical standards’ section of our CR website for more information.

SOCIAL: PRODUCT RESPONSIBILITY Customer health and safety

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures

Lifecycle Management (LCM) is a mandated process at BAE Systems. The purpose of the LCM framework is to provide a structured approach to managing the Company's commitments for all types of Projects throughout their Lifecycles. LCM promotes the application of best practice

management and facilitates continuous improvement across the Company. The

application of LCM with appropriate tailoring is critical to the capability of the Businesses to deliver Projects on time, within projected cost and according to contract enabling them to meet external and internal customer commitments. Items considered in the LCM framework include reputation, safety, environment and supply chain. See our 2013 Annual Report:

 Strategic Report - Risk Management  Strategic Report – Sustainability

Summary

 Directors’ Report - Sustainability  Governance – Corporate Governance

(26)

Report.

For more information see the ‘product stewardship’ section of our CR website. PR2 Total number of incidents of

non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services, by type of outcomes

There were 35 safety enforcement notices for minor violations during 2013.

Product and service labeling

PR3 Type of product and service information required by

procedures, and percentage of significant products and services subject to such information requirements

We do not report on this indicator.

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes

We do not report on this indicator.

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

Customer satisfaction surveys are used to collect customer opinions on key customer-funded projects. This provides an opportunity for customers to share information on perceived performance levels, and identify areas of strength and weakness.

 Strategic Report - Key Performance Indicators

Marketing communications

PR6 Programmes for adherence to laws, standards and voluntary codes related to marketing

The sale and marketing of defence equipment is highly regulated and subject to well established strict government approval. BAE Systems is

(27)

communications, including advertising, promotion and sponsorship

committed to compliance with all applicable regulations.

See our CR website for more information. PR7 Total number of incidents of

non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion and sponsorship, by type of outcomes

We do not report on this indicator as we do not believe it is relevant to our business.

Customer privacy

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

We do not collect this information at global level.

Compliance

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

During 2013 there were 35 safety enforcement notices for minor violations in the UK businesses, but no fines recorded.