How can sustainability take flight in aerospace and defense?

The proliferation of satellites and drones has led to a rise in geospatial data, which typically refers to satellite and aerial imagery, cellphone pings, Internet of Things device data, transponders on ships, and synthetic-aperture radar.

With the help of this data, the A&D industry holds the potential to drive progress across various UN Sustainable Development Goals: for example, in detecting greenhouse gas emissions at manufacturing facilities and supply chains, monitoring for disaster management and helping farmers to maximize crop yield.

A Canada-based satellite company uses its satellites to monitor greenhouse gas emissions from industrial facilities around the world. While space agencies including NASA have been monitoring these gases for years to inform global climate change models, these newer satellites focus on a more granular level to track facilities with much lower emission rates.

Meanwhile, the rise of as-a-service business models can work wonders for players in the field of geospatial analytics, with models ranging from geospatial data-as-a-service to building integrated analysis models and providing recommendations.

EY teams have identified four actions that A&D companies can take to impact sustainability for the better. 

1. Invest and revisit business models: Leaders are dedicating portions of their R&D budgets to developing more sustainable materials and technologies. They are also building innovation hubs and incubators to make sure that there are always internal stakeholders with sustainability-related advances as their top priority. As noted, these sustainability-focused areas raise the potential for as-a-service business models that should be considered.

Business model innovation requires companies to re-examine, and often challenge, their own core competencies. Sometimes a value creation opportunity demands capabilities outside the company’s experience or beyond its sector. In these cases, manufacturing leaders should focus on building or joining an ecosystem.

2. Build a partner ecosystem and pursue transactions. Forward-thinking firms are increasingly focused externally as well as internally, recognizing that some of the most significant advances can be realized via increased collaboration with ecosystem partners. This can even include working with customers to introduce new commercial models — improving financial outcomes for both parties, as well as the environment.

A&D leaders need to determine where partnerships would best support value creation and delivery by extending capabilities, market presence and innovation. Ecosystems generally provide value creation opportunities for all participants, but leaders should look for ways to own them for greater control over how the additional value is spread.

3. Assess the links in your value chains — including a potential expansion of your portfolio — to understand who is creating the most value and how, showing whether greater collaboration (including with startups) is preferable. Startups and scale-ups are contributing significantly in the AAM as well as earth observation space. Many AAM players are in some form of an alliance with established A&D and mobility players, and the proliferation of satellites and drones has resulted in a rapid increase in the number of earth observation and space tech companies, creating headroom for alliances.

The M&A route could be more promising. In the EY CEO Outlook Survey from January 2023, 98% of advanced manufacturing respondents said they expected to actively pursue transactions (such as M&A, divestments and joint ventures) over the next 12 months. Not only does this route provide opportunities for expansion of offerings; it also becomes a convenient path for acquiring talent with superior technical skills and knowledge.

4. Address the need for talent. Regardless of sector, sustainability and digital enablement are high on c-suite agendas, and both areas require strategies enabled by talent. With a greater focus on sustainability, A&D organizations can appeal to recruits’ sense of purpose not only through strengthening national defense but in battling climate change. This talent is needed for pursuing new avenues for growth with new mindsets, as well as core to traditional revenue streams more greatly enabled by emerging technologies.