This week’s announcement that five of the world’s biggest aerospace and defence firms were seeking opportunities in the environmental and energy technology sectors makes a lot of sense.
Western governments are slashing military budgets in an attempt to bring their deficits down and the reality of global politics means defence companies can’t just turn to the developing world to find new customers to arm.
This comes on top of the decline in defence spending in European countries since the end of the Cold War. Where some national manufacturers could once survive solely as a contractor to their own governments, now they must search for new export opportunities if they are to thrive.
Under these conditions, it’s not surprising that some European firms are looking to consolidate. It must have come as a bitter strategic blow to BAE Systems and EADS when their proposed merger collapsed last week.
With governments firmly reluctant to allow the job losses that would almost inevitably result from such mergers, the need for new markets is even more imperative.
So why go green? In their statement, the companies (Lockheed Martin, Raytheon, Saab, Finmeccanica and Northrop Grumman) themselves recognise the scale of the so-called global challenges they say they are ready to address. Climate change – how to prevent it and how to mitigate its effects – is one of the biggest crises mankind has every faced.
The answer is probably not altruism. Businesses are out to make profit not save the world, although I’m sure they would welcome doing so in the process – plus it’s good PR. By focusing on energy and environment issues, in some ways these companies are simply following the money.
Governments are spending less on their militaries because the national security threats have changed. Instead of destruction by nuclear weapons, we are now scared of climate catastrophe, natural disasters and running out of energy. And so the funding is flowing to those trying to solve or prevent these problems.
There’s also some natural crossover. Aerospace and defence firms possess huge technological expertise, high-tech research facilities and a keen understanding of innovation – just the things you need to solve the fiendishly difficult engineering problems that environmental issues present.
Many companies are actually already involved in these sectors. Some have a presence through their security arms, protecting oil rigs and power plants. The natural extension of that is in smart grid technology, where they can extend their knowledge of secure infrastructure with sophisticated sensors and communication to public networks.
Others are involved in energy generation and alternative power sources. Military bases require secure energy supplies and even the often climate sceptic US is investing hundreds of millions through its defense department on renewable technology. No wonder then that the likes of Boeing and Lockheed Martin have operations in solar, wind and marine generation.
Then there’s the aerospace aspect. These firms aren’t just helping to develop more efficient engines and turbines, they’re even taking on radical new projects, such as Qinetiq and Boeing’s attempts to build solar-powered aircraft. Plus the entry of unmanned aerial vehicles (UAVs) to the civilian sphere is opening up all sorts of new ways that drones can help gather data and monitor the environment. There’s even a UAV manufacturer called Aerovironment – the very embodiment of this crossover.
In fact, in some ways, the statement released this week is more an indicator of a growing trend than a major turning point. Organised by the hosts of a conference promoting this very issue, the announcement suggests how far the industry has come as much as where it wants to go.
But it’s also a reminder that the move won’t be easy or straightforward. Aerospace and defence firms won’t just be swapping one set of government contracts for another. They’ll need partners, business models and a strong strategy. Some are already far more involved than others and some companies are even withdrawing from the more traditional aspects of the energy sector. If they can make the right moves, however, the opportunities could be huge.