Responsibility at IBM

2012 Corporate Responsibility Report

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Overview

In this section, Chairman, President and Chief Executive Officer Ginni Rometty’s letter describes how IBM’s goal to unite its business and citizenship strategies is taking shape. We take a thoughtful, comprehensive approach to corporate responsibility and corporate citizenship at IBM, and we integrate that approach into many aspects of our company. In this section you will also find a high-level overview of some of our major activities.

Communities

It’s not enough to develop world-class technology, services and expertise—at IBM we realize we must directly apply these things to the communities in which we live and work in order to have a positive impact. In this section, you will find examples of the ways we practiced this approach over the course of 2012 and into 2013.

The IBMer

A great company is forever evolving and growing. At IBM, we make it a top priority to hire, support and retain the people who make us a great company. In this section, you will find examples of the ways we support both the personal and professional development of our employees.

Environment

IBM’s unwavering commitment to environmental protection is evidenced across all of our business activities, from our research, development, products and services to the solutions we provide our clients that help them be more protective of the environment. In this section of IBM’s Corporate Responsibility Report, you will find information on our environmental programs, performance and solutions during 2012.

Supply Chain

Social and environmental responsibility is an important part of our business relationships with our suppliers. We work closely with them to encourage sustained improvement throughout our global supply chain and across various aspects of corporate responsibility. In this section you will find examples of how we set requirements for the companies we do business with, grow the global diversity of our supply base and collaborate with industry groups and stakeholders.

Governance

IBM’s culture of ethics and integrity is guided by a rigorous system of corporate governance. In this section, you will find examples of the many ways we govern the conduct of the company, manage risk and contribute our expertise to public discourse.

Awards & Metrics

Many of our corporate responsibility efforts received recognition from others in 2012. The most significant of these are listed in “Awards and Recognition.” We rely on a number of metrics to measure our corporate responsibility efforts. Our Key Performance Indicators and other significant metrics can be found in “Performance Summary.”

Global Governance and Management System

IBM’s Corporate Policy on Environmental Affairs calls for environmental leadership in all of the company’s business activities.

Global Environmental Management System

Our corporate environmental affairs policy objectives range from workplace safety, pollution prevention and energy conservation to product design for the environment and the application of IBM’s expertise to help address some of the world’s most pressing environmental problems.

The policy is supported by corporate directives that govern IBM’s conduct and operations worldwide. These directives cover areas such as pollution prevention, chemical and waste management, energy management and climate protection, environmental evaluation of suppliers, product stewardship, and incident prevention and reporting.

IBM's commitment to environmental leadership is implemented through our Global Environmental Management System (EMS) which requires and confirms that we adhere to the same high standards all across the world.

Employee and management responsibility

Every employee is expected to follow IBM’s corporate environmental policy and report any environmental, health or safety concern to IBM management. Managers are expected to take prompt action when faced with a potential violation of the policy or its directives.

In addition, all of our employees are required by the company’s Business Conduct Guidelines to comply with environmental laws and with IBM’s own environmental requirements.

IBM executives are responsible for the environmental performance of their organizations or locations.

Our environmental programs and performance are reviewed annually by the Directors and Corporate Governance Committee of IBM’s Board of Directors. Formed in 1993, the Charter for this committee established its responsibility for reviewing IBM’s position and practices on significant issues of corporate public responsibility, including protection of the environment.

Environmental goals

Environmental goals are an important part of IBM’s EMS. We maintain environmental goals covering the range of our environmental programs, including climate protection, energy and water conservation, pollution prevention, waste management and product stewardship. These goals and our performance against them are discussed in their respective sections of this report, and are provided in the listing of IBM’s environmental Key Performance Indicators.

ISO 14001 Standard on Environmental Management Systems

In 1997, IBM became the first major company in the world to earn a single global registration to the International Organization for Standardization (ISO) 14001 Environmental Management System Standard. We achieved this credential within just one year of the finalization of the standard.

The initial registration covered IBM’s manufacturing, product design and hardware development operations across our business units worldwide. We have since expanded our global ISO 14001 registration to include our research locations that use chemicals, several country organizations with their non-manufacturing locations, our product development function, our Global Asset Recovery Services and our Integrated Supply Chain organization.

As our business model has evolved to include more services offerings, we have updated our EMS to appropriately address environmental opportunities and challenges in the services area.

ISO 50001 Standard on Energy Management Systems

IBM’s energy management program dates back to 1974, when our CEO issued a formal corporate policy calling for the conservation of energy and materials in all of IBM’s activities. Over the intervening years, we sustained our global energy management program and integrated it into the company’s global EMS.

Upon the issuance of the ISO 50001 standard on energy management systems in June 2011, IBM set forth a strategy to achieve verification of conformity of our EMS against this newly published standard.

Within one year of the issuance of this standard, we achieved ISO 50001 registration of our energy management program at the corporate level and as an integral component of IBM's global EMS. Our approach recognizes and leverages the fact that IBM’s existing EMS addresses both environmental and energy management.

Consistent with our global ISO certification strategy and following our successful ISO 50001 EMS registration at the corporate level, IBM’s major energy-consuming locations are now receiving registration audits of their site-specific energy programs under IBM’s single global ISO 50001 certification. Three of our manufacturing locations, one in the United States, one in Mexico and one in Canada, have successfully concluded their registration audits thus far. Additional IBM locations are undergoing ISO 50001 registration audits during 2013 and 2014 as we continue the demonstration of conformity of our global EMS, inclusive of our energy program, against the requirements of the ISO 50001 standard.

Public disclosure

IBM’s Corporate Policy on Environmental Affairs also calls for the company to publicly disclose information on our environmental programs and performance. This report marks IBM’s twenty-third consecutive year of annual corporate environmental reporting.

In addition to providing information on our environmental programs and performance in this report, which we have been publishing annually since 2002, we provide a report based on the Global Reporting Initiative (GRI) and information through a number of other voluntary reporting programs and tools, such as the Carbon Disclosure Project and the OneReport® Sustainability Reporting Network. IBM's additional environmental reporting may be found at the following websites:

Stakeholder Engagement

IBM has a variety of outreach programs through which we engage with various groups and individuals on the subject of the environment. Our community environmental outreach programs range from open houses and emergency preparedness drills with local organizations to the support of and participation in local environmental projects and environmental education efforts.

IBM has ongoing dialogues with many stakeholders, including socially responsible investors and other shareholders, environmental nongovernmental organizations (eNGOs), governments, employees and others on a range of environmental issues. We consider these relationships to be very valuable, as they allow us to share ideas and obtain various perspectives, input and feedback regarding our programs, activities and performance. They also inform our reporting, enabling us to better meet the information needs of a wide variety of interested people and entities.

In addition, IBM Stockholder Relations holds an annual Corporate Responsibility Financial Analysts Call and Webcast during which executives from various areas of corporate responsibility in IBM—including Corporate Environmental Affairs, Global Supply Chain, Corporate Legal/Governance, Global Human Resources and Corporate Citizenship & Corporate Affairs—present a brief update on our programs and performance and invite questions from analysts on any of the areas of corporate responsibility in IBM.

The executives participating on this annual analyst call are on IBM’s Corporate Responsibility Executive Steering Committee. Corporate responsibility is not a separate, standalone organization in IBM. Consistent with our century-long commitment to being a good corporate citizen, corporate responsibility is integrated throughout IBM. We coordinate across the company through our Corporate Responsibility Executive Steering Committee, which consists of executives responsible for the various relevant functions in IBM. The Committee is supported on a day-to-day basis by a Corporate Responsibility Working Group of representative experts from these various IBM functions.

Another example of engagement is collaborative innovation. We believe that integrating different expertise and different perspectives can accelerate new solutions to longstanding problems. You will find examples of IBM’s collaborative innovation—in research and solutions, with business partners, clients, universities and other entities—throughout this report.

Voluntary Partnerships and Initiatives

IBM is strongly committed to participation in voluntary programs and we have founded or joined many voluntary initiatives and partnerships with governmental and nongovernmental organizations over the years.

Some current governmental examples include the United States Environmental Protection Agency’s (EPA) ENERGY STAR®, SmartWay® and WasteWise programs and the European Union (EU) Code of Conduct for Energy Efficient Data Centers.

Examples of partnerships with eNGOs include our charter membership in the World Wildlife Fund’s Climate Savers program and membership in the Center for Climate and Energy Solutions (the successor to the Pew Center on Global Climate Change). We also work with and support organizations such as The Conservation Fund, the Environmental Law Institute and the World Environment Center (WEC).

In addition, we partner with other companies and institutions to foster solutions for environmental sustainability. For example, IBM is a founding member of the GridWise® Alliance, an organization representing a broad range of the energy supply chain—from utilities and technology companies to academia and venture capitalists. Its mission is to transform the electric grid to achieve a sustainable energy future.

Two recent initiatives follow:

  • In January 2013, IBM joined the Green Power Market Development Group (GPMDG) in Bangalore, India. Launched by the World Resources Institute (WRI) and the Confederation of Indian Industry, the objective of this initiative is to help improve the purchasing conditions for electricity generated from renewable sources and spur the growth of competitively priced renewable energy in this market. (IBM was a charter member of the WRI’s Green Power Market Development Group in 2000.)
  • In January 2012, IBM and the WEC formed the Innovations for Environmental Sustainability Council with the participation of major corporations. Its purpose is to explore how innovation in business process and technology can enable strategic solutions to major challenges such as those involving materials, energy, water, infrastructure and logistics. The Council recently published a report entitled “Meeting Next Generation Challenges through Innovations in Sustainability.” (IBM has been a member of the WEC since its founding in 1977.)

A more complete listing of our voluntary partnerships and initiatives may be found on IBM’s Voluntary environmental initiatives website.

We also encourage our employees to support environmental efforts. For example, through our Matching Grants program IBM matches contributions made by our US employees to a wide variety of environmental organizations including The Nature Conservancy and the World Wildlife Fund, as well as smaller groups dedicated to preserving lands and habitats in local communities.

In addition, our employees can support environmental organizations in their local communities through IBM’s On Demand Community (ODC) program. ODC is a first-of-its-kind global initiative to encourage and sustain corporate philanthropy through volunteerism. It provides our employees and retirees with a rich set of IBM technology tools they can use to help schools and nonprofit organizations with which they volunteer, including environmental organizations. The program combines the expertise, interests and skills of our employees with the power of IBM’s innovative technologies and solutions to help nonprofit organizations more effectively address community needs.

Environmental Investment and Return

Over the past five years, IBM has spent $89.4 million in capital and $498.5 million in operating expense to build, maintain and upgrade the infrastructure for environmental protection at our plants and labs, and to manage worldwide environmental programs.

Environmental Capital and Expense Worldwide

($ in Millions)
200820092010 2011 2012
Capital $31.7 $14.3 $15.1 1 $18.4 $9.9
Expense $111.3 $102.3 $90.6 $96.1 2 $98.2
Total $143.0 $116.6 $105.7 $114.5 $108.1
1 IBM has restated our worldwide Environmental Capital Cost for 2010 due to discovery that some costs were previously omitted from the 2010 Environmental report.
2 IBM modified our methodology for estimating operating expenses in 2011 to include information on expenses associated with compliance with worldwide environmental legal requirements for products, including costs associated with compliance with worldwide product takeback and recycling requirements.

IBM has tracked environmental expenses related to our facilities, corporate operations and site remediation efforts for more than 25 years, and began publicly disclosing this information in our environmental report for 1992. In 2011, we expanded our tracking of environmental expenses to include expenses associated with compliance with environmental legal requirements related to products, including those costs incurred for compliance with product takeback and recycling requirements. In 2012, total environmental expenses associated with IBM’s operations were $108.1 million.

IBM also estimates savings that resulted from our policy of environmental leadership. These include savings that come from energy, material and water conservation; recycling; packaging improvement initiatives; reductions in chemical use and waste, and process improvements from pollution prevention. Ongoing savings from the previous years’ initiatives are not carried over in this comparison, resulting in very conservative estimates.

In addition, IBM realizes avoidance of costs that likely would occur in the absence of our environmental management system. These savings are not measurable in the same way that expenses are, but avoiding these environmental costs does result in savings for IBM, and a reasonable attempt has been made to estimate them. In 2012, IBM’s estimated environmental savings and cost avoidance worldwide totaled $141 million.

IBM’s experience has shown that annual savings from our focus on conservation, pollution prevention and design for the environment consistently exceed environmental expenses, thus demonstrating the value of proactive environmental programs and performance.

$141 million

estimated environmental savings and cost avoidance worldwide in 2012

2012 Environmental Expenses Worldwide

($ in Millions)
Personnel $39.1
Consultant and legal fees 3.6
Laboratory fees 2.1
Permit fees 0.7
Waste treatment and disposal 7.7
Surface water and wastewater management operations 8.3
Air emission control operations 0.4
Groundwater protection operations 1.3
Product takeback and recycling costs 0.9
Waste and materials recycling 2.2
Superfund and former IBM site remediation 22.7
Other environmental operations 9.2
Total $98.2
 

2012 Estimated Environmental Savings
and Cost Avoidance Worldwide

($ in Millions)
Location pollution prevention operations* $34.6
Corporate operations* 5.6
Packaging improvements 17.3
Environmentally preferable materials usage 0.3
Energy conservation and cost avoidance 51.1
Superfund and site remediation efficiencies 1.7
Spill remediation cost avoidance** 4.9
Compliance cost efficiency*** 19.6
Potential fines, penalty and litigation avoidance**** 5.9
Total $141.0
* Savings or costs avoided by having internal professional staff and tools versus using external consultants and tools.
** These savings are estimates based upon certain assumptions. The figure for spill remediation cost avoidance is estimated considering IBM's actual experience with remediation costs.
*** Compliance cost efficiency considers costs avoided through proactive efforts to stay ahead of environmental regulations and requirements.
**** The estimation for the avoidance of potential fines, penalties and litigation does not include cost avoidance of potential business interruption or fines related to noncompliance with product environmental laws and regulations (e.g., EU REACH or RoHS requirements).
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