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.”

2012 Performance Data Summary

Over the course of a year, IBM uses a series of metrics to measure our corporate responsibility efforts. Below is a summary of the data in several important areas. Our Key Performance Indicators (KPIs) for various parts of the business are also noted, along with some explanation.

Denotes Key Performance Indicator.

Employees

Learning

At IBM, we focus on allowing IBMers to flourish by providing guidance and opportunities for career and expertise growth, allowing IBM and IBMers to succeed in this rapidly changing world. IBM blends traditional, virtual, and work-enabling learning and development activities to accomplish this. This strategy enables us to provide timely, comprehensive, and targeted learning while achieving more efficient, effective learning delivery.

20082009201020112012
Learning Investments Worldwide ($M) 648 490 547 466 477
Learning Hours Worldwide (M) 23.2 25.5 28.6 27.4 33
Learning Hours Per Employee 61 64 67 63 78

Women in the Workforce

For over 100 years, IBM has shown a dedication to addressing the specific needs of women in our workforce and to creating work-life and career development programs that address their needs. We are committed to the progress and leadership development of women in our workforce and providing opportunities across the more than 170 countries where we do business.

20082009201020112012
Women in the Workforce %
Global Workforce 28.9 28.7 28.1 28.5 30
Global Executives 21.2 21.2 21.4 21.5 22.3
Managers 24.5 24.6 24.8 24.6 25.6

Global Illness/Injury Rate

20082009201020112012
Global Illness/Injury Rate
Total Number (per 100 employees) 0.3 0.27 0.27 0.33 0.29

Volunteering

IBM supports and encourages employees in volunteering in their communities. IBM celebrated its Centennial in 2010-11 and the exceptionally high volunteer hours for 2011 reflect the many special volunteer projects associated with the Centennial. In 2012, volunteering returned to more usual conditions but still showed a rise over pre-Centennial years.

20082009201020112012
2012 Retiree and Employee Volunteer Hours (k)
Asia Pacific 143 118 111 663 116
Europe, Middle East, Africa 175 155 198 430 216
Latin America 41 43 44 152 39
North America 1,170 954 1,110 1,956 1,210

Giving

IBM tracks global corporate contributions by issue, geography and type of grant. Giving by issue is important as our goal is to maintain education as our primary focus. Giving by geography is important to understand the alignment of our resources to our global operations. The type of giving—services, technology (including software) and cash—is important as we focus on providing the best of our company’s technical services and technology to address key social issues.

While education is our highest priority, we currently intend to maintain some investment in human services, culture, health and the environment. Additionally, we want to keep flexibility for new initiatives and to meet extraordinary external conditions, such as disaster relief. Our contributions in 2012 met these goals. Our overall contributions rose by about $1 million and education remained our largest area of activity.

The percentage growth of our contributions in 2012 over the prior year was lower than average. However, in 2011 contributions grew over the prior year by a larger percentage than average due to special contribution initiatives associated with our Centennial. 2012 marked a return to contribution levels consistent with the pattern of the past five years.

IBM is a globally integrated enterprise operating in nearly 170 countries. This is reflected in the distribution of our contributions by geography. Some of our contributions are given on a globally competitive basis, so geographical distribution may vary due to the number and quality of applications. By type of contribution, technology and services as a percentage of total contributions increased in 2012, consistent with our focus on providing solutions.

We do not set goals for percentage change in contributions year over year, nor for giving by geography or by type of contribution. We focus instead on increasing the quality of our work with organizations on projects that successfully use IBM solutions and that have significant impact on key social issues. Current trends in contributions will not necessarily continue, but rather will be determined within the framework of increasing the effectiveness of our contributions.

2008 - 2012 Global Contributions

20082009201020112012
Global Corporate Contributions by Issue ($M)
K–12 Education45.444.034.728.824.7
Higher/Other Education82.692.4116.8113.0118.3
Culture10.55.73.23.83.7
Human Services15.315.07.717.916.9
Health4.04.24.34.53.5
Other19.319.916.122.724.8
Environment2.24.76.45.45.2
Total179.3185.9189.2196.1197.1
Global Corporate Contributions by Type ($M)
Cash42.940.339.346.942.6
Technology93.8102.2105.391.399.2
Services42.643.444.657.955.3
Total179.3185.9189.2196.1197.1
Global Corporate Contributions by Geography ($M)
United States94.677.175.870.869.9
Asia Pacific24.445.434.836.335.9
Canada3.48.46.86.87.1
Europe, Middle East, Africa44.435.254.360.264.4
Latin America12.519.817.522.019.8
Total179.3185.9189.2196.1197.1

Environment

IBM maintains goals covering the range of its 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 the Environment section of this report. The goals identified here as KPIs are based on stakeholder interest and materiality. IBM considers all of its goals to be important metrics of the company’s performance against its commitment to environmental protection.

Energy Conservation

IBM’s goal is to achieve annual energy conservation savings equal to 3.5 percent of IBM’s total energy use. In 2012, IBM again achieved this goal, attaining a 6.5 percent savings from its energy conservation projects.

20082009201020112012
Energy Conservation
As % of total electricity use 6.1 5.4 5.7 7.4 6.5

CO2 Emissions Reduction

Between 1990 and 2005, IBM’s energy conservation actions reduced or avoided CO2 emissions by an amount equal to 40 percent of its 1990 emissions. To further extend this achievement, IBM set an aggressive “2nd generation” goal: to reduce the CO2 emissions associated with IBM’s energy use by 12 percent between 2005 and 2012 through energy conservation and the procurement of renewable energy.

As of year-end 2012, IBM’s energy conservation results and procurement of renewable energy yielded a 15.7 percent reduction in its energy-related CO2 emissions since 2005 – achieving and exceeding our 12 percent reduction goal.

20082009201020112012
CO2 Emissions Reduction
% reduction against the 2005 base year -1.6 -5.7 -16.7 -16.0 -15.7

Product Energy Efficiency

IBM’s product energy goal is to continually improve the computing power delivered for each kilowatt-hour of electricity used with each new generation or model of a product. Performance is tracked by product line: Servers and Storage Systems.

     
Product Energy Efficiency Please see the Product Energy Efficiency table.

Recycled Plastics

In 2012, 25.5 percent of the total weight of plastic resins procured by IBM and its suppliers through IBM’s corporate contracts for use in IBM’s products were resins that contained between 25 and 100 percent recycled content. Comparing only the weight of the recycled fraction of these resins to the total weight of plastics (virgin and recycled) purchased, 12.6 percent of IBM’s total weight of plastic purchases in 2012 was recycled plastic versus the corporate goal of 5 percent recyclate.

20082009201020112012
Recycled Plastics
% of total plastics procured through IBM contracts
for use in its products that is recyclate
10.3 13.2 11.5 12.4 12.6

Product End-of-Life Management

IBM’s goal is to reuse or recycle end-of-life IT products such that the amount of product waste sent by IBM’s Product End-of-Life Management (PELM) operations to landfills or incineration for treatment does not exceed a combined 3 percent of the total amount processed.

In 2012, IBM’s PELM operations sent only 0.3 percent of the total processed to landfill or incineration facilities for treatment.

20082009201020112012
Product End-of-Life Management
% of total processed sent by these operations
to landfill or incineration for treatment
0.6 0.5 0.6 0.4 0.3

Hazardous Waste Management

IBM’s goal is to achieve year-to-year reduction in hazardous waste generated from IBM’s manufacturing processes indexed to output. IBM’s hazardous waste generation indexed to output increased 2.9 percent in 2012.

There were two primary factors for this year-to-year increase: 1) an increased use of a solvent in a photolithography process, and 2) a mechanical problem that resulted in additional water entering a hazardous waste stream before the situation could be addressed.

20082009201020112012
Hazardous Waste Reduction
% change in hazardous waste generated from
manufacturing operations indexed to output
-10.9 +8.4 -21.6 -3.5 +2.9

Nonhazardous Waste Recycling

Our voluntary environmental goal is to send an average of 75 percent of the nonhazardous waste generated at locations managed by IBM to be recycled. In 2012, we recovered and recycled 87 percent of our nonhazardous waste.

20082009201020112012
Nonhazardous Waste Recycling
% recycled of total generated 76 76 79 78 87

Water Conservation

IBM’s goal is to achieve annual water savings equal to 2 percent of total annual water usage in microelectronics manufacturing operations, based on the water usage of the previous year and measured as an average over a rolling five-year period. In 2012, new water conservation and ongoing reuse and recycling initiatives in IBM’s microelectronics operations achieved an annual 2.2 percent savings in water use, resulting in a rolling five-year average of a 2.2 percent savings versus the 2 percent goal.

20082009201020112012
Water Conservation
% annual water savings in microelectronics manufacturing
based on previous year usage and measured as an average
over a rolling five-year period
4.6 3.1 2.8 2.6 2.2

Supply Chain

2012 total supplier spend was down $1.2 billion as the result of: divestiture of IBM's Retail Store Systems business, marketplace dynamics, a reduction in labor subcontractor usage, and non-repeatable spend in 2011 for IBM's Centennial and Watson promotional activities.

Supplier diversity provides IBM a competitive advantage through gains in market share and client satisfaction by giving global opportunities to diverse owned businesses. IBM’s Global Supply strategic goals and objectives are supported by diverse suppliers around the world that deliver value in areas such as flexibility, innovation and sustainability, thereby helping to contribute to a Smarter Value Chain.

20082009201020112012
Supplier Spending by Category
Services and General Procurement (%) 68 69 64 64 64
Production Procurement (%) 29 28 33 33 33
Logistics Procurement (%) 3 3 3 3 3
Services and General Procurement ($B) 26.1 22.6 22.1 23.4 22.8
Production Procurement ($B) 11.4 9.3 11.6 12.0 11.5
Logistics Procurement ($B) 1.0 0.9 1.0 1.1 1.0
Supplier Spending by Location
North America (%) 39 39 35 34 35
Asia Pacific (%) 30 29 35 34 35
Europe, Middle East, Africa (%) 25 25 22 23 21
Latin America (%) 6 7 8 9 9
North America ($B) 14.9 12.8 12.3 12.5 12.4
Asia Pacific ($B) 11.4 9.4 12.2 12.5 12.4
Europe, Middle East, Africa ($B) 9.8 8.1 7.5 8.3 7.4
Latin America ($B) 2.4 2.5 2.7 3.2 3.1
20082009201020112012
First-Tier Spending
Total US ($B) 12.5 10.9 10.7 10.6 10.7
Diverse US ($B) 1.5 1.4 1.5 1.7 1.7
Diverse non-US ($M) 745 806 742 881 939

IBM’s supplier social responsibility assessment protocol requires that all audited suppliers create and submit a Supplier Improvement Plan (SIP) for all non-compliance, with priority given to major non-compliances. The SIP forms a conduit, linking initial audit findings to supplier-generated improvements geared toward resolution of root causes with verification taking place through a re-audit scheduled following the completion of all improvement actions. The reduction in 2012 Supplier Improvement Plans was the result of a higher degree of supplier code compliance during full audits in 2011-2012.

20082009201020112012
Supplier Improvement Plans Completed and Accepted 169 84 316 473 311
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