Responsibility at IBM

2012 Corporate Responsibility Report

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.

2012 Year in Review

At IBM, corporate responsibility is fully integrated with our business model. This is evidenced in the strategy we set, the alliances we establish and the relationships we build with the communities around us. There are four aspects of IBM’s corporate responsibility activities that are of particular interest to our stakeholders:

  1. The support of our employees and communities.
  2. The impact of IBM’s products and operations on the environment.
  3. The management of our global supply chain.
  4. The governance, ethics and integrity of our company.

In this section you’ll find a summary of our activity in 2012 regarding these four key aspects of corporate responsibility. You’ll also find a few examples of our values at work. For more detailed information please visit our corporate responsibility website.

Employees and Communities

Our 430,000 employees across the world personify IBM–they represent our brand, they embody our values and they drive our success. And so we continuously strive to find new ways to support our employees’ growth, development and satisfaction. Hiring, nurturing and retaining employees continued to be a top priority at IBM in 2012. Over the last year we worked on fostering the alignment of IBMer engagement and client experience. We understand that the more we challenge and support our employees to be at their best, the more effective and satisfied they are in their jobs, which in turn improves customer interaction and satisfaction. To this end we held a broad range of tactical activities across geographies and business groups, from new manager training in India to "IBM University" in the United Kingdom and virtual job fairs in the United States and elsewhere. In 2012 we also intensified our focus on social media in order to cultivate expertise, share health and wellness information, understand employee sentiment, foster collaboration with each other, reach out to new hires and extend learning opportunities. Using analytics to drive action was also an important component of our 2012 activities that helped train HR professionals and identify key performers and effective managers. And we continued to help build employee skills and improve the IBMer experience through IBM’s pioneer activities: the Corporate Service Corps, Executive Service Corps and Smarter Cities Challenge.

Sharing experiences, expertise to reinvent our cities

In 2012, 173 IBMers were deployed to 31 cities around the world to assist local government leaders in their efforts to make their cities smarter and more livable. They worked to develop strategies on topics such as improving efficiency, spurring economic growth and engaging citizens. As part of the second full year of our Smarter Cities Challenge program, a three-year, 100-city program, these IBMers drew on the experience and knowledge gained through their work and immersed themselves in issues critical to each city, such as the administration of healthcare, education, public safety, social services, transportation, communications, sustainability, budget management, jobs and economic opportunity, and energy and utilities. The Smarter Cities Challenge is perhaps the best example of IBM’s integrated approach to corporate citizenship. This $50 million competitive grant program provides teams of IBM experts to 100 cities around the world over a three-year period. Though this is a philanthropic endeavor, it draws on the expertise and knowledge we’ve gained through building a substantial business in helping cities collect and analyze critical data, gaining a clearer understanding of how these complex governmental systems of systems really work, and especially to identify how they can work better.

“The truth is some serious work has been done, very complete work,” said Mayor Francisco de la Torre of Málaga, Spain, which used a Smarter Cities Challenge grant to help develop a sustainable, integrated economic plan based on an expanded culture of entrepreneurship. “Many people have been interviewed, many hours have been spent studying Málaga’s reality and I believe they have found a series of key proposals to advance our technological development, drive entrepreneurship and therefore, create jobs.”

In November 2012, IBM welcomed more than 150 Smarter Cities Challenge city leaders—including nearly 20 mayors representing every inhabited continent, as well as urban thought leaders and IBM's Smarter Cities Challenge experts—to the Smarter Cities Challenge Summit in Palisades, New York. Following the Summit, IBM Citizenship published a white paper, “How to Reinvent a City: Mayors' lessons from the Smarter Cities Challenge,” sharing the insights mayors learned from their participation in this IBM Citizenship initiative.

The Smarter Cities Challenge engages IBM top talent directly in addressing city problems and the development of meaningful solutions, helping build expertise among IBMers and transferring that expertise to city officials to achieve long term results.

Other employee initiatives

On the employee well-being front, IBM’s Integrated Health Services (IHS) team placed particular emphasis on holistic health in 2012. Mental health care coverage is now available to IBMers in many countries, and our IHS team launched programs to help relieve the negative effects of stress. Safety—both in buildings and on the road—was the target of other 2012 well-being programs. We also built on the foundation of programs that drive healthy behaviors through smoke-free policies, nutritious food selections at the worksite and options for physical activity, weight management, infection prevention and disease screening. Meanwhile, we continue to expand the reach of primary care. Two years ago, IBM took an extraordinary step by providing 100 percent coverage for primary healthcare for IBMers in the United States who are enrolled in IBM’s self-insured health plans. In 2012, the expansion of fully covered primary care was extended to many other countries including Mexico, the Philippines and Turkey. More information on employee well-being is available in this Report.

We also continued to demonstrate leadership in our support of constituent groups in the areas of lesbian, gay, bisexual and transgender workplace equality and the advancement of women and people with disabilities. We sponsored the 2012 Cultural Adaptability Awareness Week, designed to highlight the programs, activities and resources we’ve developed to help IBMers cultivate deeper cultural knowledge and insights. More information on diversity is available in this Report.

IBM’s long history of investing in the development of its leaders continued to be a top priority during 2012 as we focused on building unique experiences and refreshing core programs to accelerate advancement to leadership positions. These include the Joint Leadership Development Program, the Integration and Values Team and the Client Experience Team.

Understanding the importance of working collaboratively across all of civil society—with lawmakers, regulators, public officials and civic leaders—we contribute our expertise, experience and perspective on some of the most urgent issues facing the world today. In 2012, one important area of focus for us was the worldwide shortage of graduates prepared for careers in science, engineering, technology and math (STEM). IBM is working to address this issue by encouraging action on the part of states, localities and the US Congress. We are working to drive education reform, workforce training and immigration/migration legislation and policy, and have used our localized efforts (for example, Pathways in Technology Early College High School or P-TECH) to develop recommendations and demonstrate innovative educational approaches.

Better preparing students for promising careers

During his 2013 State of the Union address, President Barack Obama highlighted a new approach to educating high school students, designed to better prepare them for jobs. He was referring to a collaborative effort between IBM, educators and business to develop an innovative school model for grades 9–14 that helps prepare students for college completion or a career in computer science technology or electromechanical engineering technology, and he stated that every student should be offered such opportunities.

The first school to implement this model, called Pathways in Technology Early College High School (P-TECH), opened in September 2011 in Brooklyn, New York. P-TECH is a collaboration between the New York City Department of Education, the City University of New York, New York City College of Technology and IBM. During 2012 the P-TECH model was replicated in four Chicago schools, and plans were developed to spread its innovative model elsewhere. IBM is sponsoring one of these schools, the Sarah E. Goode STEM Academy, in collaboration with the Chicago Public Schools, City Colleges of Chicago, and Richard J. Daley College. Via the leadership of Governor Cuomo, the P-TECH model is also expanding throughout New York State and to other cities across the United States.

This new model for public school innovation brings together the best elements of high school, college and the world of work. Within a six-year, structured and integrated timeframe, students graduate with not only a high school diploma, but an Associate in Applied Science degree, along with the skills and knowledge to continue their studies or be competitive for jobs in the information technology industry. This model was designed to be both widely replicable and sustainable as part of a national effort to enhance career development and technical education.

The P-TECH model was designed not only to better prepare young people for 21st century jobs, but to also address the shortage of skills to fill key positions in the workforce. As the model expands, IBM hopes to work with others to help many more students and better connect education to jobs and spur local economic development.

Helping communities, employees and the company

In 2008, IBM first launched a unique service program, loosely modeled after the Peace Corps, and designed to deliver deep benefits at the individual, corporate and community levels. Since then the Corporate Service Corps (CSC), has sent nearly 2,000 IBMers to more than 30 different countries, working collaboratively with governments, educational institutions, and nonprofit organizations to address local challenges at the intersection of technology and society to develop sustainable economic solutions. CSC teams comprise eight to fifteen IBMers who spend approximately six months on a CSC engagement–three months in preparation, one month full-time in the local community and two months in post-service work. This blending of social responsibility and business expertise produces a triple benefit: premier leadership development for civic-minded individuals, pro bono problem solving for communities in need, and a greater understanding of new markets for IBM.

In 2012, CSC provided services to 32 communities in 20 countries, engaging in 100 vitally important projects. One example is a CSC team that worked with the Kenyan government, the US government and the Presidents Emergency Fund for AIDS Relief (PEPFAR), in the fight against cervical cancer. The groups worked collaboratively to solve the information management challenges that arise from collecting data between more than 4,000 clinics and six levels of healthcare facilities spread over a large geographical area serving 15 million women. With the CSC team’s help, the program will collect more reliable data to improve screening rates, which have already jumped from almost none to 70 percent in five years. Work like this helped earn IBM the No.1 ranking in The Civic 50, a ranking of America’s most community-minded businesses published by BusinessWeek in November 2012. The Civic 50 measures how companies use their time, talent and financial resources to improve their communities. The award recognizes the continuing and growing impact and leadership of our global corporate service work.

Environment

IBM has long maintained an unwavering commitment to environmental protection, formalized in a corporate environmental policy in 1971. Our policy calls for IBM to be an environmental leader across all of our business activities—from our research, operations and products to the services and solutions we provide our clients.

Our comprehensive environmental programs range from energy and climate protection to pollution prevention, chemical and waste management to resource conservation and product design for the environment. IBM’s energy and climate programs are highlighted here because of the increased global interest in this topic. In 2012, we achieved outstanding operational results and continued to leverage our research, technologies and solutions to help clients and the world grow in ways that are more energy efficient and protective of the planet. More information on environmental issues is available in this Report.

Energy conservation across the enterprise

In 2012, IBM’s energy conservation projects delivered savings equal to 6.5 percent of our total energy use, significantly exceeding our annual goal of 3.5 percent. These projects avoided the consumption of 336,000 megawatt-hours (MWh) of electricity and 215,000 million Btu of fuel oil and natural gas, representing the avoidance of 155,000 metric tons of CO2 emissions. They also saved $35 million in energy expense. From 1990 through 2012, our annual energy conservation actions have avoided 6.1 billion kWh of electricity consumption, avoided 3.9 million metric tons of CO2 emissions (equal to 57 percent of the company’s 1990 global CO2 emissions) and saved $477 million.

In 2009, amid business growth and continued increases in global energy prices, IBM created an aggressive strategy to conserve 1,100,000 MWh of energy by year-end 2012. This was a substantial undertaking because 1,100,000 MWh represented over 20 percent of the total energy IBM consumed during 2008. Over the last four years, an integrated team from IBM’s environmental and finance staffs, real estate organization and business units saved 1,246,000 MWh of energy through conservation and efficiency, exceeding our target by 13.3 percent. More than 6,000 individual projects were completed across more than 500 facilities in 56 countries.

Data center energy efficiency

IBM manages a diverse portfolio of data centers all over the world. In 2012, the European Commission, the executive body of the European Union (EU), awarded 43 IBM data centers in 19 countries “Participant” status on data center energy efficiency, based on the EU Code of Conduct for data centers. The registered data centers represent more than 70 percent of IBM’s strategic outsourcing data center space in the EU. This honor represents the largest portfolio of data centers from a single company to receive this recognition to date.

Performance against our 2nd generation climate protection goal

As of year-end 2012, we reduced our operational CO2 emissions by 15.7 percent through conservation and purchases of renewable energy, exceeding the company's stated goal of a 12 percent reduction by 2012 using 2005 as the base year. This achievement is particularly noteworthy considering that between 1990 and 2005 IBM had already reduced its operational CO2 emissions by an amount equal to 40 percent of the company’s 1990 emissions through energy conservation.

Research to advance renewable energy

Scientists from IBM Research are working with others to develop an affordable photovoltaic system that can convert 80 percent of incoming solar radiation into useful energy. The design is based on a low-cost, large dish-like concentrator and micro-channel cooled high performance photovoltaic chips that can be mass produced. If successful, it could provide sustainable energy and potable water to locations around the world including southern Europe, Africa, southwestern United States, South America and Australia.

Supply Chain

IBM conducts business with suppliers located in nearly 100 countries, with social and environmental responsibility being a major aspect of our business relationship. We work closely with our suppliers to help them attain improvements throughout our global supply chain across various aspects of corporate responsibility. This work begins with our requirement for suppliers to implement and sustain a Social and Environmental Management System, which encourages suppliers to set voluntary goals, measure their performance and report publicly in order to increase transparency across the entire supply chain.

In 2012, we continued our supply chain assessment activities conducting 377 initial audits and re-audits of suppliers located in 29 countries. These third-party audits measure supplier compliance to the Electronic Industry Citizenship Coalition (EICC) Code or the IBM Supplier Code of Conduct. Though there is more to do, we saw continued improvement in code compliance across our global supply chain.

During 2012, IBM and other members of the EICC, the Global e-Sustainability Initiative (GeSI), and companies from other sectors continued working toward the goal of achieving a supply chain with socially responsible sources of tin, tantalum, tungsten and gold. EICC/GeSI updated its web-based listing of Conflict-Free Smelters highlighting companies that successfully completed their rigorous assessment. The CFS assessment is directed at smelters and refiners that play a crucial role in the extended supply chain, as they are the link where concentrated ores are converted into the higher level materials that are used in technology products. The year also saw the release of the updated EICC/GeSI Conflict Minerals Reporting Template and Dashboard. This survey provides companies a common format for their upstream suppliers to identify the use of the four focus materials, smelters used and—when known—the country of origin of the raw materials. IBM has deployed successive versions of this survey to account for its use of the four materials and is providing consolidated results to its clients.

IBM also saw continued growth in its base of diverse suppliers, with purchases reaching $3.3 billion for both first-tier and second-tier companies. In parallel, we maintained our support and engagement with organizations worldwide that are dedicated to the nurturing and development of this important element of the extended supply chain. More information on our supply chain efforts is available in this Report.

Governance, Ethics and Integrity

At IBM, a rigorous set of corporate governance systems facilitate our ability to achieve the highest standards of ethics, transparency and integrity. One such system is our Corporate Responsibility Steering Committee, composed of senior executives who meet periodically to provide leadership and direction on key corporate responsibility issues. The Steering Committee is supported by our Corporate Responsibility Working Group, which includes representatives from 10 functional areas who meet monthly to manage IBM’s corporate responsibility activities and stakeholder engagement across the company. We also work shoulder-to-shoulder with communities, governments and the social sector to engage and collaborate with stakeholders.

Our Business Conduct Guidelines reflect our longstanding commitment to ethical conduct and decision-making. Every IBMer receives training in the Guidelines every year to promote the highest ethical standards in our work.

We have developed a consistent, systemic and integrated approach to risk management to help determine how best to identify, manage and mitigate significant risks throughout the company. In 2012, we continued to expand risk education and training, and focused on applying technology, tools and analytics to support risk management.

We take privacy and security very seriously at IBM, and we consider these issues in everything we do. We are aware that institutions of all types must work to earn the public’s trust in their ability to steward information, and in turn we as consumers must take educated steps to protect ourselves and our families. In 2012, IBM launched a number of initiatives around privacy and expanded others already underway. For example, we worked with the Future of Privacy Forum to develop a consumer trust seal, we continued our involvement with the Pro Bono Privacy Initiative to help human services agencies navigate privacy and data protection issues, and we furthered our work on the Privacy by Design program. More information on our integrity activities is available in this Report.

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