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Chairman’s Letter

A commitment to corporate responsibility pervades IBM, from new hires to the chairman’s office. In this year’s letter, Chairman, President and Chief Executive Officer Sam Palmisano describes IBM’s long-term approach to corporate responsibility, and the IBMers that make it possible.

IBM’s Approach

Through the years, IBM has consistently expanded the definition of corporate citizenship, pushing the boundaries of what is required to be considered a responsible enterprise. In this section of IBM’s 2010 Corporate Responsibility Report, you will find more detail on our approach to corporate responsibility, and some examples of how that approach manifested itself during the past year.

Communities

At IBM we engage with communities around the world by offering our technology, services and expertise to help solve some of the world’s most complex problems. While the monetary value of these contributions is great, we eschew checkbook philanthropy whenever possible. We believe that this approach is the most efficient, effective and sustainable way to practice good corporate citizenship. And we believe it is helping to make the world work better. In this section of IBM’s 2010 Corporate Responsibility Report, you will find examples of the contributions IBM made to the global community this past year.

The IBMer

For the last 100 years, IBM has pioneered innovative approaches to hiring, managing and retaining our work force. From some of the earliest thinking on work force diversity to progressive programs for employee well-being and leadership development, this ongoing commitment to our employees is critical to the success of IBM and IBMers. And as the nature of our business changes, we will continue to apply the same innovation and creativity we use to develop products and services to our relationship with employees. In this section of IBM’s 2010 Corporate Responsibility Report, you will find examples of the commitments IBM made to its work force this past year.

Environment

IBM has long maintained an unwavering commitment to environmental protection, which was formalized by a corporate environmental policy in 1971. The 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 to help them be more protective of the environment. Download this section of the report (2.2MB)

Supply Chain

IBM manages a supply chain of more than 27,000 suppliers in nearly 100 different countries. We understand that managing a supply chain of this size carries with it considerable social responsibility. Even so, we are continually expanding the definition of what it means to run a responsible supply chain, challenging ourselves and our suppliers to reach ever higher standards of social and environmental compliance. In this section of IBM’s 2010 Corporate Responsibility Report, you will find examples of IBM’s supply chain responsibility efforts over the past year.

Governance,
Ethics and Integrity

Both the size and nature of IBM’s business necessitate that it adhere to the highest standards of conduct. IBM employs more than 400,000 employees, and provides services and technology that support businesses, governments, schools, hospitals and highways. As such, integrity, transparency, privacy and risk management are all crucial parts of our business, and our commitment to making the world work better. In this section of IBM’s 2010 Corporate Responsibility Report, you will find examples of how IBM is setting the modern standard for business ethics.

Global Governance and Management System

Global Environmental Management System

IBM’s corporate environmental affairs policy calls for environmental affairs leadership in all of the company’s business activities.

The policy objectives range from workplace safety, pollution prevention and energy conservation to product design for the environment, continual improvement and the application of IBM’s expertise to help address some of the world’s most pressing environmental problems. The policy can be found at www.ibm.com/environment/policy.

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 conservation and climate protection, environmental evaluation of suppliers, product stewardship, and incident prevention and reporting.

IBM’s commitment to environmental protection is implemented through its global environmental management system (EMS).

Employee and Management Responsibility

Every employee is expected to follow the corporate environmental affairs policy and its directives 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 directives.

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

IBM executives are responsible for the environmental performance of their organizations. Site location executives are responsible for the environmental performance of their sites.

IBM’s environmental programs and performance are reviewed annually by the Directors and Corporate Governance Committee of IBM’s Board. 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. The company maintains environmental 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 IBM’s 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 Environmental Management System Standard

Over a decade ago, IBM became the first major company in the world to earn a single global registration to ISO 14001. The company 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 its business units worldwide. IBM has since expanded its global ISO 14001 registration to include its research locations that use chemicals, several country organizations with their non-manufacturing locations, its product development function, and its Global Asset Recovery Services.

As its business model evolves to include more services offerings, IBM updates its EMS to appropriately address environmental opportunities and challenges in the services area.

More information about IBM’s EMS and programs supporting its environmental objectives may be found at www.ibm.com/ibm/environment/.

Public Disclosure

IBM’s Corporate Policy on Environmental Affairs also calls for the company to publicly disclose information on its environmental programs and performance. This report marks IBM’s 21st consecutive year of annual corporate environmental reporting. IBM also participates in a number of other voluntary reporting programs, such as the Carbon Disclosure Project. More about IBM’s environmental reporting may be found at www.ibm.com/ibm/environment/annual.

Environmental Evaluations of Suppliers

IBM has long been committed to doing business with environmentally responsible suppliers and was an early leader in providing requirements addressing this topic in its global EMS.

1972
IBM established a corporate directive requiring the environmental evaluation of suppliers of hazardous waste services.
1980
IBM expanded its environmental evaluations of suppliers by establishing a second corporate directive which required the environmental evaluation of certain production-related suppliers.
1991
IBM further expanded its environmental evaluations of suppliers, adding a requirement that its product recycling and product disposal suppliers be evaluated.
2002
Nongovernmental organizations raised a concern about electronic waste being exported to some non-OECD countries. Though IBM confirmed that it was not shipping electronic waste products to non-OECD countries, IBM added a requirement to assess its suppliers and certain subcontractors they may use to handle recycling and/or disposal operations in non-OECD countries.
Icon of Progress: Corporate Leadership in Environmental Responsibility Icon of Progress: Corporate Leadership in Environmental Responsibility

Explore IBM’s continued leadership
in protecting the environment.

In 2010, IBM again expanded its supplier requirements. To help its suppliers build their own capability to succeed in this area, IBM established a requirement that all its first-tier suppliers establish a management system to address their social and environmental responsibilities. These suppliers are required to:

  • Define, deploy and sustain a management system that addresses their intersections with their employees, society and the environment;
  • Measure performance and establish voluntary, quantifiable environmental goals;
  • Publicly disclose results associated with these voluntary environmental goals and other environmental aspects of their management systems; and
  • Cascade these requirements to their suppliers who perform work that is material to the products, parts and/or services being supplied to IBM.

More information on these new supplier requirements may be found in the Supply Chain section of this report and on IBM’s supply chain environmental responsibility Web site.

Stakeholder Engagement

IBM has a variety of outreach programs through which it engages with various groups and individuals on the subject of the environment. The company’s 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 also 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. These dialogues are valuable, as they allow the company to share ideas and obtain feedback about its programs, activities and performance.

Another example of engagement is collaborative innovation. IBM believes integrating different minds and different perspectives can accelerate new solutions to longstanding problems. Since 2001, one way the company has embraced this ideal is through IBM’s Jams, an online technology that enables global conversations on strategic business and societal issues across industries, disciplines, stakeholders and national borders. For example, in 2010, IBM brought together 1,600 business executives, government officials, nongovernmental organization (NGO) leaders, journalists, analysts and environmental experts from more than 60 countries for the company’s Eco-Efficiency Jam—a two-day online, interactive discussion of the opportunities for continued advancement of eco-efficiency. The IBM Institute for Business Value wrote a report from the Jam—“The emergence of the eco-efficient economy”—and it can be found here.

1,600

business executives, government officials, nongovernmental organization (NGO) leaders, journalists, analysts and environmental experts from more than 60 countries took part in IBM’s
Eco-Efficiency Jam.

In April 2011, IBM held the “Start Jam”, which brought together hundreds of leaders from the U.K. and Ireland to explore how businesses can put sustainability at the heart of their strategies. Start Jam builds on the success of the IBM Summit at Start, a nine-day business summit held in September 2010 in association with Start—a national initiative inspired by HRH The Prince of Wales to promote and celebrate sustainable living. The objective was to move forward from the examination of the value and importance of sustainability in business to the questions around how to affect the strategic and cultural changes required to drive a genuine transformation in sustainability.

The Jam thus focused on the “How!”—How to influence consumer behaviors; how to build the right skills; how to optimize resources; and so on. Discussion threads were driven to focus on actions, collaborations, projects and commitments.

As part of its ongoing commitment to the social exchange of best practice ideas, IBM will summarize the key findings and highlight the creative ideas generated by Start Jam to share with participants.

The Eco-Patent Commons

The Eco-Patent Commons is a unique opportunity for global business to make a difference—sharing innovation to foster sustainable development. The Commons is an online collection of environmentally beneficial patents pledged by companies for free use by anyone. It was designed to facilitate the use of existing innovation that is protective of the environment and encourage collaboration for new innovation.

The Eco-Patent Commons was initiated by IBM and the World Business Council for Sustainable Development and launched in January 2008 with Nokia, Pitney Bowes and Sony. Since then, eight additional companies have joined the Commons including Bosch, Dow, DuPont, Fuji Xerox, Hewlett-Packard, Ricoh, Tasei and Xerox.

Examples of the environmental benefits of patents that may be pledged to the Eco-Patent Commons include:

  • Energy conservation or improved energy or fuel efficiency
  • Pollution prevention (source reduction, waste reduction)
  • Use of environmentally preferable materials or substances
  • Water or materials use reduction
  • Increased recycling opportunity

To date, the 12 member companies have pledged more than 100 patents to the Eco-Patent Commons, 28 of which were pledged by IBM.

For more information, to join the Commons or to view pledged patents, visit the Eco-Patent Commons Web site.

Voluntary Partnerships and Initiatives

IBM is strongly committed to participation in voluntary programs and has joined a number of voluntary initiatives and partnerships with governmental and nongovernmental organizations.

Some governmental examples include the U.S. Environmental Protection Agency’s (EPA) ENERGY STAR®, SmartWaySM and WasteWise programs, and the OECD Committee on Industry, Innovation and Entrepreneurship.

Partnerships with eNGOs include, among others: charter membership in the World Wildlife Fund’s Climate Savers program; charter membership in the Chicago Climate Exchange®; and membership in the Pew Center on Global Climate Change. IBM also works with and supports organizations such as The Conservation Fund, the Environmental Law Institute, the World Environment Center and the World Resources Institute. In addition, IBM is a founding member of The Green GridSM and a member of the World Business Council for Sustainable Development (WBCSD). In 2010, IBM became a founding member of the WBCSD Water Leadership Group. The WBCSD Water Leadership Group is focused on the development of new approaches to sustainable water management to achieve cost-effective, credible and operational outcomes around company water use, impacts assessment, measurement and reporting.

A more complete listing of IBM’s voluntary partnerships and initiatives can be found at IBM’s voluntary initiatives page.

IBM has partnered with the Wildlife Habitat Council (WHC) to manage many of its properties in ways that enhance habitats. Seven IBM sites (Armonk, New York; Boulder, Colorado; Research Triangle Park, North Carolina; Rochester, Minnesota; two locations in San Jose, California; and Toronto, Canada) have had their land management and wildlife habitat programs certified by the WHC.

IBM also encourages its employees to support environmental efforts. For example, through its Matching Grants program, the company matches contributions made by U.S. employees to a wide variety of environmental organizations ranging from international organizations such as The Nature Conservancy and the World Wildlife Fund to smaller groups dedicated to preserving lands and habitats in local communities.

In addition, IBM 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 IBM employees and retirees with a rich set of IBM technology tools they can use to help schools and the nonprofit community organizations in which they volunteer, including environmental organizations. The program combines the expertise, interests and skills of IBMers with the power of the company’s innovative technologies and solutions to help nonprofit organizations more effectively address community needs.

Environmental Investment and Return

IBM tracks its environmental spending (capital and expense) related to the operation of its facilities worldwide, as well as environmental spending associated with its corporate operations and site remediation efforts. In 2010, the total costs associated with these operations were $103.1 million.

Over the past five years, IBM has spent $108 million in capital and $517.6 million in operating expense to build, maintain and upgrade the infrastructure for environmental protection at its plants and labs, and to manage its worldwide environmental programs.

Environmental Capital and Expenses Worldwide
($ in millions)
2006 2007 2008 2009 2010
Capital $19.5 $30.0 $31.7 $14.3 $12.5
Expense* $105.2 $108.2 $111.3 $102.3 $90.6
Total $124.7 $138.2 $143.0 $116.6 $103.1

IBM also estimates the savings which have resulted from its commitment to environmental leadership. These include savings 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, yielding very conservative estimates.

IBM also realizes savings through the avoidance of costs that likely would occur in the absence of its 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 2010, IBM’s estimated environmental savings and cost avoidance worldwide totaled $138 million.

U.S. $138 million

estimated environmental savings and cost avoidance worldwide in 2010.

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

2010 Environmental Expenses Worldwide*
($ in millions)
Personnel $29.8
Consultant fees 3.4
Laboratory fees 1.8
Permit fees 0.7
Waste treatment and disposal 8.8
Water and wastewater management operations 10.2
Air emission control operations 1.2
Groundwater protection operations 1.1
Other environmental systems operations 3.0
Waste and materials recycling 2.5
Superfund and former IBM site remediation 21.0
Miscellaneous/other 7.1
Total $90.6
2010 Estimated Environmental Savings and Cost Avoidance Worldwide
($ in millions)
Location pollution prevention operations* $39.0
Corporate operations* 5.6
Packaging improvements 8.8
Environmentally preferable materials usage 0.2
Energy conservation and cost avoidance 47.5
Superfund and site remediation efficiencies 9.5
Spill remediation cost avoidance** 5.6
Compliance cost efficiency*** 18.1
Potential fines, penalty and litigation avoidance**** 3.7
Total $138.0