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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.

Pollution Prevention

Hazardous Waste

The best way to prevent pollution is to reduce the generation of waste at its source. This has been a basic philosophy behind IBM’s pollution prevention program since 1971. Where possible, IBM redesigns processes to eliminate or reduce chemical use and substitutes more environmentally preferable chemicals. Chemicals needed for research, development and manufacturing must be properly managed, from selection and purchase through storage, use and disposal.

IBM developed a methodology to correlate the hazardous waste generated from its manufacturing operations to its production in 1992 and expanded its use to IBM sites worldwide in 1993. The company established a goal based on this methodology in 1995. That goal: to continually reduce the waste generated from IBM’s manufacturing operations relative to production.

This goal covers approximately 90 percent of the hazardous waste generated by IBM, which currently comes from three manufacturing sites.

In 2010, IBM’s hazardous waste generation indexed to output decreased 21.6 percent. This significant year-over-year decrease was largely attributable to process changes during the transition to lower line width microprocessor technologies that drove an increase in hazardous waste indexed to output in 2009 and source reduction projects in our manufacturing lines in 2010.

Hazardous Waste Generation
%21.6
Goal

Achieve year-to-year reduction in hazardous waste generation from IBM’s manufacturing processes indexed to output.

Result

In 2010, IBM’s hazardous waste generation indexed to output decreased by 21.6% (714 metric tons).

For waste that is generated, IBM focuses on preventing pollution through a comprehensive, proactive waste management program. Of the total amount of hazardous waste IBM generated worldwide in 2010, 49 percent was recycled and 29.7 percent was sent to landfills. Of the total amount sent to landfills, 97 percent was sludge from industrial wastewater treatment plants. Local government regulations required disposition of this sludge in secure hazardous waste landfills.

Hazardous Waste Management Worldwide

2010 Quantities: 8,400 metric tons

2010 Quantities for Hazardous Waste Worldwide

IBM’s total hazardous waste generation has decreased by 21 percent over the past five years, and has decreased by 96.3 percent since the 1987 base year of this metric.

Hazardous Waste Quantities Worldwide

metric tons x 1,000

2010 Quantities

Nonhazardous Waste

IBM also has focused for decades on preventing the generation of nonhazardous waste and recycling that which is generated. Nonhazardous waste includes waste such as paper, metals, plastics, deionized resins and nonhazardous chemicals.

IBM established its first goal to recycle nonhazardous waste streams in 1988. The goal has since developed on two fronts. The first included not only traditional dry waste streams, but also nonhazardous chemical wastes and end-of-life IT product waste from IBM’s own operations as well as IBM-owned equipment that is returned by external customers at the end of a lease. The second was to include nonhazardous wastes generated by IBM administrative, manufacturing and research operations in IBM owned, managed and leased locations meeting certain criteria.

In 2010, IBM generated 71,100 metric tons of nonhazardous waste. This represents a decrease of 10.2 percent when compared to 2009 volumes. The reduction was primarily due to a decrease in construction activities/projects, which is reflected directly in the amounts of nonhazardous construction debris and soil generated by IBM.

Nonhazardous Waste Recycling
Goal: 75% - Result: 79%
Goal

Send an average of 75% of the nonhazardous waste generated at locations managed by IBM to be recycled.

Result

In 2010, IBM sent 79% of its nonhazardous waste to be recycled.

Nonhazardous Waste Generated and Recycled Worldwide
(metric tons x 1,000)
Year20062007200820092010
Total recycled 102 84 62 60 56
Total generated 134 107 82 79 71
Percent Recycled* 76% 78% 76% 76% 79%

IBM’s source reduction and waste prevention projects not only help protect the environment, they also provide a financial benefit. In 2010, these programs prevented the generation of over 4,300 metric tons of nonhazardous waste, generated $6.3 million in revenues from the sale of recyclable materials and accounted for $7.0 million in cost savings and cost avoidance.

Chemical Use and Management

Under the U.S. Superfund Amendments and Reauthorization Act (SARA) of 1986 and the U.S. Pollution Prevention Act (PPA) of 1990, companies are required to file an annual inventory of routine releases to the environment and off-site transfers of waste for treatment and disposal in addition to recycling, treatment and energy recovery activities (collectively known as “reportable quantities”) for more than 600 chemicals listed on the U.S. Toxics Release Inventory (TRI) list.

IBM’s operations rely on the use of some chemicals on the TRI list.

63 metric tons

less TRI-listed chemicals were used by IBM in 2010 as compared to 2009.

International Performance Measure

IBM has used TRI reportable quantities as a metric to track the environmental performance of its operations globally since 1993. One of IBM’s objectives continues to be identifying opportunities to minimize its TRI releases to the environment. In 2010, IBM sites worldwide used 18 of the TRI-listed chemicals in amounts greater than the reporting threshold of 10,000 pounds (4.54 metric tons) of use per year.

The company’s total reportable quantities associated with chemicals on the U.S. TRI list decreased by 1.8 percent (63 metric tons) in 2010, compared to 2009.

IBM’s 2010 total reportable releases to the environment and waste transferred off-site for treatment and disposal from its worldwide operations amounted to 514 metric tons, an increase of 29 metric tons from 2009.

This small increase was primarily due to nitrate compounds discharged to one of our manufacturing site’s wastewater treatment plant. It was triggered by a ramp up of production and is expected to drop in early 2011. The increase in nitrate compounds represented 62 percent of the total releases to environment and waste transferred off-site for treatment and disposal in 2010.

Worldwide Reportable Quantities* Associated with Chemicals on the
U.S. Toxic Release Inventory List

Reportable Quantities in metric tons x 1,000

Worldwide Reportable Quantities Associated with Chemicals on the U.S. Toxic Release Inventory List
2010 Worldwide Reportable Quantities* Associated
with Chemicals on the U.S. Toxic Release Inventory List
ChemicalMetric Tons
Sulfuric acid (aerosol only) 1,227
Xylene 832
Nitrate compound 495
Ethylbenzene 179
Nitric acid 154
Hydrogen flouride 153
n-methyl-2-pyrrolidone 122
All others 339
Total 3,501
Total Releases, Treatment and Off-Site Transfers
of Chemicals on the U.S. Toxic Release Inventory List* 2010

3,655 metric tons

Total Releases, Treatment and Off-Site Transfers of Chemicals
Total Releases to Environment & Wastes Transferred
Off-Site for Treatment and Disposal Worldwide*

metric tons x 1,000

Total Releases to Environment & Wastes Transferred Off-Site