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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.

2010 Performance
Data Summary

Over the course of a year, IBM uses a series of metrics to measure our corporate responsibility efforts. On this page you will find 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 of each.

Denotes Key Performance Indicator.

Employees

At IBM, we focus on enabling 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-enabled learning and development activities to accomplish this. As realized in 2010, this strategy enables us to provide timely, comprehensive and targeted learning while achieving more efficient, effective learning delivery.

20062007200820092010
Learning Investments Worldwide ($M)682622648490547
Learning Hours Worldwide (M)19.622.323.225.528.6
Learning Hours Per Employee5558616467

IBM has a long-standing commitment to understanding employee issues and concerns through the use of employee surveys and analysis. In 2011, IBM will begin implementing a more contemporary approach to employee surveys. We will shift from large, enterprise-wide surveys to surveys tailored to local needs or focus areas that enable the business to move more nimbly. These new survey methods will include more frequent, targeted surveys focused on business performance. Employee participation in these surveys will help IBM develop more actionable insights around topics that are important to the targeted employee population and have direct application to moving the business forward. These survey techniques will also help foster a culture of analytics within IBM’s business. (Note: The industry benchmark IBM compares itself against also declined from 2009 to 2010.)

20062007200820092010
Employee Satisfaction (%)6769676965

IBM has demonstrated 100 years of commitment to addressing the specific needs of women in our workforce, and to creating work-life and career development programs that address their needs. We continue to monitor the progress and leadership development of women in our workforce and provide opportunities across the 170 countries where we do business.

20062007200820092010
Women in IBM Workforce (%)
Global Workforce28.528.828.928.728.1
Global Executives19.720.321.221.221.4
Managers24.524.824.524.624.8
Global Illness/Injury Rate
Total Number (per 100 employees)0.320.300.270.270.26
Retiree and Employee On Demand Community (Hours in Thousands)
Asia Pacific134163143118111
Europe, Middle East, Africa284210175155198
Latin America3142414344
North America1,2631,3031,1709541,110
Total registrations inception through 2010 was 164,129.
(Employees: 150,356 Retirees: 13,773)

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. Our balance of contributions in 2010 met these goals. Our overall contributions rose by 1.8 percent, in line with the five-year trend.

IBM is a globally integrated enterprise operating in over 170 countries. In 2010, the percentage of contributions in mature markets generally fell, while contributions in developing markets rose. 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, cash as a percentage of total contributions dropped slightly in 2010, consistent with our emphasis on giving services and technology.

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 partners 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.

20062007200820092010
Global Corporate Contributions by Issue ($M)
K–12 Education49.441.745.444.034.7
Higher/Other Education51.549.282.692.4116.8
Culture12.311.910.55.73.2
Human Services19.816.715.315.07.7
Health10.64.64.04.24.3
Other7.940.719.319.916.1
Environment0.61.82.24.76.4
Total152.1166.6179.3185.9189.2
Global Corporate Contributions by Type ($M)
Cash48.843.842.940.339.3
Technology59.255.893.8102.2105.3
Services44.167.042.643.444.6
Total152.1166.6179.3185.9189.2
Global Corporate Contributions by Geography ($M)
United States95.791.894.677.175.8
Asia Pacific19.922.324.445.434.8
Canada4.03.63.48.46.8
Europe, Middle East, Africa26.140.844.435.254.3
Latin America6.48.112.519.817.5
Total152.1166.6179.3185.9189.2
Employee Charitable Contribution Campaign (U.S.)
Amount Donated ($M)34.735.136.136.136.2
Employee Participation Rate (%)5758575959
Recipient Agencies*7,7428,3668,7769,4869,706
Employee Charitable Fund (Canada)
Amount Donated ($M)3.43.33.03.03.0
Employee Participation Rate (%)5249494342
Recipient Agencies*1,2751,3231,1501,3731,480
*Data for 2006–2009 has been revised.

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 the online IBM Corporate Responsibility 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.

IBM’s goal is to achieve annual energy conservation savings equal to 3.5 percent of IBM’s total energy use. IBM again achieved this goal in 2010, attaining a 5.7 percent savings from energy conservation projects.

20062007200820092010
Energy Conservation
As % of total electricity use3.93.86.15.45.7
Renewable Energy Procured
As % of total electricity use7.38.58.611.311.2

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 2010, IBM’s energy conservation results and procurement of renewable energy yielded a 16.7 percent reduction in its energy-related CO2 emissions since 2005.

20062007200820092010
CO2 Emissions Reduction
% reduction against the 2005 base year+2.0-1.6-5.7-16.7
Product Energy EfficiencyPlease visit our Product Energy Efficiency section
Recycled Plastics
% of total plastics procured through IBM contracts for use in its products that is recyclate—against annual goal of 5%11.710.610.313.211.5

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 2010, IBM’s PELM operations sent only 0.6 percent of the total processed to landfill or incineration facilities for treatment.

20062007200820092010
Product End-of-Life Management
% of total processed sent by these operations to landfill or incineration for treatment1.10.80.60.50.6

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 decreased by 21.6 percent in 2010.

20062007200820092010
Hazardous Waste Reduction (%)-8.1-8.4-10.9+8.4-21.6
Nonhazardous Waste Recycling
% recycled of total generated against an annual goal of 67% (in 2006) and 75% (2007-2010)7678767679

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 2010, new water conservation and ongoing reuse and recycling initiatives in IBM’s microelectronics operations achieved an annual 1.8 percent savings in water use, resulting in a rolling five-year average of a 2.8 percent savings versus the 2 percent goal.

20062007200820092010
Water Conservation (%)7.06.04.63.12.8

Supply Chain

20062007200820092010
Supplier Spending by Category
Services and General Procurement (%)6467686964
Production Procurement (%)3331292833
Logistics Procurement (%)32333
Services and General Procurement ($B)23.225.026.122.622.1
Production Procurement ($B)11.711.411.49.311.6
Logistics Procurement ($B)0.90.91.00.91.0
Supplier Spending by Location
North America (%)4243393935
Asia Pacific (%)2726302935
Europe, Middle East, Africa (%)2627252522
Latin America (%)54678
North America ($B)15.016.014.912.812.3
Asia Pacific ($B)9.79.811.49.412.2
Europe, Middle East, Africa ($B)9.29.99.88.17.5
Latin America ($B)1.91.62.42.52.7

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.

20062007200820092010
First-Tier Spending
Total U.S. ($B)12.712.612.510.910.7
Diverse U.S. ($B)1.31.41.51.4*1.5
Diverse Non-U.S. ($M)61570974580674.2
*Data for 2009 has been revised.

IBM’s supplier social responsibility assessment protocol requires that all audited suppliers create and submit a Supplier Improvement Plan (SIP) for all noncompliance—with priority given to major noncompliances. 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.

20062007200820092010
Supplier Improvement Plans Completed and Accepted16984316