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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.

Supplier Assessment and Improvement Plans

IBM continued to deploy its supply chain assessment activity with focus on growth market countries in which we have grown our purchasing during the year.

Two additional countries, Singapore and South Korea, were added to the roster of in-scope activity. A large proportion of resources was allocated to 380 initial audits completed in 2010 along with 23 re-audits of suppliers in the target countries. These assessments total more than 900 from 2004 through 2010, and measure supplier compliance to both the Electronic Industry Citizenship Coalition (EICC) and IBM Codes of Conduct. In 2010, IBM was the largest user of the EICC’s Validated Audit Process (VAP), directing all hardware supplier initial assessments through this sector-developed approach. For suppliers and buyers, the EICC VAP provides a common audit for sharing results and eliminating duplicate costly assessments.

Supplier Initial Audit Results—Global Cumulative (2004–2010)

Argentina, Brazil, China, Czech Rep, Hungary, India, Korea, Malaysia, Mexico, Philippines,
Poland, Romania, Singapore, Slovakia, Taiwan, Thailand and Vietnam


IBM’s supplier assessment protocol requires that all audited suppliers create and submit a Supplier Improvement Plan (SIP) for all noncompliance—with priority given to major noncompliance. 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 following the completion of all improvement actions. IBM’s Supply Chain Social Responsibility (SCSR) team independently reviews and advises on the submitted SIPs and their likely impact toward code compliance. In 2010, a total of 316 SIPs (covering hardware and services suppliers) were reviewed and accepted from suppliers (audited during the previous 12 months) all within 90 days of the initial audit.

The effectiveness of IBM’s audit-SIP-re-audit approach was further illustrated in the past year. Re-audits of services suppliers located in China, India, Mexico, the Philippines and Thailand yielded results of 85 percent with no priority/major code noncompliance after completion of the SIP. This is a testament to the commitment of our suppliers to make the necessary improvements to reach code compliance and therefore generating benefits accruing to the employees of these firms. The remaining 15 percent that still had major noncompliance were required to submit a supplemental SIP or face potential resourcing of their IBM business to other suppliers. We will be monitoring the progress of those suppliers against the supplemental SIPs. We also consider removing business from those suppliers if they do not make progress. These actions underscore the importance to IBM of a socially and environmentally compliant supply chain.

900

assessments measuring supplier compliance from 2004 through 2010.