IBM Position on Scope 3 GHG emissions

Scope 3 greenhouse gas (GHG) emissions are not a company's actual emissions. Instead, they are the direct emissions of numerous other entities with whom a company interacts. These entities include all suppliers around the world across all tiers (e.g., from the origin of a raw material to a finished product), all of a company's customers, and all of a company's employees as those employees commute to a workplace. These entities are collectively referred to as a company's "value chain." Under a voluntary accounting standard named the Greenhouse Gas Protocol, the direct emissions of all the entities described above are also allocated and assigned to the company in question as that company's indirect, Scope 3 emissions. These same emissions may also be assigned multiple times to intermediary companies in the value chain. Therefore, Scope 3 emissions represent the double-counting, triple-counting, quadruple-counting, and more of another entity's actual emission.

Determining such indirect Scope 3 emissions across a company's "value chain" in a factual, reliable manner is extremely challenging if not impossible due to the lack of primary source data across multiple entities that can be credibly attributed to individual companies in question. As such, most Scope 3 emissions cited by companies are order of magnitude "guesstimates" that are built upon layers of assumptions and generic substitutes for primary source data with widely varying degrees of credibility and completeness. This is true regardless of whether they are communicated in a way that implies that they are factual numbers.

While these estimates can help companies realize in a macro sense where many actual, direct Scope 1 emissions are likely to occur from a multitude of entities across a "value chain," their lack of factual basis, reliability, and credibility render most of them unsuitable for numeric goals against which real progress needs to be tracked. Likewise, they are rarely suitable for comparing products, services or performance as there are too many inherent assumptions that must be made and too many ways to manipulate estimates in order to end up with the numbers one may seek.

Of the fifteen Scope 3 emissions categories defined by the GHG Protocol's Corporate Value Chain Emissions Accounting and Reporting standard, IBM can deterministically calculate emissions in one specific situation under the "Purchased goods and services" category — namely, emissions associated with electricity IBM consumes in third-party operated spaces that IBM leases for data center operations (referred to as co-location data centers). We can do so because we know the actual quantity of electricity that we consume. In addition, because IBM has control over its consumption of electricity in co-location data centers, we include it and the associated emissions in our energy and climate goals. Otherwise, we do not have suppliers from whom we can reliably determine emissions attributable to IBM's involvement with them. We do not employ contract manufacturers. IBM's business typically represents only a small percentage of any supplier's revenue and we do not control their operations.

Nevertheless, recognizing that there exists an interest in the overall idea of indirect Scope 3 emissions, IBM attempts broad approximations of some emissions in four additional Scope 3 categories. These broad approximations do not represent all of the Scope 3 emissions assigned to IBM in these categories but only those pertaining to aspects for which we have some relevant information. We do not estimate Scope 3 emissions in other categories because the assumptions that must be made lack requisite credibility.

IBM believes that real reductions of emissions are directly and demonstrably achieved when the organization generating the emission takes action to do so. This requires each organization to build its own capacity to succeed for the long term, regardless of whether IBM continues to procure from it or not. This capacity building is essential to address climate change across society-at-large.

At IBM, we work with suppliers with that objective in mind. Since 2010 IBM has required all of its first-tier suppliers to implement an environmental management system, measure and set goals to reduce their GHG emissions, and publicly disclose their results. Building upon these requirements, in April 2021, IBM enhanced its supplier engagement by establishing a new goal requiring key suppliers in emissions-intensive business sectors to set a goal to reduce their Scope 1 and Scope 2 emissions that is aligned with scientific recommendations from the Intergovernmental Panel on Climate Change to limit Earth's warming to 1.5°C above pre-industrial levels.

IBM has long been committed to doing business with suppliers who conduct themselves with high standards of ethical, environmental, and social responsibility, no matter where they operate. We support this commitment not only by setting specific environmental requirements for our suppliers but also by partnering with them to help drive their continual improvement. Individual companies know their business, operations, impacts and opportunities. They are best positioned to deliver measurable results and should be recognized for their achievements. In that regard, IBM does not take credit for a supplier's accomplishment as our own.