2014 Corporate Responsibility Report

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Year in Review

At IBM, corporate responsibility isn’t about generating flattering headlines or checking off items on a list. It’s about demonstrating what we believe in through the actions we take, the examples we set and the priorities that guide us. When high standards of corporate responsibility are achieved, they benefit not only the company, but also our employees, our clients and the communities around us. Our commitment is evident in the business we pursue, the partnerships we establish, the relationships we build with all of our stakeholders, and the achievements we’ve attained. Each year, we strive to evolve our corporate responsibility goals as the world around us transforms; 2014 was no exception.

There are five aspects of IBM’s corporate responsibility activities that are of particular interest to our stakeholders:

  1. The ability of IBM to positively affect societal progress in communities
  2. The support of our employees and communities
  3. The impact of IBM’s products and operations on the environment
  4. The management of our global supply chain
  5. The governance, ethics and integrity of our company

This section highlights our activity in 2014 in these five key areas of corporate responsibility. For more detailed information, please visit our corporate responsibility website.

Communities

In 2014, IBM expanded and deepened efforts to help governments, nonprofits, educators and communities transform themselves by helping to manage their toughest challenges. We leveraged our technologies, our expertise and our employees’ commitment to service across a broad spectrum of engagements around the world.

Below are selected examples of IBM’s corporate responsibility efforts in 2014:

Launched in 2011, IBM’s innovative Pathways in Technology Early College High School (P-TECH) grades 9-14 School Model shifted into high gear in 2014. The P-TECH network grew to 27 IBM- and partner-affiliated schools across urban, suburban and rural areas in three states. Forty P-TECH schools — affiliated either with IBM or with one of the nearly 100 companies that has joined the P-TECH revolution — are expected to be operational for the 2015-16 school year, and we expect 100 P-TECH model schools across five states and two countries to serve tens of thousands of students by fall 2016.

Taking the P-TECH model to scale would be meaningless without results, and P-TECH schools have delivered on that promise. Attendance rates are significantly higher than those of other schools. Students from historically underserved communities are making honor rolls for the first time, meeting the standards for timely promotion and graduation, taking and passing significant numbers of full-credit college courses while in high school, and positioning themselves to earn their high school diplomas and college degrees on accelerated schedules. Six young scholars from Brooklyn P-TECH’s inaugural class began the 2014-15 school year as high school students but finished it as college graduates — earning their degrees two years ahead of schedule. All six received job offers from IBM, and three will be attending four-year colleges and universities with scholarships.

P-TECH remains an adaptable model that works within existing public school budgets and admits students without “cherry picking” or testing. As nearly 100 corporations from global enterprises to regional businesses partner with school districts and community colleges to provide young people with educations that are rigorous and relevant, P-TECH is helping a generation bridge the skills gap, redefine its potential and reshape its destiny.

IBM’s Corporate Service Corps (CSC) provides pro bono consulting to community organizations and governments in developing economies to underpin our commitment to citizen diplomacy. The IBM Smarter Cities Challenge grant program deploys teams of IBM’s top talent who deliver pro bono expertise to cities and regions faced with the unique challenges of urban environments. In 2014, we broadened the reach of these programs by forging essential cross-sector partnerships and expanding the number of cities and communities that benefitted.

CSC forged new partnerships with clients, government entities and nonprofits on significant projects focused on protecting women’s health and preserving the environment. In Ghana, a CSC team collaborated with the Ghana Health Service and researchers from the Yale School of Medicine on an initiative to reduce mother-to-child HIV transmission. In Peru, the CSC worked with Becton Dickinson & Co. and the nonprofit CerviCusco clinic to expand outreach and cervical cancer testing to a larger population of women from underserved and often impoverished rural areas. And in the Amazon rainforest of Brazil, CSC partnered with The Nature Conservancy and local governments on a project to broaden the use of an online environmental portal to track land ownership and develop environmental management strategies that allow for economic growth.

IBM’s largest philanthropic initiative, the Smarter Cities Challenge, has delivered pro bono consulting valued at more than $50 million since 2010. During that time, we deployed 700 IBM experts in teams to work with 116 cities and regions around the world. Of particular note in 2014: Syracuse, New York, where a Smarter Cities Challenge team helped develop strategies that led to a 69 percent year-to-year increase in the collection of delinquent property taxes and fees (which was recognized by the 2014 Secretaries’ Award for Public-Private Partnerships — awarded by the Department of Housing and Urban Development, the Department of Agriculture, and the Council on Foundations); Perth, Australia, where a Smarter Cities Challenge team helped city officials develop a roadmap for improving the essential services infrastructure while reducing costs; Zapopan, Mexico, seeking to increase its role as a leading food and beverage producer by linking researchers and large and small producers across the production chain more effectively; and Dublin, Ireland, where an IBM team that included financial experts from HSBC developed an assessment of the business potential for municipally owned and distributed solar energy.

IBM Impact Grants enable pro bono skills-based volunteerism through delivery of IBM’s advanced capabilities in cloud, analytics, mobile, social and security to nonprofits and schools in local communities in more than 70 countries around the world. In 2014, IBM delivered more than 500 Impact Grants. In China, an Impact Grant helped the One Foundation develop a strategic plan to improve fundraising and operate more efficiently. In Japan, an Impact Grant including IBM SPSS Predictive Analytics software enabled us to provide data-driven insights to combat youth unemployment. An Impact Grant to the American Red Cross International Services department helped them evaluate strategies for using cloud-based tools for information management following disasters and other crises. Enabled by an Impact Grant, a five-day training session for more than 450 Egyptian government ministry managers helped them improve their leadership, social media and project management skills. A small-business resource marketing grant helped Nigeria’s National Association of Women Entrepreneurs provide business planning training to its constituency. And in the United States and United Kingdom, IBM and our partners Corporate America Supports You and the Military Spouse Corporate Career Network launched the Veterans Employment Initiative to provide data analyst training and job placement assistance for post-9/11 era veterans.

The IBMer

Throughout 2014, IBM launched or furthered a number of initiatives designed to give our employees the tools they needed to develop, learn and transform. We started the Watson Ambassador Program to train IBMers in telling the story of our cognitive technology that helps people make better and more informed decisions. Last year, thousands of IBMers voluntarily participated in the training course, and many became committed Watson Ambassadors. We also trained IBM HR professionals worldwide in the use of big data and analytics to enhance their effectiveness as their profession transforms.

We strive to help our employees adapt to the changing world around them by encouraging them to examine not just their individual health, but the overall health of the communities they live in. In 2014, we supported this initiative during the Ebola outbreak in West Africa. In response, IBM launched a social media platform to centralize global workforce communications, workplace infection control management, travel guidance and hardship considerations for employees in affected communities. In addition, IBM provided a number of social tools to help employees become better-informed consumers of their healthcare benefits.

In 2014, IBM continued support for our constituent groups. We received prestigious awards for Lesbian, Gay, Bisexual, Transgender workplace equality and the advancement of women. We furthered our support for people with disabilities by creating a learning framework for access to technical and leadership development opportunities. And we leveraged the Global IBMers Community on our internal website during our annual Cultural Adaptability Awareness Week to encourage IBMers to explore, learn about, and share their cultural experiences with others.

IBM’s leadership development efforts in 2014 focused on meeting today’s changing business needs with agility and foresight. We launched the Faculty Academy to advance the culture and practice of leader-led employee development. We created the IBM Manager Journey program to support leadership development at all levels of management. And our Growth and Transformation Team worked to create a more agile IBM through eight experiments across three geographies, culminating in the development of the Agile Toolkit and the IBM Agile Academy.

Environment

This report marks a quarter century of IBM’s sustained, annual, voluntary corporate environmental reporting. Our comprehensive environmental programs range from energy and climate protection to pollution prevention, chemical and waste management, resource conservation, and product design for the environment. IBM’s energy conservation and climate protection programs are highlighted here because of the global interest in this topic. In 2014, we achieved outstanding operational results in this area and continued to leverage our research, technologies and solutions to help clients and the world advance in ways that are more energy-efficient and protective of the planet.

Energy conservation across the enterprise

In 2014, IBM’s energy conservation projects across the company delivered savings equal to 6.7 percent of our total energy use, surpassing our annual goal of 3.5 percent. These projects saved and avoided the consumption of 325,500 megawatt-hours (MWh) of electricity and 267,200 million British thermal units (MMBtu) of fuel oil and natural gas, avoiding 142,000 metric tons of carbon dioxide (CO2) emissions. Our 2014 conservation measures also saved $37.4 million in energy expenses. Between 1990 and 2014, IBM saved 6.8 million MWh of electricity consumption, avoided 4.2 million metric tons of CO2 emissions (equal to 61 percent of the company’s 1990 global CO2 emissions), and saved $550 million through annual energy conservation actions.

New renewable electricity procurement goal

In February 2015, IBM established a new goal to procure 20 percent of its annual electricity consumption from renewable sources by 2020. To achieve this goal, IBM plans to contract for over 800,000 MWh per year of renewable electricity — enough to power a city of 100,000 people. IBM works with its electricity providers to directly procure renewable electricity to supply IBM’s facilities, making a clear connection by matching purchases to consumption as opposed to purchasing renewable energy certificates as offsets.

New third-generation CO2 emissions reduction goal

IBM has aggressively reduced greenhouse gas emissions since 1990 and has had an annual worldwide energy conservation goal since 1996. From 1990 to 2005, IBM’s conservation actions helped us avoid three million metric tons of CO2 emissions — an amount equal to 40 percent of our 1990 emissions. We then exceeded our second-generation CO2 emissions reduction goal to reduce operational CO2 emissions by 12 percent from 2005 to 2012, achieving a further reduction in CO2 emissions of 15.7 percent. Building on this accomplishment, IBM established its third-generation goal in February 2015 to reduce CO2 emissions associated with IBM’s energy consumption 35 percent by year-end 2020 against a base year of 2005, adjusted for acquisitions and divestitures. This represents an additional 20 percent reduction, from year-end 2012 to year-end 2020, over the reductions achieved from 2005 to 2012 under IBM’s second-generation goal.

Leveraging analytics for further efficiencies

We use IT-based monitoring and management systems to optimize our operations and reduce the use of energy. We have implemented real-time monitoring and energy management for systems controlling more than one-third of our building energy use and 60 percent of our data center and IT lab energy use. IBM has achieved an average of 10 percent reduction in annual energy use since 2011 for the buildings and systems monitored and managed by our TRIRIGA® Real Estate Environmental Sustainability Manager (TREES) solution. In 2014, the 28 sites monitored and managed by TREES achieved savings of 30,500 MWh and $1.6 million. We make this and other energy management solutions available to our clients to help them achieve greater operational efficiencies.

Energy solutions for a more sustainable future

IBM is applying its research and technologies to help the world use energy more efficiently and to improve renewable energy systems. For example, IBM’s energy and utility offerings combine data from available sensors and sources, then apply analytics and advanced weather forecasting to that data. The resulting information enables enhanced control of energy distribution that integrates conventional and renewable electricity generation sources with non-conventional storage assets to help deliver electricity reliably to commercial and residential consumers. Working with a range of leading partners, IBM’s solutions for energy management can help to power a more environmentally sustainable future.

Supply Chain

IBM buys from suppliers from nearly 100 countries and has infused social and environmental responsibility into the fabric of our business relationships. We work diligently with our suppliers to encourage them to achieve improvements within their operations and to cascade this mindset throughout their upstream supply chain, across various aspects of corporate responsibility. The scope of our work spans the requirement for suppliers to implement and sustain a Social and Environmental Management System, to embrace the elements of the Electronic Industry Citizenship Coalition (EICC) Code of Conduct, to set voluntary environmental performance goals, to measure performance, and to report publicly in order to increase the transparency of our supply chain.

In 2014, we continued our decade-long supply chain assessment activities by collaborating with our suppliers on 107 full-scope audits and 69 re-audits in 21 countries. These third-party audits measured compliance to the EICC Code, version 4.0.

During 2014, IBM and other members of the Conflict-Free Sourcing Initiative (CFSI) continued to leverage our collective resources and made significant progress toward achieving a supply chain with socially responsible sources of tin, tantalum, tungsten and gold. CFSI frequently updated its web-based listing of conflict-free smelters, highlighting companies that successfully completed their rigorous assessment. Last year also saw an incremental update of the CFSI Conflict Minerals Reporting Template (CMRT) and dashboard. This survey provides companies operating in multiple sectors with a common format for their upstream suppliers to identify the four focus materials, the smelters used and, if known, the country of origin of the raw materials. IBM has used successive versions of the CMRT to account for its use of the focus materials. In 2014, our efforts focused on harnessing the work of the past four years in preparing the reporting documentation filed on June 1, 2015, with the US Securities and Exchange Commission as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, section 1502; specifically, the Specialized Declaration Form and related Conflict Minerals Report. At the end of 2014, nearly 50 percent of IBM’s upstream smelter network was determined conflict-free by means of the CFSI’s third-party assessment protocol — a significant increase from the prior year.

IBM also continued its long-term commitment to developing a base of diverse suppliers, with global purchases totaling $2.9 billion, inclusive of first-tier and second-tier companies. To help our diverse suppliers, we maintained our support of and engagement with organizations worldwide that are dedicated to the nurturing and development of this valuable element of our global supply chain.

Governance

Our efforts to govern the conduct of the company, manage risk and contribute to public discourse in 2014 included a number of new and enhanced initiatives. Among these were online courses in ethics and integrity education for new employees, IBMers promoted to management positions, and those taking assignments in emerging markets. More than 45,000 employees took our survey on integrity at IBM, and the insights gleaned from their responses will inform our global ethics and integrity programs. In 2014, we also partnered with US universities to support the Young African Leaders Initiative fellows program, hosting 500 young African leaders for six weeks of networking and skills-building exercises in business, entrepreneurship and public policy.

Our enterprise risk management activities in 2014 included a new structured assessment approach for risk scenario planning, designed to better prepare IBM to adapt to society’s changing needs. We furthered our use of big-data automation to help gain end-to-end views of emerging risk and held risk workshops with teams in Latin America and Europe.

IBM’s public policy efforts in 2014 were highlighted with the announcement of a $100 million investment in South Africa, to be made over a period of 10 years. The Equity Equivalency Investment Program is one of our contributions to Broad-Based Black Economic Empowerment, an initiative of the South African government aimed at promoting economic transformation to enable meaningful participation of disadvantaged people in the economy.