2014 Corporate Responsibility Report

Energy conservation and climate protection

IBM recognizes climate change is a serious concern that warrants meaningful action on a global basis to stabilize the atmospheric concentration of greenhouse gases (GHGs). We believe all sectors of society and the economy, as well as governments worldwide, must participate to address climate change.

Climate change

IBM has been a leader in addressing climate change through our energy conservation and climate protection programs for decades. IBM’s leadership is defined by our:

  • Longstanding global commitment
  • Comprehensive and multifaceted programs covering the company’s operations, products and services
  • Leading-edge innovations and client solutions
  • Significant results, both early and ongoing, benefiting IBM, our clients and the world

A six-part strategy

We have a longstanding commitment to climate protection and execute a six-part strategy to reduce the GHG emissions related to our operations:

  1. Designing, building, updating and operating facilities, including data centers and manufacturing operations, that optimize their use of energy and materials and minimize GHG emissions
  2. Purchasing electricity generated from low carbon dioxide (CO2)-emitting and renewable sources where it makes both business and environmental sense
  3. Minimizing the use and emissions of GHGs in semiconductor manufacturing, including perfluorocompounds (PFCs, a family of GHGs) and other GHGs
  4. Requiring our suppliers to maintain an environmental management system that includes energy use and GHG emissions inventories and reduction plans
  5. Reducing employee commuting and business travel
  6. Increasing the efficiency of IBM’s logistics operations

In addition, for our hardware and software products and services, IBM’s strategy includes designing and providing clients with energy-efficient offerings that also help reduce their climate impact.

IBM considers energy and material conservation to be the cornerstone of our climate protection efforts. IBM does not have plans to use emissions offsets to become “carbon neutral” for all or part of our operations. Our efforts to reduce IBM’s GHG emissions are focused on delivering results by devoting available resources to actions, products and solutions that actually increase energy efficiency and reduce GHG emissions for both IBM and our clients, rather than merely offsetting them.

Conserving energy

IBM formalized its energy conservation and management program in 1974 and has continued it unabated ever since. Energy conservation is a major component of our comprehensive, multifaceted climate protection program because the release of CO2 by utility companies powering our facilities, or from our use of fuel for heating or cooling, represents the greatest potential climate impact associated with our operations.

In 2014, IBM’s energy conservation projects across the company delivered annual savings equal to 6.7 percent of our total energy use, versus the corporate 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, and an associated 142,000 metric tons of CO2 emissions. The conservation projects also saved $37.4 million in energy expense, an increase of $1.6 million over 2013 savings. These strong results are due to our continued, across-the-board focus on energy demand reduction, efficiency, and the implementation of standard, global energy conservation strategies for facility operating systems.

IBM’s energy conservation goal recognizes only completed projects that actually reduce or avoid the consumption of energy in our operations. Reductions in energy consumption from downsizings, the sale of operations and cost avoidance actions such as fuel switching and off-peak load shifting are not included in the results for measuring performance against achieving this goal. Moreover, the conservation results cited above are conservative in that they include only the first year’s savings from the projects. Ongoing conservation savings beyond the first year are not included in the results. Accordingly, the total energy savings and CO2 emissions avoidance from these conservation actions is actually greater than this simple summation of the annual results.

6.7%

In 2014, IBM’s energy conservation projects delivered annual savings equal to 6.7 percent of its total energy use — surpassing our goal of 3.5 percent.

6.8M

From 1990 through 2014, IBM conserved 6.8 million MWh of electricity, avoiding 4.2 million metric tons of CO2 emissions and saving $550 million.

Electricity and fuel use and related CO2 emissions

Scope 1 and Scope 2 CO2 emissions

    CO2 emissions (estimated)
metric tons x 1,000
  Electricity and fuel use
(1,000 MMBtu)
Calculated with grid
emissions factors
Reduced by the CO2 avoided by
renewable electricity purchases
2014 20,842 2,092 1,842
2013 21,190 2,186 1,962
2012 21,613 2,404 2,195
2011 21,758 2,397 2,182
2010 21,622 2,426 2,156

IBM uses the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, developed by the World Resources Institute and the World Business Council for Sustainable Development, for estimating and reporting its CO2 emissions.

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 its annual energy conservation actions.

Managing IBM’s energy program

Our global energy management program leverages the expertise of more than 50 IBM energy management professionals deployed around the world. The team has created best-practices checklists that set minimum expectations for building systems and operations, including controls and equipment for lighting, heating/ventilating/air conditioning (HVAC), central utility plants, compressed air, data center and IT systems, cafeterias, and office systems.

All IBM sites using 2,000 MWh/year or more of energy must complete the checklists, perform a gap analysis and develop an energy conservation implementation plan a minimum of every four years. The program is buttressed by several enterprise-level databases that collect, store and analyze energy-use data, conservation project results, completed checklists, and relevant key performance indicators. These analyses enable monthly metrics reporting to the management team and the identification of opportunities for improvement. The continuous review of energy use and conservation performance has driven the strong results noted above.

More than 2,200 energy conservation projects involving a full range of energy efficiency initiatives delivered savings by 341 IBM locations globally in 2014. Examples include:

  • Projects to match building lighting and occupancy schedules or install more efficient lighting systems were implemented at 181 locations, reducing electricity use by 9,800 MWh while saving $1.4 million.
  • HVAC systems or operating schedules were modified at 155 locations, reducing 36,100 MWh of electricity use and 97,800 MMBtu of fuel use, saving $4.4 million.
  • Central utility plant projects were implemented at 72 locations, reducing 33,600 MWh of electricity and 103,200 MMBtu of fuel use, saving $5.1 million.
  • More than 200 manufacturing energy efficiency projects — including fab tool consolidation, idling test tools when not in use, optimization of manufacturing temperature and humidity settings, and data center efficiency improvements — were implemented, saving 53,200 MWh of electricity, 37,700 MMBtu of fuel and $4.8 million.
  • Data center cooling and server and storage virtualization and consolidation projects saved over 160,000 MWh of electricity consumption and $17.5 million.

Applying analytics to drive further efficiencies

IBM’s TRIRIGA Real Estate Environmental Sustainability Manager (TREES) is being deployed in IBM facilities to increase energy efficiency.

The TREES solution is an IBM-designed software product that integrates existing controls infrastructure across a location, collecting data on an hourly basis and analyzing it for anomalies. It has been deployed at 28 locations around the globe, representing over one-third of IBM’s building space. There are 74 basic operating rules in the TREES solution focused on the air conditioning systems, small chilled-water systems, air compressors, boilers and heat exchangers. New rules can be proposed and adopted by users based on operating experience, driving advances in the system’s capabilities. Identified problems include equipment operating outside scheduled hours or running at full design speed because of broken components and incorrectly configured control logic.

IBM has sustained an average of 10 percent reduction in energy use annually since 2011 for the buildings and systems monitored and managed by the TREES solution. In 2014, the 28 connected sites achieved energy savings of 30,500 MWh and $1.6 million. Since the start of the program in 2011, total energy savings of 78,700 MWh ($4 million) have been realized.

IBM also has installed chiller optimization software (COS) at eight locations. COS enables integration of chiller units and free cooling systems using a rules-based approach to optimize the overall efficiency of cooling delivery considering the efficiency characteristics of the individual units and the availability of free cooling. By balancing the operation of all the system components under the rules, cooling delivery is maximized while energy use is minimized. IBM saved 6,800 MWh of energy ($0.7 million) in 2014 and has realized annualized savings of 42,500 MWh (more than $4 million) at the eight locations since deployment began in 2011.

Data centers

IBM manages a diverse portfolio of data centers, consisting of both IBM and IBM-managed customer facilities all over the world. IBM operates additional raised-floor space to support internal hardware and software development operations including design and test centers.

We take a holistic approach to managing our data centers — building new, high-efficiency data center space where needed to meet the needs of existing and new clients, and retrofitting and improving existing data center space to increase utilization and derive more workload per area, equipment and energy resources.

In 2014, we completed nearly 290 projects at more than 120 existing data center locations. These projects reduced energy use by almost 28,000 MWh, and saved more than $3.6 million. This energy savings is equivalent to the total annual energy use of 2,500 homes in the United States. IBM took the following actions in 2014 to achieve these energy reductions:

  • Installed Measurement Management Technology (MMT), which monitors and controls the thermal profile of the data center. In additional data centers, MMT is now used in systems representing more than 60 percent of IBM’s data center electricity use.
  • Installed thousands of blanking panels and cable cutout plugs, reducing the short-circuiting of cooling air in the data center.
  • Increased the average raised-floor temperature by 0.4ºC in 2014 and 2.0ºC for the period 2011-14, with work continuing to further raise temperatures toward an average of 24ºC.
  • Shut down over 120 computer room air conditioning (CRAC) units. Overall, IBM has shut down more than 33 percent of the total installed CRAC units from 2010 to 2014, reducing the energy required to cool the data center and improving the average power usage effectiveness (PUE).

$3.6M

Nearly 290 energy conservation projects at more than 120 existing data center locations reduced energy use by almost 28,000 MWh in 2014, saving $3.6 million.

Data center power usage performance

IBM measures or uses estimating protocols to determine the PUE of the data centers we manage. These data centers include more recently constructed Leadership Data Centers as well as large existing data centers. The average PUE for IBM's raised-floor space is 1.71, a slight improvement over our 2013 average of 1.73. The average PUE is based on data collected from data centers representing over 69 percent of IBM strategic outsourcing and resiliency services raised-floor space and is calculated by aggregating monthly IT and total power consumption for the 12 months of 2014.

Because the majority of the data centers in IBM’s portfolio consists of spaces that are 10-30 years old and contain IT equipment varying in age from new to 10 years, improving the energy efficiency of these data centers requires thoughtful planning and execution to meet operational objectives and commitments to clients.

The overall performance of IBM data centers compares favorably with the average PUE of 1.7 as reported in the Uptime Institute 2014 Data Center Industry Survey of 1,000 data center users predominately located in North America, and with an average PUE of 2.0 as reported by a February 2014 Forrester Consulting Survey commissioned by Digital Realty Trust. IBM has made — and will continue to make — significant investments to reduce energy demand and improve energy efficiency in our data centers.

Voluntary data center energy efficiency initiatives

In January 2012, the European Commission awarded 27 IBM data centers in 15 European Union (EU) countries with “Participant” status in Data Center Energy Efficiency, based on the EU Code of Conduct (CoC) for Energy Efficiency in Data Centres. Over the last three years we registered an additional 18 data centers, bringing the total number of data centers participating in this program to 45 in 19 countries. The 45 registered data centers represent the largest portfolio from a single company to receive the recognition to date. These registered data centers represent more than 70 percent of IBM’s IT delivery and resiliency services data center space in the EU. The EU CoC for Energy Efficiency in Data Centres is a voluntary initiative that aims to promote energy efficiency performance standards for data centers.

IBM’s leadership data center in Boulder, Colorado, has been certified as a US Environmental Protection Agency (EPA) ENERGY STAR data center. The ENERGY STAR certification recognizes that the Boulder Leadership Data Center performs in the top 25 percent of similar facilities nationwide for energy efficiency and meets strict energy efficiency performance levels set by the EPA.

IBM data center and IT system professionals continue to be involved in governmental and industry data center energy efficiency initiatives, including the EU CoC for Energy Efficiency in Data Centres program, ENERGY STAR and the Green Grid. These programs set operating criteria or metrics that inform and encourage data center operators and owners to reduce energy consumption in a cost-effective manner without compromising the objectives of mission-critical operations of their data centers.

45

IBM data centers in 19 countries have received “Participant” status in energy efficiency, based on the EU Code of Conduct.

System virtualization and cloud computing

Virtualizing server and storage systems allows individual systems to support multiple applications or images, making greater use of the full capabilities of the IT equipment and executing more workloads in less space with less energy.

IBM continues to virtualize and consolidate workloads from multiple servers and storage systems with low utilization onto single systems, reducing energy use and expense. In 2014, IBM virtualized more than 30,000 applications in our owned and leased data centers, avoiding almost 135,000 MWh and $14 million. Implementation of server and storage virtualization across client accounts and IBM’s internal operations has been a key contributor in reducing the overall electricity consumption by our data centers over the past three years.

IBM continues to expand its cloud computing offerings. SoftLayer, an IBM company, now operates 24 data center locations in 18 cities worldwide, and IBM’s Cloud Managed Services operates from 13 data centers in 12 countries. Cloud computing is an efficient model for providing IT services that optimize hardware utilization and virtualization technologies across the server, storage and network infrastructure.

Renewable energy

In 2014, IBM contracted with its utility suppliers to purchase 683,000 MWh of renewable energy over and above the quantity of renewable energy provided as part of the mix of electricity that we purchased from the grid. The 683,000 MWh represented 14.2 percent of our global electricity consumption and resulted in the avoidance of 250,000 metric tons of CO2 emissions.

IBM’s renewable energy purchases increased by 17.9 percent from 2013 to 2014. The increase was achieved through the addition of 17,325 MWh of wind- and biomass-generated electricity in Ireland, 43,810 MWh of wind-generated electricity for three cloud data centers in Texas, and increased purchases of renewable energy in Germany, Italy, Spain and Switzerland. In addition, approximately 5 percent of IBM’s electricity purchases from the grid were generated from renewable sources — bringing our total renewable energy purchases to approximately 19 percent of our consumption in 2014.

IBM continued to contract for defined renewable energy purchases above and beyond the renewable electricity supplied as part of the grid mix in Australia, Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, Japan, Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States in 2014. In addition, three on-site solar photovoltaic systems with capacities of 780, 50 and 40 megawatts, respectively, generate electricity for our consumption at the following IBM locations: Littleton, Massachusetts; Zurich, Switzerland; and New Delhi, India. We also have a 480-megawatt geothermal heating/cooling system at IBM Zurich. As the result of these purchases and systems, approximately 33 percent of IBM’s locations with data centers, IT and product development labs, and 28 percent of our cloud data centers, currently source some or all of their electricity from renewable-generation sources.

We procure renewable electricity generated from wind, large and small hydro, biomass, and solar installations around the globe. We report all of our contracted renewable electricity purchases — be they from new, “additional” or existing generation sources, and without discriminating large hydro installations — and the associated CO2 avoidance. Our rationale is that all purchases signal to our suppliers our desire for them to maintain and broaden their renewable electricity offerings. We value all economically accessible renewable generation sources and their availability from our utility suppliers.

Our procurement of renewable energy must meet our business needs. Not only should the offerings be cost-competitive with market prices over time, but the electricity supply must also be reliable in providing uninterrupted power for our critical operations. IBM’s strategy of contracting for defined renewable energy has been most successful in Europe, and we continue to request the inclusion of electricity generated from renewable sources as an option in our contracts in all geographies.

Procuring electricity from renewable sources remains complicated by the relatively low energy density and intermittent nature of wind- and solar-generated electricity; limitations and choke points in the electricity transmission system; and by international treaties and national, state and local regulatory and legislative requirements. Continued advances are needed in renewable electricity generation, distribution and storage technologies, and in contracting and delivery mechanisms to increase the availability of economically viable renewable electricity in the marketplace, and to supply that electricity directly to consuming locations. IBM is working with industry peers, utilities, NGOs and other renewable-energy industry participants to identify, develop and capture opportunities to procure electricity generated from renewable sources where it makes business sense.

IBM also endeavors to incorporate co-generation or tri-generation systems on an individual location basis. Three facilities in Europe have co-generation/tri-generation systems that provide 10-20 percent of facility electricity use, as well as heating and cooling, to support building operations.

In December 2014, IBM commissioned a one-megawatt fuel cell to provide electricity to IBM's data center in Connecticut. The system is delivering more than 8.5 million kWh per year, beginning in 2015. The fuel cell will reduce IBM's expenses for the electricity it purchases while lowering the associated CO2 emissions by over 600 metric tons per year.

14.2%

Renewable energy represented 14.2 percent of IBM’s global electricity purchases in 2014, or 683,000 MWh.

New renewable electricity procurement goal

In February 2015, IBM established a new goal to procure electricity from renewable sources for 20 percent of IBM’s annual electricity consumption by 2020.

To achieve this goal, IBM plans to contract for over 800,000 MWh per year of renewable electricity — an amount that can 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.

20%

IBM's goal is to procure 20 percent of its electricity from renewable sources by 2020.

Research and solutions to advance the use of renewable energy

In addition to procuring renewable energy for our own use, IBM is working to further the availability and affordability of renewable energy by investing in IT-related research and development.

  • Watt-sun solar management program — IBM research has developed a solar forecasting platform that continually gathers data from a wide range of sources — from existing models to satellite views to cloud cover imagery captured by cameras lashed to poles — to predict the output of photovoltaic solar panels. The Watt-sun program has been tested at about a dozen solar sites in the United States, demonstrating that its predictions are 35 percent better than comparable tools. The program can help power companies manage the intermittent nature of photovoltaic generation and more effectively integrate solar generation systems into their supply grids.
  • Solar concentrator — IBM Research has partnered with Airlight Energy, a Swiss-based supplier of solar power technology, to bring affordable solar technology to the market by 2017. Each system can concentrate the sun’s radiation 2,000 times and convert 80 percent of it into useful energy to generate 12 kilowatts of electrical power and 20 kilowatts of heat on a sunny day — enough to power several average homes.
  • Spray-on solar cells — Researchers with the Department of Electrical and Computer Engineering at the University of Toronto and IBM Canada’s Research and Development Centre have invented a new way to spray solar cells onto flexible surfaces using minuscule light-sensitive materials known as colloidal quantum dots (CQDs). The invention is considered a major step toward making spray-on solar cells easy and inexpensive to manufacture.

Operational CO2 emissions management

IBM’s operational CO2 emissions, those associated with IBM’s use of fuel and electricity at its locations, were reduced 6.1 percent from 2013 to 2014. There were four main factors that drove this reduction:

  • IBM’s energy conservation efforts drove year-over-year reductions in our electricity use for the third year in a row. Electricity use was reduced by 1.9 percent from 2013 to 2014, resulting in a decrease of associated CO2 emissions of 1.8 percent.
  • The average CO2 emissions factors associated with our grid-supplied electricity were reduced by 0.01 metric tons of CO2 per MWh as a result of a change in the mix of generation sources supplying our locations. These changes contributed to a reduction of approximately 2.6 percent in our operational CO2 emissions.
  • A reduction in our fuel use of 36,000 MMBtu resulted in a 0.3 percent decrease in our CO2 emissions.
  • The shift to greater use of renewable electricity during 2014, discussed above, resulted in a 1.4 percent reduction in our CO2 emissions.

6.1%

IBM's operational CO2 emissions associated with the use of fuel and electricity at our locations was reduced by 6.1 percent from 2013 to 2014.

New third-generation CO2 emissions reduction goal

IBM has aggressively reduced GHG 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 its 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 a third-generation CO2 reduction goal in February 2015 to reduce CO2 emissions associated with our 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.

IBM plans to achieve this new goal through continued focus on energy conservation and a shift to greater use of renewable electricity. With ongoing efforts, IBM’s 2014 CO2 emissions were already more than 25 percent below the 2005 baseline.

IBM’s new CO2 emissions reduction and renewable electricity procurement goals were recognized during a White House Executive Roundtable on Federal Supplier GHG Reduction in March 2015.

35%

IBM's third-generation CO2 reduction goal is to reduce emissions by 35 percent below 2005 levels by 2020.

PFC emissions management

IBM releases some perfluorocompounds (PFCs) from our semiconductor manufacturing operations. PFC emissions represented approximately 10 percent of IBM’s Scope 1 and 2 emissions during 2014. IBM was the first semiconductor manufacturer to set a numeric reduction target for PFCs in 1998. We subsequently set a second-generation goal to achieve an absolute reduction in PFC emissions of 25 percent by 2010 against a base year of 1995. We exceeded that goal by reducing IBM’s PFC emissions by 36.5 percent at the end of 2010.

We continue to take actions to reduce our PFC emissions. In 2014, our PFC emissions were approximately 215,900 metric tons of carbon dioxide equivalents (CO2e), a reduction of 10.8 percent from 2010. Our reported emissions increased by 11.1 percent from 2013 to 2014 as a result of using revised emissions factors required by the US EPA for estimating emissions associated with semiconductor manufacturing processes. In 2014, IBM’s semiconductor manufacturing plant in Vermont continued to convert from hexafluoroethane (C2F6) to octafluorocyclobutane (C4F8) on selected chamber cleaning processes, reducing the CO2 emissions associated with chamber clean operations by 40 percent. Because C4F8 has a much higher utilization rate and much lower global warming potential than C2F6, it significantly reduced the GHG emissions from the process. In addition, IBM’s manufacturing facility in New York continues to abate PFC emissions associated with its semiconductor operations, minimizing the emissions from that facility.

10.8%

IBM’s PFC emissions were reduced by 10.8 percent between 2010 and 2014.

Overall CO2 emissions inventory

IBM tracks and manages Scope 1 and 2 emissions across its operations from data center, semiconductor research and manufacturing, hardware development and assembly, and office operations. As discussed in the previous sections, IBM executes a range of programs and processes to reduce GHG emissions. IBM decreased its overall Scope 1 and 2 emissions by 3.6 percent from 2013 to 2014. The summary of our 2014 emissions inventory is provided in the following table:

IBM 2014 Scope 1 and 2 emissions inventory

(Metric tons [MT] of CO2 equivalent)

Scope 1 emissions Emissions type 2013 2014
Fuel use Operational 225,514 226,187
Perfluorinated compounds PFC 194,301 215,893
Nitrous Oxide Other 23,150 23,724
Heat transfer fluids Other 61,747 83,566
HFCs Other 9,752 7,283
Total Scope 1 emissions 514,464 556,653
Scope 2 emissions
Electricity: Using grid and location MT CO2/MWh emissions factors Operational 1,934,736 1,847,141
Purchased energy commodities Operational 43,858 34,871
Total Scope 2 emissions 1,978,594 1,882,012
Total Scope 1 and 2 emissions 2,493,058 2,438,665
CO2 avoidance: Renewable electricity purchases Operational (223,624) (250,345)
Total Scope 1 and 2 emissions adjusted for renewable electricity 2,269,434 2,188,320

Transportation and logistics initiatives

Employee commuting and leased/rental vehicles

IBM has been active for decades in promoting programs that reduce employees’ work-related commutes. Key contributors to this effort are IBM’s two flexible work programs that are available to many employees:

  • Work-at-home — Enables employees to work from a home office
  • Mobile employees — Enables employees to work from home for a designated number of days each week

In 2014, 100,000 of our 379,592 global employees participated in one of these two programs, which not only helps employees balance their work and personal responsibilities but also benefits the environment. In the United States alone, IBM’s work-at-home program conserved approximately 4.8 million gallons of fuel and avoided 38,000 metric tons of CO2 emissions in 2014.

IBM is a member of the Best Workplaces for Commuters (BWC) program. Currently, 25 IBM locations in the United States are registered as BWC sites, which represent approximately 60 percent of the company’s US employees. Many locations actively work with their local or regional transit commissions to integrate IBM’s programs with regional programs to increase commuting options for our employees. Globally, many of our locations provide support for the use of public transit systems, including shuttles from locations to mass transit stations and alternate transportation or “loaner” cars for business trips during the workday.

In some countries, IBM provides leased vehicles for employees that they may use for both business and personal purposes. For these vehicles, we continue our effort to move to more fuel-efficient models by setting standard guidelines for vehicles with lower emissions profiles. These guidelines enable reductions in average car emission levels as the car fleets are renewed. For the cars our employees rent while travelling for business, we have worked with rental car companies to require and/or offer more fuel-efficient vehicles.

Efficiency of logistics

IBM is reducing the CO2 emissions associated with transporting our products through the efficient design of our packaging, working with suppliers on their packaging designs and optimizing logistics. IBM has been an active participant of the US EPA’s SmartWay Transport Partnership since 2006. SmartWay is a voluntary initiative to improve fuel efficiency and reduce GHG emissions associated with logistics operations.

Since 2009, 100 percent of IBM’s spending on shipments of goods within the United States and from the United States to Canada and Mexico went through a SmartWay logistics provider. IBM also voluntarily applies specific SmartWay requirements to our distribution operations globally.

IBM’s packaging programs also help reduce transport-associated CO2 emissions by reducing the volume and weight of the company’s product shipments through innovative packaging design. Accomplishments in this area are discussed in the product stewardship section of this report.

Energy and climate protection in the supply chain

IBM is committed to doing business with environmentally responsible suppliers. One of the supply chain areas we focus on is our suppliers’ energy efficiency and climate protection programs.

We require that all of our “first-tier” suppliers (those with which we hold a direct commercial relationship) establish and sustain a management system to address their corporate and environmental responsibilities — including their use of energy and Scope 1 and 2 GHG emissions — and to cascade IBM’s requirements to their suppliers. Our suppliers are also required to measure their performance, establish voluntary goals in these areas and publicly disclose their performance against those goals. We manage this requirement through two processes: IBM’s own supplier environmental management system requirements and our membership in the Electronic Industry Citizenship Coalition (EICC).

IBM has continued to work with first-tier suppliers to further our requirement that all IBM suppliers have an environmental and social management system in place and disclose information on goals and performance. More information on this supplier program may be found in the environmental requirements in the supply chain section. The IBM Supply Chain organization assesses suppliers (existing and new) regarding their compliance with the IBM Social and Environmental Management System requirements as a component of its broader supplier management and assessment process.

IBM’s requirements for our suppliers rest on the foundational belief that real results in GHG emissions reduction are made possible by actionable information about a company’s energy use and GHG emissions, and that each company is best positioned to assess and implement actions to address its own emissions in a way that is meaningful and sustainable. In short, each enterprise must take responsibility to reduce its own energy use and GHG emissions.

IBM has been an active participant in the EICC Environmental Reporting Initiative, which asks EICC members and suppliers in the global electronics supply chain to measure and report key energy consumption, carbon emissions, water and waste indicators. We believe, as do the other EICC members, that as companies gain an understanding of their energy use and GHG emissions, they are more likely to take actions to improve their performance. EICC and its member companies have developed education modules to assist suppliers in tracking their energy use and GHG emissions. Companies in the electronics industry share many suppliers, and the EICC GHG emissions disclosure process enables efficiency associated with information disclosure. We use the EICC reports completed by our component and parts suppliers to augment and validate our internal supplier assessment work.

IBM’s position on the determination of Scope 3 GHG emissions

Approximations of Scope 3 GHG emissions can help entities recognize where the greatest amounts of GHGs may occur during the lifecycle of a typical process or general product or service on a macro level. This can be helpful when assessing, for example, what phases of a general product’s design, production, use and disposal are ripe for improved energy efficiency and innovation. However, IBM does not assert the specific amount of Scope 3 GHG emissions associated with our value chain. The necessary estimating assumptions and corresponding variability simply do not allow for adequate credibility, let alone calculations that could be perceived as deterministic.

Like many manufacturers, IBM has thousands of suppliers around the world. They are in all types of businesses and very few, if any, work solely for IBM. Furthermore, the sources of energy used by these suppliers vary, and IBM does not believe we could determine a credible estimate or apportionment of the energy used by these suppliers that would be associated with the products or services provided to IBM alone, versus those emissions associated with products or services provided to their other customers. In addition, IBM’s specific scope of business with any given supplier remains dynamic, as it is driven by business need.

Moreover, one company’s asserted Scope 3 emissions are another company’s Scope 1 and 2 emissions. Since the ultimate goal for climate protection is for global societies to achieve demonstrable reductions in actual GHG emissions, IBM believes real results in GHG emissions reduction are directly achieved when each enterprise takes responsibility to address its own emissions and improve its energy efficiency. This is reinforced by IBM’s announcement in 2010 that all of our first-tier suppliers are expected to develop a management system, identify their significant environmental impacts — including GHG emissions — and develop reduction plans for those impacts.