2014 Corporate Responsibility Report

Global governance and management system

IBM implements its environmental programs through a global environmental management system that integrates corporate directives that govern IBM's conduct and operations worldwide.

Global environmental management system

Our corporate environmental affairs policy objectives range from workplace safety, pollution prevention and energy conservation to product design for the environment and the application of IBM’s expertise to help address some of the world’s most pressing environmental problems.

IBM’s corporate environmental affairs policy calls for environmental affairs leadership in all of the company’s business activities. This leadership is implemented through a global environmental management system (EMS) that integrates corporate directives that govern IBM’s conduct and operations worldwide. These directives cover areas such as pollution prevention, chemical and waste management, energy management and climate protection, environmental evaluation of suppliers, product stewardship, and incident prevention and reporting. It is through the consistent implementation of this global EMS that IBM ensures operations are executed with the same protective standards for the environment in every country where business is conducted.

Employee and management responsibility

As noted in IBM’s Business Conduct Guidelines, all IBMers have a role to play in protecting the environment. IBM’s corporate policy on environmental affairs and its supporting global EMS provide more specific detail on IBM’s environmental requirements. Every employee is expected to follow IBM’s corporate environmental policy and report any environmental, health or safety concern to IBM management. Managers are expected to take prompt action when faced with a potential violation of the policy or its directives. IBM executives are responsible for the environmental performance of their businesses functions or locations.

Our environmental programs and performance are routinely monitored and results are reviewed annually by all levels of management up to the Directors and Corporate Governance Committee of IBM’s Board of Directors to ensure the ongoing suitability, adequacy and effectiveness of IBM’s single global EMS for IBM’s activities, products and services. Formed in 1993, the Directors and Corporate Governance Committee reviews IBM’s position and practices on significant issues of corporate public responsibility, including protection of the environment.

Environmental goals

Environmental goals are an important part of IBM’s EMS. We maintain a range of environmental goals designed to drive continual improvement of our environmental programs — including climate protection, energy and water conservation, pollution prevention, waste management and product stewardship. These voluntary goals and our performance against them are discussed in their respective sections of this report, and a summary of key goals and their outcomes are provided in the listing of IBM’s environmental key performance indicators.

ISO 14001:2004 standard on environmental management systems

In 1997, IBM became the first major company to earn a single global registration to the International Organization for Standardization (ISO) 14001 environmental management systems standard. We achieved this credential within just one year of the finalization of the standard, in part due to the results already delivered under our environmental policy, first issued in 1971, and the early implementation of our environmental management programs.

The initial registration covered IBM’s manufacturing, product design and hardware development operations across our business units worldwide. We have since expanded our global ISO 14001 registration to include additional entities such as our research locations that use chemicals, several country organizations and their non-manufacturing locations, our product development function, as well as our Global Asset Recovery Services and supply chain organizations.

As our business model has evolved to include more services offerings, we have updated our EMS to address environmental opportunities and challenges in the services area. IBM’s single global ISO 14001 EMS accreditation with a complete list of registered entities worldwide can be viewed on IBM's ISO 14001 webpage.

ISO 50001:2011 standard on energy management systems

IBM has always been committed to the efficient use of energy, and our CEO issued a formal corporate policy in 1974, calling for the conservation of energy and materials in all of IBM’s activities. Over the intervening years, we improved our global energy management program and integrated it into the company’s global EMS.

Once ISO issued the ISO 50001 standard on energy management systems in June 2011, IBM set forth a strategy to achieve verification of conformity of our EMS against this newly published standard.

Within one year of the issuance of the ISO standard, we achieved ISO 50001 registration of our energy management program at the corporate level as an integral component of IBM's global EMS. Our approach recognizes and leverages the fact that IBM’s existing EMS addresses both environmental and energy management.

Following our successful ISO 50001 EMS registration at the corporate level, IBM’s major energy-consuming locations received registration audits of their site-specific energy programs under IBM’s single global ISO 50001 certification.

As of year-end 2014, 15 locations — 10 in the United States and one each in Canada, France, Hungary, Ireland and Mexico — had successfully concluded their ISO 50001 registration audits.

Public disclosure

IBM’s Corporate Policy on Environmental Affairs also calls for the company to publicly disclose information on our environmental programs and performance. This report marks IBM’s 25th consecutive year of annual corporate environmental reporting.

In addition to providing information on our environmental programs and performance in this report since 2002, and in IBM’s annual corporate environmental report, which we have been publishing annually since 1990, we provide a report based on the Global Reporting Initiative and supply information through a number of other voluntary reporting programs and tools, such as the Carbon Disclosure Project, EcoVadis and OneReport. For more details on IBM's environmental reporting, see the IBM environmental reporting, disclosure and verification webpage.

Stakeholder engagement

IBM has a variety of outreach programs to engage various groups and individuals on the subject of the environment. Our community environmental outreach programs range from open houses and emergency preparedness drills with local organizations, to the support of and participation in local environmental projects and environmental education efforts.

IBM also has ongoing dialogues with many stakeholders. Engaged stakeholders include socially responsible investors and other shareholders, environmental nongovernmental organizations (eNGOs), governments, employees, clients, suppliers and others. We consider these relationships to be very valuable, as they allow us to share ideas and obtain various perspectives, input and feedback regarding our programs, activities and performance. They also inform our reporting, enabling us to better meet the information needs of a wide variety of interested people and entities.

Some examples of engagements in 2014 included:

  • We met with a leading bank in Europe and participated in their sustainability summit, explaining IBM’s practices and discussing possible collaborative initiatives with the client.
  • We met with a group of stockholders and clarified IBM’s practices and programs for the recycling of lead-acid batteries worldwide.
  • We met with several leading universities and participated in several of their events to explore the impact of big data on sustainability.

In addition, IBM Stockholder Relations holds an annual call and webcast for financial analysts, in which executives from a range of IBM organizations are available to discuss all aspects of our corporate responsibility programs and performance.

Another example of engagement is collaborative innovation. We believe that integrating different expertise and unique perspectives can accelerate new solutions to long-standing problems. You will find examples of IBM’s collaborative innovation — in research and solutions, with business partners, clients, universities and other entities — throughout this report and in the section on solutions for environmental sustainability.

Voluntary partnerships and initiatives

IBM is strongly committed to participation in voluntary programs, and we have founded or joined many voluntary initiatives and partnerships with governments and eNGOs over the years.

Some current governmental examples include the US Environmental Protection Agency’s (EPA) ENERGY STAR and SmartWay programs, and the European Community’s EU ENERGY STAR program and EU code of conduct for energy-efficient data centers.

Examples of partnerships with eNGOs include membership in the Center for Climate and Energy Solutions, Best Workplaces for Commuters and the Wildlife Habitat Council. We also work with and support organizations such as the Conservation Fund, the Environmental Law Institute and the World Environment Center.

In addition, we partner with other companies and institutions to foster solutions for environmental sustainability:

  • GridWise Alliance — IBM is a founding member of the GridWise Alliance, an organization representing a broad range of the energy supply chain — from utilities and technology companies to academia and venture capitalists. Its mission is to transform the electric grid to achieve a sustainable energy future.
  • The Nature Conservancy — IBM has continued its collaboration and partnership with the Nature Conservancy (TNC) in several ways. Ten IBMers participated in our pro bono Corporate Service Corps program and spent one month in Belém, Brazil, helping TNC further develop a land management tool it created to help landowners comply with Brazil’s forest code. IBM also participates in the Latin American Conservation Council, which works with TNC to develop strategies for the design and implementation of projects aimed at addressing water security, sustainable food security and smart infrastructure in Latin America.
  • Eco-Patent Commons — Together with Nokia, Pitney Bowes, Sony and the World Business Council for Sustainable Development, IBM launched the Eco-Patent Commons in January 2008. The Eco-Patent Commons provides a unique opportunity for business to share innovation that can foster sustainable development through an online collection of environmentally beneficial patents pledged by the member companies for free use by anyone. Since its launch, more than 100 patents have been pledged by 11 member companies representing a variety of industries worldwide: Bosch, Dow, Fuji-Xerox, HP, IBM, Nokia, Pitney Bowes, Ricoh, Sony, Taisei and Xerox. The Environmental Law Institute became the host organization in 2013.

Environmental investment and return

Over the past five years, IBM has spent $80.7 million in capital and $463.6 million in operating expense to build, maintain and upgrade the infrastructure for environmental protection at its plants and labs, and to manage its worldwide environmental programs.

Environmental capital and expense worldwide

($ in millions)

2010 2011 2012 2013 2014
Capital $15.1 $18.4 $9.9 $17.0 $20.3
Expense $90.6 $96.1* $98.2 $92.3 $86.4
Total $105.7 $114.5 $108.1 $109.3 $106.7

*IBM modified its methodology for estimation of operating expenses in 2011 to collect information on expenses associated with compliance with worldwide environmental legal requirements for products, including costs associated with compliance with worldwide product takeback and recycling requirements.

IBM has tracked environmental expenses related to our facilities, corporate operations and site remediation efforts for more than 25 years, and began publicly disclosing this information in our environmental report for 1992. In 2011, IBM expanded its tracking of environmental expenses to include expenses associated with compliance with environmental legal requirements related to products, including those costs incurred for compliance with product takeback and recycling requirements. In 2014, total environmental expenses associated with IBM’s operations were $106.7 million.

IBM also estimates savings it has realized from its policy of environmental leadership. These include savings from energy, material and water conservation; recycling; packaging improvement initiatives; reductions in chemical use and waste; and process improvements from pollution prevention. Ongoing savings from previous years’ initiatives are not carried over in this calculation, yielding very conservative estimates.

In addition, IBM realizes avoidance of costs that likely would occur in the absence of its environmental management system. These savings are not measurable in the same way that expenses are, but avoiding these environmental costs does result in savings for IBM and a reasonable attempt has been made to estimate them. In 2014 IBM’s combined, estimated environmental savings and cost avoidance worldwide totaled $121.1 million.

IBM’s experience has shown that annual savings from its focus on conservation, pollution prevention and design for the environment consistently exceed environmental expenses, thereby demonstrating the value of proactive environmental programs and leadership performance.

$121.1M

IBM’s environmental savings and cost avoidance worldwide in 2014 was an estimated $121.1M.

2014 environmental expenses worldwide

($ in millions)

Personnel 38.3
Superfund and former IBM site remediation 12.4
Surface water and wastewater management operations 8.6
Waste treatment and disposal 6.4
Waste and materials recycling 3.9
Consultant and legal fees 3.0
Laboratory fees 2.3
Groundwater protection operations 1.2
Permit fees 0.8
Product takeback and recycling costs 0.6
Air emission control operations 0.2
Other environmental operations 8.7
Total 86.4

2014 estimated environmental savings and cost avoidance worldwide

($ in millions)

Energy conservation and cost avoidance 56.2
Location pollution prevention operations* 28.4
Compliance cost efficiency** 17.3
Corporate operations* 7.0
Spill remediation cost avoidance*** 4.9
Potential fines, penalty and litigation avoidance**** 4.3
Packaging improvements 2.0
Superfund and site remediation efficiencies 0.8
Environmentally preferable materials usage 0.2
Total 121.1

* Savings or costs avoided by having internal professional staff and tools versus using external consultants and tools.
** Compliance cost efficiency considers costs avoided through proactive efforts to stay ahead of environmental regulations and requirements.
*** These savings are estimated considering IBM's actual experience with remediation costs.
**** The estimation for the avoidance of potential fines, penalties and litigation does not include cost avoidance of potential business interruption or fines related to noncompliance with product environmental laws and regulations (e.g., E.U. REACH or RoHS requirements).

Chairman’s Environmental Award program

For nearly 25 years, the Chairman’s Environmental Award has promoted the contributions of IBM’s business units toward the objectives of IBM’s Corporate Policy on Environmental Affairs. Recipients of the Chairman's Environmental Award are selected based on their degree of leadership, initiative and results in contributing to IBM’s environmental policy objectives. Performance against these criteria is evaluated against each nominee's opportunity to contribute given its mission and operations.

IBM's Global Asset Recovery Services (GARS) organization received the 2014 Chairman’s Environmental Award. GARS is the line of business within IBM Global Financing that is responsible for remarketing pre-owned and end-of-lease IBM system assets externally, reutilizing and redeploying assets internally, and providing an environmentally responsible product end-of-life management structure for the disposal of scrap IT equipment. GARS is uniquely positioned to help clients in the areas of equipment buyback and disposal as they upgrade their own IT infrastructure or move to one of IBM’s cloud solutions.

Highlights from their operations in the three years covered by the Chairman's Environmental Award nomination included:

  • Sent 2.4 million assets for refurbishment, with more than 90 percent resold or reused
  • Generated significant revenue and savings for IBM clients from reuse of 1,293 IBM System z® and IBM Power Systems™ equipment through a technology exchange program
  • Enabled energy savings for IBM and its clients by replacing and consolidating older technology hardware with more energy-efficient refurbished assets
  • Achieved excellent waste minimization and pollution prevention results: less than 0.7 percent of materials sent for de-manufacturing and scrap was landfilled or incinerated despite increased activities in countries with underdeveloped recycling infrastructure

IBM established the Chairman’s Environmental Award Program in 1991 to encourage leadership and recognize achievement and progress in environmental affairs on the part of IBM’s organizations. IBM’s chairman presents the award to an executive from the recipient business unit at a gathering of IBM senior executives from all business units.

ibm_global_governance_management_system_chairman_ceo

IBM Chairman, President and CEO Ginni Rometty presents the 2014 IBM Chairman's Environmental Award to Martin Schroeter, senior vice president and chief financial officer, in recognition of IBM's Global Asset Recovery Services organization.