In 1973, IBM began its formal energy conservation program. In 2000, IBM set its first carbon dioxide (CO2) emissions reduction goal when we helped the World Wildlife Fund create its Climate Savers program. In 2007, IBM published its position on climate change: IBM recognizes that 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 in solutions to 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:

  • Long-standing 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 five-part strategy

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

  • 1.

    Designing, building, updating and operating facilities, including data centers and product development and manufacturing operations, that optimize their use of energy and materials and minimize GHG emissions

  • 2.

    Purchasing electricity generated from renewable sources where it makes both business and environmental sense

  • 3.

    Requiring our suppliers to maintain an environmental management system that includes inventories of energy use and GHG emissions, reduction plans and public reporting of results

  • 4.

    Managing business travel

  • 5.

    Increasing the efficiency of IBM’s logistics operations

In addition, IBM’s strategy includes designing energy-efficient products and providing services and solutions that help our clients reduce their own energy use and climate impacts.

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 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

5.3%

In 2016, IBM’s energy conservation projects delivered annual savings equal to 5.3 percent of its total energy use — surpassing our goal of 3.5 percent.

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.

5.3%

In 2016, IBM’s energy conservation projects delivered annual savings equal to 5.3 percent of its total energy use — surpassing our goal of 3.5 percent.

In 2016, IBM’s energy conservation projects across the company delivered annual savings equal to 5.3 percent of our total energy use, surpassing the corporate goal of 3.5 percent.

7.2m MWh

From 1990 through 2016, IBM conserved 7.2 million MWh of electricity, avoiding 4.4 million metric tons of CO2 emissions and saving $600 million.

These projects saved and avoided the consumption of 190,000 megawatt-hours (MWh) of electricity and 163,000 million British thermal units (MMBtu) of fuel oil and natural gas, and an associated 83,000 metric tons of CO2 emissions. The conservation projects also saved $20.4 million in energy expense. These strong results were due to our continued, across-the-board focus on energy demand reduction, efficiency, and the implementation of standard, global energy conservation strategies at our facilities.

7.2m MWh

From 1990 through 2016, IBM conserved 7.2 million MWh of electricity, avoiding 4.4 million metric tons of CO2 emissions and saving $600 million.

In measuring performance against IBM’s energy conservation goal, we recognize 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 results cited above are conservative in that they include only the first year’s savings from 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.

Electricity and fuel use and related CO2 emissions

(Scope 1 and Scope 2 CO2 emissions)

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Electricity and fuel use (1,000 MMBtu) Calculated with grid emissions factors* Reduced by the CO2 avoided by renewable electricity purchases*
2016 14,876 1,554 1,254
2015 17,974 1,836 1,584
2014 20,842 2,092 1,842
2013 21,190 2,186 1,962
2012 21,613 2,404 2,195

*CO2 emissions (estimated) – metric tons x 1,000
Notes:
(1) The 2016 CO2 emissions quantities were not calculated in accordance with the GHG Protocol Scope 2 Guidance, issued in 2015, to enable consistent year-to-year comparisons. As discussed in the overall CO2 emissions inventory section below, the differences between the quantities reported here using the IBM methodology and the quantities calculated using the market-based methodology of the GHG Protocol are minimal (0.6 percent). See the IBM 2015 and 2016 Scope 1 and Scope 2 emissions inventory for more detail.
(2) IBM divested its semiconductor manufacturing operations in July 2015. Data from 2012 to 2014 include full-year emissions from the semiconductor manufacturing facilities. The 2015 data includes emissions from those facilities during the first half of 2015.
(3) Data for IBM’s operations at co-location data centers are not included in this table.

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/ventilation/air conditioning (HVAC), central utility plants, compressed air, data center and information technology (IT) systems, cafeterias and office systems.

All IBM locations 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, results of conservation projects, completed checklists and key performance indicators. These analyses enable monthly metrics reporting to management 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 2,000 energy conservation projects involving a range of energy efficiency initiatives delivered savings at more than 500 IBM locations globally in 2016. Examples include:

  • Projects to match building lighting and HVAC with occupancy schedules, or to upgrade equipment efficiency through recommissioning equipment or installation of new equipment, were implemented at 227 locations, reducing annual energy use by 44,000 MWh and saving $3.8 million.
  • Central utility plant projects were implemented at 52 locations, reducing annual energy use by 24,900 MWh and saving $1.6 million.
  • The IBM Building Monitoring and Management solution, a part of IBM’s Building Management Center solution, has been installed at 27 major IBM campuses, encompassing 155 buildings, reducing annual energy use by 41,800 MWh and saving $1.8 million.
  • Data center cooling projects and server and storage virtualization and consolidation projects reduced annual energy use by nearly 102,000 MWh and saved $10.4 million.

2016 energy conservation savings by project category

2016 energy conservation savings by project category 50% Data centers 15% Heating, ventilation and air conditioning 11% Central utility plant 10% Building controls 6% Continuous commissioning 5% Lighting 3% Other

Applying analytics to drive further efficiencies

The IBM energy management and data center teams leverage analytics-based monitoring to minimize energy use and optimize operating performance at many IBM locations.

IBM continues to install its Building Monitoring and Management solution at IBM locations, deploying the solution at 10 additional buildings in 2016. In addition, the energy management team added 15 new operating rules and modified 12 existing rules during 2016 to increase and improve the solution’s systems and operations coverage. Annual energy savings achieved using the solution increased 52 percent to 41,000 MWh from 2015 to 2016. The solution enables early identification of building system problems. For example, use of the solution reduced the number of “comfort calls,” concerns about an office being too hot or cold, by 20 percent at the 10 largest locations that have deployed the solution. Overall, the solution saves 5 to 15 percent of the overall system operating costs at the locations and buildings where it is used.

IBM also continues to leverage and upgrade its data center cooling management systems. Three locations have piloted a new generation of the automated cooling management system with functionality that dynamically matches cooling and IT heat load in real time, delivering significant energy savings at the demonstration sites. It is expected that further deployment of this technology will yield a 10 percent reduction in cooling energy demand at the locations where it is implemented. Specific energy conservation results for data centers are discussed in the next section.

Data centers

$2.6m

344 energy conservation projects at 97 data center locations reduced cooling energy use by nearly 25,800 MWh in 2016, saving more than $2.6 million.

IBM manages a diverse portfolio of data centers worldwide in support of our clients and our internal operations. IBM also operates IT lab raised-floor spaces that support its hardware and software development and testing operations.

$2.6m

344 energy conservation projects at 97 data center locations reduced cooling energy use by nearly 25,800 MWh in 2016, saving more than $2.6 million.

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

In 2016, we completed 344 projects to improve cooling efficiency at 97 existing data center locations, reducing energy use by nearly 25,800 MWh while saving over $2.6 million. Some examples of projects included:

  • Installed thousands of blanking panels, wall panels between racks, cable cutout plugs, and cold aisle containment systems, reducing the mixing of hot and cold air and increasing cooling efficiency.
  • Shut down computer room air conditioning (CRAC) units, reducing energy use. For the period 2011-2016, IBM increased the average raised floor temperature by more than 2.5 degrees Celsius by shutting down CRACs and rebalancing data center airflow.

Achieving these savings while maintaining the reliability of the data center operations required the use of analytics-based IT systems to monitor the data center temperature profile and identify and mitigate hot and cold spots.

Construction was completed on two new data centers that began operation in Belgium in 2016. The centers are in the process of consolidating workload from nine current data centers and have sufficient capacity to support new business. The data centers are designed for a power usage effectiveness (PUE) of 1.3, a 30 percent improvement over the data centers being replaced and a best-in-class PUE for high-reliability, enterprise-class data centers. The data centers use indirect free cooling, hot/cold aisle containment and CRAC units with variable-speed fan drives.

IBM also continues to expand its cloud computing offerings. At year-end 2016, IBM operated over 55 cloud data centers in 19 countries. IBM is building its cloud data centers using standard installation templates for a highly efficient IT infrastructure. These data centers are typically designed to operate at a PUE of 1.5 or better at full IT capacity. The templates are updated with each new generation of IT technology. The templates also address cold aisle containment to optimize cooling delivery. Cloud computing can be an efficient model for providing IT services, optimizing hardware utilization and virtualization technologies across the server, storage and network infrastructure.

Data center power usage performance

IBM collects meter readings or uses estimating protocols to calculate the PUE at many of the data centers we manage. PUE is the ratio of the total energy consumed by the data center, divided by the energy consumed by the IT equipment. The closer the value is to 1, the more efficient the cooling delivery. Using data reported from 59 percent of IBM’s data center space, we calculated the average PUE for IBM’s raised-floor space to be 1.69, a 1 percent reduction from 2015. The PUE range for the reporting facilities was 1.39 to 2.7. Data centers are highly complex systems. As clients move in and out of the data center and increase or decrease their workloads, and as existing server, storage and network equipment is refreshed with new technologies, data center equipment layout changes. Depending on how cooling delivery is adjusted in response to these changes, PUE can increase or decrease.

As one of the longest-term providers of service in the IT industry, IBM’s data center portfolio consists of spaces and equipment of varying vintages. Improving the energy efficiency of these data centers requires thoughtful planning and execution to meet operational objectives and commitments to clients. 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

39

39 IBM data centers in 18 countries are registered under the EU Code of Conduct for Energy Efficiency in Data Centres.

In January 2012, the European Commission awarded 27 IBM data centers in 15 European Union (EU) countries “Participant” status in the EU Code of Conduct (CoC) for Energy Efficiency in Data Centres program. Over the last four years, we have registered additional data centers, bringing the total number of data centers participating in this program to 39 in 18 countries. IBM’s registered data centers represent the largest portfolio from a single company to receive the recognition to date. The registered locations include 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.

39

39 IBM data centers in 18 countries are registered under the EU Code of Conduct for Energy Efficiency in Data Centres.

In addition to the EU CoC for Energy Efficiency in Data Centres program, IBM is involved with ENERGY STAR (a U.S. government program) and The Green Grid (industry collaboration) data center energy efficiency initiatives. These initiatives have established recommended operating criteria and 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.

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 2016, we increased the number of virtualized images by more than 29 percent, the average number of images per virtualized server by 20 percent, and the number of virtualized servers by 4 percent — improving the overall efficiency of our installed base of servers. Storage and server virtualization consolidation projects avoided nearly 78,000 MWh and $8.4 million of annualized consumption and cost. Implementation of server and storage virtualization has been a key contributor in reducing the overall electricity consumption of our data centers over the past five years.


Renewable electricity

21.5%

Contracted renewable electricity represented 21.5 percent of IBM’s global electricity purchases in 2016, or 783,000 MWh, achieving our renewable electricity procurement goal four years early.

In 2016, IBM contracted with its utility suppliers to purchase approximately 783,000 MWh of renewable electricity representing 21.5 percent of our global electricity consumption. These purchases exceeded IBM’s goal to purchase 20 percent of its electricity consumption from renewable sources by 2020, over and above the quantity of renewable energy provided as part of the mix of electricity that we purchase from the grid. We achieved this goal four years early. IBM avoided 300,000 metric tons of CO2 emissions through these purchases.

21.5%

Contracted renewable electricity represented 21.5 percent of IBM’s global electricity purchases in 2016, or 783,000 MWh, achieving our renewable electricity procurement goal four years early.

Our contracted renewable electricity purchases as a percent of our global electricity consumption increased by over five points year-over-year, due to increased purchases of renewable electricity and reduced electricity consumption.

2016 IBM global electricity consumption: 3,637,715 MWh

2016 IBM global energy consumption: 3,637,715 MWh

40.6%

Combining our contracted renewable electricity purchases and the renewable electricity in the grid mix, 40.6 percent of our global electricity supply in 2016 was generated from renewable sources.

IBM’s contracted renewable electricity purchases occurred in 18 countries: Australia, Austria, Belgium, Brazil, Denmark, Finland, France, Germany, India, Ireland, Italy, the Netherlands, Spain, Sweden, Switzerland, Taiwan, the United Kingdom and the United States.

40.6%

Combining our contracted renewable electricity purchases and the renewable electricity in the grid mix, 40.6 percent of our global electricity supply in 2016 was generated from renewable 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 or existing generation sources, “additional” or otherwise, without discriminating against large hydro installations — and their 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.

Combining our contracted renewable electricity purchases and the amount of renewable electricity IBM received as part of the grid mix, 40.6 percent of our global electricity supply in 2016 was generated from renewable sources.

IBM’s use of renewable electricity from 2001 to 2016

2001'01'01

2002'02'02

2003'03'03

2004'04'04

2005'05'05

2006'06'06

2007'07'07

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Purchases of renewable electricity for data centers

IBM locates most of its data center operations in data centers managed by the company. Overall, 37 percent of IBM’s managed data centers obtained some or all of their electricity from our contracted renewable-generation sources in 2016. Including both contracted and grid-supplied renewables, nearly 50 percent of the electricity procured for IBM’s managed data center operations comes from renewable sources.

IBM also locates some data center operations in co-location data centers where a third party (known as a co-location provider) owns the facilities and provides power and cooling services, while IBM installs, owns and operates the IT equipment. For these co-location data centers, 18.2 percent of electricity supply came from renewable generation sources in the grid. In addition, we obtained renewable energy certificates (RECs, see additional discussion about RECs below) for approximately 10 percent of the electricity consumed by IBM’s operations at these locations. These RECs were allocated to IBM by the landlord of the facilities. Overall, 28.2 percent of the electricity consumed at these locations came from renewable sources or was offset by RECs.

Renewable energy certificates (RECs)

An REC is a document that is created for every MWh of renewable electricity generated. RECs are tradable, non-tangible commodities representing the zero emissions attributes of power produced from renewable sources. They are used to offset CO2 emissions associated with the use of electricity from conventional sources (e.g., natural gas, coal or oil). RECs can be further defined as either bundled RECs or unbundled RECs. When bundled, the renewable electricity and its associated REC are sold in the same grid region where the power provider and user are located. When unbundled, the REC is separated from the renewable electricity that was generated and sold separately to a purchaser residing in a different grid region from where the renewable electricity was actually generated. To avoid “double counting,” only the final owner of the RECs (bundled or unbundled) can claim their environmental attribute.

IBM’s strategy and approach regarding renewable electricity purchases

IBM’s strategy is to procure renewable electricity that is generated in the grid regions where IBM’s facilities are located. When possible, we match our purchases to the physical consumption of our facilities so that we are consuming the electricity at the same time that the renewable electricity is being generated. However, output from wind and solar facilities varies depending on the time of day and weather conditions. As such, we must rely on electricity generated from conventional sources (i.e., fossil fuels) to ensure business continuity in such cases. When our consumption exceeds the output from renewable sources, we use “bundled” RECs to offset the CO2 emissions associated with the electricity we consumed from conventional sources. Our intent is to procure renewable electricity and its zero-emissions attributes from the grid regions in which our facilities operate, either by directly matching our physical consumption or using bundled RECs to offset emissions.

Our strategy and approach make it clear to our electricity suppliers that we want them to increase the quantity and availability of renewable electricity in their offerings. IBM continues to work with industry peers, utilities, NGOs and other renewable energy industry participants to identify, develop and capture opportunities to procure electricity generated from renewable sources. In 2016, we joined the Business Renewables Center and the Renewable Energy Buyers Alliance to broaden our networking and efforts to expand the availability of renewable electricity to corporate buyers.

While the purchase of unbundled RECs is an admirable way to financially support the production of renewable energy, we think it would be misleading for IBM to claim that we are consuming renewable electricity based on purchases of unbundled RECs. The reason is simple: IBM would not actually be using the renewable electricity that the purchase of unbundled RECs helped to fund. It also obfuscates the need for hard public policy decisions and investments across the energy value chain that must be made to genuinely increase the quantity and availability of renewable electricity delivered to the grid.

We would certainly like to be able to power our operations with 100 percent renewable electricity, and we are committed to expanding our procurement of renewable electricity for our global operations. However, we recognize that it is not possible in today’s market or in the foreseeable future to actually power IBM’s operations reliably with 100 percent renewable electricity, given the company’s vast and diverse presence in over 170 countries along with its need in many places for uninterrupted power (which is usually made possible by fossil fuels).

Transparency in communicating about the use of renewable electricity

There is a difference between purchasing RECs and actually using renewable electricity. A complete understanding of a company’s use of renewable electricity requires a higher degree of transparency in how renewable electricity and REC purchases are reported.

IBM supports and exercises full transparency in disclosing its use of renewable electricity. We are seeking to increase our procurement of renewable electricity for our operations and working with industry groups, selected utilities and energy service companies to develop contracting approaches to enable physical delivery of renewable electricity to our facilities. There are myriad challenges involving renewable electricity output, demand forecasting, grid management, and transmission and storage infrastructures that must be overcome before large organizations, with few exceptions, can actually power all their operations with renewable electricity. In the interest of more transparent accounting, we believe renewable electricity purchases may logically be broken down and reported under three categories:

  • Physical or matched consumption: In this case, renewable electricity is generated in the grid region where the consuming facility is located and at the same time that the facility is consuming electricity. The electricity can be physically delivered or it can be matched to the facility’s consumption.
  • Matched offsets: In this case, renewable electricity is generated in the same grid region where the consuming facility is located, but it occurs at a time when the facility is not able to consume it or when the amount of renewable electricity generated exceeds or lags the demand from the facility. In this case, the RECs are separated from the renewable electricity and bundled with the electricity generated from conventional sources (i.e., fossil fuels) that is actually consumed by the facility. The purpose is to offset the GHG emissions associated with conventional generation in this specific grid region.
  • Unbundled RECs: In this case, as renewable electricity is generated, the RECs are separated or “unbundled” from the renewable electricity with which they are affiliated. The electricity is sold into the grid region in which it is generated, but the “unbundled” REC is sold to a consumer of conventional electricity (i.e., fossil fuels) who is located in a different grid region in order for the purchaser of these unbundled RECs to offset the emissions associated with the conventionally generated electricity that it actually consumed. There is no physical connection between the facility generating the renewable electricity and the facility using the unbundled REC.

The type of contract used to procure renewable electricity or RECs and the renewable generation source(s) will determine what percentage of a company’s renewable purchases fall into each of the three categories. A purchase from a biomass or hydropower plant will likely be able to be matched to physical consumption. A wind or solar power purchase will have a portion of the output or bundled RECs matched to physical consumption, while most will be used as matched offsets due to the intermittent nature of wind and solar generation. Unbundled RECs are not matched to any of a facility’s consumption because the renewable electricity is generated in a different grid region. They serve solely as an offset for the CO2 emissions associated with the purchaser’s actual consumption of electricity from conventional sources (i.e., fossil fuels).

Each of these three categories is often represented as a “use” of renewable electricity but only renewable generation that is matched to physical consumption can truly be considered to provide power to a facility. IBM does not rely upon the purchase of unbundled RECs to assert that a facility is using renewable electricity when, in fact, it is not. It is admirable to financially support the production of renewable electricity by purchasing RECs, but we do not believe it is appropriate for IBM to assert that the purchase of RECs is equivalent to physically using renewable electricity.

The table below (Allocation of renewable electricity IBM received during 2016) shows the renewable electricity procured by IBM during 2016 broken into the three categories discussed above. We used publicly available information to estimate the quantity of renewable electricity in our grid supply. (For more, see The Shift Project Data Portal: Energy and Climate Data.) We developed the following assumptions for allocating renewable electricity to the categories of (a) physical or matched consumption and (b) matched offsets (using bundled RECs) for solar and wind generation, based on our knowledge of their characteristics such as output profiles and shape curves.

  • Wind — 40 percent physical or matched consumption and 60 percent matched offsets
  • Solar — 20 percent physical or matched consumption and 80 percent matched offsets
  • Hydropower and biomass — 100 percent physical or matched consumption

Using representative data for the average utilization of the wind and solar generation to determine the percentage of renewable output that can be matched to consumption is a conservative approach. We will endeavor to continually refine our estimating methodology going forward.

Allocation of renewable electricity IBM received during 2016

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Total MWh of renewable electricity received (contracted purchases and grid-supplied) 1,478,850
Percent of renewable electricity in IBM’s total electricity supply 40.6%
• Percent supplied through the grid 19.1%
• Percent obtained through contracted purchases 21.5%
Renewable electricity use by category
• Physical or matched consumption 83.5%
• Matched offsets 16.5%
• Unbundled RECs 0%

IBM has a high percentage of physical or matched consumption because almost three-quarters of IBM’s contracted and grid-supplied renewables come from hydropower or biomass generation sources.

Challenges and opportunities in procuring renewable electricity

Through our efforts over the years to increase our purchases of renewable electricity to power our operations, we have identified a number of factors that impact a company’s ability to, or must be considered when, procuring renewable electricity for consumption. They include:

  • Size of electricity demand of consuming facilities. A smaller demand presents a greater challenge to execute contracted purchases.
  • Ownership of the facilities (e.g., owned, leased). Leased locations have more constraints in negotiating contracted purchases.
  • Number of countries in which a company’s facilities operate (consume electricity). As the number of countries increases, procurement becomes more challenging as many countries do not currently offer renewable electricity for commercial purchase.
  • Type of electricity market (e.g., regulated, unregulated) serving the facilities and availability of renewables from service providers.

Many of IBM’s clients require their data center operations to be supported from facilities in specific countries or geographical regions to ensure response times and provide backup should a disruptive event occur at one facility. As a result, IBM operates a large number of data centers that are geographically dispersed and that have relatively low electricity demands (0.5 to 5 megawatts (MW)). The diversity of size and location of IBM data centers and the relatively low demand make it difficult to economically match renewable generation sources to our consumption.

In addition, a great majority of IBM’s facilities with electricity demand greater than 1 MW are leased locations, and these locations reside across 30 countries. Over one-third of these locations have limited or no opportunity to procure economically priced, commercial quantities of renewable electricity. These realities further challenge our ability to negotiate appropriate contract terms with providers and/or to procure renewable electricity to power our operations.

In the current market, “green tariff” offerings of one- to three-year terms from utilities and energy service companies offer the best match to our needs, but come with high premiums in many markets. Contract offerings with four- to eight-year terms for our desired quantity of electricity have emerged in the last year, and we are hopeful they will present us more economical procurement options in the future. Despite these challenges, we remain steadfastly committed and will continue to aggressively pursue renewables procurement to power our operations.

Research and solutions to advance the use of renewable electricity

While increasing the renewable generating capacity in the global electricity supply is an important step to decarbonizing the electricity supply, the quantity of renewable electricity in the grid will ultimately be limited without advances in demand and the forecasting of generation; grid management systems; and electricity storage and transmission technologies. Recognizing the importance of these advancements to expanding the availability of renewables, IBM has made major investments in the use of powerful weather models and analytic and cognitive capabilities to develop highly accurate forecasting tools for electricity demand as well as solar and wind-power generation. These tools will enable better utilization of available renewable generation and more effectively integrate new capacity into the grid. IBM has worked with partners and clients to implement forecasting and management projects in over 30 countries, with one example detailed in the solutions for environmental sustainability section of this report. The environmental benefits resulting from IBM’s investment in these technologies exceed the benefits from IBM’s purchases of renewable electricity for its own consumption by increasing the quantity and availability of renewable electricity from existing and planned projects.


Operational CO2 emissions management

38.1%

IBM’s 2016 net operational CO2 emissions were reduced by 38.1 percent versus the 2005 baseline, surpassing our goal four years early.

13.2%

IBM’s net operational CO2 emissions associated with the use of fuel and electricity at our locations were reduced by 13.2 percent from 2015 to 2016.

In 2016, IBM achieved and exceeded its third-generation CO2 emissions reduction goal: to reduce CO2 emissions associated with our energy consumption 35 percent by year-end 2020, against base year 2005 and adjusted for acquisitions and divestitures. The achievement of this goal came four years early as IBM reduced its operational CO2 emissions by 38.1 percent against the 2005 baseline. This result was driven by a continuous decrease in energy consumption since 2011, a robust renewable electricity procurement program, and a reduction in the overall electricity emissions factor associated with IBM’s grid purchased electricity.

38.1%

IBM’s 2016 net operational CO2 emissions were reduced by 38.1 percent versus the 2005 baseline, surpassing our goal four years early.

13.2%

IBM’s net operational CO2 emissions associated with the use of fuel and electricity at our locations were reduced by 13.2 percent from 2015 to 2016.

Operational CO2 emissions reduction against 2005 baseline

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15.7%15.7%15.7%

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27.7%27.7%27.7%

28.7%28.7%28.7%

38.1%38.1%38.1%

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IBM’s net operational CO2 emissions associated with its energy use were reduced by 13.2 percent from 2015 to 2016 when excluding the first half year emissions from semiconductor manufacturing operations which were divested in July 2015. There were three main factors that drove this reduction:

  • 1.

    Energy conservation actions and a reduction in our energy consumption drove a 61,000 metric ton (MT) reduction in CO2 emissions. This accounted for an approximate 4.2 percent reduction in our overall CO2 emissions.

  • 2.

    The average CO2 emissions factor associated with our grid purchased electricity was reduced by over 0.02 MT/MWh, reducing CO2 emissions by 80,700 MT. This accounted for a 5.5 percent reduction in our overall CO2 emissions.

  • 3.

    An increase in renewable electricity purchases avoided 50,500 MT of CO2 emissions — an approximate 3.5 percent year-over-year reduction.


Overall CO2 emissions inventory

IBM tracks and manages Scope 1 and Scope 2 CO2 emissions across its operations. This includes operational CO2 emissions related to IBM’s energy consumption as discussed in the previous section, as well as other Scope 1 emissions such as those resulting from the use of leased vehicles for IBM’s service technicians and other operations, refrigerants in cooling systems, and heat transfer fluids in our lab and test operations. IBM’s overall Scope 1 and Scope 2 emissions decreased by 27 percent from 2015 to 2016. Excluding the emissions from the divested semiconductor manufacturing operations, the year-to-year reduction was 12.8 percent.

We calculated our 2015 and 2016 emissions in accordance with the “market-based method” in the GHG Protocol Scope 2 Guidance (issued in 2015), as well as in accordance with IBM’s own calculation method, which preceded the newest guidance and was used to assess IBM’s progress in attaining its CO2 emissions reduction goal. The IBM method calculates the operational CO2 emissions based on emissions factors specific to a location, country and grid region, and then subtracts the avoided CO2 emissions associated with IBM renewable electricity purchases to get the net operational CO2 emissions for the year. The market-based method recognizes the actual environmental attributes of energy consumed (e.g., assigns zero emissions to the consumption of contracted renewable electricity), allows the use of utility-specific emissions factors in the calculation at locations where they are available, and requires the use of “residual” emissions factors (currently available for the European Union) for grid consumption at locations where only a portion of the consumption is satisfied through contracted renewables purchases. Our comparison of the operational CO2 emissions calculated by the IBM and GHG Protocol market-based methods indicates that the results from the two calculation methods only differ by 0.6 percent.

A summary of our total 2015 and 2016 emissions inventory is provided in the following table:

IBM 2015 and 2016 Scope 1 and Scope 2 emissions inventory

(Metric tons [MT] of CO2 equivalent, including semiconductor manufacturing operations for the first half of 2015)

IBM 2015 and 2016 Scope 1 and Scope 2 emissions inventory

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 and/or that reduce commute-related CO2 emissions. For example, many locations promote biking to work by having bicycle lockers, racks and showers available on-site. At several larger locations, IBM sponsors shuttle services to transport employees to mass transit stations and also between IBM campuses and buildings. Globally, many of our locations partner with local public transit authorities to develop ride-sharing programs and negotiate subsidized transit passes for IBM employees. In Europe and Japan, for example, many IBM locations are within reach of the public transportation system, giving employees the choice to use more energy-efficient mass transit to commute to work.

IBM employees in the United States can now take advantage of IBM’s Commuter Benefits Program. Launched in 2016, the program allows employees to pay for eligible mass transit and qualified parking expenses related to commuting to work with pre-tax money. Use of the benefit to procure mass transit passes translates into monetary savings on commuting costs and encourages employees to opt for more efficient commuting options where available.

IBM is a member of the Best Workplaces for Commuters (BWC) program. Currently, 18 IBM locations in the United States are registered as BWC sites, where approximately 42 percent of the company’s U.S. employees report to work. Many locations actively work with their local or regional transit commissions to integrate IBM’s programs with regional programs, increasing commuting options for our employees.

In some countries, IBM provides leased vehicles for employees that they may use for both business and personal purposes. For these vehicles, we have set standard guidelines for the leasing of 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 traveling for business, we have worked with rental car companies to require or offer more fuel-efficient vehicles.

Reducing business travel

Business travel is a necessary and important part of ensuring that IBM understands our clients’ needs and delivers the best client experience possible. IBM has developed and deployed a number of technologies, including IBM Connections™, our primary social platform, Sametime® messaging, and IBM SmartCloud® meetings to facilitate remote collaboration and reduce the need for some business travel.

Efficiency of logistics

IBM is optimizing logistics operations and increasing packaging density and strength to reduce the CO2 emissions generated by the transport of IBM products and their components.

IBM has been an active participant of the U.S. Environmental Protection Agency’s SmartWay Transport Partnership since 2006. SmartWay is a voluntary initiative to improve fuel efficiency and reduce GHG emissions associated with logistics operations.

In 2016, 98 percent of IBM’s spending on shipments of goods within the United States and from the U.S. to Canada and Mexico went through a SmartWay logistics provider. The remaining 2 percent were largely carriers hired for local or one-off deliveries or support at an operating facility. IBM voluntarily applies specific SmartWay requirements to our distribution operations globally.

IBM also develops product packaging that minimizes material use and package volume while optimizing package strength. This helps reduce transport-associated CO2 emissions. 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. 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 Scope 2 GHG emissions — and to cascade IBM’s requirements to their suppliers who perform work that is material to the goods or services being supplied to IBM. 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). The IBM Global Procurement organization assesses suppliers (existing and new) regarding their compliance with the IBM Social and Environmental Management System requirements as a component of its overall 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 indicators on energy consumption, carbon emissions, water and waste. 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 establishing programs to track their energy use and GHG emissions. Companies in the electronics industry share many suppliers, and the EICC GHG emissions disclosure process enables more efficient information disclosure. We use the EICC reports completed by our component and parts suppliers to augment and validate our internal supplier assessment work.

More information on IBM’s supplier programs may be found in the environmental requirements in the supply chain section.

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 be generated during the lifecycle of a typical process, 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 provide the best opportunities 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 companies, 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 generate 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 Scope 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.

Download the 2016 report