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The issues we are addressingfrom clean water, to safefood, to sustainable and vibrant cities, to smarter work, toempowered communitiesare not a choice betweenbusiness strategy and citizenship strategy. They are both.
2008 Corporate Responsibilit Report
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Lette om Samuel J. Palmisao
Chairman, President and Chie Executive Oicer
In the rst decade o the 21st century, we have been conronted witha series o crises, each o which has caused us to rethink major aspectso how our world works.The 9/11 terrorist attacks and their atermathcaused us to reexamine our rameworks or global security. Catastrophichurricanes and tsunamis have raised questions about the preparednesso our coastlines and cities. Concerns about the saety o our ood, ourmedicine, even our toys, have led to questioning o our increasingly
global supply chains. The growing recognition o global warming hasdriven an intense ocus on everything rom how we move people andthings, to how we build our houses and oces, to how we generatethe energy to power it all. Most recently, we have seen how seeminglysimple nancial instruments such as mortgages can be packaged,leveraged and traded in ways that threaten the worlds nancial system.
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2 IBM Corporate Responsibility Report
Appearances to the contrary, these are not, I believe, unrelated events. They
constitute a series o wake-up calls on a single subject: the reality o global
integration. We have become accustomed to reerring to these jolts as system ailures
or breakdowns. Taken together, they tell us that our planet is becoming integrated
into a system o systems.
That is wonderul news i we are wise enough to take advantage o it.
Technology isnt the issue. For the rst time in history, almost anything can
become digitally aware and interconnected. Enormous computational power
can be delivered in orms so small, abundant and inexpensive that it is being put
into things no one would recognize as computers: phones, cars, appliances,
roadways, power lines, clothesand even natural systems, such as livestock and
rivers. All o these digital devices soon to number in the trillionsare being
connected through the Internet. And all o that data the knowledge o the
world, the fow o markets, the pulse o societiescan be turned into intelligence,
because we now have the computing power and advanced analytics to makesense o it all.
The challenge we ace is to gure out how to use this vast new capability to
make the world work better, especially or those most in need.
Today, around the world, we see the inusion o intelligence into companies,
entire industries and natural ecosystems, which is why you may have been hearing
about smart power grids, smart healthcare, smart supply chains, smart bays
and the like.
In these pages, you will read about IBMs multiaceted response to this shit
in the global arena or work, society and community. It is a shit we oresaw several
years ago, causing us to re-examine and transorm IBM in undamental ways,
in order to be in a position to seize upon its potential. We remade our portolio obusinesses, globally integrated our operations (and mindset) and changed the way
we manage our company, pushing decision making out and down. Most importantly,
we took a resh look at our essential reason or being, and collectively renewed
the core values oIBMers or a new era.
This report is a description o our progress. But it is also an invitation to you to
join us in seizing this unique moment in history.
The time or action is now. From cabinet rooms, to board rooms, to kitchen
tables around the world, people are ready and eager or new approaches. We are
witnessing a global consensus in avor o major change. And such a mandate doesnt
come around very otenperhaps once in a generation, or once in a century.
I and my ellow IBMers do not intend to waste it. We believe that i the world seizesthis moment to address our most critical challenges, and does so in a truly
systemic way, enormous and lasting progress can be achieved.
Certainly, this is no time to retreat into our shells. Quite the contrary, its time
to go on the oense. Although some companies are reacting to the present
crisis by hunkering down and hoping to ride out the storm, rom both a business
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3LETTER FROM SAMUEL J. PALMISANO
and a societal standpoint, we are taking a dierent approach, across every aspect
o our companys existence and our relationships with all communities and
constituencies. In the broadest oIBMs roles, as a global citizen, we believe that
the issues acing the world are too critical and ar too urgent and the opportunities
to make meaningul progress on them too immediatenot to act now.
Indeed, the most interesting result o our smarter planet initiative, to me, is
how it is causing our business strategy and citizenship strategy to merge.
The issues we are addressing rom clean water, to sae ood, to sustainable and
vibrant cities, to green energy, to better schools, to smarter work, and an
empowered workorceare not a choice between one and the other. They are
both. And because the complex systems that make up our world today are inherently
multi-stakeholderbecause they cross the old lines o public sector, private
sector and voluntary sector, spanning all o civil society the solutions we
devise will require the most advanced intelligence rom business, rom science,
rom policy and rom communities around the world.Again, the barrier is no longer technology. What we make o this new reality
will depend, rather, on how we pursue the timeless goals o all social and economic
systems reliability, trust, airness, inclusion, sustainability, human rights,
prosperity and individual empowerment. I believe we must do so in very new ways.
Building a smarter planet isnt simply a recipe or economic growth; its also a
recipe or radically expanded economic and societal opportunity. Its not just a
way to make the planet more ecient, but also to make it more sustainable. Its not
just a way to do well by doing good; its also a way to do good by helping all the
worlds regions and people do well.
I believe thats something or which its worth going on the oense.
Samuel J. Palmisao
Chairman, President and Chie Executive Oicer
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The istdeade o the
21st etuhas beea seiesowae-up alls.
IBM Corporate Responsibility Report4
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5OUR AGENDA
These are system crisesrom security, toclimate, to ood and water, to energy, tonancial markets and more. Together, they tellus that our economy and society are nowglobally integrated. They also tell us that the
systems by which the world works must betransormed. In their current orms, they areunsustainable.
Over the past decade, we have seen, rommultiple angles, that we are all connected:economically, socially, technically, biologicallyand environmentally. When a crisis occurson one part o the planetwhether rommicrobes, malware or mortgages it can bringproblems to the entire planet within days or even hours.
We can now see that being connected isntenough. The way the world literally works has
to become smarter.
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7OUR AGENDA
Food
Global food reservesare at their
lowestlevelin 30 years.
In 1900, only 13% ofthe worlds population lived
in cities. By 2050, thatnumber will have risen to70%. We are adding theequivalent of
sevenNew Yorksto the planet every year.
Ubaizatio
Healthae
In many parts of theworld, healthcare costs are
rising two times fasterthan economic growth and
100million
people are pushed belowthe poverty line by
personal healthcareexpenditures each year.
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8 IBM Corporate Responsibility Report
We have an opportunityand a responsibilityto make the world work better.Happily, now we can. Intelligence is being inused into the way the world literally
works into the systems, processes and inrastructure that allow services to
be delivered, that acilitate the movement o everything rom money and oil towater and electrons, and that can help billions o people work and live.
And although it may be surprising or a company like IBM to say this, the
primary challenges acing the world are not o technology, but o policy, culture,
collaboration and purpose.
In the end, thats what we mean when we talk about building a smarter planet.
When a business takes a systemic view o the worldwhen you see the economy,
society and physical environment as a complex, global system it opens up
new ways o working with all your constituencies communities, clients and
individualsi was that matte:
Assist vitims o
atual disastes
When disasters strike,
speed and coordination o
relie eorts can make the
dierence between lieand death. Those involved
need to understand
quickly what is happening
on the ground and how to
make a maximum impact.
Victims in Chinas Sichuan
Province, Indonesia,
Peru, the Philippines and
Sri Lanka, have beneted
rom Sahana, an open
source, Web-baseddisaster relie in a box
management system. The
sotware, supported by
IBM, provides essential
tools or tracking missing
persons, coordinating
relie eorts and manag-
ing pledges or support.
Addess ood
shotages
Food shortages are elt
locally, but their causes
and solutionsare global
and systemic. Escalatingenergy and grain costs,
climate change and
demand or biouel caused
some ood prices to rise
by almost 40 percent in
2008. One way to help is
to improve the ood itsel.
IBMs World Community
Grid is being used to
compute genetic data to
develop stronger strainso riceaiming or larger,
more nutritious yields,
pest and disease resistance,
and better water and
nutrient use.
Mae eeg gids
moe efiet
With businesses and
societies acing oten
volatile energy supplies,
a smart grid can saveelectricity and money and
the planet, by linking
smart meters in the home
with instrumented power
lines and plants. And
it even paves the way to
integrate renewable
sources like wind and solar.
IBM today is leading seven
o the worlds top 10
automated meter projects.
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9
Develop ew models
o ommuit sevie
In emerging markets, the
most critical and challeng-
ing aspect o long-term
economic stimulus isdeveloping expertise the
skills to compete globally.
In 2009 ve hundred o
IBMs uture leaders rom
nearly 40 countries will
complete assignments in
our Corporate Service
Corps. Now in its second
year, IBMs corporate
Peace Corps is sending
teams o employees tonine emerging countries
to work on projects
that combine economic
development and job
creationpreparing them
and their local partners
alike to unction as true
global leaders.
Impove eduatioal
oppotuities
Education around the
world aces systemic
challenges in curriculum,
teacher training andretention. IBMs multiac-
eted response includes
creating the Reinventing
Education program
which brings the right
groups together to identiy
barriers, develop solutions
and implement them via
the BlueSky open source
portal. IBMs Reading
Companion voice-recog-nition technology is used
by more than 700 schools
and nonprot organizations
in 22 countries. And more
than 10 million children
have beneted rom our
early childhood interactive
learning centers.
Pla the gowth
o ou ities
All the worlds systems
rom transportation, to
energy, to healthcare, to
ood, to education andmorecome together in
our cities. IBM is helping
cities across the world
get smarter smart trac
systems in London,
Brisbane and Singapore;
smart crime ghting in
New York; smart energy
in Houston; smart water
in So Paulo; smart
buildings in Shanghai.The opportunities and the
innovations keep growing.
In cities across the world,
were helping improve
inormation sharing across
agencies to provide
more ecient municipal
services.
Peseve at-is
watewas
The United Nations
predicts that nearly hal
the worlds people will
experience critical watershortages by 2080 in
large part because water
isnt managed as a global
system. With todays
technology, we can create
a reliable, up-to-the-
minute view o water use.
IBM and The Nature
Conservancy are building
advanced, Web-based
tools or river basin man-agement. Computer
simulations in a geospatial
3-D environment help
users visualize the possible
impact on ecosystem
services and biodiversity o
dierent policy scenarios
or land water use.
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10 IBM Corporate Responsibility Report
IBM Basis
IBM is a values-based enterprise o individualswho create and apply technology to make theworld work better. Today, about 400,000 IBMersaround the world invent and integrate hardware,sotware and services to enable orward-thinking enterprises, institutions and peopleeverywhere to succeed on a smarter planet.
Since its inception, IBM has been a company that denes itsel by undamental
valuesnot by products, technologies or leaders. Today, shared values are
more essential than ever beore or enterprises, or individuals and or the
globally integrating society o the 21st century. In 2003, IBMers worldwide
came together to renew and dene our core values which now serve as the
oundation oIBMs culture and brand, and the guide or each IBMers work,
decisions and relationships.
Majo Opeatios
Ou Values
Consists primarily
o middleware that
enables clients to
integrate systems,
processes and
applications, and
operating systems
sotware that runs
computers.
Our Sales
organization and
our Research,
Development and
Intellectual Property
organization
also deliver value
to clients.
Primarily provides
outsourced IT
inrastructure
services and
business process
services.
Provides clients
with solutions that
require advanced
computing power
and storage
capabilities, as
well as leading
semiconductor
technology
and products.
Primarily provides
proessional
services and
application
outsourcing
services.
GlobalTeholog
Sevies
GlobalBusiessSevies
Sstemsad
TehologSotwae Othe
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11IBM BASICS
IBM entered this economic period rom a position o strength because o
the changes weve made to our business. TodayIBM operates in more
than 170 countries, has approximately 400,000 employees, and recorded
$103.6 billion in revenue in 2008. IBM is very dierent rom what it was 10
or even veyears ago.
1.Among the most important drivers oIBMs transormation has been an
increasing clarity and ocus in our business strategy and in our values-based
culture to support that strategy.
2.Our mix o technologies and businesses is signicantly dierent.
We remixed our portolio toward services, sotware and solutions.
We invested more than $50 billion in R&D and acquired more than 100
companies rom 20002008.
3.We have transormed our processes and the way we run the company.
A major part o this shit has been to build a 21st century workorce.
Hired more than 250,000 new employees in the past ve years
Increased learning opportunities
And improved our ability to eectively deploy the expert skills
oIBMers.
THE PrOFESSIOnAL MArkETPLAcE:
An application used to quickly deploy talentto clients, organizes the work history and skills oIBMers into 8,290 specialized
skill sets that include 23 industries and areas o expertise rom business
intelligence and analytics to virtualization and green solutions. The application
also contains languages spoken, visa, status and availability.
4.And our nancial results demonstrate the impact o this transormation.
2008 revenue was a record $103.6 billion, up ve percent, and we delivered
a pre-tax margin o 16.1 percent, our points above our results in 2000.
IBMs Tasomatio
Segmet Pe-Tax Iome Mix
Sotware 40%
Services 40%
Financing 9%
Financing 10%
Services 42%
Sotware 25%
Hardware 9%
Hardware 24%
2000
2008
06 55
05 55
04 46
08 61
07 58
Leaig Hous pe Emploee
Fiaial Peomae Histo
Dollars in Billions
04
96
05
91
06
91
07
99
08
$104
Revenue
Pre-tax incomeFree cash ow
$14.3
$16.7
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12 IBM Corporate Responsibility ReportEMPLOYEES
Setio Oe: EmploeesGlobal emploees, global itizes
Even in the current economic downturn,
IBM continues to invest in our workorceproviding our employees with skills training,health and wellness programs, andopportunities to gain global experience.
The speed at which our business is changing is unprecedented, and each
year we move thousands o people into jobs that are very dierent rom what
they were hired to do.
IBM has a large knowledge-based business, so we must constantly evolve
employee skills based on market demand. There are three undamental waysthat we adjust our skills as requirements change:
First, we retrain and evolve skills rom within. In 2008 we spent over
$600 million in training and development$1,700 per employee to enable
the company to transition thousands o people into new skill areas.
Second, we hire externally and where there is signicant opportunity we
make acquisitions. Over the past decade, IBM has made 100 acquisitions.
Finally, where we need towhen we have people in a skill area or
geography where client demand does not support itwe rebalance skills and
make reductions.
As we continue to evolve as a global enterprise, certain challenges remain
ongoing: How do we manage and acilitate employee transitions in anincreasingly complex world? And how do we remain engaged with IBMers
spread across disparate locations and time zones to oster innovation and
collaboration among our richly diverse workorce?
IBM has announced a number o commitments on an enterprise level
or 2009:
Investing in salary increases or employeesalthough not or executives.
Continuing to oer perormance-based bonus programs or all
employeesnot just executives and managersat amounts comparable
to the prior year.
Continuing to hire in selected skill groups in all markets.
IBM is addressing the challenges o managing our human resources in many
ways, some o which are proled in this section. In 2008, we ocused on several
initiatives in the areas o employee learning and development, employee
engagement, diversity, and health and wellness.
1
O the Web
For Web-exclusive content and more on
our eorts around employees, visit us
online at ibm.com/responsibility/employees
50%o IBMs nearly 400,000 employees have
less than ive years o service.
40%o IBM employees work remotely, either
rom home or at a client site.
8.6millionvolunteer hours logged through
the On Demand Community program
since inception.
ke Peomae Idiato
Employee Satisaction
Up to 40% o IBMers are randomly invited
to participate in our annual Global Pulse
Survey. The annual averages shown are
the responses to, Considering everything,
how satisied are you with your job?
08 67%
07 66%
06 65%
05 65%
04 67%03 69%
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13SECTION ONE
Uited States
South Aia
Uited kigdomchia
Idia
In 2008, we instituted cross-geography mentoring on a pilot basis with China,
India and South Arica with plans to expand the program in 2009 to include
Brazil, Dubai, Indonesia, Malaysia, the Philippines and Vietnam. The programs
objectives are to increase the fow o knowledge and develop talent company
wideovercoming geographic barriers by ostering collaboration and promoting
cultural intelligence.One o the programs pairs is Danny Chen, a Taiwan-born engineer who
now works in Austin, Texas, and David Lin, a sotware programmer at the
Taipei Lab in Taiwan. Chen mentors Lin on the intricacies o the patent process
and how to develop patentable ideas, and Lin shares important inormation
with Chen about doing business in China.
The relationship has already paid o, personally and proessionally. Last year,
the Taipei lab was awarded ve patentsup rom one in 2005. And a team at
the lab now publishes a newsletter eaturing a wealth o useul tips or other
inventors.
Emploee Leaig adDevelopmet: Global Metoig
04
15.3
05
18.0
06
19.6
07
22.3
08
23.3
In 2009, IBM is deploying a new,
enterprise-wide learning ramework that
will help IBMers develop capabilities
that are important to our clients as well
as their individual career development.
ke Peomae Idiato
Total Learning HoursHours in Millions
Emploee Leaig ad Developmet:
Busiess Aaltis ad Optimizatio
Were seeing a rising trend in the number
o jobs in what is known as BusinessAnalytics and Optimization (BAO), which
includes high-demand areas like business
orecasting and business intelligence.
BAO draws on many disciplinesevery-
thing rom meteorology and computer
visualization to Web 2.0 application
development and organizational psychology
to biology and computer science.
Together with our business partners,
clients and universities, IBM is driving
innovation around this new class o
consulting jobs and plans to retrain or hire
up to 4,000 new analytics consultants
and proessionals. In second quarter 2009,
we established a network o Analytics
Solution Centers, with initial locations in
Beijing, London, New York, Tokyo andWashington, DC. The centers will enable
IBM to meet growing client demand or
advanced analytics capabilities as part o
new, smarter business systems.
3
1
Mentor: Jon Tilt,
Chie Test Architect, U.K.Mentee: Srinivas Pinjala,
Java Technologies,
India Sotware Lab
Most recent discussion:
Intellectual property issues
3
Mentor: Marilyn Johnson,
V.P. Market Development,U.S.
Mentee: Lenhle Daka,
Territory Manager,
South Arica
Most recent discussion:
Black economic
empowerment laws in
South Arica
2
Mentor: Mike Smith,
Distinguished Engineer,U.S.
Mentee:Rice Chen,
Executive, BetaWorks,
China
Most recent discussion:
Leadership skills
1
2
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14 IBM Corporate Responsibility Report
In the all o 2008, more than 100 IBMers in the U.S. and the U.K. took
steps to put their years o experience at IBM to work in K12 education. Many
are already working in the classroom, thanks to IBMs Transition to Teaching.
The program addresses the need to support our employees as they transition
rom IBM employment into ullling encore careers such as skilled science and
math teachers.According to the U.S. Department o Labor, more than 260,000 new high
school math and science teachers were needed or the academic year 20082009.
The shortage is also acute in the U.K. and other countries.
Acknowledging that a shit in vocation takes time and training, IBM helps
underwrite the costs associated with earning a teaching certicate. Employees
are eligible or a total o$15,000 or tuition reimbursement or stipends or
up to a year o eld experience.
IBM has also orged partnerships with many colleges and universities, state
education departments and public school districts to help shape the program.
More than 100 companies have expressed their interest in Transition to Teaching,
with Intel Corporation launching an initiative modeled ater our program.Transition to Teaching has been so successul that IBM has broadened the
Transition2 Program to serve the public sector in conjunction with Partnership
or Public Service as well as higher education and nonprot organizations via a
strategic alliance with The Bridgespan Group. Over the past year, the Center
or Teaching Quality (CTQ), in partnership with IBM, has begun documenting
the eects o this initiative and its potential to serve as a model or corporations
willing to invest in uture workorce development.
IBM has long understood that investing in prevention and well-being makes
sense or our employees as well as our business. Healthy employees tend
to experience better quality o lie and higher personal productivity, and those
who discover health problems early tend to get well aster and spend less on
medical care. Our strategy or improving employee health, while keeping costs
in check, has our core elements:
Supporting health system reorm
Investing in prevention and primary care
Developing programs or healthy liestyles among our employees
and community
Scaling programs and services through Web-based healthcare tools
Emploee Leaig adDevelopmet: Tasitio toTeahig
Health ad Welless:cadiovasula ad Diabetes
Welless pogams i Idia
Building, energizing and maintaining
a high-quality workorce is the keyto success o any organizationin thepublic as well as the private sector.
IBM is leading the way thorough itsclose collaboration with the Partnership
or Public Service, which resulted inthe Fed Experience program. The goal isto identiy, recruit and hire interested
IBM employees and retirees and matchthem to key ederal government jobs.
To meet the countrys most pressingchallenges, government needs the righttalent with the right skills in the right
jobs, a mandate that provides businesseswith the opportunityand responsibility
to help revitalize government.Max Stie, President and CEO,
Partnership or Public Service
EMPLOYEES
O the Web
For more inormation on Partnership or
Public Service and The Bridgespan Group,
visit ourpublicservice.org and bridgestar.org
respectively.
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15
One recent example o our preventative programs was a comprehensive
employee screening eort we conducted in India during 2008, in response to
what data rom the World Health Organization (WHO) and the Indian
Medical Association (IMA) have shown to be alarming rates o cardiac disease
and diabetes in the country.
The program was organized at ve major locations covering an IBM
population o almost 45,000, with approximately 18,000 employeesparticipating. Analysis o the participants health risks revealed the ollowing
group prole:
29 percent o participating employees below 30 years o age had high blood
pressure recordings, which exceeds the average rate o hypertension in
this age group.
88 percent o employees over 40 years o age have a body mass index (BMI)
o 25, with 27 percent o them having BMI> 30. A recentWHO study
indicates a 30 to 35 percent obesity rate (BMI> 30) in the similar age group o
the general population.
48 percent o employees over 40 have high asting blood sugar (FBS) values.
IBM plans to conduct a Health Risk Assessment targeting all IBM employees
in India, and also to establish a diet and nutrition awareness program to
help employees address some o the liestyle issues related to cardiovascular
disease and diabetes.
Given the speed and diversity o the global marketplacegeographically,
culturally, ideologicallyour success as a global enterprise depends on
our ability to work eectively across those dierences and using diversity to
drive innovation.
In July 2008, senior leaders across IBM laid out a new charter or a company
diversity strategy to help saeguard the continued viability and growth oIBM on
a global scale. As part o the new charter, we are revalidating our diversity
competencies, integrating them into every development and evaluation process,
and restructuring programs. Importantly, those revamped competencies
include ensuring employees have a deeper level o cultural intelligence and the
ability to collaborate and lead across the globe.
For example, we noticed that typical IBM international assignments did not
align with the new strategy. As a result, we are revising our approachdening
goals to increase global opportunities or high-potential technical and leadership
talent rom every demographic group. In addition we are providing specictransitional support or employees on assignment regardless o duration. We are
also creating processes to maximize the application o their experience and
knowledge ater the international assignments end.
Divesit 3.0: A new chate
SECTION ONE
AessibilitAessibilit & Disabilit
cetal: The new A&D Central, a Web
application that will help employees with
disabilities improve their productivity
and ind the resources they need to work
eectively, will be piloted as an IT solution
this year. The tool will streamline
accommodation requests or items like
computer audio screen readers andlive captioning or teleconerences. It will
also centralize the delivery processes to
assist employees with disabilities, their
managers and human resources partners.
Divesit: Speaig out o GLBT issues
On September 24, 2008, IBM provided
expert testimony on the business rationale
or adoption o Domestic Partnership
Beneits at the U.S. ederal level. IBM
was selected to provide the corporate
perspective and advisement on
implementation or the public sector.
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16 IBM Corporate Responsibility ReportMARKET PROFILE
Maet Pofle:The itesetio o busiess adesposibilit i chia
To be competitive, any individual, communityor enterprise has to adapt continuouslylearning new skills in new areas. Today, IBMsbusiness is expanding most quickly in thehyper-growth economies spread across AsiaPacic, Latin America, Central and EasternEurope, the Middle East and Aricamarkets
in varying stages o development.
This reality demands that we continually look at new approaches to how we
grow in the communities in which were already workingand develop leaders
prepared to unction not just locally but also as global citizens and proessionals.
A program like our Corporate Service Corps, described in this section o the
report, has a triple benet. It benets communities by solving problems on the
ground. It benets IBMers by providing them with an exemplary orm o
leadership training and development. And it benets the company by developing
a new generation o global leaders.
$12.2millioninvestment made by IBM in 2008 in China
talent and skill development, supporting
both our local and global missions. IBM has
invested more than $23.5 million in China
talent and skill development over the last
three years.
1946is the year IBM entered the China market.
The company reentered in 1970.
employees in 26 oices.18,000
More than
$2.6 billionin revenue in 2008.
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17
In April 2009, a team o nine IBMers rom Europe, Asia and North America,
with a broad range o skills, traveled to Chengdu, a city o 11 million in
Chinas Sichuan Province, or a month-long assignment, as part o the Corporate
Service Corps initiative. Now in its second year, IBMs corporate Peace
Corps sends uture leaders, rom all over the globe, to developing countries to
work in teams on projects where inormation technology is used to oster
economic development.
The Chengdu team, or example, worked with local businesses, oeringtraining in corporate governance, nancial management and corporate commu-
nications, including how to promote cooperation with oreign investors.
The team also implemented a plan or an integrated IT system and network or
the Chengdu Chamber o Commerce to help it provide better services to all
o its member businesses.
copoate Sevie cops:A Woldwide Pogam witha Loal Emphasis
Assessig the impat o the copoate
Sevie cops:The Harvard Business
School recently studied the eects
o the IBM Corporate Service Corps andound it has clearly had positive impacts
on individual participantspersonally
and proessionallyas well as on the
communities served.
Harvard also surveyed 31 o the local
project hosts to assess their satisaction
with the program. The vast majority cited
improvements in their internal business
processes and their ability to orge new
and stronger partnerships with other
private sector, NGO and governmental
agencies in-country as a result o their work
with the IBM Corporate Service Corps.
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18 IBM Corporate Responsibility ReportMARKET PROFILE
The city o Chengdu in the Sichuan Province
is a major center o Chinas sotware
industry and the largest railway hub
in southern China with our major railways
converging there. However, the devastating
8.0 earthquake in May 2008 let the
economic inrastructure o Chengdu in
serious need o rebuilding. To help in this
eort, IBM commissioned a Corporate
Service Corps team o nine IBMers to
Chengdu in April o 2009, the irst o three
teams working in the region.
100employees were selected or Corporate
Service Corps assignments in 2008,
out o 5,500 applicants rom 54 countries.
Five hundred will receive CorporateService Corps assignments in 2009.
1,500IBMers will be deployed between 2008
and 2010. In 2009, teams will work
in Brazil, China, Egypt, Ghana, India,
Malaysia, Nigeria, the Philippines,
Romania, Tanzania, Turkey, Vietnam and
South Arica. Beginning in the second
hal o 2009, IBM will deploy the irst
Corporate Service Corps executive team.
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19
The social service sector is stressed by asigniicant increase in the number andtypes o needs that must be addressedand by a reduction in the resourcesavailable to respond to them. However,organizations around the world arereporting an enormous growth in thenumber o people who are volunteeringtheir time and talents. There is a realopportunity to rethink how corporationscan utilize their most valuable assetemployeesto create change, like IBM
has done with its Corporate ServiceCorps and On Demand Communityvolunteer program.
Mihelle nu, CEO, Points o Light
and HandsOn Network
IBM is working with the Ministry o Education to leverage the open source
Blue Sky instructional portal, which we developed earlier in our Reinventing
Education initiative. This will provide access to the latest Web 2.0 unctionality
and the highest quality educational content or teachers and students in the
region. IBM is also supporting the China Research Lab in its eorts to develop
new emergency and early earthquake warning systems and technologies.A Mandarin language version o the Small Business Toolkit, an online portal
oering a variety o business resources, is being launched in 2009 to support
young entrepreneurs in Sichuan Province.
On May 12, 2008, Sichuan Province was the epicenter o an 8.0 magnitude
earthquake that killed more than 70,000 and let ve million homeless.
Within 24 hours various IBM teams, including IBM On Demand Community
volunteers, were mobilized.
Sahana, an open-source disaster management system, and six IBM high-end
enterprise servers were donated, congured and installed byIBM expertsto support the Zhongmin Charity Inormation Center under the Ministry o
Civil Aairs and the Blood Center o Beijing Red Cross Society. More than
50 IBM development lab and technical support experts worked around the clock
to customize and translate the Sahana sotware, based on the request o the
Emergency Command Center in Chengdu City and the National Disaster
Reduction Center in Beijing.
Because a large number o schools were destroyed in the quake, IBM oered
100 KidSmart Early Childhood Learning Centers to the Ministry o Education,
and these were deployed in the relie villages which had been set up by the
Government immediately ollowing the disaster.
Impovig Eduatioalresoues i Sihua Povie
Eathquae Disaste reliei Sihua Povie, chia
Sahana, an open source, Web-based disaster relie in a box management system, was
instrumental in helping the citizens o Chengdu and the Chinese government track missing
persons, coordinate relie eorts and manage pledges or support.
O the Web
For more inormation on the SME toolkit,
visit china.smetoolkit.org
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IBM Corporate Responsibility Report20
Setio Two: commuitiesA sstemi appoah to poblem solvig
The challenges that communities ace
educating the young, keeping citizens saeand healthy, attracting and acilitatingcommerce, and enabling the smooth low opeople and goodsare compounded by theserious global economic downturn.
IBM remains committed to helping solve societal problems through a range
o programs that bring expertise and skills development where they are
needed most. We approach these complex issues rom childhood cancer,
to literacy, to entrepreneurial supportby looking at them systemically
and engaging our global community oIBMers and our best technology and
knowledge to reach scale.
This approach osters innovative problem solving, whether its through such
well-received programs as the Corporate Service Corps (eatured on pages
1719), mobilizing millions o users to donate unused computing power through
World Community Grid, improving literacy skills, or developing new math
and science curricula.
Looking ahead, well continue to pursue progressive approaches to problem
solving and making a positive contribution to improve education, increase
economic development and alleviate humanitarian crises, as demonstrated by
the key 2008 initiatives detailed in this section o the report.
2
COMMUNITIES
44countries were represented by Corporate
Service Corps volunteers during the irst ull
year o the program.
68countries beneit rom the work o
On Demand Community volunteers.
10millionchildren rom 60 countries are served by
the KidSmart program.
1.2milliondevices run World Community Grid.
O the Web
For Web-exclusive content and more
on our eorts around communities,
visit us online at ibm.com/responsibility/
communities
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21
Service science will completely changethe way people think about economic
activities and producing economic value.We need these changes becauseindustrial logic has reached its limitswhen it comes to dealing with thecurrent eco logical and economic crises.
Bed Biezeisle, Fraunhoer Institute or
Industrial Engineering, Stuttgart, Germany
SECTION TWO
The Smate Plaet Uivesit Jam:
On April 2124, 2009, IBM hosted the irst-
ever Smarter Planet University Jam. More
than 150 IBMers and approximately 2,000
aculty, students and administratorsrom
more than 200 universities and research
centers worldwidebrainstormed ideas on
how technology and business can build a
smarter planet. The 72-hour online
dialogue centered on ive themes: Smart
Cities, Smarter Healthcare, Smart Grid,
Smart Water Management & Green Planet,
and Smarter Planet Skills & Education.
IBM is conducting a post-Jam analysis to
extract and evaluate the wealth o ideas
that came out o the three-day session.
IBM also recognized 20 students around
the globe or their insightul and innovative
contributions to the Jam and will present
IBM Faculty Awards to two top aculty
contributors to support urther research
collaborations on smarter planet topics.
ke Peomae Idiato
Global Contributions
We continue to ocus on emphasizing
technology and services contributions
worldwide. Non-U.S. contributions continue
to increase in accordance with strategy.
Goal:Maintain or increase total level ocontributions globally, as well as the percen-
tage o technology and services and the
percentage contributed outside o the U.S.
2008 cotibutios b Geogaph
Dollars in Millions
Latin America$12.5
Cash$42.9
Canada$3.4
U.S.$94.6
Technology$93.8
Europe,Middle Eas& Arica$44.4
TechnicalServices/Personnel$42.9
Asia Paci$24.4
2008 cotibutios b Issue
Dollars in Millions
HumanServices$15.3
Health$4.0
Higher/OtherEducation**$82.6
K12 Education$45.4
Environment$2.2
Culture$10.5
Other*$19.3
2008 cotibutios b Tpe
Dollars in Millions
*Includes Community and Economic Development activity or Carson, SMB and Corporate Service Corps.
**Includes Academic Initiatives sotware donations.
In 2008, IBM signed agreements with the governments o Egypt, Malaysia,
the Philippines and Vietnam to incorporate Service Science Management andEngineering (SSME) education into their national curricula.
SSME is an academic discipline designed to help teach students the combined
business, social and technology skills needed to enter todays workorce and
be ready to contribute immediately to their countries economic and innovation
agendas. For the past several years, IBM has been working with universities
worldwide to develop and promote interest in SSME. As the world becomes more
instrumented, interconnected and intelligent, it demands new problem
solving and communication skillsand the ability to address complex systems
and networks that can serve customers and communities more eectively.
SSME helps students better prepare or jobs in engineering, management,
consulting, science, entrepreneurship, design and high-skill knowledge workacross industry segments, rom healthcare to retail to sustainable municipal
inrastructure systems.
What started with seven universities launching SSME programs has turned
into a global initiative with 250 universities in 50 countries now oering
SSME courses and/or degrees. In March 2009, representatives rom many o
these academic institutions met in Helsinki at a global Service Science
Summit conerence. SSME is also promoted by the IBM-led nonprot
Service Research and Innovation Institute.
Equippig Studets: Sevie
Siee, Maagemetad Egieeig Eduatio
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IBM Corporate Responsibility ReportCOMMUNITIES22
Recognizing that improved literacy is one o the strongest contributors to
sustained economic growth, IBM has been committed to improving the literacy
skills o children and adults around the world or more than a decade.
One o our key literacy initiatives, the Reading Companion grant program,
is working to implement our innovative Reading Companion voice-recognition
sotware in as many countries and schools as possible. The technology iscurrently in use in more than 700 schools and nonprot organizations in
22 countries.
Since the program was rst introduced in Mexico City in 2006, it has grown
to include three Mexican states as well as the Federal Districthelping about a
thousand students gain essential English language skills and improving their
interest in reading. In a recent evaluation o the program, Boston Consulting
Group (BCG) ound that Reading Companion sites are not only seeing tangible
results in students reading and pronunciation but in other areas as well. For
example, the evaluation ound that students improve computer literacy and
become more condent in their computer skills.
Equippig Studets:readig compaio
Reading Companion has opened newcultural horizons or our children.With such a wide choice o books toincrease their vocabulary and improvetheir comprehension skills, theyredeveloping a true love or reading.
Patiia Daz covaubias,
Executive Director, Christel House de
Mxico, A.C.
Our research indicates that the U.S.
nonproft sector needed 43 percent moreleaders in 2008 than we predicted in2006. To fll this gap we need to connecttalented and experienced peopleincluding those rom the private sectorwith leadership and managementopportunities in nonproft organizationsand in education.
Were beginning to see how businesscan help address both this need and theneeds o their own employees by assistingwith transitions into new felds. Workingwith Bridgespan, IBM has expanded itsTransition to Teaching program to helpemployees move into positions in the
nonproft and public sector.Programs like these solve the seriousneed or highly skilled people in thenonproft and public sectors as the waveo baby boomers begins to exit theworkorce.
Thomas J. Tiee,
Chairman and Co-Founder,
The Bridgespan Group
readig compaio: This Web-based
literacy program, featuring interactive
voice recognition software, improves
reading skills by giving the learner
individualized feedback and reinforcement.
Connect: Practicing readers
are equipped with headset
microphones that are connected
to their computers.
Read: They select an e-book
from the virtual library
and read the phrases and
sentences aloud.
Understand: The Reading
Companion software listens
and then provides immediate
audio feedback.
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23SECTION TWO
Wold commuit Gid:This new cancer
project could help build smarter health
systems by delivering better drug treatments
that could empower individuals to
customize or target their therapies and
treatment plans.
Three million drug candidates:
The study will determine which
ones have the potential to
prohibit the growth o certain
proteins that are key to cancer
progression.
One virtual supercomputer:
More than 430,000 members,
with links to more than 1.2
million computers.
The Small Busiess o SME Toolit:
This Web portal is designed to support
small business growth worldwide, including
young enterprises in emerging markets and
women- and minority-owned businesses in
the U.S.
Wealth o resources: More than 500
interactive tools, business orms and
how-to articles
Global content: Best-o-breed small
business content acquired rom major
providers worldwide
An online community: Features Web 2.0
collaborative tools and in-person and
online training modules
O the Web
For more inormation on the SME toolkit,
visit us.smetoolkit.org
One o the barriers to the growth o small businesses worldwide is limited access
to the same tools and resources that are so readily available to larger companies.
To address this challenge, IBM and the World Banks International Finance
Corporation collaborated to create the Small Business Toolkit.
Now translated into 16 languages and deployed in 30 countries, this ree Web
portal oers a wealth o tools to help new enterprises learn and implement
eective business management practices and improve their access to capital
and new markets. In 2008, during the economic downturn, ree resources like
the Small Business Toolkit helped serve as a lieline or small businesses,
particularly those in emerging markets.
In 2004, IBM joined orces with leading science, education and philanthropic
organizations worldwide to create the largest public humanitarian grid in
existence. Since then, World Community Grid has been used or research to
address such pressing global issues as clean energy, world hunger, cancer, dengue
ever, and the H1N1 and HIV/AIDS viruses.
In March 2009, IBM and researchers rom the Chiba Cancer Center Research
Institute in Japan launched a new World Community Grid project to try to
discover a treatment or neuroblastoma, the most common cause o death in
children with solid tumorswith survival rates o less than 40 percent. The
project will try to identiy which o the three million potential drug candidates
prohibit growth o three proteins believed to be key in the progression o thecancer. All results will be made available to the general scientic community to
advance cancer biology and drug discovery. Dr. Akira Nakagawara, rom the
Chiba Cancer Center Research Institute, says, It would take us about 100 years
using our own computing resources to make progress, but with access to one
o the worlds largest virtual supercomputers, we estimate to complete this
project in two years.
Equippig Etepeeus:Small Busiess Toolit
Egagig the Wold i PoblemSolvig: Wold commuitGid ad childhood cae
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24 IBM Corporate Responsibility Report
Setio Thee: EviometIovatig to avoid o edueeviometal impats
A dedication to creating solutions that helpprotect the worlds environment is not just partoIBMs smarter planet agenda, it has beenone o the guiding principles o our companyor nearly our decades.
IBMs longstanding commitment to environmental protection was rst
ormalized as a corporate policy in 1971. From how we run our operations to
the products and solutions we provide to our clients, we are committed to
leadership across environmental areas ranging rom energy eciency and waterconservation to pollution prevention and product stewardship.
Here we prole some o our most signicant work in the areas o energy
conservation, climate protection, environmental requirements in the supply chain,
environmentally preerable materials and the management o end-o-lie
electronic equipment.
3
ENVIRONMENT
4.9billionkWh o electricity was saved as a result oIBMs annual energy conservation projectsbetween 1990 and 2008.3.3millionmetric tons o CO2 emissions were avoided
as a result, an amount equal to:
48%o IBMs 1990 global CO2 emissions, whichtranslates into:$343million
in energy expense savings.
O the Web
For Web-exclusive content and more
on our eorts around environment,
visit us online at ibm.com/responsibility/
environment
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25SECTION THREE
IBMs climate protection programs as they relate to our operations ocus on:
Energy Conservation
Reducing Perfuorocompound (PFC) Emissions
Procuring and Fostering Renewable Energy Supporting Alternate Employee Commute Options
Increasing the Eciency o the Companys Logistics
EnErGy cOnSErVATIOn: IBMs commitment to energy conservation dates back
to 1974 and has continued, unabated, over the intervening years. In 2008, IBMs
energy conservation projects across the company delivered savings equal
to 6.1 percent o its total annual energy use, exceeding the corporate goal o
3.5 percent. These projects avoided the consumption o 235 million kilowatt-
hours (kWh) o electricity and 6.3 million gallons o uel, representing the
avoidance o 215,000 metric tons oCO2 emissions. The conservation projects
also saved $32.3 million in energy expense.Two examples o initiatives in 2008 that enabled signicant increases in
IBMs own data center energy eciency include:
IBMS MOBILE MEASUrEMEnT TEcHnOLOGy (MMT): Using this thermal mapping
tool developed byIBM Research, surveys perormed at nine strategic
IBM data centers with over 30,000 kWo electricity demand identied
opportunities or a 2,100 kWdemand reduction (7 percent), o which
approximately 110 kWhave been captured. Work is underway to capture
much o the remaining opportunity.
SErVEr cOnSOLIDATIOn: This aspect oIBMs data center program enables
us to do more work with less energy. In 2008, 19 data centers consolidated
various server operations, saving 10 million kWh o electricity use and
$1 million in expense. IBM is also oering these services and capabilities to
its clients globally, extending the energy and climate benets well beyond
the companys operations.
Eeg cosevatioad climate Potetio
54.5C
13.0C
33.7C
ke Peomae Idiato
Energy Conservation2008 Savings as Percentage o
Total Energy Use
Goal:Achieve annual energy conservation
savings equal to 3.5% o IBMs total
energy use.
Results: In 2008, IBMs energy conservation
projects across the company delivered
savings equal to 6.1% o its total energy
use. (Associated energy cost savings:
$32.3 million)
Goal
Perormance
3.5%
6.1%
A cosevative Appoah: Only savingsrom energy conservation projects are
credited in IBMs energy conservation goal.
Energy savings as a result o divestitures
or downsizings do not count toward the
energy conservation goal. Moreover,
IBMs reported results are conservative
in that they include only the irst years
savings rom the conservation projects.
Ongoing conservation savings beyond the
irst year are not included in the tally.
Accordingly, IBMs total energy savings
and CO2 emissions avoidance rom
these conservation actions is actually
greater than this simple summation o
the annual results.
Mobile Measuemet Teholog:A CT scan or data centers, Mobile Measurement Technology rom IBM
Research measures 3-D temperature distributions within these acilities. A position monitoring system with a
network o up to 100 sensors gathers thermal data with unprecedented speed and accuracy. Shown here is a
temperature mapping o an actual data center, with the red areas highlighting hot spots that require attention.
Such intelligence can be used or improving spatial use and increasing energy eiciency by as much as 10%.
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26 IBM Corporate Responsibility Report
PrOcUrInG AnD FOSTErInG rEnEWABLE EnErGy: In 2008, IBM purchased
450 million kWh o renewable energy, which represented 8.6 percent o the
companys 2008 global electricity usage.
In addition to procuring renewable energy or its own use, IBM is working
to urther the availability and aordability o renewable energy by investing
in IT-related research and development.
ADVAncInG SOLAr TEcHnOLOGy:IBM is exploring our main areas o
photovoltaic research: using current technologies to develop cheaper and
more ecient silicon solar cells; developing new thin lm photovoltaic
devices; pioneering concentrator photovoltaic technology to harness the suns
power more eciently and cost eectively; and researching uture generation
photovoltaic architectures based upon structures such as semiconductor
quantum dots and nanowires.
DEVELOPInG SMArT GrIDS: IBM is developing and oering solutions to help
utilities add a layer o digital intelligence to their grids and thus automate,
monitor and control the two-way fow o energy across operationsrom
power plant to plug. Smart grids can also incorporate new sustainable energysources such as wind and solar power and interact locally with distributed
power sources or plug-in electric vehicles.
rEPUrPOSInG ScrAP SILIcOn WAFErS: Solar energy technology is aected by
the availability o silicon. IBM has developed a polish process that enables
the repurposing o scrap silicon waersthe base material used or chips in
everything rom computers to consumer electronics rom its semiconductor
manuacturing operations or use in solar panels. The new process is helping
to reduce the estimated three million silicon waers discarded each year across
the computer industry, while also providing new supplies o raw materials to
the solar energy industry.
ENVIRONMENT
Renewable EnergyProcuredPercentage o Total Electricity
The procurement o renewable energy is part
o IBMs CO2 Emissions Reduction Goal.
01
08 8.6%
O the WebFor more inormation on IBMs environ-
mental policy and programs, visitibm.com/
ibm/environment/. For more inormation on
IBMs programs to reduce CO2 emissions
associated with employee commuting
and business travel, as well as product
packaging design, see our 2008 IBM and
the Environment report. Visit ibm.com/
ibm/environment/annual/
covetig Silio Waes ito Sola Eeg
Reclamation
Through a polish reclamation
process, IBM repurposes scrap
silicon waers rom its chip
manuacturing operations.
Repurposed
The repurposed waers
are being reused in internal
manuacturing calibration
as monito r waers.
Solar
They are also being sold to
the solar cell industry, to
meet the growing demand
or silicon material to
produce photovoltaic cells
or solar panels.
0.2%
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27
rEDUcInG PFc EMISSIOnS:IBM releases some perfuorocompounds (PFCs) rom
its semiconductor manuacturing operations. The companys goal is to reduce
PFC emissions rom semiconductor manuacturing 25 percent by 2010 against a
base year o 1995. As o year-end 2008, IBMs emissions were 30.4 percent
below the 1995 baseline amount o 381,000 metric tons oCO2 equivalent.
cO2 EMISSIOnS rEDUcTIOn GOAL: Between 1990 and 2005, IBMs energyconservation actions reduced or avoided CO2 emissions by an amount equal
to 40 percent o its 1990 energy use. To urther extend this achievement, IBM
set itsel an aggressive second generation goal: to reduce the CO2 emissions
associated with its energy use 12 percent by 2012 against a 2005 base year through
energy conservation and the procurement o renewable energy.
In 2008, IBMs signicant conservation results delivered a 3.4 percent
reduction in its energy-related CO2 emissions over 2007. The companys
procurement o renewable energy equaled 8.6 percent oIBMs total
2008 energy use. Together, these eorts resulted in a 1.6 percent reduction
in IBMs energy-related CO2 emissions at year-end 2008 rom the 2005
base year o this goal.
PrODUcT EnErGy EFFIcIEncy:IBM continues to enhance the ability o its
hardware products to deliver more computing power or each kWh o
electricity used with each new generation or model o a product. The new
server models released in 2008 or which comparable products existed
delivered rom 1.3 to 93 percent more computing capability or each kWh
o electricity used than the previous model/product. Inormation on the
eciency o specic product sets may be ound in the 2008 IBM and
the Environment report.
EFFIcIEncy OF LOGISTIcS:IBM is reducing the CO2 emissions associated withtransporting its products through the ecient design o its packaging, working
with suppliers on their packaging designs and optimizing logistics. In the
area o logistics, IBM is a member o the U.S. EPAs SmartWay Transport
Partnership and, in 2008, 86 percent oIBMs spending or shipping goods within
the U.S. and rom the U.S. to Canada and Mexico was spent with SmartWay
carriers. IBM also voluntarily applies specic SmartWay requirements to its
distribution operations globally.
IBM Global Logistics has also been analyzing its logistics transaction level
data and utilizing an IBM developed tool, the Carbon Trade-O Modeler, to
model the interaction among various levers: transportation mode, uel, packaging
weight, load consolidation, alternate sourcing and service level agreement. Thisinitiative has enabled IBM Global Logistics to make decisions that optimize the
benets identied rom the Modeler across these levers.
SECTION THREE
Goal:Between 1990 and 2005, IBM
reduced or avoided CO2 emissions by
an amount equivalent to 40% o its
1990 emissions through its global energy
conservation program. IBMs new goal is
to urther extend this achievement by
reducing CO2 emissions associated with
IBMs energy use 12% between 2005 and
2012 through energy conservation and the
procurement o renewable energy.
Results:At year-end 2008, IBM had
reduced its energy-related CO2 emissions
1.6% rom the 2005 base year o its goal.
ke Peomae Idiato
CO2 EmissionsReductionMetric Tons x 1,000
Second Generation
Reduction Goal by 2012
12.0%
05 2,543
08 2,502
Decrease rom
2005 Base Year
1.6%
ke Peomae Idiato
PFC EmissionsReductionIn Carbon Dioxide Equivalent
Goal: Reduce PFC emissions rom semi-
conductor manuacturing 25% by 2010
against a base year o 1995.
Results: As o year-end 2008, IBMs
emissions were 30.4% below the 1995
baseline amount o 381,000 metric tons
o CO2 equivalent.
08 241,900
95 381,000
Actual Reduction
30.4%
Reduction Goal
by 2010
25.0%
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28 IBM Corporate Responsibility Report
EnErGy AnD cLIMATE OBJEcTIVES In THE SUPPLy cHAIn: IBM has had environ-
mental requirements or relevant subsets o its suppliers or decades. As part
oIBMs leadership in the Electronic Industry Citizenship Coalition (EICC) and
the Carbon Disclosure Project (CDP) Supply Chain Project, IBM is increasing
its ocus on the energy and climate programs o its suppliers. Further described
in the Supply Chain section o this report, the purpose o this ocus is to
encourage our suppliers to understand and reduce the greenhouse gas emissionsrom their operations.
EnErGy AnD cLIMATE rESEArcH:IBMs commitment to climate protection is
integrated throughout the company and is also a ocus o our corporate
philanthropy. For example, climate change is the topic o two o the research
projects selected or the IBM-sponsored World Community Grid:
AFrIcAncLIMATE@HOME:This project o the University o Cape Town
is developing more accurate climate models o specic regions in Arica
that will serve as a basis or understanding the impact o uture climate
change so that measures to alleviate its adverse eects can be developedand implemented.
SOLAr cELL rESEArcH: The Clean Energy Project research being conducted
by scientists in the Aspuru-Guzik research group at Harvard University is
seeking to discover materials or the next generation o solar cells and later,
energy storage devices.
cLIMATE AnD WATEr: Climate is also an aspect o the new computer-modeling
ramework being developed byIBM and The Nature Conservancy in their
Water or Tomorrow partnership. The partnership is creating a decision
support system that can analyze wide-ranging data on climate, rainall, land use,
vegetation and biodiversity across major watersheds.Through computer modeling and scenario orecasting, users will be able to
simulate the behavior o river basins around the world based on the varying
actors and their potential impacts on the watersheds. Rich, three-dimensional
visualizations o the scenarios will help planners and policy makers understand
the possible outcomes o various land use and watershed management options.
This knowledge can acilitate more sustainable management o the worlds
great rivers to benet both the environment and the people who rely on these
reshwater resources.
The project will initially be implemented in the Paraguay-Paran river
system in Brazil with the goal o replicating the decision support system in the
Yangtze River in China, the Mississippi River in the U.S. and eventually otherriver systems throughout the world. The tool developed in the rst phase o this
research will be released in 2009.
ENVIRONMENT
Suppl chai:See Energy and Climate
Programs in the Supply Chain on page 33
or details on the EICC and CDP Supply
Chain programs.
The global economy is placing growingdemands on available reshwater
supplies, oten altering these naturalsystems and hindering their ability to support communities, livelihoods,businesses and wildlie. The NatureConservancys reshwater conservationeorts involve local, on-the-ground
projects as well as innovative andstrategic eorts to develop and testnew techniques or conserving andrestoring reshwater systems. But wecant accomplish this alone, so we workcollaboratively with governments,businesses, academic institutions andother organizations to develop
sustainable water management solutions.In Brazil were currently testing a
computer modeling ramework developedby IBM researchers and The NatureConservancy that will allow users to
simulate the behavior o river basins,helping to inorm policy and managementdecisions around the globe.
Ma Tee, President and CEO,The Nature Conservancy, a science-based
international conservation organization
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29
Among its objectives, IBMs environmental policy calls or the company to use
development and manuacturing processes and to provide products that are
protective o the environment.
EnVIrOnMEnTALLy PrEFErABLE SUBSTAncES AnD MATErIALS:IBM routinely and
consistently monitors and manages the substances it uses in its manuacturing
and development processes and in its products. IBMs precautionary approach includes the careul scientic review and
assessment o certain substances prior to their use in IBMs processes and
products. In specic instances, IBM has chosen to proactively prohibit, restrict
or substitute substances used in IBM processes and products when the weight o
scientic evidence determines an adverse eect upon human health or the
environment, even when law permits their use.
In addition, IBM conducts scientic investigations o existing approved
substances when new processes or major modications to existing processes are
being developed. The objective o these scientic investigations is to identiy
potential substitutes that may be environmentally preerable. IBM believes that
the same scientic rigor is required when investigating the human healthand environmental eects o potential substitutes as was given to the substance
currently in use.
MATErIAL SUBSTITUTIOnPFOS/PFOA: One current initiative is our work to
eliminate PFOS (perfuorooctanesulonic acid) and PFOA(perfuorooctanoic
acid). PFOS is perhaps most commonly known or its use in stain repellents.
In the semiconductor industry, these materials have been widely used or waer
patterning and etching processes.
Poess ad PodutStewadship
Maintaining
healthy forests
helps regulate
water availability
by controlling
erosion and
sedimentation.
People have
profoundly altered
river systems by
diverting water and
developing lands
for agricultural and
urban use
threatening the
capacity of our
rivers to support
the people, plants
and wildlife.
Approximately
70% of our
freshwater
supplies are used
to irrigate crops.
The worlds rivers
and streams have
been altered by
unsustainable
land-use practices.
Loss of habitat,
invasive plants and
animals, over-
harvesting, climate
change and
decreasing water
quality add to the
stress on these
systems.
More than 20%
of the worlds
10,000 known
freshwater species
have become
extinct or
endangered.
Less than 1% of
water found on
earth is available
for human
consumption as
freshwater. One in
five people on the
planet do not have
adequate access
to safe, clean
drinking water.
Changes to river
systems are
having a negative
impact on people.
Communities are
economically
impacted by poor
water quality,
water scarcity,
increased flooding
and low levels of
native fishes and
birds for food.
The natue coseva ad IBMs Wate o Tomoow pateship: As our communities grow,
we make decisions that affect the freshwater ecosystems. How can we effectively balance the multiple
tradeoffs we face when making decisions that affect the worlds freshwater supply?
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30 IBM Corporate Responsibility Report
IBM made a commitment to transition away rom PFOS and PFOAbased
on growing evidence o their persistent bioaccumulative and toxic properties.
The commitment began with a prohibition on the development o new
photoresist materials with these chemicals in 2003, ollowed by a prohibition on
new uses oPFOS and PFOAin the companys manuacturing in 2007 and a
goal to eliminate all existing uses o these chemicals by the end o 2009.
The identication o chemical substitutes that are preerable rom anenvironmental and saety perspective, and yet provide the same necessary level
o unction as PFOS and PFOA, involves dicult technical challenges.
In order to eliminate PFOS and PFOArom IBM processes, we have worked
with our chemical suppliers to develop new ormulations in accordance with
our specications.
At the end o 2008, IBM successully completed an extensive, multi-year
eort at both its New York and Vermont waer development and production
acilities to eliminate all PFOS and PFOAin the wet etch processes. IBMs
Vermont acility received the Vermont Governors Award or Environmental
Excellence in Pollution Prevention or this accomplishment. As we drive toward
completing the elimination oPFOS and PFOArom our other processes,IBM is actively engaged in the development o next generation, fuorine-ree,
photolithography chemicals.
nAnOTEcHnOLOGy: Nanotechnology is the application o scientic and
engineering principles to make and utilize very small things (dimensions o
roughly 1 to 100 nanometers). An important aspect o nanotechnology is
creating materials in the nanoscale, where unique properties enable novel and
useul application.
Nanotechnology is already part o a wide variety o productsrom cosmetics
and sunscreens to paints, clothing and gol equipment. It can make products
lighter, stronger, cleaner, less expensive and more precise, and has been criticalto the success o the IT industry.
A pioneer in the eld, IBM has achieved numerous breakthroughs that are
undamental to the development o nanotechnology. One signicant example is
the scanning tunneling microscope. As is oten the case with the introduction
o new technologies, there are some environmental, health and saety questions
related to nanoparticles because o the relatively limited inormation available
about them.
IBM has taken proactive steps to respond to this uncertainty. IBM was one o
the rst companies to create sae work practices and health and saety training
or its employees working with nanoparticles.
IBM is also partnering with governmental agencies and other organizations
such as the National Institute o Occupational Saety and Health (NIOSH) to
engage in and support the development o the necessary environmental, health
and saety inormation that will lead to greater human health and environmental
protection, and responsible and sustainable nanotechnology development.
ENVIRONMENT
ke Peomae Idiato
Recycled Plastics2008 Percentage by Weight
Goal: Ensure recycled plastics represent
5% or more o the total plastics procured
by IBM and its suppliers annually under
IBMs corporate contracts or use in IBM
products.
Results: In 2008, recycled plastic
represented 10.3% o IBMs total plastic
purchases (recycled and virgin plastics).Since the inception o the program in 1995,
12.7 million pounds o recycled resins
have been procured under IBMs corporate
contracts or use in IBM products.
Goal
Perormance5%10.3%
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PrODUcT EnD-OF-LIFE MAnAGEMEnT: As part o its product end-o-lie manage-
ment (PELM) activities, IBM began oering product take-back programs in
Europe in 1989 and has extended and enhanced them over the years. Today, IBMs
Global Asset Recovery Services organization oers Asset Recovery Solutions
to commercial customers in 57 countries.
In 2008, IBMs PELM operations worldwide processed 42,302 metric tons o
end-o-lie products and product waste. These PELM operations reused orrecycled 96.9 percent o the total amount processed and sent only 0.6 percent to
landlls or to incineration acilities or treatment, versus IBMs corporate goal o
minimizing its combined landll and incineration rate to no more than 3 percent.
IBM continues to conduct environmental evaluations o its product recycling
and disposal suppliers, as it has done since 1991. In 2002, to address general
concerns about electronic waste being exported to some non-OECD countries
where it was then being improperly handled, IBM expanded its supplier
evaluation requirements to include assessments o subcontractors the suppliers
may use to handle recycling and/or disposal operations in non-OECD countries.
In addition, IBM has criteria to avoid the sale o technologically obsolete
or nonunctional equipment to brokers or resale. Moreover, brokers whoprocure used products or parts rom IBM or resale are required to sign
an agreement not to resell into non-OECD countries i the broker knows or
has reason to believe that the equipment and/or parts will not be used or their
originally intended purpose without the need or disassembly or disposal.
SECTION THREE
ke Peomae Idiato
Landill and IncinerationMinimization2008 Percentage by Weight
Goal:Reuse or recycle end-o-lie products
such that the amount o product waste
sent by IBM to landills or to incineration or
treatment does not exceed a combined
3% o the total amount processed.
Results:In 2008, IBMs product end-o-lie
management operations worldwide
processed 42,302 metric tons o end-o-
lie products and product waste, and sent
only 0.6% o the total to landills or to
incineration acilities or treatment, versus
IBMs goal to minimize its combined
product landill use and incineration or
treatment rate to no more than 3%.
Recycled54.4%
Resold or Reuse31.4%
Reused7.1%
Waste-to-Energy
4.0%
In Process2.5%
Incineration0.4%
Landilled0.2%
Eal results:Since 1995, when IBM irst
began reporting the volumes o product
waste it collected and recovered in the
companys annual corporate environmental
report, IBM has documented the collection
and recovery o more than 1.6 billion
pounds (729.2 million kilograms) o product
and product waste worldwide through
year-end 2008.
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32 IBM Corporate Responsibility Report
Setio Fou: Suppl chai resposibilitA ommitmet to ollaboatio
IBM runs one o the worlds largest and most
complex supply chainswith more than30,000 supplier locations spread over morethan 60 countries.
We know that our sizeable purchasing power is a unique resource we must
manage responsibly. We also know that our strong supplier relationships
provide us with the opportunity to work with our providers to dene standards
ethical, social and environmental in the global IT supply chain. We believe
that the work we do together can improve operational excellence, working
conditions, and environmental standardsresulting in higher quality goods and
services or our customers.
4
SUPPLY CHAIN RESPONSIBILITY
36% / 37%Health and Saety 27%
23% / 32%Working Hours 45%
14% / 31%Wages and Benefts 55%
28% / 0%Communications 72%
1% / 0%Freedom o Association 99%
0% / 0%Ethical Dealings 100%
27% / 4%Respect and Dignity 69%
14% / 8%Record Keeping 78%
10% / 1%Nondiscrimination 89%
10% / 1%Child Labor & Regulations 89%
6% / 3%Environmental 91%
Forced Labor & Regulations 93% 4% / 3%
Compliant to IBM code
Noncompliant (Major)
Noncompliant (Minor)
The graph relects cumulative indings o assessments, including suppliers o both manuactured products, sotware and
services in Argentina*, Brazil, China, Czech Republic, Hunga ry, India, Malaysia*, Mexico, the Philippines, Poland, Romania,
Slovakia, Taiwan, Thailand and Vietnam*.
*New in 2008
ke Peomae Idiato
Supplier InitialAudit Results
20042008
Since 2004 we have conducted more than
550 audits with suppliers in 15 growth
markets. Audits were conducted by third-
party irms with local personnel.
Supplier Spending$38.5 Billio Total i 2008
O the Web
For more inormation on our supply chain
initiatives, visit us online at ibm.com/
responsibility/supplychain
Logistics3% $1.0
Latin America6% $2.4
Production30% $11.4
Asia Paciic30% $11.4
North America39% $14.9
Services andGeneral68% $26.1 Europe,
Middle East, Arica25% $9.8
2008 b IBM Loatio
Dollars in Billions
2008 b catego
Dollars in Billions
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During 2008, IBM continued to implement its Supply Chain Social Responsibility
(SCSR) initiative across its global network o suppliers. By the end o 2008, we
had completed a cumulative total o 553 initial audits; including expansion into
three additional growth market countries (36 initial audits): Argentina, Malaysia
and Vietnam. In 2008, we conducted 136 initial and re-audits, exceeding our
target o 100. As described, our SCSR deployment is with rms IBM holds adirect commercial relationship with, called rst-tier suppliers. In order to
urther the coverage o our initiative, in 2009 we are working to engage
rst-tier suppliers to enable them to expand SCSR activity into the second-tier
o the IBM supply chain.
IBMs SCSR initiative includes working with suppliers to develop
improvement plans that are based on the ndings o our audits. IBM works
collaboratively with its suppliers on these improvement plans to oer
commentary based on our extensive knowledge o best practices witnessed in
the perormance o over 500 assessments. Oten there is a period o exchange
until we reach agreement on an appropriate improvement plan. The timerame
or improvements can range rom a matter o days (or easily rectiednoncompliance such as installing exit signs or distributing oIBMs code o
conduct to workers) to several months or longer (or more complex
non-compliances such as the establishment o proper management systems).
In 2008, we reviewed 169 o these supplier improvement plans with suppliers
that were audited in 2007 and 2008.
To test the eectiveness o these improvement plans, IBM perorms re-audits
on a planned requency ater plan establishment. The results o our re-audits
generally show improvements by the supplier. On the other hand, we have also
seen that some suppliers in growth markets have not always been able to sustain
improvements in certain areas such as working hours and health and saety.
Oten the root cause or unsustained improvements by those suppliers ingrowth markets can be attributed to the suppliers lack o strong management
systems. This is a conclusion that has become clearer to rms participating in
the industry group, the Electronic Industry Citizenship Coalition (EICC). The
EICC, o which IBM is a key member, is working on means to help suppliers
who continue to need improvement with health and saety and working hour
compliance. The EICC is also working to deploy Web-based education or its
members and suppliers and is encouraging suppliers to take advantage o
third-party educational resources in their local countries.
In the ourth quarter o 2008, IBM took a signicant step by moving the
SCSR initiative orward into exploratory work in some new regions that IBM is
considering or uture sourcing. One such example is Sub-Saharan Arica
(SSA). By including SCSR in the SSAanalysis, we introduced potential suppliers
to IBMs supplier code o conduct.
A commitmet tocotiuous Impovemet
Eeg ad climate Pogams i the
Suppl chai: In 2008, we undertook two
speciic initiatives relative to climate change:
1. As a member o the Electronics Industry
Citizenship Coalition, IBM is participating
in the development o a Web-based
application that companies in the
electronics sector can use, along with
their suppliers, to estimate their
operational greenhouse gas (GHG)
emissions as a orerunner to creating
reduction programs.
2. As a participant in the Carbon Disclosure
Projects Supply Chain Project, IBM
invited 114 o its major suppliers
to respond to the Carbon DisclosureProjects Questionnaire. These 114
suppliers represent 80% o IBMs
expenditures with production-related
suppliers and 30% o spend with services
and general procurement suppliers.
O the 114 suppliers to whom we sent the
request, 72 suppliers responded to the
CDP Questionnaire. This 63% response
rate is relatively high compared to that
received by other participating companies
in the CDP Supply Chain Project. IBM
participated in this endeavor because we
want to work with our critical suppliers to
gain an understanding o their operational
impacts and assess where these suppliers
are with regard to having a GHG emissions
inventory and reduction plans. Survey
responses showed that about one-third o
production suppliers had reduction plans,
and about one-hal o non-production
suppliers had plans. This is an encouraging
sign, but these numbers highlight the
inancy o this initiative in the supply chain.
In 2009, IBM is again participating in this
CDP program and urther collaborating
with our core suppliersboth those who
did and did not respondin order to
encourage their work to understand
and reduce their GHG emissions rom
their operations.
SECTION FOUR
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As part o this eort, we conducted audits in SSAcountries with certain
potential uture suppliers. The results o the audits are being shared with these
suppliers in order to provide them with clarity about areas in which they need
to improve. This marks the rst region in which we have enacted this activity in
the pre-sourcing stage. It gives Procurement visibility to the challenges relating
to social responsibility input that will be incorporated into the sourcing
decision process as IBM looks to develop a supply chain in this growth region.
In 2008, IBM continued its strong involvement in the EICC. It currently holds
the Chair o the Board position and it has participated in work groups such as
Communications/Stakeholder engagement, Extractives, and the Validated Audit
Process. In early 2009, the EICC released its rst annual report, which describes
the coalition, its history, current projects and recent accomplishments.
An example o the EICC deliverables IBM uses is the EICC Sel-Assessment
Questionnaire (SAQ). Not only is IBM a supplier to our customers but we
also supply other companies in the electronics supply chain. During 2008, IBM
completed the corporate portion o the EICCSAQ. In late 2008, we createda plan to have IBM manuacturing locations implement the SAQ in support o
our endorsement o the EICC code o conduct.
IBM is not only extending SCSR to its suppliers but also including itsel in
this initiative; this will help us become a better customer in the supply chain
and will help put us in a better position to consult our suppliers on how they
too can improve in the mutual objective to drive sustained improvements.
In 2009, IBM is transitioning rom its own code to using the EICC code o
conduct and its associated audit questions and Validated Audit Process. We will
use the EICC audit process or uture assessments o manuacturing/production
suppliers. The EICC Validated Audit Process is very rigorous and well suited
or larger manuacturing suppliers. In addition, by converting to this ormat,we will urther support the EICCs objective o eliminating redundant audits in
the supply chain and increasing the sharing o audit results across multiple
customers (within the established procedures o the EICC).
collaboati