2017 Corporate Responsibility Report

Putting smart to work for our company and the world

 1 2017 Corporate Responsibility Report | Contents

02 Chairman’s letter About this report IBM’s annual Corporate Responsibility Report is published during the second quarter of the subsequent calendar 04 Our approach to corporate responsibility year. This report covers our performance in 2017 and some notable activities during the first half of 2018. 07 Performance summary and awards In selecting the content for inclusion in our 2017 report, we have used the Global Reporting Initiative (GRI) reporting 12 Citizenship principles of materiality, sustainability context, stakeholder inclusiveness, and completeness. A GRI report utilizing 22 Environment the GRI G4 Sustainability Reporting Guidelines, as well as additional details about IBM’s corporate responsibility activities and performance, can be found at our corporate 31 IBM Research responsibility website.

34 The IBMer Unless otherwise noted, the data in this report covers our global operations. Information about our business and financial performance is provided in our 2017 Annual Report. 40 Supply chain IBM did not employ an external agency or organization to audit the 2017 Corporate Responsibility Report. 53 Governance As we continue to transform IBM into a cognitive solutions and cloud platform company, we regularly review our strategy and approach to corporate responsibility. This ongoing analysis helps us to identify and prioritize the issues of relevance to our business and our stakeholders. Chairman’s letter 3 2017 Corporate Responsibility Report | Chairman’s letter

More than at any time in recent history, governments, These principles make clear how IBM has earned about who trains their AI systems, what data was Corporate Citizens. I am proud to say that in 2018 businesses and individuals are examining how our reputation as a responsible steward of data, used in that training and, most importantly, what IBM was once again honored to receive the Catalyst companies operate. They are voicing concern over and they provide a guidebook for how all companies went into the algorithm’s recommendations. IBM Award for leadership in building a diverse and how personal data is being handled and protected, can do the same — how they can design and deploy also believes that while bias can never be fully inclusive workplace — the only tech company honored the potential misuse of technology platforms, and new technologies in a way that advances the march eliminated, and our work to eliminate it will never in the past 20 years and the only company ever to the impact of automation and AI on jobs. They are of societal progress. be complete, we and all companies advancing AI have won the award four times. also examining the diversity and inclusion practices have an obligation to address it proactively. of these companies. Our Principles state: We believe that IBM’s policies, practices and IBM’s Principles are a reflection of a new era, programs offer compelling evidence for optimism: The world, in other words, is deeply in need of The Purpose of AI is to Augment one where technology increasingly influences every As more companies begin to adopt similar organizations that act responsibly. At IBM, for more Human Intelligence: aspect of society, from how government services approaches, a new era of global prosperity and than a century, we have sought to earn and keep We believe the real value in AI lies in its ability to are delivered, how we shop and entertain ourselves, progress becomes possible. the trust of our clients, partners, employees and with augment — not replace — human expertise. That belief to how children learn and physicians treat patients. the people in the many thousands of communities is reflected in the technologies we build and bring We invite all companies, not just tech companies, where we live and work. Indeed, that trust is why to market. We recognize that AI will change every to adopt these principles for their own use. governments around the world choose us to run job in some way. That is why we have been investing systems and services that serve their citizens. It in training IBM employees in new, in-demand skills This is not a new endeavor for IBM. From our also is why 95 percent of Fortune 500 companies and advocating for new approaches to skills educa- company’s start, IBM has adopted policies that rely on IBM to handle their data. tion, including the P-TECH educational model. promote inclusion and treat people with dignity Ginni Rometty and respect. Chairman, President and In this report, you will read about our Corporate Data and Insights Belong to Their Creator: Chief Executive Officer, IBM Responsibility efforts to reform education, protect Trust in the promise of the digital economy can only That legacy continues today — from our commitment the environment and advance new models for be earned through responsible and transparent to genetics privacy and LGBTQ equality for our inclusion and diversity. Yet, crucially, you will also data practices. IBM is dedicated to the protection employees to advocating for public policies that read about an area where there is increasing need of our clients’ data and to harnessing its power reflect our values. For example, in 2017, we took for corporate responsibility — our advocacy for to expand prosperity and opportunity. We firmly positions against the revocation of DACA and trust and transparency in the technology industry — believe that a client’s data and the unique insights against a discriminatory “bathroom bill” in Texas. and beyond. derived from that data belong to that client. We also reaffirmed our support for U.S. participation in the Paris Agreement on climate change. Indeed, as we continue to change the way the world New Technology, including AI Systems, works, we have turned our decades of experience Must Be Transparent and Explainable: IBM is consistently recognized as a corporate into a formal set of guidelines: IBM’s Principles of Society will only trust a technology that can be responsibility leader — from the Just 100 Trust and Transparency. understood. Technology companies must be clear and Fortune Change the World to the 100 Best Our approach to corporate responsibility

High standards are smart business

IBM pursues the highest standards of corporate responsibility as we work with clients and suppliers, support and empower employees, govern our company and connect to communities.

IBM Cloud™ developers 5 2017 Corporate Responsibility Report | Our approach to corporate responsibility

IBM’s core values are IBM pursues the highest standards of corporate IBM’s core values are embedded in all our corporate –– We endeavor to effect widespread, measurable responsibility as we work with clients and suppliers, responsibility policies, practices and programs. and sustainable change. To maximize the impact embedded in all our support and empower employees, govern our These are: of our investments, we plan for the longevity company and connect to communities. Our definition and sustainability of our solutions by working to corporate responsibility of corporate responsibility reflects our expansive –– Dedication to every client’s success make them scalable and transferable. footprint and spans environmental responsibility; policies, practices and social responsibility to our workforce, clients and –– Innovation that matters, for our company Stakeholder engagement business partners; innovation to address critical and for the world programs. societal needs; and a culture of ethics and integrity — Engaging and collaborating with stakeholders guided by a rigorous system of corporate gover- –– Trust and personal responsibility in all from a cross section of communities, governments, nance — that promotes transparency on a global basis. relationships investors and the social sector is integral to our business strategy. Public/private collaborations Responsibility for our economic, environmental We approach corporate responsibility as we do any are essential to overcoming societal challenges that and societal performance, as well as compliance engagement, by applying our talent and technology are too big for any single public entity or industry with laws, regulations and the corporate policies to develop innovative solutions for key societal sector to manage. Below is a small sample of the that govern our operations and practices worldwide, issues. We follow these principles in our corporate collaborations we engage in our corporate responsi- begins with our CEO and includes the IBM Board citizenship efforts: bility efforts. of Directors and its committees that regularly review performance and compliance. –– We work closely with the public and private IBM is a founding member of the Responsible sectors, including local, regional and national Business Alliance (RBA) — formerly the Electronic A Corporate Responsibility Executive Steering governments, nonprofit organizations, universities, Industry Citizenship Coalition (EICC) — a nonprofit Committee provides leadership and direction across research organizations and school systems. industry group which enables companies to support our corporate responsibility activities. Chaired by continuous improvement in the social, environmental the vice president of IBM Corporate Citizenship, –– We apply our best talents and technologies to and ethical responsibility of their supply chains. IBM the committee includes members from human help craft innovative solutions and then bring requires its direct suppliers of goods and services to resources, employee well-being, corporate gover- them to scale. We concentrate on fewer, more adhere to the RBA Code of Conduct, which contains nance, environmental affairs, research, investor comprehensive programs that can help address provisions for labor, health and safety, environmental, relations, governmental programs and supply chain. issues that no single entity can manage alone. ethics and management systems. 6 2017 Corporate Responsibility Report | Our approach to corporate responsibility

We complement our environmental management skills and credentials needed for 21st-century Corporate sponsors such as American Express, strategies by engaging with stakeholders from jobs. In 2018, P-TECH will reach nearly 120 Citigroup, JPMorgan Chase and USAA are essential governments, nongovernmental organizations (NGOs), schools in four countries to help more than to the program, working with IBM to place these business partners, clients, universities, investors 75,000 students build new-collar skills. highly skilled vets in roles in their companies. and other interested parties. As a member of the U.S. Water Partnership, for example, IBM helps to –– Teacher Advisor With Watson is an AI-powered unite and mobilize the expertise, resources and tool featuring Open Education Resources. ingenuity in the U.S. to help address global water Teachers have informed its development at every challenges, with a special focus on developing stage so that it can help improve their effective­ countries where needs are greatest. ness in teaching math. It launched publicly in September 2017 and registered over 10,000 IBM is a founding member of IMPACT 2030, users from all 50 United States in its first a business-led coalition that convenes leaders from seven months. corporations, the United Nations (U.N.), civil society, academia and philanthropic organizations from –– Teachers TryScience, a global initiative developed around the world, uniting their corporate volunteering in collaboration with the New York Hall of efforts to help address the U.N. Development Science and teachengineering.org, now includes Agenda through collaboration. more than 500 lessons and pedagogical strategies in 21 languages, designed to help teachers Engagement is integral to all our corporate strengthen their instruction in STEM (science, citizenship activities. For example, IBM works with technology, engineering and math). educators and other key stakeholders globally to help create innovative models and technologies that –– In 2017, the IBM University Relations program can better prepare people to engage meaningfully launched the “Digital — Nation Africa” initiative in 21st-century opportunities. to build digital skills for a 21st-century workforce in Africa. More than 60 organizations have –– P-TECH™ is the groundbreaking education model joined IBM to collaborate in the enablement of IBM created in 2011 with the New York City this program. Department of Education and The City University of New York, to help provide young people the –– IBM’s Veteran Employment Accelerator Impact Grant program helped hundreds of vets train for data analyst certification throughout 2017. Performance summary and awards

Corporate Service Corps team in Peru, 2017 8 2017 Corporate Responsibility Report | Performance summary and awards

Performance summary Employees Giving Global corporate contributions by type ($M) KPI 2013 2014 2015 2016 2017 Learning IBM reports global corporate contributions by IBM measures many aspects of our corporate We continue to empower IBMers with personalized issue, geography and type of grant. The type of our Technology 100.2 104.4 109.5 171.7 261.1 responsibility efforts every year. Below are data and learning. Your Learning, a digital platform powered giving — services, technology (including software) Services 66.3 69.2 60.0 44.3 34.8 key performance indicators (KPIs) for various parts by Watson, integrates formal, informal and social and cash — is what distinguishes IBM. We work Cash 41.4 36.8 35.5 41.8 36.6 of the business. learning sources and customizes content for each collaboratively to transform approaches to societal Totals ($M) 207.9 210.4 205.0 257.8 332.5 learner. Users can access training anytime and in challenges through innovative solutions that can KPI denotes Key Performance Indicator. their preferred format, gaining control and continu- achieve measurable outcomes. ously developing their skills in a faster and more Global corporate contributions by efficient way. Giving by issue reflects our goal to maintain issue ($M) KPI 2013 2014 2015 2016 2017 education as our primary focus, although we main- Education 147.1 149.2 154.8 208.4 291.7 2013 2014 2015 2016 2017 tain investments in human services, culture, health Human services 17.3 20.1 18.6 15.9 15.2 Investments worldwide and the environment. We also remain flexible to ($M) KPI 525 482 484 498 425 address new initiatives and meet extraordinary Health 3.5 3.7 3.6 5.2 9.8 Total hours worldwide (M) 40 25.8 25 26.7 23.7 external conditions such as disaster relief and Culture 3.0 3.6 3.4 4.0 4.0 Hours per employee KPI 82 62.5 58.3 56 59 recovery. The geographic distribution of our contri- Environment 5.0 3.1 0.6 3.5 2.7 butions reflects how IBM operates — in a global, Other 32.0 30.7 23.9 20.8 9.1 Volunteering fully integrated fashion. Some contributions are IBM supports employees and retirees in skills-based given on a globally competitive basis, so geographical Totals ($M) 207.9 210.4 205.0 257.8 332.5 volunteering in their communities worldwide. Since distribution may vary due to the number and quality 2003, our volunteering enablement initiative has of applications. We do not set goals for percentage Global corporate logged over 20 million hours of service. change in contributions year-to-year, nor for giving contributions by geography ($M) KPI 2013 2014 2015 2016 2017 by geography or type of contribution. We focus on 2013 2014 2015 2016 2017 increasing the quality of our work with organizations North America 83.5 84.7 65.4 99.2 132.2 Worldwide retiree/ on projects that use innovative solutions and can Asia Pacific 37.5 40.3 42.6 39.3 52.1 employee hours (K) 1,496 1,532 1,195 1,248 1,205 have significant, measurable impact on key social Europe, Middle East, Africa 65.7 64.8 82.2 104.2 118.3 issues. Future contributions will reflect our goal of Latin America 21.2 20.6 14.8 15.1 29.9 Global illness/injury rate increasing their effectiveness. Totals ($M) 207.9 210.4 205.0 257.8 332.5 2013 2014 2015 2016 2017 Total per 100 employees 0.30 0.42 0.33 0.30 0.25 9 2017 Corporate Responsibility Report | Performance summary and awards

Supply chain Supplier spending in 2017. Our goal is to achieve annual savings by location 2013 2014 2015 2016 2017 equal to 3.5 percent of IBM’s total energy use in Global supplier spending was $24.8 billion in 2017, North America (%) 36 37 42 43 43 IBM-managed space. increased slightly from 2016 and distributed among Asia Pacific (%) 35 33 31 29 30 categories and regions as shown below. See the Energy conservation Europe, Middle East, KPI 2013 2014 2015 2016 2017 supply chain section of this report for details on our Africa (%) 21 23 22 23 22 spending and programs including supply chain As % of total energy use 6.7 6.7 6.3 5.3 4.2 Latin America (%) 8 7 5 5 5 social responsibility, industry collaboration, supplier North America ($B) 11.8 11.2 10.8 10.6 10.6 diversity and more. Renewable electricity procurement Asia Pacific ($B) 11.4 9.9 8.0 7.3 7.5 IBM’s renewable electricity procurement goal is to Supplier spending Europe, Middle East, purchase 20 percent of our electricity consumption by category 2013 2014 2015 2016 2017 Africa ($B) 7.0 6.9 5.8 5.6 5.5 at IBM-managed space from renewable sources by Services and general 67 71 79 82 81 Latin America ($B) 2.6 2.3 1.2 1.2 1.2 2020, over and above the quantity of renewable procurement (%) Totals ($B) 32.8 30.3 25.8 24.7 24.8 energy provided as part of the mix of electricity that Production we purchase from the grid. In 2017, IBM contracted procurement (%) 30 26 18 15 17 with its utility suppliers to purchase approximately First-tier spending KPI 2013 2014 2015 2016 2017 Logistics procurement (%) 3 3 3 3 2 779,000 megawatt-hours of renewable electricity, Total US ($B) 10.2 9.8 9.3 9.7 9.9 Services and general representing 22.9 percent of our global electricity procurement ($B) 22.1 21.6 20.3 20.3 20.0 Diverse US ($B) 1.9 1.5 1.3 1.3 1.4 consumption and once again exceeding our goal. Production Diverse non-US ($M) 917 883 718 744 657 procurement ($B) 9.7 7.8 4.7 3.8 4.2 Renewable electricity procurement KPI 2013 2014 2015 2016 2017 Logistics procurement ($B) 1.0 0.9 0.8 0.6 0.6 Environment As % of total Totals ($B) 32.8 30.3 25.8 24.7 24.8 IBM maintains goals covering the range of its envi- electricity purchases 11.8 14.2 16.2 21.5 22.9 ronmental programs including climate protection,

energy and water conservation, pollution prevention, CO2 emissions reduction

waste management and product stewardship. Our third-generation CO2 emissions reduction goal

These goals and our performance against them are is to reduce CO2 emissions associated with energy discussed in the environment section of this report. consumption at IBM-managed locations 35 percent by year-end 2020, against base year 2005 and Energy conservation adjusted for acquisitions and divestitures. In 2017, IBM again surpassed its goal by attaining a 4.2 percent savings from energy conservation projects 10 2017 Corporate Responsibility Report | Performance summary and awards

IBM once again exceeded this goal having reduced Product energy efficiency KPI As of May 2018, IBM had five Power Systems

its operational CO2 emissions by 42.9 percent IBM’s product energy efficiency goal is to improve servers and seven storage products certified to against the 2005 baseline. the computing power delivered for each kilowatt- the ENERGY STAR requirements. The Power hour of electricity used for each new generation of Systems servers meet the EPA’s requirements for CO2 emissions servers. In 2017, IBM released its POWER9™-based power-supply efficiency, idle power limits or power reduction KPI 2013 2014 2015 2016 2017 Power Systems™ Accelerated Compute (AC922) management capability, and SPEC SERT metric data As % of 2005 baseline server for high-performance computing analytics reporting. The storage products meet requirements CO emissions 24.7 27.7 28.7 38.1 42.9 2 and artificial intelligence. When compared to com- for power-supply efficiency and reporting of the parable IBM POWER8® products, IBM POWER9- Storage Networking Industry Association Emerald Water conservation based servers have Server Efficiency Rating Tool Power Efficiency Measurement Specification results. IBM made further reductions in annual water with- (SERT) weighted geomean active efficiency scores drawals at 45 data centers and other large locations in up to three times higher — which represents three Product end-of-life management water-stressed regions. The 2.9 percent reduction in times the performance or work delivered without IBM’s goal is to reuse or recycle end-of-life IT 2017 again achieved our goal, established in 2016, of any increase in power use. The SERT was created products such that the amount of product waste year-to-year reductions at these locations each year. by the Standard Performance Evaluation Corporation sent by IBM’s product end-of-life management (SPEC). IBM also introduced its next-generation (PELM) operations to landfills or incineration for Water conservation KPI 2016 2017 mainframe, the IBM z14™ server, in 2017. On average, treatment does not exceed a combined 3 percent % annual reduction in water withdrawals the IBM z14 server delivers 23 percent or more (by weight) of the total amount processed. In 2017, at data centers and other large IBM locations work per kilowatt depending on the choice of com- IBM’s PELM operations sent only 0.7 percent of the in water-stressed regions 6.6 2.9 ponents and cooling method. total processed to landfill or incineration facilities for treatment. Nonhazardous waste recycling ENERGY STAR certified products KPI Our goal is to send an average of 75 percent (by IBM has a goal to qualify its new server and storage Product end-of-life weight) of the nonhazardous waste generated products to the U.S. Environmental Protection management KPI 2013 2014 2015 2016 2017 at locations managed by IBM to be recycled. In Agency’s (EPA) ENERGY STAR program criteria % by weight of total 2017, we recovered and sent 87.8 percent of our where practical, and where criteria have been devel- processed sent by IBM’s PELM operations nonhazardous waste to be recycled. oped for the specific server or storage product type. to landfill or incineration In 2017, IBM certified select configurations of the for treatment 0.3 0.5 0.7 0.6 0.7 Nonhazardous waste IBM Storwize® V7000 storage product to Version 1 recycling KPI 2013 2014 2015 2016 2017 of the ENERGY STAR data center storage require- % by weight sent for ments. None of the server products IBM released recycling of total during 2017 were subject to ENERGY STAR criteria. generated* 86.0 85.9 85.2 86.3 87.8

* Excludes sanitary wastewater transported to publicly owned treatment systems 11 2017 Corporate Responsibility Report | Performance summary and awards

Awards and recognition Corporate responsibility • Mexico’s Federal Environmental Protection Agency (PROFEPA) — • Government of India — National Award, Best Employer for Clean Industry Recertification People with Disabilities • American Chamber of Commerce in Thailand — 2017 Excellence in • Philippines’ Department of Energy — Outstanding Award in the 2017 • Human Rights Campaign Foundation — Best Places to Work for Don Emilio Abello Energy Efficiency Awards (fourth consecutive year) LGBT Equality (15th consecutive year) Every year, publications, advocacy groups, CSR Projects Award • Smart Energy Decisions — Innovation Award in the Customer Project • IABC Gold Quill Awards — Excellence Award in human resources and governments and nongovernmental organizations • CONCAMIN — Ethics and Values Award for 14th consecutive year awards category for Energy Data Management benefits communications, Merit Award in internal communications around the world rate and recognize IBM for our • Chief Executive magazine — 2017 Corporate Citizenship Award • Military Friendly — 2018 Employer of the Year corporate responsibility efforts. We are proud • Corporate Knights — 2017 Top Foreign Corporate Citizens (Canada) • Mogul — Top 100 Innovators in Diversity & Inclusion in 2017 to share highlights of our recognition from 2017 • CR Magazine — 100 Best Corporate Citizens Supply chain • Dow Jones Sustainability Index, North America • National Association of Female Executives — Top 10 Company for and early 2018. Female Executives (10th consecutive year) • EcoVadis — Gold-level CSR rating • Business Equity Network — Inaugural Eminence Award for our • NatWest British LGBT Awards — Top 10 Employer • Barron’s — World’s Most Respected Companies • Education Commission of the States — 2017 Corporate Award work with LGBT suppliers • U.S. Business Leadership Network — Employer of the Year for (for Teacher Advisor and P-TECH) • European Diversity Awards — Supplier Diversity Program of the • Boston Consulting Group — The 50 Most Innovative Companies People with Disabilities • Fast Company — 2017 Innovation by Design Awards Year Award • Forbes — The Just 100 • Working Mother — Best Companies for Multicultural Women • Global Views Magazine — 2017 Corporate Social Responsibility Award • Manufacturing Leaders — Sustainable Manufacturing Award • Forbes — World’s Most Valuable Brands • Working Mother — 100 Best Companies • National Institute for Transforming India — Best Practice in the • National Minority Supplier Development Council — Global Link • Fortune — Change the World private sector (Teachers TryScience) Award for Best International Program in the world • Working Mother India — Top 10 Employers • Fortune — Most Admired Companies • Points of Light — The Civic 50, most community-minded companies • Omnikal — Omni50 award, Top 50 U.S. organizations for multicultural • Workplace Pride Foundation — World’s Most LGBT-Inclusive Company • Fortune — The Most Powerful Women, Ginni Rometty in the U.S. business opportunities • Interbrand — Best Global Brands • Project Management Institute Educational Foundation — 2017 • Procurement Leaders — Risk Mitigation and Transforming External Community Advancement Through Project Management Award Partnerships Awards, World Procurement Awards 2017 For more on our diversity and inclusion awards in • Women’s Business Enterprise National Council — Top Corporation, 2017 visit the IBM Jobs blog. Environment Platinum Level (14th consecutive year as “top corporation”)

• Center for Climate and Energy Solutions and The Climate Registry, HR/diversity in partnership with Bloomberg Philanthropies — Six-time Climate Leadership Award winner, 2018 winner in the Excellence in • American Heart Association — Gold Designation, Workplace Greenhouse Gas Management, Goal Achievement category Health Achievement • City of Austin, Texas — Austin Green Business Leaders Program, • American Indian Science and Engineering Society — Top 50 Platinum level for IBM’s Austin facility Workplaces for Native American STEM Professionals • Clean Energy Ministerial — 2017 Energy Management Insight Award • AnitaB.org — 2017 Top Companies for Women Technologists • Colorado Department of Public Health and Environment — Momentum Award Gold Leader in the Environmental Leadership Program, for IBM’s • Catalyst — 2018 Catalyst Award (fourth time) Boulder facility • European Excellence in HR — Leadership Development Award • Hong Kong Environmental Campaign Committee — Class of Excellence Wastewi$e Label • Forbes Japan — Women Award 2017 Citizenship

Bringing smart to life

We combine the greatest strengths of our company and its people — technology, expertise and energy — to develop innovative programs focused on challenges facing communities where we live and work.

P-TECH graduates 13 2017 Corporate Responsibility Report | Citizenship

Education and skills P-TECH education model –– P-TECH completed its first full six-year cycle, with –– The seven new schools that broke ground in the first cohort graduating from P-TECH Brooklyn Australia last year are now fully launched, bringing The P-TECH school model is a groundbreaking public at a rate more than four times the on-time national the total to nine, including one in Ballarat where education reform initiative designed to address community college graduation rate. Students IBM serves as lead industry sponsor. IBM is also both education and workforce development issues. earned associate degrees in computer information lead sponsor for one of two schools that opened Extending high school to six years, students can systems or electromechanical engineering in Morocco. Taiwan committed to replicating the graduate with a high school diploma, a no-cost technology in six years or less. The vast majority model, planning its first three schools for 2018. associate degree aligned to industry needs, and of graduates have gone on to further education workplace experiences, including mentorship and in a four-year institution. At the end of 2017, the Teacher Advisor With Watson internships. P-TECH (or Pathways in Technology Early first two schools, in Brooklyn and Chicago, had College High School) helps to strengthen regional a combined 98 graduates — many are the first Teacher Advisor With Watson is a free online economies with a workforce more prepared for in their families to earn college degrees, and 15 resource to help teachers plan and deliver lessons new-collar jobs and provides current, relevant now work at IBM. aligned to 21st-century standards and establish technical and professional education opportunities foundational knowledge in young students. to young people from primarily disadvantaged –– Throughout the network of schools, students are Following a pilot deployment, it launched publicly in backgrounds. demonstrating significant success. Students at September 2017 and registered over 10,000 users the Sarah E. Goode STEM Academy in Chicago, from all 50 United States in its first seven months. The first P-TECH school opened in Brooklyn, New Illinois are achieving a 90 percent pass rate in York, in September 2011, as a collaboration among college courses. At 16 P-TECH schools in New IBM Watson’s cognitive abilities enable the system to IBM, the New York City Department of Education, York state, 85 percent of students earned college interact with teachers, understand their needs and the City University of New York and the New York credits and one-third completed two or more recommend resources from among 4,000 lessons, City College of Technology (“City Tech”). In 2017, college courses before year four of the model. activities, strategies and standards details available there were 90 P-TECH schools in the U.S. across At Excelsior Academy in New York, more than online. UnboundEd, a nonprofit organization devoted seven states (New York, Illinois, Connecticut, one-third of the first class is on track to graduate to teacher support and quality instructional practice, Maryland, Colorado, Rhode Island and Texas), as two years early, while at Norwalk Early College selects and reviews all content for quality and align- well as Australia and Morocco. In 2018, P-TECH will Academy in Connecticut, 18 percent are on track ment with current standards. Initial content supports be in nearly 120 schools with over 500 corporate to graduate two years early. elementary-school math for students ages 5–11, sponsors, and is on track to prepare more than with plans to add middle-school math (ages 12–14) 75,000 students for new-collar jobs. IBM serves as –– New York launched six new P-TECH schools for in August 2018. the lead sponsor for eight schools, while providing a total of 37 statewide, while Maryland opened leadership across the entire network. In 2017: three and Rhode Island two. The 2017 launch followed a multi-year development in collaboration with education leaders, subject- matter experts in instructional pedagogy and 14 2017 Corporate Responsibility Report | Citizenship

teacher professional development — and of course, Although developed for U.S. educators and available have reached 1.7 million students in India teachers. We asked about challenges in elementary only in English, Teacher Advisor is open for anyone since 2013 with lesson plans customized for classrooms, and heard consistently about time to use at teacheradvisor.org. local regions. pressures: U.S. teachers average nine hours weekly outside of school time planning their work, according Teachers TryScience Additional workshops and events in Hong Kong, to a study by the Bill and Melinda Gates Foundation. Korea, Malaysia, Thailand and Vietnam extended We also heard about struggles to find quality and IBM’s global initiative to strengthen teacher STEM teaching to new regions and schools. aligned resources that help build students’ under- instruction by providing free, quality STEM lessons standing of elementary math. Teacher Advisor is and instructional resources grew to serve 28,000 The American Chamber of Commerce in Thailand designed to help address both challenges. Asked to registered users with 617 lessons and pedagogic recognized IBM Thailand with an Excellence in CSR search for a concept, resource or student need, resources in 21 languages. The Teachers TryScience Projects Award for its Teachers TryScience teacher Watson leverages its ability to understand natural website received 216,756 visitors from 210 countries professional development project in collaboration language to help locate targeted, quality content in 2017. with the Kenan Foundation. faster. “It allows teachers to quickly get their hands on exactly what they need,” said Regan Lonien, Educators across Asia Pacific embedded Teachers University relations who teaches fourth grade in Minnesota. TryScience resources into teacher training and curriculum throughout 2017. IBM continues to introduce initiatives and challenges The Christensen Institute, a nonprofit think tank to engage and inspire many of the world’s most exploring disruptive innovation in education, wrote: –– The Australian Museum Research Institute promising undergraduate and graduate students to “AI’s capabilities arguably limit it from performing launched education resources on the Teachers build much-needed IT skills. In today’s knowledge- many of the intensely human aspects of teaching. TryScience website to complement a citizen based economy, enabling digital competence AI does have the potential, however, to complement science project called FrogID, which involves the and nurturing innovation will help better position teachers in new ways that could radically free up entire country in a frog count and identification academia, private and public entities for success. their time… The AI technology in Teacher Advisor of frog species. allows teachers to search for resources and create Bringing digital skills to Africa lesson plans in a fraction of the time it would take –– In Malaysia, the Ministry of Science, Technology In 2017, IBM launched the “Digital — Nation Africa” them to do it alone.” and Innovation announced plans to use the (DNA) initiative to build digital skills for a 21st- website to train 4,400 special-needs educators century workforce in Africa. The initiative provides a The Education Commission of the States cited across the country over two years. cloud-based learning platform designed to provide Teacher Advisor and P-TECH when presenting free skills development programs for millions among its 2017 Corporate Award to IBM, honoring –– The National Institution for Transforming India Africa’s youth, enabling digital competence and our sustained commitment to improving U.S. recognized Teachers TryScience as a “best nurturing innovation in Africa. The platform includes public education. practice” in the private sector. The site’s resources Watson artificial intelligence, which communicates 15 2017 Corporate Responsibility Report | Citizenship

Corporate Service Corps with the user to build a profile, gives an overview of once while completing their studies. The program We negotiated with the human resources the current job market and suggests multiple learn- encourages nominations of women and minorities, departments of six key corporate sponsors and sent 30 IBM teams ing paths. Over 60 organizations have joined IBM supporting IBM’s long-standing commitment to now have a fully functioning model pipeline for to collaborate in the enablement of this program. workforce diversity. employment for veterans in the fast-growing field of worldwide in 2017 on cybersecurity, where there is a shortage of data Delivering more assets to academia Veterans employment initiative analysts. “This relationship has expanded over the immersive, socially The IBM Academic Initiative showed significant years and we now work directly with the IBM growth in 2017 after the first full year of our new IBM’s Veterans Employment Accelerator Impact Corporate Citizenship team to provide cybersecurity impactful projects. academic channel, OnTheHub.com/IBM. Through Grant program provides software training, certifica- training and certification in IBM’s i2 and QRadar® the channel, validated faculty and students get tion and job placement assistance to hundreds of technologies,” says Kloeppel. “These trainings have access to IBM cloud, as well as powerful software veterans pursuing careers as data analysts. Through impacted hundreds of active duty service members and learning resources. Over 57,000 academic a comprehensive grant of our Kenexa® software, and veterans and our collaboration has now placed orders from 4,481 institutions in 114 countries we have empowered Corporate America Supports more than 150 individuals directly into cybersecurity more than tripled IBM’s reach from the previous You (CASY) to place thousands of veterans in jobs jobs — some at IBM.” program. Students embraced the program, ordering in the last four years. 65 percent of all assets delivered on topics including data and analytics, Internet of Things, cloud and “Our relationship with IBM has been very impactful, Community resiliency security. IBM.onthehub.com continues to expand, to us as an organization and to our military and adding topics including blockchain and quantum veteran communities,” said CASY founder and CEO Corporate Service Corps computing. Daniel Kloeppel. “Every day we work with military, veterans, and their spouses to place them into good Corporate Service Corps (CSC) has provided pro Refreshed IBM Ph.D. Fellowship awards program paying, career-type jobs. Leveraging IBM technology, bono consulting teams to communities worldwide We updated our global Ph.D. Fellowship awards we’ve now assisted well over 100,000 individuals since 2008. Inspired by the Peace Corps, CSC program to focus on artificial intelligence, block- in job preparation while having placed over 35,000 offers IBMers an immersive experience designed chain, security and quantum computing. Since directly into jobs. BrassRing® technology sits at to benefit communities, enrich its participants the program’s creation in 1951, it has introduced the core of what we do as an organization and we culturally and professionally, and support IBM’s thousands of graduate students — more than 700 could not track the details of these placements global leadership development. over the past decade — to new technologies and and our program success without it.” their impact on industries and societies through The program deploys teams of 12–15 to work with these strong industry-university collaborations. In 2017, IBM experts conducted over 30 veteran governmental, not-for-profit and social organizations, Covering two academic years, the fellowship award training sessions in the United States, United healthcare providers and other civic leaders to help includes financial support, guidance from an IBM Kingdom and Canada, and certified over 500 veter- address high-priority issues in education, health, mentor and encouragement to intern at IBM at least ans in IBM’s i2® Analyst’s Notebook® software. economic development and community resiliency. 16 2017 Corporate Responsibility Report | Citizenship

The teams — consultants, researchers, marketers be used by the 29 leading business schools in the blockchain into a collaborative platform for use by and other domain experts — work on projects to Global Network for Advanced Management. Also all stakeholders including citizens, and upgrading upgrade educational technology, assess ways in 2017, Chief Executive magazine named CSC existing sensor infrastructure to support video to improve water quality, and much more. Many the “best community and economic development analysis and an Internet of Things (IoT) platform. IBMers call these experiences life-changing. In initiative” in its annual Corporate Citizenship Awards. 2017, CSC sent 404 IBMers from 50 countries on In its first decade, CSC has sent nearly 4,000 “What I confirmed during my SCC experience in 30 engagements that included 122 distinct projects. IBMers in 320-plus teams to work on more than Busan is that technology alone is not what makes us Projects from our 2017 engagements included: 1,300 individual projects in 40 countries. essential to clients,” said IBM’s Frédéric Bauchot, CTO of our solutions center for energy/utilities –– In Argentina, we helped the Food Bank of Jujuy Smarter Cities Challenge clients. “The combination of technology with indus- develop a system to coordinate food donations try expertise is what ultimately helps us to achieve and distribution, supported by a plan to promote For seven years, the IBM Smarter Cities Challenge® economic, societal and organizational advances.” the solution’s adoption, with a goal of increasing (SCC) program has combined IBM talent and tech- the organization’s capacity. nology to tackle urban challenges. A flagship IBM In San Jose, California, our team helped to support program since 2010, SCC is coming to an end as our affordable housing initiatives by working with –– In China, we created a plan for Dongfang Huimin citizenship portfolio evolves and, in some instances, the city’s housing department to make recommen- Microfinancing, which makes loans to women carries forward projects that began with SCC and dations on new web applications and a centralized farmers, to deliver loans faster and without are now flourishing — such as P-TECH. rent registry to be used by landlords, tenants and increased costs by increasing their use of IT city staff to help residents search and apply for and digital financing tools. In 2017, SCC deployed IBM teams to five cities on affordable housing. Additionally, the team guided four continents. Each city collaborated with our the city on how to protect and analyze the data –– In Peru, we collaborated with local organizations cross-industry experts to focus on issues related to they will be collecting. to develop a system for coordinating volunteers social equity, economic development, emergency assisting long-term recovery work after floods management or the environment. “The SCC team’s recommendations showed us left hundreds of thousands homeless. (Watch a what is possible and offered additional consider- video about this engagement.) In Busan, South Korea, an SCC team holistically ations as we move forward with this project,” addressed organizational, technological, process said San Jose Mayor Sam Liccardo. “For example, The Yale School of Management, the University of and human resource considerations as they helped recommendations such as improving housing Ghana Business School and EGADE Business School devise prevention and remediation strategies for department communications and designing solutions developed a case study in 2017 examining CSC. natural disasters. Working with city leadership, with privacy in mind were based on many in-depth It was subsequently part of the Aspen Institute’s IBMers recommended expanding the scope of interviews and workshops with stakeholders that 2017 Business & Society International MBA Case disaster management systems to include cognitive provided valuable insights.” Competition, involving over 1,000 students, and will and predictive analytics capabilities, embedding 17 2017 Corporate Responsibility Report | Citizenship

SCC also deployed teams in 2017 to: We’ve delivered –– In New Zealand, an analytics grant helped Youthline optimize its data collection and –– Yamagata City, Japan, to establish a data-driven over 2,600 Impact management. The NGO is combating a high level plan to increase international tourism. of youth suicide and wanted to identify which Grants since 2012, of its programs have the greatest impact. –– Palermo, Italy, to foster innovative solutions for social inclusion through technology and and 422 in 2017. –– In Turkey, we delivered a technology roadmap sustainable partnerships. grant to the country’s only NGO focused on teacher development. Teachers Academy Foundation is –– Abuja, Nigeria, to develop collaborative tools Impact Grants using our recommendations to enhance their online Watch a video about our Impact Grant to DeliverFund. to create new revenue streams and strengthen services to 125,000 teachers. investor partnerships. IBM Impact Grants deliver pro bono consulting and integrated software solutions — with particular Also in 2017, the Project Management Institute In SCC’s seven years, more than 800 high-perform- emphasis on cloud, mobile, analytics and cognitive — Education Foundation presented its “Community ing IBMers collaborated with leaders in 138 cities to not-for-profit and educational organizations. Advancement through Project Management” award on actionable solutions to urban challenges in Since the program’s launch in 2012, we’ve delivered to IBM and our not-for-profit collaborator in Japan, engagements valued at $69 million. In turn, IBMers more than 2,600 grants with a combined market Entrepreneurial Training for Innovative Communities. have applied their SCC experience to their work value of $85 million. In 2017, we delivered 422 in The award recognized Impact Grant project man- with business clients. 28 countries valued at $14 million. agement workshops delivered in Japan following the devastating Tōhoku earthquake and tsunami “My experience taught me to do my job in a com- –– A grant of IBM i2 Analyst’s Notebook software is in 2011. pletely new way, opening my eyes, ears and mind,” helping DeliverFund, a U.S. not-for-profit, use said Nancy Greco, who works on cognitive IoT cyber-intelligence to fight human trafficking by With Independent Sector and the IBM Institute for solutions at IBM Research. “Now I work hard to identifying and tracking networks through their Business Value, we published a first-of-its-kind study make my designs relevant in all environments — online activity. about NGOs’ adoption of big data and data analytics. even those with limited resources, like electricity.” Leap before you lag assessed 60-plus analytics –– In Colombia, two analytics grants to Corporacion Impact Grant projects as part of this study. Makaia Asesoria Internacional are helping develop Accompanying the paper is an online interactive tool an open-data air quality initiative in Medellín. NGOs can use to assess their analytics maturity. The first assessed what data should be collected, while the second analyzed data from sensors at We worked with the U.S. Chamber of Commerce six city locations. Foundation leadership team on two Impact Grants assessing online social sentiment, and drew on 18 2017 Corporate Responsibility Report | Citizenship

those results to co-publish The CSR Effect: Social In 2017, SafetyNet grants were awarded to four technologies with expertise to help affected areas Media Sentiment and the Impact on Brands. The not-for-profit organizations that deliver critical and individuals regroup, rebuild and recover. In report demonstrates how promoting organizations’ programs and services to vulnerable citizens — 2017, IBM committed nearly $4.8 million for Impact CSR activities through social media has a positive United Way California Capital Region (Sacramento), Grants focused on disaster, the majority for recovery effect on their brands. Aspiranet (which provides children and family efforts following Hurricanes Harvey, Irma and Maria, services throughout California), and two in New York and earthquakes in Mexico. SafetyNet City: Grand Street Settlement and the Chinese- American Planning Council (CPC). Atlantic hurricanes IBM SafetyNet helps address two distinct challenges The 2017 Atlantic hurricane season was the not-for-profit organizations face: delivering high- “SafetyNet has streamlined our system of tracking costliest in U.S. history, devastating communities quality services and documenting results to support each client’s progression through our workforce in states along the Gulf of Mexico and on islands continued funding. As a cloud-based data manage- training programs,” said Wayne Ho, CPC’s executive across the Caribbean. The widespread loss of lives, ment solution, SafetyNet helps social service director. “Data aggregated through the SafetyNet homes, businesses, infrastructure and more, providers aggregate and quickly analyze client data, application has helped us identify programmatic represents a historic and continuing tragedy. IBM pinpoint and address possible gaps in services, and trends, patterns and pain points. We are thankful for delivered Impact Grants directly supporting recov- innovate to support clients better. SafetyNet also IBM because SafetyNet has been a valuable tool in ery and resiliency following Hurricanes Harvey, simplifies compliance and reporting requirements — supporting our reporting practices and decision- Irma and Maria, and mobilized volunteers and often prerequisites for funding — freeing staff to making processes, as well as gauging the efficacy of charitable donations to help affected communities in focus on serving clients. our services and impact within our community.” Texas, Florida and Puerto Rico. The comprehensive and ongoing program includes: Grant recipients receive access to the SafetyNet SafetyNet has 10 grantees serving over 350,000 application as well as training and consulting ser- clients through over 200 programs, supporting issues –– Consulting for the American Red Cross, including vices. “Using SafetyNet, Riis Settlement was able to such as community health, workforce development, business process and IT expertise to optimize complete a detailed mapping analysis of all of our children and youth, seniors, families and immigration. shelter and volunteer management, and use of program and participants,” said Christopher Hanway, The Weather Company® platforms for American executive director of Jacob A. Riis Neighborhood Red Cross advertising that resulted in hundreds Settlement, an initial grantee. “This analysis is Natural disasters and of thousands of dollars in donations in the imme­ already beginning to show results in how we target diate aftermath of the storms. programs and interventions based on the individual humanitarian crises and collective needs of the individuals and families –– Blockchain prototyping and design thinking for we serve. That is a cornerstone of good care and Since 2001, IBM has responded to more than 70 the OneStar Foundation in Austin, Texas to SafetyNet is making it possible.” disasters around the globe. We reach out to com- explore how blockchain can be used to store and munities in times of need, integrating advanced 19 2017 Corporate Responsibility Report | Citizenship

process data and claims, helping manage the chatbot responded to over 3,600 public IBM Volunteers allocation and disbursement of recovery inquiries across 16 topics. As a result, government payments efficiently. and local organizations could more quickly and IBM Volunteers is our expanded, refreshed and efficiently answer an influx of disaster-related renamed initiative to support our employees’ and –– AI/machine learning technology and expertise for questions, freeing critical staff to handle other tasks. retirees’ volunteer efforts. Launched in 2003 as United Way Worldwide to develop chatbots to On Demand Community®, the program has recorded alleviate disaster-related strains on call centers. “The IBM Watson Chatbot enabled us to communi- over 20 million hours of service in 80 countries, cate in real time with citizens through our platform,” including 1.2 million hours in 2017. –– Situational awareness and weather modeling said Abel Aguilar, secretary of social communication for the Texas A&M University System to mitigate of the Presidency of the Council of Ministers of The program is designed to help IBMers apply their Watch a video Voices of IBM Volunteers. threats to and failures in power distribution Peru. “This was key to being able to respond to the professional and technical skills in their communi- systems when disasters strike. large number of inquiries and requests for assistance ties, but is open to everyone. Its new website to victims during the emergency.” offers free resources — most available in multiple “When we asked corporations to help, IBM was languages — that anyone can use to plan and right there, bringing to Houston a team of consul- The Ministry of Defense of Peru honored IBM’s conduct a wide range of volunteer activities. It also tants who worked for more than two weeks with “outstanding participation and willingness to connects IBMers with other service-minded our operations staff to optimize our data integration collaborate in the care of the population affected colleagues and helps them find opportunities to and reporting,” said American Red Cross President by the emergency caused by the El Niño coastal help local organizations. and CEO Gail McGovern. “The American Red Cross phenomenon.” is deeply grateful for IBM’s expertise and for our The January 2018 relaunch also introduced impactful partnership.” 2015 Chennai flood SkillsBuild™, an initiative with the goal of reaching IBM’s two-year commitment to help India recover 1 million students every year for the next five years Peru flooding and mudslides from the catastrophic 2015 floods in Chennai, India, with engaging, hands-on activities that introduce In the spring of 2017, torrential rain flooded large is now complete. Over the course of the grant, the 21st-century skills and technologies: coding, swaths of South America. The resulting mudslides in IBM Intelligent Operations Center for Emergency AI, robotics and more. The SkillsBuild educational Peru killed over 100 people while destroying 14,000 Management provided state and local government resources are available at no charge to anyone. homes and leaving 150,000 people homeless. agencies with innovative capabilities to integrate, IBM volunteers came together from across Peru to visualize and communicate the status of emergency IBM Community Grants plan and design tools to aid response efforts. conditions and operations, demonstrating the IBMers who report their community service through power of analytics and cloud technology for crisis IBM Volunteers can apply for IBM Community Through an IBM Impact Grant, our consultants management. Grants to benefit the schools and community orga- developed a chatbot using Watson Conversation nizations where they volunteer. IBM awarded 2,800 Services. In the first month following the mudslides, cash grants worth a combined $3.8 million in 2017. 20 2017 Corporate Responsibility Report | Citizenship

Volunteer Excellence Awards Health –– IBM Health Corps, ACS and CHAI convened The IBM Volunteer Excellence Award recognizes experts at the American Society of Clinical exceptional service to communities by IBMers, IBM Health Corps Oncology annual meeting in May to share early individually or in teams. Our 12 recipients for 2017 results of the triad’s joint work through a session developed technical solutions for not-for-profit IBM Health Corps is a social impact program on Transforming the African Oncology Market. organizations, created a program to help elderly through which IBM works with health organizations people use new technology, and promoted STEM to address urgent public health needs around the –– ChemoQuant, an online chemotherapy forecasting skills to thousands of students worldwide. world. We nurture new ideas and use technology and budgeting tool developed by IBM Health to expand access to health services and help Corps in conjunction with ACS and CHAI, helps –– Michal Chorev motivates girls in Israel to study improve health systems and population outcomes. to increase access to life-saving cancer treatment Watch a video about IBM Health Corps in Africa. computer science. In 2015, she co-founded IBM experts work on-site for three weeks to in Africa. In June, ACS and CHAI announced a nationwide initiative that each year delivers help empower and equip health organizations to groundbreaking market access agreements with workshops on app development to more than reduce health disparities and deliver lasting pharmaceutical manufacturers Pfizer Inc. and 2,000 ninth-grade girls from 70 schools, led change. Launched in 2016, the program has eight Cipla Inc. to set competitive prices on 16 essential by 200 female technical professionals. projects to date. cancer medications, including chemotherapies, in Ethiopia, Nigeria, Kenya, Uganda, Rwanda and –– Simon Christiansen recruited a volunteer team to Improving cancer care in sub-Saharan Africa Tanzania. ChemoQuant will help the countries develop a system for a social services organ­i­ The cancer burden in sub-Saharan Africa is signifi- quantify their medicine needs, and plan budgets zation in Denmark that pairs adult mentors with cant and projected to increase from 447,700 cancer and procurement. disadvantaged children. The solution, which tracks deaths in 2012 to 984,000 annually by 2030. IBM and manages volunteers’ work, is now being is working with the American Cancer Society (ACS) –– IBM Health Corps and ACS worked with the implemented at another not-for-profit agency. and the Clinton Health Access Initiative (CHAI) National Comprehensive Cancer Network (NCCN) to support their efforts to improve cancer care in to create Cancer Guidelines Navigator — a digital –– After an IBM Impact Grant devised a social the region, where late diagnosis and limited access tool to help NCCN standardize and raise the media strategy for the Malaysian Mental Health to treatment leads to poor patient outcomes. “This quality of cancer treatment. Demonstrated at the Association (MMHA), three IBMers volunteered to is one of the most remarkably conceived, planned, AORTIC Cancer Conference in November, Cancer implement the plan. Social media has helped and executed public health initiatives we’ve ever Guidelines Navigator allows oncologists easy MMHA dramatically improve its engagement with observed — and it’s just the beginning,” said Dr. and efficient access to the newly created NCCN at-risk young people and exceed its fundraising Richard Wender, ACS chief cancer control officer. Harmonized Guidelines for sub-Saharan Africa. goal by 20 percent. Activity in 2017 included: The guidelines will highlight treatments that could provide more resource-efficient impact, and Read about all the 2017 honorees and other detailed decision-making criteria that can support IBMers’ volunteer efforts at stories of service. clinicians who may lack sub-specialty training. 21 2017 Corporate Responsibility Report | Citizenship

Other 2017 projects World Community Grid Children’s Medical Center. “It is bringing us that With Gorgas Memorial Institute for Health Studies much closer to finding the right drug for each type in Panama, we developed a mobile disease World Community Grid® enables anyone to donate of cancer.” surveillance system to connect public health inves- unused computing power to advance scientific tigators with epidemiologists and policy makers. research related to health and sustainability. The World Community Grid volunteers have supported Visualization of field data facilitates rapid decisions initiative provides computing resources free of 29 projects since its inception, including research for infectious disease control across Panama. The charge to researchers and since 2004, 750,000 into renewable energy, water quality and treatments project received Fast Company’s 2017 Innovation participants have donated 1.6 million years of for cancer, HIV/AIDS and tropical diseases. In doing by Design Awards honorable mention in the social processing power from their computers and Android so, they have enabled important scientific advances good category. Winners were selected from more devices. In 2017, World Community Grid launched in water purification, childhood cancer treatment Watch a video about the Smash Childhood Cancer project. than 2,500 international submissions across two research efforts. and solar energy. 13 categories. The Microbiome Immunity Project is undertaking Learn more and join at worldcommunitygrid.org. We also joined Duke Health in Durham, North the most comprehensive study of bacteria to date Carolina, to design a solution for sharing and mapping of the human microbiome to help scientists better community health information among dozens understand how to treat and cure autoimmune of local clinics and agencies. Our team devised a disease. The team includes researchers from the technical strategy for the system to facilitate greater Broad Institute of MIT and Harvard, the University collaboration on community health. of California San Diego, and the Flatiron Institute at Simons Foundation. “Without World Community IBM Health Corps’ work received the following Grid, we wouldn’t have even contemplated this additional recognition in 2017: project,” said Rob Knight, Ph.D., director of the Center for Microbiome Innovation at UC San Diego. –– The New York Times named the work to help improve cancer care for patients in Africa as Smash Childhood Cancer seeks better treatments a top 10 development in science and medicine for a number of common childhood cancers and for 2017. involves researchers from Japan, Hong Kong and the United States. “Crowdsourcing computer –– Global Views magazine 2017 Corporate Social processing power will save us years of experiments,” Responsibility Award in the public welfare said Ching Lau, M.D., Ph.D., director of the category for the IBM Health Corps project with Hematology-Oncology Center at the Connecticut Taiwan Centers of Disease Control to help fight dengue fever. Environment

Environmental sustainability is smarter for all

We apply innovative technology and deep expertise to minimize the environmental impact of our business and develop smarter solutions for a more sustainable world.

Plastic Bank’s recycling work uses IBM technology. 23 2017 Corporate Responsibility Report | Environment

At IBM, we have Commitment to Environment. This section previews the full report certified to ISO 14001. We have sustained this ISO with selected highlights from our environmental 14001 certification for 20 years, and in 2017, we seen first-hand what environmental leadership programs and 2017 performance. completed an update to our global EMS to success- fully transition our certification to the 2015 edition can be achieved A decades-old commitment to environmental of the standard. leadership is an impressive legacy. And, at IBM, Environmental with a sustained focus we are very proud of our past accomplishments. IBM’s global EMS also conforms to the ISO 50001 But we also take pride in sustaining this legacy, management system standard on energy management systems. We on the environment. and we are always looking to enhance what IBM achieved a corporate-level registration to the began half a century ago with the issuance of our IBM implements its environmental, energy and ISO 50001 standard in 2012, within one year of first corporate directive regarding pollution control. chemical management programs through a global the issuance of the standard. IBM currently has Thomas J. Watson, Jr. was the CEO at the time, environmental management system (EMS) that 16 entities worldwide certified to the ISO 50001 and his vision for the future of the business drives the implementation of corporate directives standard under its corporate registration. and its relationship to the environment remains which govern IBM’s conduct and operations world- our guidepost. wide. Our corporate environmental policy provides Audits and compliance the strategic framework for our EMS and calls for IBM reviews its environmental performance against Today, we have a new Watson — a set of cognitive environmental leadership in all of the company’s both external and internal requirements, and takes applications helping clients achieve remarkable business activities. prompt action if issues are identified. In 2017, IBM outcomes and accelerating discovery using innova- received 73 governmental agency inspections tive, unique data connections. We have come a In 1997, IBM became the first major multinational at facilities worldwide with no resulting fines or long way in this journey and we embrace the future company to earn a single global registration of its penalties. IBM locations reported eight accidental with great anticipation for creating solutions and EMS to the International Organization for Standard­ releases of substances to the environment related technologies to improve the environment and our ization (ISO) 14001 standard. We achieved this to IBM operations through our Environmental quality of life. credential within just one year of the original standard Incident Reporting System — five releases to air, being published in 1996. two releases to land and one release to water. The In our own operations, we have seen first-hand root causes were investigated for all releases and what can be achieved with a sustained focus on IBM’s single global ISO 14001 EMS accreditation corrective actions were taken as appropriate. None the environment. That focus has driven impressive includes its manufacturing and chemical-using of the releases were of a duration or concentration and quantifiable results across all our business research locations as well as several IBM organiza- sufficient to cause long-term environmental impact. intersections with the environment. Our complete tions at the individual country level. In addition, 2017 IBM and the Environment Report is published several business functions such as product design separately and available online at IBM and the and development, procurement and supply chain, and Global Asset Recovery Services have also been 24 2017 Corporate Responsibility Report | Environment

Energy conservation and (MWh) of energy, an associated 64,000 metric Energy use and net operational CO2 emissions associated with IBM-managed locations

tons of CO2 emissions, and saved $16.1 million climate protection in expense. These strong results were due to our continued, across-the-board focus on energy In 1973, IBM began its formal energy conservation demand reduction; efficiency; and the implementa- program and in 2000 set its first carbon dioxide tion of standardized, global energy conservation 20,000 2,000

(CO2) emissions reduction goal, when we helped the strategies at our facilities. World Wildlife Fund create its Climate Savers pro- 15,000 1,500 gram. In 2007, IBM published its position on climate Conservation and efficiency savings are increasingly change: IBM recognizes that climate change is a enabled by automated, analytics-based systems serious concern that warrants meaningful action on that optimize data center and building operations. 10,000 1,000 MMBtu x 1,000 MMBtu a global basis to stabilize the atmospheric concen- For example, these systems are used to increase Metric tons x 1,000 Metric tons tration of greenhouse gases (GHGs). We believe that utilization of servers and storage equipment, 5,000 500 all sectors of society and the economy, as well as reducing IT hardware requirements. They are also governments worldwide, must participate in solu- used to improve data center cooling efficiency 0 0 tions to climate change. IBM continues to be a leader and to track and correct building system anomalies 2013 2014 2015 2016 2017 in addressing climate change through our energy in near real time to optimize building energy use conservation and climate protection programs. continuously. Collectively, these analytics-based systems reduced or avoided more than 105,000 Electricity and fuel use Note: Energy use and CO emissions from 2013 to 2015 do not include data Conserving energy MWh of energy consumption and saved $9 million — 2 Net operational CO emissions from the divested semiconductor manufacturing operations. IBM’s energy consumption is the predominant 61 percent of IBM’s total energy conservation 2 source of CO2 emissions attributed to its operations. savings during 2017. From 1990 through 2017, IBM In 2017, IBM’s energy conservation projects across conserved 7.4 million MWh of electricity, avoiding the company delivered annual savings equal to 4.4 million metric tons of CO2 emissions and saving 4.2 percent of our total energy use at IBM-managed $616 million. locations, surpassing the corporate goal of 3.5 percent. IBM-managed locations are places where Renewable electricity From 1990 through IBM is responsible for procuring energy and manag- In 2017, IBM contracted with its utility suppliers ing facilities infrastructure and operations. to purchase approximately 779,000 MWh of renew- 2017, IBM conserved able electricity, representing 22.9 percent of our These projects, numbering more than 2,000 and global electricity consumption at IBM-managed 7.4 million megawatt- implemented at over 500 global locations, avoided locations. These purchases exceeded IBM’s goal to the consumption of 173,000 megawatt-hours procure 20 percent of its electricity consumption hours of electricity. 25 2017 Corporate Responsibility Report | Environment

Use of renewable electricity as a percent of global electricity generated from renewable sources by 2020, over and IBM received a Climate Leadership Award from the consumption at IBM-managed locations above the quantity of renewable electricity provided Center for Climate and Energy Solutions, The Climate as part of the mix of electricity that we purchase from Registry and Bloomberg Philanthropies in the cate- 45% Contracted the grid. IBM avoided 275,000 metric tons of CO2 gory of Excellence in Greenhouse Gas Management renewables 40% emissions through these contracted purchases. Goal Achievement in March 2018, in recognition of Grid-supplied achieving our third-generation CO emissions reduc- 35% renewables 2 Including the renewable electricity that was part tion goal in 2016. This award made IBM the first and 30% of IBM’s purchases of electricity from the grid, only company to win a Climate Leadership Award 25% 41.4 percent of the electricity consumed in IBM’s six times in this program’s seven-year history.

20% Goal: Procure managed locations was sourced from renewable 20% of IBM’s generation assets in 2017. 15% global electricity consumption Water conservation 10% from contracted In March 2018, IBM finalized a power purchase renewable sources 5% by YE 2020 agreement to procure all of the electricity — roughly The preservation of water resources and the pro- 0% 10,000 MWh per year — generated by a 6-megawatt tection of watersheds are important areas of focus 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 solar array to be constructed at IBM’s Boulder, for IBM. In 2016, IBM established a new water Colorado, facility. The array is expected to go into conservation goal to achieve year-to-year reductions production by early 2019. IBM continues to work in water withdrawals at 45 data centers and other with regulated utilities, energy retailers and service large IBM facilities located in water-stressed

Operational CO2 emissions reduction against 2005 baseline companies, and renewable project developers to regions. In 2017, withdrawals at these locations at IBM-managed locations 3rd-generation craft shorter-term (4–6 year), economically viable were reduced by 2.9 percent versus 2016. goal contracting approaches for renewables procurement. 2012 2013 2014 2015 2016 2017 2020

42.9% 2017 water use at IBM locations Operational CO2 emissions management 38.1% in water-stressed regions 35% IBM’s operational CO2 emissions reduction goal is 45% Domestic water use 28.7% applicable to its managed locations. From 2016 to 27.7% 24.7% 2017, IBM reduced CO emissions at its managed 31% Heating, ventilation Goal 2 locations by 96,000 metric tons (7.7 percent) to and air conditioning achieved in (HVAC) systems 15.7% 2016. 1,158,000 metric tons. When measured against the goal’s 2005 emissions baseline, we reduced 19.5% Landscape irrigation our CO2 emissions by 42.9 percent, continuing the attainment of our goal to reduce emissions by 4.5% Manufacturing processes 35 percent by 2020. 26 2017 Corporate Responsibility Report | Environment

Hazardous and nonhazardous (by weight) of its nonhazardous waste to be IBM also introduced its next-generation mainframe, 2017 total generated hazardous waste recycled — surpassing our goal of 75 percent. the IBM z14 server, in 2017. On average, the IBM worldwide by treatment method waste management z14 server delivers 23 percent or more work per (% by weight of 1,460 metric tons processed) kilowatt depending on the choice of components The best way to prevent pollution is to reduce the Product stewardship and cooling method. 44.2% Recycle generation of waste at its source. This has been a 33.6% Incineration basic philosophy behind IBM’s pollution prevention IBM established its product stewardship program IBM also has a goal to qualify its new server and

18.8% Landfill program since 1971. in 1991 as a proactive and strategic approach storage products to the U.S. Environmental to the environmental design and management of Protection Agency’s (EPA) ENERGY STAR program 3.4% Treatment IBM’s total hazardous waste generation in 2017 our products. The program’s mission is to develop, criteria where practical, and where criteria have increased by 7 percent (by weight) from 2016, to manufacture and market products that are been developed for the specific server or storage 1,460 metric tons. This increase was caused by the increasingly energy efficient; that can be upgraded, product type. In 2017, IBM certified select configu- disposal of hazardous waste generated by a water refurbished, remanufactured and reused to extend rations of the IBM Storwize V7000 storage product 2017 total generated nonhazardous waste leak from a fire suppression system at one of our product life; that incorporate recycled content to Version 1 of the ENERGY STAR data center worldwide by treatment method facilities. The water was contaminated with diesel and environmentally preferable materials and storage requirements. None of the server products (% by weight of 36,900 metric tons processed) fuel from an emergency generator located within finishes; and that can be dismantled, recycled IBM released during 2017 were subject to ENERGY

87.8% Recycle the area where the leak occurred. The contaminated and disposed of safely. STAR criteria. water was contained, avoiding any release to the 10.8% Landfill environment. If hazardous waste generated as a IBM’s product energy efficiency goal is to improve As of May 2018, IBM had five Power Systems 1.4% Other treatments result of this incident had been removed, IBM would the computing power delivered for each kilowatt- servers and seven storage products certified to the

Note: Total generated have seen a 16 percent reduction in hazardous hour of electricity used for each new generation of ENERGY STAR requirements. The Power Systems nonhazardous waste excludes waste generation in 2017. servers. In 2017, IBM released its POWER9-based servers meet the EPA’s requirements for power- sanitary wastewater sent to publicly owned treatment systems. Power Systems Accelerated Compute (AC922) supply efficiency, idle power limits or power man- Of the total 1,460 metric tons of hazardous waste server for high-performance computing analytics agement capability, and SPEC SERT metric data IBM generated, 44.2 percent (by weight) was and artificial intelligence. When compared to com- reporting. The storage products meet requirements recycled, 33.6 percent was sent by IBM directly for parable IBM POWER8® products, IBM POWER9- for power-supply efficiency and reporting of the incineration, 18.8 percent to regulated landfills, based servers have Server Efficiency Rating Tool Storage Networking Industry Association Emerald and 3.4 percent for treatment. (SERT) weighted geomean active efficiency scores Power Efficiency Measurement Specification results. up to three times higher — which represents In 2017, our worldwide operations generated three times the performance or work delivered Product end-of-life management approximately 36,900 metric tons of nonhazardous without any increase in power use. The SERT was As part of our product end-of-life management waste, a decrease of about 7,600 metric tons created by the Standard Performance Evaluation (PELM) activities, IBM began offering product from 2016. IBM recovered and sent 87.8 percent Corporation (SPEC). takeback programs in Europe in 1989, and has 27 2017 Corporate Responsibility Report | Environment

extended and enhanced them over the years. In Solutions for environmental Tackling ocean plastic with IBM many countries and U.S. states, we offer solutions A 2015 research paper published in Science maga- to household consumers for the end-of-life man- sustainability zine estimated that between 5.5 and 14.6 million agement of computer equipment, either through metric tons of plastic made their way into our voluntary IBM initiatives or programs in which At IBM, we thrive on challenges. And, striving to solve oceans that year, and that the yearly amount could we participate. IBM’s global PELM operations environmental challenges is a job we take very double by 2025. processed 26,500 metric tons of end-of-life prod- seriously. We apply our vast technology, expertise ucts and product waste in 2017. Of this total, we and insight across industries, addressing the necessi- Working with IBM and IBM Business Partner® sent 0.7 percent directly to landfill or incineration as ties of life itself — from the air we breathe, to the Cognition Foundry, Plastic Bank is mobilizing entre- a disposal treatment, better than our goal of not-to- water we drink and the food we eat. The challenges preneurs from the world’s poorest communities to exceed 3 percent (by weight), while 52.2 percent we face today have never been more complex, recycle plastic waste in return for life-changing was sent for recycling as materials, 39.6 percent demanding or seemingly impossible to solve. goods. The team developed a blockchain-powered was resold as products, 4.4 percent was product However, IBMers are working to develop and imple- token reward to underpin the recycling of plastic reused by IBM, and 3.1 percent was incinerated for ment solutions once only dreamed of — creating waste. The tokens can be exchanged for valuable energy recovery. innovation that truly matters for our company and the commodities. IBM’s blockchain technology tracks world. Following are examples of some innovative the plastic recycling process, from waste collection, solutions we are developing and implementing that credit and compensation through delivery to 2017 product end-of-life contribute toward environmental sustainability. companies for reuse. management operations (% by weight of 26,500 metric tons processed) Protecting and managing our Plastic Bank’s token rewards and exchange plat- 52.2% Recycled water resources form incentivizes the collection of plastic, preventing it from entering the oceans. To date, 39.6% Resold Water affects every aspect of human life. It plays Plastic Bank has collected over 8 million pounds 4.4% Reused a role in everything from health and nourishment, of plastic waste — the equivalent of 144 million 3.1% Waste-to-energy to business and commerce, to energy and trans- plastic bottles — from its first recycling centers in portation. IBM solutions provide the technical Haiti. This was accomplished by more than 1,850 0.7% Landfill and incineration foundation to facilitate the flow of information full-time collectors working across 40 collection across organizations and establish a shared, locations. (Watch a video about this project.) comprehensive view of our water resources. Our solutions also help the farming industry to improve crop yield while using less water. 28 2017 Corporate Responsibility Report | Environment

Using sensors with IBM’s cognitive IoT in Lake George, New York, in conjunction with the water needed — based on highly targeted irrigation technologies to improve water management ongoing Jefferson Project at Lake George. This requirements — to be dispensed to each grapevine. In 2017, IBM teamed with Dublin City University project, begun in 2013 with partners Rensselaer As the weather changes, the irrigation rates change (DCU) Water Institute to launch a pilot program that Polytechnic Institute and The Fund for Lake George, to ensure vines only receive water when needed. uses the Internet of Things (IoT) combined with is an ambitious effort in lake modeling in order to The result? For E. & J. Gallo Winery, the world’s advanced analytics to monitor and manage ecologi- get a holistic view of everything happening in and largest family-owned winery, the Watson IoT solu- cal systems. The deployment of DCU sensors with around one of the United States’ most pristine tion resulted in a 26 percent improvement in yield IBM’s machine learning and cognitive IoT technolo- lakes. The project not only helps to manage and quantity, a 50 percent improvement in uniformity, gies will help protect and conserve natural resources protect this particular natural resource, but also and a 25 percent reduction in water use required. and address environmental management issues provides a blueprint to preserve important lakes, such as water quality for both freshwater and rivers and other bodies of freshwater around the Improving the air we breathe marine environments. globe. (Watch a video about this project.) IBM researcher Harry Kolar deploys a Dublin City University Water Institute sensor at Lake George in New York. According to the World Health Organization (WHO), In the past, water systems have been monitored by Watson IoT enables water conservation exposure to outdoor air pollution accounts for technicians manually gathering water samples and through precision irrigation approximately 3 million deaths annually. WHO sending them to labs for analysis. Yet with sensors Having farmed in California for more than 80 years, has concluded that this more than doubles previous becoming cheaper and more durable, it is now E. & J. Gallo Winery believes that no resource is estimates, and confirms that air pollution is now the possible to place them directly into water systems more important than water, making water manage- world’s largest single environmental health risk. and continually gather data. That, combined with ment a top priority of the company for decades. IBM is working with cities around the globe to tackle geospatial coverage, creates full models of ecosys- The winery worked with IBM Watson IoT™, which air pollution challenges and provide solutions to tems that scientists can use to identify problems developed technologies to use weather reports help improve the air we breathe. and intervene before they become major environ- and remote sensor data to deliver precise amounts mental issues. The sensors can measure physical, of water to each grapevine, optimizing growth Providing community air quality data chemical and biological parameters to better and reducing the amount of water required for One way to increase public awareness of the understand changes in the environment. Additional irrigation. The secret is located above the clouds, impacts of air pollution is by making air quality data applications may include improved management in a satellite looking down on the vineyard. more broadly available. In 2017, The Weather of pollution from sources such as agricultural or Company (an IBM Business) collaborated with air stormwater runoff that can affect lakes, rivers, A 30-by-30-meter grid, aligned with National quality sensor manufacturer PurpleAir to expand estuaries and marine ecosystems. Aeronautics and Space Administration satellite the availability of local air quality and pollution data imagery, is mapped over the vineyard block. Each for the public. As a result of this collaborative effort, IBM and DCU Water Institute are piloting these block of vines in the grid gets its own personal owners of PurpleAir devices can now contribute technologies in Ireland and the United States. In the irrigation plan based on weather data and soil data from their units to Weather Underground®, a United States, the first DCU sensors are being used moisture levels. This allows the exact amount of consumer division of The Weather Company. This 29 2017 Corporate Responsibility Report | Environment

data is displayed on maps on its website to provide For future applications, Green Horizons will move In the United States, emissions from oil and gas one of the most granular pictures available of air toward personalized pollution exposure measure- systems are the largest industrial source of meth- pollution within the United States. ments and health services. Because environ­mental ane gas in the atmosphere. The U.S. Environmental pollution, health, and safety are highly connected, Protection Agency estimates that 9.3 million metric Green Horizons initiative and IBM is moving swiftly to apply a targeted yet tons of methane leaked from natural gas systems in air pollution forecasting integrated approach to enable governments and 2016. Scientists at IBM are working with natural gas Green Horizons is a 10-year initiative launched individuals in their efforts to battle pollution and producers, such as Southwestern Energy, to by IBM in 2014 with the city of Beijing. It uses associated diseases. develop intelligent methane monitoring systems. advanced machine learning and IoT technologies to improve the understanding and forecasting of Conserving energy and addressing At the heart of IBM’s research is silicon nano-pho- pollution events. The IBM China Research Labor­ climate change tonics that are tuned to detect minuscule amounts atory is working with the Beijing Environmental of methane. This evolving technology transfers data Dr. Jin Dong of IBM Research — China leads IBM’s Green Horizons initiative. Protection Bureau to provide one of the world’s Climate change is one of the most critical environ- by light, enabling computing literally at the speed of most advanced air quality forecasting and decision mental challenges facing the planet. Since the early light. These chips can be embedded in a network support systems, able to generate high-resolution 1990s, IBM has been collaborating with clients and of sensors on the ground near natural gas infrastruc- pollution forecasts and pollution trend predictions. others on innovations to help protect the world’s ture, or even fly on autonomous drones — generating It models and predicts the effects of weather climate through energy conservation and the use insights that, when combined with real-time wind on the flow of pollutants in the air and the reactions of renewable energy. Today, we continue that effort data, satellite data and other historical sources, between weather and pollutant particles. and reinforce our long-standing commitment to can be used to build complex environmental models addressing these environmental challenges. to detect the origin and quantity of pollutants as Utilizing IBM’s data assimilation and cognitive they occur. modeling, the city of Beijing has seen a significant Developing smart sensors to detect reduction in fine particulate matter concentration greenhouse gas emissions Smarter Buildings (known as PM2.5). During the first seven months of Most pollutants are invisible to the human eye, until The IBM Smarter Buildings solution started as 2017, the PM2.5 concentration was recorded to their effects make them impossible to ignore. an internal pilot initiated by IBM’s Real Estate be 34.7 percent lower than during the same period Methane, for example, is the primary component of Strategy and Operations, software development, in 2013, prior to the launch of Green Horizons. IBM natural gas. If methane leaks into the air before and research organizations. The objective was to has also entered into research collaborations with being used, it can warm the earth’s atmosphere. apply IBM analytics to existing building system governments in Delhi, India, and Johannesburg, Methane is estimated to be the second-largest operational data, generating insights to improve South Africa, to leverage Green Horizons technology contributor to global warming after carbon dioxide. energy efficiency. What began as a pilot at one IBM and address air pollution issues in those cities location in 2009 is now deployed at 24 major IBM as well. campuses, encompassing 155 buildings and over 30 2017 Corporate Responsibility Report | Environment

24.5 million square feet of space around the globe. Protecting wildlife people in the vicinity. IBM’s IoT technology was This solution captures 40 percent of IBM’s energy selected by MTN as part of their Connected Wildlife usage and 34 percent of our energy spending. The protection of wildlife and endangered species Solution. from extinction is important to the health of the The IBM Smarter Buildings solution combines IBM’s planet. While it may be viewed as a natural process, Protecting the rhinos begins with fitting collars real estate management, software and services extinction is being hastened due to a number of containing custom sensors onto prey animals includ- expertise with analytics to reveal a building’s hidden factors — poaching being one of them. IBM technol- ing zebra, wildebeest, eland and impala. Information failings and to identify opportunities for improvement ogy is being used on the front line to help save African is collected on animal location, movement, direction in building performance and efficiency. The solution rhinos from the threat of poachers and extinction. and average speed of travel. Using the data, patterns implemented at IBM compiles real-time operating are developed based on the animals’ response to data from approximately 27,000 field data sources Today, South Africa is home to more than 70 percent threats. As a result, animals such as zebras will act (e.g., air conditioning systems, boilers, chilled water of the world’s remaining rhino population. Conserva­ as sentinels with their response patterns becoming systems) every 15 minutes. The Smarter Buildings tionists are battling to protect these iconic animals. an early warning system to indicate the presence solution sends out automatic alerts when systems Over the past decade, more than 7,000 rhinos were of poachers and protect the rhinos. are operating outside of optimal conditions, killed across the African continent, and in 2016, with a specific focus on energy efficiency, so that 1,054 were reported killed in South Africa alone. The predictive nature of this solution takes away the personnel can take corrective action and implement reliance on game reserve teams to be in the right operational modifications. In 2017, IBM joined forces with Wageningen place at the right time, or to respond to events such University in the Netherlands, India IT provider as the distant sound of gunfire. The aim is for the From 2013 to 2017, IBM’s global energy manage- Prodapt, and MTN, a leading African telecommuni- technology to be made available for deployment at ment team utilized IBM’s Smarter Buildings solution cations provider, to protect endangered rhinos at game reserves across Africa and abroad. to reduce energy consumption by 35,000 MWh per South Africa’s Welgevonden Game Reserve. A year, with associated annualized savings of $1.7 solution was needed that would help the wildlife million. The implementation has demonstrated on managers to understand and predict possible average a positive return on investment after one to threats of poaching, and act ahead of time to prevent two years, while energy savings have increased in harm to the animals. each year of operation. Due to the outstanding results of IBM’s internal Smarter Buildings solution According to research conducted on Welgevonden implementation, IBM offers the service to its clients Game Reserve, prey animals in the wild react in as Building Optimization with IoT. different ways, depending on the type of threat they encounter and the perceived danger from preda- tors, such as lions and leopards, or the presence of IBM Research

Smarter solutions for critical challenges

IBM Research applies world-class expertise and leading-edge technologies to innovative solutions for healthcare, energy, the environment and other societal challenges.

A cryostat from IBM’s quantum computing lab 32 2017 Corporate Responsibility Report | IBM Research

The IBM Research Breakthroughs to watch Science for Social Good Health Analytics® data to develop insights and early warning systems, and making them available to Science for Social Each year IBM Research showcases five innovations In IBM’s Science for Social Good initiative, IBM providers, payers and public health officials to help that will help change our lives within five years. The Research scientists and engineers work with a curb the opioid epidemic. Good initiative result of work by more than 3,000 researchers in 12 diverse range of nongovernmental organizations labs on six continents, these “5 in 5” breakthroughs (NGOs) to tackle emerging societal challenges using Data-driven social impact tackles emerging have the potential to solve big, societal problems. In science and technology. Projects in 2017 included: Many social entrepreneurs are lost early in their 2018, one of these innovations combats bias in AI journey due to lack of support. Echoing Green, a societal challenges systems and algorithms, so that they will be impar- Cognitive disease hunter funder of social enterprises, receives around 3,000 tial and trusted for decision making. Predicting new or unexpected outbreaks remains applications per year for a limited number of two- using science and one of the most difficult problems of modern times. year fellowships that include financial and technical Another problem we’re tackling is protecting our Given that most infectious diseases emerging in support. The IBM team is analyzing the collection of technology. most important natural resource: water. By 2025 humans originate in animals, the team is using AI to applications to uncover trends and characteristics more than half of the world’s population will be study the intrinsic features of pathogens that of successful organizations to help prospective living in water-stressed areas, yet water is crucial cross-infect humans, with the aim of identifying new social entrepreneurs better direct their efforts and to our survival. Plankton provide clues to the health infectious pathogens before they emerge. magnify impact. of our oceans, rivers and lakes as they are the base of the oceanic food chain and highly sensitive to Emergency food efficiencies Financial empowerment changes in water quality. But very little is known Emergency food provider, St. John’s Bread & Life, Lack of cash between paychecks coupled with about their behavior in their natural habitat and they serves more than 2,500 meals daily with extraordi- predatory lending is one of the leading causes of are time consuming and expensive to study in the nary efficiency. The team is capturing these best burdensome debt among low-wage workers. lab. IBM researchers are building small, AI-powered, practices to model the food supply chain and create Neighborhood Trust Financial Partners provides robot microscopes that will be placed in bodies of and share an interactive digital experience. This will programs, counseling and tools to help clients water around the world and networked in the cloud. allow Bread & Life to share best practices with food change their financial future. Using data and Continually monitoring plankton behavior and thus providers around the country and engage more experiences of past clients, the team is developing the condition of our water, this innovation will help effectively with the public about combatting hunger. predictive models and decision support that preserve the health of our ecosystems. allow Neighborhood Trust to offer financial advice Tools to tackle the opioid crisis tuned to each client. Read more about 5 in 5 at IBM Research. Understanding the patterns and signs of addiction and guidelines for responsible prescription are Read more about IBM’s instrumental when battling new opioid addictions. Science for Social Good initiatives. The team is coupling advanced machine learning methods with the wealth of Watson Health™ Truven 33 2017 Corporate Responsibility Report | IBM Research

Environment and energy Accessibility Healthcare and life sciences AI helps fight malaria With continuing budget pressures, public officials This report’s environment section describes IBM Research is using AI tools and expertise to help Our healthcare and life sciences team explores and need to know what malaria intervention strategies “solutions for environmental sustainability” that eliminate barriers, personalize interactions and develops methodologies and improves processes for work best, where and when. AI can hold the include work by IBM Research. prolong independence. a broad range of healthcare challenges — diagnosing answers. Working with the University of Oxford, diseases, managing population health, or improving IBM Research — Africa is developing multiple AI A smart approach to healthy living our understanding of the human genome. algorithms to act as expert advisors, exploring In collaboration with the University of California “what if” scenarios and supporting policy makers at San Diego, we are advancing the use of AI to IBM scientists devise AI strategies for Africa with insights into how to do the most good for the enhance quality of life and independence for seniors. Most African countries still have fewer than one greatest number of people. At the new Artificial Intelligence for Healthy Living doctor for every thousand people, and the continent Center (AIHL), located at the UC San Diego campus, overall has a short supply of equipment and medica- IoT and analytics to improve access we are modeling changes in cognition during the tion. There’s a need to build more hospitals and train to drinking water aging process, with the goal of creating AI-powered, more doctors, but this isn’t enough. Africa needs IBM scientists in Africa developed a water manage- personalized robots that help support wellness. to merge healthcare and technology for care deliv- ment service platform to address the needs of ery — and one obvious strategy is through AI. Three approximately 3 million Kenyans living in the remote Ah-ha moments for all researchers at our lab in Johannesburg, South northern regions of the country without access to For people with cognitive disabilities, the aging Africa, are working on projects to help improve how safe water. The platform is part of the Kenya Resilient population, or those learning English as a second data is used to manage healthcare resources. For Arid Lands Partnership for Integrated Development language, understanding complex content can be example, in South Africa there is a five-year lag time (Kenya RAPID) and was developed in collaboration challenging. Content Clarifier uses AI to simplify in cancer statistics reporting, which prevents any with various private and public sector partners, as content while retaining meaning. Complex words meaningful prevention strategies. IBM’s Africa Lab is well as representatives from the northern counties. and phrases are replaced with simpler alternatives using cognitive algorithms to automate the inference The water services platform uses data from remote and supplemented with additional context, so of national cancer statistics in South Africa, which sensors to provide a range of capabilities, including a that people have an easier time consuming and is expected to bring reporting to near real-time. repository for information about water points (loca- comprehending the most important concepts. The IBM team also spent several weeks in Uganda tions where water can be accessed); a historical meeting with more than 40 oncologists from a dozen record of water drawn from boreholes, along with a Learn about additional projects at countries to get feedback about how AI can help record of breakages and repairs; the capability to IBM Accessibility Research. them meet more patients and provide better care. create detailed water budget models; and a view into the groundwater potential throughout the region.

Learn about additional projects at IBM Research healthcare and life sciences. The IBMer

Smarter business begins with the IBMer

IBMers are committed to leading a new era of business and IBM commits to empowering their success — supporting and guiding them in careers that reward themselves, our clients and the world. 35 2017 Corporate Responsibility Report | The IBMer

IBM’s ability to Supporting IBMers the tool recommends how to grow skills, future job Bureau Veritas recertifies IBM’s Well-Being roles and stretch assignments. Management System serve our clients To thrive in an ever-changing world, we must con- IBM’s Well-Being Management System (WBMS) is tinue to reinvent how we work and inspire IBMers in Your Learning framed around IBM’s Corporate Policy 127, respon- and communities their careers. We provide personalized guidance The Your Learning platform is an IBMer’s gateway sibility for employee well-being and product safety. and resources — augmented by AI and supported to professional development. Personalized with Following International Organization for Standardiz­ depends upon by digital, social and mobile technology — so that cognitive capability, it understands exactly what an ation (ISO) consensus standards, system components IBMers around the world can enjoy satisfying IBMer needs and recommends and tracks the include proactive planning, execution excellence, employee well-being. careers, increase their expertise, learn from others employee’s professional education all in one place. measurement and continuous improvement in the and engage in their professional development. areas of employee health and well-being. Our investment in skills, combined with our use of design thinking and agile practices as standards Employee well-being Continued external certification of IBM’s WBMS of working, have created a workplace uniquely through the Occupational Health and Safety capable of delivering better solutions in less time. At IBM we continue to believe that our ability to Assessment Series (OHSAS) 18001 certification serve our clients and communities depends upon process, and a standardized approach to managing Blue Matching employee well-being. In 2017, we focused on employee well-being globally, provide IBM the Blue Matching helped nearly 800 IBMers advance supporting evolving global community health priori- ongoing ability to fulfill marketplace demands and their careers in 2017. The internal service uses ties while continuing to enhance our health and foster business opportunities around the world. workforce predictive analytics to produce a list safety management system. of jobs currently available in IBM based on the Additionally, all of IBM’s hardware research and employee’s location, level, job role and experience. Disaster relief efforts in the Americas development operations in the United States were By “opting-in” IBMers receive weekly notifications In 2017, our health and safety teams provided recognized once again as Occupational Safety to view potential job matches within the company. timely support to IBMers and their families affected and Health Administration (OSHA) Voluntary Since Blue Matching more effectively targets by hurricanes Harvey, Irma and Maria; earthquakes Protection Programs star sites for outstanding applications, IBMers who use it have received up in Chiapas, Oaxaca, Mexico City; and wildfires in programs and results. to twice as many interviews and five times the California. They engaged with IBM’s crisis manage- number of offers. ment teams and building management staff to Awards ensure safety during these events, volunteered in –– IBM received the American Heart Association My Career Advisor cleanup efforts, supported the reoccupation of Gold Designation for a healthy workplace, My Career Advisor is a personal cognitive solution facilities and provided much-needed employee and achieving double the average score. IBMers can interact with for real-time career family counseling to address emotional health, insights and guidance. Using what-if scenarios, medical support, financial and legal challenges. 36 2017 Corporate Responsibility Report | The IBMer

–– IBM was recognized with two International In 2017, IBM fought the transgender bathroom bill perspective that offers us. Four of Ginni Rometty’s Association of Business Communicators (IABC) in Texas, where it is a significant employer. The direct reports are women: IBM Senior Vice Gold Quill Awards, for excellence in human company bought full-page ads in some of the state’s Presidents Michelle Browdy (IBM’s general coun- resources and benefits communications, and for largest papers, joined forces with other technology sel), Diane Gherson (human resources), Michelle merit in internal communications. companies and signed a joint letter to the governor, Peluso (chief marketing officer) and Bridget van and sent our executives to Austin to persuade state Kralingen (leader of IBM’s global blockchain legislators to drop the bill — which they did in August. business). Employee inclusion Later in the year, IBM took a similar tack to urge the For us it’s not simply about representation, but IBM consciously builds inclusive teams and encour- U.S. Congress to find a permanent legislative solu- also driving a culture of inclusion where women can ages diversity of ideas to have the greatest impact tion to enable “dreamers” — children raised in the thrive. We’ve done this through initiatives such for our clients, our colleagues and the world. U.S. after their parents brought them into the coun- as Elevate — a leadership development program try without legal immigration status — to stay in the focused on helping to prepare women to be consid- Standing with our employees United States. The company launched an awareness ered for advancement from middle-management campaign and flew the 31 “dreamers” it employs to positions into senior leadership roles through IBM’s long history with LGBT+ (lesbian, gay, bisexual, Washington to meet with lawmakers directly. Ginni customized learning plans, coaching, and shadowing transgender) workplace equality began in 1984 Rometty also went to Washington for discussions opportunities. Started in 2015, the program has when we included sexual orientation in our nondis- with lawmakers. For more, read the statement by reached over 700 women across 20 countries. crimination policy. In 1995, we established an IBM Vice President of Government and Regulatory About half of participants have already been pro- LGBT+ executive task force that today is known as Affairs, Christopher Padilla, about IBM’s amicus moted into senior roles. the Global LGBT+ Council and is focused on making curiae brief filed in the U.S. District Court for the IBM a safe and desirable workplace for all people. Northern District of California. The brief supports IBM’s hiring practices continue to be based on several states, local governments and others identifying the best-qualified individual to fill a For the 15th consecutive year, IBM scored 100 challenging the revocation of the Deferred Action position. At one time, the industry standard for the percent on the Human Rights Campaign’s Corporate for Childhood Arrivals (DACA) program. selection of programmers was the IBM Programmer Equality Index, the national benchmarking tool for Aptitude Test — in 1967, over 700,000 people took it, corporate policies and practices related to LGBT+ Advancement of women resulting in 20,000 women going into programming employees. The index, released each autumn, in the 1970s. Over time, this test was overtaken provides an in-depth analysis and rating of large A significant imperative for IBM has been the belief by newer, much less scientific, personality-based U.S. employers and their policies and practices that “you can’t be what you can’t see,” and in a assessments, resulting in a decline of women pertinent to LGBT+ employees. world where less than 5 percent of CEOs at S&P 500 entering technical/engineering fields. Today, IBM companies are women, we continue to take pride in continues to use cognitive aptitude tests, proven our Chairman’s leadership and the diverse predictors of job performance — and arguably this 37 2017 Corporate Responsibility Report | The IBMer

We are committed to the gender-neutral selection approach helps explain PINK October – Breast cancer awareness organizations and individuals. IBM is regarded as a why we continue to have one of the highest propor- Leaders of the IBM Women’s Executive Council and thought leader around the world for people with progress and leadership tions of technical women in our industry — and a the IBM International Foundation launched PINK disabilities, as illustrated by some recent awards. culture of inclusion. October globally throughout IBM. During the month, development of women we provided resources, support and hope for –– Australia — IBM came first in the Australian IBM has also partnered externally to drive out- IBMers who have been diagnosed, are in remission Network on Disability’s Access and Inclusion Index at IBM. comes. One example is a collaboration with the or are supporting others in the fight. Through local Soledad O’Brien Foundation, through which we activities and work we are doing with clients and –– India — IBM received the Nipman Foundation co-launched the IBM and PowHERful summit in partners supporting the cause, we explored the Equal Opportunity Award 2017. The summit provided young women, ages 14 vast impact breast cancer has on society and to 23, an opportunity to explore different career planned breast cancer walks globally with IBM –– Italy — IBM received the Dyslexia Friendly options, receive guidance and advice, and interact representation. Corporate Certification Award from the Italian with IBM technical professionals. Participants Dyslexia Foundation engaged in a three-hour Cognitive Challenge People with disabilities where they worked with IBM Watson® and received –– Hungary — IBM received the Disability-friendly coaching from IBM artificial intelligence experts. Including people with different abilities in IBM’s Workplace Award delivered by the Salva Vita workforce is based on sound business judgment and Foundation Our success in initiatives such as these has led to anchored in IBM principles and HR strategy. IBM’s our receiving the prestigious 2018 Catalyst Award recruiting teams play an essential role in identifying Employee engagement for leadership in building a workplace that values and interviewing skilled people with disabilities. diversity and inclusion. IBM was the only tech Through a training module and a recruitment guide, IBM’s efforts to lead progressive workplace company honored this year — and the only company IBM helps recruiters understand how to effectively practices around diversity and inclusion are a in the history of the award to be recognized for a provide reasonable accommodations when recruit- constant part of the company’s culture. In 2017, fourth time. IBM was also recognized by Working ing people with different abilities and to know what IBM dramatically expanded family support Mother Media as one of the top 10 companies support is available within IBM for employing people options in the United States, to meet the increas- on both its 2017 100 Best Companies (for the with disabilities. ingly diverse needs of parenting today. 32nd consecutive year) and Best Companies for Multicultural Women lists (for 15 consecutive years). In 2017, IBM was recognized by the U.S. Business –– We increased paid parental leave for IBM birth Working Mother also named IBM a top 10 employer Leadership Network as the Employer of the Year for mothers up to 20 weeks (from 14 weeks). in India for 2016 (the inaugural year) and 2017. We its commitment to building a better working world also received the Momentum Award from the Anita through its actions and engaging with like-minded –– We doubled paid parental leave for IBM fathers, Borg Institute for significant year-over-year growth in partners and adoptive parents to 12 weeks. women technologists in senior and executive roles. 38 2017 Corporate Responsibility Report | The IBMer

–– IBM parents can choose to take bonding leave even stronger when challenged. Our leaders strive each other, which enables better skills integration time during the first year following the birth or for and maintain excellence by utilizing data-based, and maximizes SME impact. The success of Blue adoption of a child. externally benchmarked success profiles and Core Coaching encouraged us to apply this approach assessments to build skills targeted for critical roles. to other leadership training, such as Servant –– IBM will reimburse up to $20,000 for eligible Leadership, Leading with Resilience, sales leader- adoption or surrogacy expenses, including medical Aspiring Manager’s Program ship, agile coaching and offering management. costs associated with surrogate birth mothers. In 2017, we expanded the opportunity for those who aspire to be managers by creating a scalable, Manager Champion Group IBM Business Resource Groups (BRGs) are volunteer, engaging and cost-effective assessment and Manager Champion Group (MCG) is a one-year cross-department, employee-led groups that focus development experience. By using multi-method, leadership development experience, launched in on a common interest or a certain constituency. criterion-validated assessments and simulations, 2013, that grows and empowers exemplary IBM BRGs aim to align their programs and initiatives with we are providing objective business insight and managers to drive change. Participants have oppor- IBM’s business and talent workstreams, which uncovering hidden talent. Using design thinking, we tunities to accelerate IBM’s business goals, serve include Recruitment and Hiring, Talent Development, created a highly engaging experience that considers as the voice of IBM managers around the world and Employee Retention and Market Development. the needs of participants, their managers, as well further develop their own leadership skills and the as HR and business unit leadership. The inclusion of talent of others. In 2017, Manager Champions –– IBM now has 45,000 employees who belong to a manager’s portal for participants’ managers, and facilitated over 50 management development 300 BRG chapters registered in 51 countries a cadre of debriefing specialists/coaches to support workshops, led coaching circles and participated supporting 13 constituencies or focus areas. participant questions and help interpret their as co-hosts for Leadership Live (our monthly, live assessment, keeps the human connection intact as leadership development broadcast); advocated –– Recent groups added include an LGBT+ BRG in we move to a digital platform. The scalability for new initiatives such as Performance Manage­ Russia and our first Women’s BRGs in Saudi achieved reduces the cost, allowing more aspiring ment, the Aspiring Manager’s Program, and Arabia and Pakistan. managers to participate. Cognitive Talent Alerts; and partnered with the Millennial Corps, Employee Experience Team, the Coaching IBM Leadership Academy and many other key Leadership development We augmented our Coaching Community of Practice stakeholders. in 2017 through the addition of Blue Core Coaching, At IBM, we support our leaders through simple, which utilizes a peer-to-peer engagement frame- Corporate citizenship science-based solutions to sustain high performance work by pairing a subject matter expert (SME) with a IBM uses its globally recognizable brand to lead and accelerate adaptation to change. Programs such cohort of learners. Learners do pre-session devel- social progress by partnering with external as Leading with Resilience provide a whole-self opment and then use 10 weekly sessions to practice organizations that serve diverse populations and approach to adopting new mindsets and behaviors the GROW (Goal, Reality, Options, Will) model for underrepresented communities to provide leader- to meet the demands of the job and bounce back coaching. Participants learn from the SME and from ship development. In 2017, in association with 39 2017 Corporate Responsibility Report | The IBMer

Pro bono programs help IBM’s Diversity Team, we engaged with college collaboration skills. Among 24 professional skills we IBM also supports employees and retirees in students and early professionals through partner- ask about, CSC participants said their engagements self-directed efforts through IBM Volunteers, our equip IBMers for the ships with Leadership Enterprise for a Diverse helped develop 11 on average. Over 40 percent also expanded, refreshed and renamed initiative. America (LEDA), Advancing Minorities’ Interest in reported that their CSC work improved their profi- Launched in 2003 as On Demand Community, challenges of working Engineering (AMIE) and the American Indian ciency in key technologies including data analytics, the program has recorded over 20 million hours of Science and Engineering Society (AISES). We cloud and social. service in 80 countries, including 1.2 million in and leading in a global worked with IBM Corporate Citizenship to deliver 2017. It provides free resources to help IBMers education on feedback, coaching and manager Corporate Service Corps (CSC) offers IBMers share their skills and expertise to improve organization. effectiveness at the Global Peace Foundation’s an immersive experience designed to benefit com- communities while enriching their professional annual conference in Manila, and delivered a munities, enrich its participants culturally and development. Leadership Impact Grant to the International support IBM’s global leadership development. The Young Leaders Assembly during their 2017 Global program deploys teams of 10–15 to partner with Summit hosted at the United Nations. governmental, not-for-profit and social organizations, healthcare providers and other civic leaders to address high-priority issues in education, health, Professional growth through economic development and community resiliency.

social impact IBM Health Corps teams focus on healthcare dispar- ities, using technology to expand access to services IBMers have the opportunity, through specific IBM and improve health systems. The program engages pro bono programs, to apply their professional and with partners to develop innovative solutions for technical skills for social impact. Whether a project improving health systems, access to services and is on the other side of the world or across town, they population outcomes. IBM experts deploy for three collaborate with communities and organizations to weeks and in 2017 our work reached sub-Saharan solve immediate problems and return after their Africa, Panama and the Southeastern United States. engagement more skilled and engaged. Smarter Cities Challenge has sent IBMers to devise These immersive experiences equip IBMers for the solutions for urban challenges in 138 cities over challenges of working and leading in a global organi- seven years. IBM experts deploy for three weeks to zation. For example, over 80 percent of 2017 collaborate with local city and civic leaders on issues Corporate Service Corps (CSC) participants said the including social equity, economic development, experience improved their leadership skills, and emergency management or the environment. In over 90 percent said it benefited their teamwork and 2017, teams assisted five cities on four continents. Supply chain

A smarter, responsible supply chain

We seek diversity among IBM’s suppliers, require them to demonstrate a commitment to social and environmental responsibility, and collaborate to help advance these values in our industry. 41 2017 Corporate Responsibility Report | Supply chain

Our supply chain 2017 supplier spending by category

81% Services and General Procurement IBM’s 2017 global supply chain spend was $24.8 ($20.0B) billion with over 13,000 first-tier suppliers in 100-plus countries. In our relationships with these suppliers, 17% Production Procurement ($4.2B) we require a commitment to social and environmen- tal responsibility — as an extension of what IBM’s 2% Logistics Procurement ($0.6B) own clients expect of us. We establish meaningful requirements for suppliers and assess compliance, collaborate with industry groups to drive broader improvements, and work to increase the diversity of our supply chain. We recognize the potential for progress in a supply chain of this scale, and invest 2017 supplier spending by location in a range of initiatives to promote sustainable performance as a shared objective. 43% North America ($10.6B)

The following lists of suppliers — with links to their 30% Asia Pacific ($7.5B) responsibility reports and/or related websites — 22% Europe, Middle represent a significant portion of IBM’s global East, Africa ($5.5B)

expenditures. In 2017, half of our suppliers listed 5% Latin America below published corporate responsibility reports, ($1.2B) and nearly 85 percent of those published are mapped to the Global Reporting Initiative guidelines. We encourage our suppliers without public report- ing to take that step as a means to further expand the transparency of the supply chain. 42 2017 Corporate Responsibility Report | Supply chain

In 2017, 90 percent of our global spending in In Services and General Procurement (supporting Production and Logistics Procurement (supporting client services, software offerings, and internal our hardware brands and product distribution operations) 46 percent of our global spending was operations) was with the following 50 firms: with the following 50 firms:

• Acbel Polytech • Molex • Adecco • Jones Lang LaSalle • Applied Materials • NEC Platform Technologies • Akamai Technologies • Juniper Networks • Artesyn • NetApp • American Airlines • LeasePlan • BDT Media Automation • Nvidia • American Express • Lenovo • Benchmark Electronics • Pontocom • Apple • Manpower • Broadcom • Quantum • Aricent Holdings • Microsoft • Cavium • Redsis • Artech Info Systems • Mitsubishi • Celestica • Samsung • AT&T • NTT Group • Cisco Systems • Seagate • Bilfinger • Oracle • Compro Business Services • SK hynix • BMC Software • Persistent Systems • Delta Electronics • Super Micro Computer • CA Technologies • Red Hat • DFF Corporation • Syncreon • Camelot Info. Systems • Rocket Software • DHL • Teleplan • CBRE Group • SAP • Finisar • Thermo Fisher Scientific • CDI • SDI International • Flextronics • Tokyo Electron • CenturyLink • SHI International • Fuji Electric • Toshiba • Cisco Systems • Sumitomo Corporation • Fujifilm • Trenton Systems • Collabera • The Employment Solution • Geodis • Venture • Computer Task Group • UNICOM Systems • GlobalFoundries • Western Digital • CVS Caremark • Westcon Group • Hon Hai/Foxconn • Wistron • Dell • WPP • i3 Technologies • Zollner Elektronik • Delta Airlines • Zebra Technologies • Intel • Fluor • Jabil Circuits • George P. Johnson • Kyocera • HCL Technologies • Lenovo • Hilton • Mellanox Technologies • Hitachi • Mercury Corporation • Infinite Computer Systems • Micron Technology • INTEC • Microsemi • Internet Initiative Japan 43 2017 Corporate Responsibility Report | Supply chain

Supply chain social Supplier assessment and –– Publicly disclose results associated with these view of the supply chain. As a founding member of voluntary environmental goals and other the Electronic Industry Citizenship Coalition (EICC), responsibility has been improvement plans environmental aspects of their management IBM endorses the EICC Code of Conduct for its systems. internal operations and requires the same of our a key element of our Commitment to continuous improvement is essen- direct (first-tier) suppliers for hardware, software tial to sustained progress in supply chain social –– As part of their social and environmental and services. IBM communicates our requirement procurement strategy responsibility. In 2017, our ongoing efforts to lead management system, conduct self- for code compliance at the initial stages of supplier and encourage our supply chain to embrace positive assessments, audits and senior leadership onboarding. Continuous focus on social responsibil- since 2004. change generated many improvements. This section reviews of their system. ity as part of our daily business and the commitment includes successes that IBM and our suppliers of our suppliers has led to many improvements over achieved, along with our approach to the challenges –– Cascade these requirements to their next- the past decade and a half. Along with participating that still remain. tier suppliers. in EICC-generated education, audits and re-audits continue to play a valuable role in providing our IBM’s Social and Environmental Management In 2017, over 1,200 new suppliers — primarily from suppliers with objective, third-party evidence to System for its suppliers the Services and General Procurement sector of our determine if their operations are code-compliant or In 2010, IBM established a requirement that first-tier supply chain — were afforded a period not to exceed need further improvement. As described in the suppliers create a management system to address 12 months to demonstrate compliance with these “engagement and collaboration” section below, the their social and environmental responsibilities. requirements. Suppliers are tracked monthly and EICC re-branded itself the Responsible Business Our objective was to help our suppliers build their action is taken to confirm plans reach acceptance. Alliance (RBA) in October 2017. For purposes of this own capability to succeed in this area. In summary, year’s report, we will retain use of EICC terminology suppliers are required to: More information on these eight supplier since all audits were completed against the EICC requirements may be found on IBM’s supply chain code. For 2018 onward, the code and assessments –– Define, deploy and sustain a management system environmental responsibility webpage. will be performed under the RBA banner. that addresses intersections with employees, society and the environment, and that addresses Supply chain social responsibility In this report, we share summarized results of the integration with and compliance to the Responsible Supply chain social responsibility has been a key audits and improvements made by our suppliers, Business Alliance (RBA) Code of Conduct. element of our procurement strategy since 2004, which can positively promote good working condi- when IBM elevated this work based on the growing tions for thousands of people employed in our –– Measure performance and establish voluntary, interest of stakeholders and our realization of the extended supply chain. In 2017, audits to the EICC quantifiable environmental goals in the areas of added responsibility that comes with having a code took place simultaneously for both our waste, energy and greenhouse gas emissions. supply chain dispersed over 100 countries. Today Production and Logistics Procurement suppliers, this work forms a segment of our larger risk and those in the Services and General Procurement management work that encompasses a 360-degree supply chain. IBM has long maintained a dual path 44 2017 Corporate Responsibility Report | Supply chain

of supplier audits and included its services and 2013–17 distribution of nonconformances 2017 distribution of nonconformances general purchasing suppliers. Our experience has by section of EICC Code of Conduct by section of EICC Code of Conduct been that risk of noncompliance is present in these (375 full audits) (45 full audits) sectors as well, as services suppliers may be less 30% Health and Safety 33% Labor familiar with health and safety and environmental aspects of the code. By including both categories of 29% Labor 33% Health and Safety

suppliers, we have assessment coverage across 24% Management 22% Management our broad set of suppliers, which permits testing of Systems System

code compliance across the spectrum of suppliers 9% Ethics 9% Environmental in critical emerging areas such as the prevention of human trafficking. For all supplier audits, IBM 8% Environmental 3% Ethics continued its long-standing use of the EICC’s Validated Audit Process (VAP), the standardized social responsibility audit developed by the elec- Since 2013, we directed 375 full-scope EICC audits. In 2017, IBM had full-scope audits conducted on tronics industry. Data included in the 2013–17 cumulative and 2017 45 of its first-tier suppliers: 30 were Production chart depicts the percentage of major and minor Procurement suppliers and 15 were Services and From 2004 through 2017, the total number of IBM nonconformance regarding the five categories in the General Procurement suppliers. Data included in driven full-scope audits (not counting re-audits) EICC code: labor, health and safety, environmental, the 2017 chart depicts the percentage of major reached 1,966. These audits measure supplier ethics, and management system. (For reporting and minor nonconformance in each EICC category. compliance to the EICC code and in earlier years — purposes, incidents of priority nonconformance found prior to 2010 for Production Procurement suppliers, during audits are consolidated into major noncon- and 2012 for Services and General Procurement formance depicted in the charts.) suppliers — to IBM’s Supplier Conduct Principles. 45 2017 Corporate Responsibility Report | Supply chain

2017 completed full audits and re-audits For a broader view of our 2017 assessment activity, by country IBM’s 45 full-scope supplier audits were combined

(79 total) with 34 re-audits for a total of 79 audits in 14 coun- tries or territories — China was the most active for audits and re-audits, followed by Thailand, Singapore, China 16 33 Mexico, India, Taiwan, Malaysia and South Korea. Across these audits, 72 percent were with our Thailand 5 7 Production and Logistics suppliers, and 28 percent Singapore 4 7 with our Services and General Procurement suppliers.

Mexico 3 6

India 4 6

Taiwan 2 4

Malaysia 4

Korea 2 4

United Arab Emirates 2

Hungary 1 2

Turkey 1

Romania 1

Poland 1

Indonesia 1

Full Audits

Re-Audits 46 2017 Corporate Responsibility Report | Supply chain

2017 results from 45 full audits In the 45 full-scope EICC audits in 2017, the system — having documented goals, objectives,

(top 10 nonconformances to EICC code provisions by %) 10 most frequent code nonconformance (major metrics, periodic reviews with in-line management and minor) are provided in the chart to the left. To and tracking of improvements. An EICC audit report link the nonconformance to the five code sections, identifies and describes noncomformance found we have noted this via abbreviation: Lab (labor), during the audit with a cross-reference to the Working hours (Lab) 10% 16% H&S (health and safety), Env (environmental), Eth applicable provision of the EICC code. This level of (ethics) and Mgt (management system). detail is an important feature of an EICC audit and Emergency enables suppliers to isolate the root cause of any preparedness (H&S) 11% 13% In 2017, the two largest areas of noncompliance finding so they can work on improvements. Occupational were labor, and health and safety. The environmental 6% 7% safety (H&S) category improved its compliance level as a result IBM’s supplier assessment activity follows the of continued dialogue with our suppliers and our methodology developed by the EICC, under which Freely chosen employment (Lab) 4% 6% requirement that suppliers have a social and envi- audited suppliers create and submit a Corrective ronmental management system in place. Action Plan (CAP) for all nonconformances discov- Food, sanitation and 3% 4% ered in an assessment. This requirement is a core housing (H&S) Audits are a valuable tool, and if combined with tenet of IBM’s supplier management system and

Wages and benefits (Lab) 3% 4% long-term supplier relationships and suppliers’ is fully supported by IBM Global Procurement and agreements to invest in improvements toward code its executive team. The CAP enables the audited

Occupational injury compliance, audits can help drive relative long-term company to create meaningful targeted improve- 2% 4% and illness (H&S) improvement. For example, in the case of “working ments — and later, to test their effectiveness hours.” By comparing results over the near- and through a re-audit. During 2017, 57 supplier CAPs Supplier responsibility 2% 3% (Mgt) mid-term, we can see improved results. In 2017 were reviewed and accepted within 90 days of data, combined major and minor nonconformance for submission, reflecting audits and re-audits that Hazardous 2% 3% working hours was 16 percent for audits conducted, occurred in late 2016 and throughout 2017. substances (Env) down from 20 percent in 2016. Similarly, “hazardous substances” saw an improvement from 7 percent Nondiscrimination (Lab) 2% 3% in 2016 to 3 percent in 2017.

The EICC code requires an organization to have robust management systems to achieve and main- Major nonconformance tain ongoing compliance with the code provisions. Minor nonconformance Suppliers who fail to conform to the code often lack one or more elements of a strong management 47 2017 Corporate Responsibility Report | Supply chain

• Pollution prevention and resource reduction (Env) 2017 improved nonconformance rates The effectiveness of our audit/CAP/re-audit system • Wastewater and solid waste (Env) from re-audits is demonstrated by comparing “before and after” • Air emissions (Env) (% nonconformance to EICC code provisions) results of suppliers undergoing a complete assess- • Product content restrictions (Env) ment cycle, as shown by the chart to the left. • Storm water management (Env) 26.5 Re-audits conducted during 2017 at 34 Production • Energy consumption and greenhouse emissions (Env) Working hours (Lab) 18.4 and Services and General Procurement suppliers • Business integrity (Eth) are compared with their full-scope audits (conducted • No improper advantage (Eth) Emergency 22.7 over the 2015–17 timeframe). Major and minor preparedness (H&S) • Disclosure of information (Eth) 2.7 noncompliance results are shown. • Intellectual property (Eth) Occupational 10.3 • Fair business, advertising, and competition (Eth) safety (H&S) .5 Within the 34 re-audits, there were 41 code provi- • Company commitment (Mgt) sions from the full-scope audits with major or minor Wages and 8.6 • Management accountability and responsibility (Mgt) benefits (Lab) 4.3 nonconformance. The CAPs drove compliance • Legal and customer requirements (Mgt) improvement across all 41 code provisions. The • Training (Mgt) Hazardous 7.6 chart to the left shows a sample of these improve- • Worker feedback and participation (Mgt) substances (Env) 2.2 ments focusing on the 10 provisions having the • Documentation and Records (Mgt) Occ upational injury 7.0 highest nonconformance. All 10 provisions showed • Corrective action process (Mgt) and illness (H&S) .5 significant improvement, including working hours (30 percent improvement), emergency preparedness Supplier responsibility 5.9 (Mgt) .5 (88 percent improvement) and occupational safety In addition to the above improvements, 41 percent (95 percent improvement). For the following 27 code of the re-audited suppliers resolved all code non- 5.4 Food, sanitation provisions, all prior major and minor noncompliance compliance after completion of their re-audit and housing (H&S) .5 were fully corrected in the CAP/re-audit process: cycle — a sizable accomplishment and testament to Freely chosen 4.9 the results of following the full EICC process as well employment (Lab) 0 • Freely chosen employment (Lab) as the commitment of our suppliers to invest in • Young worker avoidance (Lab) Environmental permits 4.3 lasting improvements. IBM Global Procurement has and reporting (Env) • Humane treatment (Lab) .5 contingency plans for suppliers that remain non- • Non-Discrimination (Lab) compliant after a re-audit, and each is being handled • Freedom of association (Lab) with executive involvement. Our procurement • Industrial hygiene (H&S) executive team reviews the results of all supplier Full Audits Provisions shown are the 10 most frequent major findings • Physically demanding work (H&S) from the full audits preceding the re-audits. audits (full-scope and re-audits) on a monthly basis, Re-audits • Machine safeguarding (H&S) and quarterly with IBM’s chief procurement officer. • Health and safety communication (H&S) 48 2017 Corporate Responsibility Report | Supply chain

From the results of 2017 EICC full-scope audits of what constitutes an environmental law has Engagement and and re-audits, IBM is adjusting its communication continued to expand. The product-oriented laws plans with suppliers for 2018 audits. Our 2018 directly pertain to all hardware products IBM collaboration audit plan includes full-scope audits aligned with designs, manufactures or contracts to manufacture, the Responsible Business Alliance (RBA) Code of and/or purchases for resale. The scope of IBM’s Collaborating with industry groups, academics, Conduct version 6 (effective Jan. 1, 2018), and to product environmental compliance work includes nongovernmental organizations and other profes- further improve full-audit compliance, we will be but is not limited to: sional organizations is a way of leveraging multiple extending to suppliers access to a core set of RBA efforts for the benefit of the whole. IBM openly learning academy courses designed to help them –– Validating that all IBM hardware products do not shares our work and learns from these others in build capability in the provisions of the code. contain prohibited substances, or do not exceed order to make ongoing investments in supply chain certain maximum thresholds of reportable social responsibility. Center of Excellence for Product substances, as specified by EU RoHS and REACH Environmental Compliance regulations, in addition to non-EU RoHS and In October 2017, our primary supply chain social IBM’s Center of Excellence (CoE) for Global Product REACH-type regulations. responsibility collaboration group, the EICC, Environmental Compliance helps IBM to meet re-branded itself as the Responsible Business environmental regulations in all countries where –– Meeting eco-design directives as well as power Alliance (RBA). This change in name was the culmi- IBM does business, by rolling out consistent meth- and energy reduction regulations and voluntary nation of over a year and a half of work by the odologies to deliver environmentally compliant standards such as the U.S. Environmental Board, its officers, and focus groups comprised products. The CoE’s mission includes comprehensive Protection Agency’s ENERGY STAR program. of members and their management. More than just and detailed reviews of regulations, the development a new name and logo, this change reflects the of compliance strategies, processes and deployment –– Complying with the U.S. Toxic Substances Control dynamic nature of the group — which has continued plans, as well as education and training materials Act, nanomaterials reporting requirements, to grow in scope and membership during each for IBM’s employees and suppliers. The CoE is also battery laws, product takeback regulations and year of its existence. an active member on many industry and regulatory annual reporting. bodies around the world. At year-end, the EICC/RBA had grown to over 120 –– Delivering supplier education via dedicated members across automotive, communications, As governments worldwide become increasingly global webinars. consumer electronics, computer brands, contract concerned about the environment and health and manufacturing, hardware components, industrial safety of their citizens, the number of product Globally in 2017, we identified 160 new or modified equipment, logistics, software, retail, and (new for environmental laws has grown exponentially over product-related regulations and acted upon them 2017) toy and other service industries — represent- the last several years and we expect this trend to to meet the milestones and requirements defined by ing multiple distinct tiers of the extended supply continue. Not only are such laws growing in number, the regulations. chain. IBM is also an active member of the they are also increasingly detailed and the scope Responsible Minerals Initiative (RMI), which is 49 2017 Corporate Responsibility Report | Supply chain

focused on the topic of conflict minerals and staying Building upon its long history of working with indirect IBM continues its relationship with Centro de ahead of other emerging issues in extraction (such suppliers (in our services and software businesses), Reflexión y Acción Laboral, a nongovernmental as cobalt). IBM co-leads the indirect spend workgroup. This organization located in Mexico. On a case-by-case group is engaging members that deploy the EICC/ basis and through open communication, we are IBM’s involvement with the EICC/RBA remained RBA Code of Conduct to indirect suppliers that addressing in a constructive manner areas of strong in terms of support, participation and utiliza- support the electronics industry. Suppliers in this mutual concern regarding working conditions in tion of the organization’s growing base of collateral. sector are varied and range from large global firms our regional supply chain. As a founding member, IBM encourages its suppliers to locally owned, small enterprises, which presents of products and services to join the group and a challenge in communicating and assessing compli- participate in the development and deployment of ance to the code. Conflict minerals resources aimed at driving improvements in social responsibility. The EICC/RBA annual report provides an in-depth In 2017, we continued our efforts to achieve an review of the organization’s accomplishments. This upstream supply chain using tantalum, tin, tungsten Each member of IBM’s global Supply Chain Social report is highly recommended for anyone with an and gold mined and processed in a responsible Responsibility team is part of one or more of the interest in the areas the group is engaged in and the manner. These four minerals (also known as 3TG) EICC/RBA’s workgroups. This allows us to remain collateral being developed for members and suppli- are referred to as conflict minerals, with focus engaged in, contribute to and learn from other ers to use in making improvements across the five placed on sources emanating from the Democratic companies that constitute the various groups: pillars of the RBA Code. Readers are encouraged to Republic of Congo or adjoining countries (DRC). link to the RBA website and explore the varied topics With proper care, however, market access to legiti- • Code revision workgroup this important group is engaged in, at responsible- mate sources of supply from within the DRC is • Validated audit process workgroup business.org. possible to support a compliant supply chain. Like • Audit manual sub-workgroup most companies using these four materials, IBM is • Capability building workgroup In addition to its involvement with the EICC/RBA, not a direct purchaser and is four to six supplier tiers • Indirect spend workgroup IBM continues its engagement activities with local downstream from the smelters or refiners (SORs) of • China smelter engagement team and nongovernmental organizations around the these minerals. • Europe smelter engagement team globe. For example, as a key member of the elec- • Asia/Indonesia smelter engagement team tronics industry in Mexico, IBM collaborates with IBM’s conflict minerals program is executed by • Global smelter engagement team industry chambers and nonprofit organizations a geographically dispersed, dedicated team of • Gold subteam that share our passion for a sustainable and respon- experienced supply chain professionals within the • Conflict minerals reporting template team sible supply chain. IBM Global Procurement organization. That team reports to IBM’s vice president and chief procure- ment officer. 50 2017 Corporate Responsibility Report | Supply chain

IBM participates in the Responsible Minerals 3) Performing due diligence by surveying our names and locations of these smelters or refiners Foundation and Initial Audit Fund, which offers Initiative (RMI), along with over 350 other companies in-scope direct suppliers using the RMI’s are published in IBM’s 2017 Conflict Minerals SORs an incentive for participating in the RMAP by and industry groups, focused on working to resolve Conflict Mineral Reporting Template (CMRT) to Report at ibm.com/conflictminerals. fully paying for the cost of their initial audit. Our challenges associated with this issue. IBM and ascertain the SORs present in the supply chain. outreach efforts extended to minerals conferences RMI members are working together to identify, vet, In-scope direct suppliers with CMRTs containing in China, Dubai, India and Indonesia, which we converse with and lead the entire portfolio of mem- 4) Working with those SORs to gain their SORs that are not progressing toward conflict-free attended to meet with SOR and industry contacts, ber-identified SORs to participate in the Responsible engagement in RMAP or equivalent programs. are required to have a plan to remove those SORs to further RMAP participation and understanding. Minerals Assessment Program (RMAP). RMAP In the spirit of collaborative work, IBM accepts from products provided to IBM. The IBM Conflict was created for SORs that play a crucial role in the the LBMA Good Delivery List, Responsible Minerals team and the IBM Global Procurement In 2018, we are continuing our work to reach conflict- extended supply chain, as they are the point at Jewellery Council Chain of Custody Certification, organization work closely with suppliers to help free on 3TG and have started exploring our supply which concentrated ores are refined into the high- TI-CMC as proof of conflict-free stature. them achieve this goal. Recognizing that a well- chain for cobalt, which may become the next mate- er-level materials that cascade into technology informed supply base is required to sustain this rial of interest. products. Readers are encouraged to access the To determine information about its upstream complex challenge, IBM has provided conflict RMI website for information on the many tools and sources of 3TG, IBM used multiple iterations of the minerals education to our suppliers through webi- programs being driven by this important initiative RMI CMRT with its in-scope direct suppliers. The nars and RMI online courses. The work to attain at responsiblemineralsinitiative.org. CMRT was developed to provide companies with a conflict-free supply chain is difficult, yet our a common format for their upstream suppliers suppliers recognize the expertise of the team and IBM’s due diligence measures for conflict minerals to identify the use of 3TG, the SORs used in the our commitment to their success. conform to the framework set forth in the Organi­ extended supply chain and, where possible, the sation for Economic Co-operation and Development country of origin of 3TG. In the fourth quarter of Another aspect of our efforts to drive change is (OECD) Due Diligence Guidance for Responsible 2017, IBM deployed the CMRT to our in-scope direct interaction with SORs and trade groups that Supply Chain of Minerals from Conflict-Affected and suppliers representing greater than 95 percent of are associated with the processing of these materi- High-Risk Areas. Our work to date can be summa- our total supply chain expenditures for our covered als. Our global Conflict Minerals team works in rized in four categories: products. We received responses from all of the association with the RMI smelter engagement team in-scope suppliers and learned the identities of 307 to contact SORs and bring them into the RMAP 1) Establishing a supply chain standard for upstream 3TG SORs located in 61 countries. By process. In 2017, IBM global team members along conflict minerals. comparing the IBM-identified SORs to the RMAP list with other member companies of RMI met with and the results of our further due diligence on SORs SORs in China, Czech Republic, India, Netherlands 2) Performing a Reasonable Country of Origin not participating in one of those third-party audit and Vietnam to advance their participation in RMAP. Inquiry (RCOI) regarding the potential processes, we determined at the end of 2017 that This work takes us to production facilities where we sources of conflict minerals in our products. 92 percent of the SORs identified by our in-scope promote RMAP participation and help them to suppliers were conflict-free or pursuing assessment prepare for their assessments. To remove the cost (up from 86 percent at year-end 2016). The specific barrier of RMAP audits, IBM donated to the RBA 51 2017 Corporate Responsibility Report | Supply chain

Supplier diversity 2017 spending with first-tier diverse suppliers by region Map Created by Ted Grajeda from the Noun Project

IBM has long recognized that diversity is critical to fostering innovation, impacting our bottom line and delivering value to clients — and that supplier diversity adds to our competitive advantage while stimulating growth in a global marketplace and driving development in growing economies.

IBM created its supplier diversity program in 1968, predating the existence of the U.S. Department of Commerce’s Minority Business Development Agency; the National Minority Supplier Development Canada Council (NMSDC); and the Women’s Business $153M Enterprise National Council (WBENC). With half a century of engagement in this area, our program’s Asia Pacific perennial goal is to provide opportunities to diverse United States $213M $1.4B suppliers that can add value to our supply chain in every region where we operate. Suppliers qualify as E/ME/A $211M diverse by being at least 51 percent owned by people from an ethnic minority (as defined in each country or region), or by women, military veterans, people with disabilities or LGBT individuals. Latin America $80M In 2000, IBM was the first information technology firm to join the Billion Dollar Roundtable, an organi- zation that encourages businesses to increase their spending with diverse suppliers. Since then, IBM has annually conducted greater than $1 billion in business with first-tier diverse suppliers in the United States. (Companies with which IBM has direct business relationships are considered 52 2017 Corporate Responsibility Report | Supply chain

“first-tier” suppliers.) With the growth of IBM’s Supplier Development Council, Supply Nation, During our 50-year history of supplier diversity, As IBM marks the 50th anniversary of our supplier diverse supplier initiative outside the United States, and WEConnect International. IBM employees are IBM has been a leader in inclusion. We have always diversity program in 2018, we will continue to IBM since 2006 has conducted more than $2 billion on the boards of CAMSC, MSDUK, MSD-China, understood that our actions on this front resonate, foster diversity in our global supply chain as in business annually with first-tier diverse suppliers and WEConnect International, where an IBMer is not just within the walls of IBM but throughout the business needs evolve, and will work with external globally. In 2017, IBM purchased $2.6 billion in also chair of its board. world economy. Within our supply chain, IBM’s organizations to support the identification and goods and services from first- and second-tier Global Supplier Diversity organization has been development of diverse firms in countries where diverse suppliers globally, of which nearly $1.4 billion IBM works with its diverse suppliers to help them widely considered an industry leader globally. Our we have purchasing needs. was with first-tier diverse suppliers in the United expand their capabilities and delivery models so supplier diversity organization and IBM employees States and $657 million with first-tier diverse they can respond more effectively to IBM’s require- were recognized approximately 30 times in 2017. suppliers in other countries. ments. For example, SuperSeva Services Pvt. Ltd, The most prestigious awards were: a certified WEConnect International India member, In 2003, IBM expanded the program beyond the received their first Request For Proposal (RFP) from • WBENC Top Corporation, Platinum Level — 14th consecutive United States to seek relationships with diverse IBM in 2007. Over the next two years they honed year IBM has received “top corporation” status suppliers in every country where we operate. Each their skills and obtained their first IBM purchase • NMSDC Global Link Award — Best International Program in the world geographic region has its own program manager, order in 2009. From this point they worked with • European Diversity Awards — Supplier Diversity Program and each has established locally relevant criteria for IBM’s Asia Pacific procurement team to understand of the Year Award diverse suppliers. IBM’s representatives actively our growing customer requirements and were • Business Equity Network — Inaugural Eminence Award for engage in collaborations with external organizations awarded an additional contract in late 2009. During our work with LGBT suppliers involved with outreach programs to facilitate diverse this time we recommended they pursue WEConnect supplier identification and development. We have certification, which they did in 2011. This certifica- also expanded our second-tier program beyond tion accelerated the number of RFPs from IBM. NMSDC included IBM Program Director of Global the United States, requiring our direct suppliers to By 2015 they had won Employee Transport Supplier Diversity Michael Robinson on its list of the seek diversity through their supply chains. Our goal Manage­­ment contracts with IBM, with support 45 Most Influential People who have impacted is to seek suppliers that can provide value to our workers numbering 140. By year-end 2017, they diversity, and their organizations, in the NMSDC’s supply chain, and to promote economic opportuni- were managing various business projects for 45-year history. He also received the National LGBT ties for historically disempowered groups wherever IBM — including Employee Transport Management, Chamber of Commerce Legacy Award for his contri- we operate. Asset Management, Workplace Security, SSP butions to LGBT suppliers. These corporate and Operations, Class Management and Stamp Paper individual awards are a demonstration of IBM’s IBM is a member of many international affiliates of Services — with approximately 400 workers sup- commitment and leadership in the industry. They the NMSDC, including the Canadian Aboriginal porting this work, illustrating the growth of this one are not limited to the U.S. or to a specific constitu- and Minority Supplier Council (CAMSC), Minority supplier over a 10-year period with us. ency, and illustrate the program’s global impact. Supplier Development China (MSD-China), Minority Supplier Development U.K. (MSDUK), South Africa Governance

Trust, transparency and smarter business

Our diligent approach to governance — measuring compliance, managing risk and engaging public discourse — enables IBM to innovate while maintaining the trust of clients and society.

IBM Cloud data center 54 2017 Corporate Responsibility Report | Governance

All IBMers worldwide Governance at IBM Corporate Responsibility Working Group IBMers around the world on topics including public The Corporate Responsibility Working Group man- procurement, business amenities, anticorruption participated in our IBM has a culture based on ethics and integrity, ages IBM’s corporate responsibility activities and and ethics. Additionally, more than 28,000 IBMers guided by a rigorous system of corporate governance. stakeholder engagement. Meeting at least monthly completed Corporate T&C University online Business Conduct Grounded in our standards, we remain committed to review key policy and strategic issues and make education lectures. For employees facing new to addressing today’s challenges through transfor- recommendations to the steering committee, the integrity challenges at turning points in their Guidelines program mative leadership, innovation, values and essential working group consists of representatives from careers — for example, when they are new to IBM, partnerships. In this section you’ll find examples 10 functional areas across the company, including new to management or new to emerging mar- in 2017. of how we continue to enhance the ways we govern global representation. Daily activities are coordi- kets — targeted integrity training is required. our company, manage risk and contribute our nated in the Corporate Citizenship organization, expertise to public discourse. which reports to the chief communications officer. Also in 2017, IBM senior business leaders around the world sponsored integrity summits in 34 countries, IBM senior management, overseen by our Board Ethics and integrity leadership in both emerging and major markets. These summits, of Directors, is responsible for the company’s eco- Creating and maintaining IBM’s sustained culture managed and run by local senior leadership, nomic, environmental and social performance, as of ethics and integrity starts with our employees emphasized the role of leaders in creating an ethical well as for adherence to IBM’s overall compliance and leaders and extends to our business partners culture and focused on key compliance risks in programs. Corporate responsibility is integrated and suppliers. We teach, listen and collaborate, as each region, along with specific actions that can be across the business through the following forums. we continue to transform and enhance our internal taken to mitigate these risks. compliance, education and integrity programs. Corporate Responsibility Executive Listen: For more than 50 years, IBM has maintained Steering Committee Teach: IBM achieved 100 percent participation an internal “speak up” reporting channel for employ- Chaired by the vice president for Corporate Citizen­ in its Business Conduct Guidelines (BCG) pro- ees, as well as channels for suppliers, business ship, our Corporate Responsibility Executive Steering gram — employees around the world certified our partners and others to report concerns or suspected Committee provides leadership and direction on key BCG policy, currently available in 25 languages, and violations of our BCGs or unethical or unlawful corporate responsibility issues. The committee completed the BCG course. The BCG course includes behavior to the company. These channels support comprises senior executives from functional areas an introductory video from our Chairman emphasiz- anonymous reporting. across the company, with each area responsible for ing the importance of integrity to IBM and business developing its own corporate responsibility goals scenarios depicting integrity decisions that employ- In 2017, nearly 24,000 IBMers completed our and strategy. Organization-wide goals are approved ees may face while conducting IBM’s business. annual Global Integrity survey, providing valuable by the steering committee. feedback on their perception of ethics and integrity IBM’s trust and compliance (T&C) officers, lawyers within the organization. We use the insights and management in 2017 provided in-person compliance and ethics training to more than 26,000 55 2017 Corporate Responsibility Report | Governance

gathered from these annual surveys, completed also increase. At IBM, we not only carefully consider Effective May 25, 2018, the GDPR represents the since 2010, to enhance our global ethics and security when developing our technology solutions, biggest change in data privacy legislation in two integrity programs. but also examine our internal systems and pro- decades. IBM has established and is executing a cesses to assess how we can best reduce risk and global program to prepare our internal processes Collaborate: IBM’s commitment to ethics and maintain the continuity of our business. and our commercial offerings for the GDPR. As part integrity leadership extends to our IBM Business of this program, we are enhancing our ongoing Partners’ and suppliers’ employees, as part of their The human element also puts businesses at risk commitment to “privacy by design,” to help ensure partnership commitment to IBM. In 2017, IBM as attackers take advantage of lapses in security or that personal data use is limited by default to what is provided online ethics and integrity education to use social engineering to target unwitting users. specifically required. We are revising all agreements more than 15,000 representatives from our IBM Recognizing that education is among the best forms with our suppliers, vendors and clients where Business Partners and suppliers around the world. of protection, we continuously strive to reinforce personal data is collected or processed, and incor- IBM Business Partner and supplier personnel have a cybersecurity-aware culture within our company porating measures into new and existing contracts received in-person training in connection with our and throughout the communities around us, by to cover the new GDPR requirements. IBM also is integrity summits in some emerging markets. For promoting increased knowledge and understanding leveraging the capabilities of its readiness program the fifth year in a row, IBM’s chief trust and compli- of relevant issues. Because threats continuously to help clients prepare for the GDPR. For more, read ance officer emphasized the value of ethics and evolve, each of IBM’s employees is required to about IBM’s Journey to GDPR Readiness, including integrity in an annual address at our Global Business complete an annual cybersecurity and privacy course the IBM GDPR Framework. Partner Leadership Conference (PartnerWorld®). that is regularly updated with new insights on the latest types of attacks and security best practices. Security and privacy Embracing regulatory change Responsible data stewardship is central to IBM’s IBM has been at the vanguard of rapidly evolving commitment to its clients. This approach is surpris- data privacy regulations. We were one of the first Data privacy and ingly unusual within the tech industry today, but companies to appoint a chief privacy officer, to it is how IBM has always done business. As a result, develop and publish a genetics privacy policy, to be security have been, data privacy and security have been, and will con- certified under the APEC Cross-Border Privacy tinue to be, a critical consideration for all aspects of Rules system, and to sign the EU Data Protection and will continue to be, our business. Code of Conduct for Cloud Service Providers (the EU Cloud Code of Conduct). IBM is bringing that a critical consideration IT security same spirit to implementation of the EU General As companies continue to expand their businesses Data Protection Regulation (GDPR). for all aspects of and IT infrastructure — adding more devices and increasing connectivity — their vulnerabilities can our business. 56 2017 Corporate Responsibility Report | Governance

Forging industry standards go through recognized legal channels. IBM remains mitigate significant risks throughout the company. IBM does not simply wait for regulatory require- committed to being a responsible participant in The IBM Risk Management Framework aligns ments; we actively work within the technology the important discussion concerning law enforce- to industry standards and good practices, focusing industry to establish prudent standards to safeguard ment access to data, as well as a strong advocate on leadership, programs and practices, enablement customer data. In 2017, we expanded our partici- for our clients. and effectiveness supported by a strong risk- pation in the EU Cloud Code of Conduct to cover 24 aware culture. additional services — making IBM the first company Enterprise risk management to offer our customers this transparent, indepen- Leadership and governance dent endorsement across such a large portfolio of IBM has developed a consistent, systemic and In 2017, the leadership team, compromised of services, covering not just infrastructure but also integrated approach to risk management to help senior management, continued its collaborative software and platform cloud services. More details determine how best to identify, manage and process of identifying, evaluating and managing are available in this blog post by IBM Chief Privacy Officer Cristina Cabella.

IBM also has certified more than 160 offerings to IBM Risk Managment Framework date for compliance with Privacy Shield; and, in Leadership 2017, IBM further certified to the Swiss-U.S. Privacy Shield framework. IBM will continue to certify additional offerings under available frameworks on Report Communicate an ongoing basis. Culture Fighting to protect customer data When necessary, IBM will fight to protect customer Smarter Risk Program A Competitive Advantage data under applicable legal frameworks. In 2017, Effectiveness & Practice IBM joined a handful of technology companies in supporting a legal challenge to a government request for customer data which, in IBM’s view, did Culture not follow proper channels and process. For more, read the statement by IBM General Counsel Monitor Implement Michelle H. Browdy about IBM’s amicus curiae brief to the U.S. Supreme Court. This brief detailed IBM’s Enablement long-standing position that government efforts to obtain data for law enforcement purposes should 57 2017 Corporate Responsibility Report | Governance

IBM is focused on enterprise-level risks. This includes periodic could be driven by various factors, such as changes Benchmarking and effectiveness reviews and interaction with the Board of Directors, in the external environment, the company’s strategic An effective risk management framework should applying technology, whose Audit Committee oversees the company’s imperatives and where and how we do business. ultimately lead to improved business performance enterprise risk management (ERM) framework, and help the company protect its reputation while tools and analytics program and associated processes. Through our Over the course of the year we held in-depth delivering on its social responsibilities. IBM continu- executive compensation program, we motivate our discussions with leading consultants on emerging ously evaluates its ERM practices for effectiveness to support risk leaders to deliver a high degree of business perfor- risks and conducted a robust internal study that and alignment with those priorities. In 2017, we mance without encouraging excessive risk-taking. included polling, surveys and interviews of approxi- established and baselined a set of new enterprise- management. mately 150 top executives. In 2017, we held a level metrics for effectiveness. We also continued Our ERM Executive Council, comprising 17 senior design thinking session with leaders from IBM to collaborate with Internal Audit, Trust and managers representing different units, functions Research to identify emerging risks and trends. As Compliance, Business Controls and other oversight and geographies, meets regularly to help improve a result, we updated our enterprise-level risk map organizations to enhance IBM’s approach to the management of enterprise risks. In 2017, and refined senior management focus for 2018. identifying, prioritizing and addressing risk within we refreshed the ERM Council with seven members business processes, in order to improve support rotating off and seven new members replacing Advancing risk management through for risk-based controls and assurance. Lastly, we them, and we expanded the council for the IBM analytics and cognitive continued our benchmarking with other leading Credit business. To foster collaboration and trans- IBM is focused on applying technology, tools and organizations to provide insights to good practice parency, participants share risks and mitigating analytics to support risk management. In 2017, and emerging risks. actions so that the council can more effectively we continued to build upon the success of the manage risk across the entire enterprise, identifying award-winning Country Financial Risk Scorecard; Driving a risk-aware culture best practices from one part of the business to we enhanced the predictive algorithms, expanded The success of the framework is predicated on a standardize and apply across units globally. coverage and performed deep dive assessments strong culture of risk awareness, identification, of the risk environment across several countries. analysis and mitigation. To support this, IBM contin- Addressing emerging risks Analytics and cognition are the next big frontiers ued to deploy education modules in video formats Our company-wide approach to identifying and for risk management which, when coupled with the and provide awareness and transparency through managing risk is based on the ISO 31000 Risk abundance of data, provide the ability to infuse global video blogs, case studies, external perspec- Management and the Committee of Sponsoring insight into risk management. In 2017, we deployed tives and business leader risk and tool training. In Organizations of the Treadway Commission (COSO) to over 100 countries our cognitive-based tool to 2017, approximately 50,000 IBMers from around the ERM guidance. In adapting these, IBM considers and automate the identification of emerging storylines world collaborated in internal social communities, assesses potential strategic, financial, operational, and risks and project possible future scenarios and engaging with a range of materials and risk-manage- regulatory and other risks to our business, which implications. The tool enhances our global geographic ment experts, to broaden their risk education. leaders’ risk awareness and ability to improve local resiliency to risks. 58 2017 Corporate Responsibility Report | Governance

Advancement through community engagement We expanded on that in May 2018 with three –– Data privacy: IBM is fully committed to protecting –– The major sources of data and expertise — Community engagement helps advance the risk “principles for trust and transparency” for protecting the privacy of our clients’ data, which is and the methods — used to train AI systems and management acumen of our current and future client data and insights, and for providing the fundamental in a data-driven society. solutions. business leaders. In 2017, we participated on five responsible, transparent use of AI and other trans- ERM councils, including advisory board membership formative innovations. They include: –– Data security: IBM is devoting our powerful –– Although bias can never be fully eliminated, for two university ERM programs, and delivered engines of innovation to create tools to protect IBM and all companies advancing AI have an presentations on contemporary risk best practices The purpose of AI is to augment our clients, their data and global trade from obligation to address it proactively. We therefore at IBM- and non-IBM sponsored industry events. human intelligence. cyberthreats, and convening a broader discussion continually test our systems and find new data The purpose of AI and cognitive systems developed on balancing security, privacy and freedom. sets to better align their output with human Principles for trust and transparency and applied by IBM is to augment — not replace — values and expectations. human intelligence. Our technology is and will be –– Government access to data: IBM has not IBM believes organizations that collect, store, designed to enhance and extend human capability provided client data to any government agency Learn more at ibmpolicy.com/trust-principles. manage or process data have an obligation to handle and potential. At IBM, we believe that AI should under any surveillance program involving bulk it responsibly. That belief — embodied in our centu- make all of us better at our jobs, and that the bene- collection of content or metadata. ry-long commitment to trust and responsibility in all fits of the AI era should touch the many, not just the relationships — is why the world’s largest enterprises elite few. To that end, we are investing in initiatives –– Cross-border data flows: IBM views the free trust IBM as a steward of their most valuable data. to help the global workforce gain the skills needed movement of data across borders as essential to to work in partnership with these technologies. 21st-century commerce. In October 2017, IBM Chairman Ginni Rometty told the Financial Times, “We’re entering an era in Data and insights belong to their creator. New technology, including AI systems, which data can be used to solve all sorts of the IBM clients’ data is their data, and their insights are must be transparent and explainable. most pressing problems, but only if there’s trust in their insights. Client data and the insights produced For the public to trust AI, it must be transparent. how that data has been handled.” We take that trust on IBM’s cloud, or from IBM’s AI, are owned by IBM’s Technology companies must be clear about who seriously, and in 2017 launched a comprehensive clients. We believe that government data policies trains their AI systems, what data was used in that statement of beliefs and practices that we follow should be fair and equitable and prioritize openness. training and, most importantly, what went into in advancing new technologies and growing the their algorithm’s recommendations. If we are to use digital economy. –– Data ownership: Clients are not required to AI to help make important decisions, it must be relinquish rights to their data — or insights derived explainable. IBM will make clear: from it — to have the benefits of IBM’s solutions and services. –– When and for what purposes AI is being applied. IBM, the IBM logo, ibm.com, Analyst’s Notebook, i2, IBM Business Partner, IBM Cloud, IBM Watson, IBM Watson IoT, IBM z14, On Demand Community, PartnerWorld, P-TECH, Power Systems, POWER8, POWER9, QRadar, SkillsBuild, Smarter Cities Challenge, Storwize, Watson Health and World Community Grid are trademarks or registered trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. BrassRing and Kenexa are registered trademarks of Kenexa, an IBM Company. Truven Health Analytics is a registered trademark of Truven Health Analytics, an IBM Company. The Weather Company and Weather Underground are registered trademarks of TWC Product and Technology, LLC, an IBM Company. Intel is a trademark of Intel Corporation or its subsidiaries in the United States and other countries. Microsoft is a trademark of Microsoft Corporation in the United States, other countries, or both. Other product and service names might be trademarks of IBM or other companies.

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