2016 Corporate Responsibility Report 2 2016 IBM Corporate Responsibility Report 3 Chairman’s letter 4 Year in review 8 Our approach to corporate responsibility 12 Awards and recognition 14 Performance summary 18 Communities 34 The IBMer 42 Environment 84 Supply chain 98 Governance About this report IBM’s annual Corporate Responsibility Report is published during the Unless otherwise noted, the data in this report covers our global second quarter of the subsequent calendar year. This report covers operations. Information about our business and financial performance is our performance in 2016 and some notable activities during the first half provided in our 2016 Annual Report. IBM did not employ an external of 2017. agency or organization to audit the 2016 Corporate Responsibility Report. In selecting the content for inclusion in our 2016 report, we have used the As we continue our journey to transform IBM into a cognitive solutions and Global Reporting Initiative (GRI) reporting principles of materiality, cloud platform company, we regularly review our strategy and approach sustainability context, stakeholder inclusiveness, and completeness. A to corporate responsibility. This ongoing analysis helps us to identify and GRI report utilizing the GRI G4 Sustainability Guidelines, as well as prioritize the issues of relevance to our business and our stakeholders. In additional details about IBM’s corporate responsibility activities and 2014 we engaged Business for Social Responsibility, a global nonprofit performance, can be found at our corporate responsibility website. business network and consultancy dedicated to sustainability, to conduct a materiality analysis. That analysis maps corporate responsibility priorities to IBM’s business strategy, stakeholders, and impact on global society. This process was completed in 2014 and the results have been considered in the approach and content of this report. Corporate Citizenship & Corporate Affairs 3 Innovation, transformation and leadership Tackling big challenges comes naturally to our company. There is a reason one of the core Values that IBMers wrote for themselves was “Innovation that matters — for our company and for the world.” The harder the problem, the more interested an IBMer becomes — and the more the world turns to us for ideas, breakthroughs and partnership. You see this in the kinds of challenges IBM has undertaken over the years — from the creation of Social Security in the United States; to the shaping of modern finance, transportation and Finally, you see this seriousness of purpose in how we act as business; to putting a man on the moon and returning him safely. stewards of IBM itself. We are now in the midst of arguably the You see it in our current “moonshots,” as we apply the power of most ambitious and extensive transformation in a history of cognitive technology and the thinking and dedication of the continuous reinvention. IBM is one of few companies in our world’s most brilliant workforce to problems like cancer and industry to have moved from era to era for more than a century. education. We have done so not by tinkering around the edges of change, but accepting the need for fundamental, bet-the-business You see this mindset not only in which challenges we tackle, but transformation — in order to help our clients and the world move in how we tackle them. We don’t just throw money at a problem to the future. or make symbolic gestures of our good intentions. We actively seek out partners from across civil society and government, often This nexus of innovation, transformation and leadership, on a collaborating with both — but we don’t wait for someone to ask societal scale and with global impact, is expressed nowhere more us for help. Rather, we take the initiative, approach complex clearly than in our Corporate Citizenship strategy, work and problems as the systemic challenges they are, and don’t feel outcomes. It is the subject of this report. I hope it engages you as satisfied until we have put in place lasting, institutionalized and an ambitious professional — no matter what your field or industry. systemic solutions. And I hope you will join us in building a world that is healthier, less wasteful, more productive, more sustainable and fairer. For IBMers, this is what transformation and leadership mean. It is the “matters” in “innovation that matters.” And you will see example after example of it through this report. You will see the creation of an innovative model of education that seamlessly connects school to college and career; of citizen diplomacy Virginia M. Rometty designed to empower communities: and new ways to transform Chairman, President and Chief Executive Officer oncology, genomics and the “last mile” of healthcare. You will learn how we are not just offering new forms of artificial intelli- gence, but are implementing principles to guide their fair, just and societally sustainable use. 4 2016 IBM Corporate Responsibility Report Year in review Responsibility is integral to our business and New skill, new collar draws us to social challenges where we can Many jobs in today’s economy are neither white nor blue collar but matter, where IBM’s innovation and expertise can rather “new collar,” requiring expertise but not always advanced degrees — so IBM is exploring new ways to build skills. Pathways improve communities and lives. We forge in Technology, or P-TECH, joins schools with corporate partners sustained partnerships with nonprofit to extend high school curricula with college courses and skills organizations — allied in purpose, focused on development through mentoring and internships. P-TECH results. Following are highlights of these efforts schools will soon number 100 in the U.S. and Australia, with more planned. IBM has hired 10 P-TECH graduates, and most are from our 2016 report. pursuing four-year degrees as IBMers. Our new Veterans Employment Accelerator Impact Grant program has trained 600 military veterans in IBM’s i2® Analyst’s Notebook software, and 100 have joined IBM and partner compa- nies as data analysts. Our IBM Africa Skills Initiative helps universities across Africa prepare students for today’s IT jobs, with nearly 600 participants having joined IBM as interns or employees. C is for cognitive Teacher Advisor with Watson uses cognitive computing to help teachers plan lessons, initially focused on third-grade math. Piloted with hundreds of teachers in 2016, the free resource will be available across the United States for the 2017-18 school year. Also, IBM Watson Education has partnered with Sesame Workshop to design and build an adaptive platform that applies Watson to early education through apps, games and educational toys. The collaboration’s first result is a cognitive vocabulary app for kindergarten students, which completed the first phase of its pilot in Georgia’s Gwinnett County Public Schools in May 2017. Another initiative, Teachers TryScience, offers STEM-focused lessons and strategies free of charge to teachers worldwide. In 2016, its website added 425 new resources in 10 languages. Read more about our education initiatives. Corporate Citizenship & Corporate Affairs 5 99 A new, rainbow version of our logo represents IBM’s commitment IBM regularly audits its suppliers for compliance with the to inclusion and equal opportunity for all IBMers worldwide. It’s Electronic Industry Citizenship Coalition (EICC) Code of Conduct. now used with our diversity initiatives and advocacy. In 2016, 99 audits and re-audits were conducted in 15 countries. Read more in the IBMer section. Read more in the supply chain section. Society is our client Applying expertise and technology to problems is what IBM does best, and our citizenship work takes the same approach. Launched in 2016, IBM Health Corps sends experts worldwide to work pro bono on engagements that expand and improve healthcare. Among its first five projects is a predictive analytics system to forecast demand for chemotherapy in sub-Saharan Africa, where few patients receive it. Read more in the communi- ties section about other IBM initiatives that employ the same strategy: Corporate Service Corps deploys teams of consultants worldwide to assist community organizations. In 2016 it Teacher Advisor With Watson overview reached 28 cities and began a partnership with the Peace Corps. Smarter Cities Challenge works with city authorities to devise strategies to manage congestion, pollution, poverty and other urban challenges. In 2016, the program engaged 10 cities on six continents. Impact Grants engaged over 400 nonprofit organizations in 60 countries in 2016, with consulting and software to support their work to resettle refugees, disrupt human trafficking, respond to natural disasters, contain infectious diseases, and much more. IBM SafetyNet helps nonprofits automate the collection and Introducing IBM Health Corps management of their data by providing Cúram software, consulting and ongoing support. Its initial five engagements are expanding to six more in 2017, with grants valued at $300,000 each. 6 2016 IBM Corporate Responsibility Report Environmental milestones Innovation for life IBM achieved two important goals related to our efforts to help World Community Grid® combines the idle computing power of combat climate change, four years ahead of schedule. In 2016, PCs and mobile devices worldwide to create a “virtual supercom- IBM’s renewable electricity purchases represented 21.5 percent of puter” that helps researchers working on humanitarian projects. our global consumption (beyond what’s already provided from the In 2016, it provided the equivalent of 167,000 years of computing grid), exceeding our goal of 20 percent. IBM also achieved its time to support projects including research into treatments for the third-generation CO2 emissions goal, reducing operational Zika virus, cancer and tuberculosis. emissions by 38.1 percent compared to a 2005 baseline and surpassing the 35 percent target we’d set for 2020. We continue IBM Research and the Vermont Electric Power Company have to apply expertise and technology to address environmental jointly developed a system to forecast the amount of power challenges for our clients and the world.