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IBM Corporate Citizenship and Supply Chain Social Responsibility

IBM Corporate Citizenship and Supply Chain Social Responsibility. ISM NY/NJ Conference – Nov 6, 2010 John M. Gabriel. IBM is a values-based enterprise.

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IBM Corporate Citizenship and Supply Chain Social Responsibility

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  1. IBM Corporate Citizenship and Supply Chain Social Responsibility ISM NY/NJ Conference – Nov 6, 2010 John M. Gabriel

  2. IBM is a values-based enterprise 400,000 IBMers around the world invent and integrate hardware, software and services to enable forward-thinking enterprises, institutions and people everywhere to succeed on a smarter planet IBM operates in more than 170 countries There are approximately 400,000 employees $95.8 billion in revenue in 2009 SCSR ISM Presentation - Nov 6, 2010

  3. IBM 2009 Corporate Responsibility Report Highlights • Communities • Employees • Environment • Supply Chain Responsibility • Governance and Public Policy SCSR ISM Presentation - Nov 6, 2010

  4. Communities • A systemic approach to problem solving • World Community Grid • Literacy • Entrepreneurial support • Education • Disaster relief SCSR ISM Presentation - Nov 6, 2010

  5. Employees Employee Satisfaction IBM continues to invest in our workforce • Skills training • Health and wellness programs • Opportunities to gain global experience; Corporate Service Corp • Supporting employee volunteerism SCSR ISM Presentation - Nov 6, 2010

  6. Environment Energy Conservation 2009 Savings as Percentage of Total Energy Use 3.5%- Goal 5.4%- Performance Goal: Achieve annual energy conservation savings equal to 3.5 percent of IBM’s total energy use. Results: In 2009, IBM’s energy conservation projects across the company delivered savings equal to 5.4 percent of its total energy use. (Associated energy cost savings: $26.8 million) Innovating to avoid or reduce environmental impacts • Energy conservation • Climate protection • Environmental requirements in the supply chain • Environmentally preferable materials • Management of end-of-life electronic equipment For more about IBM and the Environment go to ibm.com/ibm/environment/annual/ SCSR ISM Presentation - Nov 6, 2010

  7. Commitment to continuous improvement Industry collaboration Supply chain diversity Supply Chain Responsibility Commitment to collaboration in the global IT supply chain • Supply chain standards deployed • Ethical • Social • Environmental SCSR ISM Presentation - Nov 6, 2010

  8. Governance and Public Policy • IBM works closely with governments, regulators and standard setters. • 2009 priorities were: • Global Economic Integration • Global Workforce Flexibility • Finance, Energy and Environmental Priorities • Export Compliance • Intellectual Property and Open Standards • Government Relations and Market Support SCSR ISM Presentation - Nov 6, 2010

  9. IBM Supply Chain Social Responsibility (SCSR) • SCSR is part of IBM’s Corporate Citizenship activity • IBM procured $32.8B of goods and services in 2009 (across 90 countries) • SCSR is a requirement for all IBM suppliers since 2004 • Supported by the Chief Procurement Officer andProcurement managers/staff • Suppliers are viewed (externally) as an extension of IBM’s brand - Supply chains are visible; the Internet makes this possible SCSR ISM Presentation - Nov 6, 2010

  10. SCSR – Code Provisions • Requirement for all IBM suppliers (contained in -> Supplier Conduct Principle Letter Agreement) • IBM Suppler Conduct Principles address the following 13 provisions • EICC (industry code) adds +2 Management System provisions • IBM has adopted the EICC code as equivalent to its own code Health and safety Protection of the environment Laws, including regulations and other legal requirements Ethical dealings Communications Monitoring/record keeping Forced or involuntary labor Child labor Wages and benefits Working hours Nondiscrimination Respect and dignity Freedom of association SCSR ISM Presentation - Nov 6, 2010

  11. SCSR Audit Program • IBM Procurement and Supply Chain Social Responsibilityteam determine suppliers to be audited in growth market countries • Suppliers in mature markets (70% of the supply chain) have contractual attachments stipulating compliance • Approved third party audit firms contracted for the assessments • Validated audit results provided to IBM and the suppliers • Supplier Improvement Plans (SIPs); reviewed/accepted by SCSR team • Re-audit sustainability after implementation of SIP • Procurement executive review of results and SIP acceptance timeframe SCSR ISM Presentation - Nov 6, 2010

  12. Supplier Initial Audit Results – Global Cumulative (2004-2009)Argentina,Brazil, China, Czech Rep, Hungary, India, Malaysia, Mexico, Philippines, Poland, Romania, Slovakia, Taiwan, Thailand and Vietnam SCSR ISM Presentation - Nov 6, 2010

  13. SCSR Audits: Observations / Conclusions • A number of issues are seen in growth market countries: • Health & Safety; Working Hours; Wages & Benefits • Management systems are weak relating to social responsibility and laws/regulatory compliance • Corporate Citizenship remains a new concept (although gaining acceptance) • Steady improvements have been validated over the 2005-2010 timeframe • In 2009, 46 suppliers were engaged in re-audits following submission of SIPs. • These suppliers demonstrated a 60-percent reduction in the number of major and minor noncompliant findings. • Nearly 50 percent of the re-audited suppliers had no major noncompliance SCSR ISM Presentation - Nov 6, 2010

  14. Social & Environmental Management System Requirement Supplier requirements (announced 2010) Deploy a social responsibility and environmental management system Measure performance and establish voluntary environmental goals (numeric) Publicly disclose results Cascade this set of requirements to the supplier's suppliers who perform work that is material to the products, parts and/or services being supplied to IBM Objectives Help suppliers build their capability to effectively manage these responsibilities Help suppliers acknowledge their own accountability Make managing these responsibilities systemic, integral, long term, sustainable SCSR ISM Presentation - Nov 6, 2010

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  16. Electronic Industry Citizenship Coalition (EICC) • Formed in 2004 (as an industry group) to create a sector code of conduct and means for efficient / consistent implementation • By working together, the sector can reduce potential code/audit proliferation, leverage resources, and make progress faster than solo-efforts • A vector of positive change for Technology firms to embrace and drive the effort SCSR ISM Presentation - Nov 6, 2010

  17. Components Materials Brands Manufacturing EICC Objectives and Membership Scope • Deploy credible process for evaluation and management of supply chains • Establish a governance structure to support the organization • Build external awareness, participation; stakeholder engagement • Maintain Code of Conduct, implementation applications, change control, and continuous improvement • Share training and education to improve social and environmental performance in the supply chain • Report of progress against objectives consistent with anti-trust Linking 4 Tiers of the Electronic Sector • 50+ member companies: Asia - Americas – Europe • Publicly recognized as one of the best sector Corporate Social Responsibility efforts • IBM is current Chair of the organization (John Gabriel) SCSR ISM Presentation - Nov 6, 2010

  18. EICC Members SCSR ISM Presentation - Nov 6, 2010

  19. EICC Code of Conduct • Freely Chosen Employment • Child Labor Avoidance • Working Hours • Wages and Benefits • Humane Treatment • Non-Discrimination • Freedom of Association • Permits & Reporting • Pollution Prevention • Hazardous Substances • Wastewater • Solid Waste • Air Emissions • Product Content Environmental Labor Management Systems Health & Safety Ethics • Occupational Safety • Emergency Preparedness • Occupational Injury & Illness • Industrial Hygiene • Physically Demanding Work • Machine Safeguarding • Dormitory & Canteen • Business Integrity • No Improper Advantage • Disclosure of Information • Intellectual Property • Fair Competition • Protection of Identity • Community Engagement SCSR ISM Presentation - Nov 6, 2010

  20. EICC/GeSI Validated Audit Process A facility is audited once (rather than multiple times), using common criteria, the audit report shared among multiple customers – driving efficiency – saving resources for improvements Member Notification Supplier Notification Audit Guidance DocumentFacilities Demographics Pre-audit Checklist Pre-audit Communication Audit Questions Scoring Audit Report Auditor Capability & Quality Validated Audit Auditor Selection Audit Checklist SCSR ISM Presentation - Nov 6, 2010

  21. Code Implementation Tools • Supplier Communication Package • Supplier Risk Assessment Application • Self Assessment Questionnaire • Audit Question Template (and scoring) • Chosen 3rd Party Audit Firms & Auditors • Secure database SCSR ISM Presentation - Nov 6, 2010

  22. Stakeholder Engagement Model Non-Governmental Organizations (NGO’s) Media Customers Engagement Principles Collective, Transparent, Credible Regulators Governments Governments Industry Groups CommunityGroups Socially Responsible Investment Entities SCSR ISM Presentation - Nov 6, 2010

  23. EICC Communications EICC Website: www.eicc.infoEICC Weekly Bulletin SCSR ISM Presentation - Nov 6, 2010

  24. 2009 Notable Accomplishments • Annual report • Enhanced External / Internal Web-based Communications • Code review process complete • Carbon Reporting System for supply chain • Stakeholder engagement sessions • Working Hours taskforce • Extractives study - part Two: Tin; Tantalum; Cobalt • Expansion of Board of Directors and Asia Network launch • Web-based education for member’s and supplier’s management • Validated Audit Process - China and Mexico SCSR ISM Presentation - Nov 6, 2010

  25. 2010 Work Items • Membership reporting on implementation activities • New member recruitment – expand scope to further drive change • 3rd party auditor training and certification program • 2nd Annual report • EICC/GeSI Extractives – tin source-identification model (Demo Rep of Congo) • EICC/GeSI Extractives - Smelter Validation Process for tantalum • Expansion of Validated Audit Process to other countries • e-training – new modules: Worker Communications & EHS Training • Stakeholder collaboration in focused initiatives • Enhancement of Carbon Reporting System for supply chain SCSR ISM Presentation - Nov 6, 2010

  26. Resources

  27. Resources • Supplier Conduct Principles & Guidelines (www.ibm.com/procurement) • IBM Corporate Citizenship Report (www.ibm.com/ibm/responsibility) • IBM's Requirements for Suppliers Regarding a Corporate Responsibility and Environmental Management System(www.ibm.com/procurement) • Electronic Industry Citizenship Coalition(www.eicc.info) • John M. Gabriel: jmg548@us.ibm.com SCSR ISM Presentation - Nov 6, 2010

  28. SCSR ISM Presentation - Nov 6, 2010

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