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Kim Østrup, Vicedirektør, IBM Denmark , 6 october 2011

Corporate Responsibility at IBM -sustainable procurement Sådan høster IBM gevinsten af bæredygtighed og bæredygtige indkøb. Kim Østrup, Vicedirektør, IBM Denmark , 6 october 2011. IBM 2010. Industry Sectors & Revenue. $99.9B. Global Services. 56%. IBM Revenue. Software. 23%. Hardware.

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Kim Østrup, Vicedirektør, IBM Denmark , 6 october 2011

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  1. Corporate Responsibility at IBM-sustainable procurementSådan høster IBM gevinsten af bæredygtighed og bæredygtige indkøb Kim Østrup, Vicedirektør, IBM Denmark , 6 october 2011

  2. IBM 2010 Industry Sectors & Revenue $99.9B • Global Services 56% IBM Revenue • Software 23% • Hardware 18% • Global Financing > 2% $50B Global Supply Global Process Services Managed Spend $15.2B • Enterprise Investments/Other < 1% Global Supply Spend (35% of Revenue) $34.7B People • 427 000 Employees Worldwide

  3. GovernanceandFinancialAccountability CorporateCommunityRelations EnvironmentalAffairs andProductSafety EmployeeWell-Being GlobalHumanResources Supply Chain GovernmentalPrograms Coordinating and Managing Initiatives Across the Areas of Corporate Responsibility Corporate Citizenship Steering CommitteeSenior executive representation from each functional area meet regularly to provideleadership and communicate direction on key issues internally and externally. Corporate Citizenship Working GroupRepresentatives from each functional area meet monthly to manage IBM’s responsibility reporting, stakeholder engagement and address cross-company citizenship issues. IBM Confidential

  4. IBM Annual Corporate Responsibility Report Key Take Aways ISM Sustainability & Social Responsibility Summit http://www.ibm.com/ibm/responsibility/index.shtml

  5. Conserve natural resources- recycle materials, purchasing recycled materialsDevelop, manufacture, and market products- that are efficient in use of energy- protective of environment - reuse, recycled, dispose safelyProcesses to- minimize waste, prevent air and waterdischarges- dispose of waste safely and responsibly Corporate Policy on Environmental Affairs Corporate Environmental Affairs staff Implement, monitor and provide feedback for continual improvement Develop and deploy common managementsystem requirements Business Units- eg ISC IBM is committed to environmental affairs leadership in all of its business activities Responsible use of energy- conserve energy, improve energy efficiency- reduce associated greenhouse gas emissionsMeet/exceed all applicable government requirements- voluntary requirements - set / adhere to stringent requirements defined by IBM Continually improvement- IBM's environmental management system and performance

  6. IBM’s Chief Procurement Officer’s Perspective Sustainability is a procurement imperative Supply shortages and the rising price of raw materials were also forcing companies to reappraise and adopt a more environmentallysavy approach There are financial benefits for procurement organizations across the world to get innovative with suppliers

  7. Environmental requirements are integrated throughout IBM’s operations IBM’s Environmental Leadership Provides Savings $138 millionestimated environmental savings and cost avoidance worldwide in 2010 • IBM estimates the savings which have resulted from its commitment to environmental leadership. These include savings from energy, material and water conservation; recycling; packaging improvement initiatives; reductions in chemical use and waste; and process improvements from pollution prevention. Ongoing savings from the previous years’ initiatives are not carried over in this comparison, yielding very conservative • IBM also realizes savings through the avoidance of costs that likely would occur in the absence of its environmental management system. These savings are not measurable in the same way that expenses are, but avoiding these environmental costs does result in savings for IBM, and a reasonable attempt has been made to estimate them. IBM’s experience has shown that annual savings from its focus on pollution prevention and design for the environment consistently exceeded environmental expenses, thus demonstrating the value of proactive environmental programs and performance the estimated environmental savings and cost avoidance exceeded environmental expenses worldwide in 2009.

  8. Strategic Approach Global Supply Social & Environmental Management System CDPSCP Global Supply Social & Environmental Management System Based on direction and requirements IBM’s Global EMS document CoE GL SCSR • IBM’s Global Environmental Management System • Corporate Environmental Affairs 1 ENV 109 Global SupplyS&EMS Central repository for all Global Supply’s Social & Environmental Programs SCEI Others • Suppliers document their own mgmt system • Requirements from IBM to be included • Review suppliers’ mgmt systems 2 4 Councils GS S&EMS Team educates and trains councils 2nd tier Supplier Mngt System 3 1st tier SupplierManagementSystem GS S&EMS Team helps prepare education material for councils to present to suppliers Suppliers

  9. Global Supply Social & Environmental Management SystemKey Elements Supply Chain Social Responsibility Product Environmental Compliance IBM’s Voluntary Environmental Goals Global Logistics Environmental Programs Driving Suppliers to Disclose Their Greenhouse Gas Emissions Key Metrics and Reports

  10. Supply Chain Social Responsibility (SCSR) Part of IBM’s Corporate Social Responsibility activity Requirement for all IBM suppliers (as contained in -> Supplier Conduct Principle Letter Agreement) Suppler Conduct Principles address the following provisions Forced or involuntary labor Child labor Wages and benefits Working hours Nondiscrimination Respect and dignity Freedom of association Health and safety Protection of the environment Laws, including regulations and other legal requirements Ethical dealings Communications Monitoring/record keeping “SCSR is not optional, it is a requirement for IBM suppliers … We can not have supply chain issues that impact our brand's perception in the market” John Paterson, Chief Procurement Officer

  11. Electronic Industry Code of Conduct based on the following international standards: • ”ILO Code of Practice in Safety and Health” • ”National Fire Protection Agency” • ”ILO International Labor Standards” • ”OECD Guidelines for Multinational Enterprises” • ”United Nations Convention Against Corruption” • ”United Nations Global Compact” • ”Universal Declaration of Human Rights” • ”ISO 14001” • ”SA 8000” • ”SAI” • ” Ethical Trading Initiative” • ”OHSAS 18001” • ”Eco Management and Audit System” 11 11

  12. Supplier Initial Audit Results – Global Cumulative (2004-2010) Argentina, Brazil, China, Czech Rep, Hungary, India, Korea, Malaysia, Mexico, Philippines, Poland, Romania, Singapore, Slovakia, Taiwan, Thailand and Vietnam 13 SCSR Overview - Sep 12, 2011

  13. Chief Procurement Officer Letter to 28 000 Global Suppliers IBM's Requirements for Suppliers Regarding a Corporate Responsibility and Environmental Management System, Measuring Performance, Setting Goals, and Disclosing Results IBM asks its suppliers to: define, deploy, and sustain a corporate responsibility and environmental management system that identifies significant aspects of the supplier's intersections with these matters, including those articulated in IBM's Supplier Conduct Principles and the Electronic Industry Citizenship Coalition Code of Conduct establish programs (within the management system) to control operations that intersect with these matters and confirm compliance with applicable law, regulation and any particular contractual requirements measure performance associated with supplier's significant environmental aspects where applicable and include at a minimum each of the following aspects common to virtually all businesses: energy conservation scope 1 and scope 2 greenhouse gas emissions * waste management and recycling set voluntary environmental goals to achieve positive results associated with significant aspects where applicable and include at a minimum one in each of the three aspects cited in item 3 above publicly disclose results associated with these voluntary environmental goals and other environmental aspects from the management system, including any regulatory fines or penalties that may have occurred train employees who are responsible for performing this work conduct self-assessments and audits as well as management reviews 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 *Note: Scope 1 greenhouse gas emissions: direct emissions generated by the company Scope 2 greenhouse gas emissions: indirect emissions that are associated with the generation of electricity that is purchased and consumed by the company Illustrative information about IBM's own Global Environmental Management System and Environmental Reporting and Disclosure can be found at: http://www.ibm.com/ibm/environment/ems/ (IBM's Global Environmental Management System) http://www.ibm.com/ibm/environment/annual/ (Environmental Reporting and Disclosure)

  14. New Management System Requirement for Suppliers Summary of requirements Deploy a responsibility and environmental management system Measure performance and establish voluntary environmental goals (numeric); Publicly disclose results Also for supplier's suppliers Objectives is to help Help suppliers build their capability to effectively manage these responsibilities Help suppliers acknowledge their own accountability Make these responsibilities systemic, integral, long term, sustainable IBM is not asking suppliers to do anything IBM has not done itself: IBM manages these subjects via a global management system Has published an annual corporate environmental report since 1990, and a corporateresponsibility report since 2002

  15. Implementation Formally integrate requirements into existing business processes Governance under Global Supply Social & Environmental Management System Procedures Manual Internal sourcing directives (IBM “Blue Book”) updated with the new requirements Include in pre-sourcing checklist (used prior to award of business to new suppliers) Extensive education and training material provided For IBM sourcing teams and suppliers Owned and implemented by sourcing teams (Production and Indirect) Evaluation assessment template prepared used to assess whether a supplier meets these threshold requirements or not (no ranking of suppliers’ performance) Time allotted for suppliers to update or establish a management system (if one not in place) New suppliers - 12 months from award of business Suppliers with existing management system may need augment what is in place to fully address all 8 requirements

  16. Dedication to everyclient’ssuccess Innovationthat matters – for our company and for the world Trustand personal responsibility in all relationships Value based management system – IBM Core Values IBM values 17 17

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