“Big Green Innovations”

1. “Big Green Innovations” Sustainable Water Resources Roundtable Jim Loving, Client Executive U.S. Federal Industry November 16, 2007 loving@us.ibm.com

2. Agenda • Requirements for Sustainability • Overview of IBM Sustainability Solutions – ‘Big Green Innovations’ • National Indicators for Water Sustainability – observations and potential actions

3. It’s not “speculation” any more… • Atmospheric warming is a now a broadly accepted trend • 41% of the Earth’s population (2.3 billion) live in water-stressed areas; 3.5 billion will do so by 2025 • Increasingly includes developed areas such as Western USA, Australia, SE England • There is now increasing pressure on traditional energy resources, especially from rapidly industrializing nations (China, India) • Energy consumption is expected to increase by over 129% in parts of Asia by 2020 • CEO/CFO focus is turning to energy costs & environmental costs (CO2 emissions) • Major investors increasingly see poor green performance as a source of risk Climate change Climate change Renewable energy Global warming

4. Three Trends Drive Environmental Demand for Business Keystone Strategies • Increasing regulatory requirements • Many regulations enforced globally Regulatory Compliance • Rising energy, raw material, and waste disposal costs • Environmental costs becoming strategic • Customers becoming environmentally aware • Many willing to pay a price premium • This is driving product strategy Economic Demand Customer Demand These demand drivers are elevating environmental issues to a strategic level within many companies March, 2007 4 Big Green Innovation

5. Role of US Federal Government in Sustainability • Set Strategy and Policy – “National Strategy for Sustainability and the Environment” • Years of work on National Environmental Indicators: CINE, Heinz, NAPA • GAO/National Academy of Sciences initiative on National Indicators – Forums linking to UN, OECD, and other government’s initiatives – Australia, Canada, France and others. • Integrate/Coordinate relevant federal agencies and S&L governments. • Implement laws, enforce regulations, fund research, providing public value through execution of agency missions. • EPA, Interior, Agriculture, Energy, Commerce, OMB, CEQ, NSF, Army Corp of Engineers, other agencies. • Lead in Sustainable practices for Federal government operations • Ofc of Federal Environmental Executive, Executive Order 13243, January 2007 • Calls for federal agencies to implement Environmental Management Systems and practices to strengthen federal Environmental, Energy, and Transportation Management practices. • Performance Goals across: Vehicles, Petroleum, Alternative Fuel, Energy Efficiency, Greenhouse Gas reduction, Renewable Power, Building Performance, Water Conservation, Procurement, Electronics Management.

6. 1 Policy Outcomes: Governments determine and foster societal progress using key national indicators across multiple segments – GAO/NAS Promotion of National Environmental Indicators using Environmental National Accounts is one recommended approach. What do we want? Where should we go? 1 Results, Progress Adjustments 2 Policy, Direction, Delivery Strategy, Transformational Design 2 Outcomes-based Public Policy based on National Indicators can assist Civil Society in connecting the dots – between what’s important, who’s involved, and what they could/should do with what they have or could have – and transforming at the appropriate level. How are we doing? Should we adjust what we’re doing or what we want? How do we make it happen? What do we do? 1&2 Government Investments in National Infrastructure to Collect and Report Appropriate Data for National Environmental Indicators. SOLVING BIG PROBLEMS, SEIZING BIG OPPORTUNITIES Desired Outcomes for ‘three legged stool’ of sustainability will be part of a national strategy. An end-to-end approach that systematically measures environmental indicators will meet the Sustainability challenge across Economy, Ecology and Society. Innovation providing improved Societal Intelligence will deliver greater insight and improved decision making. “Societal Intelligence Dashboard” Implementation, Execution, Results

7. Societal Intelligence (SI) is a new capability for dynamically visualizing available statistical information, and enabling evidence-based decision-making. The Societal Intelligence Discovery Process Sensed & Statistical Data Data Visualization Systemic Outcomes Key Indicators Making decisions … reduced decision latency INFORMATION DECISION Get the FACTS Focus on CORE ISSUE Consider the POSSIBILTIES REAL-TIME Real-Time Data Rendering Visual Representation Of Data On Demand Hidden Insights Trends, Patterns & Outliers Better Choices, Better Decisions Discovering New Facts, Statistics Driven Visual Analysis

8. Environmentally sound business practices start with well-articulated corporate values, which underlie business case considerations for action. • Which environmental issues are the most important to the company? • What is the scope of my environmental concern? Local, national, international? • Values • Policies • Practices • Governance • Which environmental issues can we really affect as a business? • How do these issues affect different aspects of my business? • How do we want to be viewed as stewards of the environment? • Who is involved in setting and overseeing my policies?

9. 1971 USEPA Climate Protection Award 1998 and 2006 Green Power Purchaser Award 2006 Charter member 2003 Charter Member 2000 Business Environmental Leadership Council 1605(b) voluntary emissions reporting since 1995 Charter Member 2002 Environmental responsibility is a core IBM value. BGI is the latest step in a journey that IBM began 36 years ago. 2005 1992 IBM becomes charter member of EneryStar program 2006 IBMers “jam” on innovations for a better planet, and IBM invests $20M 40% Reduction in IBM’s total worldwide CO2 emissions attributable solely to its energy conservation efforts between 1990 and 2005. We will further extend IBM’s early accomplishments by reducing CO2 emissions 12% from 2005 to 2012. Big Green Innovations Intelligent Utility Network 1990 1996In remarks at a White House briefing on climate change, Vice President Gore applauded IBM's new PFC emissions reduction goal. "These developments send a strong message: A healthy environment and a healthy economy go hand in hand," the Vice President said. "Through technology and innovation, we can turn this challenge into a huge opportunity for business and for America. And the sooner we act, the easier it will be." IBM formally establishes a Corporate policy on Environmental Affairs Collaborating to solve problems

10. IBM Sustainability Related Programs Smart Oil Fields (Chem & Petroleum Industry) Project Big Green (Data Centers) CorporateSustainability Intelligent Utility Network (Energy & Utility Industry) Intelligent Transportation Systems (Travel & Transportation Industry) Big Green Innovations

11. “Big Green Innovations” is a portfolio of environmentally-focused initiatives that IBM has launched under the heading of “innovation that matters for our company and for the world”. • The portfolio consists of the elements set out in this presentation, most of which are deliberately designed to leverage, then extend, existing IBM strengths.

12. Big Green Innovations’ portfolio has four core areas Alternative Energy Green Operations and Supply Chain Advanced Water Management Carbon Trading • “Enabling utilities, enter- prises & countries (policy makers & regulators) to maximize the efficiency and sustainability of energy generation, trans- mission, distribution & use • PV technologies • Manufacturing consulting • Not formally part of the Big Green Innovations portfolio, but under active consideration based on customer interest and existing IBM capabilities • Likely to be closely linked with Green Operations and Supply Chain • IBM is a founding member of the Chicago Climate Exchange • “Maximizing the efficiency & effective-ness of water provision for human, agricultural & industrial consumption”. • Scenario modeling: • Weather • Demand • Availability • New technologies • Water network management • Sensors and systems integration • Filtration technologies • Consulting services • “Minimizing the carbon footprint of companies’ operations and supply chains”. • Diagnosis • Modeling/analysis • Green SigmaTM Process and product redesign • Consulting services • Related IBM initiative • Intelligent Utility Network (power grid management, sensors & systems integration, analytics, scenario modeling, consulting services) • Related IBM initiatives • Green Data Centers, Server Virtualization • Sustainable Facilities Management Computational Modeling • Support for computational and business/process modeling and analytics associated with improving global environmental health • “Center for Earth Systems Intelligence” • Support for the above and areas such as weather, climate, hydrology, pollution, pandemics….

13. IBM’s role in Advanced Water Management. We are building partnerships in every area. • Consumption/demand modeling • Demand reduction – process and technology change, scheduling etc • Hydrological modeling • Weather modeling • Pipeline management • Flow management (“smart” meter management) • Quality monitoring • Weather modeling • Quality monitoring (in- and out-bound) • Filtration membranes

14. The Great Rivers project Paraguay-Parana River Basin, Brazil Mississippi River, USA Yangtze River, China • Build a new software modeling framework that will allow users to simulate the behavior of river basins around the world. • Inform policy and management decisions that conserve the natural environment benefiting the people who rely on these resources. Photos courtesy of The Nature Conservancy

15. Nonprofit scientific-research organization focused on science, policy, management and education - Mission: “To create a global center for interdisciplinary research, policy-making and education regarding rivers, estuaries and their connection with society.” • Creating REON (River and Estuary Observatory Network) with the goal of turning all 315 miles of the Hudson river into a distributed network of sensors that will collect and analyze biological, physical, and chemical information • Will link models to understand phenomena across a range of spatial and temporal scales • IBM as the IT partner will collaborate on the design of a sensor backbone network (hardware and software) to support the entire length of the Hudson River and estuary

16. Water Usage, USA – (2007 IBISWorld Industry Report) 67% is Residential usage.Most of this usage is controlled and regulated by 53,000 local water utilities that are mostly government owned.

17. Water Indicators that report on the Demand side of Water Usage – ‘MPG’ for Family/Industry Water Usage, could help inform Policy Makers and Consumers to enable changed behavior and improved decision making. IBM 'Gas Gauge' Monitors Mainframe Energy Usage IBM has added a mainframe gas gauge to more than 1,000 z9s deployed since May 11 to monitor energy usage and cooling statistics. By Darrell Dunn InformationWeek October 11, 2007 12:34 PM The Environmental Protection Agency in August asked server manufacturers to develop "miles per gallon" ratings for their equipment that would provide users with accurate assessments of energy efficiency. IBM (NYSE: IBM) on Thursday announced that it would begin providing typical usage ratings for its line of z9 mainframe computers. The usage ratings were developed using data collected from more than 1,000 z9s deployed to customers since May 11 when IBM added a "mainframe gas gauge" feature to the computers that monitors energy usage and cooling statistics. As a result, IBM has found that typical energy use by the systems is normally 60% less than the maximum ratings. IBM will provide typical energy use numbers by model for its z9 mainframes, and will continue to monitor systems in the field to adjust the ratings on a monthly basis, said Dave Anderson, an IBM green consultant, in an interview.

18. Actions for Further Consideration • Develop a ‘Data Architecture’ for the agreed upon indicators. Involve a FACA-like committee to include all key stakeholders for data exchange. • Data Standards - XML • Data Governance • Develop a pilot to demonstrate the efficacy of water indicators. Work with the NAPA recommendation to do so within next 18 months. • Lead by example: Support EO 13423 by using agency compliance programs with water consumption mandates as part of initiatives to publicize water indicators. • Lead by collaborating and providing incentives to states/localities/citizens • HR 3957 – “The Water Use Efficiency and Conservation Research Act of 2007” provides a potential legislative platform that could tie environmental indicators for water to foster greater collaboration between federal agencies with state and local government and other stakeholders.

19. Collecting, Manipulating and Disseminating Environmental Indicators will require Collaboration, Data Governance & Architecture for effective Data Integration and Interoperability. Examples ofFederal-led/funded structures. • Federal Geographic Data Committee – National Spatial Data Infrastructure • FGDC is an interagency committee that promotes the coordinated development, use, sharing, and dissemination of geospatial data on a national basis. This nationwide data publishing effort is known as the National Spatial Data Infrastructure. The NSDI is a physical, organizational, and virtual network designed to enable the development and sharing of this nation's digital geographic information resources. – http://www.fgdc.gov • Environmental Information Exchange Network – EPA – • Exchange Network is a partnership among states, tribes, and the U.S. Environmental Protection Agency that shares data efficiently and securely over the Internet. This new approach is providing real-time access to higher quality data while saving time, resources, and money for partner states, tribes, and territories. http://exchangenetwork.net, http://www.epa.gov/neengprg/index.html • Consortium of Universities for the Advancement of Hydrological Science – Hydrologic Information System (HIS) http://www.cuahsi.org • CUAHSI represents more than one hundred U.S. universities. CUAHSI receives support from the National Science Foundation to develop infrastructure and services for the advancement of hydrologic science and education in the United States.HIS goals are to unite the nation's water information, to make it universally accessible and useful, and to provide access to the data sources, tools and models that enable the synthesis, visualization and evaluation of the behavior of hydrologic systems. The CUAHSI Hydrologic Information System is a geographically distributed network of hydrologic data sources and functions that are integrated using web services so that they function as a connected whole.

20. Hydrologic Information System

21. A Case Study for Needed Indicators - Atlanta Water Supply 90 Days “Boat houses barely touch the water of Atlanta's shrinking Lake Lanier reservoir” “Atlanta Water Situation Called Dire” “3 States Compete for Water From Shrinking Lake Lanier Interior Secretary Is Dispatched to Mediate Clashing Priorities” Saturday, October 27, 2007 Front Page

22. Thank-you!