IBM’s Environmental Push
IBM, one of the world’s largest technology firms, recently announced they would require its suppliers to install new management systems for tracking their environmental impacts. The primary data to be collected and reported include energy use, greenhouse gas emissions, waste generation, and recycling efforts. Suppliers must also set environmental goals and make their progress public (via the Internet or annual reporting) in meeting those goals. In turn, these companies must ask their subcontractors to do the same. IBM currently holds contracts with 28,000 suppliers in over 90 countries.
In the spirit of clarity, IBM has not yet established any numerical goals for its suppliers to achieve. On the other hand, the goal is to institute data-gathering systems that will collect information on a variety of environmental performance measures. What is the fallout if companies do not comply? John Patterson, IBM’s Vice President of Global Supply, said “Ultimately, if a supplier cannot be compliant with requirements on the environment and sustainability, we’ll stop doing business with them.” IBM has set the date of late 2011 for suppliers to meet compliance with their directive. Primary responsibility for working with suppliers to implement the initiative will fall to IBM buyers and procurement engineers.
How can IBM mandate such an order? Well, IBM’s products and services own a significant portion of the global supply chain, estimated to be roughly $40 billion annually. IBM reports it spends 36 percent of its supply chain budget on suppliers in North America, while 33 percent goes to companies in emerging markets like Brazil, China and India. If companies wish to partake in this financial market, they will have to comply or find another market to join. In addition, there is a benefit to being associated with the banding and namesake of IBM.
First, let us look at where IBM may have issues with their demands. The biggest challenge facing IBM will be working with suppliers in regions of the world where sustainability and environmental awareness are not as big an issue as it is in the United States and Europe. While these emerging markets have a significant influence in IBM’s overall global supply chain, some regions may lack the innovation, resources, or capital to meet to directive of IBM. IBM must spend a significant portion of time and money to help these suppliers do what they are asking them to do. Wayne Balta, VP of Corporate Environmental Affairs and Product Safety, recognizes this need and says that IBM needs to help “our suppliers build their own capacity in a way that’s not only good for the environment but their business.”
Second, is this a smart and feasible objective for IBM? I would argue it is. IBM has recently worked with a shipping supplier out of China and redesigned its supply chain and inventory control. The company reduced its carbon footprint by 15 percent and maintained its profits during the transition. In doing so, IBM has a cheaper product (in dollars, not quality) to purchase from a supplier. IBM has a massive share of the market when it comes to technology services and products. Smart and financial sound businesses do not enter into the realm of environmental awareness and advocacy without first understanding the economic affordability of the process. A singular interest now is environmental management and sustainability across their supply chain. IBM’s overall interest is financial; there is no arguing this fact. If they can create a supply chain this is both efficient, economical, and environmentally suitable, shareholders and executives alike will be pleased.
Lastly, this begs the question of “Where does this leave the consumer in all of this?” Whether you own a business or serve as a technology consultant, there may be some impact (positive and negative) to you. We are always concerned about price and affordability. Prices do rise, that is inevitable. Where else can impacts be seen? It may be in the form of faster delivery of services or in the form of better customer service. Time will tell the overall impact this has for the consumer and for IBM.
