Social responsibility of business is not a new concept, however; it has become a widespread practice in the modern world. Nearly every organization wants to go beyond the provision of goods and services to taking part in various community-based activities. According to de Bakker, Groenewegen, and den Hond (2005), corporate social responsibility is defined as “actions that appear to further some social good, beyond the interest of the firm and that which is required by law.” Besides complying with the rules and regulations of the firm, most organizations take part in multiple other activities that are not directly related to the company. For instance, most business invests a portion of their net profit in projects that are intended to promote conservation of natural resources (Lee 2007).
Consumers tend to associate more with the companies that take part in activities that promote safer, healthy, and productive society. Even though most of the corporate social responsibilities are very costly, it is most beneficial in the long-term. As such, most firms are making steps to ensure that their actions have a positive social and environmental impact. This is a report that outlines the corporate social responsibility activities of International Business Machines Corporation (IBM). It details some of the motivations that IBM has for its various CSR activities and how such activities contribute to its sustainable competitive advantage. The report ends with a recommendation of policy to the Board of directors regarding the company’s CSR programs.
International Business Machines Corporation (IBM) is a technology firm that was incorporated in 1911. The company ranks as one of the largest information technology firms in the world that offers a wide variety of software, hardware and services offerings (Ibm.com. 2016). IBM is known to operate five segments, which include systems and Global Financing, Cognitive solutions, technology service & Cloud platforms, and Global Business Services (GBS). The company started as hardware where it prospered for years and became the best supplier of mainframe computers. After a while, the company shifted its operations to software and services before further modifying its business in the 2010s to cloud-based services as well as cognitive computing.
Even though IBM continues to be one of the most significant players in the IT sector, its dominance that was initially there has remarkably reduced. The company went through 18 consecutive quarters of decline in revenue as of October 2016 following the transition into new technologies as well as lines of business. In 2015, IBM managed to record revenue of $81.7 billion, which was a severe decline from the 2011 revenue that was $106.9 billion (Rouse, 2016). The revenue for the year 2017 was $79.1 billion, and in the fourth quarter of the same year, the company managed to grow its revenue by 4 percent. IBM, however, remained a world leader in cloud and the revenue of cloud increased 24 percent in 2017 to $17 billion.
Various services of the company such as reinvented systems franchises registered significant growth in 2017. Due to the launch of z14, mainframes had a remarkable fourth quarter. The system is the only one that can encrypt data pervasively while at the same time not changing applications and without downtime. IBM expects growth in the mainframe that is already present in the market.
To remain competitive, the company has continuously reinvented its products and services to best fit the customer needs. As the leader in quantum computing, which is the first and only 50-qubit system prototype was introduced in 2017 to offer consumers experience in computation beyond classical computation. Close to 75,000 users have run in excess of 2.5 million quantum experiments through IBM Q Experience (Ibm.com. 2016). Besides, the company has managed to be the world leader in the blockchain. Several major organization around the world are already using IBM’s blockchain platform for the trusted transaction. For instance, Dole, Wal-Mart, Kroger, Nestle, and other reputable firms already use blockchain to enhance food safety.
The company did long-term competitive investment where $5.6 billion was used in research and development while net capital expenditure was $3.3 billion. The step is to improve the company’s capabilities in high growth in the coming future. At the same time, $9.8 billion was returned to owners, $4.3 went to gross share repurchases, and $5.5 billion was used in dividends (Rouse, 2016). The fact that IBM was raising its dividend for the 22nd consecutive year makes it attractive to potential investors. The company has been able to issue dividends for 102 years, and that demonstrates how creativity and passion have propelled the company to success amidst dynamics in the industry. IBM has always reinvented itself repeatedly to ensure that it moves with its clients from one generation to another. Currently, the company is undergoing a transition through the smart business.
The mission statement of IBM from its website is “to lead in the creation, development, and manufacture of the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices, and microelectronics” (“IBM Our Values at Work – the United States,” n.d.). The company uses professional solutions as well as services business across the world to translate these high-level technologies into great value to its customers (Boutellier, Gassmann, &Von Zedtwitz, 2008). The company focuses on the providing its consumers with services that offer value for their money. IBM is driven by the desire of building a sustainable and robust client relationship by proving solutions and services that meet the aspirations of its clients.
Values
According to IBM, value means more than compliance, ethics, or specific codes of conduct. The company believes that values express its mission and aspirations, the way it makes decisions, the organizations behavior, and what differentiates its stakeholders (“IBM Our Values at Work – the United States,” n.d.). Some of the specific values include:
International Business Machines Corporation (IBM) like many other companies across the world is under pressure to take part in social responsibility programs. The company has been in operation for more than 100 years, and it has taken part in multiple corporate social responsibility programs both locally and internationally. IBM is known to engage its stakeholders and their respective interest by a holistic CSR strategy. Stakeholders are the people or groups of people with interest in the firm or the effect of the business. IBM is a company that emphasizes the need for sustainability in the information technology sector by reducing the negative impact on the natural environment. As one of the largest IT company in the world, actions of IBM is more likely to cause significant harm to the environment. As such, people tend to expect much inform of social responsibility as a way of giving back to the society for the possible damages and as appreciation to consumers and the environment. Consumers tend to associate with only companies that show great concern towards the environment. It is for this reason that companies such as IBM have resorted to remain relevant in the market by bowing to the pressure from consumers to take part in multiple projects that are intended to promote safer, healthy, and sustainable environment. Customers measure the attractiveness of IBM based on its involvement in the corporate social responsibility.
IBM is a company with broad spectrum of stakeholders with interest in different business areas. As such, the company has always come up with multi-pronged CSR strategy. The strategy must focus on providing consumers with healthy products and service, starting initiatives for investors, and starting sustainability programs towards the environment. Every year, the company tries to evolve its corporate responsibility goals as customer needs continue to change.
Aspects of IBM corporate social responsibilities and the particular interest to its stakeholders are grouped into five. The first one is the ability of the company to affect the progress of the society positively. Secondly, IBM believes in support of its employees and the community at large. The third aspect is the understanding of the impact its product and operations have on the environment. Forth is the management of its global supply chain and finally governance, integrity, and ethics of the company (Crane & Matten 2003). To obtain corporate citizenship, corporate responsibilities by IBM are addressed to the following category of stakeholders.
1. Communities
Communities become the first category of stakeholders that IBM considers their interest when investing in corporate responsibility activities. In the year 2015 through to 2017, the company continued its worldwide collaboration with cities, governments, and nonprofit service providers to come up with various means of improving the human condition. The company entered into a crucial partnership with multiple groups such as humanitarian research, education, economic development, and social services to create a synergy that would not be possible with a single entity.
In 2011, IBM started one school in Brooklyn through the innovative P-TECH grade 9-14 program. The facility has provided students from low-income families with the opportunity to complete their school associate degrees and diploma by nearly one or two years earlier than the normal period. The company planned to have more than 60 schools beginning 2016 and serve several students in the six states in the United States as well as Australia (“2015 IBM Corporate Responsibility Report About this Report”, 2016). According to corporate social responsibility report 2017, P-TECH is expected to serve more than 60,000 students drawn from four continents. The programs equally plan to draw partnership with companies that are more than 430. Some of the students that have gone through the P-TECH are being absorbed in IBM while working to complete their four-year degrees.
Besides the P-TECH program, IBM through Impact Grant portfolio helps address the skills gap among the veterans through Veterans Employment Initiative. The goal is to have offering transitional training among the service members to be certified data analysts (Ibm.com. n.d.). So many veterans have been coached in programming, and some of the cohorts are accepting placements with IBM.
Another way through which the company engages in corporate social responsibility to address the interest of communities as one of the stakeholders includes using IBM Cognitive Computing. When powered by Watson, cognitive computing works as a teacher advisor where teachers can learn through a virtual mentor (Ibm.com. n.d.). It can be useful in the creation of the lesson plans and enhance teachers’ classroom skills more confidently and without any cost involved. A good example is the IBM Health Corps that uses the cognitive as well as analytical technologies together with the extensive consulting expertise of IBM to address world most complicated health issues in the community.
Hunger, poor nutrition, and poor sanitation are some of the most significant challenges that most of the low-income communities across the world suffer (Wilson, M. 2003). To address such problems, IBM came up with engagement program known as Smart Cities Challenge in various cities in the United States such as Alabama and Birmingham that addressed hunger and poor nutrition. IBM has equally helped in the use of data analytics to come up with efficient delivery routes for the low-income communities that live far away from suburban supermarkets. The effort has resulted in a mobile food market program required for transporting groceries to areas that have been marked to be of dire need.
IBM has taken part in humanitarian programs during the turbulent year by providing survivors of natural disasters as well as political clashes with aid in areas such as the Middle East, India, and Nepal. During the massive earthquake in Nepal, the company volunteered technologies and skills to help the government during such a hard time. For instance, IBM experts programmed and donated a highly complicated disaster recovery solution to support the government to handle the situation. Additionally, the company helped Italy, Germany, and France deal with the refugee crisis by designing a custom application that was not intended for profit. The application was to be used in delivering service to places such as Afghanistan, Syrian, and northern part of Africa. Besides offering expertise and technology, the company provided voluntary services to its employees who are spread in many parts of the world.
Corporate citizenship programs by IBM consider employees as one of its major stakeholders. IBM employees are commonly referred to as IBMers, and their interest is higher pays and pleasant working environment. As such, the CSR programs that the company designs must address the interest of its employee since IMBers are highly essential in determining the capabilities of the firm. One of the CSR programs that focus on the employee interest is fair hiring practices as well as competitive salaries and wages (Peloza & Shang, 2011, P. 118). They are equally provided with the opportunity to discover their career opportunities as a way of expanding their knowledge. Launching of Blue Matching is an excellent example of the effort the company puts in place to allow its employees to access various job opportunities through analytics (Tilling 2004). IBM equally introduced Appreciation, Coaching, and Evaluation (ACE) app that employees use to send and receive feedback anywhere and anytime.
IBM is known as one of the companies that promote diversity and inclusion among its staff to boost their morale. In 2015 for instance, the company was got prestigious awards for practicing workplace equality and promotion of women (“2015 IBM Corporate Responsibility Report About this Report”, 2016). The company hires competent employees without focusing on their sexual orientation. It is the company that has a workforce comprised of lesbian, gay, bisexual, and transgender (LGBT). Besides, the company used its expert in identifying and hiring skilled people with disabilities through recruitment guide and new training module (McWilliams & Siegel 2001, P. 120). The company equally has new workshops where employees are trained in how to avoid cases of unconscious bias.
IBM introduced a system that helps in maintaining wellness and fitness IBMers through an integrated health service organization. The company values its employees and one sure way of demonstrating that is by ensuring that they remain in their health best all the time. Those who may have health challenges are accessible to medical covers that can be effectively used by all employees (Moon 2004). This is one of the sure ways of improving the moral of employee, and a feeling of belonging by the employees is created through such efforts.
IBMers have been provided with development and training programs that equip them with the evolution of consumer needs and technological changes (Arora, & Cason 1996, P. 415). For instance, the company designed human resource internship program together with the human resource leadership development program (Carroll & Shabana 2010). The two programs are intended to develop employees on how to deal with human resource related issues. It explains why IBM has been able to acquire highly competent workers and maintains very low employee turnover.
The last aspect that the company uses to enrich employees with the skills required to handle world problems is the employee involvement in the community-based sustainability activities (Gladwin, Kennelly, & Krause 1995, p. 902). Besides, the company has developed a culture that promotes skills and talents development when it comes to radical thinking, which is essential in innovative roles.
The environment is one of the stakeholders that IBM considers very important. The interest of this stakeholder is majorly environmental conservation and reduction in the effect of the business operations on the environment. Addressing such an interest requires IBM to come up with a sustainability program that will help protect natural resources from being polluted. IBM has highly extensive internal and external environmental conservation programs. Such programs are majorly preventive (Lockett, Moon, & Visser 2006, P. 118). The company is equally known to take part in environmental assessment as well as cleanups in various locations. The company’s program on water conservation has been of great help to millions of people. IBM equally has an environmental management system (EMS) which works towards aligning its operations with the protection as well as environmental goals. The company through EMS has been able to work on its energy conservation, waste reduction, and similar activities. For instance, IBM was able to save up to 6.3 percent of its energy use in 2015 through its conservation projects.
In 2015, the company was able to contract for the purchase of renewable energy equals to 679,000 MWh, which is 16.2 percent of IBM’s electricity consumption across the world. The project led to the reduction in the emission of carbon dioxide from 252,000 metric tons (“2015 IBM Corporate Responsibility Report About this Report” 2016). The intention is to realize a 20 percent annual electricity use by 2020, which is procured from contracted renewable sources.
IBM has more than 14,000 suppliers in close to 100 countries, and it promotes social responsibility at every stage of its supply chain (“2015 IBM Corporate Responsibility Report About this Report” 2016). The company uses the Electronic Industry Citizenship Coalition (EICC) to help in assessing and evaluating compliance with supplier terms (Thorne, Ferrell, & Ferrell, 2003). Additionally, there is the global office for procurement Ombudsman that makes sure that there is compliance at every given stage of the supply chain.
Some factors always motivate every action taken by large companies such as IBM. The CSR activities are always calculated moves by companies with the intention of achieving a particular goal (Crane 2008 P. 150). Some of the most motivation behind the IBM CSR programs can be discussed as follows.
The first motivation of IBM to take part in numerous CSR activities is the value driven. The company has incorporated social responsibility activities in strategic goal to the extent that it has become part of the company culture (Bansal & Roth 2000, P. 720). The company incorporates some of these activities as a way of conveying the moral concerns of the company. Corporate social responsibility demonstrates the perception of the top management on the social commitment.
IBM CSR activities are majorly driven by internal self-regulation through the code of conducts and corporate values (Turker, Altuntas, & Idowu 2016, P. 65). These are essential in defining behaviors of the company such as the process of decision-making and strategic management. It is from such practices that the actions of the company towards social commitment are inclined with the mission statement.
Another motivation behind the IBM CSR programs is the desire to enhance its financial performance and to increase its competitive advantage. Even though companies are not expected to gain financially from the CSR activities, there are higher chances that the company will be able to earn more reward from the programs (Agle, Mitchell, & Sonnenfeld, 1999, p. 700). For instance, CSR is one of the most effective marketing strategies, and that is how IBM grows its sales. It is nearly impossible for most companies to invest more money in CSR programs when it does not profit them in one way or another.
When IBM uses CSR to promote social concern of its customers, it gains corporate trust, image, and builds stronger customer loyalty. That leads to a stronger customer relationship, which eventually promotes financial returns (Burke & Logsdon1996, p. 499). Customer loyalty promotes returns to customers, and that increases sales. Consequently, performance can be the motivation behind the increasing number of CSR activities by IBM.
Stakeholder-driven CSR is another motivation that motivates IBM to invest in social projects. Forces such as supplier, customer, and such like entities influence this motivation to CSR. These stakeholders influence the organization’s resources implicitly and explicitly (Donaldson & Preston 1995, P. 78). IBM is likely to be taking part in some of the social responsibility for fear of the customers or suppliers reactions (McIntosh et al., 1998). In that case, CSR activities are mostly a reaction to the external pressure from the public or customers and not spontaneous offering such service (Hillman & Keim 2001, P. 126). For instance, IBM embraces diversity and inclusivity and hires LGBT and women without cases of discrimination mostly because there is the increased concern on the discrimination based on sexual orientation.
As already discussed, one of the motivations behind CSR is the performance. IBM just like many other companies across the world takes part in these activities to gain a competitive advantage in many ways. For instance, IBM corporate image is enhanced when it invests in programs that promote environmental sustainability (Porter, & Kramer 2006, P. 79). Through improve corporate image, the company is capable of building a strong customer relationship and enhance trust among investors, which results in strengthening competitive advantage over its competitors.
Corporate social responsibility such as hiring diverse and inclusive workers and offering competitive packages is one way of forming highly competitive personnel (Barney 2002). Training and development workshops that IBM offers its employees help in building highly skilled and very innovative employees, which subsequently enhances the competitiveness of the company.
The social responsibility activities that IBM is involved in are majorly viewed as a marketing tool. The company through its volunteered products and experts in disaster management like in Nepal and warring parts of Middle East is strategic. It is easier for the company to sell its products in places where it has offered humanitarian help, unlike those firms that have not (Lawton & Rajwani 2015, P. 257). Consequently, the company enhances its competitiveness globally through its charity work in places that need humanitarian aid such as food, clothes, technology for disaster resolution and such like. Consequently, IBM CSR activities enhance its competitive advantage over its competitors in the same industry.
Conclusion:
From the report, corporate social responsibility has become part of the organizations around the world. Nearly every company is having CSR programs, which in most cases is due to the external pressure from the public. The world is becoming more conscious towards environmental sustainability and companies are expected to demonstrate such through various activities. IBM is one of the many companies that have initiated numerous CSR programs to meet the needs of all its stakeholders such as employee, customers, the environment, and many others. These activities are motivated by the desire for performance, value creation, and stakeholder driven. The programs are effective tools towards building a substantial competitive advantage to IBM.
IBM is one of the largest IT firms that have immensely given back to the society in many ways. The company has benefited in many ways through the many social responsibility activities that it takes around the world. However, there are specific recommendations that I would wish that the board of directors take into consideration.
I find these two areas to be crucial in enhancing the competitiveness of the company and help IBM get back to its old stature.
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