International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher Marsh - 451 Research, LLC - Analyst : Okay. That's probably enough for me, I think. Let's open this up to discussion. Before I do that, let me just remind you and especially if this is the first of the next sessions you're dialing into that you can actually submit questions. So please feel free to do that through the console. We'll try and get to as many questions as we can towards the end of the session or throughout if I see them coming up. And any questions you do ask, we will commit to answering them if we don't get to them in discussion. So again, if you have a question, please feel free to submit it in one way or another, we will come back to you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) Okay. So let's open this up to discussion. I'm going to ask this question to each of you, but Manjit, maybe we can start with you. Let me throw this first question your way. You've been involved for a long time in assessing company's ESG commitments. Across different industries, you have a very interesting perspective that plays not just to the technology industry, but much more widely than that. So help us level set a little bit here. We're about 20 years or so, I believe, into "ESG" being used as a term, whatever that means. But where are we in the overall trajectory of ESG as a movement. Are we still early days, would you say? Is it beginning to mainstream? Just help us understand a little bit, if you wouldn't mind where we are in terms of the overall maturity of this as we look across different industries. Manjit Jus Thanks, Chris. So I would say we've been doing this for over 20 years. So probably as long as that term has existed, and it's gone through various kind of shapes and forms. I would argue that companies have certainly understood sustainability much longer than the rest of the world has or the rest of the market has. So we certainly see that investors are now slowly starting to understand how sustainability has implications in the real world and in business value. But I would argue that companies -- or many companies have understood this for a long time, even though they possibly weren't measuring it or they weren't able to take kind of these intangible things that are often associated with measuring sustainability and turn them into numbers that they could use. But if we look at kind of the way we've interacted with companies over the last 20 years, certainly, we went from having 300 companies engaged with us in our annual assessment process right at the beginning to close to 2,000 of the world's most kind of important companies engaging with us this year. And I think that is clearly a sign that reporting is becoming more robust to allude to something you said earlier, there is regulation that's changing very quickly. Companies want to get ahead of this. But also, I think, they understand that the market is valuing sustainability and the integration of sustainability into business practices and that push, I think, from an investor perspective to companies has also helped companies understand more tangibly why sustainability is important. And it's not just about cost savings or avoiding risks and avoiding risks of noncompliance, but it can actually be something that drives new opportunities. And I think especially in the technology sector, it's all about kind of innovation and driving new solutions to solve problems. And I think as climate change and other, kind of these macro trends that are very much behind all of these ESG issues kind of materialize, I think the tech space is perfectly kind of situated to address a lot of these challenges.

Question: Christopher Marsh - 451 Research, LLC - Analyst : Yes. That's great. That's really interesting to see how it's sort of rebalancing. That's, of course, a sign of maturity. Edan, maybe if I can bring you in at this point, you've been involved in the E of ESG for a long time. And of course, that's where a lot of the focus still is, companies increasingly making more concrete and specific commitments around climate change issues, environmental impacts. What's your take -- because you've been thinking about this for a long time, what's your take on how things have changed over time? And where we are at the moment when it comes to companies focusing on environmental issues, but also where those environmental issues sit alongside maybe other commitments in this wider mandate that they're also looking to embrace? Edan Dionne Yes. Thanks, Chris. And I would just build upon what Manjit said earlier. As you mentioned, as a company ourselves, IBM is over 110 years ago. And the benefit of being a long -- company has been around a long time and have been a manufacturer for a long while. I mean we were vertically integrated through almost early 2000s, right? And we still continue to manufacture. And as Manjit said earlier, that experience actually inform us to continue to gain deeper and deeper understanding on the E part of the ESG. And I would also agree the social part is less defined, but let me focus on E to answer your question. So the -- I think, first and foremost, inform us about the real substance about the environmental impact or environmental benefit, however you look at it from certain operations before the onset of ESG, if you will. So I think in that sense, those companies who have had to deal with whether it's regulation or external pressure or whatnot, I think relatively speaking, would be at a more mature place of the curve. But as it's been mentioned, today, certainly, global companies recognize ESG is strategically important. And even as Manjit said correctly, it's really geographically this item has been embraced. And we are seeing regulators, some countries, some geography may be more mature than others, but it is catching on. And I would say one last point is, hopefully, we will begin to see companies advance beyond goal-setting and advance beyond -- into basically integrating what we need to do into operations. And that is -- hopefully will come out during this discussion as we have this back and forth. And to me, that would be a key indicator showing the continued advancement of this topic, move from paper, from goals, from strategy to operation to integration. So ESG is not a separate item. We, within IBM, has had the time and history and experience to drive the integration of this topic into the business. And I think that will be a good metric, good test.

Question: Christopher Marsh - 451 Research, LLC - Analyst : Super interesting. JJ, what was that statistic you mentioned earlier? I think, was it 95% of customers have some kind of content in their RFPs around sustainability? Was that the... Jennifer Davis That's right. That's right. And for our Dell Technologies select customers, the biggest of the big multinationals, more than 50% of them have their own climate goal as an example. And so if they have any hope of achieving their climate goal, they're going to need IBM or Dell or other technology companies to help them because it's going to really come down to a lot of green IT solutions and how their use of electricity and infrastructure starts to evolve and change.

Question: Christopher Marsh - 451 Research, LLC - Analyst : Yes. Really interesting perspectives. I mean the employee comment was particularly interesting, partly because the team I lead in 451 is the workforce productivity and collaboration team. So we focus a lot on issues of employee experience and what drives employees' engagement. And we see signals of this as well. The criteria at which employees are using to decide where they work is changing significantly, I would say. And technology apart from what they're wanting their company to align with from a sort of mission statement values point of view, I think the technologies that they're using day to day are increasingly playing a role in determining how they evaluate their employer and from a career progression point of view where they want to take their career and who they want to work for. So I think technology is becoming increasingly central to a lot of these different issues. So super interesting. Just before we move on and talk a little bit more specifically around what each of your respective sets of clients are asking from you or wanting to see from you, maybe just sort of fleshing out some of these issues just a little bit more. I think for a lot of enterprises who are maybe less mature in terms of their overall ESG approach, they may be asking the question, what's the difference between CSR and ESG? What's the link between these 2 things? Are they the same thing? Is ESG a maturation of CSR? Is ESG, in some way, sort of a bigger way of talking about the issues involved and CSR is the way that companies operationalize commitments they're making in the wider sort of umbrella? So JJ, maybe you can give an opinion on that. For those that are trying to get their head around, is it CSR, is it ESG? Does that distinction even matter anymore? What would you say? Jennifer Davis We're actually doing a cheat sheet of definitions internally right now because even in a company as mature in this area as we are, there's a lot of confusion. I do think ESG is the maturation of CSR. What I would say is a few years ago, we were thinking a lot and talking a lot about the rise of corporate reputation and the fragility of that, and it's important. Then we started to really focusing on the purpose of the company and our CEOs have all signed on to the business roundtable purpose statement as an example. Now I think it's all about trust which ESG enables. That's where transparency really comes in, the marrying of ethics and security and privacy. Is this a company I can trust, meaning do I want to do business with them or work with them, which those things are really new on top of maybe diversity and inclusion and sustainability as an example. But that is what I think is most exciting now about the broader ESG purview and mandate is you're marrying those things together so that stakeholders can really say, "All right, I want to do business or work for a company that marries who they are with what they do, and that's really important to me." And so I do think we are kind of retiring CSR as the term internally. I just hired a Vice President of ESG and thought long and hard and did a bunch of research on even what I wanted to use in that title because I think it is so much bigger and corporate social responsibility to me makes it still sound like doing good is good business and social impact sits off to the side versus to it on point, it's integral to the operations and the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) heartbeat of the company. And if you don't make ESG performance, over time, as important as financial performance, you're going to miss the mark.

Question: Christopher Marsh - 451 Research, LLC - Analyst : Yes. That's really interesting. I mean, I think it was a point well made about this not being static. And I think that's obviously a challenge I think for companies who need to decide what commitments they make. But I would assume also there's an opportunity for companies because they can put their own identity against, of course, the commitments they're making. They can work it into what they're saying they stand for as a company. They can sort of, if you like, personalize the commitments they're making and help that define the purpose that they're understood as representing as a company, which, again, going back to the comment, Mark, you made about sort of employee retention, I think, is increasingly important. So not static. That's a challenge, I think, potentially also an opportunity for companies as they get deeper into taking this on as a set of commitments. So let's change the focus a little bit. Let's go a little bit sort of pull it down in a couple of levels. And think about how technology suppliers can specifically help your customers on the ESG journey, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) So there's quite a few things, I guess, to unpack here. Overall level of engagement with the mandate we've talked about a little bit. So I guess 2 questions. And again, I'll ask this of each of you and Edan, maybe we can start with you, but what are they expecting to see, because I remember one of the comments you made when we were doing our prep call around how you're increasingly being brought in as an expert into customer-facing engagements and being asked to provide expert input. So I guess you're increasingly hearing from customers the kind of things that they want counsel around. So I guess 2 questions really as part of this overall topic, what are they expecting to see from IBM's own commitment to ESG, right, when they want to tick those boxes, but also what are they expecting from you vis-a-vis investments they're placing with you, right? Is it just more sustainable IT solutions? Is it more consultative support when it comes to setting up programs? Is it just better data and telemetry from their IBM investments to support reporting? Give us a sense of sort of what they want to see from you and what they want from you to help them make their own commitments more material. Edan Dionne Sure, Chris. So the first one is probably a shorter answer. In terms of what I experience when I got brought in to talk to the clients, I think the flavor goes, some are genuinely interested in what has been your journey, right? As I said, we have been doing this for 50 years formally. We've had policy. So we were able -- I would be able to explain how we identify the important intersections of E matters to our business. So we will share that how we strategically manage down to the nitty gritties of data, metrics, how do we measure performance and so forth. And there are also clients who -- all right. It really depends on where they are, each client, as I would mentioned earlier, the maturity and what industry sector and different goal-setting. So for us, it's the desire to see how a technology service provider itself handle this matter. And it's -- and also, it's a matter of establishing the credibility, the trust with the client that we have -- we are ourselves, right, expecting ourselves to perform well. So that is kind of the first part. And again, in terms of topic, it ranges from very nitty gritty to strategics, depending on where the client is, their maturity. The second question, right, you asked about what do clients look for. So let me just step back to first start by saying today, we have 3 major business lines in IBM, right? We have IBM Consulting; Infrastructure, which includes hardware systems, zSeries servers and so forth; and our software, right, AI, hybrid cloud. So clients come to us, ask for expertise in all 3 areas. So let me take the consulting, IBM Consulting. Under that would include clients asking how do I do reporting, as you mentioned, right? And I think that is probably one of the most basic steps all companies expected to do. But then you can advance that to -- there are others who were quite sophisticated. An example will be they're actually looking at how do I mitigate risk and how do I turn that into opportunities? So risk is not just climate, but certainly, climate is an example, right, whether you're in a financial sector, insurance sector. Those are real business intersections, and they are very sophisticated. They understand that. Or a company that is in the energy sector, right? How do we operate? How do I provide energy that is more sustainable literally, less environmental impact and while helping society and company to operate with continuity, right? So consultants, our consultants will be advising clients from, again, basics to risk management to opportunity arena -- to the arena. Take software, take hardware, again, I see clients to be very sophisticated today. No longer are clients only looking at cost of a piece of hardware, right? They're looking at the cost of ownership. So you take a server that is energy-consuming, as a piece of energy-consuming equipment, they want to know how you make it, but that's not enough. When I use it, how much energy do I draw, right? How do you help me select the servers for my application? But depending on the application, right, sometimes a very -- some applications are very competition-intensive and how could I use that equipment to best get my job done while using the least amount of energy. And the last bit, I will just give you as an example in the hybrid cloud, AI space. It's the same situation. Clients not only expect us to be running their workloads in a way that is energy-efficient or use the renewable energy when you're able to get that, they are also interested in collaborating with IBM as a service provider to say, well, I had this workload. What are the opportunities I may be able to run it more efficiently, right? How can I move workflow around, how can I do management? How could I even share a virtual machine with others provided there is privacy, security, all of the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) bells and whistles that you continue to commit to me, IBM, but I'm willing to explore opportunities to work on hybrid cloud or a virtual environment to reduce energy demand. So it's really all across the board, and we welcome these discussions with clients. And many of them, as I said, are very, very sophisticated in their business.

Question: Christopher Marsh - 451 Research, LLC - Analyst : That's great. And Mark, same question to you. You're relatively new in Adobe. So this is putting you on the spot a couple of weeks in, I guess. But what can you gather from having spoken to Adobe customers already about what are they expecting to see from you? And as they think about REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) Adobe technologies that they're using, what they want to see from you in terms of supporting commitments they may increasingly be making? What does that sound and look like? Mark Heintz Yes. So -- interesting observations for me. So it feels to me like the operational part of it, like what Adobe and the other clients are sort of doing on their own operations is really table stakes. They expect that, you're reducing your carbon footprint, that you've got aggressive goals out there. The part where I think they really want to collaborate is on the products. And so for Adobe, we make products that help digitize processes. And specifically, our digital signature product called Adobe Sign has huge environmental impacts. And so we found that our customers want to understand those better. And it's funny for me because I've -- the last 10 years, I've been starting up and helping other companies start up their sustainability programs where they haven't done before. And as I was developing the program, I wanted to understand what the benefits were of the digitization that happened in various processes throughout the company. And I would try to figure this out, and it was very difficult. And so that's what customers are doing now. They see that Adobe produces and creates this product called Adobe Sign. We've got other sort of products around 3D substance where you can do virtual photo shoots or you can do prototyping virtually as well. And they want to understand those environmental impacts. And so we've actually generated this resource saver calculator that helps people understand when you do a digital signature, here's the savings in terms of carbon footprint, savings in terms of money, water, energy and so on. So that's really what I've seen so far is just this hunger and this need to understand how these digitizing processes, these products that Adobe Cells can help them reduce their footprint.

Question: Christopher Marsh - 451 Research, LLC - Analyst : Yes, that makes sense. JJ, what would you say to that as well? Jennifer Davis I totally agree that none of this can be done in a vacuum and setting a goal for goal's sake. I might bring it at the level and say, first, start with what is the purpose of your company? Do you have a stated purpose? For us, it is developing technologies that drive human potential. And then what is the vision for your company? And what is your culture? And do you have a culture code or anything like that, that you live by? And then from there, what is your business strategy? And we know strategies get stated and they evolve over a 3- or 5-year period. But if you anchor your social impact or your ESG strategy in purpose, vision, culture and strategy, then you really can't go wrong. Then you have to set goals because you can't manage what you can't measure, and you've got to have the right back-end data and data analytics to inform that. But it's not enough to say, okay, I have a progress, made real agenda for 2030, which is what we call our social impact agenda, but then set annual targets and annual measures against those targets to know are you on track or off track. Then what we have found is we have initiatives within those goals and those annual targets. And sometimes, I have to say there's not enough money or people working on an issue to give it the scale it needs to actually matter. And then you have to say, well, is this strategic and I do it anyway? Or do I retire it and put more money into fewer things to have bigger impact. So for us, one of our transforming lives or our giving goal is around transforming 1 billion lives by 2030, and it's really all about how our technology, our scale and our people can drive lasting and enduring value. Well, there's a whole big debate in that space around, well, how do you measure enduring value. Does anybody care about social return on investment on the top of normal ROI for how a company might invest? And this is all super and mature and continuing to grow and where we have to work together. But we are then looking at all of this data and where we are, and we do quarterly business reviews on ESG, just like we do financial and P&L reviews. And then we're constantly adjusting and having really honest conversations. And I'm sure like a lot of you, a lot of our work in ESG is dispersed across the business, it's disaggregated. It has to be because supply chain and product development are going to drive the sustainability innovations we need, not my team sitting at the corporate center. But we have done a lot in the last year to really focusing on the G, the governance of it all to get it standardized, to ensure we can automate the data we've got because before it was all over the place. And so I mean, I know, Chris, that's a really big answer, but that's how I would approach it in a super high level what I think companies are going through in their maturity curve when it comes to ESG. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel)

Question: Christopher Marsh - 451 Research, LLC - Analyst : Yes. Manjit, maybe if I can bring you in here. Again, your experience of having looked across different industries and supporting different organizations with their own sort of ESG assessments, anything specific to glean from those assessments about the role organizations you're expecting their technology supplies to play? I guess another way of asking that question is when you frame the question as that form the basis for those assessments, how much do you bear in mind the role that technology plays in companies evaluating where they are from an ESG point of view? Manjit Jus Well, I'll say that it's become increasingly important. I mean, we've, for example, introduced topics around cyber security, data privacy into the questionnaire, into our various questionnaires. It used to be something that was reserved for a small number of industries where we felt there was the biggest potential risks. And now I think since last year, we basically have it everywhere because, yes -- and I'll focus on cybersecurity and privacy because we see this technology is touching all aspects of these industries. There's a great example of one of the world's largest aluminum producers a few years ago that had their factory shut down for a week because of a hacker attack. Now certainly, the aluminum smelting business was not the industry we would have ranked most highly in terms of risk of cyber attack, but it has materialized. And through that, we see that companies aren't actually doing a great job. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2021 / 3:30PM, IBM.N - International Business Machines Corp, S&P Global Inc, Dell Technologies Inc, and Adobe Inc at S&P Global - 451Nexus Virtual Conference (Panel) So we see that areas like reporting on IT breaches, infrastructure-related incidents, having the right systems around data governance and transparency and things like that. These are issues that are maybe well understood in the technology space, but less understood by other companies. And certainly, I mean, the only way to kind of address those is to partner with the technology companies that are integral kind of in making sure that those systems are robust. So those are just 2 examples of topics that have kind of manifested themselves really only in recent years in kind of places that we probably would have never thought to look before. And I think that shows how connected technology is to all of this.