Managing a Sustainable Business

Our Technology And Energy Efficiency

Energy efficiency is a design principle of Microsoft products and we are working to maximize the role of technology in the transition to a more energy-efficient economy.

• Windows 7 has been designed to use less energy when in idle and active state, and includes tools to identify applications that are unnecessarily using energy.
• Microsoft Windows Server 2008 achieve power savings of up to 10% over Windows Server 2003 at comparable levels of throughput.
• Microsoft Unified Communications (UC) reduces the need for business travel and commuting. Forrester Research found wide deployment of UC can yield as much as 30% in travel reductions
• Microsoft Dynamics AX and its integrated Environmental Sustainability Dashboard let small and medium-sized businesses measure and manage their carbon footprint.
• Microsoft Hohm—a free online application currently available in the U.S.—lets people better understand their home energy usage, get recommendations to conserve energy and save money.

Our Carbon Footprint

We adopted a comprehensive environmental policy in 2006 and have made good progress in monitoring and reducing our environmental footprint.

• Newer Microsoft-owned buildings are designed to Leadership in Energy and Environmental Design (LEED) standards and consume over 20 percent less energy than traditional buildings.
• We’re reducing our travel. By using Microsoft’s own technology, including instant messaging, video conferencing, and unified messaging, we’ve reduced our annual carbon dioxide emissions by 17,000 metric tons or the equivalent of 100,000,000 miles of airplane travel.
• We’re increasing our renewable energy usage, for example:
• Currently 25% of Microsoft’s total energy purchases come from renewable sources including water, solar and wind.
• Over half of Microsoft’s Redmond, WA campus energy comes from hydroelectricity and our data center facility in Quincy, WA uses 100% hydropower.
• Our newly opened Dublin and Chicago datacenters use innovative technology and design so they are 50% more efficient than traditional data centers built 5 years ago.
• We voluntarily measure and publicly report our total carbon footprint annually through the Carbon Disclosure Project. In 2008 our total carbon footprint was 1.13 million tons of CO2.

Our Environmental Impact

We’re constantly searching for opportunities to minimize our environmental impact, reduce waste, and conserve water and other raw materials.

• Microsoft recycles an average of 208.78 tons of material each month, including glass, plastic, aluminum, electronics, cardboard, paper, and organic waste.
• We’ve become the first U.S. corporate campus to achieve Certified Green Restaurant™ status. Our move to compostables at our Redmond, WA
headquarters has reduced cafeteria waste by 50% since July 2008. We also ship roughly 10,000 gallons of used kitchen oil to biodiesel refineries to be converted to biodiesel fuel.
• We provide commuting arrangements for employees, including the Microsoft Connector Service—a series of commuter buses which eliminate approximately 32,200 miles of travel every day. Our employees are also given free public transportation passes to commute to our Redmond, WA campus, as well as other assistance with carpooling and bicycling.

Supply Chain

We view our supply chain—which includes around 35,000 contractors, suppliers and vendors—as an extension of the Microsoft business, so their conduct, conditions, and welfare are important to the sustainability of our business.

• We require our suppliers to sign and adhere to our Vendor Code of Conduct and have established policies for selection and retention of suppliers based on social and environmental performance metrics.
• We audited 84 factories and related facilities of our contracted manufacturing suppliers, and performed 113 follow-up site audits in 2008, in accordance with the Electronics Industry Citizenship Coalition (EICC) guidelines.
• We are monitoring the sub-tier suppliers of our contract manufacturing suppliers, completing 62 initial site evaluations in 2008. This is part of our effort to delve deeper into our supply chain.
• We perform a greenhouse gas emissions assessment of hardware suppliers, which represents over 90 percent of our direct spending on materials from contract manufacturers.
• We conduct a Supplier Satisfaction Survey with 2,300 vendors, representing 75 percent of our total supply chain spending.
• We recycle an average of 208.78 tons of material each month.
• We help extend the life of over 500,000 PCs each year through our Digital Pipeline and Microsoft Authorized Refurbisher program.

• Vendor Code of Conduct
• Microsoft Standards of Business Conduct
• Digital Pipeline
• Precautionary Principle

Corporate Governance

Ultimately we are a publically held enterprise and so good corporate governance is a responsibility to our investors and critical to the long-term viability of our company. We comply or exceed governance codes used in the United States. We use a one-tier management system, with ten people on our board of directors, eight of whom are independent. Our board committees include: Audit; Compensation; Governance and Nominating; Finance; and Anti-Trust Compliance.

• Microsoft outperforms 98.2% of the companies in the S&P 500, and every company in the Software and Service grouping, according to RiskMetrics Group/Institutional Shareholder Services.
• We scored 8.5 out of 10 when Governance Metrics rated our corporate governance standards for: Board Accountability, Financial Disclosure and Internal Controls, Shareholder Rights, Remuneration, Market for Control, and Corporate Behavior.

• The Microsoft Commitment to Corporate Governance
• Microsoft on the Topic: Corporate Governance
• Microsoft Office of Legal Compliance

Employees

Our 93,000 employees drive our business, and we have a responsibility to create a respectful and rewarding work environment for them. In addition to typical employee benefits:

• Written policies cover equal opportunities and anti-discrimination for all employees globally. We are a recognized leader in creating a diverse workplace.
• Ninety percent of employees participate in Microsoft stock programs.
• Well-developed contingency plans in the event of a pandemic are in place to protect our employee base.

Employees have a responsibility to act ethically in their work. We do not tolerate bribery or corruption. Every employee signs our Standards of Business Conduct, and receives training on ethical conduct and environmental practices as part of their new employee orientation.

• Microsoft Diversity and inclusion
• Anti Corruption Policy for Representatives

Political Association

Microsoft has a policy and code of conduct that governs corporate political spending, transparency, and trade association dues. In the United States we run the Microsoft Political Action Committee, which informs its members about decisions made by government officials that affect our business, and enables Microsoft employees and shareholders to jointly support public policy positions.

Stakeholder Engagement

We endorse several cross-stakeholder sets of principles and initiatives, including the:

• United Nations Global Compact
• United Nations Millennium Development Goals
• Universal Declaration of Human Rights
• Electronics Industry Citizenship Coalition Code of Conduct
• Climate Savers Computing Initiative
• Global Network Initiative

We also participate in several stakeholder groups and dialogues including Business for Social Responsibility (BSR), Boston College Center for Corporate Citizenship, the World Economic Forum Global Citizenship Initiative and Net Impact.

Our Forward-Looking Goals

• Reduce carbon emissions per unit of revenue by 30% by 2012 compared with 2007.
• Phase-out entirely the use of phthalate plasticizers and BFR from all our hardware products by the end of 2010.
• Improve the energy efficiency of new data centers, so that new data centers we build in 2012 will average 1.125 in Power Use Effectiveness (PUE), an industry metric of data center energy efficiency where 1 represents optimal energy use. The datacenter industry average for PUE is currently 2.
• Contribute to reducing the IT industry’s carbon footprint by over 50 million tons a year by 2010 as part of our membership of the Climate Savers Computing Initiative.
• Continue transitioning to the electronics industry auditing and development solutions, maintaining coverage of new and existing hardware supplier facilities through risk based auditing of 80 to 100 facilities annually.
• Increase the coverage of our monitoring of Vendor Code of Conduct conformance by sub-tier hardware suppliers.
• Expand greenhouse gas reporting for our direct material supply chain and establish improvement targets.
• Begin assessment of water consumption and waste generation in the direct material hardware supply chain.

*Research conducted by IDC into the economic impact of Microsoft in 52 countries.