Environmental Report

March 1, 2007

IBM Heritage:

• 1989 - Began offering product take back programs in Europe
• 1990 - Published first corporate environmental report. Established packaging environmental guidelines, including prohibition on ozone depleting chemicals
• 1991 - Established Environmentally Conscious Products program
• 1992 – Charter member of U.S. EPA Energy Star Computers Program
• 1993 – Eliminated manufacturing use of Class 1 ozone depleting substances. Used recycled content plastics in energy efficient PC
• 1994 – Converted manuals to recycled paper. Began packaging PCs in corrugated packaging, minimizing foam inserts
• 1995 – One of three manufacturing companies to begin voluntary reporting of greenhouse gas emissions
• 1996 – Developed internal tool for rating products on “design for the environment”
• 1997 - First major multinational company to earn single global ISO 14001 registration. Released corporate standard for environmentally conscious product design
• 1998 – U.S. EPA Energy Star “Computer Partner of the Year.” Grand prize in Japan Environmental Agency Action Plan. Society of Plastics Engineers’ Recycler of the Year. Electronic Industries Associations’ Special Recognition for Environmental Progress. Established Product Environmental Profiles internal database for tracking product environmental attributes.
• 1999 - First company to produce computer using 100 percent recycled resin for major plastic parts. Awarded U.S. EPA Energy Star “Computer Partner of the Year”
• 2001 – Awarded U.S. EPA's Energy Star "Excellence in Corporate Commitment" award
• 2003 - Processed 68,831 metric tons of end of life products with only 1.62 percent being land filled
• 2004 – Used 97.8 percent powder coatings on decorative metal finished products, avoiding estimated 871,000 pounds of volatile organic compound (VOC) emissions

Lenovo China Heritage:

• 2001 - Achieved ISO 14001 certification
• 2004 & 2005 - Received “Green Product” award for desktop PC from China Environment Protection Foundation. Received “Green Innovation” award for Lenovo Innovation Center building.
• All Lenovo commercial products meet China’s energy savings targets
• Lenovo China represents the PC industry as a member of the Reduction of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) implementation advisory group
• A Lenovo representative is serving as chairman of the group writing the general technical specification for China PCs. The specification includes environmental attributes such as low radiation, noise, energy, etc.

Lenovo is committed to leadership in environmental affairs in all of its business activities by continuing to build upon its combined history of environmental achievement. While Lenovo follows all global regulations and has already implemented a number of voluntary programs, Lenovo is committed to doing more and is continually evaluating potential opportunities. As a new company, Lenovo is actively researching ways to expand its environmental stewardship and integrate it into its business practices. The company’s long-term, comprehensive approach considers everything from site operations to product design to recycling. Corporate strategies, policies and guidelines support this environmental responsibility, and each manager and employee, as well as any contractor working on a Lenovo site, bears a personal obligation to Lenovo's environmental commitments. The following report describes in more detail Lenovo's environmental policy, programs and commitments.

2. Lenovo's Environmental Policy
Lenovo's corporate environmental policy applies to all Lenovo operations and forms the foundation of Lenovo's Environmental Management System (EMS). A copy of the policy can be found at www.pc.ibm.com/ww/lenovo/about/environment/cp5.html.

3. Lenovo's Environmental Management System
Lenovo's EMS is based on systems that existed at IBM and Lenovo prior to the acquisition. The systems are ISO 14001 certified and cover all manufacturing, product design and development activities for Lenovo. Lenovo is currently integrating the two systems to one common system, a task which will be completed in 2007. As part of Lenovo's ISO 14001 certification, an external registrar audits all major operations and product development areas annually. In addition to these external audits, Lenovo conducts regular internal audits to ensure the EMS is functioning properly, tracks progress towards objectives and targets and identifies possible areas for continual improvement.

Lenovo sets environmental goals for locations and products annually. These objectives and targets are established and driven in association with the management of our significant environmental aspects. Lenovo's goals for 2007 cover recycling and energy consumption for manufacturing sites. For products, Lenovo's goals focus on energy efficiency, design for recycling and reuse, use of recycled materials and environmentally preferable finishes, among others. Lenovo monitors progress towards these goals at a global level through periodic reporting and internal and external EMS audits.

Lenovo's EMS goals for 2005 covered the transition period during the IBM acquisition. A summary 2005 goals for Lenovo’s international operations and progress made in meeting these goals is listed below:

4. Lenovo's Environmentally Conscious Products Program
IBM established a corporate-wide program for environmentally conscious product (ECP) design in 1991. Prior to the IBM acquisition, Lenovo China had developed technical specifications for PCs that included environmental attributes such as energy, and all commercial products were designed to meet China’s energy savings targets. Since the acquisition, Lenovo has developed a Lenovo ECP program based largely on the IBM program and is in the process of transitioning this program to Lenovo’s product families.

Lenovo is committed to eliminating potential health hazards and minimizing the environmental impact of its products. In order to implement this commitment, Lenovo’s chemical and substance management policy supports a precautionary approach, ensuring Lenovo will take appropriate action even if some cause and effect relationships are not fully scientifically established.

Lenovo’s priority is to use environmentally preferable materials whenever applicable. In adhering to the precautionary approach, Lenovo supports banning the intentional addition of materials of environmental concern, when economically and technically viable alternatives exist. These restrictions may also include implementing concentration limits for incidental occurrences. For materials where economically and technically viable alternatives do not exist, Lenovo collects data on the usage of these materials above defined concentration limits. This data can be reported to customers or other stakeholders. Finally, we actively search for environmentally preferable materials which can be substituted.

Lenovo expects its suppliers to adhere to requirements of Lenovo’s Environmentally Conscious Products Program. Lenovo supplier specifications, available at http://www.pc.ibm.com/ww/lenovo/procurement/Guidelines/
Restrictions.html restrict the use of environmentally-sensitive materials in our products. The specification encompasses both regulatory and Lenovo imposed material bans and restrictions, including the prohibition of ozone depleting substances for all applications and the elimination of some European Union (EU) Restriction on Hazardous Substances (RoHS)-restricted materials in advance of the directive in specific applications. Lenovo's implementation strategy and requirements are consistent with the requirements specified in the EU's RoHS Directive. Additional information about RoHS can be accessed at http://www.pc.ibm.com/ww/lenovo/about/environment/
RoHS_Communication.pdf.

Lenovo requires its suppliers to report any usage of brominated flame retardants (BFRs) above 1,000 parts per million (ppm), or any usage of polyvinyl chloride (PVC). In recognition of the continuing concern about usage of PVC and BFRs, Lenovo is implementing a phase out plan for both of these substances.

Lenovo currently prohibits use of PVC in external cover parts of more than 25 grams. Lenovo’s target for elimination of all use of PVC is 2009.

Lenovo currently prohibits Polybrominated Biphenyls (PBBs) and Polybrominated Diphenyl Ethers (PBDEs), including Deca-Brominated Diphenyl Ethers from intentional addition to any Lenovo parts. Lenovo also prohibits BFRs from intentional addition to any newly released parts except printed circuit cards, cables and electrical assemblies. Lenovo’s target for elimination of BFRs from intentional addition to all remaining parts is 2009.

These phase out plans are dependent upon the availability of economically viable, safe alternatives, particularly for PVC-free cables and BFR-free circuit cards and components. Lenovo will work with industry suppliers and other interested parties to make a good faith effort to ensure economically viable and safe alternatives are available to support the phase out plan.

In addition to the banned and restricted materials, Lenovo has identified a list of materials and substances of environmental interest, which may be candidates for further restrictions in the future. Lenovo holds suppliers accountable for reporting the use of these materials when present in concentrations above specified levels. Lenovo requires Supplier Material Declarations using the industry standard IPC 1752 form for confirmation of compliance to the restrictions and for reporting the use of substances of interest. In some cases Lenovo has used the flexibility of the IPC 1752 form to include additional substances and tighter limits than called for in the industry standard Joint Industry Guide (JIG). Lenovo informs customers about the environmental attributes of its products and compliance with applicable laws and regulations through the presentation of a completed industry standard IT Eco Declaration 2004, upon request.

Consistent with the precautionary approach, Lenovo analyzes the regulatory environment, and proactively engages customers, non-governmental organizations and other stakeholders in evaluating potential health and environmental impacts of its products. Lenovo weighs these inputs to determine the restricted substances, as well as the substances of interest to be tracked for the purpose of reporting and for consideration for future restrictions.

In addition to Lenovo's corporate-wide implementation of reduction/elimination of the hazardous substances, corporate environmental standards and specifications require the designers of all Lenovo information technology products to consider certain environmentally conscious design practices to facilitate recycling and minimize resource consumption. For example:

• All product lines adhere to marking of plastic parts greater than 25 grams for identification of resins for recycling.
• Products are designed to minimize the types of plastics they contain and avoid contamination of plastics by paints, glues or welded connections. Tools needed for disassembly to subsystem levels are also universally available.
• "Product-specific upgradeability features” are described in product literature and declarations for all Lenovo product lines.
• Recycled resins, ranging in recycled content from 10 percent% to 50 percent, are used in a number of Lenovo hardware applications and are specified as preferred materials where practical.
• New products are evaluated for chemical emissions. To minimize potential VOC emissions, non-solvent based powder coatings are used for decorative painted parts wherever practical.
• Most Lenovo desktops and notebooks meet the U.S. EPA’s and U.S. Department of Energy’s Energy Star labeling program. Energy Star qualified computers use less electricity than computers without enabled power management features.
• Many Lenovo notebook, desktop and monitor products have been registered to the Electronic Product Environmental Assessment Tool (EPEAT) criteria. EPEAT assesses several criteria such as reduction/elimination of environmentally sensitive materials, material selection, design for end of life, product longevity/life extension, energy conservation and end of life management.

5. Lenovo's Manufacturing and Supply Chain Operations
Lenovo's manufacturing locations include former IBM Personal Computing Division sites as well as sites previously owned by Lenovo China. As a result of merging multiple sites into one global company, Lenovo continues to assess current operations to ensure compliance with all local and national legal requirements and permits.

Suppliers of materials, parts and products to Lenovo must adhere to Lenovo's Engineering Specification "Baseline Environmental Requirements for Materials, Parts and Products for Lenovo Products," which includes requirements for banned or restricted materials, reportable substances, labeling and others. All assembly and major sub-assembly suppliers are encouraged to be ISO 14001 certified. Preference may be given to ISO 14001 certified suppliers. Suppliers can access Lenovo's environmental requirements at www.pc.ibm.com/ww/lenovo/procurement/.

In addition to these specific environmental requirements for suppliers, Lenovo is a steering committee member of the Electronics Industries Code of Conduct (EICC) and supports its goals. “The Electronic Industry Code of Conduct” outlines standards to ensure that working conditions in the electronics industry supply chain are safe, that workers are treated with respect and dignity and that manufacturing processes are environmentally responsible as outlined on its web site at EICC: Electronic Industry Code of Conduct: Home. Lenovo’s existing policies and processes relevant to the environment, health and safety, labor, ethics and other issues are consistent with the requirements of the EICC and are fully compliant with international standards regarding forced and child labor. It is Lenovo’s policy to conduct itself ethically and fairly in relation to its suppliers and all others with whom Lenovo does business. Lenovo expects its employees and suppliers to keep the letter and spirit of all agreements, build long term relationships on trust, honesty and candor and never compromise Lenovo’s overall best interest in the pursuit of local or divisional interests.

Lenovo’s membership in EICC illustrates commitment to these requirements and more effectively ensures that Lenovo suppliers are also in compliance. Lenovo works diligently with its supply base to ensure full compliance with this code and expects suppliers to have the same stringent expectations of their extended sources of supply engaged in the production of goods and services for Lenovo.

6. Product End of Life Management
Lenovo supports efforts to reduce the volume of electronic products being disposed in landfills and to reduce the need for raw materials by increasing the beneficial reuse or recycling of materials. Lenovo supports legislation assigning financial responsibility for end of life management to the individual producers. Given the complex nature of the needed recovery systems, Lenovo supports a recovery and recycling infrastructure in which all the major stakeholders – manufacturers, retailers, government, non-governmental organizations, users and recyclers – participate based on their unique expertise and capabilities. The goal of these institutional stakeholders should be to develop an efficient collection and recycling infrastructure which is convenient for the individual consumer. Producer responsibility legislation must address all classes of producers, including retailers distributing under their own house brands.

Lenovo encourages its customers to reuse or recycle products at the end of their useful lives. Lenovo offers consumers and/or commercial clients recycling options for end of life products, batteries and product packaging worldwide through voluntary programs and/or country, province or state programs in which Lenovo participates.

In the U.S. and Canada, Lenovo participates in the Rechargeable Battery Recycling Corporation's (RBRC) "Call2Recycle" Program. Rechargeable lithium ion batteries from Lenovo products such as notebooks can be recycled free of charge at any of the RBRC's more than 30,000 drop off locations in the U.S. and Canada. For more information about the RBRC's Call2Recycle Program and to locate a battery recycling location near you, visit Welcome to Call2Recycle. Information about the location of components such as batteries that may require special handling at the product's end of life can be found in the product manual or by contacting environment@us.lenovo.com.

In China, where Lenovo is a mobile phone supplier, China Mobile and eight major domestic cell phone manufacturers, including Lenovo Mobile, have cooperated in offering a “Green Box” scheme for recycling end of life cell phones and its accessories to help protect the environment. In this scheme, cell phone consumers can dispose of their cell phones and accessories in recycling boxes located at China Mobile business halls in 40 cities across China and at manufacturer sales and service sites. Lenovo Mobile is currently establishing recycling boxes in its authorized service centers. Since these reclaimed end-of-life articles contain heavy metals, professional companies will manage them for safe treatment and recycling. In addition to end of life cell phones and accessories, other electronic products and accessories that consumers put in these boxes (excluding ordinary dry cell batteries) will also be recycled.

In December, 2006, Lenovo announced in China, free take back and recycling of Legend and Lenovo branded PCs, laptops, monitors and servers, and ThinkPad laptops, ThinkCentre PCs, and ThinkVision Monitors, whether produced by Lenovo or IBM. Lenovo will ensure that recovery, reuse, recycling and disposal of these returned products comply with regulatory and Lenovo standards.

Customer access information for these solutions as well as recycling options for batteries and packaging waste can be accessed through the Lenovo environmental web site at www.pc.ibm.com/ww/lenovo/about/environment/index.html. Additional asset recovery solutions are also offered through IBM for a large number of countries globally. The links for these services in the Americas, Asia Pacific and Europe/Middle East/Africa are also listed on this web site.

When Lenovo procures product refurbishing, remanufacturing, product end of life management, hazardous waste and disposal services from suppliers, the local Geographic and Country Environmental Affairs Focal Points and Lenovo Global Environmental Affairs must approve these suppliers prior to their use to ensure their compliance with applicable legal and Lenovo environmental requirements. The supplier evaluation process includes, among other things:

• an onsite inspection, documentation of the suppliers' EMS and process controls
• an identification of supplier subcontractors and verification of their compliance to applicable legal and Lenovo environmental requirements
• and a disclosure of how they dispose of end of life products, options, parts and materials.

Brokers and resellers of surplus and used products, options and parts must also agree not to resell to non-Organization for Economic Co-Operation and Development countries if the broker knows or has reason to believe that the equipment and/or parts will not be used for its originally intended purpose without the need for disassembly or disposal.

In the past year, Lenovo has participated in a number of regulatory and voluntary take back programs. During fiscal 2006, ending March 30, 2006, Lenovo managed or financed the proper disposal of more than 15,000 metric tons of end of life or returned products, with less than 1.71 percent being land filled. Chart 1 shows the disposition of those materials.

Chart 1 -Product End of Life (PELM)Disposition

Of the total product disposal, more than 1270 metric tons came from customer owned end of life products. Chart 2 illustrates the disposition of customer returned product.

Chart 2 – Disposition of products returned through Customer Product Take Back (PTB) programs

The recycled material from customer owned returns represents 0.72 percent of the weight of product shipped in fiscal 2006, and 8.8 percent of the weight of products shipped in 1998. Since Lenovo does not operate its own asset recovery services for large enterprises, the customer end of life data reported here is primarily from its contribution to EU WEEE, Japan consumer take back and other mandatory take back programs as well as Lenovo’s voluntary take back offerings in the U.S. and Canada. Also, with the purchase of the IBM PC business during fiscal year 2006, the normalization of the take back to products shipped in fiscal 2006, is calculated against the total Lenovo China shipments summed with the Lenovo international shipments after May 1, 2005. Shipments for the 1998 normalization consider only Lenovo China shipments for that calendar year. After a full year of data collection, Lenovo intends to establish targets for recovery for future years.

Health and Safety/Wellness Activities
In 2006 Lenovo's Global Occupational Health and Safety organization has been focusing on developing and implementing the Lenovo worldwide Global Occupational Health and Safety Program by merging the prior programs of IBM's Personal Computing Division and Lenovo China operations. As part of this effort, Lenovo has published Corporate Policy 3, "Responsibility for Employee Health and Safety," which forms the foundation of Lenovo's commitment to provide a safe and healthy workplace for employees. To support the implementation of these policy goals, Lenovo has developed its Global Occupational Health and Safety Manual covering operations at worldwide locations. As part of this effort, Lenovo is training a network of health and safety personnel to act as local experts at Lenovo China manufacturing locations.

Lenovo has begun a system of formal and informal reviews of a variety of health and safety related operations to examine the progress of this program. Lenovo is conducting health/hygiene reviews of cafeterias, formal audits of all manufacturing locations and safety and health building reviews at new, large real estate locations.

Lenovo continues to monitor issues of global health and safety. In 2006, Avian Flu raised particular concern. Lenovo is monitoring the situation on an ongoing basis and is developing a business continuity plan in case the situation becomes more serious.

Public Outreach and Industry Involvement
Lenovo participates actively in several industry associations that are working towards environmental solutions for the electronics industry. These include:

• Environmental Issues Council of Electronics Industry Associations - Board Member
• Japan Electronics and Information Technology Industries Association - Member
• Electronics Product Stewardship Canada - Board Member
• Alliance for Communication and Information Technologies - Member
• Australian Information Industry Association (AIIA) - Member

Lenovo and the former IBM product lines have a rich history of sharing environmental expertise. A partial list of recent presentations and papers includes:

• 2004 - "E-scrap Plastics Opportunities and Barriers from an Electronic Producer Perspective"
• 2003 - Facilitated and provided source materials for CTC Plastics Recovery Demonstration
• 2002 - "Environmental and Cost Benefits of Using Powder Coatings"
• 2001 - "An overview of IBM Product Take back Programs, Considerations for commercial and consumer returns"
• 2000 - "A Decision Methodology for Ranking Environmental Aspects of Product Design Alternatives"
• 2000 - "ECP Integration Into the Supply Chain: an IBM Perspective"
• 1999 - "Evaluation of IBM End of Life Products: Measuring DFE Effectiveness."
• 1998 - "Dynamics of Plastics Recycling in the Computer Industry"

Other recent environmental outreach activities since the IBM acquisition include the following:

• In January 2006 Lenovo was an invited participant in an EPA led initiative on "e-cycling" addressing standards for waste electronic equipment recyclers.
• Lenovo is an invited member of US Department of Energy peer review team for Mid-Atlantic Recycling Center for End of Life Electronics.
• Lenovo has contributed to the development of the EPA sponsored EPEAT standard and program.
• Lenovo presented an invited paper titled "Impact of Global WEEE legislation on Lenovo Products" at RECCON 05 Global Electronic Recycling Solutions conference in Morgantown, West Virginia, and at World Recycling Shanghai 05.

Lenovo is committed to environmentally responsible practices in the communities around the world in which it does business. Lenovo’s combined environmental history through IBM and the Lenovo Group demonstrates a commitment to developing, continuing and advancing environmental policy and programs. As a global leader in the PC market, Lenovo is building on this history with a long-term, comprehensive environmental approach focused on product design, management and supply chain operations, product end of life management and the health and wellness of employees. By engaging stakeholders and through active participation in the PC industry, Lenovo will continue its tradition of environmental commitment.

Contact Lenovo
For more information on Lenovo's environmental programs, please contact
Lenovo Environmental Affairs
ZGSA/Building 2
1009 Think Place
Morrisville, NC. 27560
environment@us.lenovo.com