Microsoft's AI, Privacy, and Sustainability: 6 Key Principles and Initiatives, Exams of Technology

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Microsoft 2019

Corporate Social

Responsibility Report

Content

Our approach

02 Letter from Satya Nadella 03 Impact at a glance 04 Approach to CSR and reporting

Trust and responsibility

06 Privacy and cybersecurity 09 AI 12 Human rights 15 Responsible sourcing 18 Empowering our employees

Closing the opportunity gap

23 Broadband access 25 Skills and employability 28 Empowering nonprofits 30 Accessibility

Protecting our planet

33 Environmental sustainability

Resources

37 Reports hub

IMPACT AT A GLANCE

Trust and

responsibility

26 million

People around the world connected with tools, best practices and guidance for GDPR compliance.

6.5 trillion

Signals analyzed each day, plus processing of 450 billion authentications and scanning 400 billion emails for malware and phishing each month as we work to protect our customers.

67 countries

358 companies and 139 international and civil society organizations mobilized to join The Paris Peace Call for Trust and Security in Cyberspace.

$125 million

Over five years committed to using artificial intelligence to tackle some of society’s biggest challenges.

$500 million

In loans and grants to accelerate the construction of more affordable housing in the Puget Sound region.

Closing the

opportunity gap

Over 110

Nonprofit organization partnerships in 42 countries to reach millions of young people with quality digital skills and computer science experiences.

40 million

Unserved and underserved people around the globe to be connected with high speed internet access by 2022 through a new international track of our Airband Initiative.

$1.5 billion

In donated or discounted software and services via Microsoft Philanthropies.

$170 million

(including company match) Through our employee giving program to support nonprofits in local communities around the world.

152 percent

Increase in the number of women corporate vice presidents.

Protecting

our planet

75 percent

Reduction in operational emissions to be achieved by 2030, achieving the Paris Accord targets two decades early.

$15 per metric ton

Internal carbon fee, nearly doubling our previous fee.

60 percent

Renewable energy for powering our datacenters to be achieved by the end of this year, with 70 percent achieved within the next four years.

OUR APPROACH

Empowering every person and every organization to achieve more requires careful attention to the impact of

our business practices, policies, and community investments.

Our

commitment

Our business practices and policies reflect our commitment to making a positive impact around the globe. We work to apply the power of technology to earn and sustain the trust of the customers and partners we empower and the communities in which we live and work. This focus extends to our work to build a sustainable future where everyone has access to the benefits and opportunities that technology can bring. It’s central to our mission to empower every person and organization to achieve more, and it’s why many of our employees come to work every day. Further, it’s a commitment that strongly aligns to the United Nations Sustainable Development Goals. We demonstrate our commitment to sustainable development through our products and solutions, our responsible business practices, our programs, our policy and advocacy work and our philanthropic investments. Explore the pages of this report to learn about some of the ways we’re harnessing technology to empower a sustainable future for everyone. Visit our CSR site for more about our sustainable development commitment

Working

together with

stakeholders

We know that the decisions we make affect our employees, customers, partners, shareholders, suppliers, and communities and we take their voices into account. Microsoft receives input from millions of people each year—from individual customers to policymakers and global human rights specialists. We bring outside perspectives into the company and inform our business decisions through a variety of feedback channels. We go beyond formal channels, proactively engaging with key stakeholders, advocacy groups, industry experts, Corporate Social Responsibility (CSR) rating agencies, CSR-focused investors, and many others. We also share our learnings and practices thereby generating industry dialogue, informing public debate, and advancing greater progress.

About this

report

We place a premium on transparency and embrace our digital world to share both year-end and year-round updates. We’ve designed our CSR report PDF as a resource to help guide our stakeholders to the wealth of rich information available across the web about how we’re making the world a better place. In his annual shareholder letter, Satya Nadella, addresses our business and social impacts and sets the stage for both the 2019 CSR and Financial annual reports. Unless otherwise stated, the information in this report covers all of the Microsoft global operations during the 2019 fiscal year (July 1, 2018 to June 30, 2019). Learn more about our CSR and reporting approach

PRIVACY AND CYBERSECURITY

We recognize privacy as a fundamental human right. We work to preserve our customers’ ability to

control their data, make informed choices to protect their privacy, and support critical efforts to secure

cyberspace against new and emerging threats.

Our commitment

and approach

We commit to working collaboratively across industry, governments, educational institutions, and NGOs in the fight to protect privacy and cybersecurity for individuals and businesses around the globe. Privacy The cloud offers us enormous potential, not only in driving innovation and efficiencies but also in serving as a secure location for storing confidential and sensitive information. These new technologies, however, raise challenging questions about the rules for how related data should be treated. Businesses and individuals have the reasonable expectation that the information they create and store in digital form should be accorded the same privacy protections as information they commit to paper. Microsoft product development and privacy practices focus on six key privacy principles: Learn more about our principles Cybersecurity To maintain global trust in technology—and secure cyberspace against new and emerging threats—public policy must continue to evolve. Microsoft supports these critical efforts, focusing on four broad themes of concern to policymakers: cybersecurity policy and resilience, cloud security and assurance, a Digital Geneva Convention, and cybercrime legislation and strategy. We also work with law enforcement and other public/private partnerships via our Digital Crimes Unit to disrupt nation-state activity. Defending democracy Threats to our democratic processes from cyber-enabled interference have become a critical concern. Through our Defending Democracy Program, we work with stakeholders including governments, non-government organizations, academics, and industry all in democratic countries globally to protect campaigns from hacking, increase political advertising transparency online, explore technological solutions to preserve and protect electoral processes, and defend against disinformation campaigns. Read the program announcement

Highlights

We’re driving compliance across our cloud, helping users view and control their activity, and engaging with stakeholders on the future of artificial intelligence. Complying with GDPR Microsoft is committed to making sure that our products and services comply with GDPR. We also provide our commercial customers with robust tools, backed up by contractual commitments, to help them comply. Since GDPR became enforced on May 25, 2018, over 26 million people around the world have used Microsoft’s Privacy Dashboard to control their personal data and exercise GDPR privacy rights, which Microsoft has extended to all of our consumer customers worldwide. Learn more about our progress Creating a safer world for digital transformation Cybersecurity is one of the most critical challenges we and our customers face. We continue to invest in innovation and partnerships around the globe to address this challenge. We’re working to protect our customers by analyzing more than 6.5 trillion signals each day, processing 450 billion authentications and scanning 400 billion emails for malware and phishing each month. Learn more about our measures Protecting political campaigns Our Defending Democracy Team is driving critical work to protect political campaigns, candidates and the institutions of democracies. This team has introduced ElectionGuard, Microsoft 365 for Campaigns and has deployed AccountGuard in some 26 countries. Learn more about our progress Promoting trust and security in cyberspace We’ve partnered with the Government of France to mobilize 67 countries, 358 companies, and 139 international and civil society organizations to join the Paris Peace Call for Trust & Security in Cyberspace. Learn more about this step toward digital peace Tools and Weapons: The Promise and the Peril of the Digital Age A new book by Microsoft President Brad Smith and Microsoft Senior Director of External Relations and Executive Communications Carol Ann Browne, discuss the impact of AI, the rise of cyberattacks, threats to digital privacy and more. Learn more about the book

Reporting

resources

Law Enforcement Requests Report US National Security Orders Report Content Removal Requests Report This semi-annual report provides information about the legal demands for customer data we receive from law enforcement agencies around the world, as well as our responses to them. This semi-annual report provides the data we’re legally allowed to share about demands for customer data we receive from the US government pursuant to national security laws, as well as our responses to them. This semi-annual report provides information about the number of requests received and accepted to remove access to content that is available online through one of our consumer products or services.

AI

We build AI responsibly, taking a principled approach to guide the development and use of artificial

intelligence with people at the center of everything we do.

Our commitment

and approach

Designing AI to be trustworthy requires creating solutions that reflect ethical principles that are deeply rooted in important and timeless values. We then apply those principles to empower innovative solutions. Microsoft AI Principles Fairness AI systems should treat all people fairly. Reliability & Safety AI systems should perform reliably and safely. Privacy & Security AI systems should be secure and respect privacy. Inclusiveness AI systems should empower everyone and engage people. Transparency AI systems should be understandable. Accountability AI systems should have algorithmic accountability. Learn more about our principles AI for Good AI is fueling some of the most creative people on our planet to make change once thought impossible a reality. Through our AI for Good initiative, we seek to combine Microsoft’s technology and AI expertise with the talent of groups around the world to solve humanitarian issues and create a more accessible and sustainable world. AI for Earth Placing AI technology and cloud software in the hands of those working to solve global climate issues. Learn more about AI for Earth AI for Accessibility Leveraging the power of AI to amplify human capability for the more than one billion people globally with disabilities. See how AI is empowering lives AI for Humanitarian Action Leveraging AI to support disaster recovery, address the needs of children, protect displaced people, and promote human rights. See our commitment in action AI for Cultural Heritage Leveraging the power of AI to empower people and organizations dedicated to the preservation and enrichment of cultural heritage. Learn about our commitment

Highlights

We’re driving compliance across our cloud, helping users view and control their activity, and engaging with stakeholders on the future of artificial intelligence. Microsoft announces AI for Cultural Heritage A new and fourth pillar to Microsoft’s AI for Good portfolio will use artificial intelligence to work with nonprofits, universities, and governments around the world to help preserve the languages we speak, the places we live, and the artifacts we treasure. Read the announcement Using AI to help save lives In conjunction with the 2018 United Nations General Assembly meeting, we announced AI for Humanitarian Action committing $40 million over 5 years. See the blog post by Brad Smith Ag-Analytics helps farmers and researchers use AI to prepare for climate change Sharing Microsoft’s goal to help monitor, model, and manage earth’s natural resources with cloud and AI, Ag-Analytics brings precision agriculture to fruition in a platform that helps farmers leverage all available data to make the best decisions for their land. Learn more Microsoft and National Geographic Society announce AI for Earth Innovation grantees With the help of artificial intelligence, new grantees are actively working to uncover new insights to better monitor, model, and ultimately manage the world’s natural resources more effectively and sustainably. Find out more about these changemakers Using AI to drive accessible innovation around the world Last year we launched our AI for Accessibility program, a $25-million commitment to drive innovation and amplify human capability for people with disabilities. AI for Accessibility now has grantees across the globe leveraging our technology to empower people with disabilities. Learn more about our grantees Innovative solutions to water security We see huge potential for artificial intelligence, remote sensing, data analytics and adaptive innovation to be applied to water security challenges, especially when paired with conservation science, and impact investment. Microsoft’s AI for Earth program and The Nature Conservancy’s collaboration with the Techstars Sustainability Accelerator offer some examples of how such innovations can drive adaptive water solutions. Find out more about these innovative solutions

HUMAN RIGHTS

We aim to respect human rights in the way we do business and to advance those rights with the power

of technology.

Our commitment

and approach

Microsoft aspires to leadership in business and human rights and to serve as a catalyst for action by others—in the technology sector and beyond. Class-leading due diligence We aim to conduct best-in-class human rights impact assessments on our salient human rights actions and emerging trends in business and human rights. Rights-aware decision making We’re deploying an integrated approach to human rights decision making across key aspects of Microsoft. Proactive engagement We use actions and public statements to demonstrate that Microsoft is an important voice, and we advocate for the promotion of human rights. Transparent leadership We’re advancing transparency in our work and promoting human rights through increased disclosure and engagement.

Highlights

The UN Guiding Principles on Business and Human Rights and the Global Network Initiative Principles on Freedom of Expression and Privacy steer our human rights work. Global human rights standards A focus on human rights helps our employees to make good decisions and ethical choices, and builds trust with our customers and partners. As articulated in Microsoft’s Global Human Rights Statement we rely on international standards to ensure that our business activities respect and promote human rights so that technology plays a positive role across the globe. Learn about our global human rights efforts Empowering the UN We’re working with the UN Human Rights Office to help them develop technology to predict, analyze, and respond to human rights situations. We’re also collaborating on joint projects and have provided a multi-million-dollar grant to support ongoing efforts. Learn about our partnership AI and human rights Artificial intelligence can improve life in many ways and help solve societal problems, but AI comes with both challenges and opportunities. We need to address the challenges together with shared responsibility. Our book, The Future Computed, outlines the future of responsible AI technology. Learn about The Future Computed

Collaborating with UC Berkeley Integrating critical human rights issues directly into education can generate innovative approaches to managing our responsibilities and may help create the next generation of ethical leaders. We’re partnering with UC Berkeley to provide annual conferences, student consulting projects, and other collaborative efforts. Learn how we’re working together Advancing digital safety The Global Internet Forum to Counter Terrorism is an international coalition to prevent terrorists and violent extremists from exploiting digital platforms. Individually and collectively, we are taking steps to implement the Christchurch Call to Action. Learn about our digital safety efforts

Reporting

resources

Microsoft Annual Human Rights Report (PDF) Using the United Nations Guiding Principles Reporting Framework, we provide detailed disclosures for each of our salient human rights issues and activities through a downloadable report. GNI Assessments 2018/ Download the Global Network Initiative Public Report on the 2018/2019 Independent Company Assessments. Modern Slavery and Human Trafficking Statement (PDF) Download the report to learn about the actions we’ve taken to prevent modern slavery and human trafficking in our business and supply chain. Law Enforcement Requests Report Using the United Nations Guiding Principles Reporting Framework, we provide detailed disclosures for each of our salient human rights issues and activities through a downloadable report. US National Security Orders Report This bi-annual report provides the data we’re legally allowed to share about demands for customer data we receive from the US government pursuant to national security laws, as well as our responses to them. Content Removal Requests Report This bi-annual report provides information about the number of requests received and accepted to remove access to content that is available online through one of our consumer products or services.

RESPONSIBLE SOURCING

At Microsoft, we work to ensure that our suppliers operate in a socially, environmentally, legally, and

ethically responsible manner—and treat the people who work for them fairly and with dignity.

Our commitment

and approach

We set high standards for our suppliers and collaborate with them to positively impact their workers, their local communities, and their business operations. Microsoft has relationships with thousands of suppliers around the globe, spanning both hardware suppliers that manufacture our devices and components, and indirect suppliers that provide everything from advertising services to building construction and maintenance. We expect all suppliers that do business with Microsoft to uphold the human rights, labor, health and safety, environmental, and business ethics practices prescribed in our Supplier Code of Conduct (SCoC). This code aligns with, and exceeds, the Responsible Business Alliance (RBA) Code of Conduct. The Supplier Code of Conduct is included in all our supplier contracts and Microsoft Social and Environmental Accountability (SEA) requirements are also incorporated into our hardware and packaging supplier contracts. Devices responsible sourcing Since 2005, Microsoft Devices has operated an industry-leading Responsible Sourcing program (also referred to as SEA) to ensure that our hardware and packaging suppliers conform to our Supplier Code of Conduct and additional requirements for living conditions, safe working practices, and environmental, health, and safety protection. We advance our responsible sourcing commitments through:

• Analysis of risks and opportunities
• Assurance and accountability
• Capability building
• Shared value and advancement of the Sustainable Development Goals set by the UN to improve people’s quality of life, protect the environment, and foster equitable growth Procurement responsible sourcing Since 2013 Microsoft Procurement has also operated an industry-leading Responsible Sourcing program to promote socially and environmentally responsible companies in their supply chain. We engage with a broad range of stakeholders to shape and implement our Responsible Sourcing program and to extend our overall impact. Our approach is to converge on credible, industry leading sustainability products and services. Through this approach, we achieve efficiencies, facilitate participation, reduce risk, and ultimately, improve our suppliers and other stakeholders social and environmental performance.

Highlights

Microsoft continues to focus on business and human rights, and acts as a catalyst for others who are participating in these efforts, in the technology sector and beyond. Microsoft Devices Embedding compliance and sustainability into our business We’ve built an Audit Management System (AMS) to continue to transform how we embed compliance and sustainability into our business. Using Microsoft Power BI, we can track performance and enable continuous supply chain improvements throughout the SEA Stages. Workers’ Voice Hotline Our Workers’ Voice Hotline program was extended to 153 factories in FY19. We were named one of the Top 2 Leading Companies for Workers Voice by Know the Chain. Children out of mining We continued our partnership with Pact to end child labor in tin and cobalt mines located in the Democratic Republic of Congo (DRC). Learn about Pact Capacity-building We delivered capability-building programs to 21 suppliers in Taiwan to improve factory labor management in mitigating human trafficking and forced labor. Understanding risk To identify and prioritize risk, we completed our mapping of the origination of key raw materials that are used in our complex and global upstream supply chain. This allows us to continually improve our supplier due diligence and capability building efforts to drive change and accountability regarding materials used in our products. Learn more from our Devices Sustainability Report Microsoft Procurement (^) Supplier diversity In FY19, Microsoft spent almost more than $3 billion with minority-, disabled-, veteran-, LGBTQ-, and woman-owned businesses, ranking among the top 20 companies for spending with diverse-owned suppliers globally. Climate performance In FY19, 100 of our top suppliers reported an average of $530K invested in emissions reduction activities, reducing their collective footprint by 5.6 million metric tons of carbon dioxide equivalents (CO 2 e). Supplier awards In FY19, with stakeholders including Business for Social Responsibility, United States Environmental Protection Agency, the CDP and the Rockefeller Foundation, we provided awards for our supplier leaders in Supplier Diversity, Climate Change, and Impact Sourcing. Learn more about our progress

EMPOWERING OUR EMPLOYEES *Those ILO principles are freedom of association and the effective recognition of the right to collective bargaining; elimination of all forms of forced or compulsory labor; effective abolition of child labor; and elimination of discrimination in respect of employment and occupation.

At Microsoft, we’re focused on bringing out the best in people, supporting their goals, and

empowering them to find deep meaning and purpose in their work.

Our commitment

and approach

Microsoft’s mission is to empower every person and every organization on the planet to achieve more. The only way we will achieve our mission is by transforming our culture. We are seeing results from our efforts, but we are not done. We are constantly learning. Our culture At its core, Microsoft’s strength lies in our talented people and a culture grounded in growth mindset. This means anyone can change, learn, and grow. We believe potential can be nurtured and is not pre-determined, and we should always be learning and curious - trying new things without fear of failure. We identified four attributes that allow growth mindset to flourish. Obsessing over what matters to our customers, becoming more diverse and inclusive in everything we do, operating as one company instead of multiple siloed businesses and lastly, making a difference in the lives of each other, our customers and the world around us. Learn more about our mission and culture Respecting human rights Our Global Human Rights Statement, and participation as a signatory to the UN Global Compact, demonstrate our commitment to respecting the following human rights covenants and declarations: Universal Declaration of Human Rights International Covenant on Civil and Political Rights International Covenant on Economic, Social, and Cultural Rights International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work* Total rewards We develop dynamic, sustainable, and strategic programs that together provide a highly differentiated portfolio to attract, reward and retain top talent and enable our employees to do their best work. These programs reinforce our culture and values. The result is a global performance and development approach that fosters our culture, competitive compensation that ensures equitable pay by role while supporting pay for performance, and distinctive benefits that delight our employees. Learn more about our benefits

Diversity and inclusion At Microsoft we have an inherently inclusive mission – empower everyone on the planet. We think of diversity and inclusion as core to our business model, something which informs our actions and can impact economies and people around the world. There are billions of people who want to achieve more, but have a different set of circumstances, abilities, and backgrounds that often limit access to opportunity and achievement. The better we represent that diversity inside Microsoft, the better we’re able to innovate for those we seek to empower. At Microsoft we each strive to include others by holding ourselves accountable for diversity, driving global systemic change in our workplace and workforce, and creating an inclusive work environment. Through this commitment we can allow everyone the chance to be their authentic selves and do their best work every day. Learn more about global diversity and inclusion at Microsoft Training and development Our growth mindset culture begins with valuing learning over knowing—seeking out new ideas, embracing challenges, learning from failure, and improving over time. To support this culture, we offer a diverse range of learning and development opportunities. We believe training can be more than formal instruction, and our philosophy focuses on providing the right learning, at the right time, in the right way. Opportunities include:

• Personalized, integrated, and relevant views of all learning opportunities on Microsoft Learning and LinkedIn Learning
• In-the-classroom learning and sharing with learner boards
• On-the-job “stretch” opportunities for advancement
• Frequent promotion opportunities
• Coaching on career development through ongoing manager connections
• Customized manager training to enhance coaching and mentoring skills
• New employee orientation covering a range of topics including company values, culture, and Standards of Business Conduct Wellness and safety Microsoft is committed to supporting our employees’ well-being and safety while they are at work and in their personal lives. In addition to our comprehensive benefits package, our Occupational Health and Safety program helps ensure employees can stay safe while they are working.
• Professionals assess the safety risks of work activities and engage with workers and management to implement safe work practices, hazard controls, and training to minimize safety risks and to provide continual improvement for employee health and safety
• New and existing workspaces are periodically assessed to ensure they are constructed with sound design-for-safety principles and that controls are implemented effectively
• Microsoft involves employees and managers in Health and Safety Committees specific to our datacenters, retail operations, and office locations where required Learn more about our commitment to safe and productive workplaces