sustainability report 2006 a new future for people, society and the

Sustainability Report 2006 A New Future for People, Society and the PlanetToyota Motor Corporation (TMC) began issuing environmental reports in 1998 and renamed the report the Environmental & Social

Report in 2003 in an effort to expand the scope of information disclosure concerning social aspects of its activities. This year, we have enhanced the sections on social and economic aspects even further and present our business activities from the perspective of contributing to the realization of a sustainable society. The theme of the Sustainability Report 2006 is “A New Future for People, Society and the Planet.”

In the section on environmental aspects, we maintain extensive coverage and detailed information, while in the section on social aspects we explain in greater detail activities undertaken during FY2005 with respect to each category of stakeholder. In addition, more examples of activities by overseas consolidated subsidiaries are included, and a summary of the TMC Annual Report is presented in the section on economic aspects. The report also incorporates the opinions of various stakeholders including employees.

In order to make further improvements and enhance the quality of Toyota’s reports, we look forward to receiving your comments and views. Please make use of the questionnaire included at the end of the report to voice your frank opinions and thoughts.

1) Period covered: The period covered in the data is from April 2005 to March 2006, and major developments are described as of June 2006.

2) Scope of report

3) Sustainability Report 2006 SupplementToyota Motor Corporation Site DataIncludes detailed information concerning environmental activities at individual plants and other sites.

Environmental Aspects: TMC’s initiatives on an unconsolidated basis, and examples of activities by overseas consolidated subsidiaries, as well as the progress of consolidated environmental management both in Japan and overseas.

Social Aspects: TMC’s initiatives on an unconsolidated basis, and examples of activities by overseas consolidated subsidiaries.

Economic Aspects: A summary of the TMC Annual Report.

Reports by Overseas AffiliatesToyota is committed to disclosing information on a global scale. With the publication of a report by New Zealand in 2005, eleven

countries and regions, besides Japan, now publish local environmental reports. Together, the reports pertain to 85% of Toyota vehicles sold throughout the world.

http://www.toyota.co.jp/SR/en06repo/

http://www.toyota.co.jp/en/ir/library/annual/

http://www.toyota.co.jp/SR/en06plantdata/

Annual Report

Sustainability Report 2006A New Future for People, Society and the Planet

Environmentalaspects

Socialaspects

Economicaspects

North Americahttp://www.toyota.comCanadahttp://www.toyota.ca

Argentinahttp://www.toyota.com.ar

Thailandhttp://www.toyota.co.th

Taiwanhttp://www.toyota.com.tw

Europehttp://www.toyota-europe.com

South Africahttp://www.toyota.co.za

Australiahttp://www.toyota.com.au

The Philippineshttp://www.toyota.com.ph

New Zealandhttp://www.toyota.co.nz

Indiahttp://www.toyotabharat.com

Sustainability Report 2006

ContentsExecutive Message 2Corporate Philosophy 4Corporate Governance 7Establishing Compliance 8

This mark refers to the page where more information can be found

This mark indicates the website where more information can be found

An asterisk next to a word indicates that an explanation has been provided in a footnote

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Environmental Aspects Social Aspects

Business Results and Global Expansion of Business

Economic Aspects

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Environmental ManagementBasic Concepts with Regard to the EnvironmentImplementation StructureStatus of Achievement of the Third Toyota Environmental Action PlanThe Fourth Toyota Environmental Action PlanFY2005 Status of Company-wide Environmental PoliciesEnvironment-related AccidentsInitiatives for Consolidated Environmental ManagementTMC Initiatives at Overseas Affiliates

Examples of Initiatives at Overseas AffiliatesExpanding ISO 14001 Certification AcquisitionGlobal Environmental DataImproving Environmental Performance Through Global ProjectsEnvironmental Accounting

Development and DesignProduct Environmental ManagementImproving Fuel EfficiencyReducing Exhaust EmissionsReducing External Automobile NoiseDevelopment of Clean-energy VehiclesReduction of VOC Inside the CabinApplication of Eco-VAS to All New Models

Production and LogisticsProductionProduction Environment ManagementLegal Compliance ActivitiesProactive Preventive MeasuresPrevention of Global WarmingReducing Substances of ConcernResource Conservation ActivitiesWater Consumption / Air and Water Quality DataLogisticsCO2 Emissions Reduction Activities in JapanReducing Packaging and Wrapping Materials

RecyclingInitiatives in the Development and Design StageReduction of Substances of ConcernDevelopment of Dismantling TechnologiesResponses to the Automobile Recycling LawDevelopment of Recycling TechnologiesSteady Progress in Recycling at Dealers and Parts DistributorsHybrid Vehicle Batteries Recycling System in Japan

Other BusinessesBiotechnology and Afforestation BusinessesHousing Business

Appendix

Highlights in FY2005

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Global Society/Local CommunitiesInitiatives toward Improving Traffic SafetyIntelligent Transport Systems (ITS)Social Contribution ActivitiesEducationThe EnvironmentCulture and the ArtsVolunteer Activities

Examples of Overseas InitiativesEnvironmental and Philanthropic Activities Conducted on the National and Regional Levels (Thailand)Greening of 715 School Grounds Nationwide (Canada)Supporting Exhibits Highlighting the Importance of Water (U.S.A.)Environmental Protection Awards for Youth Created (China)TME Conducts the Road Safety Tour Through Europe 2005 with European Red Cross (Europe)Traffic Safety Education Program Aimed at First-year Elementary School Students (Vietnam)Working together with an NGO to Implement Driver Skills Program Targeted at High School Students (New Zealand)Providing Periodic Healthcare Service in Poverty-stricken Areas (The Philippines)Supporting “Hitozukuri” through “Monozukuri” Courses and Robot Contests (Vietnam)Supporting Financial Independence of Women and Impoverished People (Saudi Arabia)Toyota Production System Support Center Assists North American Manufacturing Industries (North America)

CommunicationExamples of Overseas InitiativesTwo-way Communication with Tomorrow’s Decision Makers (Thailand)Environmental Programs Held within TMMF Site in Cooperation with an Environmental NGO (France)

Shareholders

Business PartnersRelations with SuppliersRelations with Sales Networks

Relations with Dealers in JapanRelationship with Overseas DistributorsExamples of Overseas InitiativesImplementing Training for Suppliers and Creating Common Values (South Africa)

EmployeesSharing the Toyota WayLabor-Management Relations Based on Mutual Trust and RespectHuman Resource DevelopmentRespect for DiversitySafety and Health

Examples of Overseas InitiativesEmployee Housing Constructed in Conjunction with New Plant Construction (Indonesia)Fostering Employees Who Can Think and Act on Their Own (Vietnam)

CustomersToyota’s Customer First Policy

Examples of Overseas InitiativesImproving Customer Satisfaction through Mobile Service Vans (India)

Protection of Personal Information

Highlights in FY2005

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Special Story:Providing the Freedom of Mobility to a Greater Number of Customers 80 - 82

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Sustainability Report 2006Sustainability Report 20062 3

This year’s report includes information on the environmental, social, and economic

aspects of Toyota’s business activities aimed towards the realization of sustainable

development of society and the planet, and for this reason it has been renamed the

Sustainability Report.

To achieve sustainable mobility in the twenty-first century, Toyota is taking on the

challenge to develop various technologies and incorporate them in products, including

improved fuel efficiency to reduce carbon dioxide emissions, diversification of energy

sources with an eye towards restricted petroleum consumption, and clean emissions

and safety technologies. We will strive to remain an exemplary manufacturing company

that can provide the ultimate in mobility to customers.

One specific measure is a commitment to developing further innovations in hybrid

technology, a key technology in addressing environmental issues, and also to continue

expanding the hybrid model lineup. At the same time, we will make further efforts to

enable the use of synthetic and bio-fuels and to develop fuel cell vehicles as options for

alleviating reliance on fossil fuels, as well as to take further measures from the

perspectives of both preventive and collision safety.

Automobiles will play a key role in achieving sustainable mobility in the twenty-first

century, and Toyota’s mission will be to provide vehicles that customers can use with

pride and joy.

We are fully aware that stakeholder expectations are not limited simply to products

with a focus on automobiles, but also extend to the type of company that Toyota is. To

fulfill these expectations, Toyota seeks to be a company that emphasizes fairness and

good faith, acts with courage and determination, and displays abundant vitality and

dignity. To this end, I expect all Toyota employees around the world to work with

enthusiasm, enjoyment and zeal to put the Guiding Principles at Toyota into practice in

their day-to-day work, and to strive always to act in accordance with social expectations.

I look forward to your frank comments and opinions concerning this report.

July 2006

Katsuaki WatanabePresident, Toyota Motor Corporation

� Sustainability Report 2006 Sustainability Report 2006

Seeking Harmony between People, Society and the Global Environment, and Sustainable Development of Society through “Making Things”

Since its foundation, Toyota has continuously strived to contribute to the sustainable development of society through the manufacturing and provision of products and services that lead the times. The foundations of these endeavors are the Guiding Principles at Toyota and an explanation paper entitled Contribution towards Sustainable Development that interprets the Guiding Principles at Toyota. In 2002, Toyota adopted the Global Vision 2010 which proposes the ideal stance to be adopted for the benefit of people, society, and the global environment. Toyota will continue its efforts to contribute to the realization of a sustainable society through “making things.”

We will endeavor to protect the personal information of customers in accordance with the letter and spirit of each country’s privacy laws. (Guiding Principles 1)

Employees

We respect our employees and believe that the success of our business is led by each individual’s creativity and good teamwork. We stimulate personal growth for our employees. (Guiding Principles 5)

We support equal employment opportunities, diversity and inclusion for our employees and do not discriminate against them. (Guiding Principles 5)

We strive to provide fair working conditions and to maintain a safe and healthy working environment for all our employees. (Guiding Principles 5)

We respect and honor the human rights of people involved in our business and, in particular, do not use or tolerate any form of forced or child labor. (Guiding Principles 5)

Through communication and dialogue with our employees, we build and share the value “Mutual Trust and Mutual Responsibility” and work together for the success of our employees and the company. (Guiding Principles 5)

Management of each company takes leadership in fostering a corporate culture, and implementing policies, that promote ethical behavior. (Guiding Principles 1 and 5)

Business Partners

We respect our business partners such as suppliers and dealers and work with them through long-term relationships to realize mutual growth based on mutual trust. (Guiding Principles 7)

Whenever we seek a new business partner, we are open to any and all candidates, regardless of nationality or size, and evaluate them based on their overall strengths. (Guiding Principles 7)

We maintain fair and free competition in accordance with the letter and spirit of each country’s competition laws. (Guiding Principles 1 and 7)

Guiding Principles at ToyotaThe Guiding Principles at Toyota (adopted in 1992 and

revised in 1997) reflect the kind of company that Toyota seeks to be in light of the unique management philosophy, values, and methods that it has embraced since its foundation. Toyota hopes to contribute to society through its corporate activities based on understanding and sharing of the Guiding Principles at Toyota.

Contribution towards Sustainable Development

In January 2005, Toyota prepared the Contribution towards Sustainable Development to explain in greater detail the Guiding Principles at Toyota and convey Toyota’s commitment to contributing to sustainable development in harmony with society and the global environment, with an emphasis on all stakeholders.

Customers Based on our philosophy of Customer First, we develop and provide innovative, safe and outstanding high quality products and services that meet a wide variety of customers’ demands to enrich the lives of people around the world. (Guiding Principles 3 and 4)

Corporate Philosophy

1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world

2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities

3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities

4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide

5. Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management

6. Pursue growth in harmony with the global community through innovative management

7. Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships

Guiding Principles at Toyota(Adopted January 1992, revised April 1997)

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In 2002, Toyota adopted the Global Vision 2010 which is based on the Guiding Principles at Toyota. In order to achieve this vision, a medium- to long-term management plan was drafted and Toyota is working towards achieving the goals specified in the plan. In addition, the Toyota Way 2001 and Toyota Code of Conduct contain the values and methods that employees should adopt in putting the Guiding Principles at Toyota into practice and serve as guides for day-to-day activities.

Global Vision 2010 Centered on the Basic Theme of Innovation into the Future

The Global Vision 2010 proposes the corporate image which Toyota should strive to achieve in 2010 and beyond. Centered on the basic theme of “Innovation into the Future — A Passion to Create a Better Society,” Toyota is carrying out globalization with renewed passion and even higher aspirations, based on four themes to create a more prosperous society in this new century.

Shareholders We strive to enhance corporate value while achieving a stable and long-term growth for the benefit of our shareholders. (Guiding Principles 6)

We provide our shareholders and investors with timely and fair disclosure of our operating results and financial condition. (Guiding Principles 1 and 6)

Global Society/Local Communities Environment

We aim for growth that is in harmony with the environment throughout all areas of business activities. We strive to develop, establish and promote technologies enabling the environment and economy to coexist harmoniously and to build close and cooperative relationships with a wide spectrum of individuals and organizations involved in environmental preservation. (Guiding Principles 3)

Community We implement our philosophy of “respect for people” by honoring the culture, customs, history and laws of each country. (Guiding Principles 2)

We constantly search for safer, cleaner and superior technology to develop products that satisfy the evolving needs of society for sustainable mobility. (Guiding Principles 3 and 4)

We do not tolerate bribery of or by any business partner, government agency or public authority and maintain honest and fair relationships with government agencies and public authorities. (Guiding Principles 1)

Philanthropy Wherever we do business, we actively promote and engage, both individually and with partners, in philanthropic activities that help strengthen communities and contribute to the enrichment of society. (Guiding Principles 2)

Guiding Principles at Toyota(Explanation) Contribution towards Sustainable Development

Global Vision 2010

Medium- to long-term management plan

Corporate policies: annual policies, division policies, policies for individual areas (environment, safety, etc.)

Day-to-day activities

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The Paradigm Changeto Attain Our Vision

What Society is Expected to be Like from 2020 to Around 2030

Arrival of a Revitalized, Recycling-based Society

Expansion of Motorization on a Global Scale

Advent of a Mature Society

Age of ITS and the Ubiquitous Network Society

A New Corporate Image for Toyota to Pursue

2. ManagementExcitement for the World

Promote the appeal of cars throughout the world and strengthen the Toyota

brand image

Kind to the EarthBecome a leader and driving force in global

regeneration by implementing the most

advanced environmental technologies

Innovation into the FutureA Passion to Create a Better Society

To contribute to society through the manufacturing of automobiles.We must now move forward with renewed passion and even higher aspirations,

to create a more prosperous society in this new century.

• Global movement toward a “Revitalized Society.”

• Shifting from an age of mass production and mass consumption to a “Recycling-based Society.” Reduction, Reuse and Recycling of Resources

• People all over the world will benefit from the car’s mobility

• Society will move toward greater respect for people from other nations and cultures

• In international companies, people from different nations and ethnic groups will work together

• Advanced communication technology and automobile IT technologies

• Dramatic improvement in information services accessible while driving

• Improved driving safety, coordinated withthe traffic structure

(1) Transnational management

(2) Group strategic management

(3) Changing the way we work

3. Profit Structures

(1) Create a balanced global structure

(2) Focus on stakeholders and efficient use of capital

1. Technology Development /

Product Development(1) Technology

Development(2) Product

Development

We must adopt a new corporate structure paradigm and improved business practices

Paradigm Change

Global Vision 2010

Respect for all People

Be a truly global company that earns the respect and support of people all over

the world

Comfort of LifeBecome a leader in

creating automobiles and an automobile-based

society in which people can live in ease, safety and

comfort

GlobalVision2010

� Sustainability Report 2006




Sharing the Toyota Way ValuesThe Guiding Principles at Toyota reflect the kind of company

that Toyota seeks to be. The Toyota Way 2001 clarifies the values and business methods that all employees should embrace in order to carry out the Guiding Principles at Toyota throughout the company’s global activities.

With the rapid growth, diversification and globalization of Toyota in the past decade, values and the business methods that had been passed on as implicit knowledge were identified and defined in 2001. Toyota is preparing to operate as a truly global company, guided by a common corporate culture.

In order to continue fulfilling its role as the backbone of all Toyota operations, the Toyota Way must evolve amidst an everchanging business environment. Toyota will continue to update it in the future to reflect changes in the times.

The Toyota Way is supported by two main pillars: “Continuous Improvement” and “Respect for People.” We are never satisfied with where we are and always work to improve our business by putting forward new ideas and working to the best of our abilities. We respect all Toyota stakeholders, and believe the success of our business is created by individual efforts and good teamwork.

Human Resources Development by the Toyota Institute

To promote sharing of the Toyota Way, the Toyota Institute was established in January 2002 as an internal human resources development organization.

Since 2003, overseas affiliates in North America, Europe, Asia, and Africa have established their own human resources training organizations modeled on the Toyota Institute.

The Toyota Code of ConductThe Toyota Code of Conduct (former version adopted in 1998

as the Code of Conduct for Toyota Employees) organizes the basic attitudes necessary for people working at Toyota to put the Guiding Principles at Toyota into practice and to fulfill social responsibilities, and indicates specific points to keep in mind.

In March 2006, the Code of Conduct for Toyota Employees was revised into the Toyota Code of Conduct based on the latest legislation and changes in society. Its contents were revised so that the globally valid essence could be shared by all people working at Toyota worldwide. The new Toyota Code of Conduct consists of voluntary declarations by people working at Toyota rather than orders and instructions from the company. The two-tier system consists of the Code of Conduct section applicable globally, and the Handbook section for TMC personnel, which indicates specific points to keep in mind when conducting business. The Code of Conduct section was distributed not only to all employees at TMC but to the management of subsidiaries in Japan and overseas to develop a shared awareness.

The Toyota Code of Conduct

ToyotaWay

Challenge

Kaizen

Genchi Genbutsu

Teamwork

Respect

ContinuousImprovement

Respectfor People





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Toyota’s Check and Balance Functions

Specifically, we have introduced a unique management system focused on prompt decision making for developing our global strategy and speeding up of operations. Furthermore, we have a range of long-standing in-house committees and councils responsible for monitoring and discussing management and corporate activities from the viewpoints of various stakeholders to ensure heightened transparency and the fulfillment of social obligations.

Ultimately, however, a well-developed awareness of ethics among individuals is the key to successful governance systems. Without such awareness—regardless of the governance structure of a company—corporate governance cannot function effectively. Toyota has a unique corporate culture that places emphasis on problem solving and preventative measures, such as problem solving based on the actual situation on the site and highlighting issues by immediately flagging and sharing them. Toyota’s management team and employees conduct operations and make decisions founded on that common system of checks and balances and on high ethical standards.

Toyota’s Management SystemIn June 2003, Toyota introduced a new management system

that includes a streamlined Board of Directors and the new position of non-board managing officers with responsibility for specific operational functions. A distinctive feature of Toyota’s management system is that senior managing directors do not focus exclusively on management. They also serve as the highest authorities in the specific operational functions and as the link created between management and on-site operations. Retaining an emphasis on developments on the site helps closely coordinate decision making with actual operations. Management decisions can be swiftly reflected in operations, while overall management strategy is able to readily incorporate feedback from frontline operations.

Toyota has adopted an auditor system that is based on the Japanese Commercial Code. In order to increase transparency of corporate activities, four of Toyota’s seven corporate auditors are outside corporate auditors.

Systems for Ensuring Appropriate Management

As a system to ensure appropriate management, Toyota has convened meetings of its International Advisory Board (IAB) annually since 1996. The IAB consists of approximately 10 distinguished advisors from overseas with backgrounds in a wide range of fields, including politics, economics, the environment, and business. Through the IAB, we receive advice on a diversity of business issues from a global perspective. In addition, Toyota has a wide variety of conferences and committees for deliberations and the monitoring of management and corporate activities that reflect the views of a range of stakeholders, including the Labor-Management Council, the Joint Labor-Management Round Table Conference, the Corporate Citizenship Activity Committee, the Toyota Environment Committee and the Corporate Ethics Committee.

Based on the Guiding Principles at Toyota, Toyota’s aim is to become a trusted corporate citizen in international society through open and fair business activities that honor the language and spirit of the law of every nation. To put that philosophy into practice, Toyota considers it essential to achieve stable, long-term growth by building favorable relationships with all of its stakeholders, including shareholders, customers, business partners, local communities, and employees, and providing products that fully cater to customer needs. Toyota is taking concrete measures to reinforce its corporate governance functions in order to enhance and maintain corporate value by becoming an even more competitive global company.


Corporate Governance

Shareholders

Monitoring

Appointment

Monitoring

NY/London stock listings

Board of Corporate Auditors

Financial Statement Audits based on

US & Japan auditing standards

Board of Directors

Managing Officers

[Majority are outside corporate auditors]

Disclosure Committee* The U.S. Sarbanes-Oxley Act (internal control system)

readiness project team

*This Committee ensures appropriate, timely and fair disclosure of material information

Senior Managing Directors

Stock Option Committee

Labor-Management Council/ Joint Labor-Management Round

Table Conference

Corporate Ethics Committee

Toyota Environment Committee

Corporate Citizenship Activity Committee

International Advisory Board

Toyota’sCorporateGovernance

� Sustainability Report 2006


Establishing Compliance

For Toyota, compliance does not mean simply observing laws; it means respecting societal norms and corporate ethics, complying with the expectations of all stakeholders, and engaging in fair corporate activities. The first clause of the Guiding Principles at Toyota, “Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world,” codifies this thinking and establishes compliance as one of Toyota’s management principles. Establishing compliance requires steady efforts in the performance of day-to-day operations. Toyota is promoting compliance through the construction of frameworks such as the Corporate Ethics Committee and other internal organizations, and the development of human resources to raise individual awareness of compliance.

Corporate Ethics CommitteeThe Corporate Ethics Committee was established in 1991 to

serve as the core organization for establishing compliance. The Committee, which includes all executive management from the executive vice president level and higher as well as corporate auditors (including outside auditors), discusses key matters relating to corporate ethics, compliance and risk management, and responses to those issues. Conclusions of the Committee are announced at an Executive Meeting and directors and managing officers disseminate information to the divisions they oversee.

In FY2005, the committee discussed responses to the new Corporation Law, revision of the Code of Conduct for Toyota Employees, and company-wide risk reassessment activities.

Toyota established the Risk Finding/Assessment Meeting under the auspices of the Corporate Ethics Committee. Risk Finding/Assessment managers of each Group discuss compliance risks and other issues. The Meeting also serves to disseminate information about matters decided by the Corporate Ethics Committee to each division. The content of its deliberations are reported to the Corporate Ethics Committee as necessary.

The Compliance HotlineToyota contracted an outside law firm to establish a

Compliance Hotline that allows employees to consult in private in the event they have any questions or doubts concerning issues of compliance. Toyota is working to increase awareness of this hotline among employees by including information in the pocket edition of the Toyota Code of Conduct and by the placement of boards promoting its use.

Actual consultations are conducted by using the employee’s name. The content of the consultations, however, is conveyed anonymously to a secretariat within Toyota and the facts confirmed, and the details are investigated with scrupulous care to ensure that the identity of the consulting employee is not revealed. If the results of the investigation indicate a compliance-related issue, a response is immediately implemented and the number and content of consultations are reported to the president and corporate auditors.

Activities to Re-assess Compliance with Laws and Regulations

In December 2003, Toyota employees leaked proposed questions for a government-sponsored written examination for auto mechanics. In light of this incident, in FY2004, Toyota took measures to ensure legal compliance focusing on activities to re-assess compliance with laws and regulations and activities to ensure the firm standing of ethics and social responsibility in the workplace, as the company-wide Implementation Priority.

In FY2005, based on these activities, Toyota sorted out statutory and operational risks in each division from July to September, and confirmed a certain outlook for implementation of countermeasures.

Also, based on the results of FY2004 activities to reassess compliance with laws and regulations, reassessments were performed in early 2006 to check if systems to ensure compliance have been incorporated into day-to-day operations, and if those systems are functioning properly. Results of the reassessments were confirmed by the Senior Managing Director in charge of each division by May 2006 and reported to the Corporate Ethics Committee in June.

Ensuring Thorough ComplianceIt is crucial that awareness

of compliance extends from senior managers to other employees. Awareness is developed through on-the-job training and managerial training.

In FY2005, training was conducted for newly appointed managing officers, 107 newly appointed general managers of departments and about 490 newly appointed group managers. In April 2006, 1,909 new employees underwent training and learned about the importance of compliance.

Global Compliance MeasuresIn conjunction with the globalization of business, Toyota

considers it important to establish compliance by all affiliates worldwide, and will continue to reinforce compliance based on the Toyota Code of Conduct.

New employees learn about compliance

9Sustainability Report 2006

Toyota Dream House PAPI

TSOP=Toyota Super Olefin Polymer

RSPP=Recycled Sound-Proofing Products

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600,000

500,000

400,000

300,000

200,000

100,000

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(Number of Vehicles)

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’05 ’06’04’03’02’01’00’99’98’97

Highlights in FY2005 Environmental Aspects

All goals specified in the Third Environmental Action Plan were achieved and initiatives begun towards achieving the Fourth Environmental Action Plan goals.

Environment Committees were established in Europe in FY2003, North America in FY2004 and South America in FY2006 to reinforce environmental activities by affiliates subject to consolidated environmental management.

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Environmental Management

Achieved the 2010 Fuel Efficiency Standards in all vehicle weight categories.

The percentage of total production that meets the Ultra Low-Emission Vehicle level reached 96%.

In March 2006, the Lexus GS450h equipped with a newly developed dedicated hybrid system for rear-wheel drive passenger vehicles was launched, widening the market base for hybrid vehicles.

Worldwide sales of Toyota hybrid vehicles in FY2005 were approximately 250,000 units, for a cumulative total exceeding 610,000 units.

Development and Design

All goals, including that for reduction of CO2 emissions were almost achieved.

Through energetic actions to reduce volatile organic compound (VOC) emissions, conversion to water-borne paints for the top coating (base coat) was completed on all lines in Japan.

The Toyota Environmental Management System (TOYOTA-EMS) that incorporates the Toyota Way was defined and expanded to all affiliates worldwide.

Production and Logistics

Steadily implemented measures to recycle/recover automobile shredder residue (ASR) and recover airbags and CFCs/HFCs from end-of-life vehicles towards the smooth operation of the Automobile Recycling Law.

Steadily incorporated new designs for recycling (DfR) into new models.

Reduced the usage of four substances of concern (SOC) at Toyota operations worldwide.

Further developed new practical dismantling technologies and marketed them widely.

The number of vehicles in which Recycled Sound-Proofing Products (RSPP) was used exceeded the 10 million mark.

Promoted the collection and recycling of batteries from end-of-life hybrid vehicles.

Recycling

Began operating a pilot plant in May 2005, to verify the feasibility of mass-production technologies for bio-plastics.

Developed and marketed plants species that contribute to environmental improvement.

Developed an experimental dream house of the future, called Toyota Dream House PAPI, which was opened to the public during EXPO 2005, Aichi, Japan.

Biotechnology and Afforestation/Housing Business

South American Environment Committee (set up in May 2006 in Brazil)

Actual Fuel Efficiency of Toyota Vehicles in FY2005 and 2010 Fuel Efficiency Standards

Cumulative Number of Hybrid Toyota Vehicles Sold Worldwide

(Year)(March end)

Total CO2 emissions from production areasCO2 emissions per sales unit

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CO2 Emissions (Energy Consumption) and CO2 Emissions per Sales Unit

Note: For facilities in non-production areas for which FY1990 emissions data is not available, the oldest subsequent data available is used for the graph

10 Sustainability Report 2006

Environmental Aspects


Basic Concepts with Regard to the Environment

To ensure that its products are accepted and well received around the world, Toyota has positioned the environment as a priority management issue. Further, as outlined in the Global Vision 2010, Toyota seeks to become a leader of global regeneration through its outstanding environmental technologies.

In addition to working to reduce environmental impact at all stages from vehicle development to production, use, disposal, and recycling, Toyota undertakes environmental activities in all its business areas, including housing, information, biotechnology, and afforestation. Additionally, in order to conduct environmental activities at the highest levels in every country and region, Toyota has established environmental management systems in all regions and areas of operation and works with related companies in Japan and overseas to implement consolidated environmental management and promote environmental management on a global scale.

This chapter discusses Toyota’s environmental activities and the current progress status in achieving goals set for each phase of the automobile lifecycle. Also discussed is the status of consolidated environmental management and global activities, including examples of environmental activities by consolidated subsidiaries overseas.

Principles and PoliciesThe Toyota Earth Charter (adopted in 1992,

revised in 2000) is based on the Guiding Principles at Toyota adopted in 1992 (revised in 1997), and embodies the comprehensive approach to global environmental issues. The Toyota Earth Charter is currently shared by approximately 560 affi liates worldwide. The Toyota Environmental Action Plan is a medium- to long-term plan that summarizes specifi c activities and goals in order to promote environmental preservation activities in accordance with the Toyota Earth Charter.

Reuse

Customer

Extractionof resources

EnergyRaw

materials WaterFuel

Dealer

Parts and materials supplier

Recycling company

Toyota

Disposal

Procurement

Logistics

Logistics

Recycling

Use

Production

Global warming (CO2 emissions)Resource conservation (packaging materials, etc.)Substances of concern

Global warming (CO2 emissions)Resource conservation(packaging materials, etc.)

Waste(waste oil, used parts, etc., resulting from maintenance)

Global warming (CO2, HFC)Released into the atmosphere(HC, CO, NOx, PM, etc.)

Waste(shredder residue, waste oil, used parts, including batteries, etc.)

Global warming (CO2

emissions)Substances released into the atmosphere and discharged to waterways, noise, odor, waste, etc.

Developmentand Design

Annual Plan

Environmental Management System

The Toyota Earth Charter

GuidingPrinciplesat Toyota

Toyota Environmental Action Plan(five-year plan)

The business spirit since inception

Shared by approximately 560 affiliates

Drafted by approximately 220 companies subject to consolidated environmental management

Conceptual Diagram of the Toyota Environmental Action Plan

I. Basic Policy II. Action Guidelines

2. Pursuit of environmental technologiesPursue all possible environmental technologies, developing and establishing new technologies to enable the environment and economy to coexist harmoniously.

1. Contribution toward a prosperous 21st century societyContribute toward a prosperous 21st century society.Aim for growth that is in harmony with the environment, and set as a challenge the achievement of zero emissions throughout all areas of business activities.

4. Working in cooperation with societyBuild close and cooperative relationships with a wide spectrum of individuals and organizations involved in environmental preservation including governments, local municipalities, related companies and industries.

3. Voluntary actionsDevelop a voluntary improvement plan, based on thorough preventive measures and compliance with laws, that addresses environmental issues on the global, national, and regional scales, and promotes continuous implementation.

1. Always be concerned about the environmentTake on the challenge of achieving zero emissions at all stages, i.e., production, utilization, and disposal

2. Business partners are partners in creating a better environmentCooperate with associated companies

3. As a member of societyActively participate in social actions

4. Toward better understandingActively disclose information and promote environmental awareness

(2) Pursue production activities that do not generate waste

(1) Develop and provide products with top-level environmental performance

(3) Implement thorough preventive measures

(1) Participate in the creation of a recycling-based society

(2) Support government environmental policies

(3) Contribute also to non-profit activities

(4) Promote businesses that contribute toward environmental improvement

Toyota Earth Charter

Promotion by the Toyota Environment Committee which consists of top management (chaired by the president)

III. Organization in Charge


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Implementation StructureThree committees were established under the Toyota

Environment Committee, which is chaired by the president and meets twice a year to address issues and response policies in each area. The Environmental Affairs Division functions as a secretariat for committee operation. All related departments promote company-wide environmental action in cooperation with each other.

At a Toyota Environment Committee meeting held in FY2005, there were discussions regarding reduction and control of CO2 emissions and other issues, and the Fourth Toyota Environmental Action Plan.

In FY2000, TMC introduced consolidated environmental management and has been implementing environmental action in concert with consolidated affi liates in Japan and overseas. In addition, Environment Committees were established in Europe in FY2003, North America in FY2004 and South America in FY2006 to reinforce local environmental activities.

All-Toyota Production Environment ConferenceAll-Toyota Production Environment Meeting

Environmental Product Design Assessment Committee

Fuel Efficiency and Exhaust Emissions Committee

Noise Reduction Subcommittee

Clean-energy Vehicle Subcommittee

Working Group by Topics

ISO 14001 Promotion Subcommittee

Eco-VAS Subcommittee

Production Environment Technology Subcommittee

Overseas Production Environmental Subcommittee

Plant Production Environmental Subcommittee

Production Environment Logistics Subcommittee

Environmental Manager by Region (Plant General Manager)

Environmental Preservation Secretariat by Plant

Research and Development Subcommittee

Domestic Subcommittee

Overseas Subcommittee

Production Environment Committee

Recycling Committee

Toyota Environment Committee

Environmental Affairs Division

SOC Subcommittee

Chairman: President Katsuaki Watanabe

Established in 1992Directs Toyota’s priority environmental action issues

Chairman: Managing Officer Tatehito Ueda

Established in 1973Studies key environmental preservation issues related to development and design of Toyota vehicles

Chairman: Senior Managing Director Atsushi NiimiVice Chairman: Senior Managing Director Shoji Iikawa

Established in 1963Discusses and determines important issues for environmental preservation in the area of production and logistics

Chairman: Senior Managing Director Yoshio ShiraiVice Chairman: Managing Officer Masamoto Maekawa

Established in 1990Implements responses to recycling laws and studies the development of technology and designs for recycling

Development of new air conditioning coolants, reduction of VOC emissions inside vehicles, etc.

Promotes the manifest system and compliance by dealers with CFC and other substance regulations

Promotes the reduction of usage of substances of concern

Promotes development of designs for recycling, the prior assessment of 3Rs (reduce, reuse, recycle) and the reduction of substances of concern

Secretariat of Environmental CommitteesEstablished in 1998Manages action policies and goals. Drafts environmental action plans and annual company-wide environmental policies

Executives in charge of Environmental Affairs DivisionExecutive Vice President Takeshi Uchiyamada Senior Managing Director Yoshio ShiraiManaging Officer Tatehito UedaManaging Officer Tetsuo AgataManaging Officer Masayuki Nakai

South American Environment Committee (set up in May 2006 in Brazil)

Organization Framework (Positions and Areas of Responsibility as of March 2006)

Promotion Structure for Global Environmental Management

South AmericanEnvironment Committee

(May 2006 -)

EuropeanEnvironment Committee

(2003 -)(2003 -)Toyota

Environment Committee(1992 -)

North AmericanEnvironment Committee

(2004 -)(2004 -)


Environmental Aspects Environmental Management

Status of Achievement of the Third Toyota Environmental Action PlanThe Third Toyota Environmental Action Plan was adopted as an action plan covering the fi ve-year period from FY2001 to FY2005.

Goals were achieved in all 23 categories adopted as action items. FY2006 marked the start of the Fourth Toyota Environmental Action Plan, which will continue until FY2010. Based on the Environmental Action Plan, an Annual Environmental Action Plan is drafted every year, and environmental initiatives steadily promoted.

Results of Third Toyota Environmental Action Plan (FY2001 - FY2005)Item Action policy / Specifi c goal Results

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1. Fuel effi ciency • Achievement of the top level within the class in all countries and all regionsAchievement of the Japanese 2010 Fuel Effi ciency Standards by 2005Responses toward realizing Japan Automobile Manufacturers Association’s (JAMA) commitment to reduce CO2 emissions to 140g/km by 2009

• Japan: Achieved the 2010 Fuel Effi ciency Standards in all seven weight categories for gasoline-engine passenger vehicles in FY2005, ahead of schedule

• Europe: Steady progress toward realizing JAMA’s commitment to reduce CO2 emissions to 140g/km by 2009

2. Exhaust emissions • Taking appropriate measures based on assessment of the urban environmental conditions in each country and region

• The percentage of vehicle series that meet or surpass the Ultra Low-Emission Vehicle level in FY2005 reached 96% of total production

3. Clean-energy vehicles

• Further enhancements to hybrid systems and an increase in the number of vehicle series equipped with hybrid systems

• Development of fuel cell vehicles and early introduction

• Equipped 10 vehicle series with hybrid systems. Completed development of the Toyota Hybrid, System II (THS II), a next-generation hybrid system, in 2003.

• Began limited marketing of Toyota FCHVs in 2002 (world’s fi rst) • Cumulative hybrid vehicle sales top 610,000 units in FY2005

4. Recoverability • Designs for recycling (DfR) toward a 2015 vehicle recovery rate of 95% • Developed new DfR in 2003 and incorporated its features in new models, starting with the new Raum

5. Substances of concern

• Promotion of elimination of four substances (lead, mercury, cadmium and hexavalent chromium)

• Achieved JAMA’s voluntary goals of eliminating lead, mercury and cadmium. The goal to eliminate hexavalent chromium was largely achieved in June 2006.

• Measures for the complete elimination of these four substances by 2007 is underway globally

6. Automobile noise • Further reduction of all automobile-related noise • Achieved the goal of 100% compliance with the latest standards (from 1998 to 2001)

7. Air conditioning systems

• Development of an air conditioner that uses a new refrigerant instead of HFC134a

• Air conditioner that uses CO2 as a refrigerant adopted on the Toyota FCHV. However, issues such as performance, cost, etc. still remain.

8. Prior-assessment systems

• Promotion of environmentally conscious designs starting at the development stage

• Implemented Eco-VAS (Eco-Vehicle Assessment System) in all vehicles in FY2005 starting with the redesigned Vitz launched in 2005

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9. Global warming threat

• FY2005 CO2 emissions level: Reduction by 5% from the FY1990 level • Actively carried out merging and discontinuance of processes and introduced innovative energy-conserving technologies, etc. CO2 emissions in FY2005 reduced by 19% from the FY1990 level.

10. Waste and resource conservation

• Promotion of waste reduction and resource conservation actions to achieve zero emissionsAchievement of zero landfi ll waste at all plants by the end of FY2003 and reduction of combustible waste to 1/3 or less of the FY1990 level

• Achieved zero landfi ll waste at all plants by December 2000

• Combustible waste: 87% reduction compared to the FY1990 level

11. Water resources • New measures for conserving water resources with a focus on vehicle production plantsWater consumption per vehicle: Reduction by 20% from the FY1995 level

• Systematically implemented reduction and management of water consumption to achieve a reduction of 36% from the FY1995 level

12. Substances of concern

• Reduction of VOC emissions from body painting linesVOC emissions: Average of 35g/m2 or less on all lines

• Reduction of the discharge of substances subject to the PRTR (Pollutant Release and Transfer Register) law: Reduction by 50% from the FY1998 level

• Reduced to average of 30g/m2 on all lines by systematically switching to water-borne paints or other methods

• The discharge of substances subject to the PRTR law was reduced by 68% from the FY1998 level

13. Logistics* • Stabilization of CO2 emissions to the FY1990 level or lower

• Reduction of packaging and wrapping material usage by 20% from the FY1995 level

• Reduced CO2 emissions by 5.9% from the FY1990 level through improvements in loading rates, modal shifts and other measures

• 44% reduction from the FY1995 level through conversion to returnable containers

Coop

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soc

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14. Environment-oriented business ventures

• Active promotion of businesses that help improve the environment, such as ITS (Intelligent Transport Systems) and afforestation businesses

• Promoted an ITS model project. Also promoted afforestation in Australia, roof garden businesses, etc.

15. Suppliers • Support and accelerate the creation of environmental management systems

• Ensure thorough management of substances of concern based on Toyota’s standards

• About 450 companies subject to consolidated environmental management acquired ISO 14001 certifi cation

• A revised version of the TOYOTA Green Purchasing Guidelines was created in March 2006• Proceeded with measures to ensure that the substances (464 substances) banned by Toyota were

not contained in primary and supplementary materials

16. Dealers’ cooperation • Promotion of actions to establish and achieve full compliance with the Toyota Japanese Dealer Environmental Guidelines created in 1999

• All dealers achieved the goals defi ned in the guidelines by FY2002• Adopted the Toyota Japanese Dealer CSR Guidelines in FY2005. The Toyota Dealers Association

issue a CSR declaration.

17. Recycling system(Japan, Europe)

• Participation in the creation of recycling systems in Japan and Europe, through cooperation with the industry

• Development of recycling/recovery technologies

• Systems were launched in 2005 in response to the Japanese Automobile Recycling Law • Recycling systems for end-of-life vehicles are under construction in Europe in preparation for

recycling/recovery of all end-of-life vehicles beginning in 2007• Announced the Toyota Recycle Vision in 2003 and developed a new automobile shredder residue

recycling/recovery technology and new dismantling technology• The number of vehicles featuring RSPP (Recycled Sound-Proofi ng Products), a high-quality insulating

material made from recycled automobile shredder residue passed the 10 million mark at the end of FY2005

18. Transportation systems

• Promotion of and proposal on research related to “the ideal transportation environment”

• Cooperated in issuing “Mobility 2030: Meeting the challenges to sustainability”

19. Related basic research

• Promotion of and proposal on basic research that can help improve the environment

• Promoted research via the World Business Council for Sustainable Development (WBCSD) and JAMA

20. Socially-contributing activities

• Promotion of global support of environmental education, tree-planting activities and basic academic research, etc.

• Grants provided to a cumulative total of 89 projects under the Toyota Environmental Activities Grant Program (from 2000)

• Founded the TOYOTA Shirakawa-Go Eco-Institute in April 2005, which had 14,000 visitors in its fi rst year

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ent 21. Among the public • Enhanced cooperation with society (communication) • Published local environmental reports in 12 countries/regions

• The “Environmental Report” becomes the “Environmental & Social Report” from 2003, with enhanced information on the social aspects of Toyota’s activities

• Drafted and made public the Contributtion towards Sustainable Development, which interprets the Guiding Principles at Toyota, in January 2005

22. Among employees • Enhancements to environmental education • Provided education to employees in key positions, environmental leaders and new employees, etc.

23. Global consolidated environmental management

• Implementation of consolidated environmental management that includes automobile-related production companies in Japan and overseas(Establishment of a system to consolidate numerical data and follow up annually)

• Began collecting and publishing production-related environmental data from all companies subject to consolidated environmental management in FY2002

• Developed and implemented the Environmental Performance Information (EPI) System

*In FY2005 Toyota switched from the ton-kilometers method of calculating CO2 emissions volumes to the fuel method. Target values that were previously indicated using the ton-kilometers method have been recalculated using the fuel method.


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The Fourth Toyota Environmental Action PlanThe Fourth Toyota Environmental Action Plan is a clear statement of the activities that Toyota must undertake between FY2006 and

FY2010. It seeks to achieve a balance between Toyota’s growth and harmony with society and to contribute to the development of a sustainable society. In adopting the plan, Toyota addressed four main topics:

1. Energy/Global warming2. Recycling of resources3. Substances of concern4. Atmospheric qualityFor each of these four topics, Toyota has adopted action items, specifi c measures, and goals in the areas of development and

design, procurement and production, logistics, sales and marketing, and recycling, and will continue to implement its environmental management.

The Fourth Toyota Environmental Action Plan

Unconsolidated

Individual entities

Domestic scale

Single year

Consolidated

Business partners

Global scale

Medium- long-term


Cooperation with SocietyManagement

Energy/Global

warming

Recycling ofresources

Substances of concern

Atmosphericquality

Developmentand

Design

Productionand

Logistics

AutomobileRecycling

Further reduce CO2

emissions in Toyota’s global operations

Promote the effective use of resources to further contribute to the realization of a recycling-based society

Reduce water consumption

Reduce the discharge of substances subject to the Pollutant Release and Transfer Register (PRTR) law*

Reduce emissions to improve air quality in urban areas in all countries and regions

Implementinitiatives to reduce VOC emissions

Promote the development of technologies to achieve the best fuel efficiency performance in each country and region

Develop technologies to respond to the diversification of energy and fuel sources

Reduce CO2 emissions in the production and logistics activities of each country and region

Further promote and expand the use of designs based on the designs for recycling (DfR) concept

Strengthen consolidated environmental management

Enhance environmental education Contribute to the development of a recycling-based society

Improve disclosures of environmental information and two-way communications

Actively contribute to and propose environmental policies based on sustainable development

Further promote environmental management to business partners

Promote new businesses that contribute to environmental improvement

Steadily reduce environmental impact over the entire lifecycle of the product through full-scale implementation and establishment of Eco-Vehicle Assessment System (Eco-VAS)

Steadily implement recycling systems in Japan and Europe• Steadily implement initiatives to

increase vehicle recovery rates in Japan and Europe to reach 95% by 2015

Recovery rates:Japan: equivalent to 92% in FY2010Europe: 85% in 2006

Promote management and further reductions in the use of substances of concern (SOC)• Eliminate use of four

SOCs (lead, mercury, cadmium and hexavalent chromium) globally

Promote initiatives to improve traffic flows using a variety of networking technologies

Promote the development of clean-energy vehicles, encourage their effective introduction and ensure wider market acceptance

*PRTR Law:Law Concerning Reporting, etc. of Releases to the Environment of Specific Chemical Substances and Promoting Improvements in Their Management



FY2005 Status of Company-wide Environmental PoliciesIn accordance with the Third Toyota Environmental Action Plan, Toyota set goals for FY2005 in each area and took action. The

FY2005 goals were achieved in all areas.1) In the area of management, all goals specifi ed in the Third Toyota Environmental Action Plan were achieved and initiatives begun

towards achieving the Fourth Toyota Environmental Action Plan goals.2) In the area of development and design, Toyota achieved the 2010 Fuel Effi ciency Standards for all vehicle weight categories. The

percentage of total production that meets the Ultra Low-Emission Vehicle level reached 96%. In March 2006, the Lexus GS450h equipped with a newly developed dedicated hybrid system for rear-wheel drive passenger vehicles was launched. Cumulative worldwide sales of Toyota hybrid vehicles exceeded 610,000 units.

3) In the area of production, goals for reduction of CO2 and VOC emissions were achieved. The Toyota Environmental Management System (TOYOTA-EMS) that incorporates the Toyota Way was defi ned and expanded to affi liates worldwide.

4) In the area of recycling, initiatives to reduce the usage of four substances of concern at Toyota operations were implemented worldwide. Toyota also continued the development of easy-to-dismantle technologies and steadily promoted recovery and recycling initiatives in response to the Automobile Recycling Law.

Management FY2005 action policy Action results FY2006 action policy Related

pages

1. Achievement of goals outlined in the Third Toyota Environmental Action Plan (FY2001 - FY2005) and start of initiatives towards achieving the Fourth Toyota Environmental Action Plan

• All Third Toyota Environmental Action Plan goals were achieved• Environmental initiatives are steadily being promoted toward

achieving the Fourth Toyota Environmental Action Plan goals

1. Steady promotion of the Fourth Toyota Environmental Action Plan (2006 - 2010)

10–

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2. Prepare and implement scenarios to control global CO2 emissions • Studied environmental strategies from the three aspects of energy conservation, air quality and CO2 emissions and presented a report to the President in September and to the Toyota Environment Committee in October 2005 and March 2006

2. Prepare and implement medium- to long-term management of global CO2 emissions 11

3. Enhance responsibilities and roles and strengthen communication with society to respond to Toyota’s growing global presence

• Compiled the Toyota National Dealers’ Advisory Council CSR Guidelines and issued the CSR Declaration toward establishment of the Contribution towards Sustainable Development which interprets and explains the Guiding Principles at Toyota

3. Enhance communication with society based on Toyota’s CSR activities 58

Development and DesignFY2005 action policy Action results FY2006 action policy Related

pages

1. Early and steady responses to fuel effi ciency goals• Achieve 2010 Fuel Effi ciency Standard in all vehicle weight

categories ahead of schedule by 2005• Steadily introduced vehicles that meet fuel effi ciency standards in

all seven weight categories

1. Early and steady responses to fuel effi ciency goals• Achieve 2010 Fuel Effi ciency Standard in all vehicle weight

categories

24–

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2. Active promotion of measures to reduce emissions• Achieve Ultra Low-Emission levels in most vehicle series by

2005• Develop and introduce clean diesel vehicles

• Introduced eighteen SU-LEV compliant vehicle series• The number of vehicle series that meet or surpass the Ultra Low-

Emission Vehicle level reached 96% of total production• The DPNR-equipped Dyna/Toyoace are certifi ed Ultra Low-

Emission Vehicles

2. Active promotion of measures to reduce emissions • Achieve Ultra Low-Emission levels in most vehicle series (gradually introduce and expand the SU-LEV line-up) 26–

27

3. Promotion of actions toward commercialization of clean-energy vehicles• Enhance development and popularization of hybrid vehicles• Promote the development of fuel cell hybrid vehicles

• Introduced the GS Hybrid equipped with THS II• The improved FCHV receives vehicle type certifi cation; Toyota

begins limited marketing • FCHV-BUS begins trial operation in the area around the Central

Japan International Airport (Centrair) and EXPO 2005, Aichi, Japan

3. Promotion of actions toward commercialization of clean-energy vehicles• Enhance development and popularization of hybrid vehicles• Promote the development of fuel cell hybrid vehicles

28

4. Promotion of environmental management and provision of information• Phased implementation of Eco-VAS in vehicle series currently

under development

• Implemented LCA at the vehicle development stage in ten vehicle series, and included LCA results in product catalogs

4. Promotion of environmental management and provision of information• Phased implementation of Eco-VAS in vehicle series currently

under development

29

Production and LogisticsFY2005 action policy Action results FY2006 action policy Related

pages

1. Reduction of CO2 emissions• Steady introduction of innovative technologies• Promote measures to further reduce energy loss

Goal: Total CO2 emissions volume: 1.8 million tons/year or less

• Energy conservation measuresPromoted merging and discontinuance of processes at plantsSteady expansion and sharing of innovative technologies

CO2 emissions: 1.71 million tons/year

• Steady introduction of innovative technologies• Further promotion of measures to reduce energy loss

Goal: Total CO2 emissions volume: 1.7 million tons/year or less

32

2. Reduction of substances of concern• Implementation of action plan to achieve PRTR/VOC goals

Goal: VOC emissions (average):Vehicle body painting: 35g/m2 or less Resin parts painting: 715g/m2 or less

Goal: Substances subject to PRTR: 2,000 tons/year or less

• Introduction of water-borne paints and reduction of purge solventsVOC emissions (average):Vehicle body painting: 30g/m2

Bumper painting: 706g/m2

Substances subject to PRTR: 1,980 tons/year

• Implement reduction measures based on the 10-year plan for VOC emissions reductions

• Reduce usage volume of purge solventsGoal: VOC emissions (average):

Vehicle body painting: 30g/m2 or less

Goal: Substances subject to PRTR: 1,950 tons/year or less

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3. Reduction of waste and conservation of resources• Promotion of actions to reduce both waste disposal costs and

CO2 emissions during waste transport/disposalGoal: Generation of combustible waste: 10,660 tons/year or less

• Implementation of measures and plans based on the scenario for FY2005Goal: Reduction of primary raw materials usage: 9,100 tons/

year or moreGoal: Usage of foundry sand: 19,000 tons/year or lessGoal: Usage of oils: 10,700kl/year or less

Generation of combustible waste: 8,200 tons/year

Reduction of primary raw materials usage: 14,300 tons/year

Usage of foundry sand: 17,500 tonsUsage of oils: 9,800kl

• Implement reduction measures based on the 10-year plan for reduction of substances dischargedInitiatives to reduce substances discharged(Waste + amount recycled for a fee + money-back recycling)Goal: Volume discharged outside the company 515,000 tons/

year or less33

4. Conservation of water resources• Meticulous control of water consumptionGoal: Water consumption of 4.1m3 or less per vehicle Water consumption per vehicle: 4.2m3 Continue activities to maintain water consumption at plants at

4.1m3 per vehicle or less

34


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FY2005 action policy Action results FY2006 action policy Related pages

5. Further promotion of proactive prevention measures• Follow-up on implementation results and thoroughly institute

necessary corrections• Further strengthening of activities to prevent non-compliance

and complaintsGoal: Zero non-compliance or complaints

Implementation of a plan for proactive prevention measuresNumber of cases of legal non-compliance: Two

1. Implement proactive prevention measures for non-compliance and complaints• Revisit foundations and starting points, ensure thorough

compliance with work rules (including maintenance inspections)

• Measures to prevent drainage into waterways2. Expand and establish implementation of Toyota EMS

Goal: Zero non-compliance or complaints

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6. Environmental initiatives at overseas production affi liates• Expansion of Toyota EMS and fi rm establishment (continue

implementation of Eco-Factory audits)Goal: 100% implementation rateGoal: Achieve FY2005 goals

• Implementation of Eco-Factory audits• Training held to improve the EMS implementation level (30

employees from 26 affi liates)• Goals were generally achieved for implementation rates and

performance

• Expansion of Toyota EMS and fi rm establishment (continue implementation of Eco-Factory audits)

Goal: 100% implementation rateGoal: Achieve FY2006 goals

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7. Reduction of environmental impact in logisticsCO2 emissions• Promotion of activities that will lead to reductions in both CO2

emissions volume per vehicle and distance driven• Promotion of shift to transport modes with lower emissions

volume per vehicle• Fuel effi ciency improvement activities• Expansion of shared transportation*Goal: 435,000 tons total per year or less

Reduction of wrapping and packaging material• Comprehensive reassessment of packaging specifi cations,

involving suppliers and receiving partiesGoal: Total volume: 48,700 tons/year or less

• Increased loading rates by switching to low-fl oor trucks• Promoted Eco Driving through driver education, etc.• Reduced the number of truck runs by sharing truck space with

TACTI and Hino

Total CO2 emissions: 414,000 tons/year

• Expanded the use of returnable containers for transport

Total CO2 emissions: 49,800 tons/year

• Promotion of activities that will lead to reductions in both CO2 emissions volume per vehicle and distance driven• Promote a shift to transport modes with lower emissions

volume per vehicle (e.g., railway transport)• Promotion of activities in cooperation with logistics companies• Fuel effi ciency improvement activitiesGoal: Total volume: 501,000 tons/year or less (The total volume is higher because of increases in production at remote sites- Toyota Motor Kyushu, Inc. and the Iwate Plant of Kanto Auto Works , Ltd.)

• Comprehensive reassessment of packaging specifi cations, involving suppliers and receiving partiesGoal: Total volume: 49,800 tons/year or less(The total volume is higher because of increases in production in Japan and overseas)

34–

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*Toyota switched from the ton-kilometers method of calculating CO2 emissions volumes to the fuel method in FY2005. Target values that were previously indicated using the ton-kilometers method have been recalculated using the fuel method.

RecyclingFY2005 action policy Action results FY2006 action policy Related

pages

1. Firm establishment of responses to the Automobile Recycling Law in Japan• Establish the use of collection/recycling systems and reduce

costs

• Ensure steady operation of an in-house information processing system

• Implement proper management of income and expenses and smooth information disclosure (June 2005)

• Firmly establish responses to the Automobile Recycling Law at vehicle dealers and conduct follow-up checks

• Achieved a balance between cost and recycling/recovery rate through measures such as optimization of ASR sent to ASR recycling/recovery facilities and landfi ll sites

• Airbags: Almost achieved goals for on-board deployment rates• In-house information-processing system improvements

completed. Made timely responses to setting individual fees.• Smooth disclosure of results of responses to the Automobile

Recycling Law in FY2004 (June 2005)• Status check of collection companies working at dealers followed

up individually

1. Promotion of low-cost recycling/recovery and steady responses to recycling laws in Japan• Promote low-cost recycling

Reduce ASR recycling/recovery costsReduce airbag recycling costs by improving technologies for on-board deployment

• Conduct voluntary audits in cooperation with related designated corporations

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2. Responses to the EU ELV Directive• Construct an ELV take-back network in the 25 EU member states• Create system for assessing and reducing recycling/ recovery

costs based on Toyota vehicle dismantling data• Solid response to obligatory reporting of recycling/recovery

results in each country

• Created a low-cost network based on the regulations/current situation in each nation (complete in 15/25 nations)

• Considered cost assessment in Germany, UK, Hungary and Poland

• Published recycling/recovery rate results in three nations

2. Responses to automobile recycling legislation overseas• Support overseas distributors in creating end-of-life vehicle

take-back and recycling/recovery systems in all EU member states

• Conduct appropriate lobbying for an effective system in the working group assessing China’s recycling laws

• Understand the status of recycling legislation creation in South Korea and Taiwan and conduct lobbying activities

• Gather information on future trends of recycling legislation in the U.S.

3. Responses to automobile recycling laws in other countries• Lobbying activities in countries considering automobile recycling

legislation (China, Taiwan, South Korea and other countries)• Conduct surveys on waste disposal laws and infrastructure in

the U.S., China and other countries

• Participated in government working groups considering recycling legislation in China

• Conducted surveys regarding the status of legislation in countries such as the U.S. 3. Promote recycling of HV batteries

• Promote lower battery recycling costs• Study designs for recycling (DfR) for HV batteries and move

forward with response plan4. HV battery recycling

• Ensure implementation of HV battery recycling and cost reduction (in Japan)

• Promoted the use of electric furnaces as a plan to lower costs

5. Promotion of recycling technologies and reduction of SOCs• Develop new designs based on the concept of DfR• Develop dismantling and recycling technologies that are suitable

for the market• Global expansion of activities to eliminate usage of the four

SOCs• Prompt response to EU Cr+6 regulations that come into effect in

2007

• Implemented in all vehicles from the initial development stage according to the Eco-VAS technical notice

• Established dismantling methods in cooperation with design divisions to enable greater LLC recovery

• Completed practical development in Australia and also in China, Taiwan and six other Asian countries

• Japan: Switchover completed one year before regulations came into effect; Europe/IMV production countries: design changes for switchover currently being implemented

4. Promote the development of recycling technologies and the reduction of substances of concern• Develop dismantling technologies that is suited to the market• Develop new designs for recycling (DfR) and incorporate into

products• Respond to requirement for recoverability rate certifi cation in

Europe• Implement measures to reduce substances of concern globally(Work to complete the SOC-free goal for all business affi liates by the end of 2007)


Environment-related AccidentsIn FY2005, an accident occurred in the production area in

September involving spillage of water tainted with coal. Turbid water containing coal was discharged when a wastewater transfer gutter containing rinse water overfl owed due to a clog. After taking steps to prevent the water from fl owing outside, vacuum trucks were brought in and approximately 400 tons of water was recovered.

In December in the Yamanashi Housing Works, an accident occurred where manganese concentration levels in wastewater surpassed standard values. The cause was speculated to be insuffi cient coagulation and sedimentation in wastewater treatment. Procedures to measure manganese levels before discharge were strengthened, and a system to cope with such an accident (stop water discharge emergency containment of water) was established.


Consolidated Environmental Management Unites Japanese and Overseas Consolidated Companies in Concerted Environmental Action

To conduct business on a global level it is important that initiatives to reduce environmental impact are not implemented by TMC alone, but rather carried out with the involvement of all consolidated subsidiaries. As part of TMC’s environmental management, Toyota started full-scale implementation of consolidated EMS in FY2000, which unites group companies subject to consolidation all over the world in concerted action. TMC presents its global environmental policy to all companies subject to consolidated EMS and offers guidance and support in sharing of best practices, exchange of information, training on how to conduct audits, and on-site checks. The percentage of vehicles produced and sold by companies subject to consolidated EMS was 99% and 91% respectively worldwide. This chapter details some of TMC’s activities to support consolidated subsidiaries and individual activities being carried out by overseas affi liates.

Companies Subject to Consolidated EMSThe consolidated EMS covers a total of 582 companies.

This includes not only all fi nancially consolidated subsidiaries, but also major production companies, overseas distributors and others not subject to consolidated accounting. Specifi cally, companies subject to consolidated EMS fall into the following four major categories:

1) 175 subsidiaries which are fi nancially consolidated and under the direct control of TMC

2) 54 major production companies and overseas distributors which are not subject to consolidated accounting (including one production/sales company)

3) 6 corporations from other types of businesses, including universities and cooperative societies

4) 348 subsidiaries which are fi nancially consolidated and under the indirect control of TMCIncluded are production and sales companies that are not

subject to consolidated accounting, but are above a certain operational scale and have voluntarily participated in response to an invitation from TMC.

TMC’s Requirements from Companies Subject to Consolidated EMS

1. Jointly adopt the Toyota Earth Charter and draft individual environmental policies

2. In production, set quantitative goals and follow up on those goals

3. In sales, create an environmental management system; reduce environmental impact, make social contributions, and carry out environmental communication in line with the nature of business

In FY2006 begin quantitative management of environmental impact such as CO2 emissions during logistics activities

4. Implement top level environmental responses based on actual conditions in each country and region

Note: TMC’s requirements from companies not subject to consolidated accounting may vary according to region and the nature of business

Main Companies Subject to Consolidated EMS (As of the End of March 2006)

Please see p. 44 for a list of major consolidatedcompaniesin Japan

European affiliates that have voluntarily participated

Toyota Hellas (Greece)Toyota Ireland (Ireland)Louwman & Parqui (Holland)Toyota AG (Switzerland)Toyota SA (Turkey)and 11 other companies.

16 non-consolidated distributors in Europe are voluntarily implementing an EMS, including acquisition of ISO certification, with TME support TMMT (Turkey)

TGB(U.K.)

TMUK(U.K.)

TMMF (France)

TFR (France)

Production/Sales companies

Productioncompanies Sales companies

Other types of businesses(regional manufacturing headquarters, etc.)

*Companies whose names are underlined and are indicated in black are financially consolidated subsidiaries

*Companies indicated in blue are not subject to consolidated accounting

*Companies indicated in bold were newly included in FY2005

TDV(Venezuela)

TDB(Brazil)

TASA(Argentina)

TMS (U.S.A.)TMA (U.S.A.)

CAPTIN(Canada)

TABC (U.S.A.)

TMMC (Canada)

TMMWV(U.S.A.)

TMMK (U.S.A.)

TMMI (U.S.A.)

TTC (U.S.A.)

Bodine (U.S.A.)

TMMNA (U.S.A.)

TME (Belgium)

TMPL (Poland)

TMR (Russia)

TMIP (Poland)

TCZ (Czech Republic)

TES (Spain)

TDK (Denmark)TSWE (Sweden)TDG (Germany)TAF (Finland)

TTFC (China)TFAP (China)

Kuozui (Taiwan)

TAP (the Philippines)

STM (Thailand)

TMCI (China)

TTCC (China)

TMKR(Korea)

TSAM (South Africa)

TMCA (Australia)

TTC-AP-TH (Thailand)

TMMIN (Indonesia)

TMV (Vietnam)

TMT (Thailand)

TKM (India)

TKAP (India)

TMAP (Singapore) TNZ (New Zealand)

TSA (South Africa)

GTMC (China)

TMI (Italy)

TTC-AP-AU (Australia)

TMMP (Poland)

TMMR (Russia)

ED2 (France)

Toyota Norge (Norway)

GTE (China)

TFTD (China)

CALTY (U.S.A.)

TMMTX (U.S.A.)

TMMBC (Mexico)

TMMAL (U.S.A.)

NUMMI (U.S.A.)

TCI (Canada)

SFTM (China)

TFTE (China)TFTM (China)

INDUS(Pakistan)

ASSB (Malaysia)

TAM (Indonesia)

TMP (the Philippines)

TTPI (India)

Ho Tai (Taiwan)

BMS (Singapore)

UMWT (Malaysia)

ALJ (Saudi Arabia)SERVCO (U.S.A.)

FTMS (China)TPCA (Czech Republic)

Europe

North America

South America

Japan

Asia, Oceania, Middle East and Africa

TMC, etc


Initiatives for Consolidated Environmental Management


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FY2005 Action Policies and ResultsFY2005 marked the last year of the Third Toyota Environmental Action Plan. Toyota promoted initiatives to ensure the achievement

of goals. In the area of production, results were achieved in respect to continual actions to reduce CO2 emissions and waste volumes, improve

environmental performance and strengthen risk management. With respect to sales and other areas, each company in Japan and overseas formulated environmental action plans with quantitative

goals for the next term. In Japan, Toyota created the Toyota Dealer CSR Guidelines and distributed them to all dealers in Japan. The environmental information network system that uses Environmental Performance Indicators (EPI) was initially created for use only by production companies. In FY2005, Toyota expanded the use of the system to include non-production companies, thus creating a system to tabulate and disclose the environmental performance of consolidated companies worldwide.

FY2005 Results of Activities and FY2006 Action Policy

Company type No. of companies

FY2005 action policy and results FY2006 action policy

Goal Activity results Action policy Goal

Overall

• Create structures for regional environment committees in regions where a committee has not yet been formed

• In August 2005, an agreement was reached with a local affi liate to set up the South American Environment CommitteeThe fi rst environment committee meeting was held in May 2006

• In Asia, measures are being promoted using Toyota Motor Thailand (TMT) as a model affi liate

• Revitalization of regional environment committees and enhanced communication with the Toyota Environment Committee and other committees • Hold periodic regional

environment committee meetings

Production(81

companies)

Japan(36

companies) • Achieve FY2005 goals set by all production companies and reduce cases of non-compliance and complaints

• Complete formulation of activity plans aimed at meeting 2010 goals

• Complete installation of follow-up system

• Consolidated production companies in Japan and overseas implemented systematic measures to achieve FY2005 goals, and almost all goals were achieved

• Proactive measures were taken to prevent non-compliance and complaints. There were, however, fi ve instances of minor non-compliance and two complaints. Relevant response measures have been completed.

• Creation of an action plan towards 2010 was completed

• Activities were implemented systematically to achieve FY2005 goals

• Achieve goals (CO2, emissions, substances discharged, VOC emissions, PRTR substances, water) by fully implementing 2006 action plans at each company

• Strengthen efforts to reduce cases of non-compliance and complaints to zero

• Create and strengthen implementation structure to achieve 2010 goals

• All companies to achieve FY2006 goals and eliminate cases of non-compliance and complaints

Overseas*(45

companies)

Sales(86

companies)

Japan(37

companies)

• Create next action plan and implement quantitative management at each company

• All companies created an action plan by February 2006

• Assist each company to promote the environmental action plan; establish global environmental performance management

• Achieve FY2006 plan goals

• (Dealers in Japan)Adopt the CSR Guidelines, which consider and promote specifi c measures to respond to medium term environmental issues

• Established a special CSR study group by Toyota Dealers Association (to meet four times annually: April, June, September, November)

• Completed distribution of Toyota Dealers Association CSR Guidelines in December 2005

• CSR declaration made at January 2006 Toyota Dealers Association meeting; started CO2 reduction efforts such as energy conservation

• Establish the Toyota Dealers Association CSR Guidelines at dealers

• Implement measures to support establishment of the Guidelines through briefi ngs and other means

• Establishment of EPI at consolidated dealers

• CSR action declaration at all dealers by July 2006

Overseas*(49

companies)

• (Overseas Distributors)Create the next action plan and implement quantitative management at each company

• (Overseas Dealers)Continue to promote voluntary environmental audit programs; work to meet the fi ve categories at 60% of dealers

• Created the next Environmental Action Plan at the 49 overseas distributors, and submitted to TMC by February 2006

• Total countries conducting audits: 48 out of 66

• Assist each distributor to promote their environmental action plan; establish global management of environmental performance data

• Conduct a dealer environmental education campaign to help establish environmental management systems at each dealer

• Establish EPI at distributors

• Conduct voluntary audits at all dealers and work towards corrections in 20 key countries

Other(76

companies)

Japan(59

companies) • Create the next action plan for each company and include quantitative goals for CO2 emissions and other indicators and introduce quantitative management of environmental performance data

• Created an environmental action policy for non-production affi liates and distributed and made requests to each company in May 2005

• All companies created a new Environmental Action Plan, and submitted it to TMC

• Held information meetings on action plans and global management of environmental performance data in May 2005

• Held EPI briefi ng (November 2005 in Japan; visited other countries individually)

• Assist each company to promote its environmental action plan; establish global management of environmental performance data

• Explore new environmental performance improvement measures, such as reducing energy consumption, and share information

• Achieve FY2006 plan goals

• Establish EPIOverseas(17

companies)

*Nine companies that perform both production and sales are included in both categories


ProductsDecision to Start Camry Hybrid Production in North America

In March 2005, Toyota announced the Camry Hybrid would be produced in North America. Imports from Japan began in May 2006, and plans call for about 4,000 units per month to be produced at Toyota Motor Manufacturing, Kentucky (TMMK) starting in autumn. Since the fi rst generation Prius was launched in 2000, cumulative sales of Toyota hybrid vehicles in North America have reached 310,000 units (as of the end of March 2006).

Production of the Prius to Begin in ChinaIn October 2005, 30 units

of the Prius produced in Japan were imported into China, and in December production began at Sichuan FAW Toyota Motor (SFTM), Changchun. These were the fi rst hybrid vehicles to be produced locally under the country’s national hybrid vehicle certifi cation system, which came into effect in October.

Clean Diesel Vehicle Introduced in EuropeThe Avensis, Corolla Verso, RAV4, and IS have all been

equipped with clean diesel engines. The 2.2-liter engine 2AD-FHV equipped with the D-CAT (Diesel Clean Advanced Technology) system meets the Euro4 emissions standard. The exhaust emissions cleaning system is fi tted with the DPNR (Diesel Particulate-NOx active Reduction) system which continuously and simultaneously reduces emissions of PM and NOx. The new piezoelectric common-rail system uses piezoelectric technology in the injection system to promote greater fuel atomization than in conventional solenoid injectors, thus improving combustion and fuel effi ciency.

ProductionEco-Factory Activities Conducted at Overseas Affi liates

Toyota is implementing on an ongoing basis Eco-Factory Activities designed to ensure that environmental measures are properly incorporated when new plants are built or major renovation or extension work is carried out. This involves confi rming environmental responses at each stage, from planning and design through to trial and initial operation by means of on-site checks using actual materials. In FY2005, checklist items for equipment were added to strengthen the fi rst and second stages of the three-stage check.

The table below shows activities results for FY2005. Plants completing the three-stage check to begin stable operations are subject to the Global Audit carried out once every three years by both TMC and the respective affi liate to further promote improvements.

Second Global EMS Training Conducted In order to strengthen environmental initiatives at overseas

production companies, Toyota adopted the Global Toyota Production Environment Management System in FY2004, and to promote implementation of this system held Global EMS Training for internal auditors at each company. In October 2005, the Second Global EMS Training was conducted over a period of fi ve days, attended by 30 participants from 26 affi liates representing 19 countries. The training included: 1) a presentation about Toyota production environment policies, achieving zero instances of non-compliance and complaints, minimizing risk, improving environmental performance, the Fourth Environmental Action Plan, and EMS; 2) hands-on training (genchi genbutsu) at plants; and 3) a fi nal examination. The training seminar was well rated by participants with an average score of 4.6 out of 5.

Camry Hybrid

D-CAT-equipped engine

Numbers indicate planned year of completionImplementation completed by FY2004Implementation completed in FY2005

BODI

NE

TMM

TX

TMM

C Pl

ant 2

TPCA

TMM

P

TMIP

FTCE

TFTM

Pla

nt 2

TFTD GT

E

GTM

C

TFTE

Pla

nt 2

TFTM

Pla

nt 3

GTE

Plan

t 2

TMT

Plan

t 3

TMM

R

North America Europe China Thailand Russia

0708 06

060606

0606

0708

0606

0607

0607

060606

0607

Audit 1 (paper audit)

Audit 2 (on-site audit)Audit 3 (performance evaluation)

Planning stage

Eco-Factory Activities in New Plants

Prius produced at the Changchun Plant BODINE : Bodine AluminumTMMTX : Toyota Motor Manufacturing, TexasTMMC : Toyota Motor Manufacturing CanadaTPCA : Toyota Peugeot Citroen Automobile CzechTMMP : Toyota Motor Manufacturing PolandTMIP : Toyota Motor Industries PolandFTCE : FAW Toyota (Changchun) EngineTFTD : Toyota FAW (Tianjin) DiesGTMC : Guangzhou Toyota Motor CompanyTFTE : Tianjin FAW Toyota EngineTFTM : Tianjin FAW Toyota MotorGTE : Guangqi Toyota EngineTMT : Toyota Motor ThailandTMMR : Toyota Motor Manufacturing Russia


TMC Initiatives at Overseas Affi liates


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LogisticsInitiatives to Reduce CO2 Emissions in Logistics Activities

Starting in FY2004, measures to determine CO2 emissions volumes from logistics activities were expanded to North America and Europe. At the Global EMS Liaison held in May 2005 (with the participation of 67 affi liates), environmental initiatives and examples of environmental best practices in the area of logistics were explained to raise awareness among affi liates in regions other than North America and Europe.

In the future, North America and Europe will shift their focus to goal management and other regions will work on determining CO2 emissions volumes.

Sales Overseas Dealer Environmental Risk Audit Program

The Dealer Environmental Risk Audit Program (DERAP) was implemented once again in FY2005. The aim was to put in place the following systems in order to establish the basis for the introduction of an environmental management system and to reduce environmental risks through proactive prevention of environmental accidents and other environment-related issues.1. Appointment of staff in charge of promoting environment-

related initiatives2. Declaration of compliance with environmental laws3. Proper disposal of hazardous waste (waste oil, LLC,1 etc.)4. Proper treatment of wastewater5. Recovery of air-conditioner coolant

In FY2005, the DERAP was held at 4,998 dealers across 66 countries, including at 18 distributors in countries where the program was not held earlier. Based on requests from EMS managers at overseas distributors, who are in charge of providing guidance to dealers, TMC’s know-how regarding improvements and information on best practices at dealers, as well as best practices of TMC support to dealers, were published on the TMC and distributor intranet to promote information sharing with distributors in different countries. This information was also made available to dealers. In FY2005, the percentage of dealers that met requirements in all fi ve categories2 rose from 41% in the previous fi scal year to 53%. To further promote implementation of DERAP, TMC plans to conduct a dealer environmental education campaign in FY2006.

1. LLC:Long-life Coolant (engine coolant)

2. Between FY2004 and FY2006, systems for requirements that must be met in fi ve basic categories were established as the fi rst step towards environmental management at dealers

The Intra Company Transferee (ICT) program hosts employees from overseas affi liates at TMC to develop overseas human resources and to promote closer communication with TMC. Transferees spend roughly between 12 and 18 months at TMC, working right alongside regular TMC employees and taking charge of several overseas projects during that time. As of March 2006, there were 432 transferees undergoing training in Japan at various TMC workplaces.

“Since the scale of overseas companies is small, the scope of what one individual is in charge of is broad. As I don’t come from an engineering background, this program has afforded me the opportunity to probe one area at a time and deepen my knowledge every day” (Yin Chi Liang from Kuozui Motors, Ltd., Taiwan). “I came with the goal of expanding my understanding of environmental technology. I am able to see how things work at many different plants. This has made the program truly worthwhile for me.” (Andrzej Depta from Toyota Motor Manufacturing Poland, (TMMP)). “I came at the recommendation of my boss, who was one of the fi rst ICT program participants. I am planning on taking what I have learned here back home and teaching others in the company there. I’m sure that there will be many things I won’t know, but I feel reassured by the network of people I have created here in Japan.” (Saori Yano from Toyota do Brasil (TDB)).

Activities Begin to Work Towards 2010 Goals at Companies Subject to Consolidated EMS

TMC holds the All-Toyota Production Environment Conference (22 participating companies) and the All-Toyota Production Environment Meeting (13 participating companies) annually to enhance the environmental performance of consolidated production companies in Japan. In FY2005, participants visited the Tsutsumi Plant to observe the status of reduction in VOC emissions as a result of the introduction of water-borne paints.

Senior Managing Director Shoji Ikawa, who serves as the chairman of the Production Environment Committee, expresses his hopes that “We must implement further group-wide initiatives to achieve our 2010 goals and aim to be at leading levels in the industry.”

Gaining Knowledge and Building Networks In Focus

Participants observe a painting line that uses water-borne paint

DERAP Implementation StatusPercentage of dealers meeting requirements in all fi ve categories

Countries where all dealers passedFY2004

resultsFY2005 results

Overseas(all countries) 41 53 7 12

Other countries* 14 19 2 4

Europe (TME) 58 74 5 8

*Other countries:Includes all countries except those under the jurisdiction of the three North American distributors and TME. The three distributors in North America conduct their own program.

A CD-ROM on environmental best practices was distributed

Mr. Yin, Mr. Depta and Ms. Yano


Safety, Environmental Issues and Quality Focused on at Annual Policies Meeting

Toyota Motor Thailand Co., Ltd. (TMT) holds biannual briefi ngs for over 800 assistant managers to promote adherence to the annual company-wide policies. In December 2005, a briefi ng was held, in which a guest speaker from TMC participated, to explain the objectives for FY2006 with an emphasis on occupational safety and health, environmental issues and quality. After President Ryoichi Sasaki discussed the company-wide policies, the heads of management, production and marketing discussed their policies and responded to questions. Various comments were voiced, such as “I realize now that the direction the company should be moving towards matches the needs of society.”

TMMNA Receives Energy Star Award Toyota Motor Manufacturing North

America, Inc. (TMMNA)* conducts many unique activities to conserve energy such as “hunting for energy-saving treasures.” In 2005 and 2006, TMMNA was honored with an ENERGY STAR® award from the United States Environmental Protection Agency (EPA) and Department of Energy (DOE) for the leadership demonstrated in operations to reduce energy consumption.

Water Consumption Reduced by Using Rainwater

In Australia, where water is one of the most precious resources, Toyota Motor Corporation Australia Limited (TMCA) is making efforts to utilize rainwater. A 45,000-liter rainwater storage collection system was installed and the collected rainwater is used to provide water for toilet cisterns and to garden ponds. To reduce greenhouse gas emissions from the pumping system, 12 newly installed solar panels and two wind turbine generators are used to supply the electricity necessary to pump the rainwater. Further, by reusing the water used in the assembly shop and other means, TMCA reduced water consumption per vehicle produced by 25% compared to 2000.

Senior Management Conducts On-site Environmental Inspections

At Toyota Motor Philippines Corporation (TMP), the president conducts on-site inspections of environmental activities to stimulate employee motivation towards kaizen. In FY2005, a presentation was made to the president concerning reductions in paint sludge, the adoption of returnable boxes for parts, and reductions in the volume of purge solvents used. The president commented on areas of focus and the feasibility of sharing these practices.

Zero Waste to Landfi ll Goal Achieved in Two Years

Toyota Motor Manufacturing Poland SP.zo.o. (TMMP) drafted a plan to achieve zero waste to landfi ll in 2003, when it acquired ISO 14001 certifi cation. First, TMMP identifi ed all possible sources of landfi ll waste, and then made process improvements to reduce the volume of waste generated, found new contractors and buyers, and carried out training of employees. The goal of zero waste to landfi ll was achieved in February 2005. This accomplishment was recognized by the Polish government and TMMP was awarded the “Environmentally Friendly Company” Award in February 2006.

VOC Emissions Reduced by Recycling Purge Solvents

Toyota Argentina SA (TASA) has been working, as part of a global initiative, to reduce VOC emissions by focusing on purge solvents, which contribute greatly to the generation of VOC emissions on the production line. Thorough management is carried out through measures such as the recovery and recycling of purge solvents that are used to clean auxiliary equipment inside the painting booths.

*In April 2006, TMMNA and Toyota Technical Center U.S.A. Inc. (TTC) were integrated to form Toyota Motor Engineering & Manufacturing North America (TEMA)

TMC’s overseas affi liates are implementing many unique initiatives to reduce environmental impact. The following best practices are from the environmental reports of these affi liates with regard to environmental management, energy conservation, waste reduction and recycling, and VOC emissions reduction.

The rainwater utilization project was planned by a company-wide project team

Recovery and recycling of purge solvents

President Ryoichi Sasaki discusses company-wide policies

An on-site inspection by President Hiroshi Ito

The ENERGY STAR® awardThorough sorting and recycling of waste


Examples of Initiatives at Overseas Affi liates

TMP, Philippines

TMMP, Poland

TASA, Argentina

TMT, Thailand

TMMNA, North America

TMCA, Australia


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Replacement of Picking Slips by Electronically Transmitted Data

At Toyota Motor Europe (TME), spare parts and accessories in logistics centers were previously shipped to retailers using picking slips, containing information related to the shipping destination and so on. A project to terminate the use of picking slips was launched in 2003. This project has been rolled out to most European markets and in 2005 resulted in a savings of 2.5 million sheets of A4-sized paper.

Reducing the Four Substances of Concern

TMT exports IMV Project vehicles to various parts of the world, and as such is promoting activities to reduce usage of lead, mercury, cadmium and hexavalent chromium, including introduction of equipment to measure the content of the banned substances, checking of actual parts, and conducting audits at suppliers.

Kenaf Used in the Avalon Produced in North America

Toyota Technical Center U.S.A. Inc. (TTC)* is taking action to improve recoverability and promote the effective use of resources. The upper door trim of the new Avalon uses thermoplastic resin that is reinforced with natural kenaf fi bers. A fi berglass-free material is used in the fabric that covers the inside of the vehicle roof, and replaceable oil fi lter elements have been introduced.

All Dealers Acquire ISO 14001 Certifi cation

By 2003, all eight dealers had acquired ISO 14001 certifi cation with support from Hotai Motor Co., Ltd. By the end of FY2005, 64 service shops had acquired certifi cation, and plans are underway for all 133 service shops to acquire certifi cation by the end of FY2007. Dealers have commented that the inspections required in acquiring certifi cation provided good motivation to review environmental measures.

Expanding ISO 14001 Certifi cation Acquisition

In FY2005, distributors TDG (Germany), TCZ (Czech Republic), TMR (Russia) and TNZ (New Zealand), all acquired ISO 14001 certifi cation. Toyota T&S Construction Co., Ltd. in Japan acquired joint ISO 14001 and 9000 certifi cation. The number of subsidiaries in Japan and overseas that acquired ISO certification increased to 113 companies out of a total of 234. The total number of overseas dealers and service shops to acquire certifi cation with support from distributors has increased to approximately 300 across 13 countries.

Global Environmental DataIn FY2005, worldwide production of Toyota vehicles increased

by approximately 10% from the previous fi scal year. However, due to steady implementation of initiatives by all companies to reduce CO2 emissions, the volume of waste generated and water consumption per vehicle, increases in total volumes were controlled.

TME, Europe

TMT, Thailand

TTC, U.S.A.

Hotai, Taiwan

Number of Companies in Japan and Overseas that have Acquired ISO 14001 Certifi cation

Production companies

Production/Sales

companies

Sales companies/

Other types of businesses

Japa

n

34 24*

Over

seas

24 9 22

Product information is now stored as digital data

Parts with reduced use of substances of concern

Training at dealers based on ISO standards

The upper door trim on the new Avalon that uses kenaf

’01 ’02 ’03 ’04 ’05 (FY)

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

500

400

300

200

100

0

Total CO2 volume (Thousand tons) Per sales unit (Tons/Billion Yen)

Per sales unit

420 410 390 370330

5,900 6,160 6,300 6,400 6,500

CO2 Emissions Volume

’01 ’02 ’03 ’04 ’05 (FY)

120

100

80

60

40

20

0

10,000

8,000

6,000

4,000

2,000

0

Total waste volume (Thousand tons) Per sales unit (kg/Billion Yen)

Per sales unit

8,300

6,3005,200

4,500

11594

83 77

4,200

81

Volume of Waste Generated

TMC Japan(excluding TMC)

NorthAmerica

Europe Asia, Australia, the Middle East, South Africa and Latin America

’01 ’02 ’03 ’04 ’05 (FY)

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

7.0

5.0

4.0

6.0

3.0

2.0

1.0

0

Water consumption (Thousand m3) (m3/Vehicle)

Averagefor plants

5.1 5.14.6 4.2

29,60029,80028,500 28,000

3.6

28,800

Water Consumption (Vehicle Assembly Plants)

*The status of ISO certifi cation was re-confi rmed. Two companies (Toyota Tokyo Parts Distributor Co.,

Ltd. and Toyota Aichi Parts Distributor Co., Ltd.) which had previously acquired certifi cation have been included.

Please see p. 42 for further details on CO2 conversion coeffi cients

22 Sustainability Report 2006 Sustainability Report 2006

The Innovative International Multi-Purpose Vehicle (IMV) Project is part of Toyota’s global operations and all processes leading up to the introduction of new models including purchasing, parts manufacturing, vehicle production and sales are being conducted outside Japan. The Project aims to develop unified models that will be recognized as the best globally, while also maintaining highly reliable performance in a wide range of particular locales that may possess unpaved surfaces or flooded roads. Vehicles manufactured at the four main production bases of Thailand, Indonesia, South Africa and Argentina will be exported to more than 140 countries worldwide. An optimized global manufacturing and supply system that incorporates environmental performance improvement has been created to enable customers to enjoy the highest “Made by Toyota” quality no matter where IMV Project vehicles are assembled or sold. Toyota aims to achieve 100% local procurement to contribute to the economic development of these countries while developing local human resources to be able to attain and maintain the same quality standards as in Japan. In FY2005, production got under way in Thailand, Indonesia, South America, South Africa and India, with output totaling 500,000 vehicles.

Using Low-emission and Fuel Efficient Engines A total of six engine types are being used for IMV Project

vehicles — three diesel engines and three gasoline engines. There is a high demand (about 80%) for diesel-powered IMV Project vehicles, and a common-rail (electronically controlled fuel injection) system is used in most regions. This system keeps PM and NOx emissions in check, and complies with the latest emissions regulations, while achieving high fuel efficiency. The gasoline engines are equipped with VVT-i (Variable Valve Timing–intelligent) to increase air intake efficiency, and achieve high fuel efficiency.

Increasing Logistics Efficiency and Working towards Energy Conservation

In Thailand, to deal with the increase in the number of suppliers resulting from the launch of the IMV Project, TMT increased the number of trips by employees to supplier sites to collect parts and other items, and improved the container packing rate. As a result, the number of truck dispatches increased only twofold

compared to a threefold increase in the volume of production parts, improving transportation efficiency. Further, to offset the increase in warehouse space for parts, TMT took measures to conserve energy by using natural lighting though the installation of skylights and by redesigning lighting configurations.

Reducing VOC EmissionsToyota is taking numerous steps to reduce VOC emissions

from IMV Project vehicles. These include activities in Thailand, Argentina and other countries such as switching to the use of decal coloring instead of paint on the pillar sections, reducing the total surface area of the vehicle to be painted, installing regenerative thermal oxidizers (RTO), improving electrodeposition painting and reducing the painting time for the top coating.

Use of Easy-to-recycle Materials Toyota uses TSOP, which is rigid, durable and easy to recycle,

in parts such as bumpers and fender covers.

Reducing the Use of Substances of Concern to Meet Global Standards

The IMV Project global production bases collaborate in manufacturing mutually complementary vehicles and parts. It is thus necessary to comply with global environmental standards with regards to usage of lead, mercury, cadmium and hexavalent chromium.

TMC’s overseas affiliates work together to support local suppliers through the provision of technology to analyze the content of substances of concern in parts, to introduce alternative materials, and other measures to ensure that locally procured parts do not contain substances of concern.

VehicleSuppliesfromtheFourGlobalProductionBases

Researching the Finer Details of Fuel In Focus

To get the most out of the common-rail system, it is important to ensure the use of quality fuel. Kaoru Hosokawa, Chief Engineer of the Product Development Group explains, “We have conducted diesel fuel sampling worldwide, and have made requests to improve fuel quality in countries where it is not as high as it should be. Nonetheless, in some countries sulfur and water are found in the diesel; there is simply no way to avoid differences in fuel quality. It has been a major challenge for us to make the engines compatible with a wide range of harsh environments.”

Thailand(Pickup truck/

SUV)

South Africa(Pickup truck/SUV)

Argentina(Pickup truck/SUV)

Indonesia(Minivan)

An open air gas station

The Hilux Vigo (left) and the Kijang Innova


Improving Environmental Performance Through Global Projects

Sustainability Report 2006 Sustainability Report 2006

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Environmental Accounting

Basic PolicyToyota defines environmental costs as “expenditures for

the purpose of reducing the environmental impact caused by the company’s business activities” and “related expenditures.” Accounting is based on a classification of environmental costs into “environmental investments”1 and “maintenance costs.”2 Toyota also calculates economic effects and eco-efficiency.

1. Environmental investments: Environmental costs whose effects are judged to extend beyond the current term into the future

2. Maintenance costs: Environmental costs other than environmental investments

Environmental Costs in FY2005Total environmental costs were 237.8 billion yen. This

represents an increase of 6.7 billion yen from the previous fiscal year and accounts for 2.3% of net sales. The increase was the result of greater investment in equipment and facilities for environmental responses, among other factors.

Economic Effects in FY20051) Actual Effects

Toyota calculates actual effects by adding savings, such as from “reduction in energy costs” achieved through energy conservation, to income, such as that from “sales of recyclable goods.” In FY2005, total actual effects were 10.4 billion yen, an increase of 0.6 billion yen from FY2004.

2) Customer EffectsIn FY2005, total customer effects resulting from the

introduction of new models and models that underwent complete redesign were 4.3 billion yen and total effects through to the end-of-life vehicle stage were approximately 46.6 billion yen.3) Inferred Effects

Since FY2003, Toyota has determined inferred effects based on trial calculations of the “contribution to profits from environmental responses.” In FY2005, total inferred effects were 390 billion yen.

Eco-efficiencyToyota calculates eco-efficiency using the formula below and

monitors the results in the form of the eco-efficiency index. CO2 emissions volume and the volume of waste generated by the Production Group were used to determine the environmental impact starting with data from FY1990. Over 15 years, the CO2 index has increased by about 60%, and the waste index by approximately 280%. In the future, Toyota will continue to pursue production that minimizes environmental impact and to enhance eco-efficiency.

EconomicEffects(ActualEffects)(Unit: Billion Yen)

FY2003

FY2004

FY2005

FY2005 results of 6 body

manufacturers*

Reduction in energy costs 1.1 1.1 2.1 1.9Reduction in waste processing costs 0.6 0.3 0.4 0.1Sales of recyclable goods 3.3 5.9 5.8 4.1Other (income from environment-related technologies, etc.)

0.8 2.5 2.1 0.1

Total 5.8 9.8 10.4 6.2

TrendinEco-efficiency

(FY)’90 ’99 ’00 ’01 ’02 ’03 ’04 ’05

(FY)’90 ’99 ’00 ’01 ’02 ’03 ’04 ’05

200

150

100

(Index) CO2 Index due to Automobile Production400

300350

250200150100

(Index) Waste Index due to Automobile Production

The “CO2 index” means the ratio of net sales to the volume of CO2

emissions, with a value of 100 assigned to the FY1990 level

The “waste index” means the ratio of net sales to the volume of waste generated, with a value of 100 assigned to the FY1990 level

ActualResultsofEnvironmentalExpensesActual Results Based on Toyota’s Format (Unit: Billion Yen)Classifi-cation Item Details FY2003 FY2004 FY2005

Envi

ronm

enta

linv

estm

ents

Research and development 166.1 192.3 191.5Recycling-related 1.2 1.3 2.1Other expenses (social contribution, ISO certification, educational & training, etc.) 2.2 4.9 2.8

Plan

t and

equ

ipm

ent

inve

stm

ent* Plant and equipment

investment primarily for environmental action

Prevention of global warming 0.8 0.8 1.4Waste processing 0.4 0.7 0.3Pollution prevention, etc 4.6 6.9 5.5

5.8 8.4 7.2Expenses for environmental action, included in normal plant and equipment investment 13.1 12.9 19.4

Subtotal for environmental investments 188.4 219.8 223.0

Mai

nten

ance

cos

ts

Expenses related to environmental measures

Waste processing 2.7 2.6 2.6Wastewater treatment 0.5 0.5 0.5Atmospheric pollution and odor abatement 1.4 1.2 0.9

Global environmental preservation 0.5 0.6 0.9Awareness-building Advertising, public relations, etc. 6.0 4.2 6.0Professional environmental staff Personnel 1.9 2.0 2.2

Environmental restoration Recall 1.5Soil and groundwater remediation 0.2 0.2 0.2

Subtotal for maintenance costs 13.2 11.3 14.8Total 201.6 231.1 237.8

*Depreciation expenses of investments in plant and equipment are not included in these costs(Reference) FY2005 Total R&D expenses: 704.5 billion yen Total plant and equipment investment: 351.6 billion yen

FY2005 Actual Results Based on the Ministry of the Environment’s Format (Unit: Billion Yen)

ClassificationToyota 6body

manufacturers*

Invest-ments Cost Invest-

ments Cost

(1) Business area costs

[1] Pollution prevention 4.2 1.4 2.9 2.4[2] Global environmental

preservation 21.6 0.9 3.5 0.4

[3] Resource circulation 0.3 2.6 2.3 2.3(2) Upstream/downstream

costsAmount allocated by recycling-related industry organizations 0 3.1 0 0.5

(3) Administration costsEnvironmental advertisements, environmental report publication, professional environmental staff, etc.

9.5 0 2.1

(4) Research and development costs

R&D for reducing substances of concern 191.5 0.5 32.9

(5) Social activity costs Contribution to environmental preservation organizations, etc. 0.5 0.1

(6) Environmental remediation costs

Soil and groundwater remediation, etc. 0.5 1.7 0.1

Total26.6 211.2 9.3 40.7

237.8 50*6 body manufacturers: Kanto Auto Works, Daihatsu Motor, Toyota Auto Body, Hino Motors, Toyota Motor

Kyushu, and Central Motor (Calculations made on the basis of standards used by each company)

Figures for environmental accounting by overseas affiliates• TMT (Thailand): Environmental costs: 319 million yen; economic effects: 205 million yen• Kuozui Motors (Taiwan): Environmental costs: 465 million yen; economic effects: 41 million yen


Improving Environmental Performance Through Global Projects

Eco-efficiencyFormula

Eco-efficiency = Net sales

Environmental impact

Information on the calculation method for customer effects and inferred effectshttp://www.toyota.co.jp/SR/en06repo/envac/

Tatehito UedaEnvironmental Product Design

Assessment Committee Chairman


Tatehito Ueda joined Toyota in 1974 and has gained experience in a wide range of areas, including development of engines and powertrains. After various assignments, including that of General Manager of the Power Train Management Engineering Div., he was appointed Managing Offi cer in 2004. He took up the position of Chairman of the Environmental Product Design Assessment Committee in June 2005.

Development and design are important activities that greatly affect an automobile’s environmental impact and include such factors as fuel effi ciency and exhaust emissions. Toyota’s basic vision in terms of technology development is to minimize any negative impact, including in relation to the environment, while maximizing customer satisfaction in terms of a vehicle’s usefulness, riding comfort, and the driving enjoyment it offers.

In order to help Toyota realize this vision, its engineers are exploring every angle in their efforts to overcome various issues by developing environmental technologies and technical innovations.

The results of the actions taken in FY2005 are summarized below. 1) Achieved the 2010 Fuel Effi ciency Standards in all vehicle

weight categories2) The percentage of total production that meets the Ultra Low-

Emission Vehicle level reached 96%.3) In March 2006, the Lexus GS450h equipped with a newly

developed dedicated hybrid system for rear-wheel drive passenger vehicles was launched, widening the market base for hybrid vehicles.

4) Worldwide sales of Toyota hybrid vehicles in FY2005 were approximately 250,000 units, for a cumulative total exceeding 610,000 units.Toyota is committed to continuing to reduce environmental

impact by increasing the use of such environmental technologies as hybrid and high-effi ciency engines.

Product Environmental ManagementIn FY2005, Toyota continued to apply its technical area

environmental management system (EMS), based on ISO 14001 standards, to the development of new products. External audits to confi rm the status of EMS operation identifi ed one minor area of non-conformity — “any other requirements that the organization agrees to must be documented in manuals.” The audits also identifi ed three areas to be monitored for further improvements, including more careful selection of managers responsible for internal audits and clarifi cation of the application scope of site manuals. On the whole, proper operation and maintenance were confi rmed.

Improving Fuel Effi ciency

FY2005 Goal• Achieve the 2010 Fuel Effi ciency Standards for all vehicle weight categories

ahead of schedule in 2005

Toyota has reduced CO2 emissions from its vehicles through fuel effi ciency improvements. In FY2005, eight out of ten Toyota vehicle series that were new or underwent complete redesign cleared the 2010 Fuel Effi ciency Standards. In the heaviest weight category, the Land Cruiser’s fuel effi ciency was improved when it underwent a minor redesign, with the result that Toyota achieved the 2010 Fuel Effi ciency Standards in all vehicle weight categories. The number of gasoline-powered passenger vehicles meeting the 2010 Fuel Effi ciency Standards reached 87% of total production.

External Audits

Surveillance

Items indicated by audits (minor area of

non-conformity)1

Items to be monitored 3


Development and Design

GS450h


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Increasing the Number of Vehicles with Fuel Effi cient Engines

Toyota developed a new 3.5-liter engine “2GR-FSE” that uses a new fuel injection system “D-4S,” resulting in improved fuel effi ciency.

The D-4S system optimally controls both in-cylinder direct injection and port injection. The in-cylinder direct injector uses a high-pressure, double-slit nozzle injector to inject highly atomized fuel into the combustion chamber from two injection openings. This system stabilizes combustion by achieving a uniform mixture of intake air and fuel, thereby improving fuel effi ciency.

Introduction of High-effi ciency TransmissionTo increase the effi ciency of its power-transmission

systems, Toyota installed Super CVT-i (Continuously Variable Transmission-intelligent), that uses a wide gear-ratio range and a torque converter that can lock up even at low speeds, and improves fuel effi ciency by working effectively with the engine. When the vehicle is stopped with the transmission in Drive, neutral control is used (that is, the clutch is partially released) to reduce the engine load, thereby improving fuel effi ciency.

The 6-speed Super ECT reduces the total gear ratio of the sixth gear (thereby increasing the gear ratio) to improve fuel effi ciency at high speeds. By reducing both the size and weight of various components, Toyota has achieved a 6-speed automatic transmission unit that is among the world’s lightest. Additionally, downshift control during deceleration maximizes the fuel-cut range, further improving fuel effi ciency.

Vehicles using Super CVT-I Ractis, RAV4, Belta and Estima

Vehicles using 6-speed Super ECT

Lexus GS, Lexus IS, Lexus SC and Estima

Initiatives for Reducing Air Resistance

Toyota has reduced the overall air resistance of the vehicle body by using fl ush surfaces, reducing the difference in surface height between the windows and the body, using a rear spoiler, and making the fl oor panels fl atter through the use of various types of air fl ow control parts. Toyota has achieved coeffi cient of drag (Cd) values of 0.28 for the GS and IS, 0.29 for the Belta, and 0.31 for the Ractis.

The new fuel injection system that features both direct injection and port injection

(Km/l)

0

5

10

15

20

GSCamryEstimaRAV4bBRactisBelta(Nov. ’05) (Oct. ’05) (Dec. ’05) (Nov. ’05) (Jan. ’06) (Jan. ’06) (Aug. ’05)

New modelOld model

Fuel Effi ciency Comparison between Selected Old and New Models

Models that Meet the 2010 Fuel Effi ciency Standards among FY2005 New Models and those that Underwent Complete Redesign (Passenger Vehicles)

Weight category (vehicle weight: kg)

Fuel effi ciency standard (km/l)

FY2005 average fuel effi ciency

(km/l)

Qualifying vehicle series of FY2005 new models and those that underwent

complete redesign828 - 1,015 17.9 20.2 Belta

1,016 - 1,265 16.0 17.0 Ractis,* Belta, bB*1,266 - 1,515 13.0 14.1 RAV41,516 - 1,765 10.5 11.8 RAV4, Estima, Camry,* IS2501,766 - 2,015 8.9 9.8 Estima, GS Hybrid2,016 - 2,265 7.8 9.92,266 - 6.4 6.5

*Some vehicles of the qualifying vehicle series may not meet the standards depending on individual models and specifi cations

Note 1: indicates a category that has achieved the 2010 Fuel Effi ciency StandardsNote 2: Vehicles that achieved the effi ciency standards before FY2004 are not includedNote 3: All fuel effi ciency values are based on the Ministry of Land, Infrastructure and Transport’s 10-15

Japanese test cycle

0

5

10

15

20

25

30

35

2,266 -2,016 -1,766 -1,516 -1,266 -1,016 -828 -

(Km/l)

(Weight category: kg)

Average fuel efficiency of Toyota vehicles in FY20052010 Fuel Efficiency Standards

Best fuel efficiency among Toyota vehiclesin each category

Actual Fuel Effi ciency of Toyota Vehicles in FY2005 and 2010 Fuel Effi ciency Standards

Ractis Estima

Airflow control parts in front of the differential gearFront floorcover

Engine undercover

Fairing in front of the front wheel Fairing in front of the rear wheel

Areas where airflow control parts are used

Rear floorcover

Differential gear support cover

Lexus IS: Use of airfl ow control parts for the underbody


Reducing Exhaust Emissions

FY2005 Goal• Set voluntary standards in response to the Exhaust Emissions Standards

specifi ed in the Safety Regulations for Road Vehicles, the Approval System for Low-Emission Vehicles and new long-term regulations, and for vehicles in the eight Tokyo area municipalities

Promotion of Widespread Adoption of Low-Emission Vehicles

In FY2005, Toyota increased the number of vehicle series that meet the 2005 Exhaust Emissions Standards in the Ministry of Land, Infrastructure and Transport’s Approval System for Low-Emission Vehicles. As a result, the combined total number of low-emission vehicle series including those that meet the 2000 Exhaust Emissions Standards reached 99.7% of total production. The number of vehicle series that achieved an exhaust emission level 75% lower than the 2005 Exhaust Emissions Standards (Super Ultra-Low Emission Vehicle level) reached 63.7% of total production, up by 40.2 percentage points compared to the previous year. The number of vehicle series that meet or surpass the Ultra Low-Emission Vehicle level and also meet the 2000 and 2005 Exhaust Emissions Standards reached 96.3% of total production in FY2005, increasing by 5.5 percentage points from FY2004. In FY2005, among Toyota’s gasoline-powered passenger vehicles, 39 models were approved as achieving a level 75% lower than the 2005 Exhaust Emissions Standards and 5 models as achieving a level 50% lower than the 2005 Exhaust Emissions Standards. The number of vehicle series that meet or surpass the Ultra Low-Emission Vehicle level and also meet the 2010 Fuel Effi ciency Standards reached 84.5% of total production, an increase of 3 percentage points over FY2004.

Responses to the Approval System for Low-Emission Vehicles

In response to the Low-Pollution Vehicle Designation System, in FY2005 Toyota submitted its vehicles to the low-pollution vehicle designation system administered by eight Tokyo area municipalities, and received certifi cation for an additional 39 of its models, reaching a cumulative total of 562 models.

Environmental Aspects Development and Design

Percentage of Total Production that Met the Approval System for Low-Emission Vehicles based on the 2000 Exhaust Emissions Standards in FY2005

( ) No. of models

Category Reduction level Percentage of total production

ConventionalLow-Emission Vehicles

25% lower thanstandard levels for 2000

3.4%(34)

0

20

40

60

80

100(%)

’05 (FY)’04’03’02’01

75% lower than standard levels for 2005





Low-Emission Vehicles as a Percentage of Total Production

Percentage of Total Production that Met the Approval System for Low-Emission Vehicles based on the 2005 Exhaust Emissions Standards in FY2005

( ) No. of models

Category Reduction level Percentage of total production

New U-LEV

50% lower thanstandard levels for 2005

32.6%(101)

SU-LEV75% lower than

standard levels for 200563.7%(69)

Percentage of Total Production that Meet Both the 2010 Fuel Effi ciency Standards and the Low-Emission Vehicle Level

(Meet or surpass the Ultra Low-Emission Vehicle level)

CategoryPercentage of total production

FY2004 FY2005

2010

Fue

l Effi

cien

cy

Stan

dard

s

Ultra Low-EmissionVehicles 0.1% 0.0%

New U-LEV 59.6% 25.6%

SU-LEV 21.7% 58.9%

Vehicles that Met the Approval System for Low-Emission Vehicles in FY2005 (2005 Exhaust Emissions Standards)

Low-Emission Vehicle level SU-LEV(Super Ultra-Low Emission

Vehicle)

New U-LEV

(Ultra-Low Emission Vehicle)

Vehicle series No. of models No. of modelsAlphard 2Ist 1Hilux Surf 1Land Cruiser Prado 2GS 3IS 3SC 1Noah, Voxy 2Ipsum 2Sienta 1Wish 3Ractis 2 1Crown 1RAV4 2Belta 2 1Isis 4bB 3Estima 4Camry 2GS Hybrid 1

Total 39 5

Low-Emission Vehicle Approval System

2000 Exhaust Emissions Standards

2005 Exhaust Emissions Standards

0.013

0 0.013 0.025(0.027)

0.05 0.1(0.054) (0.081) (0.108)

0.025

(0.028)

0.05

(0.056)

(0.084)

0.1

(0.112)

(g/km)

(g/km)

25% lower than standard levels

for 2000

50% lower thanstandard levels

for 2000

75% lower thanstandard levels

for 2000

Non Methane Hydro Carbon (NMHC)

50% lower thanFY2005 standards

75% lower thanFY2005 standards

Nitrogen Oxides(NOx)

Note: The values in the parentheses above have been converted, assuming test cycles specified in the 2005 Exhaust Emissions Standards

Exhaust Emissions Performance


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Reducing External Automobile Noise

FY2005 Goal• Make all vehicles compliant with Toyota’s voluntary standards on external

automobile noise, set in response to permissible levels specifi ed in Article 40 of the Safety Regulations for Road Vehicles

Continual Efforts to Comply with the Latest Standards

In FY2005, Toyota continued to apply the latest standards to its new models and models that underwent complete redesign.

Because passenger vehicles for off-road use have a large engine displacement, Toyota took various measures to reduce external automobile noise, including reinforcing engine blocks, using engine undercovers with a sound-absorbent material, and utilizing sound-absorbent materials in the engine rooms. Additionally, Toyota incorporated various measures to reduce

internal exhaust noise, including using an intake resonator to reduce intake noise, increasing the capacity of the main muffl er, and modifying its structure.

In FY2005, eight out of ten vehicle series that were new or underwent complete redesign (IS, Ractis, RAV4, Belta, bB, Estima, Camry and GS Hybrid) met the Japanese government’s Green Taxation System standards. The number of gasoline-powered passenger vehicle series that qualifi ed under the Green Taxation System, including vehicle series that underwent minor redesign, increased to 40 series in FY2005.

Furthermore, 14 models in a total of nine vehicle series —the Prius, Alphard, Estima, Crown, Crown Sedan, Dyna/Toyoace, Harrier, Kluger and GS Hybrid— are eligible for the FY2005 subsidy program for the purchase of electric or hybrid vehicles.

Details of Special Measures within the Green Taxation System

A reduction of approximately 25% in automobile tax



The automobile acquisition tax is reduced by 10,000 yen for an automobile for private use, and by 6,000 yen for an automobile for commercial use.



Applicable vehicle seriesIsisAlphardAlphard HybridistIpsumWISHVoxyEstima HybridCaldinaCorollaCorolla FielderKlugerSientaNoahHiace (Wagon)HarrierFun CargoPlatzProbox

bBISRAV4AllionistWISHEstimaCamryCelsiorCenturyPassoHarrierPremio

GS HybridISRAV4IsisAlphardAllexistIpsumWISHVitzVoxyEstimaCamryCorollaCorolla FielderCorolla RunxCrownKluger HybridSientaNoahPassoHarrierHarrier HybridPriusBeltaMark XRactis

Note: Not necessarily applicable to all vehicles due to differences in models or specifi cations. Applicable vehicle series are as of the end of March 2006.

Responses to the Green Taxation System In Focus

CamryRAV4

bBBelta

Hood silencerDash silencer

Intake resonator

High-rigidity cylinder blockHigh-rigidity aluminum alloy oil panEngine cover (with sound-absorbent material)

Engine undercover (with sound-absorbent material)

Main muffler capacity increaseMain muffler with modified internal structure

Noise Reduction Measures in the Land Cruiser Prado

http://www.mlit.go.jp/jidosha/green/green_16.htm (Japanese only)


Development of Clean-energy VehiclesLaunching of the Lexus GS Hybrid

In March 2006, Toyota launched the Lexus GS450h equipped with a newly developed dedicated hybrid system for rear-wheel drive passenger vehicles. This new hybrid system was developed around the concept of the Hybrid Synergy Drive, which represents a sophisticated fusion of superior driving performance, high fuel effi ciency, low emissions, and quiet operation. Because its hybrid transmission and power control unit are both smaller, lighter, and more effi cient, the new hybrid system can be used in rear-wheel drive passenger vehicles.

FCHV-BUS Begins Trial Operation in Area around the Central Japan International Airport

As part of the Fuel Cell Bus Practical Application Promotion Project of the Ministry of Land Infrastructure and Transport and with the cooperation of Chitanoriai Co., Ltd., Toyota began trial operation of the FCHV-BUS in the area surrounding the Central Japan International Airport (Centrair) in March 2006. The plan is to expand operation routes in the area to coincide with the installation of a hydrogen fueling station near the airport.

Toyota’s Improved FCHV Receives Vehicle Type Certifi cation

The improved TOYOTA FCHV, Toyota’s fuel cell hybrid passenger vehicle, became the fi rst fuel cell vehicle in Japan to acquire vehicle type certifi cation under the Road Vehicles Act, as amended and enacted in March 2005 by Japan's Ministry of Land, Infrastructure and Transport. In July, the vehicle was made available for lease and leasing began in October in the Osaka area. As of the end of March 2006, 11 units were being leased in Tokyo, Aichi and Osaka, in addition to the two leased in the U.S., with the number expected to grow in the future.

Toyota and Fuji Heavy Industries Reach Agreement on Hybrid Vehicle Development

In March 2006, Toyota and Fuji Heavy Industries Ltd. (FHI) agreed to consider the development of an FHI hybrid vehicle based on the Toyota Hybrid System. Toward the early realization of an FHI hybrid vehicle the two companies agreed to create a detailed framework, including the provision of Toyota hybrid technology, personnel exchanges and other issues.

Increasing Popularity of Clean-energy VehiclesIn FY2005, Toyota sold 57,964 clean-energy vehicles in

Japan, which accounted for 3.4% of all Toyota vehicles sold in the country. Since the launch of the fi rst generation Prius in December 1997, a cumulative total of more than 610,000 hybrid vehicles have been sold worldwide as of the end of March 2006.

Number of Toyota’s Clean-energy Vehicles Sold in Japan

FY2001 FY2002 FY2003 FY2004 FY2005

Electric vehicles 56 23 7 0 0

Hybrid vehicles 23,373 15,390 42,021 64,877 57,756

CNG vehicles 187 162 222 277 208

Total 23,616 15,575 42,250 65,154 57,964

Percentage relative to all Toyota vehicles sold

1.4% 0.9% 2.4% 3.7% 3.4%

Increased Use of Low-Pollution VehiclesAs part of its efforts to help reduce global warming and

improve the atmospheric environment, Toyota promoted increased use of low-pollution vehicles for its company fl eet. Toyota identifi ed those vehicles satisfying the Green Purchasing Law (clean-energy vehicles and vehicles that achieve an exhaust emission level 75% or lower than the 2000 Exhaust Emissions Standards and meet the 2010 Fuel Effi ciency Standards) as low-pollution vehicles and began introducing them into the company fl eet. In FY2005, 125 new vehicles were added and the percentage of low-pollution vehicles reached 64% of the total number of passenger vehicles (650 vehicles) owned by Toyota. Toyota is aiming to reach 100% conversion in FY2007.

The development of the fi rst rear-wheel drive hybrid vehicle faced a mountain of obstacles, including the need to reduce battery size, improve the cooling performance of the motor, realize quiet operation, and achieve optimal placement of various major components. “In order to achieve our goals under opposing requirements, we argued a lot and had to work really hard to fi nd solutions. Everyone involved in the project has a keen realization that we are taking the hybrid concept into totally uncharted territory,” says one of the development team members.

Environmental Aspects Development and Design

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

(Number of Vehicles)

613,296

’05 ’06’04’03’02’01’00’99’98’97 (Year)(March end)

Cumulative Number of Hybrid Toyota Vehicles Sold Worldwide

Lexus GS450h development team

Development Team Stepping into Uncharted Territory In Focus

TOYOTA FCHV at the Central Japan International Airport (Centrair)

FHI President & CEO Kyoji Takenaka (currently Director and Senior Corporate Advisor), left,

with TMC President Katsuaki Watanabe


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Reduction of VOC Inside the CabinToyota has reviewed the materials, adhesives and processing

methods used for interior parts to limit the amount of volatile organic compounds (VOCs) generated, thus improving the air quality inside the cabin. Interior VOC levels have been reduced in nine vehicle series, namely the GS, IS, Ractis, RAV4, Belta, bB, Estima, Camry, and GS Hybrid.

Application of Eco-VAS to All New ModelsIn FY2005, to further promote the use of environmentally-

considerate designs, Toyota applied Eco-VAS, a comprehensive environmental impact assessment system that allows the systematic assessment of the impact a vehicle will have on the environment throughout the entire vehicle development process and during production, use and disposal, to all ten vehicle series that were new or underwent complete redesign (GS, SC, IS, Ractis, RAV4, Belta, bB, Estima, Camry, and GS Hybrid). Comprehensive environmental performance was enhanced and the results published in product catalogs.

LCAIn FY2005, Toyota applied LCA (Life Cycle Assessment) to ten

vehicle series that were new or underwent complete redesign.LCA is an evaluation of environmental impact over the total

life span of a product, from the materials manufacturing stage, through the parts and body manufacturing stages, to the use, maintenance and disposal stages. LCA enables Toyota to assess the total volume of CO2 and other air-polluting substances released throughout the entire lifecycle of its vehicles.

In June 2006, Toyota held the Toyota Environmental Forum (Powertrain Technology Information Gathering Conference). At the Forum, Toyota reported on the status of its efforts to develop environmental technologies and its plan for creating eco-cars, from the following perspectives: (1) improving fuel effi ciency to reduce CO2 emissions, (2) cleaning exhaust emissions, and (3) addressing the issue of diversifying energy sources. With regard to the fi rst two items, efforts already began with the V6 engine developed in 2003 and Toyota plans to completely renovate its engines and transmissions by 2010. Toyota announced that it plans to install a new 1.8-liter gasoline engine with a continuously variable transmission in new models scheduled to be launched in the autumn of 2006. Toyota also plans to double the number of its hybrid models by the early part of the 2010s, and is also conducting research and development on plug-in hybrid cars.* As for item (3), Toyota has already developed a technology that will enable all of its gasoline-powered engines worldwide to use gasoline with a 10% ethanol content. Toyota also announced its plans for a vehicle that can run on 100% ethanol (Flex Fuel Vehicle (FFV)), which will be introduced in the spring of 2007 in Brazil where bio-ethanol is widely available.

*Plug-in hybrid car: Hybrid car that can be charged by an external electricity source

By combining the 3.5-liter D-4S engine with a high-performance motor, the GS Hybrid achieves a driving performance equivalent to that of a vehicle with a 4.5-liter engine, with a high fuel effi ciency of 14.2km/l (in the 10-15 Japanese test cycle), equivalent to that of a vehicle with a 2.0-liter engine. The GS Hybrid has achieved a fuel effi ciency level that is at least 20% higher than the 2010 Fuel Effi ciency Standards and an exhaust emission level that is 75% lower than the 2005 Exhaust Emissions Standards.

The GS has achieved its high fuel effi ciency level through the use of the D-4S engine and a more effi cient powertrain that uses a 6-speed automatic transmission, as well as a reduction in aerodynamic resistance. The GS also achieves cleaner exhaust emissions by using VVT-i and an air-fuel ratio compensation system. By using two stages of three-way catalytic converters to thoroughly clean the exhaust emissions, Toyota has signifi cantly reduced air pollutants in the exhaust emissions from vehicle start-up through the acceleration stage. As a result, it has been confi rmed that the new GS emits 11% less CO2, 19% less NOx, and 27% less NMHC compared to other gasoline-powered vehicles in the same class, while the GS Hybrid emits 29% less CO2, 30% less NOx, and 21% less NMHC.

Toyota Environment Forum Held to Promote Sustainable Mobility In Focus

Implementation of LCA for the Lexus GS Series In Focus

GS450h

Note 1: Assumes a lifetime travel distance of 100,000 km (10 years) and calculations based on the 10-15 Japanese test cycle

Note 2: Because Toyota uses LCA to confirm relative environmental benefits, the graph shows assessment results as indexes. Additionally, since the CO2 value is based on tonnage while other values are based on kilograms, they are indexed separately.

A B

NOx

C A B

NMHC

C A B

PM

C A B

SOx

C A B

CO2

C

1

0.8

0.6

0.4

0.2

0

1,000

800

600

400

200

A: 2002 gasoline-powered vehicles in the same classAverage of Toyota vehicles

B: GS (gasoline-powered)C: GS Hybrid

PM: Particulate Matter

NMHC: Non Methane Hydrocarbons

0

Materialmanufacturing

Vehicle manufacturing

Driving

Maintenance

Disposal

GS450h with hybrid system




Atsushi NiimiProduction Environment Committee

Chairman

In the areas of production and logistics, Toyota will focus on the complete elimination of non-compliance and complaints and aim to be an industry leader with regard to initiatives to help prevent global warming, reduce waste and usage of substances of concern, conserve water and other resources. These initiatives

are in line with the principle underlying the Toyota Production System — the elimination of wasteful practices, inconsistencies, and unreasonable requirements (muda, muri and mura). Through the joint efforts of the production engineering divisions and plants, Toyota will create production processes that do not waste limited natural resources, and work to develop human resources at each affi liate worldwide.

The results of the actions taken in FY2005 are summarized below.1) All goals, including for reduction of CO2 emissions were

almost achieved2) Through energetic actions to reduce VOC emissions,

conversion to water-borne paints for the top coating (base coat) was completed on all lines in Japan

3) 2010 action plans were created at all plants toward the achievement of the goals in the Fourth Toyota Environmental Action Plan

4) The Toyota Environmental Management System (TOYOTA-EMS) that incorporates the Toyota Way was defi ned and expanded to affi liates worldwide As the production volume increases in the future, initiatives

involving all Toyota employees to maintain the number of cases of non-compliance and complaints at zero, while reducing and controlling environmental impact, will be enhanced.

Production

Production Environment Management

FY2005 Goals• Expansion of best practices to prevent non-compliance and complaints• Steady promotion of the plan to prevent soil and groundwater contamination

TOYOTA-EMS that Incorporates the Toyota WayWith its business expanding globally, Toyota in 1996 began

encouraging its plants and housing works to acquire ISO 14001 certifi cation, an effective tool for managing environmental preservation activities, in order to ensure more complete implementation of environmental measures as well as more

transparency with regard to activities. Beginning in 2000, TMC introduced consolidated environment management at consolidated subsidiaries and has been promoting group-wide environmental preservation actions. Intent on the early realization of policies on production environment,* TMC clearly defi ned the Toyota Environmental Management System (TOYOTA-EMS), which incorporates the Toyota Way in the ISO 14001 management methodology. TMC plans to further evolve the TOYOTA-EMS through implementation at affi liates all over the world.

*Policies on production environment: Thorough compliance, proactive prevention and enhancement of environmental performance

Atsushi Niimi joined Toyota in 1971 and has gained experience in a wide range of production areas. After serving as the General Manager of the Production Control Division, he was President of TMMNA (Toyota Motor Manufacturing North America) from 2002 until 2005. He was appointed a Senior Managing Director in June 2004 and has been the Chairman of the Production Environment Committee since June 2005.

Volume of Resources Input and Volume of Substances Discharged from Production Plants and Logistics Activities in FY2005

Production Process

Volume recovered as thermal energy by Toyota (5,800 tons)

Logistics

Thermalrecovery

Input

Input

Released into waterways

Casting and Forging

MachineProcessing

Transmissions, etc.

Engines

Assembly

PaintingWeldingPress

1. GJ (giga joule) = 109J2. Greenhouse gas types

Six types: CO2, CH4, N2O, HFC, PFC, SF6

3. Includes the ash generated from incinerators during recovery of thermal energy at Toyota

Total materials volume input (1.47 million tons)Amount of materials reused in automobile production processes of Toyota (320,000 tons)Total energy consumption (32.8 x 106GJ)1

Renewable energy consumption(Wind power generation: 18GJ)Water consumption (13.97 million m3)Volume of substances subject to PRTR (16,200 tons)

Total amount of wastewater (9.28 million m3)Volume of substances subject to PRTR (12 tons)

Volume of greenhouse gases2 emitted (1.4509 million tons-CO2) CO2: 1.4487 million tons Gases other than CO2: 2,200 tonsVolume of substances subject to PRTR (1,900 tons)

Volume of substances subject to PRTR disposed of at landfills within business sites (0.2 tons)

Total volume of waste generated (508,000 tons)Volume reused (504,000 tons)Final volume disposed of (4,000 tons)3

Volume of substances subject to PRTR (270 tons)

Total transportation volume in Japan(3.8 billion ton-kilometers)Volume of wrapping and packaging materials (49,800 tons)

CO2 emissions (414,000 tons-CO2)

Gases emittedinto the atmosphere

Gases emittedinto the atmosphere

Volume of waste generatedand not processed by Toyota

TOYOTA-EMS pamphlet


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Plant EMS Internal AuditsIn FY2005, based on the policies on production environment,

Toyota conducted internal audits at seven of its plants and other business operation sites, focusing on determining whether the improvement requirements identifi ed by past audits had been horizontally propagated to other divisions within the individual plants. The results showed no outstanding issues. In FY2006, in order to further improve the effectiveness of internal audits, Toyota will base its audits on a framework geared to maintaining zero cases of non-compliance and complaints.

Production Engineering EMS Internal AuditsToyota conducted internal audits at its nine divisions related

to production engineering, focusing on the status of legal compliance (documentation to authorities), proactive prevention (environmentally conscious designs), and environmental performance improvement (production process improvements through the introduction of new technologies), all of which are goals of the Production Engineering EMS. One of the focal items was the prevention of oil spattering during equipment transportation; the audit results showed no outstanding issues in this area. In FY2006, Toyota will focus its production engineering internal audits on ensuring legal compliance and achieving zero cases of non-compliance and complaints.

Legal Compliance ActivitiesAchieving Zero Cases of Non-compliance and Complaints

By the middle of FY2005, Toyota completed the implementation of best practices in order to prevent recurrences of the 12 actual cases of non-compliance, complaints or “near-miss” accidents* with regard to atmospheric, water and noise pollution, identifi ed during the three-year period of 2003 to 2005. In response to an accidental leakage of oils used in vehicles, Toyota implemented 105 best practices, including some for minor issues. It was confi rmed that all these improvements had been made by January 2006. Additionally, in order to prevent the leaking of turbid water into public waterways, Toyota will reassess the possibility of leakage and its impact, and implement preventive measures at identifi ed areas.

*Non-compliance, complaints and near-miss accidents: Potentially high-risk incidents that do not lead to actual accidents

Reporting and Storing Electrical Devices Containing PCB

In FY2005, Toyota began using outside subcontractors to process electrical devices containing PCB. 1,279 units were processed in FY2005. The remaining 3,968 transformers and condensers, which are currently stored in accordance with the standards specifi ed by law, will be completely processed by subcontractors by the end of FY2007.

Soil and Groundwater-related MeasuresToyota completed the soil remediation measures that

it had been carrying out at six plants in FY2001. In terms of groundwater contamination prevention, Toyota completed an effl uent-prevention measure in 1997 which involved the digging of barrier-type wells and has continued groundwater remediation using pump and treat technology. Toyota reports levels of trichloroethylene to the government, as well as to local councils in the surrounding communities.

Proactive Preventive MeasuresPrevention of Soil and Groundwater Contamination by Oil Leakage

To prevent soil and groundwater contamination from oil leakage, Toyota implemented actions to ensure meticulous monitoring on a daily basis. In those areas that are diffi cult to monitor on a daily basis, Toyota installed oil fl ow meters. Toyota also created the online Manual for Prevention of Soil Contamination for training facility planning personnel and facility operation managers.

Trichloroethylene Measurement Values in FY2005

Environmental standard: 0.03 Unit: mg/l

Plant Levels in groundwater

Honsha Less than 0.002 - 1.24

Motomachi Less than 0.002 - 0.89

Kamigo Less than 0.002 - 0.44

Takaoka Less than 0.002 - 1.08

Miyoshi Less than 0.002 - 3.17

Tsutsumi Less than 0.002 - 0.86

Note 1: Measurements are taken at all plants and housing business sites

Note 2: Has not been detected in plants other than those listed

Note 3: The level has a range since each plant includes multiple measurement points

Online Manual for Prevention of Soil Contamination

In order to further improve the trust and confi dence of the local community, Toyota held community council meetings with enhanced content at its Tahara and Miyoshi plants on a trial basis. Toyota invited town leaders, as in the past, and, for the fi rst time, neighborhood association presidents, as well as fi re and police department representatives to these meetings. As a measure to help reduce environmental risks, Toyota held an emergency drill demonstration on explosions at the Miyoshi Plant.

Those local community members who attended the drill said that their level of confidence in Toyota had increased. Toyota plans to hold similar drills at other plants. Mr. Kato, Town leader, Uchikoshi,

Miyoshi-cho (left) and Mr. Higuchi, Town leader, Senzoku Town, Toyota City

Communication with Surrounding Communities In Focus


Environmental Aspects Production and Logistics

Prevention of Global Warming

FY2005 Goal• Reduce total CO2 emissions volume per year to 1.80 million tons or less

Beginning in FY2005, Toyota added its non-production sites, such as the Tokyo Head Offi ce, to the scope of its CO2 emissions reduction activities and carried out activities with the goal of reducing CO2 emissions to 1.80 million tons or less. Total CO2

emissions were no greater than 1.71 million tons.

Reduction of CO2 Emissions from Production Processes

Toyota reduced CO2 emissions from production processes through steps such as reconfi guring and integrating lines, incorporating the latest energy conservation technologies during line switchover, and switching the fuel for cogeneration from heavy oil to LNG.

Expanded Use of New Energy

In FY2005, the amount of electricity generated using new energy sources such as natural gas cogeneration and power generation from waste was 304,000MWh, accounting for approximately 10% of Toyota’s total electricity consumption.

Purchase of Green PowerToyota concluded a Green Power Certifi cation System

agreement with Japan Natural Energy Company Limited, based on which it used 1.86 million kWh of wind-generated power in FY2005.

Reducing Substances of Concern

FY2005 Goals• Body painting process: Reduce VOC emissions to an average of 35g/m2 or

less on all lines• Reduce yearly discharge volumes of toluene and xylene (substances subject

to PRTR) to 2,000 tons or less

Introduction of Water-borne Paints into Body-painting Lines Completed

Toyota continued to promote the introduction of water-borne paints as a measure to reduce volatile organic compounds (VOC) emissions. In FY2005, water-borne paints were introduced for the top coating (base coat) at the Motomachi, Takaoka, and Tahara plants, completing the conversion at all nine painting lines. Additionally, through measures such as reducing the volume of solvent used and improving solvent recovery rates, Toyota reduced VOC emissions to an average of 30g/m2 on all lines. In its Fourth Environmental Action Plan, Toyota set a goal of achieving average VOC emissions of 25g/m2 by the end of FY2010 and will proceed in introducing water-borne paints for the primer coat.

ESCO (Energy Service Company) is an internal organization within the Plant Engineering Div. focused on improving energy conservation measures. When a request is received from a manufacturing division, ESCO examines the target processes from the viewpoint of energy conservation, followed by proposals for improvement, implementation, confirmation of results and reporting. Through improvements made jointly with manufacturing divisions such as to the painting booth and air-conditioning system, ESCO has been promoting reductions in CO2 emissions. In the second half of FY2005, ESCO began supporting TMC’s overseas affiliates in their efforts to implement i n d e p e n d e n t e n e r g y conservation initiatives, and will continue these activities in FY2006.

4441

35

30

’98 ’02 ’03 ’04 ’05(FY)

0

50

60

40

30

(g/m2) 64

Emis

sion

s vo

lum

e

VOC Emissions Volumes in Automobile Painting Processes (Average of All Lines)

Checking boiler facilities

Calorifi c Energy Use RatioCoke 1.0%

Electricity 61.4%Natural gas 20.8%

A-type heavy oil 12.8%

Butane gas 3.1%

Coal 0.6%Kerosene 0.3%

’02 ’03 ’04’90Note: For facilities in non-production areas for which FY1990 emissions data is not available, the oldest

subsequent data available is used for the graph

’05 (FY)0

1.8

1.6

1.4

2.0

2.2

2.4

Please see p. 42 for further details on the CO2 conversion coefficient

0

200

100

300

400

500

210 200 193

291

1.67 1.62 1.59

1.99

0.17 0.18 0.19

0.13

1.84 1.80 1.78

168

1.51

0.201.71

2.12Total CO2 emissions from non-production areas

(Million Tons) (Tons/Billion Yen)

Total CO2 emissions from production areasCO2 emissions per sales unit

CO2 e

mis

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s pe

r sal

es u

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Tota

l CO 2

em

issi

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(ene

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cons

umpt

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Reducing CO2 Emissions through ESCO In Focus

CO2 Emissions (Energy Consumption) and CO2 Emissions per Sales Unit

(FY)’05’04’03’02’01

400

300

200

100

0

(Thousand MWh)

304278

230233

176

Expanded Use of New Energy


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Reducing the Volume of Substances Subject to PRTROf the substances subject to PRTR,1 toluene, xylene,

ethylbenzene, and 1,3,5-trimethylbenzene account for 95% of the total volume. Toyota took various steps to reduce the usage of substances subject to PRTR, including converting topcoat paints to the water-borne type and switching to the use of diluted solvents containing lower volumes of substances subject to PRTR. As a result, the actual released volume of substances subject to PRTR was reduced to 1,980 tons in FY2005, achieving the original goal. In the future, Toyota plans to implement further reduction measures such as introducing water-borne paints for the primer coat.

1. PRTR: Pollutant Release and Transfer Register

Resource Conservation Activities

FY2005 Goals• Reduce usage of primary raw materials by 9,100 tons or more• Limit usage of foundry sand to 19,000 tons or less• Limit usage of oils and fats to 10,700kl or less• Reduce the volume of combustible waste generated to 10,660 tons or less

Effective Resource UtilizationTo ensure the effective utilization of resources such as iron and

aluminum, Toyota took actions to improve the yield in each production process, reduce the number of defective pieces, integrate parts, and redesign their shapes. Toyota also took steps to reduce its usage of foundry sand by, for example, expanding and consolidating the production of aluminum engine blocks. Toyota implemented various routine measures to manage and reduce usage of oils and fats such as eliminating where possible the need for oils in the fi rst place by consolidating lines, ensuring recycling and reuse, and introducing an oils and fats control system to identify issues (mieruka). As a

result, Toyota reduced its primary raw materials usage by 14,300 tons, using only 17,500 tons of foundry sand and 9,800kl of oils and fats, thus achieving its FY2005 goals. In the area of resource conservation, Toyota wi l l continue to promote the effective utilization of resources to help build a recycling-based society. In FY2006, Toyota plans to take steps to reduce the volume of waste that is not processed in-house,2 including the amount of money-back recycling.

2. Volume of waste not processed at Toyota: Volume of waste generated + amount of money-back recycling

Reducing the Volume of Waste GeneratedToyota achieved zero landfi ll waste3 at its production plants

in December 2000 and at its non-production bases in December 2003. The volume of landfi ll waste generated from both production plants and non-production bases in FY2005 was less than 1% of the FY1995 level, and the goal of zero landfi ll waste was met once again. Toyota signifi cantly reduced the volume of waste generated in FY2005, including the portion that was recycled, through such measures as reducing the volume of industrial dust collected from casting processes through consolidation of production processes. Excluding the amount that was recycled, the volume of waste generated was 8,300 tons for the year, achieving the FY2005 goal.

3. Zero landfi ll waste:A reduction in landfi ll waste generated directly by plants to less than 1% of the 1995 level as against the initial goal of less than 5% of the 1995 level

The surface treatment agent Toyota uses before painting contains zinc phosphate as its main component and also contains substances subject to PRTR, such as nickel and manganese. Therefore, Toyota has been using enhanced wastewater treatment facilities to reduce the release of wastewater containing the surface treatment agent into waterways. In FY2005, Toyota, jointly with Nihon Parkerizing Co., Ltd., developed a new surface treatment agent based on a zirconium compound that is free of nickel and manganese, yet has the same level of anti-corrosiveness as the compound based on zinc phosphate, and introduced it to the parts painting lines at the Takaoka Plant in January 2006.

6,280

3,580 3,4703,030

1,980

’98 ’02 ’03 ’04 ’05(FY)

0

5,000

6,000

7,000

4,000

3,000

2,000

1,000

(Tons)

Discharge Volumes of Substances Subject to PRTR

Changes in Resource Utilization Rate

’02 ’03 ’04’90 ’05(FY)

0

100

95

90

85

(%)

1.2

3.80.001

1.2

1.7

Ash from incinerator 5.0

Intermediary processing by

outsidesubcontractor

Amount reduced(Thermal recovery)

Subcontractor Isolated landfills Externally-controlled landfills

Toyota controlledlandfills

8.3

Coal: 9.5RDF*: 10.9

6.6

Note: The details of incombustible waste are not included because they are minuscule*RDF (Refuse Derived Fuel): Solid fuel derived from waste

Harmless castingwaste, etc.

Hazardous dry cell batteries,

hazardous dust, etc.

Hazardous dry cell batteries,

hazardous dust, etc. Incombustible0.04

Volu

me

of w

aste

gene

rate

d(E

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that

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Com

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Fuel

Inci

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(Ene

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Development of the World’s First Painting Surface Treatment Agent Containing Fewer Substances of Concern

In Focus

Zirconium Oxide

Steel sheet

50nmor less

Surface appearance of the new surface treatment agent

’02 ’03 ’04’90 ’05 (FY)0

40

80

120

160160

81

143

80

18.2

69

13.5

66

10.5

Amount of recycling for a feeVolume ofwastegenerated

59

8.3

Volume of combustible wasteVolume of landfill waste

(Thousand Tons/Year) Volume of Waste Generated

Overview of Waste Disposal (Excluding that Recycled) (FY2005 Results) (Unit: Thousand Tons/Year)


Water Consumption / Air and Water Quality Data

Water consumption remained basically the same as the previous year. In data accumulated by Toyota on air quality,

LogisticsThe area of logistics involves transporting completed vehicles

and vehicle parts throughout Japan and overseas. In FY2005, Toyota’s transport volume in Japan was approximately 3.8 billion ton-kilometers (tonnage times kilometers). Toyota promoted improvement activities to achieve the action goals established by the Production Environment Logistics Subcommittee.

CO2 Emissions Reduction Activities in Japan

FY2005 Goal• Reduce CO2 emissions to 435,000 tons or less (reduce CO2 emissions by

18,000 tons or more)

Toyota’s initiatives to reduce total CO2 emissions during the transport of completed vehicles and parts include improving loading rates, sharing vehicles with other companies to increase transport effi ciency, shifting to more effi cient modes of transport, and increasing fuel effi ciency. As a result, Toyota was able to reduce total CO2 emissions from logistics activities by 30,300 tons in FY2005 to 414,000 tons, achieving the reduction goal.

Change in CO2 Emissions Volume Calculation Method

In order to improve the accuracy of calculating CO2 emissions volumes, Toyota reassessed its calculation method in FY2005. Toyota switched from the ton-kilometers method, which calculates CO2 emissions by multiplying the weight (tons) transported by the distance (km) traveled and a CO2 conversion coeffi cient, to the fuel method, which calculates CO2 emissions directly from the volume of fuel consumed. Toyota has also standardized all its data by estimating and recalculating past data using the fuel method.

Note: Because the ton-kilometers method was replaced by the fuel method in FY2005, numerical goals expressed in terms of the former have been converted to values expressed in terms of the fuel method. A comparison of values in terms of both the ton-kilometers method and the fuel method was made based on data for the period between January and March 2005, and tabulated.

emissions of SOx (sulfur oxides) continue to show a decreasing trend. Emissions of NOx (nitrogen oxides), however, increased in FY2005 as a result of increased use of heaters in the paint shop due to a severe winter. With regard to water quality data, nitrogen, phosphorus and COD, whose aggregate levels in waterways are regulated, all continue to be at levels that are only 10 to 40% of those allowed by regulations.

CO2 Emissions Volume

’90 ’02 ’03 ’04

500

400

300

0

(Thousand Tons)

’05

440

397 406 413 414

(FY)

Please see p. 42 for further details on the CO2 conversion coefficient

ProductTopic Details Reduction in CO2

9,800 tons/yearOther

Productionparts

Productionparts

Completedvehicles

Serviceparts

Completedvehicles

Improvements infuel efficiency

Further promoted Eco Driving throughdriver education, etc. 3,200 tons/year

Modal shift Switched to railway transport for shipping production parts to the Iwate Plant of Kanto Auto Works 600 tons/year

Use of large ships

Began using large, high-efficiency ships on the Kyushu route 2,100 tons/year

Improvedloading volume

Increased loading rates by switching to low-floor trucks 2,700 tons/year

Reassessmentof routes

Switched the unloading port (from Hakata Port to Shin-Moji Port) for the Kyushu route 11,400 tons/year

Sharedtransport

Reduced the number of truck runs by sharing truck space with Tacti and Hino 300 tons/year

Improvementsin loading rate

Improved loading rates by reassessing truck dispatching routes and shipment packaging format for loading

200tons/year

Total30,300 tons/year

Redu

ctio

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tota

ltra

nspo

rtatio

n di

stan

ceSh

ift to

a m

ode

oftra

nspo

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O 2em

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per u

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Results of CO2 Emissions Reduction Activities

Water Consumption

20181614121086420 0

(Million m3)

(FY)’011.8

14.7

’021.6

13.8

2.5

’030.8

12.9

2.4

’040.9

13.5

1.3

12.9

2.5

’05Note 1: Water consumption includes the volume consumed at automobile production plants, housing works

and non-production divisionsNote 2: Water consumption/vehicle indicates the consumption per unit produced at vehicle assembly plant

Total water consumption (company-wide)

6

5

4

3

2

1

(m3/vehicle)

5.45.0

4.1 4.0

2.5

4.2

Water consumption/vehicle (vehicle assembly plants)

Ground-water Industrial water Tap water2.6

Air and Water Quality Data

Note 1: The unit for air quality data is 1000m3N/year and for water quality data tons/yearNote 2: There was an error in the calculation period for NOx emissions. Previous figures have been

recalculated.

Item

NOx emissions volume

SOx emissions volume

Total nitrogen

Total phosphorous

COD

Air

Water

(FY)’01 ’02 ’03 ’04 ’05

448 494 472 444 526

174 157 148 139 111

95 83 71 59 46

6.3 6.9 6.1 6.8 3.9

104 96 89 86 68


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Reducing Packaging and Wrapping Materials

FY2005 Goal• Reduce usage to 48,700 tons or less (reduce usage by 2,000 tons or more)

To reduce the volume of packaging and wrapping materials, Toyota took actions such as expanding the use of returnable steel and plastic containers and streamlining of wrapping material and packaging formats. As a result, Toyota achieved its reduction goal by reducing usage by 2,600 tons. However, the increase in production volumes resulted in a total usage volume of 49,800 tons.

Activities at Logistics CentersToyota employees at the Nagoya Wharf Center, Tobishima

Logistics Center, Kamigo Logistics Center, Oguchi Parts Center and Inazawa Parts Center are all proactively taking the necessary preventive measures in terms of preserving water quality and limiting noise. Each site continually checks for oil leaks at truck parking lots to prevent oil leakage, monitors wastewater quality, and measures noise levels in the surrounding areas. In FY2005, there were no cases of non-compliance or complaints at any of the sites.

Results of Activities to Reduce Packaging and Wrapping MaterialsProductTopic Details Reduction

• Expanded use of returnable plastic boxes• Change in packaging formats and material 500 tons/year

• Expanded use of returnable steel boxes• Change of wrapping specifications• Improved packing rates in shipping containers

1,100 tons/year

Other 1,000 tons/year

Total2,600 tons/year

Increasing the use of returnable containers

Streamlining Serviceparts

Productionparts

Vehicle Logistics Flow

Ship

ping

por

t

Unlo

adin

g po

rt

Within Japan

Overseas

CurrentPromote enhancement of the management system

Scope

Partscenter

In-houseproduction plant

(assembly unit)

Bodymanufacturer

Japanesedealer

Logistics center(Packaging plant)

Parts distributorin Japan

Customer

Supplier Partscenter

In-houseproduction plant

(assembly unit)

Bodymanufacturer

Japanesedealer

Logistics center(Packaging plant)

Parts distributorin Japan

Customer

Supplier

Overseasdistributor

Plant

Supplier

Customer

Logisticscenter

Overseasdistributor

Plant

Supplier

Customer

Logisticscenter

Production parts

Completedvehicle

Completedvehicle

Completedvehicle

Service parts

Imported parts

Production parts

Directly-shippedproducts

Usage of Packaging and Wrapping Materials

’95 ’02 ’03 ’04 ’05

88.5

49.0 48.3 49.4 49.8

100

80

60

40

20

0

(Thousand tons)

(FY)

Best Practice 1Switched the Unloading Port for the Kyushu Route

In order to shorten the transport distance, Toyota switched the unloading port for its ships from the Hakata Port to the Shin-Moji Port. As a result, Toyota was able to improve the ship utilization rate and eliminate one voyage on the route, thus reducing CO2 emissions by 11,400 tons a year.

Best Practice 2Reduced the Number of Truck Runs through Shared Transport

Toyota moved the parts warehouse of Tacti Corporation, a consolidated subsidiary located in Kanagawa Prefecture, to the Toyota Haruhi Parts Center in Aichi Prefecture. This move allows Toyota to jointly ship parts that Tacti used to individually ship to parts distributors, thereby decreasing the total number of truck runs and reducing CO2 emissions by 300 tons a year.

Best Practice 3Improved Shipment Packaging Format for Bumpers Bound for North America

As the fi rst step towards improving packaging formats, Toyota switched from individual wrapping of bumpers bound for North America to packaging in large boxes. This increased the number of bumpers packed per container from 100 to 240. Then in FY2005, Toyota switched the corrugated cardboard shipping boxes to returnable containers, thus reducing packaging material usage by 460 tons a year.

First step Second stepBefore improvement

Indi

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ipm

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acka

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Environmental Improvements in Logistics Activities

In Focus

Shortened by117km

Toyota Kyushu

Shin-Moji Port

Hakata Port

Moved to Haruhi Parts Center

Before improvement After improvement

Direct truckservice to

parts distributors

Direct truckservice to

parts distributors

Kanagawa Prefecture

Aichi Prefecture

Individual base

Aichi Prefecture

Individual base

Tacti Parts warehouse

Tacti Parts warehouse

Kamigo Oguchi Inazawa Kamigo Oguchi Inazawa

Haruhi truck terminalinside Haruhi Parts Center Haruhi truck terminal

Tacti parts loaded

Parts DistributorHeadquarters


Haruhi truck terminalinside Haruhi Parts Center Haruhi truck terminal

Tacti parts loaded





Recycling

Yoshio ShiraiRecycling Committee Chairman

A dwindling supply of natural resources and the need for environmental preservation on a global scale is intensifying the need for switching to a sustainable, recycling-based society. In the automotive industry initiatives must be taken to actively promote recycling/recovery* at every stage of a vehicle’s lifecycle, from development to disposal, and to produce easy-to-recycle vehicles.

Toyota’s efforts in recycling end-of-life vehicles (ELVs) began early with the founding of Toyota Metal Co., Ltd., a shredding company, in 1970. Since then, Toyota has been proactively

implementing numerous recycling measures, including the development of an easy-to-recycle polymer called Toyota Super Olefi n Polymer (TSOP) in 1991, the development and commercialization of the world’s fi rst dry automobile shredder residue (ASR) recycling technology in 1995, the 2003 announcement of the Toyota Recycle Vision, and the development of new Designs for Recycling (DfR).

The results of the actions taken in FY2005 are summarized below.1) Steadily implemented measures to recycle/recover ASR,

recycle airbags and treat CFCs/HFCs from end-of-life vehicles towards the smooth operation of systems related to the Automobile Recycling Law

2) Steadily incorporated new DfR features into new models3) Reduced the usage of four substances of concern at Toyota

operations worldwide4) Developed new practical dismantling technologies and

marketed them widely5) The number of vehicles in which Recycled Sound-Proofi ng

Products (RSPP) was used exceeded the 10 million mark6) Promoted the collection and recycling of batteries from end-

of-life hybrid vehiclesToyota will continue to take action to attain the early

achievement of a 95% vehicle recycling/recovery rate by further promoting the development of DfR, reduction of substances of concern and other initiatives.

*Recycling/recovery: Refers to material recycling and thermal recovery of ASR

Initiatives in the Development and Design StageEnhanced Recyclable Vehicle Design

Use of Designs with Improved Dismantlability in New Models

Toyota incorporated as many DfR features as possible into the Raum, launched in 2003. Since then, Toyota has been integrating the various improvements made in the Raum into the design standards of all new vehicle series. In the vehicle series launched in FY2005, such as the new RAV4, the Easy to Dismantle Mark, which indicates effi cient dismantling points, was incorporated on large parts such as door trim, and numerous easy-to-dismantle features were used, including easy-to-dismantle designs for plastic parts, use of recyclable materials, and pull-tab structures for grounding terminals.

Implementation of Prior Assessment and Use of Easy-to-Recycle Materials

Toyota applied its Prior Assessment System to ten vehicle series that were either new or underwent complete redesign, to assess items such as recoverability and usage of substances of concern.

Furthermore, Toyota used the easy-to-recycle TSOP in the interior and exterior parts of all new vehicle series or those that underwent complete redesign, Recycled Sound-Proofi ng Products (RSPP) in fi ve vehicle series and kenaf fi bers derived from plants in some of the interior parts of four vehicle series, including the Lexus.

Yoshio Shirai joined Toyota in 1973 and has been involved in the vehicle body design of numerous vehicle series. After various assignments, including that of General Manager of the Body Engineering Div. 2, he became a Director in 2001. He was appointed Senior Managing Director in June 2005 and also took up the position of Chairman of the Recycling Committee.

FY2005 Goals• Incorporate the concept of design for recycling (DfR) into vehicles to be

launched, in response to a vehicle recycling/recovery target rate of 95% by 2015

• Improve dismantlability and switchover to easy-to-recycle materials in consideration of future recycling/recovery technologies

Easy-to-Recycle Materials Used in the New RAV4

TSOP=Toyota Super Olefi n Polymer

RSPP=Recycled Sound-Proofi ng Products


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Reduction of Substances of Concern

FY2005 Goals• Promote measures to achieve Toyota’s voluntary goal of eliminating usage

on a global scale (by the end of 2007)• Achieve ahead of schedule the voluntary goals of the automobile industry in

Japan

Elimination of the Four Substances of Concern Based on Toyota Global Standards

Based on the Toyota Global Standards, Toyota has voluntarily established the goal of early elimination of the use of four substances of concern (lead, mercury, cadmium, and hexavalent chromium). To cope with the global expansion of vehicle and parts production, Toyota decided to establish uniform, group-wide initiatives, and in FY2005 began taking steps toward achieving the goal of elimination by the end of 2007.

Toyota took action to reduce usage of the four substances of concern in vehicles produced in Japan based on the EU ELV Directive and the voluntary goals of the automobile industry in Japan.1) Lead: Achieved the voluntary standards set by the Japanese

automobile industry (reducing lead usage to 1/10 or less of the 1996 level in all new models launched in FY2006 or later) in all new vehicle models and models that underwent complete redesign in FY2005.

2) Mercury: The mercury used in discharge headlamps and backlights for meters is exempted from both the voluntary standards set by the Japanese automobile industry and the EU ELV Directive. Toyota, however, developed mercury-free alternative technologies and began using them in various vehicle models. Through these efforts, Toyota developed the world’s fi rst mercury-free high-intensity discharge (HID) headlamp and eliminated mercury from the backlight of the Optitron meter by adopting an LED. Both of these new products were used in all new models as well as models that underwent complete redesign in FY2005.

3) Cadmium and hexavalent chromium: By June 2006, Toyota essentially achieved the voluntary goals of the automobile

industry in Japan (ban on cadmium and hexavalent chromium beginning in January 2007 and January 2008, respectively).

4) Polyvinyl chloride (PVC): Toyota voluntarily reduced the amount of PVC resin used in wire harness shields and door trims. Toyota also completely removed PVC from the vehicle undercoat* and substituted an acrylic material on all of its painting lines in Japan.

5) Asbestos: Toyota had already switched main parts such as engines and brakes in vehicles produced in Japan to non-asbestos products by 1993. However, when a recheck was conducted in 2005, asbestos was discovered in a small number of two types of gaskets used in the power takeoff, a part specially designed for customized vehicles. A switch to non-asbestos products was made.

*Undercoat:Type of paint that is applied to body undercovers, wheel housings, etc. to prevent rust, noise and vibration

Development of Dismantling Technologies

In the past, it had been diffi cult to collect the copper parts contained in end-of-life vehicles. Therefore, in 2003, Toyota developed “easy-to-remove” designs as well as removal tools for wire harnesses, which account for roughly 50% of all copper parts. To deal with motors, which accounted for the remainder of copper parts, Toyota developed special removal tools in FY2005. In the case of wiper motors, the new tool does not require the removal of the cowl louver, reducing the time required for removal by half.

Witnessing Visible Results Firsthand In Focus

“I was a secretary to a director for a long time after joining Toyota,” says Tokue Tsutsumi who now works in the Quality Audit Offi ce of the Material Engineering Div. 1. The Quality Audit Offi ce has been promoting the elimination of the four substances of concern from the 80,000 parts procured in Japan.

“Since Toyota made its policy decision three years ago, even the creation of a single new rule required great effort. We proposed alternative materials, created a progress-monitoring database, and did follow-ups. I had to view various issues from the perspective of individual departments, and found that the negotiation skills I had gained working as a secretary helped me in achieving internal agreements. I feel very happy to see the results of our work.”

Cutting part of the cowl louver with a sickle Inserting the tool into the motor and leveraging it out

In order to improve on and disseminate information on dismantling technologies Toyota develops, the Automobile Recycle Technical Center of Toyota Metal Co., Ltd., held study meetings with dismantling companies to elicit their views. Two meetings were held, in October 2005 and again in January 2006, attended by approximately 70 people. The dismantling methods are explained on Toyota’s website.

http://www.toyota.co.jp/jp/environment/recycle/scrap/ (Japanese only)

Holding Seminars Targeting Dismantling Companies In Focus

Tokue Tsutsumi, Material Engineering Div. 1

A hands-on study meeting


Environmental Aspects Recycling

Responses to the Automobile Recycling Law

Status of Implementation of the Automobile Recycling Law in Japan

The Law Concerning Recycling Measures for End-of-life Vehicles (Automobile Recycling Law) went into effect in Japan in January 2005. In response, Toyota helped create and operate recycling systems, and promoted the proper collection, recycling/recovery and treatment of airbags, ASR and CFCs/HFCs, generated from ELVs. Working with dismantling and recycling companies to reliably recycle/recover and treat these three items, Toyota achieved an ASR recycling/recovery rate of 57%, equivalent to a vehicle recycling/recovery rate of 93%.

Record of Recycling and Recovery for the Three Specifi ed Items

Responses to Automobile Recycling Laws Overseas

Automobile recycling laws have been enacted in many other countries as well. For example, in Europe, many EU member states enacted such laws based on the EU ELV Directive 2000. Automakers are working to build networks to achieve the EU goal of take-back of all ELVs by 2007. In cooperation with TME and distributors in various countries, Toyota in FY2005 completed the building of its networks in 15 of the 25 EU member nations, and will proceed to build networks in the remaining 10 nations.

In China, an automobile recycling law was promulgated in February 2006, and is to be enacted by 2010. Toyota participates in deliberative council meetings and, based on its experience in Japan and Europe, is helping build an effective recycling system that will be appropriate for China.

Development of Recycling TechnologiesPromotion of ASR Recycling/Recovery

Toyota continued to recycle/recover ASR at the ASR Recycling Plant (recycling capacity of approximately 15,000 ELVs per month) built jointly with Toyota Metal Co., Ltd. in 1998. The plant recycles the sound-proofi ng material RSPP, copper, and glass, and sorts resins and rubber. In FY2005, 6,209 tons were sorted and used as an alternative to kerosene fuel.

Usage of RSPP per unit produced has decreased due to design changes to achieve lighter vehicle bodies, enhanced performance and other improved features. In FY2005, RSPP was used in 1.9 million vehicles (1.5 million vehicles in FY2004) for a cumulative total of over 10 million vehicles since 1996.

Steady Progress in Recycling at Dealers and Parts Distributors

In FY2005, 76,000 used parts were sold at dealers and parts distributors in Japan. The number of used bumpers collected and recycled increased to 898,000 units and the number of lead balance weights collected and recycled also increased to 68 tons (from 63 tons in FY2004).

54.6% of all oil supplied by parts distributors in FY2005 was through the bulk supply* system.

*Bulk supply:A tanker truck transports the motor oil to dealers, who then store it in tanks. This helps reduce the number of drums used.

Hybrid Vehicle Batteries Recycling System in Japan

In October 1998, to coincide with the launch of the Prius Hybrid, Toyota and Panasonic EV Energy, worked together to create a nationwide collection and recycling system for hybrid batteries. In FY2005, 365 battery packs were recycled.

FY2005 results

No. of vehicles collected for ASR 806 thousandNo. of vehicles

collected for airbag recovery

122 thousand

No. of vehicles collected for CFC/HFC

recovery655 thousand

Recycling/recovery

rate

ASR 57%

Airbags 93%

FY2005 results

Funds paid from JARC* 6,746 million yen

Expense for recycling/recovery

and treatment7,115 million yen

Balance - 369 million yen*Japan Automobile Recycling Promotion Center

’01 ’02 ’03 ’04

2,3102,490 2,585 2,683

’05

3,000

2,000

1,000

*Used as soundproofing products in about 1.9 million new vehicles/year

0

(Tons)

(FY)

2,420*

Usage Volume of RSPP Materials (Urethane and Fibers)

Dism

antli

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mpa

ny ((

1) R

emov

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f bat

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s fro

m E

LVs)

((3)

Tra

nspo

rt of

bat

terie

s)

((4)

Dis

asse

mbl

y of

bat

tery

pac

ks)

(2) Collection requestPanasonicEV Energy Co., Ltd.

Batteries

Metals

Resins

Preciousmetals, etc.

Scrap metals

Waste plastic

Battery recovery

Tran

spor

tco

mpa

ny Recoveryinstruction

Use as fuel

Battery recyclingcompany

Raw materials forstainless steel

Scrap processingcompany

Raw materialsfor steel, etc.

Waste plasticprocessing company

Hybrid Vehicle Battery Recycling Flow

Number of Bumpers Collected

’01 ’02 ’03 ’04 ’05

665717

771828

1,000

800

600

400

200

0

(Thousand units)

(FY)

898


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Bio-plastics Pilot Plant Begins Operation (Japan)

In May 2005, Toyota began operating a pilot plant (with an annual capacity in the 1,000-ton range) to verify the feasibility of mass-production technologies for bio-plastics (polylactic acid). The plant is conducting tests to ensure quality and establish mass-production technologies.

In addition to using it as a raw material for automobile parts, Toyota also plans to market a bio-plastic under the product name “TOYOTA Eco Plastic U’z” for use in the wide range of plastic products that pervades daily life (such as food trays, clothes hangers, and pencil cases).

Increasing Harvest Efficiency and Expanding Application at Sweet Potato Business (Indonesia)

Toyota established PT. Toyota Bio Indonesia (TBI), a sweet potato business venture, in 2001. The table below summarizes the size of the cultivated area and the sweet potato harvest.

FY2003 FY2004 FY2005

Newly cultivated area 500ha 230ha 410ha

Sweet potato harvest 1,000t 2,300t 4,100t

At the end of 2005, in order to expand the use of sweet potatoes cultivated by Toyota in Indonesia beyond livestock feed, Toyota installed a freezing facility that can process sweet potatoes into a wide range of food products for humans. With the objectives of achieving a stable and efficient harvest and increasing the range of processed food products, Toyota plans to develop sweet potato cultivation techniques and strengthen management techniques to achieve harvests of 5,000 tons in FY2006, 6,000 tons in FY2007, and 7,500 tons in FY2008.

Steadily Growing Afforestation Business (Australia)

Toyota established Australian Afforestation Pty. Ltd. in 1998. The company plants Eucalyptus globulus, a tree native to Australia that grows extremely fast. By the end of FY2005, Toyota had already planted 1,700ha of these trees, and in 2009 plans to begin harvesting 10-year

old trees and shipping them for use as pulp for paper manufacturing.As part of its social contribution activities, Toyota has been

supporting a joint desertification prevention project in Fengning Man Autonomous County of Hebei Province, China, together with the Chinese Academy of Sciences, the local forestry bureau, and Green Earth Center (an NPO), since 2001. (Please see page 67 for details.)

Developing and Marketing Plants Species that Contribute to Environmental Improvement (Japan)

Toyota developed new varieties of a cherry sage shrub, named “Kirsch Pink” and “Kirsch Red,” and a gardenia plant named “Wald,” all of which are efficient in reducing the urban heat island effect and absorbing atmospheric pollutants, such as nitrogen dioxide and sulfur dioxide. These plants are being utilized alongside city streets and on roof gardens.

Toyota began selling its easy-care, slow-growth Zoysia Grass “TM9” in January 2005. This grass grows only half as tall as conventional grass and requires mowing only once a year compared to three to five times a year for the conventional variety, thus resulting in low maintenance and reduction of waste. As of March 2006, sales of TM9 had reached 8ha.

In 1998, with the goal of helping solve global environmental issues and alleviate food shortages, Toyota began research and development in biotechnology and afforestation. Toyota built the Toyota Biotechnology and Afforestation Laboratory to establish an R&D structure and has been working to accelerate business. The biotechnology and afforestation businesses are ventures with growth potential but also represent Toyota’s efforts to help build a recycling-based society. Toyota is aiming for the realization of the coexistence of environmental protection and economic growth by utilizing environmental technologies, including biotechnology.

Toyota Roof Garden Co., Ltd., established in 2001, has adopted a greening method that uses peat from Sichuan Province, China, which is lightweight yet has excellent water-retention properties. In FY2005, Toyota Roof Garden installed 6,100m2 of roof gardens, with the cumulative total exceeding 30,000m2. Roof gardens are considered effective against the heat island effect.* The employees of Mitsuiya Industry Co., Ltd., where a roof garden was installed, offered the following positive comments: “The bright and open space with grass and flowers allows us to experience the four seasons,” and “In summer, the floors below the roof gardens are much cooler, so we use less air conditioning.”

Bio-plastics Pilot Plant

P.T. Toyota Bio Indonesia (TBI)

TM9 (Left), Conventional Zoysia Grass

Roof Gardens Providing Both a Peaceful Space and Energy Conservation Benefits

In Focus

Roof Garden at Mitsuiya Industry Co., Ltd.*Data obtained on Toyota’s test building showed that roof gardens lower the building surface temperature on summer days by 15 to 25°C, proving their energy conservation effects, which can reduce the power consumed by air conditioners by as much as 40%


Biotechnology and Afforestation Businesses



Housing Business

Environmental ManagementToyota’s housing business adopted an environmental

management system (EMS) based on ISO 14001 certifi cation and promoted initiatives to achieve its FY2005 goals. Toyota also founded the new Housing Group Environmental Preservation Organization and created the 2010 Environmental Scenario for its three housing works.

Developing Environmentally Considerate Experimental Housing

With the aim of providing housing of the future based on a unique concept and leading-edge technologies, Toyota developed an experimental dream house, called Toyota Dream House PAPI,* which brings together advanced technologies of cars, houses, and IT. This house is based on Toyota’s concept of “Factor 4,” which seeks to raise fourfold the effi ciency of resource usage while doubling affl uence and halving environmental impact. PAPI was opened to the public during EXPO 2005 Aichi, Japan and received more than 8,000 visitors, who offered a diverse variety of feedback and support. For its suggestions on the creation of a new relationship between housing and mobility and new technologies to be introduced into houses in the future, PAPI received the Good Design Award 2005 in the New Frontier Design Category. Atolis Park Kariya received the same award in 2004. PAPI also received the Good Lighting Design Award from the Illuminating Engineering Institute of Japan. Toyota is currently continuing its R&D activities in this area, focused on commercializing houses that incorporate the PAPI concept.

*Coined by combining the English words “pal” and “pizazz”

Initiatives at Production PlantsReduction in CO2 Emissions and Volume of Waste

As in FY2004, Toyota’s three housing works continued to reduce CO2 emissions by replacing obsolete compressors and boilers with more energy-effi cient types, and reduced the volume of waste by promoting the sale of discarded vinyl and thoroughly sorting adhesives. In FY2005, production volume rose by approximately 10% and a severe winter led to longer boiler operation, resulting in an increase in total CO2 emissions. Emissions per unit of production remained at almost the same level. The total volume of waste, on the other hand, was only 487 tons against a target of 600 tons. Toyota’s three housing works and the Housing Production Technology Offi ce plan to jointly take various actions to achieve the goal of reducing CO2 emissions and the volume of waste not processed by Toyota, as stipulated in the 2010 Environmental Scenario.

Conservation of Water Resources

Although various water-saving measures were implemented, including more efficient operation of the system for recycling rainwater, total consumption rose due to a 10% increase in production volume. Water consumption per housing unit was 28 tons, for a 30% reduction from the FY1995 level.

132

28

0

50

100

150

’95 ’02 ’03 ’04

133

40 112

32

122

31

131

30

’05

(ThousandTons)

(FY)

Total waterconsumption

Water consumption/Housing unit

0

20

40

60

(Tons/Housing unit)

StandardValue

Total Water Consumption

User-friendly and Environmentally Considerate Housing that Merges the Technologies of Houses, Cars, and IT In Focus

Throughout its entire structure, the Toyota Dream House PAPI, incorporates energy-generating technologies such as fuel cells and solar cells embedded in exterior walls, large windows for letting in the outside light, and energy-saving materials such as highly insulative specialty glass. PAPI’s fl exible design, which can be changed according to changing lifestyles, is intended to reduce the energy consumption during remodeling.

PAPI also incorporates many “dream technologies,” including bedrooms which incorporate various types of sensors that automatically adjust the light level and temperature to ensure a pleasant awakening. All these features are coordinated through a computer network, based on the concept of creating a “ubiquitous network.”

Because the network is also linked to a car navigation system, it can send pertinent information about the house to

the occupants, even when they are away from home, enabling them to keep tabs on the conditions inside the house. PAPI also incorporates the various features of the “universal design” concept, which enables each family member to live safely and comfortably. These features include an automatic storage function that moves heavy packages to the kitchen on the second fl oor when an occupant brings them home, a voice-activated elevator with a two-way entrance that facilitates effi cient wheelchair routing, and a front door that opens wider and at a slower speed for people in wheelchairs than for able-bodied persons.

Toyota Dream House PAPI (Nagakute-cho, Aichi, Japan)

Osamu Ito, General Manager,Housing Engineering and

Development Div.

CO2 Emissions in Production Processes

Volume of Waste Generated

0’01 ’02 ’03 ’04 ’05

2,000

4,000

6‚000

8,000

1

0

2

3

4(Tons)

(FY)

(Tons/Housing unit)

(kg/Housing unit)

Total volume of CO2 emissions

Volume of CO2 emissions/Housing unit

2.0

6,300

1.9

6,900

1.7

6,900

1.6

7,255

1.7

7,845

(Tons)

(FY)

0

500

1,000

750

250

1,300

’05’04’03’02’99

623

159

600

173

1,200

403

504

115

487

105

Volume of wastegenerated

Volume of waste generated/Housing unit

0

200

400

500

300

100

StandardValue

StandardValue


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Initiatives at Construction SitesReduction of Waste

In FY2005, the volume of waste generated per housing unit was 3.1m3, a reduction of only 43% from the FY2000 level, which did not meet the target, mainly because of a diffi culty in reducing usage of curing and packaging materials due to increasing quality requirements.

Toyota will continue taking actions to achieve zero emissions ahead of schedule by, for example, reducing the volume of waste generated, securing recycling routes for the waste generated, and reducing the volume of landfi ll waste generated at construction sites.

Asbestos Used in HousesIn terms of safety measures against asbestos during building,

demolition and remodeling, Toyota complied with all of the related laws such as the Ordinance on Prevention of Hazards due to Asbestos, the Construction Waste Recycling Law, and the Waste Management and Public Cleansing Law, in order to ensure the health and safety of workers and prevent asbestos dust from scattering to surrounding areas. Furthermore, in accordance with the Low-Height Residence Asbestos Handling Guide issued by the Japan Federation of Housing Organization (JHO), Toyota held seminars to ensure that dealers were fully informed about the dangers of asbestos.

Toyota had stopped using asbestos in most components by July 2003 and completely eliminated its use beginning in October 2004. In August and December 2005, Toyota sent written reports on the status of asbestos usage to all residents of Toyota homes and disclosed the same information on its website for the benefi t of prospective buyers.

Toyota’s Housing Business Environmental Action Plan; Results of Initiatives in FY2005FY2005 was the last year of Toyota’s Housing Business Environmental Action Plan, which was established in 2001. Toyota achieved

nearly all of the product development and launch goals. However, in the production area, Toyota was unable to reach its goals in reduction of CO2 emissions, water consumption, and waste generated at construction sites because of an increase in production volume. Goals related to suppliers and dealers were achieved. In the Environmental Action Plan 2010, Toyota will establish new goals, including in areas where goals were not achieved, and take the actions necessary to accomplish them.

Action guideline Item Specifi c action items and goals (FY2005 goals) Actual result1. Development and

supply of products with top levels of environmental performance

CO2 emissions reduction during the occupation stage

• At least 50% of houses built by Toyota to comply with “Next-generation energy-saving standards” 85%

• At least 5% of houses built by Toyota to have photovoltaic power generation systems 4%

Long-life and durability of houses

• All homes to be provided with a 30-year long-term warranty contract 100%• At least 80% of houses to correspond to top rating in Housing Performance Index System 88%

Management and reduction of substances of concern

• Reduction of formaldehyde concentration in at least 80% of houses (top rating in Housing Performance Index System)• Toluene and xylene levels to conform to interior air quality guidelines of the Japan Federation of Housing Organizations 88%

2. Pursuit of production activities that do not discharge waste

Promotion of measures to prevent global warming

• 5% reduction in total CO2 emissions compared to FY2001 25% increase

Waste reduction and resource conservation • 50% reduction in combustible waste generated compared to FY1999, aiming to achieve zero emission 59% reduction

Conservation of water resources • 20% reduction in total water consumption compared to FY1995 1% reduction

Reduction of trash at construction sites

• 70% reduction of on-site trash such as packaging and wrapping material, remnant material and excess material, compared to FY2000 43% reduction

3. Business partners are environmental partners

Enhanced cooperation with suppliers

• Promotion and support of EMS, thorough management of substances of concern, and promotion of efforts to acquire ISO 14001 certifi cation by suppliers (percentage of total value of material purchased by Toyota) 90%

Enhanced cooperation with dealers • Increased support for environmental responses of Toyota Housing dealers

Periodic audits were carried out between May and June 2005 in compliance with legal regulations governing industrial waste

Environmental Action Plan 2010Toyota’s Housing Business created the Environmental Action Plan 2010 based on the contents of the Fourth Toyota Environmental

Action Plan, which covers the period from FY2006 to FY2010, and Eco Action 21, an environmental action plan established by the Japan Prefabricated Construction Suppliers & Manufacturers Association. With a strong commitment to enhance the standard of Japanese homes, Toyota is aiming to achieve the dual goals of affl uent living for its customers and environmental friendliness for the earth.

Action guideline Item 2010 Environmental Scenario

Realization of Factor 4: Achievement of both affl uent living for customers and environmental friendliness for the earth

Product development • By the end of FY2010, all buildings constructed will exceed the next-generation, energy-saving performance standards • The use of energy-conserving and energy-creating devices such as the EcoCute (a heat-pump hot-water supply unit) and photovoltaic power generators

will be actively promotedEstablishment of CO2 emissions goals for the three housing works

• FY2010 total CO2 emissions: 3% reduction from the FY2000 level 7,836 tons (three housing works) 7,600 tons• FY2010 CO2 emissions per unit of production: 44% reduction from the FY2000 level 228 kg/construction unit (average of three housing works) 127kg/construction unit

Establishment of goals for waste not processed by the three housing works

• FY2010 total volume of waste not processed by Toyota: 20% reduction from the FY2000 level 3,893 tons (three housing works) 3,115 tons• FY2010 volume of waste per unit of production not processed by Toyota: 54% reduction from the FY2000 level 113kg/construction unit (average of three housing works) 52kg/construction unit

Construction sites • FY2010 zero emissions* at construction sites for new homes Transportation • FY2010 energy consumption per unit of production: 4% reduction from the FY2006 level

*Zero landfi ll waste excluding fl y ash

3.1

0

1.0

2.0

3.0

4.0

6.0

5.0

’05’04’03’02’00

(m3/Housing unit)

(FY)Data is based on waste reduction for an average-sized house in Japan (130 - 140m2)

3.33.42.8

5.4

StandardValue

Results of Waste Reduction Measures at Construction Sites


Status of Major Environmental Data for FY2005

CO2 Conversion Coeffi cients to Calculate CO2 Emissions Volume

(In order to look at the medium and long-term trends, the fi gures for FY1990 and FY1995 are listed in addition to those for the past three years)

1. The fuel efficiency figures for FY1990 have been obtained by converting the figures obtained in the 10 Japanese test cycle to the 10-15 Japanese test cycle2. Since non-production bases were also brought under the scope of the reduction goals in FY2005, figures include company-wide emissions from FY19903. Total figure for the period from January to December 19904. Zero landfill waste was achieved in FY2000 and has been maintained ever since

26

32

25

28

17.6

12.3 12.3

8.5 8.0

17.6

62

81

2123

29.13

211

31.2

41

83

20.2

17.0

14.1

11.8

9.8

9.9

6.5

57,964

0

57,756

208

3.4%(34)

32.6%(101)

63.7%(69)

171

16.8

30

1,980

8.2

95 or above 38

19.0

16.5

13.9

11.2

9.2

13.2

6.2

42,250

7

42,021

222

21.7%(85)

1.0%(6)

59.8%(90)

15.7%(84)

1.0%(1)

180

20.0

41

3,470

13.5

95 or above

19.5

16.9

14.3

11.5

9.3

11.1

6.1

65,154

0

64,877

277

8.5%(54)

0.2%(7)

0.1%(9)

67.2%(104)

23.5%(26)

178

19.3

35

3,030

10.5

95 or above

33 - 34

Area Key indicator (unit)Item FY1990 FY1995 FY2003 FY2004Relatedpages in

this reportFY2005

Fuel efficiency (CO2)1

Exhaust gases

Clean-energyvehiclesPr

oduc

t

CO2 emissions2

Substances of concernPr

oduc

tion

Recovery rate

Recy

cling

Waste4

Vehicles that achieved levels 25% lower than 2000 gasoline standards [Percentage of total production (No. of models)]





Number of units sold

Electric vehicles

CNG vehicles

Hybrid vehicles

(units)

(units)

(units)

(units)

Average fuel efficiency by weight category [km/l] (Gasoline-poweredpassenger vehicle)1

703 - 827kg

828 - 1,015kg

1,016 - 1,265kg

1,266 - 1,515kg

1,516 - 1,765kg

1,766 - 2,015kg

2,016 - 2,265kg

2,266kg -

Total emissions volume

VOC emissions volume per body area

Proved at Toyota Metal

Emissions volume per sales unit

(calculated in CO2 equivalent in 10 thousand tons/year)

Discharge volume of PRTR substances(tons/year)

(g/m2)

(%)

(calculated in CO2 equivalent in tons/100 million yen/year)

Volume of combustible waste generated (thousand tons/year)

(average)

(average) (average)

(average)

Diesel (truck)

C-type heavy oil (ship)

2.62 kg-CO2/l

2.99 kg-CO2/l

(1) Toyota’s Automobile Production Process (2) Logistics

Electricity

A-type heavy oil

C-type heavy oil

Kerosene

0.3817 kg-CO2/kWh

2.7000 kg-CO2/l

2.9419 kg-CO2/l

2.5308 kg-CO2/l

Butane gas

Natural gas

Coke

Coal

3.0094 kg-CO2/kg

2.3576 kg-CO2/m3

3.2502 kg-CO2/kg

2.3536 kg-CO2/kg

Railway (Japan Railway Cargo) 21.7 g-CO2/ton-kilometer

Note 1: CO2 conversion coefficient source: Japan Automobile Manufacturers Association, Inc.Note 2: Coefficients from other sources have been used in some instances

Note 1: Calculation of CO2 emissions for truck and ship transport has been changed to the fuel method since FY2005

Note 2: CO2 conversion coefficient source:Railway (Japan Railways Cargo): The Environment, Traffic and Transport, Institution For Transport Policy Studies (ton-kilometer method)Diesel (truck) and C-type heavy oil (ship): Japanese Ministry of the Environment (fuel method)

Appendix


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43

2GR-FSE

6AT

August2005

450

232.2

10.0

76

75

Specifications

Start of sales

Greenhousegases

Fuel efficiency

Externalvehicle noise

Exhaust emission levels (2005Exhaust Emissions Standards)1

Substances of concern used in parts

Recycling2

3UZ-FE

6AT

August2005

700

266.9

8.7

76

75

4GR-FSE

6AT

September2005

430

196.8

11.8

76

75

1NZ-FE

CVT

October2005

360

129.0

18.0

76

75

2AZ-FE

CVT

November2005

490

184.3

12.6

76

75

3SZ-VE

4AT

December2005

350

145.1

16.0

76

73

2SZ-FE

CVT

November2005

360

118.5

19.6

76

74

2AZ-FE

CVT

January2006

750

187.2

12.4

76

75

2AZ-FE

5AT

January2006

500

203.7

11.4

76

75

2GR-FSE

March2006

500

163.5

14.2

76

75

1.15

0.025

0.025

1.15

0.013

0.013

Regulation value 50% lower than 2005

Exhaust Emissions Levels for Gasoline-powered Passenger Vehicles (2005 Standards)

Carbon monoxide CO (g/km)

Regulatedsubstances

New mode*

NMHC (g/km)

NOx (g/km)

1.15

0.05

0.05

75% lower than 2005

*New mode: (Value measured in the 10-15 Japanese test cycle) x 0.88 + (Value measured in the 11 Japanese test cycle) x 0.12

1. Refer to the table on the right for levels of emission gases from passenger vehicles2. Please see pp. 36 - 38 for further details

*Environmental data for new models and completely redesigned vehicles (passenger cars) is available in product catalogs as “Environmental Specifications”

Note 1: In principle, the data above relates to the best-selling gradeNote 2: The vehicles listed above do not use CFC 12, which is an ozone-depleting substance. Parts in these vehicles also

do not use sodium azide, a substance of concern.

DBA-GRS191

Name

Vehicle model DBA-UZZ40

GS350 SC430 IS250

DBA-GSE20

Ractis

DBA-NCP100

RAV4 bB

DBA-ACA31W DBA-QNC21

Belta Estima Camry

DBA-SCP92

GS450h

DBA-ACR50W DBA-ACV40 DAA-GWS191

Engine model

Transmission

Parts that use easy-to-recycle materials (TSOP)

Soundproofing material made from recycled shredder residue (RSPP)

Amount of HFC134-a used (g) as air conditioning refrigerantCO2 emissions (g/km) (calculated from 10-15 Japanese test cycle fuel efficiency values)Fuel efficiency (10-15 Japanese test cycle) (km/l) (Figure reviewed by Ministry of Land, Infrastructure and Transport)

Regulation figures for acceleration noise (dB-A)

Specification figures for acceleration noise (dB-A)75% lower than standard levels (SU-LEV)50% lower than standard levels (U-LEV)Lead(compared to 1996 figure)

Mercury

Cadmium

Natural materials

Use of recycled PP

Reduced to1/10 or lessExtremely

small amount

Not used Not used Not used Not used

Bumpers andinterior parts


small amountExtremely

small amount




small amount




small amount




small amount




small amount

Bumpers andexterior parts



small amount

Interior parts


small amount



small amount



small amount


(kenaf) (kenaf) (kenaf) (kenaf)

standardsstandards

Hybridtransmission

Environmental Data for FY2005 Japanese New Models and Redesigns (Passenger Vehicles)

Environment-related Awards (FY2005) Award forOrganization Award title

Japan Association for the 2005 World Exposition

Awarding of Successful Case of Energy Conservation in Factory & BuildingChairman Prize of ECCJ

Awarding of Successful Case of Energy Conservation in Factory & BuildingChairman Prize of ECCJ

Toyo Keizai Inc.

The 9th Environmental Communication Awards Excellence Prize for Environmental Report (Global Environmental Forum, President’s Award) / Meister Award

SAE

TOYOTA Hybrid System (Prius)

Efforts toward complete elimination of energy waste through the wisdom and ingenuity of our entire workforce

Implementation of a groundbreaking heat treatment method born out of measures to prevent quality-related defects

Environmental & Social Report 2004

Environmental & Social Report 2005

Development of Innovative Three-way Catalysts Involving Ceria-Zirconia Solid Solutions with Great Oxygen Storage Release Capacity

Global 100 Eco-Tech Awards

The 8th Green Reporting AwardAward for Excellence

Environmental Excellence in Transportation Awards (Materials Development and Usage)

Environmental Glossaryhttp://www.toyota.co.jp/en/environment/communication/glossary/

Beginning this year, an explanation of Toyota’s environmental terminology can be found on Toyota’s website.


Main Companies Subject to Consolidated EMS in Japan (Alphabetical order)

Continued Reporting

33

Area Details Current status

Many techniques for reducing environmental impact were incorporated throughout the New Head Office Building, which was completed in February 2005. As initially planned, the building’s CO2

emissions volume for FY2005 is expected to be approximately 40% less than that of a conventional building on a lifecycle basis.

Sale and supply of rebuilt parts and retrofit kits at dealers and parts distributors

Status of the reuse of the Toyota Group Pavilion at EXPO 2005 Aichi, Japan, following dismantling and CO2 emissions reduction effects

Actual CO2 emissions reduction at the New Head Office Building, which incorporates energy conservation designs

In FY2005, the following rebuilt parts were sold: 11,355 (245) automatic transmissions, 19,076 (10,795) power steering systems, and 4,203 (3,360) torque converters. In addition, 1,017 retrofit kits were sold.

Note: The figures inside the parentheses indicate numbers of new parts sold

Of the total of 5,605 tons of building materials, 4,090 tons (73%) were reused and 1,515 tons (27%) were recycled, with a final achievement of zero construction waste. The volume of CO2 emissions attributable to the operation of the Toyota Group Pavilion during the expo was 390 tons. However, a wind-power generator installed outside the venue in effect reduced the CO2 emissions volume by an equivalent of 461 tons. Therefore, the Toyota Group Pavilion achieved zero net CO2 emissions during the expo. Taking into account the total CO2 emissions generated during construction, operation, and dismantling, as well as the total CO2 emissions reduction effects of the wind-power generation and the reuse of the building materials, the net CO2 emissions volume was 83 tons.

41

77

Production

Recycling

Other

Page no. in2005 report

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Toyota Home

Toyota Tokyo Parts Distributor Co., Ltd.

Toyota Tokyo Rental & Leasing Co., Ltd.

Tokyo Toyopet Motor Sales Co., Ltd., and others

Total of 37 companies

(Group 1)· Consolidated subsidiaries· Automotive production companies

· Toyota secondary companies

(Group 2)· Companies not subject to consolidated accounting

· Main parts manufacturers· Body manufacturers, etc.

(Group 3)· Consolidated subsidiaries· Automotive production companies

· Parts manufacturers

(Group 4)· Consolidated subsidiaries· Non automotive-related companies

· Various other products production companies

Production companies Salescompanies

Otherbusinesses

Central Motor Co., Ltd.

Daihatsu Motor Co., Ltd.

Hino Motors, Ltd.

Kanto Auto Works, Ltd.

Toyota Auto Body Co., Ltd.

Toyota Motor Hokkaido, Inc.

Toyota Motor Kyushu, Inc.

Toyota Motor Tohoku, Inc.

Aichi Steel Corporation

Aisan Industry Co. Ltd.

Aisin AI Co., Ltd.

Aisin AW Co., Ltd.

Aisin Seiki Co., Ltd.

Aisin Takaoka Co., Ltd.

Denso Corporation

Gifu Auto Body Industry Co., Ltd.

JTEKT Corporation

Tokai Rika Co., Ltd.

Toyoda Gosei Co., Ltd.

Toyoda Machine Works, Ltd.

Toyota Boshoku Corporation

Toyota Tsusho Corporation

Cataler Corporation

Chuo Precision Industrial Co., Ltd.

Horie Metal Co., Ltd.

Kyoho Machine Works, Ltd.

Yutaka Seimitsu Kogyo, Ltd.

Admatechs Co., Ltd.

Japan Chemical Industries Co., Ltd.

Toyota Macs, Inc.

Toyota Turbine and Systems Inc.

Shintec Hozumi Co., Ltd.

(Group 5)· Companies not subject to consolidated accounting

· Parts manufacturers

Taiho Kogyo Co., Ltd.

Toyoda Iron Works

Trinity Industrial Corporation

Aichi Rikuun Co.

Tacti Corporation

Toyota Central R&D Labs, Inc.

Toyota Enterprises Inc.

Toyota Modellista International

Toyofuji Shipping Co., Ltd.

Toyota Technocraft Co.

Toyota Transportation, and others

Total of 59 companies

All-Toyota Production Environment Conference members All-Toyota Production Environment Meeting members

*Includes 6 companies that are not subject to consolidated accounting

Appendix

Due to editorial policy or space limitations, some features included in the Environmental & Social Report 2005 could not be included in this year’s report. In the interest of continued reporting, major developments in these areas are reported below.

Highlights in FY2005 Social Aspects

Sustainability Report 2006 45

“Customer First” (CF) activities were implemented to further enhance Toyota’s superiority with regard to quality.

President Watanabe expressed his hope that labor and management can develop in mutually beneficial ways at a commemorative event to mark the 60th anniversary of the establishment of the Toyota Motor Workers’ Union.

Support systems for balancing work with childcare (and nursing care) were enhanced.

The “Toyota Child Care Bubu Park,” an on-site childcare facility was created at the Shimoyama Plant.

The system for re-employment of persons 60 years and older was reviewed.

The Global Production Center (GPC) starts full-scale operation.

The TOYOTA Green Purchasing Guidelines were revised.

The annual dividend was raised by 25 yen to 90 yen per share. Disclosure of projections for the next term’s consolidated results was begun.

Toyota dealers in Japan adopted the CSR Declaration.

World’s first Pre-Crash Safety System (PCSS) with a driver-monitoring system was developed and installed in vehicles.

Construction of the TOYOTA Safety Education Center “mobilitas,” the largest such facility in Japan, was completed.

TOYOTA Shirakawa-Go Eco-Institute was opened.

Conducted volunteer activities at EXPO 2005 Aichi, Japan, including inviting children from areas affected by the Chuetsu Earthquake.

Toyota Stakeholder Dialogue was held with “Corporate Social Responsibility (CSR) — Focusing on Environmental Issues” as its theme.

Cumulative number of visitors to Amlux hits 30-million mark.

Activities were carried out by the Global Knowledge Center (GKC) to promote the establishment and improvement of sales and marketing methods at overseas dealers.

p. 46

p. 49

p. 53

p. 52

p. 53

p. 51

p. 56

p. 58

p. 59

p. 62

p. 68

p. 67

p. 76

p. 76

p. 64

TOYOTA Green Purchasing Guidelines

p. 61100

80

60

40

20

0

28

45+9 yen

65+20 yen

(Yen)

’02/3 ’03/3 ’04/3 ’05/3 Year endedMarch 2006

36+8 yen

90+25 yen

Trend in Cash Dividends per Share

Relations with Customers

Relations with Employees

Cooperation with Business Partners

Relations with Shareholders

Global Society/Local Communities

At the 60th anniversary commemorative event (Jan. ’06)

Toyota Child Care Bubu Park

Training at GPC (Motomachi Plant)

A course in session at “mobilitas”

Junior high school children experience nature at the Toyota Shirakawa-Go Eco-Institute

The 30 millionth visitor and family to visit Amlux (Jan. ’06)

46 Sustainability Report 2006 Sustainability Report 2006

Social Aspects


Toyota’s Customer First PolicyToyota engages in business activities based on the policies of

“Customer First” and “Quality First” and interacts with customers with this policy in mind at all times.

In addition, customer opinions are conveyed to relevant divisions so they can be used to make improvements in Toyota’s corporate activities.

Improving Customer Contact Handling SystemsThe Customer Relations Division is the division within the

company in direct touch with customer needs. The staff is striving to improve customer satisfaction by carrying out the following: 1) Listening to customer questions and comments from the

customer’s perspective;2) Providing swift, sure and courteous responses at customer

consultations so that customers feel a sense of security and confidence in Toyota;

3) Providing accurate feedback to other relevant divisions and improving product development, sales, and after-sales activities.The number and content of comments and inquiries received

by the TMC Customer Assistance Center are indicated below.

The Lexus Customer Center was established in April 2005 in preparation for the August launch of the Lexus brand in Japan and the Lexus Owner’s Desk was established in August of the same year.

Toyota strives to improve customer responses and achieve customer satisfaction at all times by conducting customer contact training courses for its employees and encouraging the acquisition of qualifications such as Advisory Specialist for Consumers’ Affairs.*

*Advisory Specialist for Consumers’ Affairs (ASCA): A qualification officially approved by the Japanese Ministry of Economy, Trade and Industry

Customer Centers in Japan

Name Hours Toll-free number

Customer Assistance Center 9:00 a.m.

6:00 p.m. year round

0800-700-7700

Lexus Customer Center

0800-500-5577

Customer Contact Handling Systems at Overseas Distributors

As of the end of FY2005, 66 of 170 overseas distributors had created customer assistance centers, providing support to approximately 90% of Toyota’s overseas customers. Also, major overseas distributors gather for a Customer Relations Conference every other year to enhance customer relations capabilities.

In the future, Toyota will engage in discussions with affiliates in each country and region around the world and improve customer relations activities that are tailored to the specific circumstances in each country and region.

Built-in QualityTo significantly reinforce fundamental Group-wide measures

designed to further enhance Toyota’s superiority with regard to quality, in FY2005 Toyota promoted the “Customer First” (CF) policy and implemented CF activities to ensure the highest level of attention to quality in manufacturing by each employee, always looking at quality issues from the customer’s perspective. These activities are being carried out by all employees with a renewed awareness that “quality must be built in during manufacturing.” A CF Activity Promotion Committee consisting of personnel from all processes—development, production, purchasing, and after sales service—was formed to rebuild structures for building in quality. Keeping in mind that even if only one vehicle in a million is defective, for the customer that purchases that one, 100% are defective, Toyota has positioned quality improvements as a Group-wide top priority item.

CF activities logo

(FY)’05’04’03’02’01

400,000(Number of calls)

300,000350,000

250,000

150,000

50,000

200,000

100,000

0

Questions concerning accessories,performance,and mechanisms

35%

Inquiriesconcerningdealers and vehicle repair workshops13%

Technicalquestions16%

Other36%Operating

365 daysa year

Total numberof calls:

343,000

Number of Calls to the Customer Assistance Center

The Lexus Customer Center

A Customer Relations Conference for distributors from around the world (Sep. ’05)

Content of Inquiries (FY2005)

Sustainability Report 2006 Sustainability Report 2006

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So

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Early Detection and Early Resolution of Quality Issues

Toyota launched the Customer Quality Engineering (CQE) Division in January 2005 to engage in early detection and early resolution of quality-related issues from the customer’s perspective. Specifically, organizations in charge of quality-related issues within the Quality Division, the Domestic Service Division and Overseas Customer Service Technical Division were reorganized. New organizations were created that include design and manufacturing personnel, the Japan CQE Division in the Quality Group and the Overseas CQE Divisions in North America, Europe and Asia, to reinforce global quality activities. As a result, information concerning quality-related issues are conveyed accurately and promptly to design and manufacturing divisions and quality improvements are rapidly implemented.

In addition, the CQE Division collaborates with the Domestic and Overseas Service Field Operations Divisions, which repair customer vehicles quickly, inexpensively, and precisely, and with the Quality Division, which works to proactively prevent quality issues and conduct audits, to provide feedback to development divisions and ensure the development of high-quality products that will meet customer expectations.

Procedures and System for RecallsIn a case where product defects are discovered and it is

deemed necessary to take measures to correct them, responses such as those below will be implemented.1) Contacting the authorities in accordance with procedures

stipulated by the laws of each country2) Notifying customers by direct mail and providing explanations

at the dealer3) Recalling products and repairing them free of charge

Sales Groupin Japan and

overseas

Domestic Service Field Operations Div./Technical Service Div.

Overseas Service Field Operations Div./Technical Service Div.

ProductionGroup

Toyota and Lexus dealers in Japan

Overseas distributors, dealers

Customer

Toyota

Research & Development

Group

OverseasCQE

Quality Division CustomerRelations DivisionCustomer

QualityEngineering

Division(Japan CQE)

CustomerQuality

EngineeringDivision

(Japan CQE)

Quality Group

Direct information delivery to the Customer Quality Engineering DivisionDirect feedback from customers

Schematic Diagram of Customer Response System

From Operator to Communicator In Focus

The Customer Relations Division performs customer relations activities under the slogan “Understanding — the fastest way to a customer’s heart.” When customers call on the telephone, it is not possible to see their face, making it difficult to determine their feelings. Personnel listen attentively to the customer’s voice, making note of the customer’s disposition in addition to the content of the call, gathering the information necessary to respond appropriately, and providing feedback to other relevant divisions.

One Customer Relations Division Training Group manager explains that “The key in customer relations is to engage in communication with the customer and listen attentively to determine any needs that might be behind the actual words, and to respond in good faith with the information that the customer truly wants.”

The training manager continues, “To encourage further patronage, each one of us in direct contact with customers will aim to provide responses that will result in the customer thanking us. Communication of course means responding swiftly, surely and courteously to customer questions, but it is also important to be useful to the customer. Achieving this means continual efforts on our part.”

A training manager (left) instructs a customer relations staff member

http://toyota.jp/recall/ (Japanese only)


Social Aspects Customers

Protection of Personal InformationToyota’s Basic Policy on the Protection of Personal Information

Toyota is keenly aware that complying with the Act on the Protection of Personal Information and handling customer personal information appropriately is a fundamental corporate responsibility, and to that end it has adopted the Basic Policy on the Protection of Personal Information.

http://www.toyota.co.jp/en/terms_of_use/privacy_statement.html

Customer Contact Point Regarding the Handling of Personal Information

In accordance with the Act on the Protection of Personal Information, which came into effect in April 2005, Toyota makes it possible for the customer to request disclosure of personal information in Toyota’s possession relating to the customer. All inquiries concerning disclosure, correction, suspension of use, and deletion of personal information should be directed to the Customer Assistance Center, which will provide further information on the necessary procedures. The Center can be contacted via telephone at the number below.

Customer Assistance Center: 0800-700-7700 (Toll-free call; in Japan only)Open from 9:00 a.m. through 6:00 p.m., 365 days a year

Toyota Kirloskar Motor Private Limited (TKM) has set up 55 sales, service and service parts facilities throughout India, servicing customers across 3.28 million square kilometers. Based on the “Customer First” policy, TKM makes every effort to provide the highest degree of customer satisfaction and as such has developed the concept of a Mobile Service Van (MSV), mainly targeting customers located far from their nearest dealer. The service usually comprises of two technicians and a service adviser visiting the necessary locations. An MSV from each dealer visits a service point once a month on an average, staying roughly two days. Maintenance and repairs are conducted in collapsible pavilions, one for servicing vehicles and another with chairs for customers to relax in. Customers close to the service point are informed in advance of the MSV visit so that they can make a service appointment if necessary.

The MSV concept was introduced by TKM in 2000, and is mandatory for all dealers. TKM has developed and supplied a comprehensive MSV Operating Guide to its dealers. Additionally, special direct mail and posters have been designed by TKM for dealers to distribute. As of the end of May 2006, all dealers were providing an MSV service, covering a total of 275 service points. Introduction of the service has considerably increased the customer bases of individual dealers.

Customers have commented that they are grateful for the MSV coming out to their general locale to service their vehicles, ultimately allowing them to drive their Toyotas longer.

Improving Customer Satisfaction through Mobile Service VansTKM, India

Relations with CustomersExamples of Overseas Initiatives

A technician working on a customer’s vehicle

MSV service point

1. Obtaining Personal InformationWhen obtaining personal information, Toyota will identify the purpose of use and will obtain only the information necessary. Such information will be obtained in a lawful and proper manner. When customers contact the Customer Assistance Center, communications shall be recorded for the purpose of subsequent confirmation. Toyota uses a caller ID system so it can return calls to customers when necessary.

2. Handling of Personal Information1) Usage Only within the Stated Scope of Use

Toyota will never use personal information obtained in accordance with Paragraph 1 above for any purpose other than the stated uses without the customer’s consent.

2) Provision of Personal Information to Third Parties Toyota will never provide personal information obtained in accordance with Paragraph 1 above to third parties without the customer’s consent, except in certain limited circumstances.

3) Proper Management of Personal InformationToyota implements suitable security measures to prevent unauthorized access to and loss, damage, alteration, and improper disclosure of personal information. In addition, Toyota implements educational activities, including periodic training and instruction, for employees that handle personal information.


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Sharing the Toyota WayThe Toyota Way 2001 was adopted in April 2001 to codify

Toyota’s management beliefs and values. The Toyota Way puts into written format the implicit knowledge that Japanese coordinators have passed on to overseas affi liates to facilitate the transfer of authority in conjunction with the globalization of business. The Toyota Way, based on the two pillars of “Respect for People” and “Continuous Improvement” with fi ve key terms—challenge, kaizen, genchi genbutsu, respect, and teamwork—has been implemented worldwide within the Toyota Group (approximately 285,000 employees on a consolidated basis).

Labor-Management Relations Based on Mutual Trust and Respect

Mutual trust and respect between labor and management is a fundamental principle of Toyota’s employee relations. Following a labor dispute in 1950, mutual trust between labor and management was adopted as the foundation of the Labor-Management Joint Declaration concluded in 1962. Also, in the Labor-Management Resolve for the 21st Century signed by labor and management representatives in 1996, mutual respect was added as a basic principle of labor-management relations. Based on this fundamental principle, Toyota has adopted the Basic Principles of Human Resources Management.

In 2006, the Toyota Motor Workers’ Union marked 60 years since its establishment in 1946. At a commemorative ceremony, President Watanabe commented, “I look forward to hearing frank opinions and comments from everyone in our effort to create the ideal company where each individual can work in a meaningful way,” and expressed his hope that labor and management can develop in a mutually benefi cial manner.

Basic Principles of Human Resources Management

Communication with EmployeesToyota sees good communication as the basis for all

activities and has created numerous other opportunities for discussions between labor and management, including Labor-Management Councils and Joint Labor-Management Round Table Conferences.

Toyota has established a number of hotlines for swift and appropriate resolution of issues that cannot be resolved through regular means related to compliance, gender harassment, mental health and working conditions (some of which are available for use by family members also). Further, Toyota implements employee morale surveys every other year, and monitors employee job satisfaction and other conditions.

In October 2005, a management study conference was held to help prevent harassment using one’s position of power. This issue is also addressed in educational videos and activities. In June 2006, Toyota launched the “80,000-Person Workplace Communications Inspection Activities,” communication promotion activities for all Toyota employees, including temporary employees.

Communication with Employees’ FamiliesSince FY2003 various work sites have held workplace visits

for families to facilitate communication between the workplace and home. In FY2005, 1,020 family members participated in tours of 44 divisions.

In addition, the Toyota Fami-Net, a family-oriented website, provides families with information of company events and benefi ts.

1) Creating a workplace environment where employees can work with their trust in the company

• Stable employment where layoffs and dismissals are not readily made

• Steadily maintain and improve working conditions from a medium- to long-term perspective

• Ensure fairness and consistency• Ensure high employee morale

2) Creating a mechanism for promoting constant and voluntary initiatives in continuous improvements

• Share the management mindset and sense of critical urgency through thorough communication

• Promote employee participation in corporate activities• Refl ect business results in working conditions

3) Fully committed and thorough human resources development

• Promote personal growth through work• Communication of the Toyota Way and its role

4) Promoting teamwork aimed at pursuit of individual roles and optimization of the entire team

• Thorough consensus building and achievement in single thrust• Team results and creating a sense of unity

President Watanabe (right) shakes hands with Toyota Motor Workers’ Union President

Azuma Masamoto at the 60th anniversary commemorative event (Jan. ’06)

Yoshio Sugama (right) of the Environmental Affairs Division shows his workplace to

family members (Aug. ’05)

We form a long-term vision, meeting challenges with courage and creativity to realize our dreams.

We respect others, make every effort to understand each other, take responsibility and do our best to build mutual trust.

We stimulate personal and professional growth, share the opportunities of development and maximize individual and team performance.

We improve our business operations continuously, always driving for innovation and evolution.

We practice Genchi Genbutsu…… go to the source to find the facts to make correct decisions, build consensus and achieve goals at our best speed.

Respectfor People

ContinuousImprovement

Challenge

Kaizen

Genchi Genbutsu

Teamwork

Respect


Social Aspects Employees

Human Resource Development“Making automobiles is about developing people—the

development of human resources is essential for handing down and further advancement of outstanding manufacturing skills.” As indicated by these words, which were expressed by Honorary Advisor Eiji Toyoda, Toyota has put considerable effort into human resource development. Toyota believes that the development of human resources requires the communication of appropriate values, principles and beliefs.

Toyota Institute ReorganizedThe Toyota Institute, which was established in January 2002,

is an internal human resource development organization that promotes expansion of the Toyota Way to overseas affi liates. The Institute was reorganized in January 2006 to respond to the rapid increase in Toyota employees around the world and contacts for overseas affi liates concerning human resource development were consolidated. As the driving force behind the development of Toyota human resources, the Institute brings together initiatives for organized human resource development. Its objective is to raise the quality and pace of human resource development and create systems to ensure continuity. The basis for Toyota’s strengths, including the Toyota Way, problem solving techniques, policy management, on-the-job training (OJT), and the Toyota Production System (TPS), are adopted worldwide through the education of trainers at overseas affi liates.

Lectures Convey True Intent of Toyota Production System

Former Executive Vice President Taiichi Ohno put into practice at the production worksite the “automation with a human touch” concept promoted by Sakichi Toyoda and the “just in time” approach of Kiichiro Toyoda, in the form of the Toyota Production System. In order to pass on these philosophies, nine former direct subordinates of Mr. Ohno, including Vice Chairman Fujio Cho (currently Chairman) started lecture meetings in April 2006 to convey to current Toyota employees the true meaning of not just the Toyota Production System, but also Toyota’s “principles and beliefs” and approaches to human resource development and manufacturing.

The foundation of this philosophy is not just “teaching,” but extends to mieruka—making defects in the workplace more visible to get employees to think on their own. The Toyota Institute will effectively utilize this philosophy for future internal educational programs too.

Review of Educational Systems for Skilled Workers Three different types of group training are conducted for

skilled workers.1) Training according to rank for the acquisition of basic skills

regardless of role2) Training according to role for Section Managers and

overseas support personnel to acquire the basic knowledge, awareness, and skills required to fulfi ll that role

3) TWI training to acquire understanding of basic concepts and methods unique to Toyota, including the Toyota Production System (TPS), Toyota Job Instruction (TJI), and Toyota Communication Skills (TCS) Each type of training was reviewed in FY2005 as described

below.

Areas of Improvement in FY2005

1) Training according to rank

• Enhanced attention given to younger employees through improved leadership and teamwork

• Adoption of a new curriculum concerning the Toyota Way

2) Training according to role

• Enhanced job training in line with the diversifi cation of working styles

• Leader candidate training conducted to fi nd and foster leaders• Enhanced content of English-language training for skilled

workers

3) TWI training

• Strict adherence to standardized operations for new employee training

• Review of parts of the training system to enable quick learning of TPS

TMC is working closely with overseas affi liates to develop human resources. Exceptional personnel from overseas affi liates are periodically gathered and trained as instructors to convey in a timely fashion to the employees of overseas affi liates Toyota’s values and methods of working, including the Toyota Way and problem solving techniques.

A four-day Train the Trainer (T3) Seminar on problem solving held in May 2006 used tests of understanding and demonstrations to convey the required knowledge to trainers. Following completion of the training, trainers will teach more

than 100 local employees each year during their two-year terms. Toyota currently has approximately 100 trainers active around the world.

Train the Trainer Seminar (Apr. ’06)

Train the Trainer (T3) Seminars In Focus

TMC

Human Resources Division

Sales & Marketing divisions

Engineering divisions

GPC / Parent plant

Human resources and labor management support

Distributor training

Technical training

Skilled worker training support

Management training & general human resource

development

Problem solving techniques, policy management,

OJT & TPS

Overseas

Expa

nsio

n of

glob

al c

onte

nt

Affil

iate

s

Spec

ialize

d tra

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Toyota Institute

System to Develop Global Human Resources


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Developing a Business Culture that Emphasizes Technical Skills

Within Toyota, “technical skills” refers not only to profi ciency in work, but also extends to methods of working, the ability to make improvements in processes, and the ability to pass skills on to others. Toyota created a system to support technical employees in acquiring specialized production skills. There are four certifi cation levels (C, B, A, and S) based on the technical skills acquired, and the level of certifi cation is determined according to the basic skills and knowledge acquired during training conducted at various plants and practical skills levels acquired through on-the-job training. As of the end of March 2006, Toyota had approximately 600 technical skills trainers (of which 240 are fulltime) assigned to all plants for instructing employees on basic technical skills and knowledge.

Since 1966, Toyota has been participating in the WorldSkills Competition in related job categories (10 job categories in FY2006) to encourage the development of personnel, who form the core of the workplace through the mastery of advanced skills. In FY2005, 31 employees aged 18 to 22 participated in the national competition, winning a total of 15 medals (three gold, seven silver, and fi ve bronze) for a cumulative medal count of 87 gold, 129 silver, and 111 bronze. Gold medallists in national competitions are able to compete in the biennial international competition, at which Toyota employees have won a total of 17 gold medals, 10 silver medals, and eight bronze medals through to 2005.

Coping with Global Production and Passing Down Skills

The Global Production Center (GPC) was established within the Motomachi Plant, Japan in July 2003. The GPC’s purposes are to implement development of human resources at a pace greater than that of globalization and to simultaneously spread best practices throughout the world. It trains employees from Toyota plants in Japan and overseas on fundamental technical skills. In FY2005, the GPC trained 2,757 people (4,181 in FY2004).

Previously, when a new plant went online overseas or when a vehicle model was redesigned, veteran workers from Japan would be sent to the plant to conduct technical training. As overseas production has expanded rapidly, the burden on Japanese plants has increased, and it has become necessary to fi nd other means to train overseas employees effi ciently and quickly.

The GPC also standardizes the transmission and training of technical skills to achieve uniformly high-quality products regardless of where in the world they are made, and implements phased training starting with basic skills using visual manuals. Overseas trainers undergo training at the GPC and obtain certifi cation (renewed every three years) as a trainer or trainer’s trainer to conduct overseas training using the GPC’s methods. Regional GPCs were established in North America, Europe, and Southeast Asia between August 2005 and March 2006, and each can provide training at the same levels as the GPC in Japan.

Communication Involving All EmployeesIn order to enhance communication involving all employees,

Toyota is striving to create a sense of unity and improve work-related skills and work ethic.

In 2002, activities involving interpersonal relationships were broadly reviewed and HUREAI activities were launched. HUREAI activities encourage participation by all personnel, including fulltime, fi xed-term, and temporary employees, to foster interpersonal relationships that extend beyond ranks and workplaces and create enjoyable work environments.

In December 2005, fourteen teams from overseas affi liates participated in the 59th Ekiden long-distance relay race alongside Japanese teams. A total of 313 teams, a record high, participated in this international event.

At overseas locations, local employees have in the past been confused about learning methods of teaching detailed Japanese technical skills and there may have been misunderstanding due to minor differences

in the methods of teaching. To overcome these issues, including language barriers, the GPC developed and uses visual manuals that systematize and standardize the expertise of veteran workers in ways that anyone can understand.

“I came to Japan to learn basic technical skills. The practical training at the GPC was very easy to understand. I could confi rm on the computer screen even the position and angle of the worker’s arm for each process. This makes it possible to learn skills that are diffi cult to convey in words and enables a high level of understanding.” “I look forward to returning home and conveying these skills to my colleagues,” are some of the comments made by Mr. David Finch (TSAM, South Africa) and Mr. Demarcus Dawson (TMMK, USA).

Establishment of Regional GPCs

Country Established

Asia Thailand August 2005

North America US February 2006

Europe UK March 2006

The 59th Ekiden long-distance relay race (Dec. ’05)

Employees undergo training at the GPC in Japan

Mr. David Finch of South Africa (TSAM) (left) and Mr. Demarcus Dawson of the

United States (TMMK)

Making Profi ciency the Global Standard In Focus



Respect for DiversityThe labor market is undergoing major changes, including the

globalization of business, the social advancement of women, and an aging society with a declining birth rate, and as a result management that respects diversity of values and ideas among its workforce has become all the more important for enhancing corporate competitiveness. Based on the principle of respect for diversity, Toyota seeks to create a working environment that is an attractive arena of self-realization for a diverse range of human resources.

Support for Balancing Work with Childcare (and Nursing Care)

Since the Diversity Project was launched in 2002 to promote active roles for women, Toyota has implemented initiatives to help enable women in administration and management to work and raise children or engage in nursing care at the same time; assist in women’s career building; and reform the working environment and employee awareness. Of these, the measures to support women in balancing work with childcare and nursing care have included the creation of various options and the development of a special infrastructure, including longer childcare leave periods, enhancement of fl exible working hours, and the establishment of on-site daycare facilities to enable each employee to select working styles that meet their individual needs. Toyota has also been actively implementing such support measures for female technical workers as well since FY2005.

An internal survey determined that female employees on production lines feel that pregnancy is an obstacle to continued employment. In response, in December 2005, Toyota introduced an extended maternity leave system for female employees who work standing up, enabling them to take leave prior to maternity leave. As of the end of March 2006, two employees had requested and received such leave.

The number of employees taking childcare and nursing care leave is rising and the return-to-work rate of such employees is nearly 100%. The cumulative number of male employees who have taken childcare leave since 1999 is 14 (including four in FY2005).

Professional Career Re-employment Program Introduced

Toyota introduced the Professional Career Re-employment Program in August 2005.

Employees with professional skills and capabilities, who have resigned from position higher than specialists in technical or administrative jobs because their spouses were relocated or to provide nursing care to family members, are provided the opportunity to return to work. In general, employees are able to return to their original place of work. In FY2005, three people were re-employed under this system (four people as of end of May 2006).

Support for Balancing Work with Childcare and Nursing Care

Measure Details

Durin

g pr

egna

ncy Pre- and post-childbirth

leave• Six weeks prior to childbirth (14 weeks in the case of multiple

birth) and eight weeks after

Extended maternity leave (introduced in FY2005)

• Leave prior to childbirth leave is possible (applicable to female employees who work standing up on production lines)

Child

care

and

nur

sing

car

e

Childcare and nursing care leave

• Extended leave periods (maximum of two years)• Recruitment of a temporary replacement• Introduction of Family Care and Career Plan Communication

Sheets (enhances communication between employees on leave and the workplace)

Flexible working hours for childcare and nursing care

• Elimination of core time from the fl extime system• Work at home permitted (after 3:00 p.m.)• Reduced working hours

Childcare support • Leave to take care of sick children (up to fi ve days per year)• Enhanced childcare services under an optional benefi t system

(baby sitters, support for childcare services, etc.)• On-site daycare facilities

Professional Career Re-employment Program (introduced in FY2005)

• Re-employment system for employees who resign because their spouse is relocated or to provide long-term nursing care to family members

Trends in Number of Employees Taking Childcare Leave

(FY)’05’03 ’04

214

2

198

4

’02

176

4

’01

151128

02

300(Number of employees)

250

150

200

100

50

0

MaleFemale

(FY)

(Number of employees)150

120

90

60

30

0’05

3

’04

93

3

’03

73

2

MaleFemale

*The figure for FY2003 includes results for the period between December 2002 and March 2003

Reducedworking hours

Elimination of core time from flextime system

Limitations on overtime

Exemption from late-night work

2 % 2 %

51 %

45 %

Total:

130 people(including 3 men)

Use of the Flexible Working Hours System

Maternity Leave

Elimination of core time from flextime system

Work at home (after 3:00 p.m.)

Child nursing care (up to five days per year)

Exemption from late-night work / Limitations on overtime (up to 24 hours/month; 150 hours/year)

Use of on-site daycare facilities

Reduced Working Hours A(divisions that do not utilize the flextime system)

Reduced Working Hours B(divisions that utilize the flextime system)

Childbirth2

years6

years8

years

Diverse Options

Toyota Employees (On an Unconsolidated Basis)

Male Female Total

Number of employees

60,891 6,139 67,030

Average age 40.5 29.7 39.5

Average service years

19.9 9.6 17.9

(As of end of the March 2006)


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Long-term Contracts Offered to Limited Contract Employees

As a result of revisions to the Labor Standard Law in January 2004, the contract term for limited contract employees was increased from less than one year to a maximum of up to three years. In June 2005, Toyota introduced the Senior Limited Contract Employee system for limited contract employees who have entered the second year of their contracts. As of April 2006, this system applied to approximately 3,600 limited contract employees.

The term of employment can be extended upon the request of the employee and depending on production conditions. By working for longer periods of time, employees can gain greater experience and display higher profi ciency. Employees who extend their term of employment are subject to preferential revisions to daily pay in their second and third years of employment and are provided the opportunity to improve their skills by participating in training and acquiring specifi c work-related qualifi cations.

In addition, Toyota instituted a system for limited contract employees to become full-time employees. After six months of employment, employees are eligible to take an exam upon recommendation from their workplace. Employees can take the exam, held yearly, again in their second and third years. In FY2005, 938 employees were hired full time under this system. The number of limited contract employees is in the 10,000 range. In the future, Toyota will also implement measures for limited contract employees who have completed three full years of employment.

Employment of Disabled PeopleEach year, Toyota hires disabled people to work on its production

lines. As of the end of March 2006, Toyota had employed 854 disabled people, accounting for 1.81% of the workforce and exceeding the Legal Employment Quota.

Toyota is continuing its efforts to hire disabled new graduates and mid-career employees. Efforts are being made to create a workplace environment that is safe and easy to work in by devising various ways to adapt facilities that accommodate the nature of employees’ disabilities.

Personnel Exchanges and Training on a Global ScaleToyota created a system for intra-company transfers (ICT) that

allows employees from overseas affi liates to work at TMC, to realize personnel exchanges and training on a global scale. As of the end of March 2006, 432 employees were working in Japan under the ICT program.

Employment of People 60 Years and Older Reviewed

Toyota conducted a review of its system for re-employment of people aged 60 years and older in April 2006 in response to a changing awareness concerning employment after 60 and revisions to the Law concerning Stabilization of Employment of Older Persons (April 2006). Toyota employs 319 people aged 60 years or older (as of the end of March 2006).

The Skilled Partner System introduced in September 1991 is an internal re-employment system. The selection standards were made clearer and expanded to cover all employees, and the conditions reviewed. Management level employees are re-employed as “professional partners,” and employees with administrative and technical skills, medical workers, and other skilled workers are rehired as “skilled partners.”

The Optional Re-employment Program introduced in April 2001 is an external employment system that offers former employees locations to work outside the company, such as at group companies or affi liates, making use of the skills and experience they gained working for Toyota. This system was reviewed and the scope of employment was expanded.

The number of technical employees who retired in FY2005 was 800, but of these approximately 200 were rehired. In FY2006, approximately 1,200 employees will retire, and with the exception of those excluded for health and other reasons, almost all who requested reemployment—more than 700 people—will be rehired. Toyota also plans to institute a “consultation system” and hold “life planning seminars” to support the self-help efforts of those who have not yet reached 60 years of age.

The Toyota Child Care Bubu Park, an on-site childcare facility, was opened at the Shimoyama Plant in April 2006. In conjunction with the two on-site childcare facilities in the Head Offi ce Area established in 2003 and 2004, the facilities have a capacity of 140 children, making them the largest on-site facilities of their kind in Japan. The objective of the on-site daycare centers is to “provide convenient daycare services in response to diverse employment formats to employees who desire them, enabling the employees to work with peace of mind.”

The Toyota Child Care Bubu Park is conveniently accessible from the Tsutsumi, Miyoshi, Myochi, and Takaoka plants and accommodates the shift working hours on plant operating days (daycare hours are from 5:30 a.m. to as late as 11:30 p.m.).

Noriko Shimizu, who works in the Tsutsumi Plant Assembly Division and previously used the childcare facility in the Head Offi ce Area, says about the daycare center, “Because it is a Toyota facility, the daycare hours match our working hours, even when I have to work overtime, which is a tremendous benefi t. If my child develops a slight fever or other problem, they take care of him. And it’s close, so I can work with peace of mind.”

Please see p. 19 for further details on the ICT program

’05’04’03 ’06

1,400

1,200

1,000

800

600

400

200

0

(Number of people)

(FY)

900

100

900

100

800

200

1,200

700

Number retiringNumber re-employed

Number of Retiring Technical Employees and Number Re-employed

(Figures for FY2006 are projections)

Supporting a Balance between Work and Childcare In Focus

Noriko Shimizu, and her son (left) at Toyota Child Care Bubu Park

(Survey of technical employees conducted in 2005)

19% 24%

5%25%

27%

Unclearor other

Prefer not to work

Work inside or outside the company

Prefer to work outside the company

Prefer to work within the company

Survey of Attitudes Among Employees to Stay Employed at 60 and Older



Safety and HealthSafety and health is an important topic that is connected to

the very foundation of a corporation. Toyota is making an effort to create a safe and energetic work environment, based on the fundamental policy that “Safety is management itself” and that “Placing safety fi rst is everyone’s responsibility, from senior executives to every employee at the workplace.”

Occupational Safety and HealthThe fi fth Five-Year Safety and Health Policy was adopted for

the period from FY2005 to FY2009. The Policy’s goals are zero fatal accidents, zero STOP6-type accidents,1 and zero designated occupational diseases.2 To achieve these goals Toyota has introduced an occupational safety and health management system (OSHMS).

During FY2005, there were no fatal accidents, and the number of STOP6-type accidents and designated occupational diseases remained fl at or increased only slightly. Measures are currently being taken with respect to asbestos in facilities and buildings and are scheduled for completion in August 2006 for facilities and the end of FY2007 for buildings.

1. STOP6-type accidents:Six types of accidents that may cause death or disability (being caught in a machine, collision with a heavy object, collision with a vehicle, falls, electric shocks, and contact with a heated object)

2. Designated occupational diseases:Occupational diseases resulting from dust and noise, or musculoskeletal disorders

Building Good HealthActivities to encourage improvements in lifestyles were

implemented, centered on the BIP2 activity3 (addressing BMI4 and smoking rates). These included exercise campaigns, health training workshops, and anti-smoking campaigns. During FY2005, improvements in BMI and reduced smoking rates were seen. The rate of completely healthy employees5 was 55.4%. Toyota is taking measures to reach the 2009 goal of 70%.

3. BIP2 activity:Behavior Change Innovation Program, a lifestyle improvement campaign with targets set for body mass index (BMI) and smoking rate

4. BMI (body mass index):Weight (kg) / Height (m) / Height (m)

5. Completely healthy employees:Employees with an A ranking for health management (no health problems found during health checks and not receiving medical treatment)

Mental Health Care

Regarding mental health at the workplace, all of the newly appointed managers and supervisors participate in active listening courses that are effective for the prevention and early detection of mental problems (in FY2005 approximately 530 people participated). Also, additional questions during physical examinations were asked to enhance early detection and early treatment of problems, and the system of following up on employees undergoing outpatient care and employees who take leave from work was also strengthened.

Global InitiativesThe Toyota Safety and Health Global Vision 21 was adopted in

FY2005. This program is designed to standardize the creation of safe and healthy workplaces in Japan and overseas and perform the PDCA (Plan, Do, Check, Act) cycle based on occupational safety and health management systems specifi ed by the International Labour Organization. A system will be constructed in Japan in FY2006 and systems expanded overseas at a later time.

• Raise the level of workplace safety skillsContinue implementation and improve proactive prevention activities focusing on priority issues

• Building a workplace environment that is healthy for the mind and bodyImplement BIP2 activity and improve mental health measures

5-Year Safety and Health Policy (FY2005 – FY2009)

Main Actions Taken in FY2005Occupational Safety and Health1) Thorough implementation of basic implementation items to raise

workplace safety levels and visual representation (mieruka) of all accidents (including minor accidents)

2) Promoted the introduction of an occupational safety and health management system (OSHMS)

3) Thorough measures to prevent ergonomic (musculoskeletal) disorders implemented

4) Promotion of measures against noise and dustHealth1) Implemented activities to encourage improvements in lifestyles

• Conducted BIP2 activity to encourage reductions in BMI (body mass index) and smoking rates

2) Mental healthcare activities• Developed workplace environments that encourage consultations• Reinforced professional staff structures

(FY)’05’04’03’02’01

2

1.5

1

0.5

0

*The FY2005 figures for all industries, manufacturing industries and the automobile manufacturing industry are preliminary

All industries Manufacturing industries Automobile manufacturing industry Toyota

Industrial Accident Frequency (Frequency of Lost Workday Cases)

’04 ’05

47.045.0

50

45

40

35

30

0

(%)

(Year)

2005 reduction goal

Smoking Rate

35

30

25

20

15

0

(%)

29.1

’04 ’05 (Year)

2005 reduction goal

32.3

Obesity Rate

’01 ’02 ’03 ’04 ’05

55.6 55.0 54.3 55.0 55.4

80

70

60

50

0

(%)

(Year)

Trend in Percentage of Completely Healthy Employees

A

Review of OSHMS

Overseas Affiliates,Holding Companies,

and Plants

Housing Works and Plants

in Japan

Support andAudits

Support andAudits

Support andAudits

Information

Information

Information

EnhancedCollaboration

Safety and HealthPromotion Division

P

Internal ProductionPreparation Divisions

System Audits

C

DAdoption and Implementation of Safety and Health Plans

Clarification of Health and Safety Policies

ExternalOrganization

• Personnel exchanges• Information gathering

C

D

P

A OSHMS

C

D

P

A OSHMS

C

D

P

A OSHMS

Toyota Safety and Health Global Vision 21


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PT. Toyota Motor Manufacturing Indonesia (TMMIN) has engaged in production in Sunter in the north Jakarta region since the 1970s, but it was unable to expand its plant any further in Jakarta, so in 1996 it constructed a new plant in the Karawang region, approximately 70km from Jakarta. Initially, only group leaders were transferred, but starting in 2004 it became necessary to transfer large numbers of employees. To ensure that it was able to secure experienced employees and to facilitate transfers to the new site, TMMIN had the Indonesia Public Housing Corporation and other organizations construct employee housing. The housing was specifi cally designed to allow for expansion in consideration of family structures in the future. TMMIN provided 20% down payments and procured low-interest loans, and as a result, 856 families have purchased houses. For employees who could not move out of Jakarta, some operations were retained at the old plant.

One employee who purchased a home said, “This is the fi rst time I have owned my own house. The area is quiet with a lot of greenery and is perfect for children. I’m

looking forward to working and maintaining the house.” Johana J. Martono, director in charge of Human

Resources, comments, “The employee transfer project has had many advantages including a boost in employee motivation by ensuring job security, reduction in the number of shuttle bus trips to work resulting in lower personnel costs, an absentee rate of just 3%, half that of the national average, and the possibility of fl exible overtime.”

Employee Housing Constructed in Conjunction with New Plant ConstructionTMMIN, Indonesia


Fostering Employees Who Can Think and Act on Their OwnTMV, Vietnam

Toyota Motor Vietnam Co., Ltd. (TMV) was established in 1995. This was a time when the industrial infrastructure was ill equipped and few of the company’s employees had ever even ridden in a car. An increase in production was not possible considering the size of the market, and large investment in plants was also not viable. Therefore, TMV made a strategic decision to concentrate on human resource development and to produce small-quantities of various vehicle series. Employees’ sense of pride was emphasized and they were constantly asked: “What is the reason you are working?” and “How can you balance your own growth with the development of the company and also make a contribution to society?” At the same time language training, overseas training, and Quality Control Circle Activities were perfected. “Mastering a language is my passport to the world. It is my treasure,” says Hoang Van Cau, Manager of the Production Division of TMV. Roughly 40% of the 800 employees have experienced training in Japan, Thailand, Taiwan or other countries.

As a result the percentage of completed vehicles that can be shipped directly (vehicles with no defects at the fi nal inspection) improved from around 20 - 30% to

70 - 80%. The diffi cult technique for two-tone coloring, of coating a second color before the fi rst coating has dried, was also mastered. Employees have also begun to present self-inspired kaizen proposals, such as for new conveyance equipment. TMV’s income improved because major investment in plants became unnecessary with the effective utilization of this excellent workforce. TMV now produces 12,000 units of six vehicle series, and has become a model enterprise for Toyota’s small-quantity multi-product plants.


Examples of Overseas Initiatives

Employee housing and the family of an employee who lives there. On the right is Director Johana J. Martono

Before kaizen (door-raising by two people) After kaizen (door-raising by one person)


Social Aspects


Relations with SuppliersThe Role of Purchasing

The role of purchasing is to ensure “long-term and stable procurement of the best products at the lowest price in the most speedy and timely manner.” In order to obtain this objective, Toyota believes that it is essential to maintain mutual trust from a position of equality and to build relationships that are mutually benefi cial.

Toyota Global Suppliers Convention

The Toyota Global Suppliers Convention is held every year to convey its priority purchasing policies to its suppliers. 656 people from 411 companies, including 72 overseas companies, attended the convention held in Japan in February 2006. Toyota presented “Ensuring Safety” and “Ensuring Quality” as its key initiatives, and explained the importance of creating a danger-free workplace and thoroughly adopting the basic policies of “Customer First” and “Quality First.” Awards were also given to suppliers who demonstrated signifi cant achievements in quality, cost, technological development, etc. Similar conventions are also being held at affi liates all over the world.

Updating of Green Purchasing GuidelinesIn March 2006, Toyota reviewed and revised the Environmental

Purchasing Guidelines (adopted in March 1999), which request suppliers to proactively promote environmental initiatives. The new guidelines were named the “TOYOTA Green Purchasing Guidelines,” and have been implemented since April. The major revisions are:1) In addition to requests to implement environmental initiatives,

items with regard to the social aspects of supplier business activities have been included.

2) Initiatives that were begun after the initial purchasing guidelines had been issued (such as responses to the EU ELV1 Directive, responses to Eco-VAS,2 and environmental initiatives during logistics activities of contracted transportation companies) have been included.

3) Against the background of Toyota’s globally expanding environmental initiatives, suppliers are asked to implement environmental measures (CO2 emissions reduction, etc.) in their production activities.

4) In order to further reduce CO2 emissions during logistics operations, suppliers are asked to implement environmental initiatives in their purchasing and logistics activities.The recent revision also expanded the scope of supplier

categories targeted. Approximately 550 suppliers of equipment, and construction and logistics services were added to the existing list of parts and materials suppliers, increasing the total number of companies covered by the new guidelines to about 1,000. Toyota plans to gradually expand the application of the revised guidelines to the newly included suppliers through consolidated companies in Japan and overseas.

1. ELV: End-of-life vehicle2. Eco-VAS: Eco-Vehicle Assessment System

Toyota’s comprehensive environmental impact assessment system that allows assessment of environmental impact throughout the entire lifecycle of a vehicle from production to disposal

Toyota Global Suppliers Convention (Feb. ’06)

TOYOTA Green Purchasing Guidelines

TOYOTA Green Purchasing Guidelines Briefi ng In Focus

Toyota held a briefi ng, attended by about 800 people from about 480 suppliers, to explain the content of the TOYOTA Green Purchasing Guidelines issued in March 2006.

Feedback from the participants included the following: “We feel Toyota has a corporate culture of trying to achieve high goals together with its suppliers. By working with Toyota, any supplier with determination will be able to enhance its own competitiveness and become a global player. We have found many of Toyota’s efforts, such as its environmental actions, to be a great inspiration to us. We hope to maintain ever closer communication with Toyota and will strive to become the No. 1 supplier worldwide.”

The briefi ng held in March 2006

Toyota’s Basic Purchasing PolicyToyota conducts purchasing based on the following

three basic policies.1) Fair competition based on an open door policy

Toyota is open to any and all suppliers, regardless of nationality, size, or whether they have done business with Toyota before. Toyota’s choice of suppliers is on the basis of purely business considerations. Toyota evaluates the overall strengths of prospective suppliers, including their quality, cost, technological capabilities, and reliability in delivering the required quantities on time, as well as their potential strengths, as evidenced in such ways as their amenability to continuing kaizen (improvements).2) Mutual benefi t based on mutual trust

Toyota believes in developing mutually benefi cial, long-term relationships based on mutual trust. To foster that trust, Toyota pursues close and wide-ranging communication with suppliers.3) Contribution to local economic vitality through

localization: good corporate citizenshipAs Toyota moves to globalize its operations, production

outside Japan is increasing rapidly. Toyota will work to make an economic and industrial contribution that is fully commensurate with its market presence in each region. This includes purchasing parts and materials from local suppliers.

04社会-56-60 ネスe.indd 5604社会-56-60 ネスe.indd 56 06.8.11 2:22:24 PM06.8.11 2:22:24 PM


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Reinforcing Environmental Management by Suppliers

Toyota requests that its suppliers acquire certifi cations such as ISO 14001 and take measures to reduce substances of concern so they can engage in systematic environmental activities jointly with Toyota.

As of FY2005, approximately 450 parts and materials suppliers had already acquired certifi cation. Toyota also requested the 550 suppliers of equipment, and construction and logistics services that were newly added to the scope of the new guidelines, to acquire certifi cation.

Measures to Reduce Substances of ConcernIn order to ensure compliance with European and Japanese

regulations related to substances of concern, suppliers are requested to achieve the following:• Management and reduction of the use of the four substances

of concern (lead, mercury, cadmium, and hexavalent chromium)

• The elimination, at an early stage, of the four substances of concern even in regions overseas where these regulations do not apply

• Reduction of other substances of concern such as volatile organic compounds (VOC)To achieve the above, Toyota conducted audits of its suppliers’

management systems based on the SOC check sheet it has been promoting since FY2004, and has fi nished audits of its Tier 1 suppliers (approximately 280 companies) by the end of FY2005.

Helping Suppliers Implement the Toyota Production System

In order to help its suppliers build streamlined and competitive production and logistics systems and also to develop human resources capable of making continual improvements, Toyota is providing Toyota Production System (TPS) related support to its suppliers.

In Japan, the Operations Management Consulting Division is working with related departments to provide support to suppliers.

Since 1982, a study group consisting of the Operations Management Consulting Division and suppliers has been active in fi ne-tuning production methods, logistics operations, and production systems, in order to eliminate muda, mura and muri (wasteful practices, inconsistencies and unreasonable requirements).

Furthermore, in order to widely implement and propagate TPS among Toyota suppliers as well as other companies, Toyota has been holding lectures and seminars in Japan at organizations such as the Central Japan Industries Association and Chubu Institute of Industrial Engineering. The seminar series held twice a year at the Central Japan Industries Association is in its 27th year, and includes the “Basic TPS Concept” lecture, as well as “Improvement Exercises Based on TPS.”

Overseas, various specialized divisions at TMMNA (North America) and TME (Europe) are carrying out similar programs.

Through these activities, Toyota is contributing to environmental improvement through more effi cient production and logistics operations, and elimination of unnecessary materials and energy costs.

Suppliers Released into the atmosphere

Released into waterways Waste

Products that contain SOCs

Raw materials

Expectationsand requests

Minimizing substances of concern from Toyota products and plants

PartsToyota

Please see p. 4 for further details on theContribution towards Sustainable Development

1. Support for and shared implementation of the Contribution towards Sustainable Development, which interprets the Guiding Principles at Toyota

2. Improved management of substances of concern

3. Voluntary environmental activities by suppliers (acquisition of ISO 14001 certification)

Environmental Management by Suppliers

Joint on-site improvement activities with suppliers



Social Aspects Business Partners

Relations with Sales NetworksThe sales network is Toyota’s direct customer as well as the

point of contact with end customers. Toyota supports its sales network in various ways to enhance customer satisfaction with the network and convey TOYOTA VALUE—a statement of shared values that are characteristic of Toyota and which only Toyota can provide—to customers throughout the world.

Relations with Dealers in Japan

Within Japan, TMC concludes contracts directly with dealers. Approximately 300 companies operate 5,700 sales outlets (including used car outlets) in Japan, the majority of which are operated with local capital. The Toyota Way in Japan Sales and Marketing, adopted in 2000, sets forth fundamental principles such as putting the “Customer fi rst, dealer second, manufacturer third,” and promotes mutually benefi cial relationships between the manufacturer and dealers based on the “Customer First” policy.

Further Development of the Customer First PolicyToyota is promoting the implementation of a new product

and distribution strategy to rebuild its brand channels in order to precisely respond to changing customer values and market structures. In 2004, the Netz and Vista sales channels merged to form a new Netz channel, while in 2005 the Lexus brand was introduced to Japan. In March 2006, Toyota strengthened the visual identities of its “Toyota,” “Toyopet” and “Toyota Corolla” dealer channels in Japan to strengthen customer response by providing ample explanations of products within each brand channel and excellent after-sales service. To enhance customer support even further, the Toyota Service Card, a kind of electronic service record, was introduced at all Toyota outlets in 2005 to ensure uniform after-sales service so customers can use Toyota vehicles comfortably and with peace of mind.

Enhanced Dealer Corporate Social ResponsibilityToyota and its dealers actively implement CSR activities

based on a division of roles to ensure both parties comply with applicable laws and take into consideration preservation of the global environment. In FY2005, the Toyota National Dealers’ Advisory Council (TNDAC) created the CSR Committee, which prepared and distributed nationwide the Toyota National Dealers’ Advisory Council CSR Guidelines. The guidelines defi ne the three pillars of Toyota dealer CSR as compliance, environmental responses, and social contribution activities, with the aim of dealers working to raise levels of satisfaction by all stakeholders, and the entire Toyota Group working in concert to become a presence that is respected and liked by people all over the world. Nationwide Toyota dealers adopted the CSR Declaration at the TNDAC general conference in January 2006 to pledge their commitment to working together to implement further CSR activities. The Council held briefi ngs on the declaration in seven sales areas around the country in March. Each dealer is clarifying its fundamental CSR policy by steadily promoting the creation of structures including the establishment of internal CSR committees. Toyota also assists in the production of text books on CSR for sales personnel and uses an exclusive website for dealers to provide information concerning compliance with the Automobile Recycling Law, the Act on the Protection of Personal Information and other related laws.

http://toyota.jp/after_service/tsc/what-tsc/ (Japanese only)

TOYOTAVALUE

Customers

TMC

Dealers Dealers

Distributors,production and

sales companies

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Japan Overseas

TNDAC Chairman Nanao Oguri announces the CSR Declaration (Jan. ’06)

A Toyota Service Card

Fuji Lexus College Opens In Focus

The Fuji Lexus College, a Lexus-exclusive training facility, was established and began operating in spring 2005 within the Fuji Speedway, in Shizuoka Prefecture, Japan, in preparation for the August 2005 launch of the Lexus brand in Japan. The College was established to develop the human resources necessary to provide unparalleled after-sales service and purchasing becoming the Lexus brand.

The Fuji Lexus College has a two-story, 2,800m2 building on a 9,500m2 site where all personnel who work at Lexus dealers undergo extensive hands-on training. The main areas of instruction are brand introduction and market penetration training, product training, and after-sales service technology training In FY2005, a total of approximately 2,000 people underwent training at the college (total training reached 18,000 person-days).

Fuji Lexus College



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Relationship with Overseas DistributorsOverseas, Toyota has concluded contracts with approximately

7,500 dealers through distributors and companies that perform both production and sales. As in Japan, dealers are Toyota’s direct customers and serve to directly communicate TOYOTA VALUE to end customers throughout the world. Toyota engages in a variety of activities such as the production of sales tools for use by all employees to ensure that it shares TOYOTA VALUE with distributors, who play an essential role in supporting sales.

Global Knowledge Center OpenedThe Global Knowledge Center (GKC), established within an

educational institution at Toyota Motor Sales, Inc. U.S.A. in July 2002, plays a central role in sharing and promoting TOYOTA VALUE. Through its training programs, GKC supports continual improvements in sales and marketing methods around the world, while respecting cultural diversity and the traditions of each country and region. The GKC also prepares and distributes worldwide compilations of best practices collected from Toyota affi liates in countries and regions around the world.

The GKC’s activities are broadly divided into three phases:1) Explanation of the Toyota Way philosophy;2) Sharing knowledge and experience; and 3) Consulting

Previously, a genchi genbutsu (hands-on) educational program, TWSM-Discovery Program, based on the concept of “see, listen, touch” was developed in Japan and training using this program was conducted for phases 1) and 2).

Phase 3) was launched in FY2005. GKC personnel are being dispatched to China where they work together with local personnel to promote the Toyota Way and support day-to-day operational activities.

Emphasizing TOYOTA VALUE

Toyota provides distributors with a variety of marketing measures to convey TOYOTA VALUE to customers. One example is the provision of marketing guidebooks based on regional adaptations of the fi ve Toyota values, to formulate strategies optimized for each region. In 2005, TMC issued the Global Marketing Handbook and a guidebook on the display of hybrid vehicles at motor shows.

The GKC logo

TWSM-Discovery Program

Educational Programs for Overseas Distributors

Train the Trainer (T3) Program

A program to educate workshop trainers who train distributor personnel in different regions. The program educates trainers in each country and promotes effi cient sharing of the Toyota Way in Sales and Marketing (TWSM).

Kaizen Experience Exchange Network (KEEN) Program

The KEEN Program consists of workshops for sharing information on best practices in sales. The people who conducted the activities give presentations to share information on best practices and implement them worldwide.

Knowledge Bank

The Knowledge Bank is a website for promoting global collaboration and knowledge sharing. Users can access information on Global Best Practices and seminars held by GKC, collaborate with distributors from different countries, contact Toyota experts worldwide, and download various training and educational materials.

Global Marketing Handbook A Camry hybrid on display at the New York Motor Show (Jan. ’06)

Toyota Global Strategy Conference In Focus

A total of 850 people from Japan and overseas, including distributors, senior management of relevant companies, and TMC directors, participated in the Toyota Global Strategy Conference held in April 2006. The conference was intended to foster a sense of unity within Toyota covering production, technology, and marketing personnel and to address shared issues concerning the future corporate image that Toyota should pursue in order to become a company that is full of vitality and dignity. Following an introduction of TMC’s new management team at the main conference, the Conference was divided into regional and function-specifi c meetings. Conference participants commented variously that “the message from senior management was clear and easy to understand” and “I now understand very well what I need to do in the future.”

Toyota Global Strategy Conference (Apr. ’06)



Social Aspects Business Partners


Implementing Training for Suppliers and Creating Common ValuesTSAM, South AfricaThe School for Supplier Training and Development was established to foster supplier executives and other employees, with the aim of creating a foundation from which to share Toyota values and manufacturing skills. About 1,000 people have undergone training in two years.

Toyota South Africa Motors (Pty) Ltd. (TSAM) offi cially launched the School for Supplier Training and Development in September 2004. FY2005 saw the school expand its scope and include general business training regarding fi nance and labor relations as well as Toyota specifi c courses such as the Toyota Production System (TPS). The primary focus of the school is to assist core suppliers with the growth and development of their staff with the view to improved productivity levels, enhanced quality products, reduced costs and to stabilize production and supply. The School for Supplier Training and Development, through its product offerings, creates a foundation from which TSAM can share with suppliers its values, business methods and manufacturing skills as it strives towards meeting global performance standards.

Training for supplier executives has been conducted on an adhoc basis on TPS in March 2004, and on kaizen methods in June the same year. During feedback sessions from the supplier executives, it was realized that a greater need lies within the supplier base for Toyota specifi c training. The school was developed to meet these needs, giving structure to the training and allowing it to be conducted on a continual basis. The training takes place at TSAM training facilities and is overseen by TSAM staff with almost 20 years of experience in planning, operations and human resource development.

The main focus point is the supplier executive management and supplier supervisors. The school offers Toyota specifi c courses such as Toyota Production System, Quality Circles, Visual Management, and Problem Solving using the PDCA concept. Generic supervisory skills training is also offered, focusing on specifi c supervisory skills such as mentoring and coaching, leading one’s team to optimal performance and effective decision making

skills. Suppliers have been very enthusiastic in taking part in the training, with 315 people from the 158 principal suppliers TSAM deals with having undergone training in FY2004, and more than 600 people in FY2005.

After completing training at the School, Mario Compagnoni of Dorbyl Automotive Technologies, a TSAM supplier, commented, “I learnt a great deal both regarding the format as well as the process content. The enthusiasm and innovative thinking exhibited by the various teams was very instructive. Many thanks again for your hospitality during my visit, and the insights which I gained. I will share them with DAT management, and hopefully they will contribute towards improving our competencies as a supplier to TSAM.” Furthermore, in order to conduct even better training, TSAM is currently renovating its training facilities and is committed to offering training in the future to meet the needs of all suppliers.


Overseas suppliers who supply parts to TSAM also participated in training An employee participates in a training program

Workshop on presentation skills



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Relations with Shareholders

Toyota’s basic management principle is to benefit society through its business activities, while realizing stable growth founded on a long-term perspective. Toyota considers the long-term support of shareholders crucial in order to successfully implement this principle.

Enhancing Corporate Value Through Long-term, Stable Growth

Toyota’s overall financial strategy is based on three pillars: growth, efficiency, and stability. Toyota believes that the implementation of these three policies in a balanced manner over the medium to long term will help realize stable and sustainable growth and also lead to increased corporate value.

1. Growth: Continual forward-looking investment to enhance product strengths, technological prowess, and supply capabilitiesIt is essential that Toyota engages in active and continual

investment in R&D and plants and equipment to raise product strength for accurately meeting market needs; enhance technological prowess for creating new markets; and strengthen supply capabilities for responding to global demand. Investment is also crucial for laying the foundations for future growth.

2. Efficiency: Maintenance and enhancement of profitability and capital efficiencyToyota will endeavor to maintain the operating income rate

and return on equity (ROE) at high levels and seek a balance between growth and efficiency through efficient product launches of global core models, implementation of innovative cost-reduction activities (Value Innovation (VI) activities), steady start-up of new overseas plants, and management of global fixed costs.

3. Stability: Maintenance of a solid financial baseToyota maintains a solid financial base by ensuring sufficient

liquidity and stable shareholders’ equity. A sound financial foundation enables flexible, forward-looking investment even during sharp fluctuations in operating and market conditions. In

addition, maintaining a high credit rating allows Toyota to access low-cost, stable financing.

Return of Profits to ShareholdersBased on a solid relationship of trust with its shareholders,

Toyota is committed to reinforcing its strong financial standing, the source of future growth, as well as actively returning the results of that growth to shareholders in the form of dividends. In the fiscal year ended March 2006, the annual dividend was significantly raised by 25 yen to 90 yen per share. In the future, Toyota will strive to achieve a consolidated dividend payout ratio of 30% over the medium to long term and will work to expand the allocation of its financial results to shareholders.

Timely and Fair Disclosure of Corporate and Financial Information

Toyota considers the timely and fair disclosure of corporate and financial information to shareholders and investors as crucial for obtaining their long-term and stable support. Therefore, Toyota works to enhance its accountability to shareholders and other investors.

As part of company-wide activities, Toyota has established the Disclosure Committee to ensure the accurate, fair, and timely disclosure of financial and other important information. In the fiscal year ended March 2006, Toyota started announcing forecasts of consolidated financial results for the following fiscal year. This is an effort to increase the degree of transparency in Toyota’s management to stakeholders. Toyota remains committed to enhancing communication with markets and society in the future.

http://www.toyota.co.jp/en/ir/

1. Growth• Continual forward-looking

investment for qualitative growth

2. Efficiency• Enhancement of profitability and

capital efficiency

3. Stability• Maintenance of solid financial

base

Implementation of 1, 2 and 3 in a balanced manner over the medium to long term

Leads to sustainable growth

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Financial Strategy Policies

Please see pp. 78 - 79 for further details on economic aspects

Consolidated Net Income per Share

Trend in Cash Dividends per Share


Social Aspects Global Society/Local Communities

Initiatives toward Improving Traffi c Safety

Striving toward the Complete Elimination of Traffi c Deaths and Injuries

In order for automobiles to develop as a means of transportation that continue to provide the convenience of mobility in the future, it is important to minimize the negative effects of environmental impact, traffi c accidents and traffi c congestion. With the aim of achieving an affl uent mobile society, Toyota has for some time positioned this social task as an extremely important issue, on par with measures to improve vehicle performance and initiatives to reduce environmental impact, and has been actively involved in addressing it.

In terms of safety, Toyota is aiming for the complete elimination of traffi c deaths and injuries and is advancing initiatives for traffi c safety by viewing people, vehicles and the traffi c environment as an integrated whole. In addition to making safe vehicles, Toyota is taking a comprehensive approach with initiatives such as educating people, including drivers and pedestrians, and making proposals toward the creation of a safe traffi c environment.

Initiatives for Enhancing Vehicle Safety

Toyota divides the development of safety-related technologies and measures into the following three areas: 1) Preventive safety technologies that help prevent accidents, 2) Pre-crash safety technologies that anticipate and prepare the vehicle for an unavoidable collision in order to help minimize damage and 3) Collision safety technologies that help reduce injury to people during an accident. By staying abreast of the latest technological trends worldwide and by carrying out vehicle development that is based on surveying and analyzing various types of actual traffi c accidents, Toyota is striving to achieve solid safety performance.

Initiatives for Improving Preventive SafetyFurther Development of VDIM

Preventing accidents from occurring in the fi rst place is the key to ensuring driver safety, and this is the goal of the preventive safety concept. The basic principle of preventive safety is to assure that a vehicle will always perform its basic functions of

“moving, turning and stopping.” Toyota endeavors to improve these basic functions by consistently incorporating state-of-the-art technologies.

Toyota’s Vehicle Dynamics Integrated Management (VDIM) system, which was developed based on this concept, integrates management of the engine, brakes, steering and other control systems. For example, VDIM integrally controls the driving torque, braking force, and wheel turning angle to prevent the car from skidding sideways, ensuring safe operation even on a curved road on a rainy day. Toyota incorporated VDIM into the GS430 launched in August 2005 and the IS350 launched in September 2005.

Initiatives for Improving Pre-crash SafetyWorld’s fi rst Pre-crash Safety System (PCSS) with Driver-monitoring Function

Aiming to lessen collision injuries, Toyota expanded the use of the Pre-crash Safety System using millimeter-wave radar and installed it in the GS430 and GS350 launched in August 2005, the IS350 and IS250 launched in September 2005, and the Estima launched in January 2006.

Toyota also developed the world’s fi rst Pre-crash Safety System with a driver monitoring system that takes into consideration, for the fi rst time, the state of the driver. The system uses millimeter-wave radar and a camera to detect other vehicles and obstacles on the road ahead and a camera mounted on the steering column and an image-processing computer to detect the orientation of the driver’s face. If the system reads that the driver is not facing forward when it determines that the probability of a collision is high, it will warn the driver sooner than when the driver is facing forward, aiming to signifi cantly lessen collision injuries.

This new system was incorporated into the GS450h launched in March 2006.

PCSS camera with driver monitoring system Image-capturing range of the camera

People

Vehicles Trafficenvironment

Pursuing a higher level oftraffic safety

Participating in the creation ofa safe traffic environment

Initiatives designed to educatepeople in traffic safety

Comprehensive Measures Toward the Creation of a Safe Traffi c Environment

Frozen road surface

Dry road surface

BrakingMaintains safe vehicle orientation by optimally controlling the front wheel turning angle that will stabilize the vehicle

Vehicle orientation is unstable because the braking force generated on the dry surface is greater than that on the frozen surface

Frozen road surface

Dry road surface

Vehicle equipped with VDIM

Car not equipped with VDIM

Vehicle Control by VDIM


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Initiatives for Improving Collision SafetyOmni-directional Compatibility

Based on the concept of omni-directional compatibility, which attempts to promote crash safety for both vehicles in a two-vehicle collision of different weights and heights, Toyota is working to increase the safety of its cars during collision with two-ton vehicles.

In 2005, Toyota began conducting 50% offset frontal collision tests, offset rear-end collision tests and side collision tests at 55km/h. Omni-directional collision tests are being conducted on passenger vehicle models that are new or undergo complete redesign, beginning with the Vitz launched in February 2005.

SRS Twin-chamber AirbagIn its relentless pursuit of superior occupant protection

performance, Toyota developed a two-chamber airbag to help make front-seat passengers safer. The new airbag’s two chambers create a depression in the center of the airbag upon deployment. This deployment is met by multiple surfaces, to disperse the physical impact of the airbag on the passenger. As a result, the new airbag can be expected to lessen the localized force applied to the human body immediately following deployment. The SRS Twin-chamber Airbag has been installed in the Lexus IS350 and IS250 which were launched in September 2005.

Seat with the WIL Concept

This seat structure is effective in protecting the occupant during a rear-end collision. Since the introduction of the Prius in 1997, Toyota has been using a seat structure that is based on the WIL (Whiplash Injury Lessening) concept, in which both the seatback and headrest simultaneously

cushion the torso and the head, preventing relative movement between the two. These seats prevent an abrupt change in the angle between the torso and the head, thereby reducing whiplash injury. WIL concept seats, which have passed the standards set for an increased rear-end collision speed of 50km/h, have been incorporated into all passenger vehicle models that are new or have undergone complete redesign, beginning with the new Vitz launched in 2005.

“HELPNET” Emergency Communication ServiceIn the event of a traffi c accident or medical emergency, this

service automatically, or with the touch of a button, communicates the information necessary for emergency response actions, such as the vehicle’s location and condition, to police and fi re departments via the HELPNET Center. By shortening the time between the occurrence of an emergency situation (such as a traffi c accident or sudden illness) and notifi cation, this service is designed to contribute to reducing the number of traffi c fatalities, lessening injuries, and easing traffi c congestion. HELPNET, an automatic notifi cation system linked to the airbag, was installed as a standard feature on the next-generation telematic service* “G-LINK” installed in the GS430 and GS350 launched in August 2005, the IS350 and IS250 launched in September 2005, and the GS450h launched in March 2006.

*Telematic service: Information-providing service mainly targeted at automobiles

http://www.helpnet.co.jp/ (Japanese only)

Pedestrian Injury Lessening BodyToyota uses this type of car body in order to reduce the

injury to a pedestrian during an accident. Impact-absorbing structures in the hood, the fender, and the areas around hinges and windshield wipers are used to help reduce the impact to the head of the pedestrian, while impact-absorbing bumpers help reduce the impact to the legs.

SRS twin-chamber airbag

Test vehicleTwo-ton vehicle

Two-ton vehicle

Two-ton vehicle

Frontal collision

Side-on collision

Rear-end collision

Omni-directional Compatibility

Enhanced WIL concept seat

HELPNET Service Flow

45 3

HELPNET Center

Emergency1

Airbag-linked type One-touch type

One-touch advisory issuance

HELPNET button

Advisory2

When an airbag is deployed, an advisory is automatically sent out.The occupant can also simply press the HELPNET button to issue an advisory.

Rescue vehicle dispatchedto the accident site

Advisory relayed toa rescue vehicle

HELPNETHELPNET



Initiatives Designed to Educate People in Traffi c Safety

Since the 1960s, Toyota has been actively engaged in wide ranging activities designed to educate both drivers and non-drivers in traffi c safety, including safe-driving courses and traffi c safety education for children.

Toyota Traffi c Safety CampaignToyota conducts the Toyota Traffi c Safety Campaign together

with dealers every spring and autumn, coinciding with Japan’s Nationwide Traffi c Safety Campaigns. In FY2005, the spring campaign focused on preventing accidents that could occur if children suddenly run out into the street and the promotion of the proper use of child restraint systems. The autumn campaign centered on the theme of promoting the use of rear-seat seatbelts. Toyota has been involved in these activities since 1969 and in FY2005 donated 2.67 million traffi c safety picture books and 44,000 traffi c safety storytelling cards to children entering kindergartens and nursery schools nationwide. To raise awareness related to the use of seatbelts and child restraint systems Toyota designed and distributed approximately 1.50 million special educational leafl ets.

Toyota Safety SchoolEvery year Toyota has been inviting children from kindergartens

and nursery schools in and around Toyota City, Japan to safety classes held at Toyota Kaikan Exhibition Hall. In FY2005, approximately 5,100 children from 119 kindergartens and nursery schools participated in safety classes held at Toyota Kaikan. The class was also held at the TOYOTA Safety Education Center “mobilitas” located in Shizuoka Prefecture, with an attendance of 30 children. The cumulative total attendance of children since 1975 is approximately 200,000 from 2,308 kindergartens and nursery schools.

Toyota Child Safety CommunicationBeginning in 2000, Toyota has been conducting the Toyota

Child Safety Communication course in cooperation with organizations such as the NPO Safe Kids Network Japan.* This hands-on course is designed to teach caregivers and expectant mothers throughout Japan the need for and proper use of child restraint systems. By the end of March 2006, a cumulative total of approximately 1,600 people had attended the course.

*Safe Kids Network Japan:A nationwide organization of obstetricians and pediatricians that promotes educational activities for preventing accidents involving children

Storytelling cards and picture books distributed in FY2005

Safety class held at Toyota Kaikan (Jan. ’06)

Toyota Driver Communication at “mobilitas” In Focus

Toyota has been conducting unique nationwide safe-driving courses called Toyota Driver Communication, which were begun in 1987 with the goal of reducing the number of accidents involving young drivers. In April 2005, Toyota completed the construction of the TOYOTA Safety Education Center “mobilitas,” where Toyota Driver Communication courses are offered on a regular basis.

The largest facility of its kind in Japan, “mobilitas” encompasses a total area of 130,000m2 and is located inside Fuji Speedway in Shizuoka Prefecture. It is complete with a large fl at course, a circuit with a 35-degree bank, a straight low-resistance course,* and a winding low-resistance course. With highly skilled Toyota test drivers as instructors,

students can safely experience the performance of vehicles at their limits through such exercises as blind-spot checking, high-speed full braking, and driving and braking on a low-resistance road surface. In FY2005, 5,000 drivers attended classes at “mobilitas.”

“The class was very useful because we learned a lot of things we had never learned at regular driving schools, such as driving priority, that is, safety fi rst and then smooth and speedy operation, and quick actions to take during emergencies. I hope to attend a class here again,” says Ms. Michiru Tsuneoka who took a class at “mobilitas.”

*Low-resistance course:A road purposely designed with a low coeffi cient of friction to create a slippery surface

High-speed, full braking exercise

Michiru Tsuneoka displaying her certifi cate of completion

http://www.toyota.co.jp/mobilitas/ (Japanese only)

Child Safety Communication course


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Policy Suggestions toward Improving the Traffi c Environment

Reducing the number of traffi c accidents and building safer traffi c environments requires the joint efforts of governments and industries. Toyota has been actively making policy suggestions to various governmental agencies through the activities of the Japan Automobile Manufacturers Association (JAMA).

In FY2005, Toyota made suggestions through JAMA related to the creation by the Japanese government of the Eighth Basic Traffi c Safety Plan (FY2006 - FY2010). These suggestions focused on strengthening various areas to cope with the aging population, and called for the following measures:1) Traffi c environment: Further improvements in traffi c safety-

related infrastructures, and incorporation of community residents’ opinions

2) People: Enhancements to traffi c safety education of senior citizens and high school students

3) Vehicles: Support of widespread use of safety equipment, and further enhancements in accident analysisToyota will also continue distributing the teaching materials

created by JAMA for high school teachers (Safety Action 21).

Intelligent Transport Systems (ITS)ITS is a new system which views people, roads and vehicles

holistically and attempts to construct a transportation system that is safe, convenient, and effi cient using cutting-edge communication technologies. Toyota is developing ITS from a wide range of perspectives, including “Increasing vehicle functionality,” which involves improving both the attractiveness of vehicles and the joy of using them; and “Enhancing transport systems,” which involves achieving the smooth and effi cient movement of people and goods while creating a safe traffi c environment.

Developing ITS requires the fusion of a wide range of technologies that go beyond the traditional framework of car making, including sensing technologies, telecommunication technologies, and information processing technologies. Therefore, Toyota is participating in R&D efforts and verifi cation projects in cooperation with governments, private organizations, and academic institutions. Toyota has been a participant in the World Congress on ITS* since its inauguration, and has been leading the efforts to promote ITS, by presenting papers and exhibiting state-of-the-art ITS research results and cutting-edge technologies at the Congress sessions.

*World Congress on ITS: An international congress comprising businesses, government bodies, and academic institutions related to ITS for the purpose of discussing the commercialization of ITS technologies. The congress is held every year, rotating among Europe, Asia-Pacifi c and the Americas.

World Congress on ITS (U.S.A.) (Nov. ’05)

WBCSD Sustainable Mobility Project In Focus

The World Business Council for Sustainable Development (WBCSD) is a coalition of 180 international companies from more than 30 countries, united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance and social progress. The organization is involved in policy development and contributes to a sustainable future. The Sustainable Mobility Project (SMP) was launched by twelve automotive and energy companies. With Shoichiro Toyoda, Vice Chairman of WBCSD, as its co-chair, SMP issued “Mobility 2030: Meeting the Challenges to Sustainability” in July 2004.

Toyota (together with six other member companies of the SMP) started the Global Road Safety Initiative (GRSI) in cooperation with the Global Road Safety Partnership (GRSP), an international organization working on achieving greater road safety, and in FY2005 began developing governing structures for implementing GRSI in China, ASEAN nations, and Brazil.

In conjunction with EXPO 2005 Aichi, Japan, WBCSD held its annual council meeting in June 2005, and discussed WBCSD strategies, Asia and a Sustainable Future, and Eco Systems and Business.

Improvements in Traffi c Flows In Focus

Toyota has long sought to address the issue of rush hour traffi c congestion in the Toyota Head Offi ce area.

For example, in order to encourage employees commuting by cars to switch to alternative transportation means, in February 2003 Toyota began implementing Transportation Demand Management (TDM) measures, including the operation of commuter shuttle buses and the creation of bicycle parking lots. At present, the shuttle buses run on six routes with some 200 service runs a day and approximately 4,000 round-trip passengers. Toyota has also continued to increase bicycle parking spaces, adding about 500 since last year for a total of approximately 2,500 spaces.

In FY2004 and FY2005, Toyota participated in the Toyota City TDM Field Test, conducted by the Toyota City TDM Study Society, to improve the traffi c environment and promote changes in employees’ traffi c behaviors. As a result, the number of vehicles on the road decreased and the average speed of vehicles increased, reducing CO2 emissions by approximately 14% in FY2004 on the route from the Tomei Expressway Toyota Exit to the Toyota Head Offi ce (covering a distance of 4.2km) during morning commute hours.

Taking the commuter shuttle bus to work

66 Sustainability Report 2006Sustainability Report 2006 Sustainability Report 2006


Social Contribution Activities

Seeking to contribute toward a prosperous society and its sustainable development, Toyota has been engaged in various social contribution activities with the goal of becoming “a good corporate citizen of the world.”

The Corporate Citizenship Division was organized in January 2006 as a specialized division to focus on corporate social contribution activities. The 80-some employees of the Division, in collaboration with in-house and external organizations, are charged with the following objectives: 1) Integrate corporate social contribution functions across the

company; oversee corporate social contribution activities both within Japan and overseas.

2) Plan and carry out proactive programs; promote volunteer activities.

3) Operate facilities such as the Toyota Automobile Museum.The Corporate Citizenship Activity Committee, chaired by

the company president and comprised of relevant directors acts as the highest level decision-making body in this area. The Committee works to actively promote corporate social contribution activities using Toyota technology and expertise in response to societal needs in a variety of fields, with a particular focus on environmental issues, traffic safety and education.

Basic Policy on Social Contribution Activities

Objectives

Toyota Motor Corporation and its consolidated subsidiaries (referred to collectively as “Toyota”) vigorously promote social contribution activities in order to contribute to the development of a prosperous society and to promote its continuous development.

Stance

Toyota will promote the development of human resources, who will lead the next generation, and will engage in social contribution activities that will lead to fundamental solutions to a variety of social issues, cooperating with a broad segment of society and using its resources effectively to engage in social contribution activities.

Employee involvement

Toyota supports volunteer social contribution activities by its employees as members of society.

Information disclosure

Toyota discloses the results of social contribution activities in an effort to disseminate information broadly throughout society and to contribute to social development.

Global development

Toyota has a shared global Basic Policy on Social Contribution Activities and conducts those activities according to local conditions in each country and region.

Corporate Social Contribution Activities in FY2005

Corporate social contribution activities by Toyota affiliates worldwide in FY2005 are as shown below.1

Education Toyota supports the implementation of educational programs

on a global scale that will develop future leaders. In China, Toyota holds Japanese language classes at Jilin

University and Tianjin University and special classes such as internships at Toyota affiliates. It has also set up scholarship programs at 13 universities, including Tsinghua University and Peking University to support education in China.

In Japan, Toyota has been running a program called “Scientific Jack-in-the-Box! The Why/What Lecture” every year since 1996, which helps students appreciate the mysteries of science and the joy of making things. Toyota sends employee volunteer lecturers to hold programs such as making hovercrafts and automated toy cars. In FY2005, 23 such programs were held in 11 prefectures.

Also, in April 2006, Toyota established the Kaiyo Academy in collaboration with the Central Japan Railway Company, Chubu Electric Power Co., lnc, and other companies. The new school aims to “Create confident personnel with strong ideals, who can lead Japan in the future.”

Traffic SafetyToyota is promoting comprehensive measures geared towards

the total elimination of traffic casualties by viewing people, vehicles, and the traffic environment as an integrated whole.

Currently, of the 280,000 Brazilians living in Japan about 60,000 are of school age, many of whom face language barriers. In 1999, Toyota established the Auto Technician Course for Brazilian Residents of Japan, within the Toyota Technical College Nagoya.

The course is taught in Portuguese and is designed to help Brazilians find employment once they return home to Brazil. So far, 122 students have graduated from the course and 19 are currently enrolled (as of the end of March 2006).

Fourth semester student Carlos Teruo Nakatsugi won the Brazil Toyota Workmanship Contest and returned to Japan in April 2005 for an international gathering of regional winners. The students enrolled in the program during his visit were inspired by his success. “I’d like to work to become like Carlos, refine my skills in Japan, then return to work in Brazil.” (Program student Adriana Kaetsu)

Please see pp.62 - 65 for further details on Initiatives toward Improving Traffic Safety

President Cho (current Chairman) and Carlos Nakatsugi (Apr. ’05)

Program student Adriana Kaetsu (in front)

Training Brazilians Residing in Japan to Become Technicians In Focus

1. On a consolidated basis, including Toyota Auto Body Co., Ltd. and major subsidiaries.Results for overseas affiliates have been calculated in Japanese yen based on the average exchange rate for FY2005

2. Facilities whose operations and objectives cover more than one area have been included in “Other”

Other 2

Social welfare Local communities

Educatioin

EnvironmentTraffic safety

Arts and culture

16.8billion yen

Activities by Field of Contribution in FY2005

Sustainability Report 2006Sustainability Report 2006 Sustainability Report 2006 67

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Social Contribution Activities

The EnvironmentToyota is committed to making social contributions in the

area of the environment as a step towards realizing sustainable development of society and the planet.

Creating Sustainable Mechanisms to Achieve Harmony between Humans and Nature

The Fengning Man Autonomous County of China’s Hebei Province is located about 180 kilometers north of Beijing. It is a region where excessive grazing and deforestation have created pronounced desertification. Toyota has been working with the Chinese Academy of Sciences, the Hebei Province Forestry Bureau and the NPO Green Earth Center to support a wide variety of desertification prevention projects.

The projects have focused on measures to stop excessive grazing and deforestation, the most significant causes of desertification. Fruit trees and medicinal plants are being planted to create a reforestation model aimed at achieving economic independence for the local communities.

By FY2005, 2,174ha of forest had been planted, and plans call for forestation of the entire area of 2,500ha to be completed during FY2006. The program has resulted in environmental improvements such as revegetation and sand stabilization. A farmer who is using the grass pastures planted around the reforested areas to raise dairy cattle explains “I’m happy that we’re now able to produce milk every day. I’m hoping to increase the number of dairy cattle I have in place of goats, which are the cause of excessive grazing.” Also, local citizens are looking forward to the fruit and herbs that will be harvested in the area.

Toyota hopes that this model will continue to be used in this region as well as in other regions.

Toyota Environmental Activities Grant ProgramThe Toyota Environmental Activities Grant Program approved

a total of approximately 170 million yen for 25 projects in FY2005 centered on the theme “Environmental Technology and Human Resource Development Contributing to Environment Revitalization and Conservation.” This year, in addition to the original category of “general grants,” a new grant category, “small-scale grants,” was established for activities solely within Japan to support an even larger number of organizations and groups. The program’s selection committee, consisting of a group of experts from Japan and elsewhere around the world, judged the 556 entries on criteria such as appropriateness of the projects and continuity and future development. Twelve projects were selected for the “general grants” category and thirteen for the “small-scale grants” category. Also, site visits were conducted for past projects that were awarded grants to follow-up on their progress.

The Toyota Environmental Activities Grant Program was launched in commemoration of TMC’s receipt of the Global 500 Award,* in 1999, from the United Nations Environment Programme (UNEP). Since it began in FY2000, 89 projects in 33 countries have received a total of about 1.08 billion yen worth of funding.

*Global 500 Award: Established by UNEP to recognize individuals or organizations that contribute to greater environmental protection or improvement in terms of sustainable development (1987 - 2003)

Revegetated pastureland dotted with poplar trees

A project in Indonesia that received a grant in FY2004

In April 2005, Toyota opened the TOYOTA Shirakawa-Go Eco-Institute on land it owned in the village of Shirakawa in Gifu Prefecture. This village of houses with thatched roofs built in the style of traditional Japanese gassho architecture is registered as a World Heritage site. The school, which can accommodate up to 100 overnight guests, offers an ideal location in Shirakawa-Go, which boasts a rich cultural heritage, and among abundant natural environment at the foot of Mt. Hakusan for both children and adults to experience symbiosis with nature. The Eco-Institute programs are based on hands-on learning with regard to experiencing nature, environmental technologies, and traditional culture to promote the restoration and preservation of the environment.

Since the school opened one year ago, it has welcomed 14,000 students. A junior high school student from Gifu Prefecture who

Some of the FY2005 Awardees of the Toyota Environmental Activities Grant Program (“General grants” Category)

Project title Implementation site

Building Local Capacities for Community Based Watershed Management in Apolobamba Protected Area, Bolivia Bolivia

Sustainable Energy from Rural Landscape in the White Carpathians, Czech Republic Czech Republic

Environmental Orientation to School Education and Development of Community Based Environmental Technologies India

Sustainable Environmental Action through Participatory Learning in Chilika Lagoon, Orissa, India India

Asia ESD Promotion Projects — Establishing a website for the exchange of information on exemplary ESD promotion project implementation cases and the development of a handbook for project implementation practices

Japan/otherAsian countries

Environment Conservation and Cooperation with Residents in the Surrounding Areas of the Natural Reserves Madagascar

Establishing the Fisherfolk School towards Community Based Coastal Resource Management in the Tañon Straits, Philippines Philippines

Agriculture and Housing in an Environmentally Friendly Design of Settlement Slovak Republic

participated in a program at the school in August 2005 said, “It was fun to experience nature first-hand by making lots of things out of wood and leaves.” The school has divided the year into the 24 almanac-based seasons to create their “Programs for 24 seasons.” In spring, students experience a swamp walk in the small rivers formed from melting snow, while the summer program includes Gifu Butterfly watching. The school plans to continue to develop and expand these kinds of programs to experience the seasons and learn from nature. Junior high school students experiencing

a nature education program

The TOYOTA Shirakawa-Go Eco-Institute In Focus



Culture and the ArtsPassing down the Culture of Making Automobiles and Monozukuri

The Toyota Automobile Museum (opened in 1989), which introduces visitors to the history of automobiles, and the Toyota Commemorative Museum of Industry and Technology (opened in 1994 in collaboration with the 13 Toyota Group companies) have permanent exhibits that allow the public to learn about the culture of making automobiles and monozukuri (making things). They also hold a variety of special exhibits and manufacturing events. During EXPO 2005 Aichi, Japan, a total of 570,000 people visited these two facilities.

The ArtsIn FY2005, the Toyota Commemorative Museum of Industry

and Technology held the “Toyota Collection — Foundations of Monozukuri. Innovation in Japan.” The exhibits included science and technology materials from the Edo and Meiji periods, such as “Yumihiki Doji,” an automated arrow shooting windup doll and an “Elekitel” (battery powered electricity generator). It was successful in sparking an interest in manufacturing

among many visitors. In an effort to assist amateur music events, Toyota began

sponsoring the Toyota Community Concerts in 1981. The concert, which turned 25 this year, has been held over 1,100 times in 128 municipalities in 44 prefectures. More than 900,000 people have attended the concerts to date. In FY2005, 34,000 guests attended 37 concerts in 19 prefectures.

A separate program called “Toyota Children Meet Artists,” started in January 2004, sponsored a workshop for children in Okinawa in collaboration with the NPO Artist’s Studio in a School (ASIAS) in which three artists worked with the children.

Volunteer ActivitiesThe Toyota Volunteer Center was established in 1993 to

support the many volunteer activities conducted by Toyota employees. Today, the Center still continues to provide information to volunteers with over 24,000 participants active in FY2005. The “Toyota Group Disaster V (Volunteer) Net” was established by the Center in 2003 for the purpose of aiding the recovery of disaster victims and areas stricken by natural disasters. About 300 people participated in the hands-on experience events held by the Center in FY2005.

EXPO 2005 Volunteer ActivitiesThe Toyota Volunteer Center was able to gather together

853 employees, family members and former employees to volunteer at EXPO 2005 Aichi, Japan. Volunteers provided information, conducted patrols and cleaning, and offered assistance at the lost children center. Over 70% of the participants were volunteering for the first time. One volunteer commented, “I was able to teach a lot of foreign visitors about Japanese culture. It was a fun experience.”

Children and Other Victims of the Chuetsu Earthquake Invited to EXPO 2005

The Toyota Group Disaster V Net collaborated with the Aichi Chuetsu Support Network, composed of a variety of NPOs, to invite about 90 children, parents and teachers from the Chuetsu earthquake disaster region to EXPO 2005 during August 28 - 30. It was a well-needed break for the victims and an opportunity to provide them with dreams and hope for the future.

Volunteers helping with baby stroller rentals (Aug. ’05)

Victims of the Chuetsu Earthquake who were invited to EXPO 2005 (Aug. ’05)

Concert held at a hospital (Apr. ’05)

Since 2002, the Tokyo Head Office gymnasium has been made available free of charge to young performers of contemporary dance who have difficulties finding a place to practice. This and the Toyota Choreography Award (established in 2001 to discover and foster choreographers who will be the driving force behind the next generation of dance) are two examples of how Toyota supports the arts and culture.

Gymnasium Made Available forDance Practice In Focus

Professional dancers rehearse at the gymnasium

Toyota Automobile Museum Toyota Commemorative Museum of Industry and Technology

Please see p. 76 for further details on Toyota Information Centers


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Environmental and Social Contribution Activities Conducted on the National and Regional LevelsTMT, ThailandEnvironmental initiatives and social contribution activities such as a national campaign to help prevent global warming and projects to protect mangrove forests are being carried out. With participation from employees, the scope of these activities is expanding.

Toyota Motor Thailand Co., Ltd. (TMT) engages in environmental and social contribution activities on both the national and regional levels in its pursuit of becoming the most respected company in Thailand. On the national level, TMT is conducting the Stop Global Warming Campaign. Thailand is not subject to greenhouse gas reduction targets under the Kyoto Protocol, but it has ratified the protocol and is undertaking voluntary reduction measures. TMT seeks to be an environmentally advanced company and is implementing the Stop Global Warming Campaign in cooperation with the Thailand Environment Institute, an NGO that addresses environmental issues. A kick-off ceremony was held in August 2005. In October 2005, teachers and students from 25 schools around the country were invited to attend a camp where they learned about global warming and explored solutions. One camp participant had this impression: “At the camp we not only learned about methods of preventing global warming, we did a lot of fun activities.”

In response to the camp, 25 cities in five regions conducted a competition regarding global warming prevention activities. An awards ceremony was held with all 2,000 participants and HRH Princess Ubol Rattana in attendance. TMT will also create a website on measures to help prevent global warming.

The Environment

As part of its regional activities, TMT contributed to the establishment of the Bang Pu Nature Education Center on the Bang Pu coast about 20 minutes’ drive from TMT. This project was conducted in cooperation with the Royal Thai Army in commemoration of Her Majesty Queen Sirikit’s 72nd birthday. The project is intended to protect mangrove forests, which are declining as a result of shrimp cultivation and other factors.

The Center, which opened in 2004, is operated by WWF Thailand. TMT cooperates with the preparation of displays that focus on birds as well as the construction of wooden causeways and waterways. Thitivuth Koachasarnseen, Head of the Bang Pu Nature Education Center and a member of WWF Thailand, says with enthusiasm, “This project would not have been able to move forward if it were not for the support of Toyota. In addition to funding, Toyota has provided information on waterway designs for supporting water cycles, and its employees have participated in tree planting activities. This is just a small regional project, but we hope to turn this cooperative project with Toyota into a model for future WWF Thailand activities.”

In addition to this, mangrove forests have proven water-cleansing effects, and as a part of its contributions to the local community, TMT employees are also involved in transplanting seedlings to help restore mangrove forests. In October 2004 and in February 2006, some 600 people, comprising of employees and their families, planted some 20,000 mangrove seedlings. The experience of planting the seedlings was a good opportunity for the employees and their families to appreciate the importance mangrove forests.


TMT employees plant mangrove seedlings

Thitivuth Koachasarnseen, Head of the Bang Pu Nature Education Center (left) and Dr. Sitanon Jesdapipat, Country Director, WWF Thailand

Children participating in theStop Global Warming Campaign

Awards ceremony for the competition regarding global warming prevention activities(Center: HRH Princess Ubol Rattana)




Greening of 715 School Grounds NationwideTCI, Canada

Since 2000, Toyota Canada Inc. (TCI) and its dealers have worked with the environmental NGO Evergreen and established the “Toyota Evergreen Learning Grounds Program.” Canadian school grounds are too often covered solely by asphalt or turf, and surrounded by chain-link fencing. TCI’s greening program is an effort to transform these barren school grounds into healthy, natural and creative outdoor classrooms. Schools that have applied for participation in the program are provided with educational materials, tools, funding and hands-on expert assistance. The children themselves are involved in plant selection and garden design, planting a range of vegetables, berries, and flowers. Schools are encouraged to use Evergreen’s online Native Plant Database to search for species adapted to local conditions.

Dealers are also directly involved in the project by making vehicles available and through other activities. In 2005, 92 dealers were matched with 57 schools of the 126 schools funded. After school ground greening has been completed, children can sit in the soothing shade of tall maples, jump between the sturdy rocks of an outdoor classroom, and observe the progress of a ladybug along a

dogwood branch. To date, 715 schools and some 521,900 people have participated in the program.

Supporting Exhibits Highlighting the Importance of WaterTMMK, U.S.A.

Toyota Motor Manufacturing, Kentucky, Inc. (TMMK) recreated a stream, the Toyota Living Stream, as an exhibit at the Salato Wildlife Education Center, operated by the Kentucky Department of Fish and Wildlife Resources, in 2003. In the man-made stream stocked with native fish and surrounded with native vegetation is a glass-walled section under a waterfall where visitors can observe fish in a pseudo natural habitat. The exhibit overall is an opportunity to witness biological interdependence in and around the stream. Also on display are explanations of water-quality indicators and suggestions for ways that consumers can help maintain sound water resources. The Toyota Living Stream has become a chief attraction at the Salato Wildlife Education Center.

As one of the largest Toyota plants in the world, TMMK uses a large amount of water in its production processes. Protection of water resources has always

been a core theme at TMMK and the company has been conducting activities with the goal of reducing consumption by 16% by 2009. This also led the company to sponsor the Living Stream. Company employees and their families continue to support the Salato Wildlife Education Center in diverse ways by doing maintenance and cleanup work and also building hiking trails. “We hope that the Center will be able to function in the future without outside financial assistance,” explains Kim Menke, the manager of community relations at TMMK. The Toyota support has attracted the attention of other prospective corporate sponsors.

The Environment

The Environment

The man-made Toyota Living Stream TMMK employees volunteer

their time and energy

Children themselves are involved in the greening process


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TME Conducts the Road Safety Tour Through Europe 2005 with European Red CrossTME, Europe

Toyota Motor Europe (TME) has been supporting the European Red Cross Road Safety Campaign since 2003. The campaign aims to contribute to a reduction in the number of people injured and killed in road traffic accidents by raising awareness of road safety and promoting first aid skills. In March 2005, TME provided four Corolla Verso vehicles with special specifications for use in the Red Cross Road Safety Tour throughout Europe 2005 under the slogan “One Life. Keep It.” The four campaign cars started their tours simultaneously on June 13 from Greece, Malta, Poland, and Portugal with 24-hour support from a coordination team. Four teams of drivers covered a total of 55,000km on four different routes through 24 nations and ended the tour with the four vehicles converging in Brussels. Throughout the tour, Toyota affiliate companies from more than 10 countries participated in the campaign by holding events for children and local residents, giving demonstrations on initial first aid techniques, and emphasizing to participants the importance of initial responses following a traffic accident. One tour driver commented, “We were welcomed in every

country we visited and children understood clearly the messages of the campaign.” One 13-year-old participant said, “If a friend were hurt in a traffic accident, I’m sure I’d be able to help.

Environmental Protection Awards for Youth CreatedTMCI, China

Toyota Motor (China) Investment Co., Ltd. (TMCI), in cooperation with TMC and the All-China Youth Federation created the Toyota Environmental Protection Aid Program for China’s Youth in 2005. The program is intended to support environmental preservation activities and to encourage such activities by widely disseminating information concerning the work of the award recipients. Thirty different projects were granted awards in 2005, including activities designed to encourage the use of improved technology for methane gas tanks and

preservation of the Poyang Lake wetlands in Jiangxi Province by youth volunteers.

Recipients receive a grant and are also invited to travel to Japan to observe Toyota’s environmental activities and enhance communication with Japanese environmental NGOs. One recipient commented, “Chinese youth are very passionate about environmental protection and have ideas and dreams, but in many instances they are unable to implement them because of a lack of funding. With this grant, I feel that I can make my dreams come true.” A voluntary network has also been created among award recipient groups, leading to further promotion of environmental preservation activities in China. The program will be conducted through 2007.

The Environment

Traffic Safety


Corolla Verso vehicles with special specifications sport the slogan “One Life. Keep It”

The awards ceremony of the Toyota Environmental Protection Aid Program for China’s Youth

Award recipients observe environmental activities at a Toyota dealer




Traffic Safety Education Program Aimed at First-year Elementary School StudentsTMV, Vietnam

Vietnam has a population of 80 million people with ownership of 700,000 automobiles and more than 17 million motorcycles. Underdeveloped road infrastructure, however, means traffic-related injuries and fatalities have increased to more than 30,000 people annually. This makes traffic safety a pressing issue. In the past, some companies conducted traffic safety campaigns on a piecemeal basis, but there were no national activities. Toyota Motor Vietnam Co., Ltd. (TMV) used the establishment of the Toyota Vietnam Foundation (TVF) to launch a Traffic Safety Education Program in October 2005 for all 1.6 million first-year elementary school students nationwide. TMV has created a special booklet on road safety starring the popular cartoon character Pikachu to help get across the importance of the basics of road safety such as observing signals and looking both

ways carefully before crossing streets. As of May 2006, 1.6 million booklets, more than 14,000 VCDs, and 14,000 teacher’s manuals had been distributed nationwide. School visits by Pikachu himself and other grass roots activities are also carried out all over the country. More than 166,000 students at 153 schools have participated in the program to date. Traffic safety is also being implemented for teachers from elementary schools in 64 cities and provinces through national and local level seminars. “This is an excellent program that I wish could be used not just for the first-year students, but for older students as well,” comments one teacher. The program will run until 2008.

Working together with an NGO to Implement Driver Skills Program Targeted at High School StudentsTNZ, New Zealand

New Zealand has a high road accident and death toll compared to its small population, and accidents among teenagers are a particular issue. Given this situation, Toyota New Zealand (TNZ) has been working with the NGO Prodrive Driver Education Trust since 1994, implementing the free ‘Prodrive’ driver skills program targeted at high school students. The program improves driver awareness, enhances driver skills and car control, as well as anticipation of and reaction to road hazards. Volunteers are recruited from local car clubs who are approached by Prodrive as it conducts its courses around the country. These volunteers are trained by the Prodrive coordinators to assist students with the practical driving component of the course. Prodrive coordinators visit 95% of New Zealand high schools where they conduct a 50 minute classroom theory session followed by two hours of in-car practical modules. The practical sessions cover driving techniques to enhance vehicle control in emergencies or other situations when the driver may experience panic.

TNZ has provided program funding and a fleet of 12 ‘Signature Class’ vehicles, and also covers the cost of servicing the cars. TNZ also provides a dedicated staff

member to liaise between the partners and ensure the program operates smoothly, and is helping to modernize the classroom presentations with video and PowerPoint slides. Since the program’s inception, some 40,000 high school students have undergone training. One such student, Sam Howell, wrote in a thank you email, “I am definitely going to encourage all of my friends to participate if they get a chance, because not only was it helpful but it was quite a bit of fun!”

Traffic Safety

Traffic Safety

Traffic Safety Education Program for children

A group of Prodrive participants with their instructor

Special booklet on road safety distributed to children Children enthusiastically answering questions


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Providing Periodic Healthcare Service in Poverty-stricken AreasTMP, The Philippines With cooperation from local governments and pharmaceutical companies, TMP has been implementing an annual healthcare service in poverty-stricken areas since 1992. The program has helped raise awareness regarding healthcare and is the first step towards ensuring proper health management.

Toyota Motor Philippines Corporation (TMP), through its charitable foundation Toyota Motor Philippines Foundation, provides a periodic healthcare service that includes health management guidance known as the Medical and Dental Outreach program. The program is implemented twice a year—once near the company’s plant in Santa Rosa and once in Paranaque City, with cooperation from the municipal government, local hospitals and pharmaceutical companies. Approximately 1,500 to 2,000 children and adults from poverty-stricken areas meet with physicians for diagnosis and treatment. Between 1992, when the Medical and Dental Outreach program was launched, and 2006 about 78,600 people have received treatment.

More than 100 volunteers, including TMP employees, physicians, nurses, dentists and employees of pharmaceutical companies, participated in the 35th outreach event held in July 2005. Toyota Motor Philippines Foundation allocates the funds for the program. Meanwhile, the two cooperating pharmaceutical companies supply medicine free of charge. TMP also furnishes two vans outfitted as mobile medical centers for taking X-rays and conducting blood tests.

Municipal officials determine the degree of need of patients and distribute “participation cards.” Patients use transportation provided by the cities to travel to the local elementary schools and other sites where the program is carried out. Most of the patients might otherwise never receive care from healthcare professionals. The patients include numerous children who have colds, most of whom

display alarming symptoms of malnutrition. Parents bring many children for treatment of parasitic diseases. Physicians also perform simple surgery as necessary at the outreach sites. Patients diagnosed with serious health problems receive referrals to hospitals.

Hon. Arlene Arcillas-Nazareno, City Vice-Mayor of Santa Rosa, says that when the poor go to see a doctor, they lose an entire day’s income. As a result, they neglect health management and fall into a vicious cycle. This program is the first step in generating higher levels of awareness regarding health management.

Inadequate healthcare for the economically disadvantaged is an especially serious social issue in the Philippines. The Medical and Dental Outreach program was begun with an emphasis on social contribution empowerment. Dr. David Go, President of the Toyota Motor Philippines Foundation explains, “We’d rather help people help themselves than simply give money. All of this depends, however, on people being healthy enough to take advantages of opportunities.” The program is thus an important contribution to medical care in the communities that TMP serves.

Examples of Overseas Initiatives Development of Human Resources

Healthcare service for children

Hon. Arlene Arcillas-Nazareno (left), City Vice-Mayor of Santa Rosa and Dr. David Go, President of The Toyota Motor Philippines Foundation

Eye tests are also conducted



Development of Human Resources

Supporting “Hitozukuri” through “Monozukuri” Courses and Robot ContestsTMV, VietnamBased on its commitment to contribute to the development of Vietnam, TMV has created the Monozukuri course and sponsored Robocon competitions. TMV supports the development of human resources who are engaged in monozukuri and development of manufacturing technology.

To mark the 10th anniversary in 2005 of its founding, Toyota Motor Vietnam Co., Ltd. (TMV) established the Toyota Vietnam Foundation (TVF) in January 2006, based on its commitment to education, society and industry in its drive to help create a better future for Vietnam. In particular TMV aims to help improve education and training quality for the development of human resources. Among TMV’s activities are the creation of the Monozukuri course at the Hanoi University of Technology (HUT) in September 2005.

Over a period of one year, the course covers all processes of manufacturing, from the fundamentals to costs, quality, design, production management, production preparations, sales, and after-sales service, and includes class lectures and on-site observations at the TMV plant. TMC Vice Chairman Fujio Cho (currently Chairman) gave the first lecture of the course.

TMV provided lecturers and full financial resources in the first year, with the course recipients being primarily corporate leaders and HUT professors. Plans call for the HUT professors who took the course in the first year to take on the role of lecturers in the second year. In the long run, it is intended that the course will be run independently without the financial involvement of Toyota, and TMV’s plants will be made open to the faculty. TMV will continue to participate in the development of teaching materials. Dr. Le Hieu Hoc of the HUT Faculty of Economics and Management, who attended the course to learn about the Toyota Production System (TPS), commented after the course, “I felt that the TPS is a part of the corporate culture itself. Toyota is committed to educating and training its employees, and employees learn many things. Mr. Cho’s lecture was extremely practical and easy to understand,

and my doubts about the TPS have been eliminated. I will do my best to spread the spirit of the TPS in Vietnam.”

As an example of TMV’s commitment to what could be described as the origins of monozukuri, the company has also sponsored the Robocon competition in Vietnam, an event whereby students compete against each other with homemade robots, since the competition’s inaugural year in 2002. The objective is to link the creativity of youth with monozukuri. In the first year 17 teams participated; now more than 300 teams participate with tremendous enthusiasm. The competition generates considerable interest, and has become a national event.

The 2002 winner, a team from Ho Chi Minh City University of Technology, participated in the Asia-Pacific international final held in Japan, and in fact won the overall competition, quite an achievement considering this was the first time for the team to participate in the event. The Vietnamese team placed third in 2003 and took the trophy for a second time in 2004. One of the participants said excitedly during the competition, “I am participating to preserve the honor of my university.” TMV intends to continue its role as a sponsor of the Robocon competition in Vietnam in an effort to help the competition take firm root in the country, and in doing so promote the foundations of monozukuri in Vietnam.


TMC Vice Chairman Fujio Cho (currently Chairman) giving a lecture at HUT

Learning about the TPS

Robocon 2005


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Examples of Overseas Initiatives Development of Human Resources

Supporting Financial Independence of Women and Impoverished People The Abdul Latif Jameel (ALJ) Group, Saudi Arabia

The Abdul Latif Jameel (ALJ) Group is a Saudi Arabian corporate group that manages Toyota distributors in Saudi Arabia, Algeria, Morocco and other countries. To help eliminate poverty in the region the ALJ Group is using microfinance to extend small loans without collateral to the poor to start or expand “micro-businesses” in an effort to help them gain financial independence and improve their lives. The Group uses microfinance techniques pioneered by the Grameen Bank of Bangladesh, which has helped 2.7 million Bangladeshi families escape poverty.

The ALJ Group launched the Grameen-Abdul Latif Jameel Pan-Arab Initiative in 2003. It has collaborated with other microfinance enterprises in Egypt, Morocco and Tunisia, and serves more than 52,000 borrowers, mainly women. The Abdul Latif Jameel

Program for Productive Families was launched in 2004. It has set up six branches across Saudi Arabia and serves more than 3,000 women borrowers.

As a form of indirect microfinance support, the initiative provides training and tools to expand “micro-businesses,” and together with the Consultative Group to Assist the Poor (an arm of the World Bank) launched an Internet portal, the Arabic Microfinance Gateway, to make microfinance industry information available online.

Development of Human Resources

Toyota Production System Support Center Assists North American Manufacturing IndustriesTSSC, North America

When Toyota was established in Japan, it received extensive technology support and know-how from American manufacturers, through plant tours and the like. Interest in the Toyota Production System (TPS) grew in North America during the 1980s, and in order to make contributions as a good corporate citizen by making TPS know-how available, Toyota established the Toyota Supplier Support Center (TSSC) in Lexington, Kentucky in 1992 (the Center subsequently moved to Erlanger). TPS know-how is disclosed not only to Toyota suppliers but also to manufacturers throughout North America and improvement activities are conducted jointly. In addition, as a part of its contributions to local communities, support was provided for the improvement activities of a company that publishes Braille books and for measures to improve the productivity of a check clearinghouse. In 2002, TSSC was spun off and began providing some services on a paid basis. The objective is to train personnel in the TPS so that more companies can benefit from putting the TPS into practice.

The specific activities of TSSC are individual process improvement activities and workshop activities. Process improvement activities are carried out at the client

company’s site with the actual plant workers to conduct model and human resource development. Workshop activities use Lego simulations and case studies of workers’ actual practices to explain the TPS in easily approachable ways. A promise is extracted from companies prior to their undertaking the training: That upon implementing what they have learned, if they manage to reduce muda (wastage) and improve productivity, resulting in excess staff, that they won’t under any circumstances lay-off any employees.

Since TSSC was established, approximately 130 companies have undergone individual process improvement act iv i t ies and 2,200 persons have participated in workshops (as of end of March 2006). One recent par ticipant commented after the training, “I learned that systems should focus on people, and I am now confident that I can change work practices.”

Prince Saoud bin Abdul Mohsen (left) handing over a check to a loan borrower

and Mr. Mohammad Jameel (center), who heads the ALJ Group

The Arabic Microfinance Gateway Internet portal

A TSSC employee (right) assists in improvement activities



Communication

Interaction with the PublicShortly after its inception and the start of operations at the

Koromo Plant (now the Honsha Plant), in November 1938 Toyota opened the plant to the public. Toyota founder Kiichiro Toyoda explained, “I plan to open the plant to the public and create access ways inside the plant for tour groups since automobiles are commonplace and having people see what we are doing will help expand knowledge about industry.”

Not only does Toyota provide plant tours but it also makes efforts to interact with customers and the community through facilities to disseminate information to the public and reflect customer opinion in the corporate stance.

In 2005, partly due to EXPO 2005, which was held in Aichi, Japan, a record 200,000 people visited Toyota plants. In addition, some 8.31 million people visited Toyota information centers.

Cumulative Number of Visitors to Amlux Reach 30-Million Mark

The Toyota Auto Salon Amlux Tokyo opened in September 1990 in Ikebukuro, Tokyo, as the largest auto showroom in Japan — the first of its kind to be built by a Japanese auto manufacturer. In January 2006, the showroom welcomed its 30 millionth visitor. The facility presents a wide variety of Toyota’s corporate activities, including display of approximately 70 vehicle models, covering all current Toyota passenger cars, as well as the Toyota F1 racing car, the i-unit, and new environmental and safety technologies.

Toyota Stakeholder DialogueToyota Stakeholder Dialogues have been held each fiscal year

since 2001 to enable discussion that transcends the borders of companies and organizations.

The Fifth Dialogue, held in January 2006, adopted “Corporate Social Responsibility (CSR) — Focusing on Environmental Issues” as its theme. About 40 participants, including 30 stakeholders representing NGOs/NPOs, academia, government and industry, along with Toyota employees and executives attended a 2-day conference. Environmental CSR topics were discussed both at the plenary session and during group discussions with several points of contention such as compatibility with societal needs, balancing CSR with corporate profit, and the importance of international standardization. Based on a clarification of different goals and purposes and an awareness of common issues, communication and cooperation were identified as further issues. Respective roles of the various sectors in promoting future CSR were also suggested.

Par ticipants expressed opinions such as, “Discussions on a common theme but involving people from different fields provided a great learning experience” and “I was able to objectively examine CSR activities that are currently being implemented.” Toyota will continue to hold such dialogues in the future.

Even after EXPO 2005 Aichi, Japan, came to an end, Toyota continued to display the future personal mobility vehicle “i-unit” and “Toyota Partner Robot,” which assists human activities, at various locations throughout the country to communicate the message of the expo. Since October last year, the i-unit was showcased at 58 sales promotion events in front of about 1.27 million people. The Toyota Partner Robot has been shown to about 30,000 people in 12 locations across Japan since 2006. Event participants have been fascinated by the technology, making comments such as “How amazing to see this up close. I feel like I’m touching the future!”

Permanent Display Locations

i-uni

t

• MEGA WEB• Amlux Tokyo• Toyota Commemorative Museum

of Industry and Technology• Toyota Automobile Museum• TOYOTA Shirakawa-Go

Eco-Institute• Toyota Motor Hokkaido Inc.• Toyota Motor Kyushu Inc.• Central Japan International Airport

(Centrair)

Toyo

ta P

artn

erRo

bot

• MEGA WEB• Amlux Tokyo• Toyota Commemorative Museum

of Industry and Technology• Laguna Gamagori• Central Japan International Airport

(Centrair)

http://www.toyota.co.jp/en/about_toyota/facility/toyota_kaikan/exhibits/

http://www.toyota.co.jp/en/about_toyota/facility/toyota_kaikan/ plant_tour/

Toyota Information Centers

Name Details Number of visitors (2005) Location

MEGA WEB

Car theme park that allows visitors to “see, ride and enjoy vehicles.” Features about 130 Toyota models on display, a test drive course and a new Lexus Gallery.

5.61 million Odaiba, Tokyo

http://www.megaweb.gr.jp/English/

Amlux Tokyo

Showroom to spotlight Toyota’s vehicles, new technologies and environmental and safety initiatives.

1.63 million Ikebukuro, Tokyo

http://www.amlux.jp/english/floor/f1_f.shtml

Toyota KaikanPresents Toyota’s approach and activities with a focus on environment and safety-related issues. 440,000 Toyota,

Aichi

http://www.toyota.co.jp/en/about_toyota/facility/toyota_kaikan/

Toyota Commemorative

Museum of Industry and Technology

Presents the history of the Toyota Group through displays that highlight the transition in textile, automobile and production technologies.

310,000 Sako, Nagoya

http://www.tcmit.org/english/

Toyota Automobile

Museum

Focuses on the evolution of gasoline-powered vehicles from the end of the 19th century through a display of about 120 Japanese, European and American automobiles.

260,000 Nagakute, Aichi

http://www.toyota.co.jp/Museum/

Toyota Kuragaike Commemorative

Hall

Presents the keen spirit of Toyota at the time of its establishment and the heart of the Toyota Group for “making things.”

60,000 Toyota,Aichi

http://www.toyota.co.jp/en/about_toyota/facility/kuragaike/

Total 8.31 million

i-units on display at an event in front of Nagoya Station (Apr. ’06)

The EXPO 2005 Message as Communicated by i-unit and the Toyota Partner Robot

In Focus

TMC President Watanabe with the 30 millionth visitor and family (Jan. ’06)

Discussion by stakeholders (Jan. ’06)


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Communication


Two-way Communication with Tomorrow’s Decision MakersTMT, Thailand

Toyota Motor Thailand Co., Ltd. (TMT) opened the Style by Toyota complex in the Bangkok Siam Square in January 2006. The objective of the complex is to foster communication between the youth of today, who will be tomorrow’s decision makers, and current opinion leaders and make a contribution to Thai society by encouraging the development of young people. The complex is intended to function as a forum for discussion and debate on various issues, including the environment.

The building was constructed on the Chulalongkorn University campus in collaboration with the university, which hopes to create a “site that will enhance creativity outside the regular learning environment.” University President Khunying Suchada Kiranandana commented on the opening, “I believed that we needed a forum outside the usual university boundaries for students to study on weekends and enhance their creativity, and consequently, I am very grateful for this initiative. I recognize TMT’s tremendous commitment to human resource development, and I hope that the development of human resources will lead to the further development of Thailand as a nation.”

Style by Toyota features areas for exhibitions and events and holds events such as exhibits of design projects, based on the Yaris, created by students from four different universities. It also serves as a site to foster the creativity of students. Visitors number 900 to 1,000 each day, double the initial projections. One student says, “A cutaway model was used to show the structure of a hybrid vehicle, which helped me get a good understanding of it.”

Communication

Communication

Environmental Programs Held within TMMF Site in Cooperation with an Environmental NGOTMMF, France

Toyota Motor Manufacturing France S.A.S. (TMMF) was established in 1998 in Valenciennes, France, near the border with Belgium, as Toyota’s second European manufacturing base. Production began in January 2001, and since then TMMF has used “Green, Clean, and Lean” as its slogan to reduce environmental impact based on the Toyota Production System, which seeks to eliminate muda, mura and muri (elimination of wasteful practices, inconsistencies and unreasonable requirements).

In December 2005, TMMF concluded a three-year partnership contract with the Centres Permanents d’Initiatives pour l’Environment (CPIE Bocage de l’Avesnois), a non-governmental organization, to protect wildlife and biodiversity within the TMMF site and to create wildlife observation trails for children. The activities include surveys of wildlife within the site, development of paths for strolling through the site, and tree planting to increase bird watching opportunities. In June 2006, a Green Visit Program was begun for children. Tours of TMMF’s water treatment facilities, environmental education programs, and observation of eco-systems are also planned for ten groups of local children between the ages of 9 and 14. In

conjunction with these programs, pamphlets concerning eco-systems and bird watching games were prepared in cooperation with the CPIE, local educators, and the Ministry of Education.

Cutaway model of a Prius

The first group of local children who visited the site during Environment Week in June 2006


For the fi scal year ended March 2006, Toyota’s consolidated fi nancial results were: net revenues of 21,036.9 billion yen, up 13.4% from the previous fi scal year; operating income of 1,878.3 billion yen, up 12.3% from the previous fi scal year; and net income of 1,372.1 billion yen, up 17.2% from the previous fi scal year. All these fi gures are new record highs. The increase in operating income was mainly due to the effects of marketing and cost reduction efforts, and the effects of changes in exchange rates, partially offset by an increase in expenses as a result of active investment geared towards future growth. Net income exceeded one trillion yen for the third consecutive year.

Toyota engages in global business based on the basic policy of “manufacturing products where the demand is.” As a part of this process, Toyota is expanding local procurement and creating local jobs, thereby contributing positively to the economic

development of numerous regions around the world.As a result of these efforts, Toyota now has 52 production sites

in 27 countries and regions, and its consolidated employment has reached 285,000 people. Toyota vehicles are sold in approximately 170 countries and regions around the world and profi tability has increased in all regions. Toyota will continue its efforts to achieve long-term stable growth and increase corporate value through good relations with stakeholders in all regions.

800 400

400 200

1,600 800

1,200 600

2,000 1,000

0 0

Capital Expenditure* and R&D Expenses

R&D expenses (Right)*Excluding equipment

leased to othersCapital expenditure

Mar. ’02 Mar. ’03 Mar. ’04 Mar. ’05 Mar. ’06 (FY)

(Billion yen) (Billion yen)

1,500 25

1,200 20

15

10

5

0

900

600

300

0

Net Income and ROE

Net incomeROE (Right)


(Billion yen) (%)


10,000

5,000

15,000

25,000

20,000

0

800

400

1,200

2,000

1,600

0

Net Revenues and Operating Income


Operating incomeNet revenues (Right)

Consolidated basis Year ended March 2005(April 2004 through March 2005)

Year ended March 2006(April 2005 through March 2006)

Compared to previous year

1. Net revenues

2. Operating income

3. Net income

4. Total assets

5. Shareholders’ equity

6. ROE

7. Vehicle production

8. Vehicle sales

18,551.5 bil. yen

1.672.1 bil. yen

1,171.2 bil. yen

24,335.0 bil. yen

9,045.0 bil. yen

13.6%

7,231 thousand units


21,036.9 bil. yen

1,878.3 bil. yen

1,372.1 bil. yen

28,731.5 bil. yen

10,560.4 bil. yen

14.0%



+ 13.4%

+ 12.3%

+ 17.2%

+ 18.1%

+ 16.8%

—

+ 6.6%

+ 7.6%

Reference: Unconsolidated basisYear ended March 2006

(April 2005 through March 2006)

10,191.8 bil. yen

847.9 bil. yen

765.9 bil. yen

9,909.0 bil. yen

6,686.8 bil. yen

12.0 %



http://www.toyota.co.jp/en/ir/library/annual/

Please see p. 61 for further details on “Relations with Shareholders”

Economic Aspects

Business Results and Global Expansion of Business


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79

Europe

Asia Other

Japan

NorthAmerica

Consolidated Total7,711 thousand units

10.8%4.8%

8.1%

15.6%

60.7%

Vehicle Production by Region

Year endedMarch 2006

North America

Japan

Asia

Other

Europe

Consolidated Total7,974 thousand units

11.0%

14.4%

12.8%32.1%

29.7%

Vehicle Sales by Region

Year endedMarch 2006

1,600

800

2,400

4,000

3,200

0

40

0

80

160

120

200

Europe



(FY)Mar. ’04 Mar. ’05 Mar. ’06

4,000

2,000

6,000

10,000

8,000

0

500

250

750

1,250

1,000

0

Japan



(FY)Mar. ’04 Mar. ’05 Mar. ’06

4,000

2,000

6,000

10,000

8,000

0

500

250

750

1,250

1,000

0

North America



(FY)Mar. ’04 Mar. ’05 Mar. ’06

4,000

2,000

6,000

8,000

Vehicle Production

0

JapanOverseas

(Thousand units)

(FY)Mar. ’04 Mar. ’05 Mar. ’06

4,000

2,000

6,000

8,000

Vehicle Sales

JapanOverseas

0

(Thousand units)

(FY)Mar. ’04 Mar. ’05 Mar. ’06

1,600

800

2,400

4,000

3,200

0

80

40

120

200

160

0

Other Regions(Billion yen) (Billion yen)


(FY)Mar. ’04 Mar. ’05 Mar. ’06

23

20

17 1618 19

22

21

24

30

26 27

52

343536

29

4849

3350

39 - 45, 4746

51

313238

28

37

25 11

12

10

12

34

567

8

914

1513

Republic of South Africa

Kenya

Turkey

CzechRepublic

Pakistan Thailand

Vietnam Philippines

China

Taiwan

Australia

Canada

U.S.

Mexico

VenezuelaColumbia

Brazil

Argentina

Malaysia

Indonesia

Bangladesh

U.K.

FrancePortugal

Poland

Russia

India

Global Expansion of Business (As of the end of March 2006) Overseas production sites Scheduled overseas production sites

Region

Japan ( )

North America

Europe

Asia

Total ( + )

Overseas total ( )

Number ofemployees*

178,214

33,548

20,943

31,488

285,977

107,763

Production

Country/region

Number ofbases

22

10

8

25

74

1

2

7

9

Other 21,784 99

5227

28

*Includes employees from non-production bases

1,600

800

2,400

4,000

3,200

0

80

40

120

200

160

0

Asia



(FY)Mar. ’04 Mar. ’05 Mar. ’06


Special Story

Providing the Freedom of Mobility to a Greater Number of Customers

We had Kousuke Goto and his mother Hisayo test drive a Ractis Welcab1 wheelchair-adapted model (Type II). The Ractis uses a ramp to enable boarding and exiting while remaining in a wheelchair. This means that “Even when it’s raining, I can put Kousuke in the vehicle while holding an umbrella,” says Hisayo. Kousuke sits in an intermediate row between the front passenger seat position and the second row of seats. Toyota was the fi rst automaker in Japan to develop a vehicle that can accommodate a wheelchair in this position.

“I can see Kousuke’s face, so I can drive with peace of mind,” explains Hisayo. “Also, if he were sitting in the front passenger seat, he might play with the controls, but in the intermediate seat position he can’t reach them, although I can still reach him, so it is much safer.”

Prior to the appearance of this type of wheelchair placement, in many instances, physically disabled children rode in the front passenger seat. Parents want their children within reaching distance in case the child’s head falls forward or the child has a seizure. At the same time, however, when children are in the front passenger seat they can touch the controls, and shifting the child from a wheelchair to the seat is quite difficult. Toyota developed the Ractis Welcab wheelchair-adapted model (Type II) to address these issues.

1. Welcab is the name for Toyota’s specially equipped vehicles with factory-installed features for disabled people. The name Welcab was created by combining “welfare” and “cabin.”

Rising Demand with the Rapid Aging of Society

Toyota began development of Welcab vehicles in the mid-1960s with the manufacture of vehicles installed with devices that facilitate driving by disabled people themselves and modifi cation of vehicles that can be driven with a wheelchair on board. Toyota displayed a specially equipped vehicle based on the Hiace at the 21st Tokyo Motor Show in 1975. During the International Year of Disabled Persons in 1981, Toyota began sales of both these types of vehicles under the names Friendmatic and Handicab.

Toyota has developed vehicles specially equipped for disabled people based on its philosophy of “providing the freedom of mobility in comfort to a greater number of customers.” The benefi ts of easy mobility using automobiles have even greater signifi cance for seniors and disabled people than the young and able. It is the duty of automobile manufacturers to enable as many people as possible to enjoy these benefi ts.

In addition, there are calls within society to allow disadvantaged persons such as seniors and disabled people to enjoy unhindered lifestyles. The spread of concepts such as “barrier-free access,”2 “normalization,”3 and “universal design”4 is one of the results of such societal demands. There is a strong likelihood that these demands will increase even further in the future as Japan develops into an aging society unprecedented anywhere else in the world.

“Providing the freedom of mobility in comfort to a greater number of customers” — Welcab vehicles are one means by which Toyota strives to carry out this philosophy. We expect that demand for such vehicles will increase with the aging of Japan’s society. We examine the past, present, and future prospects of Welcab vehicles.

According to population statistics, the number of people aged 14 years and younger and those aged 65 years and older reversed positions in 1997. As a result of a declining birth rate and increased longevity, it is expected that in 2015 one quarter of the population will be 65 or older. In addition, 2.5 million people nationwide are currently bed-ridden, and 86% of their caregivers are female. Looking at the ages of the caregivers, 49% are 60 years or older. This means that as the Japanese society ages, more and more seniors will be caring for other seniors. As the number of female and senior caregivers increase, demand for specially equipped vehicles will grow.

2. Barrier-free access: The elimination of obstacles to the enjoyment of normal lifestyles by disabled people

3. Normalization: The belief that socially disadvantaged persons should be provided with an educational, employment, and living environment as close to that of other members of society as possible

4. Universal design: Design of products and environments to be usable by all people, to the greatest extent possible, without the need for adaptation or specialized design

Incorporating Universal Design in Housing In Focus

The Toyota Dream House PAPI developed by Toyota’s Housing business features intelligent storage that facilitates the placement and removal of heavy items, an elevator with a two-way entrance that facilitates effi cient wheelchair routing, exterior doors with electronic authentication that identifi es people in wheelchairs to open the door wider and at a slower speed than for able-bodied persons, and other unique universal designs that allow all family members to live safely and comfortably.

’97 ’15

1/4 of total populationare seniors

Productive population(aged 15 to 64)

Juvenile population(aged 0 to 14)

Seniors(aged 65 or older)

A low birth rate and increased longevity have resulted in a society aging at a pace unseen anywhere else in the world.

Data: National Institute of Population and Social Security Research

In 2015, one in four people will be 65 or older

80

(Million people)

60

40

20

01950 1970 1990 2010 2030 2050 (Year)

Trend in Factors Concerning Specially Equipped Vehicles

Front door that identifi es people in wheelchairs

Kousuke Goto and his mother Hisayo


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a vehicle with an intermediate seat position would satisfy users. We will continue to undertake development of Welcab vehicles so that customers tell us ‘I was waiting for exactly this type of vehicle.’”

As the father of a physically disabled daughter, Mr. Nakagawa develops Welcab vehicles from the perspective of someone who needs such a vehicle, resulting in the creation of a vehicle that meets actual needs. There is another anecdote concerning the efforts put into the development of the Ractis.

Working so Customers will Say, “I Was Waiting for this Kind of Vehicle”

The functions that users want in specially equipped vehicles are not limited to those that facilitate care, but also include those that are based on the fundamental care principle of enabling people to do everything they can on their own. It is important to facilitate use not only from the care recipient perspective, but also to make use safe and easy from the perspective of the caregiver. This will reduce the burden on caregivers while making it easier for people to request assistance.

In searching for new functions that are desirable in specially equipped vehicles and are benefi cial to both care recipients and caregivers, developers spoke repeatedly with disabled people and selected wheelchair users as developers. What is important is not just the information obtained through discussions and surveys, but determining actual needs.

Shigeru Nakagawa, Project Manager of the Product Development Group, which developed the Ractis with the intermediate seat introduced at the beginning of this section, explains, “There are some customers who are unable to tell us what they would really like because they believe that it would simply be impossible to achieve. To take the Type II specifi cations as an example, people believed that it was not possible to create a vehicle in which a parent could reach a child from the driver’s seat and that could accommodate boarding while in a wheelchair. By analyzing parents’ day-to-day activities and how the vehicle is used, however, we determined that creating

Welcab VariationsDevelopment of specially equipped vehicles began in the

mid-1970s, and with subsequent development the variations in vehicles increased.

Welcab vehicles are broadly divided into self-operated models and caregiver assisted models. Vehicles for self-operation are those with an accelerator and brake pedal that can be operated by hand, enabling people without use of their legs to drive with only their hands. These Toyota vehicles are referred to as Welcab Friendmatic Seat models. Caregiver assisted models are designed to facilitate boarding and exiting and other care-related activities. There are many variations, including models that can accommodate a wheelchair; models with seats that can rotate and slide to facilitate shifting to or from a wheelchair; and seats that rotate, slide, and move up and down, in both the passenger seat and rear seat. There are numerous variations because the desired functions vary among individual users and caregivers. There are currently

66 variations in 33 vehicle series in the Welcab lineup. Among compact vehicles, of 70 different vehicle series, 33 are available with Welcab specifi cations (as of April 2006).

Projected Increases in DemandDemand for specially equipped vehicles is clearly

increasing. In FY1995 sales of such vehicles were 1,700 units; in FY2005 this fi gure had increased to 19,140 units as a result of an increasingly aged society and the rapidly growing number of physically disabled people taking a more active role in society. In addition to use by hospitals and care facilities, use by individuals is showing rapid growth. Welcab vehicles continue to enjoy a 60% to 70% market share of specially equipped compact vehicles. In addition, use of Toyota’s Lift-up Seats by other manufacturers of vehicles for disabled people is not uncommon due to the seats’ high performance, ease of use, and cost. Lift-up Seat units manufactured by the Toyota seat manufacturer, Toyota Auto Body Co., Ltd., account for 80% of the total market share.

Shigeru Nakagawa, Project Manager, Product Development Group

’00 ’01 ’02 ’03 ’04 ’05(FY)

0

10

20(Thousand vehicles per year)

Units

sol

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0

20

40

60

80

100(%)

Shar

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Units soldShare

Sales of Welcab Vehicles and Market Share in the Specially Equipped Compact Car Market

Welcab

Caregiverassisted type

Can accommodatea wheelchair

No wheelchairuse

Can remainin wheelchair

Wheelchairadapted model

Special vehicles forFriendmatic installation

Friendmatic vehicles

Shift to seat

(Fully automatic)Rotating and Sliding

Passenger Seat modelRotating and Sliding

Rear Seat modelLift-up Front

Passenger Seat model

Side-access model

Side Lift-up Seat model

Seat rotatesand movesvertically

Seat rotatesand slides

Self-operatedtype

Welcab Types

Ractis Welcab wheelchair-adapted model (Ramp Type)


Special Story

The initial design featured a lower rear end to make it more appealing to younger customers, but the design was changed to incorporate Welcab specifi cations and allow a wheelchair to be easily put in. Looking back at that time, Executive Chief Engineer Hideyuki Iwata of the Product Development Group explains, “As the result of numerous discussions at the offi ce, this was the fi rst time that we modifi ed an original package to suit Welcab specifi cations.”

Satisfying the Needs of More CustomersThere are four issues that must be addressed to enable

Welcab vehicles to satisfy the needs of ever more customers.1) Reducing costs is a major issue. Selling products at prices

that customers fi nd affordable will expand demand and help generate a virtuous cycle to further reduce costs. Until now completely built vehicles were transported to a different plant where the fl oors were modifi ed and reassembly was performed for conversion to Welcab vehicles. The Ractis Welcab, however, is manufactured on the same production line as that of other base vehicles, greatly reducing production time and costs.

2) Opportunities to come in contact with Welcab vehicles must be increased. In addition to sales at the nine Toyota Heartful Plazas, starting in June 2006, the number of Welcab vehicles available at Toyota Rental/Lease dealers will be increased fi vefold to 800 units. This will facilitate the use of Welcab vehicles by people who require them.

3) Toyota has expanded the scope from Japan to include other countries as well. For instance, the Sienna Welcab Lift-up Seat model has been available in North America for the past two years. Sales will be expanded to Europe, and plans call for worldwide sales of vehicles equipped with Side Lift-up Seats in the future.

4) Expanding the use of self-operated models is also an important issue. There are many self-operated models in the U.S. and Europe, but they are still uncommon in Japan. One of Toyota’s strengths lies in the in-house development and

production of vehicles. When developing a self-operated model, the design must be fully integrated, taking into consideration self-operation starting with the chassis development and extending to making manually operated controls electronic. Toyota considers its ability for in-house development to be a tremendous advantage in the development of self-operated Welcab models.

Toyota Rental/Lease dealers website: http://rent.toyota.co.jp/contents/welcab_top.asp (Japanese only)

Toyota Heartful Plazas Serve as Welcab General Display Spaces for Vehicle Viewing, Driving, Testing, and Consultations In Focus

The importance of being able to view, sit in, and test vehicles, as well as consult with expert sales staff is particularly signifi cant in the case of Welcabs. Wheelchairs come in a wide variety of sizes, and it is necessary to test whether a particular wheelchair can be used in a particular vehicle. The necessary functions vary for customers who, for example, cannot bend their knees or who experience pain in their ankles.

The nine Toyota Heartful Plazas established in Sapporo, Sendai, Chiba, Chiba Chuo, Tokyo, Nagoya, Kobe, Hiroshima, and Fukuoka are permanent Welcab display spaces that meet these needs. Each site has 10 to 20 vehicles on permanent display, and dedicated staff are on hand to consult on the right choice of vehicle for each customer and on customization.

According to Chief Manager Tomotsugu Kawai of the Toyota Heartful Plaza Tokyo, “There are those customers who have already narrowed down the type of vehicle and functions that they want and those who haven’t. We explain the functions for about two hours and then have the customer test them. Functions have improved drastically over the past several years, and many customers are quite surprised. Most customers are satisfi ed, but there are also cases where the customer is unable to fi nd a particular desired function or their wheelchair won’t fi t, so I believe we have to expand the

product lineup even further.”One customer, who came all the way from Fukushima to

the Heartful Plaza in Tokyo commented, “I was able to actually test the vehicle and make sure it suited me. It was a long trip, but I’m glad I made it.”

Detailed information is also provided via the Internet. The “Welsearch” function allows customers to view the vehicles on display, enabling them to study the vehicle series they want even before coming to a Heartful Plaza.

Heartful Plaza site: http://toyota.jp/heartful/ (Japanese only)

Welsearch site: http://toyota.jp/welcab/search/ (Japanese only)

Sienna Welcab Lift-up Seat model

Toyota Heartful Plaza Tokyo


Participating in “Team Minus 6%” — national campaign to help prevent global warming

Toyota participated in “Team Minus 6%” — a national campaign to help prevent global warming and is making further efforts to reduce CO2 emissions by ensuring that the air-conditioning temperature is set to 28°C and encouraging employees to wear light clothes in summer, etc.

Company Outline

Head Office: 1, Toyota-cho, Toyota City, Aichi Prefecture, Japan 471-8571 TEL: +81-565-28-2121

Tokyo Office: 4-18, Koraku 1-chome, Bunkyo-ku, Tokyo, Japan 112-8701 TEL: +81-3-3817-7111

Nagoya Office: 23-22, Izumi 1-chome, Higashi-ku, Nagoya, Aichi Prefecture TEL: +81-52-952-2111

Name TOYOTA MOTOR CORPORATION

Date of establishment August 28, 1937

Principal operations Manufacturing and sales of automobiles and housing

Capital 397.0 billion yen

Number of shareholders 357,948

Total number of shares issued 3,609,997,000

Stock exchanges on which the shares are listed Japan: Tokyo, Nagoya, Osaka, Fukuoka and Sapporo Stock Exchanges Overseas: New York and London Stock Exchanges

Major production bases in JapanAutomobile: Honsha Plant, Motomachi Plant, Kamigo Plant, Takaoka Plant, Miyoshi Plant,

Tsutsumi Plant, Myochi Plant, Shimoyama Plant, Kinuura Plant, Tahara Plant, Teiho Plant, Hirose Plant

Housing: Kasugai Housing Works, Tochigi Housing Works, Yamanashi Housing WorksOther: Higashi-Fuji Technical Center

Independent ReportTo improve accuracy and objectivity of the Sustainability Report 2006, the quantitative information in this report concerning Toyota’s environmental activities has undergone a third-party review conducted by Tohmatsu Environmental Research Institute Ltd, a member firm of Deloitte Touche Tohmatsu.The procedure for the third-party review is: (1) Review plan development; (2) Review execution; (3) Review reporting; and (4) Final version report check and Independent report submission.

http://www.teri.tohmatsu.co.jp

*Capital and number of shareholders are as of the end of March 2006. Capital less than 0.1 billion yen is omitted.

(TRANSLATION)

Independent Review ReportJune 22, 2006

Mr. Katsuaki Watanabe, President, Toyota Motor Corporation

Tohmatsu Environmental Research Institute Ltd.Chief Executive Officer Komuro, Masamitsu

Executive Officer and Lead Auditor authorized under the JEMAI AE100 Mase, Mizuko

1. Subject and Objective of ReviewWe have performed a review of certain quantitative environmental information stated in the “Sustainability Report 2006” prepared by Toyota Motor Corporation (“Company”). The purpose of our review was to provide conclusions from an independent standpoint about whether such information in the “Sustainability Report 2006” was accurately measured and calculated in accordance with calculation methods, etc. adopted by the Company.

2. Responsibility of Management and Persons Reviewing the “Sustainability Report 2006”The “Sustainability Report 2006” is the responsibility of the Company’s management. Our responsibility is to provide our conclusions with respect to the “Sustainability Report 2006” from an independent standpoint.

3. Summary of Review To obtain an adequate and valid standard of basis for providing limited assurance with respect to our provided conclusions, we performed our review with reference to the International Standard on Assurance Engagements (ISAE) 3000 (issued by the International Federation of Accountants in December 2003), Proposed Environmental Report Review Standard (issued by the Japanese Ministry of Environment in March 2004) and Environmental Information Review Practices Guidance (issued by The Japanese Association of Assurance Organizations for Environmental Information in January 2006).

4. ConclusionsWith respect to the quantitative environmental information stated in the “Sustainability Report 2006”, our review did not identify items which were acknowledged to not be accurately measured or calculated in accordance with calculation methods, etc. adopted by the Company.

5. Special InterestsThere are no interests between the Company and Tohmatsu Environmental Research Institute Ltd. or its engagement personnel, requiring disclosure based on the rules of The Japanese Association of Assurance Organizations for Environmental Information.

EA-0608

Editing, Plate making This report is compiled using the Computer to Plate (CTP) system, resulting in the total elimination of film, an intermediate material, during the plate making process. Printing For the printing, no alkaline developing solutions or acid fixing solutions are used during the plate development and damping water containing elements such as isopropyl alcohol is not used in ink transfer; instead, a waterless process is employed.Paper: The paper used in the report consists of 60% post-consumer recycled paper and element chlorine free (ECF) paper made from 10% thinned wood pulp, which contributes to the health of forests, and 30% pulp derived from wood from Forest Stewardship Council (FSC) approved forests and from wood off-cuts. The paper has a brightness level of approximately 70% and no difficult to recycle special coatings are used.Ink: VOC (volatile organic compound) free ink is used, in which petroleum-based solvents are completely replaced by vegetable oil based solvents, principally soybean oil. Processing The adhesive for the binding is a polyurethane-type adhesive that is easy to separate and remove for paper recycling. Also, 19.3% of the blank sheets generated from sheet cutting during processing for this report is sent to a paper manufacturing company, and this is used as raw material for recycled paper.

This report utilizes materials (paper, ink, plate and adhesives) that were produced by ISO 14001 certified companies and plants. The editing and printing was also done by an ISO 14001 certified company.

Published by: TOYOTA MOTOR CORPORATION Environmental Affairs Division TEL: +81-3-5800-7274 FAX: +81-3-3817-9035Published: August 2006 (based on Japanese version issued in July 2006)Next scheduled report: Autumn 2007

http://www.toyota.co.jp/SR/en06repo/

You can download this report in PDF format from the Toyota website.

60% post-consumer recycled paper with a 70% brightness level

sustainability report 2006 a new future for people, society and the

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