toyota south africa motors sustainability report … sr16_proof 06.pdf · toyota south africa...

ToyoTa SouTh africa MoTorS

SuStainability RepoRt 2016/17

Challenge 2050

aboutthis reportToyota South Africa Motors is proud to share this sustainability report, covering the period of our 2017 financial year, which is 1 April 2016 – 31 March 2017 (hereafter referred to as ‘2016’). A deep focus on sustainability is core to the way Toyota does business. We measure success not only by our financial results, but in how we impact and contribute to the sustainable development of our society and our Earth.

This report is intended to be a transparent, candid and relevant summary of our social, environmental and governance performance during this period, detailing our successes and our challenges as well as our future targets, plans and ambitions. In compiling this report, we have drawn on international best practice

by following the reporting guidelines established by the Global Reporting Initiative (GRI).

At TSAM, we are guided by the global sustainability vision and strategy of Toyota Motor Corporation, our shareholder. This year, we have aligned our sustainability report with the TMC Sustainable Management Report in both structure and content. Should you wish to read further about how Toyota embraces sustainability globally, we encourage you to view the Sustainable Management Report 2016, available at http://www.toyota-global.com/investors/ir_library/annual/

This report focuses on TSAM’s operations, covering the Toyota, Lexus and Hino brands. Because

the impact of our activities extends beyond our offices and production plants, we also discuss our relationships with key internal and external stakeholders, including our employees, dealers, suppliers and the communities in which we operate. There were no significant changes during the reporting period to the size, structure or ownership of TSAM.

This report is available in print and online at www.toyota.co.za

Any questions or comments regarding this report should be directed to:

Charmaine Reddy Company Secretary and Legal Adviser [email protected]

toyota south afriCa motors | sustainability report 2016/17 | 1

contents

society

22environment

58governance

74Customer and quality first .................. 24

Collaboration with business partners ....... 30

Employees ................... 38

Social contribution activities ...................... 52

Emissions reduction ... 61

Resource efficiency ..... 65

Society in harmony with nature .................. 68

Approach and structures ..................... 76

Ethics ............................ 79

Risk management ....... 80

Toyota’s Global Vision ....................................................................................... 2

Chief Executive Officer’s message .....................................................................5

An introduction to TSAM .................................................................................. 8

Our brands ..................................................................................................... 11

Stakeholder engagement ................................................................................ 18

Our material issues ......................................................................................... 20

Performance summary ................................................................................... 72

2 | toyota south afriCa motors | sustainability report 2016/17

Toyota’sGlobal Vision

Toyota’s Global Vision articulates the kind of company that Toyota wants to be and the kind of values it should convey, which should be embraced throughout Toyota.

Toyota’s Vision is to strive to implement a positive cycle of making ever-better cars that exceed customer expectations, contributing to enriching the lives in communities, and being rewarded with the smile of customers and communities. This, in turn,

leads to a stable business base. Our aim is to generate such virtuous cycles and achieve sustainable growth.

We aim to lead the way into the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile.

the two pillars and Five Keywords of the toyota Way

Continuous Improvement

Respect for People

Challenge

Kaizen*

Respect

Genchi Genbutsu**

Teamwork

* Improvement** On-site Hands-on Experience

Guiding principles at toyota

toy

ota

Way

200

1

toy

ota

Cod

e of

Con

du

ctCSR Policy: Contribution towards

Sustainable Development

Toyota Global Vision

Medium- to long-term management plan

Annual directions: global corporate direction

Regular business activities


Toyota’s Olympic visionin 2015, toyota became a top 10 olympic Partner to

the international olympic Committee (ioC) and a Worldwide Paralympic Partner to the international Paralympic Committee

(iPC). in 2016, the company was excited to announce that toyota has also become a founding partner of the olympic channel. We are looking forward to the opportunities this global partnership will offer

tsam locally. the agreements are valid until 2024.

toyota believes that the olympic and Paralympic Games draw out and enrich people, centring on the power of sports, and toyota is immensely excited to be involved in creating increased sustainable mobility value as

an olympic partner.

toyota has put forth three slogans that encapsulate its vision during this sponsorship:

– ever better mobility for all – – ever better society – – ever better Toyota –

Guiding Principles at Toyota

CSR Policy


Toyota Way 2011

Toyota Code of Conduct


Andrew Kirby President and CEOToyota South Africa Motors


chief executive officer’s messageThis report recognises more than 55 years of sustainability at Toyota South Africa Motors (TSAM). What started as a small family business in 1961 has blossomed to become SA’s most successful automaker, evidenced by solid environmental governance and responsible growth to entrench TSAM’s position as the country’s market leader for the 37th consecutive year.

It’s worth noting that this was achieved against a decidedly depressed economic backdrop. The slowdown in the domestic economy, above-average new

vehicle inflationary pressures, increases in interest rates, pressure on consumers’ and household disposable income and low levels of consumer confidence contributed to an overall double-digit decline in annual domestic sales volumes. Aggregate sales during 2016 fell by 11.4% in volume terms to 547 442 units compared to the sales total of 617 648 in 2015. Toyota notched up 117 071 unit sales across the brands (Toyota, Lexus and Hino), to realise a market share of 21.38%.

A report from the National Association of Automobile Manufacturers of South Africa (NAAMSA) summarises

the country’s sales performance as follows: “South African vehicles sales ended 2016 on a weak note with figures for December 2016 at 41 639 units, recording a decline of 7 519 vehicles or a fall of 15.3% compared to the same period in 2015.” According to the association, sales of new passenger cars and light commercial vehicles (LCV) reflected a year-on-year drop of 14% and 17.8%, respectively.

As shown in the table below, aggregate sales during 2016 fell by 11.4% in volume terms to 547 442 units compared to the sales total of 617 648 in 2015:

Sector 2010 2011 2012 2013 2014 2015 2016 2016/2015 % change

Cars 337 130 396 292 442 604 450 296 438 942 412 478 361 273 (12.4)

Light Commercials 133 756 149 301 160 174 167 996 173 759 174 701 159 128 (8.9)

Medium Commercials 7 557 9 218 10 104 11 584 11 024 10 394 8 447 (18.7)

Heavy Trucks, Buses 14 464 17 438 17 737 19 340 20 534 20 075 18 594 (7.4)

Total Vehicles 492 907 572 249 630 619 649 216 644 259 617 648 547 442 (11.4)

Source: Lightstone Auto, NAAMSA


Chief exeCutive offiCer’s messaGe (continued)

From a global perspective, TSAM’s total of 117 071 unit sales achieved in 2016 placed the group 14th compared with other Toyota markets around the world – ahead of the United Arab Emirates. While there has been a notable lack of appetite for new vehicles on the continent, TSAM bucked the trend, staking a 4.2% increase of the total sales in Africa.

While we remain the largest and most dominant vehicle exporter in Africa, it should be noted that the market has dropped dramatically over the past few years due in part to macroeconomic challenges, including forex supply restrictions, commodity prices, market stagnation, government policy changes and regulatory challenges. It is also no secret that, locally, we are operating under a difficult and challenging economic climate: the South African GDP, consumer confidence and the employment rate are all in a slow, but steady decline.

As an automotive manufacturer, we keep an eye on GDP growth, because traditionally it needs to grow by more than 1% for the automotive sector to remain stagnant. We would need a GDP growth of 2% or 3% if we want any significant and sustainable growth in the market. However, Toyota tends to do well in tough markets as customers turn to well-established and reliable brands. Despite the overall decline in volumes, we have experienced a six-year period of continuous market share growth at TSAM.

Our success as a business is primarily dependent on customer satisfaction, and we value their unwavering support through the decades that Toyota has been marketed in South Africa. We are both proud and humbled that Hilux and

Fortuner remain the country’s most loved model and best-selling SUV, respectively. This is an indication that our dealer programmes are yielding good results and that our synergies with dealerships are also improving. Dealer Satisfaction Index (DSI) results have increased from 71.6% in 2015 to 78.1% in 2016.

The National Automobile Dealers’ Association (NADA) awards have become a calendar event that we all look forward to. Once again, TSAM performed supremely in the 2017 NADA satisfaction index, with our truck brand Hino coming top in the Commercial category with a Platinum award (a newly created category for a score of over 85%). Hino achieved 85.4%, increasing their score by 1.8% from 2016 and moved into the number one position in the Commercial category. Toyota achieved Gold status for the second consecutive year in the Passenger and LCV category. The Gold award indicates a score of between 75% and 85%, with Toyota achieving 81.8% – which is well above the 2017 industry average of 72.9%. Our luxury brand Lexus achieved a Silver award, delivering a score of above 70%.

Despite these achievements, we cannot rest on our laurels. It is for that reason that Toyota Motor Corporation (TMC) launched a global campaign, aptly named Toyota ReBorn, in 2017 (announced in 2016). In a nutshell, the campaign encourages each TMC affiliate to tailor-make their business practices to match consumer needs. Although our local Toyota ReBorn strategy hinges on developing sound leadership, appreciating the voice of our customers and striving to make each Toyota dealership the best in town, the key objectives are to increase our level of global

“our success as a business is primarily dependent

on customer satisfaction, and we value their unwavering

support through the decades that toyota has been

marketed in south africa.”


competitiveness, to become the most loved brand and to create a healthy and inclusive environment. One of the tangible targets is growing our customer retention from 47% to 70% between 2017 and 2021.

Our Manufacturing division is as much a part of this campaign as any division. At the core of these ReBorn initiatives is the call to put the customer first, and the voice of the customer is not only important for sales and marketing, but for manufacturing as well. TSAM’s manufacturing will be more involved with customers through fleet owners and dealer council members. The strategy will focus on flexibility of supply, affordability of product and quality of service.

Manufacturing in the automotive industry is undeniably one of South Africa’s most fascinating success stories. It remains both challenging and gratifying. The MIDP and APDP programmes have firmly established South Africa as a notable vehicle exporter and part of the global automotive supply chain. The new industrial revolution predicts a much higher level of automation and the use of technology, like robotics, in manufacturing. The big challenge is that we need to compete with other vehicle manufacturing countries that automate at much higher levels, that

are closer to their destination markets and are subsequently more cost competitive.

In South Africa, we need to strike a delicate balance between automation and keeping our people employed. TSAM also sees itself as an active citizen of the country, and has – for that reason – been actively promoting transformation among its suppliers, internally and throughout its dealer network. We have therefore invested R42 million into the creation of the Toyota Empowerment Trust (TET). The funds will be used to promote skills and enterprise development initiatives in the automotive industry.

We have already started with the creation of a fully-equipped robotics and automation training facility in Durban, KwaZulu-Natal. This facility will train technicians in the maintenance of complex manufacturing equipment, such as welding and spray painting robots. In addition to the training, the TET will eventually be able to support qualified technicians to start their own maintenance firms and offer this highly sought-after specialist service to Toyota and other vehicle manufacturers.

Prior to the official kickoff of TET in 2018, TSAM had already made significant inroads in securing the jobs of many South Africans. For example, we are incubating 17 suppliers, of which 10 are wholly black-owned; we are grooming over 2 654 trainees,

apprentices and graduates, of whom 85% are African and we are in the process of increasing the number of black dealer principals and the number of black-owned dealerships.

Transformation aside, we also remain fully committed to our Toyota Environmental Challenge 2050 (an initiative to consider the world 20 or 30 years into the future) in order to remain closely aligned with the global environment. Locally, there is a concerted effort to minimise and optimise water usage in all our operations, to strive for zero carbon emissions in our processes and, of course, reduce our wasting by encouraging recycling of materials instead of dumping. Moreover, our environmental initiatives are also geared towards ensuring that the Toyota brand lives in harmony with nature by making a positive impact on society. We have programmes that are focused on assisting NGOs foster better relations and promoting conservation of wildlife and fauna.

The other great news – which you are probably already aware of – is that we are now be the official Worldwide Olympic and Paralympic Mobility Partner. The partnership offers Toyota more than just exposure, but also gives us an opportunity to pay back to society. Among many benefits, the partnership will boost our marketing initiatives and provide a platform to leverage the Toyota values. The partnership will run until 2024.

Finally, I would like to sincerely thank my colleagues, suppliers, dealers and customers for their unwavering support in 2016. We are truly grateful to the individuals and businesses who remain loyal to the Toyota, Lexus and Hino brands – they keep us going.


an introductionto TSAMOur structure, business model and geographic footprint

TSAM was established in 1961 by Albert Wessels and, since then, has grown to represent the best of South African automotive manufacturing. TSAM is the largest vehicle manufacturer in Africa, the largest vehicle exporter in South Africa and the biggest investor in the automotive sector in the country.

TSAM is owned by a holding company, Toyota South Africa, which is in turn wholly owned by TMC. The company creates value in the form of manufacturing, importing and distributing passenger and light, medium and heavy commercial vehicles, together with their components and aftermarket parts and accessories.

Our marketing and sales functions are conducted from our headquarters in Sandton, Johannesburg, and our after-sales parts are distributed through our parts warehouse in Boksburg, in Johannesburg.

Our Toyota and Hino manufacturing and assembly operations are situated at out Prospecton plant, outside of Durban.

Five Toyota models (Hilux, Fortuner, Ses’fikile, Corolla and Corolla Quest) are manufactured and four Hino model ranges (Dyna, 300, 500 and 700-series) are assembled at our plant in Prospecton. We import an additional 22 models from other Toyota affiliates around the world. We also import all of our Lexus vehicles, which are manufactured in Toyota plants in Japan and North America.

Levels of vehicle assembly• Acompletelybuiltunit(CBU)

is a vehicle that is imported entirely intact. All of our Lexus models, and many of our Toyota models sold in South Africa are produced this way.

• Acompleteknockdown(CKD) vehicle is assembled entirely on-site from individual components. Our Corolla, Hilux, Fortuner and Quantum models are assembled at the Prospecton plant this way.

• Asemi-knock-down(SKD)assembly produces vehicles from partially assembled kits. The Hino and Dyna models are produced in this manner.


We serve the South African market and we export vehicles to 72 countries throughout Africa, Europe and Latin America. Regionally, our vehicles are distributed through our network of independently owned and run dealerships (see page 34 for more detail) and we export our locally produced vehicles according to orders placed by TMC and other TMC affiliates.

6 927 employees

Over 50 major component manufacturers

276 dealers

17 Lexus

194 Toyota

65 HinoSouth Africa

Parts Suppliers Manufacturing Sales Business Dealer Network Customers

vehicle Cost

import Duty

Parts CostParts volume market share

CKD mix

Production volumeEXPORTS

CKD

CBu mix


our brandsOur three vehicle brands – Toyota, Lexus and Hino – position TSAM to meet the needs of a large portion of southern Africa’s passenger and commercial vehicle markets. Our 31 models range from entry-level passenger vehicles to luxury passenger cars and large commercial vehicles.

Low emissions and safety are key priorities for all the vehicles we sell, and all of our vehicles have solid reputations for reliability and quality. We believe that this comes from our deep respect for people and commitment to the Japanese concept of Kaizen – continuous improvement. This is The Toyota Way, and it is reflected in our strong sales records across all our brands.

tsaM sales (units)2017

target2016

target2016

actual 2015 2014

Total production volume: Toyota, Lexus and Hino 132 230 115 140 119 585 117 708 125 395

Total domestic sales: Toyota, Lexus and Hino 126 900 114 200 117 071 119 014 127 534

Passenger car sales: Toyota and Lexus 123 050 110 540 113 525 63 911 67 997

Exports 41 664 56 523 53 322 45 041 64 789

tsaM MarKet sHare (%)2017

target2016

target2016

actual 2015 2014

Total domestic: Toyota, Lexus and Hino 22.80 20.80 21.40 19.77 19.80

Passenger cars: Toyota and Lexus 18.50 14.90 16.40 15.85 15.60

Light commercial vehicles: Toyota 30.30 32.00 29.40 30.22 31.50

Medium commercial vehicles: Hino 20.70 26.70 25.26 24.79 21.75

Heavy commercial vehicles: Hino 7.44 8.39 7.25 7.86 7.90

Mobility is an important factor in economic empowerment in South Africa and we are proud to offer vehicles across a range of classes, enabling access to transport for customers in many price points, including entry-level. We set market-related selling prices in line with quarterly price revisions and for model changes and introductions. We leave our dealers to set their transaction prices taking into account, for example, any discounts and finance deals they may be offering. However, the price that is published is our retail selling price.

We strive to keep our vehicles affordable to as many customers as possible, however, pricing is impacted by many factors such as exchange rates and import/export taxes. Fluctuations in these factors can impact our prices both negatively and positively, and 2016 was a particularly difficult year in this regard. Nonetheless, in 2016, the average price increase for most Toyota and Lexus models remained below inflation.


our brands

ToyotaSince we launched in South Africa in 1961, Toyota has grown to become an integral feature of the country’s social and business culture. The Toyota brand spans a wide array of models, offering a vehicle for nearly every requirement and taste. From the rugged Hilux to the economical Aygo, our vehicles meet the needs of a diverse nation.

In May 2016, we launched the new Hilux and Fortuner models at our newly expanded Prospecton plant. The new facility was financed through a R6.1 billion injection from TMC, the company’s biggest investment in South Africa to date.

86 auris avanza aygo

Corolla Corolla Quest etios fJ Cruiser

fortuner Land Cruiser 200 Land Cruiser Prado Prius

rav4 yaris

hilux Land Cruiser 79 series Quantum ses’fikile

Model range: Passenger

Light Commercial Vehicles (LCV)


toyota sales (units)2017

target2016

target2016

actual 2015 2014

Production volume 112 973 111 418 116 042 113 854 145 209

Domestic sales 123 800 111 000 114 019 119 367 122 385

Light commercial vehicle sales 36 480 38 920 36 609 51 132 55 693

Exports 41 664 56 523 53 322 45 041 64 789

As part of TSAM’s ReBorn strategy, we are moving to focus on the vehicle demands of younger consumers. Millennials are a growing segment of the market that represents a number of opportunities for Toyota, but they take a different, more digitally centred approach to buying cars than our traditional customers, and look for different requirements in their vehicles.

The launch of our new CHR model – a SUV crossover vehicle – in February 2017 was very well received, with the newcomer selling over 400 units in its debut month. This year, we also launched various changes to the Etios that both improved the model’s safety and changed the aesthetic to appeal to more youthful customers. (See page 25 for more information on how we are adapting to our customer’s evolving needs.) In July 2017, we launched the new Aygo semi-convertible, which builds on the already characterful and expressive nature of the city runabout, and we are looking forward to seeing how this new model performs.

The sales of both the Hilux and the Fortuner were lower than in 2015/16 but Toyota’s market share grew by 2% during 2016. The Hilux remained the best-selling LCV in South Africa for the 37th year and many other Toyota models, including the Fortuner, Corolla, Quantum and RAV4, were the top-selling vehicles in their respective classes.

Toyota performed particularly well at the 2016 National Automobile Dealers’ Association (NADA) Dealer Satisfaction Index Awards. In the Passenger/Light commercial category, Toyota’s score increased by 2.7% to an overall score of 83.2% in 2016, narrowly missing the number one position by only 0.3%.


our brands

LexusLexus – Toyota’s premium brand – is a name globally synonymous with performance, style and comfort. Launched in the US in 1989, today Lexus vehicles are sold in over 70 countries around the world, including South Africa. Our vision is for all of our customers to experience amazing.

The Lexus brand is underpinned by a unique customer care philosophy, Omotenashi (Japanese for ‘hospitality’). In line with this philosophy, Lexus delivers world-class luxury with exceptional service, treating Lexus customers as guests; paying them one-to-one attention and meeting their personal needs. This philosophy continues to strike a strong chord among Lexus owners in South Africa and their loyalty remains strong.

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LC

es Gs is

Ls Lx rC

rx

Model range


leXus sales (units)2017

target2016

target2016

actual 2015 2014


Domestic sales 1 250 1 089 1 031 1 027 1 344

*YTD

Our Lexus models maintained sales volumes in 2016, despite a shrinking premium car market, leading to an increased market share of 1.8% (2015/16: 1.3%). We were particularly proud of this, given that adverse economic conditions tend to have a disproportionately large negative effect on premium car sales. However, economic turbulence has put substantial pressure on our pricing.

This year, having reviewed our customer experience strategy, we took a deliberate approach to improving our customer satisfaction scores and on driving this philosophy through our dealer network. This renewed strategy has shown excellent results, and the Lexus brand’s competitive customer experience (CCE) score has increased, rising from an overall score of 92.1% to 92.3% due to service scores moving from 90.5% to 91.1% and Sales moving from 93.6% to 93.5%. See page 25 for more detail.

In September 2016, we launched Lexus FutureDrive, an innovative finance model with flexible finance terms, which assures customers of the future value of their Lexus. This future value, backed by Lexus Financial Services, is guaranteed in the form of a fixed balloon payment at the end of the finance term and does not change (provided that the vehicle remains in a good condition). Unfortunately, due to market conditions, the product did not achieve the results we had hoped for. However, we believe that the product itself is a solid proposition, and we are working to make it more attractive.

Post year-end, we launched the new LC500 coupé and later in 2017, we expect to unveil our new, roomier seven-seater RX model.

Lexus shines in J.D. Power’s annual awards2016 was the sixth consecutive year that Lexus topped the Vehicle Dependability Study, with the fewest problems per 100 vehicles after three years.

Toyota models received 10 of the 18 segment awards, representing the highest number of awards ever received by an individual corporation in the study.

The awardees were: Lexus ES; Lexus GS; Lexus RX; Toyota Avalon; Toyota Camry; Toyota FJ Cruiser; Toyota Prius; Toyota Prius v; Toyota Sienna; and Toyota Venza. The Toyota Camry had the lowest PP100 score industry-wide.

In the 2016 Initial Quality Study, which examines problems experienced by vehicle owners during the first 90 days of ownership, Lexus CT won best small premium car and Lexus GS won the best mid-size premium car. The Toyota Corolla was also ranked highest in its segment.


our brands

HinoFor over four decades, Hino South Africa, TSAM’s commercial vehicle brand, has been supplying South African businesses with medium and heavy commercial trucks. Hino’s vision is to be the preferred provider of products and services to professional truck users and freight operators in the southern African transport and logistics industry.

Hino offers a complete range of trucks. We also offer a full range of buses from 25 to 65 seaters. Sales were down marginally in 2016 due to economic constrictions, although they were above target. Our market share also declined, and fell below target; however, this was due to the Dyna range being reclassified from a medium commercial vehicle to a light commercial vehicle.

For business owners, a stationary truck means lost revenue. All of our vehicles are therefore built to the highest standard, ensuring that they can withstand the most challenging conditions. As part of Hino’s Total Support philosophy, we offer our customers a range of complementary support services through the Hino Care Programme. Our priority is on minimising downtime and, in doing so, maximising customer revenues. We also monitor all trucks that are off-road (i.e. not operational) on a daily basis.

hino 300

hino 500

hino 700

Model range: Medium

commercial vehicles (MCV)

Heavy

commercial vehicles (HCV)

“south african businesses in

every sector rely on the quality, durability and reliability of

Hino to get the job done right, the first time, every time.”


In continuing to focus on prioritising service excellence, in 2016, we introduced a number of additional value-add products to the Hino Care Programme (see page 28 for more detail). We have also continued to drive our ‘Bring It Back’ campaign, which offers vehicle owners various incentives to bring their trucks in for servicing. This attracts extra servicing customers to our countrywide dealer network. It is also making a positive contribution to road safety through encouraging any repairs required for a Hino to pass the annual Certificate of Fitness (COF) to be carried out at a franchised workshop.

Hino’s Total Support offerings are clearly delivering strong results, improving the experience of both dealers and customers. In 2016, Hino again won a gold award at the National Automobile Dealers’ Association (NADA) Dealer Satisfaction Index Awards (see page 34). In addition, the brand’s competitive customer experience (CCE) ranking remained at number one, while its Toyota Financial

Services share increased to 25%. Hino parts sales also increased significantly.

During 2016, Hino added an additional model to the 500 range, and now offers its customers the choice of single or double rear wheels on its 1322 four-wheel-drive model. This followed requests from operators for such an option to meet a variety of off-road applications. The new model improves the truck’s off-road handling capabilities and makes for more efficient operation in sandy conditions, as well as offering improved fuel consumption.

An important highlight of 2016 was that the Dyna can now be driven with an ordinary driver’s licence. This has opened up a big new market.

Another exciting development was the launch of the new Hino body builders’ evaluation system to ensure system-driven compliance with TSAM standards. Hino has begun to assess various suppliers and body builders, which are nominated by dealers, according to a strict set of criteria.

This evaluation is reviewed on an annual basis. Those suppliers that meet or exceed all the standards are awarded ‘Preferred Body Builder’ status by Hino, and the list of preferred suppliers is made available to all our dealers. The programme is delivering positive results: to date, we have had no post-sale issues from those body builders.

Looking forward, Hino is planning more service campaigns and to expand its product range, especially in the medium commercial vehicle segment. Most immediately, we plan to replace the current Hino 500 range, which will start to happen towards the end of 2017. This will enable Hino to increase its market share in the heavy commercial vehicle segment. This replacement will bring challenges, for example, we will assist our dealers in increasing their service capacity and capabilities for bigger trucks. We have begun prepping both ourselves and our dealers for this new stage in the Hino story.

Hino sales (units)2017

target2016

target2016

actual 2015 2014


Domestic sales 3 650 3 360 3 572 3 971 3 960

Medium commercial vehicle sales 1 760 2 280 2 112 2 425 2 322

Heavy commercial vehicle sales 1 340 1 380 1 367 1 546 1 638


stakeholderengagementTSAM views its stakeholders as partners, and as such communicates regularly and thoroughly with them. Toyota is renowned for its Obeya (large room) style of engaging with all of its stakeholders, which promotes an intensely collaborative approach to doing business and solving problems.

CustomersToyota’s ReBorn strategy places the customer at the centre of everything we do. Better understanding the needs of our customers helps us to understand and respond to new trends, improve our reputation and trust among our customers, and better ensure customer satisfaction.

TSAM engages with current and potential customers through various touchpoints, including:

• Toyota Customer Contact Centre, a central response and touchpoint for managing all customer concerns raised via phone, e-mail and social media

• Social media, including Facebook, Twitter and Instagram

• Post-service Experience, a unique TSAM dealer communication tool that gathers data on customers’ overall service experiences at the dealership after services or repairs. It helps dealers identify and resolve customer concerns in the shortest possible time

• My Toyota, a mobile app designed by TSAM that gives owners and enthusiasts fast, direct access to all

information and services related to their vehicle.

EmployeesEngagement with our employees is critical to our ability to create a collaborative and transparent company culture. Our employees are also our most valuable asset and are ambassadors for our brand; it is therefore essential that we take their recommendations under careful consideration.

Our ultimate aim is to produce vehicles that consistently exceed customer expectations. Achieving this starts with maintaining continuous dialogue with our people through selected channels, including monthly Green Area meetings where employees are encouraged to raise issues in an open environment; the My Toyota, My Future employee survey and daily meetings, as well as through regular electronic communications, and training and awareness initiatives. We are also working to build more two-way digital platforms to communicate with our employees.

Environmental matters are communicated internally with all

employees through various means. Digital screens in communal areas and posters in production areas and offices share the latest messaging. E-mails on specific topics are shared monthly. ‘Enviro Month’, held in June each year, is an opportunity to focus attention on the environment.

Suppliers and dealersOur suppliers and dealers are critical to our ability to meet customer requirements, and to build and maintain our competitive advantage. Engaging with them helps TSAM to manage its supply chain requirements, improves the overall quality of our vehicles and our post-sales servicing, and ensures that our entire value chain reflects TSAM’s high standards of ethical behaviour.

The key areas of concern for both our suppliers and our dealers tend to include the state of the South African economy, as well as price and margin fluctuations, reducing volumes and local competitiveness. We respond to their concerns through regular face-to-face engagement and written correspondence. We also ensure that we recognise and reward good


suppliers and good dealers, and maintain our relationships with them through these positive engagements and awards.

Engagement with our suppliers is conducted through formal and informal mechanisms such as service level agreements, audits and our bimonthly supplier meetings. We also conduct monthly supplier site visits and we invite suppliers to TSAM’s facilities to observe and learn Toyota best practice.

We engage our suppliers at the TSAM Annual Business Meeting and Supplier Awards. In April 2017, over 200 suppliers attended our 36th event, which covered topics such as the market, Toyota products, localisation and transformation, manufacturing and ReBorn activities, flexibility of supply and affordability of product, quality of service, and parts and supplier development.

Ordinarily our Purchasing Department is the first point of contact between our suppliers and TSAM. It also controls cost levels and the suppliers’ competitiveness. Our Logistics Department engages suppliers to ensure the incoming parts supply chain supports production. Their remit also covers the domestic and international logistics processes that deliver vehicles to their final customer.

Our partnership with our dealers is a critical part of our business. An immense amount of effort is put in to ensure our relationship with the dealers is solid. Our shared value system ensures we are constantly communicating and continuously improving. For example, Hino conducts a weekly fleet and dealer Obeya, which keeps Hino apprised of dealer operations and allows dealers to learn from one another and spread best practice.

Government and regulatory bodiesOur engagement with government and regulatory bodies helps the group to anticipate, influence and plan for policy and legislation decisions and maintain legal compliance.

The government’s key concerns in its engagements with TSAM are the future of the automobile industry in South Africa and the competitiveness of local products, as well as ensuring alignment with government initiatives and priorities, including transformation and BBBEE credentials. We therefore attend and participate in various government and industry forums, events, summits and associations and working groups, and ensure that we are regular and compliant in our submission of regulatory material such as employment equity information and in our payment of taxes.

TSAM’s new external affairs department, established in January 2017, has centralised our government relationships with TSAM. The department provides a regular, formal, more structured communication base with industry, association and government stakeholders.

Shareholder: TMCAs our sole shareholder, TSAM has a special and close relationship with TMC. A number of TMC’s executives sit on our board and we work closely with the Japanese group at all levels of our operations.

Trade unionsOur relationship with the trade unions remains mutual and positive, and there were no strikes reported during 2016.

We have established a number of committees that act as channels for constructive and ongoing

engagement on various issues between management and the unions. These are:

• Central Negotiations Committee, which meets monthly to discuss labour policy matters

• Manufacturing Industrial Relations Committee, which meets quarterly in Prospecton and Sandton to address industrial relations and operational issues

• Central Equity Employment Committee, which meets quarterly.

We also discuss all relevant and related employee health and wellness topics during monthly health and safety meetings with the unions.

2016 saw the successful conclusion of wage negotiations with the National Bargaining Forum without a strike, which we attributed in part to increased and better communication with both our employees and the unions. See page 40 for more detail.

Minibus taxi owners and driversTSAM supports the majority of the minibus taxi industry through our products. The industry is vital to the functioning of the South African economy and we are committed to supporting this segment of our customer base.

To make our engagement more efficient, we have changed our communication strategy to focus directly on the end user of our minibus vehicles: the taxi drivers, rather than on fleet owners. This shift has paid off in that we are now engaging directly with the people who drive our vehicles. This enables TSAM and the drivers to better understand one another’s concerns and to respond in the most appropriate way.


our material issues

Sustainability driver Material theme Material issue

Customer and quality first

• Ensuringcustomersatisfaction

• Serviceexcellence

• Resolvingissues

• Ensuringquality

Collaboration with business partners

• Suppliers

• Dealers

• Enterprisedevelopment

Employees

• Performancemanagement

• Traininganddevelopment

• Diversityandinclusion

• Safety

• Healthandwell-being

• Respectforhumanrights

Social contribution activities

• Communitysupport

• Initiativesforimprovingtrafficsafety

• Creatinganenrichedsociety

Emissions reduction

• Challenge1:newvehiclezeroCO2 emissions challenge

• Challenge2:lifecyclezeroCO2 emissions challenge

• Challenge3:plantCO2 emissions challenge

Resource efficiency

• Challenge4:minimisingandoptimisingwaterusage

• Challenge5:establishingarecycling-basedsocietyandsystems

Society in harmony with nature

• Challenge6:establishingafuturesocietyinharmonywithnature(including banned chemicals and substances of concern)

Governance• Approachandstructures

• Compliance

Ethics

Risk management

society

environment

governance

TSAM’s sustainable business model is dependent on the three non-financial drivers of our business: society, environment and governance. Our set of material themes and issues has therefore been grouped around these three drivers.


While our material themes are guided by tmC’s global approach to sustainability, tsam regularly reviews and refines our set of material

issues to ensure that they remain relevant, particularly in our south african context.

Periodically, we conduct detailed assessments based on surveys, one-on-one discussions with key internal and external stakeholders, and reviews of key documentation. in the interim, we revisit the issues in an annual series of interviews with senior

tsam management which represent the major divisions within the business and manage key stakeholder relationships.

in 2016, an independent consultancy assisted in testing the continued relevance of our previously identified issues and identifying new topics. through that process, we confirmed

this year that our existing material issues continue to be relevant. these guide tsam’s sustainable business

strategy and form the basis of this report’s structure and content.


SOCIETY“ toyota sustainably creates three values for society: safety and peace of mind, environmental sustainability and Waku-doki (excitement and exhilaration that wows you), while striving to enhance its corporate value.”

Preamble to the TMC CSR policy

We, toyota motor Corporation and our subsidiaries, take the initiative to contribute to the harmonious and

sustainable development of society and the earth through all business activities that we carry out in each country and

region, based on our Guiding Principles. We comply with local, national and international laws and regulations as well as the spirit

thereof, and we conduct our business operations with honesty and integrity. in order to contribute to sustainable development, we believe that management interacting with its stakeholders is

of considerable importance, and we will endeavour to build and maintain sound relationships with our stakeholders through open and fair communication. We expect our

business partners to support this initiative and act in accordance with it.

Ch

aLL

en

Ge

20

50


Our approachToyota strives through its business operations to contribute to the creation of an affluent society where mobility means safety, efficiency and freedom. We work constantly to gain and to maintain the trust of all our stakeholders, to be a good corporate citizen, and to create and supply ever-better cars to meet our customers’ changing needs. Our goal is to contribute positively to society – and to our Earth – by making automobiles, and by doing so, exceed our customers’ expectations both now and into the future.

Material issues and risksThis year, as part of aligning TSAM’s Sustainability Report to TMC’s Sustainable Management Report, the society section of this report covers the following material themes: customer and quality first, collaboration with business partners, employees and social contribution activities. Each of these material themes addresses a core aspect of our business and each comprises a number of material issues, as outlined in the table alongside.

Toyota’s CSR policy: Contribution towards sustainable developmentSince its foundation, Toyota has continuously strived to contribute to the sustainable development of society through the manufacture and provision of leading innovative and quality products and services. Motor vehicles greatly expand the freedom of mobility, but also impact society and the environment in various ways, both positive and negative.

Bearing this in mind, we listen carefully to our customers and the local community as we pursue a business that works towards harmony with people, society and the global environment, as well as the realisation of a sustainable society through monozukuri (manufacturing or craftsmanship, with the spirit to produce not only excellent products, but also the ability to constantly improve the production system and its processes).

Heightened societal interest in CSR led to TMC announcing the Contribution towards sustainable development in January 2005. It was revised and formalised in August 2008 to the CSR policy: Contribution towards sustainable development.

Toyota’s CSR policy provides a stakeholder-inclusive interpretation of the Toyota Guiding Principles. Toyota aims to be a company that is admired and trusted by society by ensuring all employees recognise and act on this policy, which is shared with all of its affiliates. We also expect our business partners to embrace its spirit and act in accordance with it.

Material theme Material issue

Customer and quality first

• Ensuringcustomersatisfaction• Serviceexcellence• Resolvingissues• Ensuringquality

Collaboration with business partners

• Suppliers• Dealers• Enterprisedevelopment

Employees

• Performancemanagement• Traininganddevelopment• Diversityandinclusion• Safety• Healthandwell-being• Respectforhumanrights

Social contribution activities

• Communitysupport• Initiativesforimprovingtrafficsafety• Creatinganenrichedsociety

24

30

38

52


customerand quality firstDuring 2016, as part of a worldwide TMC initiative, we launched our ReBorn strategy. This strategy is based on listening to the voice of the customer, placing the customer first in everything that we do and using our dealers to win car fans. From increasing the flexibility of our supply and the affordability of our products, to improving the quality of our service and connection to our customers, our customers always come first.

Our customers’ safety and satisfaction is the motivation behind everything we do. They rely on our vehicles for their personal and commercial mobility, and expect the quality, reliability and comfort synonymous with the Toyota, Lexus and Hino brands.

Our philosophy of Kaizen – a commitment to continuous improvement – is what differentiates Toyota. This commitment applies to the vehicles we deliver as well as our relationships with current and potential customers. We constantly re-evaluate and revitalise our approach to customer service, ensuring that we consistently aim to do better.

Highlights• ToyotaandLexusbrands

continue to perform ahead of the industry average in the competitive customer experience (CCE) survey

• Webeatourtargettimeforresolving issues raised through our customer call centre

• Anumberofadditionalvalue-add products were added to the Hino Care Programme

Challenges• Inlinewithourintensifying

focus on delivering quality, the number of service and recall campaigns initiated has risen


Ensuring customer satisfactionWe aim to exceed customers’ expectations by providing innovative and reliable vehicles backed by excellent service and after-sales products. An important part of ensuring customer satisfaction is being able to give our customers exactly what they want.

As part of our customer-centric ReBorn strategy, we have introduced a great deal more flexibility into our vehicles and our services. For example, Hino now offers customisable service and maintenance plans, and to cater for the region-specific customer requirements, TSAM is offering more customisable options for our vehicles, such as a wider variety of canopy options for our light commercial vehicles. A critical aspect of these offerings is that the quality of the additions to these vehicles is now assured by Toyota quality standards (Toyota Genuine).

To assess our progress on improving the customer experience among Toyota and Lexus owners TSAM uses industry surveys conducted by research firm IPSOS. These surveys allow us to benchmark ourselves against our peers and to track performance at dealer, regional and national levels. The survey is based on real customer feedback and assigns each automotive manufacturer a competitive customer experience (CCE) ranking as well as a score related to loyalty, rational, emotional, relationship and service experience aspects.

The latest survey results, published in March 2017, show that the Toyota and Lexus brands are ahead of the industry average on all indices:

overall CoMpetitive CustoMer eXperienCe: summary of indices (%) in 2016/2017

Industry average Lexus Toyota

Loyalty 90.8 91.9 92.2

Rational 89.4 90.1 90.4

Emotional 90.6 90.8 92.1

Relationship 89.7 90.1 90.9

Sales experience 94.2 93.9 94.5

Service experience 88.7 92.0 90.3

This continued success comes as a result of a number of factors, including:

• Close collaboration between TSAM field operations teams and our dealer network, ensuring a consistent sales and service process

• Ongoing Toyota Touch activities with all Toyota and dealership staff to build employee engagement

• Enhanced focus on the ‘Voice of Customer’ to ensure we address customer needs efficiently and effectively

• Continued investment in assessing, developing and training dealer staff

While we are encouraged by these survey results, we know that there is always room for improvement and we act accordingly.

CustoMer satisFaCtion (%)2017

Target2016

Actual

Overall (Sales and Service) passenger vehicles

Toyota: competitive customer experience results (%) 93 92.6

Toyota: IPSOS ranking gold silver

Lexus: competitive customer experience results (%) 93 92.3

Lexus: IPSOS ranking gold n/a*

Overall (Sales and Service) light commercial vehicles

Toyota: competitive customer experience results (%) 92 91.7

Toyota: IPSOS ranking gold gold

* Not ranked due to sample size


soCiety | Customer anD QuaLity first (continued)

Ensuring qualityToyota’s legendary reputation for quality is the result of a concerted effort over many years from numerous stakeholders backed by systematic checks and inspections. Importantly, we have begun a shift in mindset away from looking to meet audit requirements, to viewing quality as a way of life at Toyota.

jointing – can only be confirmed by destructive methods. We call this ‘hidden’ quality because it is not possible to assess by superficial inspection. Confirming hidden quality requires that we evaluate the processes for performance and robustness. Specially trained TSAM representatives visit suppliers and conduct these evaluations, ensuring that their processes will produce the expected quality.

TSAM is meticulous about driving quality controls throughout its supplier network. Our Quality Control Engineering (QCE) teams work closely with suppliers to ensure their parts meet our standards and we have introduced a carding system for our suppliers as part of our regular supplier auditing process. See ‘suppliers’ on page 31 for more detail. We also offer an incubation process for any new suppliers, whereby TSAM offers support and training, and in some cases even sets up systems for suppliers, so as to ensure that our rigorous standards are always met.

ManufacturingAt our Prospecton plant, each shift begins with a quality pledge and a discussion of any quality-related issues from the previous shift. We have built numerous quality checks into the manufacturing process, including the following:

Inspection gates: Throughout the manufacturing and assembly processes, inspectors check that work undertaken on each vehicle conforms to the required specifications. All defects are escalated to the appropriate manager or engineer according to the level of severity, and are investigated, repaired, then rechecked before the vehicle is delivered to a customer. Our specialised laboratories in the welding, chassis and suspension plants measure and confirm quality levels as well as process stability.

Appearance checks: As each vehicle comes off the production line, we carefully inspect it to ensure that all the parts are correctly in place according to the individual vehicle’s specifications. This is particularly important given that there are over 25 000 possible combinations of parts – such as radios, mirrors and seats – that can be assembled into a single Toyota vehicle. At this stage, inspectors also verify the results of the previous inspection gate checks.

Functional testing: This stage confirms that all completed vehicles

ComponentsOur vehicles’ performance and safety is a factor of the quality of the materials used, their parts and the assemblies. As a result, TSAM carefully monitors the quality of parts and materials supplied through a number of processes and programmes. Two of these are described below:

Material inspection control functionEach batch of bulk material – such as paint, sealers and adhesives – is tested and approved at our quality assurance lab. As a matter of policy, no batch delivery is accepted at our plant without the lab’s confirmation that the sample is in line with specifications. This provides an important safeguard against the possible profound negative effects of inconsistent and poor-quality bulk materials.

Critical process quality assuranceThe quality of some manufacturing processes – such as welding, steel heat treatment and plastic

The core principles behind Toyota’s quality assurance system are:

these principles are driven at every organisation level, from the shop floor to executive teams.

1 2 3Customer first

Quality first

‘Genchi Genbutsu’

(go to the source to see)


are mechanically sound. A machine-driven test analyses the performance of components such as engines, clutches, brakes, wheels, axles and transmissions.

Water test: Next, all vehicles are subjected to jets of water at high pressure to confirm that the body is properly sealed and leak-proof.

Test track: By driving all vehicles over a variety of road surfaces, inspectors are able to identify and rectify any faults that cause vibrations, rattles or abnormal noises.

Each day, vehicles are randomly taken from the end of the production line and checked for defects by TMC-trained auditors. Results are presented to the manufacturing plants daily and all defects are fully investigated to identify the root cause, in order to establish and implement necessary countermeasures.

Additionally, each year all TMC general managers gather for a conference at TMC in Japan to review case studies of safety incidents, showing examples of countermeasures and what various plants around the world have done to improve quality in specific instances. These lessons are then taken back to their home plants, as part of a global yokoten process (sharing and confirmation of implementation) ensuring that TSAM – like all TMC affiliates – is using the most up-to-date, globally competitive assurance systems and processes.

Resolving issuesAs part of the manufacturing process we

use advanced research and development, test tracks and lab-simulated conditions to test our vehicles in all

conceivable conditions. Should a problem occasionally arise during the life of the vehicle, our engineers and service staff apply

the same commitment to quality in resolving these issues as they do in designing and building vehicles to minimise potential issues. To prevent

the reoccurrence of problems, we share lessons learnt with TMC and the network of Toyota affiliates.

Customers raise any concerns through dealers or directly with our customer call centre. Our goal is to resolve 75% of these within 15 days and 92.5%

within 30 days. In 2016, our actual performance was 78% and 93%, respectively; performance we were very pleased with.

Our field technical teams are another important source of information regarding issue resolution. Each year, TSAM submits a number of

field technical reports (FTR) to TMC. TSAM has worked hard at reducing the closing speed of these reported issues.


soCiety | Customer anD QuaLity first (continued)

Service excellenceOur commitment to quality continues beyond the point at which our vehicles leave the manufacturing plant. TSAM’s network of dealers plays an important role in ensuring that Toyota, Lexus and Hino vehicles meet and exceed our quality standards (see dealers, page 34).

From a customer’s first visit to a dealership, and for as long as they drive a Toyota, Lexus or Hino, we devote ourselves to exceeding their expectations through our friendly, convenient and reliable service. Our experience demonstrates that providing this level of service is fundamental to building customer loyalty and retaining their business long term.

In continuing to focus on prioritising service excellence, in 2016, we introduced a number of additional value-add products to the Hino Care Programme, including extended warranties (for both vehicles and parts) and more flexible service and maintenance plans that can be customised. Our maintenance plans are adapted to the operating conditions of the particular truck and industry in question, taking into account typical road conditions, loads and distances.

express serviceTo enhance customer convenience and improve dealer efficiency, TSAM introduced Express Service (ES) at three dealers in 2015. The programme offers customers a convenient, while-you-wait servicing option that takes between 60 and 90 minutes. It gives busy customers the flexibility to book an appointment that best suits their schedule.

Customers also enjoy personalised service from a dedicated ES service adviser, who guides them through the entire service process. Advanced standard operating procedures executed by highly trained technicians maximise efficiency without compromising quality or safety. Dealers also benefit from improved productivity and throughput. Currently,

Customer care programmesOur Toyota Care Programme exemplifies our customer-first culture in action. It offers customers a long list of benefits that include access to AA roadside assistance for three years or 100 000 km after the vehicle’s sale date. The service gives customers peace of mind and a quick fix for common problems such as flat tyres, dead batteries and keys locked in cars. We aim to reach customers in urban areas within 60 minutes and 110 minutes in semi-rural and rural areas.

Hino owners are covered by similar roadside assistance support through the Hino Care Programme. Our dedicated call centre is available 24/7 and responds to customers’ problems, connecting them with our team of master technicians when required. These technicians are specially trained on Hino’s commercial vehicles and are on 24-hour standby so that fleet owners are able to get their trucks back on the road, where they belong, as soon as possible.

Furthermore, Hino dealers offer flexible servicing times such as evenings and weekends to minimise the commercial impact of taking the vehicles off the road for routine maintenance. We also offer mobile workshops that are able to respond quickly and conveniently to minor problems on-site.

“We devote ourselves to exceeding customers’

expectations through our

friendly, convenient and

reliable service.”


seven dealers are ES-certified, and we expect this number to reach 11 by the end of 2017. In the long term, we would like to implement the service at 20% of Toyota dealers nationwide.

early Detection, early resolutionWhen our dealers identify technical issues, our Early Detection, Early Resolution system ensures that we fix the individual problem as quickly as possible and aim to prevent it happening again by addressing component or process issues at source.

Through Early Detection, Early Resolution, we prioritise each issue reported based on the safety risk, compliance requirements and customer feedback. Our top-priority triage approach helps us to fast track response in cases with high-potential impact by working closely with TMC’s designers and engineers.

This year, TSAM rolled out TMC’s new support to automotive repair system to selected dealerships across the country, the only TMC affiliate to date that has done so. Using information raised from FTRs, we have trained a number of technicians as specialist diagnosticians.

service campaigns Worldwide, Toyota affiliates collaborate to identify and address problems as they arise. We have a specified set of global campaign types and we apply them according to the severity and potential impact of any problem that we identify. While some are initiated in response to identified defects, others are implemented as a courtesy to owners when engineers make improvements to existing components.

While recalls may be disruptive, it is important that Toyota takes this action to ensure the absolute safety of its customers. We work to educate our dealers regarding recalls, encouraging them to view recall campaigns as an additional opportunity to interact with customers and make them happy.

Looking aheadOur approach to customer and quality first is simple: we can always do better. We will continue to strive to find ways of improving our service offerings and our

quality control measures.


collaborationwith businesspartnersOur suppliers provide the thousands of components and services that help TSAM to produce and distribute vehicles to the market. Our dealer network plays a vital role in our business. Not only do they sell and service Toyota, Lexus and Hino vehicles, but they also represent our brand to current and potential customers. These partners are critical to our business and our aim is to build and maintain mutually beneficial relationships with them.

As part of our commitment to contributing to the society around us, it is important that we take steps to develop potential suppliers and dealers, and to broaden the network of TSAM partners. In this way, we add value to our own business and to the South African economy in a deliberately transformative way.

Toyota maintains a shared value, one team pledge with all of its business partners.

Highlights• Successfullaunchofour

accelerated localisation programme for suppliers

• UpdatedGreenPurchasingGuidelines launched in 2016

• 100%ofToyotadealershipsKodawari-certified (see page 34 for detail on Kodawari).

Challenges• Anydowntimeorstoppage

creates a delay in delivery as there is no catch-up time on the assembly lines

• Reductionsinvolumeduetoadverse economic conditions and decreasing demand negatively affects businesses throughout our supply chain and makes it difficult for dealerships to retain good salespeople

• Approximately80%ofTSAM’s procurement spend is with Original Equipment Manufacturers, as required by TMC, making expanding our local procurement difficult


TSAM aligns its purchasing message to the annual message communicated by TMC. Our purchasing strategy aims to ensure global best sourcing and cost reduction through localisation and increased competitiveness of local parts through Kaizen initiatives and value stream analysis.

Our Purchasing Department is the first point of contact between our suppliers and TSAM, and controls cost levels and the suppliers’ competitiveness. Our Logistics Department also engages suppliers to ensure the incoming parts supply chain supports production. Its remit covers the domestic and international logistics processes that deliver vehicles to their final customer.

Generally, our Supplier Parts Engineering (SPE) Department is responsible for implementing process improvements and supplier development. In the run-up to the launch of the new models, it maintains close relationships with our suppliers, helping them to approve components while also identifying and implementing improvement opportunities. Our Quality Control Engineering (QCE) teams work closely with suppliers to ensure their parts meet our quality levels.

stabilityAll Toyota affiliates practice just-in-time manufacturing. While a highly efficient approach, it means that the stability and reliability of our suppliers is critical. If parts are not available when expected, our plant is unable to produce vehicles. We ask that all our suppliers report on any unresolved labour issues in their workforces.

This helps us to support the business and implement solutions before the problem has a major impact.

In 2016, five of our suppliers were unable to meet their delivery targets. As a result, TSAM brought in experts from TMC and assigned a number of TSAM staff to work at these suppliers’ premises for a few months to improve and stabilise operations, and help them to meet their demand targets. This is indicative of TSAM’s one team culture.

The Motor Industry Bargaining Council (MIBCO) provides a forum for the negotiation of minimum wages and benefits for suppliers to the automotive industry. These discussions occur every three years, most recently between February and September 2016.

In 2016, wage negotiations were concluded within our supply chain, resulting in zero lost work days; a first in the past nine years.

QualityA direct link exists between the quality of our vehicles and the quality of their components. In response, we work hand in hand with our suppliers to ensure that each component is designed, manufactured and delivered to our exacting quality standards.

When it comes to managing quality, Toyota meticulously monitors progress at every step – from blueprint to delivery – not only at the very end of the manufacturing process. In line with this philosophy, our SPE and QCE teams work with suppliers to design and incorporate key specifications into all aspects of their business, from facilities and tooling to production lines

and employee training. Where relevant, we encourage suppliers to adopt the Toyota Production System (TPS) as well as quality built-in network system. We also provide training and support on the principles and methods for implementing these systems.

We constantly monitor our supplier’s performance for quality (ppm) and delivery (SSN). A yellow-card/red-card system is used to manage the performance, a similar concept to soccer/rugby.

environmentWe work continuously to reduce the impact of our operations on the environment and we expect the same level of commitment from our suppliers. Our Green Purchasing Guidelines, first published in 2006, were updated in 2016. These guidelines communicate Toyota’s requirements for providing safe and clean products, specifically in accordance with Toyota’s 2015 Challenge, and we expect all of our suppliers to work towards fulfilling these requirements. The six elements of the Green Purchasing Guidelines, aligned to the six tasks of Challenge 2050, now form a part of our suppliers’ monthly reporting basis.

In addition, all our suppliers are expected to achieve ISO14001 certification, an environmental management standard, and we actively support them in fulfilling this requirement. For example, we regularly reinforce this message during routine supplier meetings and in our annual business meeting, while our buyers monitor the progress that suppliers are making towards certification. In 2016, 112 suppliers held ISO14001 certifications.

For more on our suppliers and the environment, see page 62.

SuPPLIERS


soCiety | CoLLaBoration With Business Partners (continued)

safetyAs an extension of our own production team, our suppliers’ safety performance is as important as our own. In 2016, the average lost work case frequency rate (LWCFR) among all parts suppliers was 0.3 incidents per million man-hours worked, half of what it was in 2015 (0.6). This is partly because suppliers that experience a lost work day injury are now required not only to report to TSAM on the occurrence of these issues, but also why they occurred and what plans are in place to prevent reoccurrence.

During the course of regular site visits, our purchasing engineers and managers raise safety awareness with suppliers, identify additional risks and confirm the implementation of effective countermeasures. To raise safety awareness further, we now ensure that safety information is shared during our bimonthly supplier meetings, and we invite suppliers to our Safety Dojo at the TSAM plant, so that they can see how TSAM puts its own guidelines into daily practice.

As a result of these and other improved preventative measures, we are pleased to report that no TSAM supplier reported a fatal incident during the year.

transformation and preferential procurementWe understand that transformation and empowerment in South Africa demands a concerted effort across the business community. We play our part in this by supporting black-owned businesses where possible, while encouraging our suppliers to embrace the spirit of transformation and achieve level four contribution status.

TSAM has heeded the urgent call from government for a significant change in South Africa’s economic landscape, and we have aligned our purchasing policies to ensure that transformational objectives are at the forefront of the business. In line with this commitment, we have assembled a dedicated preferential procurement team responsible for introducing new black-owned businesses to our supply chain and working with our current suppliers to improve their BBBEE levels.

preferential procurement scorecard Target Actual

BBBEE spend as a measure against total spent 5 4.43

Spend with QSE 3 0.83

Spend with EME 4 1.21

Spend with >51% black-owned suppliers 9 2.41

Spend with >30% black female-owned suppliers 4 1.42

Bonus:

Spend with designated groups >51% black owned 2 0.01

27 10.31

Level 4 – 11%Level 5 – 10%Level 6 – 23%Level 7 – 3%Level 8 – 15%No certification – 2%Non-compliant – 3%

Level 1 – 2%Level 2 – 21%Level 3 – 10%

tsaM suppliers (%) by contribution level

number of suppliers 2 521


We have also been working with government and industry to create opportunities for businesses to network with newer and smaller local suppliers. During 2016, TSAM partnered with the Durban Chamber of Commerce to host a ‘Know Your Buyer’ event, which partnered larger businesses with local SMEs in a speed dating-type of forum, which was a big success. TSAM has begun building an internal database of these suppliers so as to be able to match them efficiently with opportunities within the TSAM value chain.

In 2016, our total procurement spend was R18.78 billion. Of this, we spent a weighted R2.27 billion with 51% black-owned suppliers and R898.96 million with 30% black women-owned suppliers. Despite performing well, procurement is a big challenge for our business due to the nature of our procurement requirements. Many of the components we source are mandated by TMC and come from large international suppliers that are often not deemed as highly empowered according to the BBBEE Codes of Good Practice. There is also a deficit of black- and particularly black female-owned businesses that manufacture component parts. However, we prioritise procurement of ancillary services from black businesses and hope to be able to source an increasing proportion of components from more empowered businesses in the future.

localisationWe aim to support the local South African economy and accelerate transformation by sourcing as many components as possible from domestic suppliers. Specifically, we aim to procure at least 60% of the parts for each vehicle from South Africa. This is becoming critical as exchange rate fluctuations increasingly impact our costs, and it provides important opportunities throughout our value chain, particularly for SMEs, and maximises the value that TSAM adds to South African society.

In 2016, as part of a number of new launches, we were able to increase our total local parts from 1 300 to 2 700. We also established a three-year accelerated localisation programme to drive both deeper and wider local content and to minimise our imported raw components, particularly in our International Multipurpose Vehicles (IMV). The first aim is to increase our locally supplied components by 3% to 4%. The wider local programme involves adding additional local parts. Initially our target is 72 local parts by October 2017, moving to 125 in 2018 and then, finally, 450 in 2019.

“We aim to support the local

south african economy and

accelerate transformation

by sourcing as many

components as possible

from domestic suppliers.”

Knowledge transfer

To ensure our suppliers have access to the resources required to

remain competitive in the South African market while delivering the quality we

require, TSAM expects them to have an affiliation with a global partner through

a joint venture or technical aid agreement. Approximately 30%

of our suppliers are in such relationships.



Dealerships are owned independently from TSAM and fulfil a distribution and service role in our value chain, working closely with TSAM and TMC to interface with customers through 198 Toyota, 17 Lexus and 65 Hino dealerships across southern Africa.

We are particularly proud of our performance this year at the National Automobile Dealers’ Association (NADA) Dealer Satisfaction Index (DSI) Awards. Both Toyota and Hino showed increased scores in 2016, and Hino again won a gold award, improving its score by 1.8% to achieve 83.6%.

This improvement is indicative of the rigorous dealer programmes that have been put in place in various areas of our business. Based on analysis of the 2015 DSI report and numerous interactions with our dealers, we identified areas of concern and put measures in place to improve our dealer relationships further.

Cultivating customer care with KodawariOur aim is to provide customers with a consistently high level of care. Toyota’s global Kodawari programme helps to ensures that dealers meet our customer care expectations. By establishing the correct practices for 79 specific operational and physical aspects of customers’ dealership experience, the Kodawari ensures consistency and excellence from the first visit through to regular maintenance and servicing.

Dealers are expected to submit monthly self-audits related to their Kodawari compliance through our e-Toyota dealer portal. These audits are validated by TSAM after-sales managers, who conduct on-site sustainability assessments at each South African dealer every six months. This helps to highlight areas for improvement.

TSAM trains our dealers on these aspects, paying close attention to facilities, processes and staff behaviour, and certifies dealers once they are fully compliant with all Kodawari requirements. They are then recertified annually through self-audits and biannual assessments. At year-end, 100% (199) of all Toyota dealerships were certified (2015: 95% and 186, respectively).

A close link exists between higher levels of customer experience and Kodawari certification. In other words, customers who visit Kodawari-certified dealers are more likely to enjoy a better experience of the Toyota brand. Aligning each of these aspects to IPSOS’ customer experience survey methodology helps us to meet the broadly accepted service standards. In 2016, 99% of Kodawari-certified dealers scored above 90% on the IPSOS survey.

DEALERS

safety at our dealerships

We have introduced the ‘Always better safety’ programme to assist our dealer network with their

safety responsibilities. It addresses dealer employee and customer safety, and involves three steps:

1. Implementation of process and fundamentals, by integration with Kodawari, DERAP, Customer Activities and

Legislative Requirements.

2. Kaizen and awareness by establishing a Safety Organisation Structure, Safety Policy, Declaration, Safety Kaizen.

3. Creation of a Safety Culture by promoting Ownership, Correct Mindset and Sustainability.

The programme rollout is being done in stages: having focused on mega dealers, we will thereafter

implement in large, then medium, then small dealerships.

“We acknowledge

the dealers’ role

in our business

and realise that

our assistance

will result in

better support

to our customers

and ultimately

reach our goal of

creating customer

smiles.”


stabilityAs with our suppliers, it is critical to Toyota that our dealers operate stably and predictably. We therefore implemented a dealer order Kaizen from our parts warehouse during 2016 in order to minimise the fluctuation in our dealers’ logistical performance. We have worked with our dealers to maximise the efficiency of our dealers’ ordering systems and provided training on correct stock parameters for parts. This has resulted in reduced pressure on the warehouse arising from too many emergency orders and month-end spikes.

We began by trialling this project with one dealer and then rolled it out across our dealer network. Our dealers have noted the benefit, seeing a reduction in their stock holdings and an improvement in supply and overall performance. By offering same-day order and delivery of more than 700 000 parts to most dealers in South Africa, we work hard to ensure that we do our part to ensure the smooth operation of our dealers’ businesses.

training pathwaysAs the first point of contact for most customers, salespeople are a critical factor in maintaining our reputation among customers. A skilled salesperson is knowledgeable about our product range including the specifications and unique selling points of each model. They should also demonstrate unwavering professionalism and earn customers’ trust in all interactions. But salespeople are not the only customer interface; indeed, most roles within a dealership have the

environmental responsibilityAs with our suppliers, we expect dealers to demonstrate the same commitment to the environment as we do. Through our Dealer Environmental Risk Audit Programme (DERAP), dealers receive assistance and guidance on minimising their environmental impact. Dealers are certified on ECO I when compliance is achieved on the five DERAP fundamentals. This is validated through biannual audits and verified by TSAM’s after-sales managers. The ultimate aim is to certify dealers on ECO III, the advanced stage of DERAP compliance. In addition to promoting initiatives linked to the proper disposal of waste and treatment of waste water, we also address other environmental issues such as reducing CO2 emissions.

eCo i-CertiFieD Dealers 2016 2015

Toyota 202 195

Lexus 17 15

Hino 66 64

ECO III-CERTIFIED DEALERS

Toyota 130 104

Lexus 17 15

Currently all our dealers are ECO I-certified and more than 60% are ECO III-certified. Our target is 67% of dealers to be ECO III-certified by the end of the 2017/18 financial year. No Hino dealers are currently ECO III-certified, but our aim is that eventually they all will be and we are working on dealer evaluation and training initiatives to achieve this.

potential to strengthen – or detract from – customer relationships. TSAM has therefore continued to roll out online ‘training pathways’ to instil the necessary competencies in our dealer partners. Each pathway is tailored to the unique skills requirements of the various roles including sales professionals, managers, after-sales staff and technicians.



enterprise developmentWe actively support the small, medium and micro enterprises (SMME) that are so important to driving South Africa’s long-term economic prosperity. TSAM is proud to consistently earn the maximum number of BBBEE points available for its enterprise development and supplier development targets. In 2016, we continued to focus our enterprise development efforts on supporting South Africa’s taxi industry, a symbol of black entrepreneurial success.

Minibus commuter taxis account for approximately 63% of all travel in South Africa and they transport around 15 million commuters to and from work every day. Their value goes beyond road trips. Each taxi creates around seven new jobs and over 600 000 people rely on the taxi industry for employment.

The taxi sector remains one of the only black-founded, -owned and -controlled industries in South Africa and TSAM has proudly supported it for many years. Our Quantum Ses’fikile minibus taxi – locally produced at our Prospecton plant – is among the most popular vehicles in the industry. As part of our BBBEE strategy, and despite severe pricing challenges caused by a weak Rand, we continue to offer registered taxi owners discounted pricing on their vehicles.

Outside of the taxi industry, we are driving enterprise development across our supplier base and, in 2016, we proudly welcomed our first black female-owned logistics company, Reddot, to the TSAM family. Reddot specialises in the door-to-door movement of vehicles such as: from dealer-to-customer;

from manufacturer-to-dealership; for inter-dealership swops; and fleet delivery. We also offered awards to one of our suppliers, the 100% black woman-owned Clean Spot Solutions, at TSAM’s annual supplier awards. They are a multidisciplinary cleaning company focused on servicing large-scale entities. We are very pleased with the exceptional service they have provided.

Looking ahead

The BBBEE Codes have been revised and are now more stringent on procurement,

which will have negative consequences on TSAM’s BBBEE score in the next audit cycle. In addition,

although not yet gazetted, the Department of Trade and Industry intends to link the award of Automotive Production and Development Programme (APDP) incentives to BBBEE targets and we expect that we will need a BBBEE level 4 by 2020 in order to enjoy APDP benefits. As such, TSAM needs

to focus intensely on its empowerment and localisation drives, as well as establishing black-owned component

manufacturers through incubation and development initiatives. We will also collaborate with existing

suppliers to improve their BBBEE ratings.

enterprise and supplier development scorecard Target Actual

Preferential procurement 27 10.31

Enterprise development 7 7

Supplier development 10 10

44 27.31


employeesOur employees’ contributions are the driving force behind our success. It is they who build our vehicles and provide all the front- and back-office support functions that help to deliver Toyota, Lexus and Hino vehicles to the market.

In 2016, we were supported by 6 927 permanent employees: 1 975 were salaried and 4 952 were hourly paid staff. Eighty-eight per cent of these are based at our Prospecton plant outside Durban, 6% at our parts warehouse in Johannesburg and 6% at our head office in Sandton.

Our temporary employees play a critical role in maintaining production stability during peak periods. Their numbers rise and fall in line with fluctuations in demand and, in 2016, they accounted for 1 227 employees, which equates to 15% of our total headcount at year-end.

We treat our temporary workers with the same respect and care as we give to all our employees, and manage them in close consultation with the unions. During the year, we converted 55 temporary employees to permanent employees.

Highlights• WepaidoutaR1500bonus

to all employees in celebration of 50 years of the Prospecton plant

• Housingsubsidyprogrammeagreed for all employees belonging to the NBF bargaining unit

• NBFthree-yearwagenegotiation concluded without any strike action

Challenges• Wefacehigherlevelsof

attrition with skilled black employees at manager and assistant manager levels


Employee engagement and performance managementBecause their role is so important to our success, it is critical that we ensure employees are positively engaged, well compensated and committed to the company.

Gauging satisfactionHourly Salaried

2016 2016

Valid participants

Engaged Neutral DisengagedValid

participantsEngaged Neutral Disengaged

1 983 26.0 37.8 36.2 1 771 48.6 31.7 19.8

performance management TSAM’s integrated performance management process encourages employees to perform their roles in a manner that supports the company’s overall strategy. All salaried staff discuss and commit to an individual development plan (IDP) with their manager. These plans include specific target outcomes and performance is evaluated each quarter. Twice a year, results are submitted to the Remuneration Department and form the basis of annual merit-based pay increases.

During the year, 90% of employees received a merit adjustment based on a successfully completed performance review, moderately lower than 91% for the previous year.

This year, we have placed greater emphasis on our employees’ aspirations and goals for their career progression. By collating employees’ aspirations by band level, we are able to engage better with line managers regarding how to maximise the potential of each employee. We have also used this to improve our succession planning.

retentionEach person we recruit has a clearly defined role to play in reinforcing our long-term competitive advantage. Accordingly, we strive to ensure that we retain our valuable team members.

In 2016, total turnover among our salaried permanent staff alone was 2.8% (2015: 7%), while the figure among all hourly staff stood at 4.4% (2015: 6%). Overall turnover across both these groups was 6% (2015: 6%). No retrenchments were made during the year. We reinforced our efforts to retain our best people through revising our compensation packages and reviewing our graduate programme, among other things. However, we have found that our employees are attractive candidates to other businesses, making them a frequent target for recruitment.

CompensationCompensation is high on the list of factors that maximise productivity levels and retention. We therefore take great care to ensure we compensate all TSAM employees fairly in line with market benchmarks and in a way that inspires them to perform at their best and remain loyal to the company.

Each year, we benchmark our compensation levels against other South African businesses and our automotive industry peers through studies undertaken by Deloitte and the Automotive Manufacturers Employers Organisation (AMEO). As a standard, we believe that:

• Noemployeeshouldearnbelowthe market’s 25th percentile

• Solidperformersshouldbeatthe50th percentile

• Highperformersshouldbepaidinline with the 60th percentile

• Excellentperformersshouldfallatthe 75th percentile

In October 2016, we conducted a review of our base pay by an independent third party and accordingly made a comprehensive market-based adjustment, giving an additional increase to approximately 70% of our employees, based on their performance. We intend to conduct another such review in 2017.


soCiety | emPLoyees (continued)

How we set employee remuneration • Salariedstaffpayisset

by the TSA Remuneration Committee, which comprises representatives from TSAM and TMC, and reports to the TSA board. Remuneration depends on performance and job grade, and is adjusted annually to reflect employee advancement and increases according to the consumer price index (CPI).

• Salaryincreasesareeffectivefrom April. From April 2017, the across-the-board (ATB) award, plus merit adjustments to salaried staff, was a weighted average of 8%. As in 2015, a discretionary award was made to high performers in specific roles to bring their salaries in line with market rates in 2016. On average, this discretionary award was worth 3% of the total salary bill.

• Hourlypayisnegotiatedatanindustry level with the National Bargaining Forum (NBF). These discussions are held every three years, with the latest held in 2016.

• Additionalincentivesforhourlypaid workers are determined by the Masibambane scheme, also known as our 14th cheque.

• Inlinewithbestindustrypractice, our Masibambane incentive scheme distributes bonuses based on targets related to production and sales volumes, after-sales and manufacturing quality and stable production in alignment with Toyota’s global focus on productivity.

a successful wage negotiation with the national bargaining Forum (nbF)2016 saw the latest round of wage negotiations with the NBF. Drawing on the lessons learnt from the 2013 negotiations, we focused on open and direct communication with our hourly employees to keep them fully informed of all the latest developments as they occurred. We used all available communication channels such as SMS updates and screens on the plant floors and in common work areas.

TSAM also worked particularly hard to align the thinking of all parties to the negotiations: government, unions, business and employees. We believe that it was keenly understood by all stakeholders that TSAM’s reputation as a stable manufacturer is becoming increasingly vital in an environment of global overcapacity in the automobile industry.

The negotiations were successful, and the first to include a housing subsidy as part of the agreed package. We were extremely pleased that, as a result of our efforts, 2016 was the first year in which there was no strike action surrounding the negotiations.

The car benefit TSAM introduced in 2015 for salaried staff at levels 5, 6 and 7 remains a well-enjoyed aspect of our compensation package. The benefit is additional to basic salary and helps employees to lease or buy a TSAM vehicle at cost. The allowance is worth approximately 6% of their basic earnings.

Other elements in TSAM’s compensation mix include a guaranteed 13th cheque, which is paid pro rata to any employees who leave during the year; a voluntary medical aid scheme that matches employees’ contributions up to a cap of R5 560; a choice of three retirement funds; and fuel cards for those at manager level and above.


trade unions Two trade unions represent TSAM employees: the National Union of Metalworkers of South Africa (NUMSA) and the United Association of South Africa (UASA). NUMSA holds collective bargaining rights for TSAM’s hourly paid employees and at year-end had a total membership of 5 954 (representing 86% of our workforce and 93% of all hourly employees). UASA represents 598 staff (9% of all employees and 30.3% of salaried staff) and holds organisational rights. In total, 6 552 of our employees are members of NUMSA or UASA, comprising 80.3% of our total permanent workforce.

employment typeCount/percentage of segment headcount

2016 2015 2014

NUMSA

Total members 5 954 5 788 5 343

Hourly 93% 88% 91%

Salaried 7% 19% 20%

Total 86% 70% 71%

UASA

Total members 598 672 729

Hourly 0% 0.1% 0.4%

Salaried 30.3% 31% 33%

Total 9% 8% 9%

“We treat our temporary

workers with the same

respect and care as we give to all our employees.”

employee grievancesOur employee grievance policy guides our approach to

receiving and responding to concerns among our workforce. Employees are encouraged to raise all issues with their supervisor,

who will attempt to resolve it directly within two days. We also encourage our employees to make use of Green Area meetings to

discuss any problems that they may have.

If this is unsuccessful, the employee can then lodge a formal grievance with the HR Department for recording and further processing.

We inform employees about this procedure during their induction training and as part of our ongoing policy awareness campaigns.

In 2016, 21 formal grievances were logged, all of which were resolved by the end of the financial year.


Employee training and developmentWe invest significant time and resources into training and developing our people. Their experience, expertise and dedication are fundamental in achieving our strategic objectives and sustaining our competitive edge. In 2016, we spent a total of R250 million in bolstering our staff’s professional and personal capabilities compared to R147 million in 2015. In line with current legislation, this figure accounts for 6% of our overall staff costs. R192 million of the total cost (77%) benefited black employees, including African, Indian and coloured individuals.

programmeNumber of

participants % African % Indian % Coloured % Female

% of participants

employed by TSAM

upon completion

Renewable Energy 119 99 0 1 43 n/a

Skills Programme 225 89 2 9 45 n/a

NQF 2 Learnership 297 93 2 5 44 92

Apprenticeship 170 83 12 4 25 88

Graduate Programme 123 88 8 2 47 93

PWD Learnership 40 85 13 3 48 0

In-service trainees 40 100 0 0 20 80

ABET 45 98 0 0 2 n/a

Study assistance bursaries 869 71 19 8 35 n/a

Bursaries 33 40% 42% 3% 15% n/a

Our training and development budget funds external training, study assistance bursaries and learnerships for production staff, people with disabilities and unemployed people. It also covers the running costs for our Technical Training Centre and the Toyota Academy.

During the year, 5 100 employees attended in-house training through the Toyota Academy. A further 869 staff received study assistance bursaries to pursue further education. On average, each TSAM employee received 67 hours of training during the year. Since 2015, our temporary employees have received the same access to training and development opportunities as our permanent workforce.

Average hours of training per employee

employee category 2016 2015

Top management 21 66

Senior management 57 92

Middle management 104 110

Junior management 85 120

Semi-skilled 77 70

Unskilled 33 86

Temporary 91 140

Total average 67 97



Creating opportunities for unemployed learnersOur commitment to training and developing people to succeed in the workplace goes beyond our own business to incorporate unemployed people in our communities.

Our Unemployed Skills Programme, launched in 2015 and designed to help out-of-work people become more employable by equipping them with basic skills, has been operating extremely successfully. Among other areas, the three-month programme covers:

• Basiclifeskills(interviewingandCV-writing)

• Basicspray-painting

• Basicwelding

• Basichandskills

• Basicdrillingandmachining

• DevelopmentofPortfolioofEvidence(POE)

Although we did not design this course as a recruitment tool, it offers unemployed learners a career path into TSAM via our apprenticeship or learnership schemes. In 2016, 91 of the 225 unemployed people who enrolled went on to join our workforce. Our learnership and apprenticeship programmes have a 98% qualifying rate.

We also run a NQF 2 course in basic administration and NQF 3 course in basic bookkeeping course for people with disabilities (our PWB learnership).

In 2016, we were pleased to begin offering a NQF 3 renewable energy training programme in partnership with the Energy and Water SETA, which we expect to be accredited shortly.

Responsibility for planning TSAM’s training and developing programmes lies with our Human Resource Development Department, while the Toyota Academy is primarily responsible for the delivery of soft skills training, technical training and Dojo training, which focuses on hand skills and quality issues. Our training delivery is governed by the national merSETA policy and ISO9001, and it is implemented with approval from TSAM’s Training Committee.

Every year, we conduct a skills audit to identify gaps and take corrective action through our Workplace Skills Plan. In 2016, the audit revealed a demand for skills in marketing and sales and logistics in Sandton; while in Durban there is a particular need for skills in production, engineering, logistics and finance. Accordingly, we focused our development efforts on engineering and finance and our skills training efforts on production (hand skills and quality).

Our career path training framework covers most employee bands, from plant floor to executive level, and outlines all Toyota training employees are expected to undertake. It is tailored to specific areas and job types and includes global, legislative, Toyota-specific, nominated and elective courses. The career path training framework sets the foundation of development, ensuring each employee is equipped to perform tasks for their current level, as well as introduce any skills required for the next band level. Our three feeder programmes – TSAM’s graduate, apprenticeship and learnership programmes – ensure that we have a reliable pipeline of external talent whenever the need arises.

TSAM has full accreditation as a Full Test

Centre for Training and Trade from the National Artisan Moderation Body (NAMB)

for the following trades:

Fitter and turner

Fitter including hydraulics

Electrical engineering

Toyota machinist

Millwright (electromechanical)

Tool jig and die making


Promising individuals with leadership potential are eligible to participate in our Management Development Programme (MDP), Senior Management Development Programme (SMDP) and Executive Management Development Programme (EMDP). These programmes, intended to ensure a sustainable pool of young future leaders, are run in partnership with the University of Stellenbosch and focus on honing leadership skills and business acumen through implementation-focused assignments. The 360-degree assessment tool which was introduced to the MDP in 2015 has been well received.

As the guardians of Toyota’s reputation for quality, it is important that our employees – as part of their ongoing training and development – are exposed to the history, importance and implications of quality for Toyota. This occurs at our quality learning centre (QLC) in Durban. The QLC has recently been revamped to make it more user-friendly, interactive and engaging, and is now focusing more on plant quality issues. We expect to see the positive impact of this revitalisation over the next year.

We also ensure the continuous development of facilitators on Toyota Global Content. TMC’s Train the

Trainer Programme at the Toyota Institute in Japan aims to develop the facilitator resources of its global affiliates to improve both quality and alignment to global standards and TMC culture. In 2016, a pilot group of facilitators was trained to become Master Trainers of Toyota Business Practices (TBP), a Toyota problem-solving tool for Toyota. Once the Master Trainer is accredited later in 2017, TSAM will have one of only 10 TBP Master Trainers in the world.

As part of Toyota’s global skills training programme, a number of team leaders were sent to Japan during 2016 to learn how team leaders manage their teams at TMC. To date, TSAM has sent only one group of 14 members, but we plan to send another group as soon as TMC’s production schedule allows for it.

The results have been very exciting, with the newly trained team leaders bringing not only new levels of expertise home with them, but energy and enthusiasm. The training taught strong leadership and management skills, but it also instilled a solid sense of self-confidence in the candidates. TSAM was proud to receive positive feedback from TMC regarding the enthusiasm shown by the South African delegates.


Diversity and inclusionWhile TSAM is a TMC affiliate, we remain fully committed to building a workforce that reflects South Africa’s rich and dynamic diversity across race, gender, age and experience. In line with our Employment Equity policy, and various business, ethical and legislative imperatives, we strive to promote and develop an enabling environment in which TSAM will deliver on its transformation strategy.

However, we are also keenly aware that the transformation journey demands time and patience. Effective and meaningful transformation requires an immense and focused cultural shift.

“our employees are the

guardians of toyota’s

reputation for quality.”


total workforce by employment type, gender, race and region Female Male

African Indian Coloured WhiteTotal

women African Indian Coloured WhiteTotal men

GRANDTOTAL

OCCUPATIONAL LEVEL

Top management 1 1 0 5 7 5 13 58 76 83

Senior management 6 10 8 18 42 16 44 2 61 123 165

Middle management 95 60 13 47 215 174 200 21 126 521 736

Junior management 111 82 26 62 281 290 252 67 101 710 991

Semi-skilled 14 2 16 119 79 19 25 242 258

Unskilled 610 61 54 4 729 3 460 337 140 28 3 965 4 694

Temporary 300 16 11 13 340 764 79 18 26 887 1 227

Total 1 137 232 112 149 1 630 4 828 1 004 267 425 6 524 8 154

REGION

Johannesburg 132 21 22 79 254 432 47 31 163 673 927

Durban 1 005 211 90 70 1 376 4 396 957 236 262 5 851 7 227

In October 2015, we introduced our third employment equity plan. In line with TSAM’s medium/long-term plan (MLTP), it includes targets to raise representation among previously disadvantaged groups at middle and junior management level by 2% by March 2017. Executive management was prioritised and this intervention resulted in a 28% increase in representation of Africans.

Our three feeder programmes (learnerships, in-service training and apprenticeships) offer an opportunity to introduce a diverse variety of people into the TSAM talent pool. Our challenge is to retain our high-potential African talent due to their market demand on completing the TSAM graduate programme. This is addressed by a multifaceted approach including increased intakes, absorptions, competitive

compensation and career paths. Our intakes are informed by the national demographics of SA.

Through various management structures and committees, including a central employment equity forum, TSAM’s most senior management meets often to review where the most immediate gaps lie in TSAM’s diversity needs and how these can best be filled. Going forward, our strategies to increase diversity across the business are:

• Arevitalisedgraduateprogramme,due to be launched in January 2018, which includes an enhanced foundation phase

• OurICTprogrammeoffersskillsdevelopment training in Europe for team members and leaders, in order to show them what it means to be globally competitive

• Reviewingourcompensationpackages in an attempt to address high attrition rates among talented black graduates and managers

We have also launched a transformation drive among senior management to raise awareness of the importance of diversity and transformation, and of different value systems and unconscious bias.

TSAM’s diversity and inclusivity extends and is not limited to the integration and accommodation of people with disabilities (PWD). This includes infrastructure improvements and providing career opportunities to PWDs. This has seen a notable improvement of 8% from 2016 to 2017.



SafetyUltimate responsibility for health and safety rests with TSAM’s Chief Executive. However, the company’s Safety, Health and Environment (SHE) Department is responsible for the day-to-day management of safety in the workplace. The department works closely with management to embed a safety culture throughout the company.

Both TSAM’s Prospecton and Sandton operations maintain separate Executive Health and Safety Committees comprised of top and executive management. The SHE Department serves as the secretariat at these meetings. These committees review TSAM’s safety performance; discuss and review safety incidents at TSAM as well as at other Toyota affiliates; formulate instructions for corrective or preventive action; and act as TSAM’s health and safety policy-making authority. Decisions taken at these committees are followed up and supported on a day-to-day basis by the SHE Department.

At shop floor level, each TSAM plant maintains a Health and Safety Committee comprising elected health and safety representatives, plant management, maintenance departments, the Human Resource Department and union representatives. These committees discuss and action health and safety matters relevant to the individual plants. The effectiveness of these meetings is closely tracked to ensure health and safety concerns are addressed as close to shop floor level as possible. The Health and Safety Committees and the organisation of health and safety representatives comply with and exceed the legal requirements for these structures.

Our approach to reducing injuries in the workplace is based on three pillars, as follows:

Best management: Ensuring a genuine commitment from management to embody a zero injury philosophy and to lead employees towards achieving this goal.

Best process: Creating a safe environment in which accidents, injuries and occupational illnesses are not possible.

Best member: Encouraging employee commitment to safety through training and awareness activities.

ZERO INCIDENTS

ZERO STOP-6

BE

ST

PR

OC

ES

S

BE

ST

ME

MB

ER

BE

ST

MA

NA

GE

ME

NT

BEST OSHMS

SAFETY CULTURE

TOYOTA WAY / GUIDING PRINCIPLES

BEST PROCESS• Goodenvironment• Cleanandbright• Standardisedwork

BEST MEMBER• Trainedskilledmember• Canimprovethejob• Self-reliant

BEST MANAGEMENT• Feltleadership• Communication• Genchi Genbutsu

Zero stop-6TSAM supports the global focus on

stopping six types of injuries that can have serious results. These are: contact with

heavy object; contact with vehicle; pinched by machine; fall from height; burns; and

electric shock.


safety performance2016 was another strong year for employee safety. Among other notable achievements, TSAM has managed to continue reducing its injury rate by more than 10%.

This success was the result of a concerted collective effort from all TSAM colleagues. In 2016, the injury rate across TSAM was the lowest on record and there were no fatalities or fines.

TSAM reports its safety performance to TMC according to standardised metrics. In 2016, we were among the strongest-performing Toyota affiliates. TSAM was awarded Safety Excellence Award for South America & South Africa Region in recognition of incident results and excellent safety activities.

We recognise that there remain opportunities to improve. In the coming year, we hope to continue learning from our peers and to share lessons learned among our South African colleagues and other affiliates around the world.

tsaM’s 2016 total injury rate compared with other toyota affiliatesEuropean Union 1.85

TSAM 1.62

Asia Pacific 0.50

Japan 0.20

recognising excellenceOn 29 May 2017 the TSAM SHE Department proudly hosted the second Annual SHE Awards Ceremony.

This annual event was initiated in 2015 in order to promote and strengthen a culture of Kaizen activity and teamwork in the pursuit of an injury-free workplace and environmental improvement. We use a balanced scorecard approach to evaluate health and safety performance, safety culture improvement initiatives, compliance and risk management actions – among other areas. Progress is tracked on a monthly basis and the leading plants are given the opportunity to showcase their activities.

Participation in the event provides a platform to showcase the best Ergonomic and Environmental Kaizens implemented as well as give recognition to the individual plants for their efforts in promoting safety and environmental improvement.

This year, the Quantum Plant was the recipient of the first place prize in the Interplant Safety Competition, closely followed by Assembly Hall and Hino in the second and third place respectively.

The Interplant Safety Competition has led to TSAM being one of the global leaders in the promotion of a Clean and Bright Workplace. It also creates energy and promotes a uniform culture of safety across TSAM.

improving safetyComplacency is not an option when it comes to our safety performance. We continue to reinforce a safety-first culture, improve our safety management processes and set stretching safety targets across all our operations.

We also invest extensively in safety training. In August 2015, TSAM opened its Safety Dojo, a targeted training centre for employees, contractors and suppliers. All employees, from new recruits and team members up to Senior Vice Presidents, go through the Safety Dojo, which comprises 30 training stations covering all aspects of health and safety. The stations and training content are fully interactive and continually updated in line with the latest trends and priorities. In 2016, 2 589 employees went through the Dojo. In 2017, our target is 4 089.

TSAM total incident rate

201620152014

1.621.852.80

1.64

2.83

4.18

targetactual

TSAM STOP-6 cases

201620152014

717

TSAM total injury cases

201620152014

303245

2943

61

targetactual

interplant safety Competition Winners – Quantum Plant



Health and wellnessWe actively encourage our employees to safeguard their personal health and well-being by adopting healthy habits in the workplace and beyond. Our Health Services Department invests significant time and resources into providing support such as health education, primary health assessments and medical treatment. In total, we spent R37.87 million on our employees’ health and wellness in 2016 (2015: R34.45 million).

occupational disease Before commencing work at TSAM, every new employee must undergo a baseline medical designed to identify and support employees with existing conditions. Among other areas, the examination covers blood pressure, glucose and cholesterol levels, vision, hearing, lungs, as well as drug testing.

Our Medical Surveillance Programme (MSP) supports a risk-based targeted approach to addressing the occupational health risks facing employees with specific job profiles before they become serious. It also helps to ensure we test for the right medical outcomes during employee checkups. Employees are assessed at frequencies as determined by the risk of exposure in a particular area, and in line with legal requirements.

Sick leave figures for 2016 suggest that our health and wellness programme is producing positive results. In total, employees recorded 58 625 sick leave days during the year, down from 63 958 days in the previous year.

employee assistance programmeOur Employee Assistance Programme (EAP) gives all TSAM employees and their immediate families access to a wide range of treatment and support services. These include:

• Counsellingonstressmanagement,substance abuse, financial and legal issues

• Freeprimaryhealthcare

• On-siteeducationsessionsresponding to emerging trends and employee needs. Topics range from substance abuse and stress management to couple- and family-related issues and conflict management

• Useofatoll-freeEAPhotlinecovering issues such as legal advice, guidance on living positively with HIV/Aids, dealing with stress, depression, psychiatric conditions and substance abuse problems

During the year, 2 065 employees took advantage of the services offered by the EAP, up significantly from 1 552 in 2015 and from 922 in 2014.

We believe this comes as a result of increased communication and heightened awareness of the services offered among employees. We continue to fine-tune the programme according to our workforce’s changing needs and concerns, for example, by introducing an on-site financial consultant to provide guidance on managing personal finances.

tsaM’s greatest health risks

Our regular occupational health assessments consistently indicate that

the three areas that pose the biggest risk to our employees are welding, chassis

manufacturing and paint plants.


Hiv/aidsHIV/Aids remains a serious problem in South Africa and its negative impact spreads beyond those afflicted and their families, to their wider communities, the national economy, and businesses like TSAM. We remain committed to addressing these problems using a combination of preventative action, counselling and treatment for our HIV-positive employees.

All TSAM employees have access to on-site health counselling and testing. Individuals who test positive are referred to the HIV Wellness Programme, which provides monitoring, monthly checkups, treatment and counselling services.

From 2016, we have followed a test-and-treat protocol, whereby all employees who test positive for HIV (i.e. have a CD4 count below 500) are, with their consent, counselled and placed on the anti-retroviral therapy (ARV) programme.

This programme is offered in partnership with the KwaZulu-Natal Department of Health and the Prince Mshiyeni Hospital in Durban. TSAM provides the hospital with a

HIV testing (% of workforce)

All employees

201620152014

65%

80% target

64%66%

95% target

HIV testing (% of workforce)

Senior management

201620152014

87%93%92%

doctor, who consults patients one day a week. In addition, we fund a full-time HIV counsellor as well as a pharmacist to assist with dispensing medication.

The programme team meets once a month to review performance and address any concerns. Employees with significantly lower CD4 counts or other parameters that indicate advanced diseases are placed on a fast-track plan to ensure they receive the treatment they need as a matter of urgency.

During 2016, 943 employees either received therapy through the HIV/Aids programme or took part in it, a similar number to 2015. The disease accounted for 15% of all employee deaths during the year compared to 33% in 2015, which improvement we believe is a reflection of the success of our programme.

Raising HIV/Aids awareness among our employees remains an urgent priority. In 2016, we continued our efforts to inform employees about the disease by providing educational material and taking part in initiatives such as World Aids Day. We actively encourage our employees to follow

a healthy lifestyle and participate in voluntary counselling and testing (VCT).

Despite our efforts, the rates of voluntary HIV testing among our employees has remained somewhat below our set targets. We have considered various reasons as to why this is the case, for example changes in headcount, and how we measure the rate of testing. Going forward, we intend to review our targets and strengthen our VCT incentives.

To reduce the stigma that often accompanies the disease, we are working to ensure all employees are familiar with our HIV/Aids policy, which states that no employee will suffer discrimination or any other form of victimisation as a result of their status.


tuberculosisBecause tuberculosis (TB) is closely linked to HIV/Aids-related deaths, preventing, detecting and treating the disease is a high priority at TSAM and throughout South Africa. We encourage all employees diagnosed with TB to undergo voluntary HIV tests. In 2016, 21 employees contracted tuberculosis compared to 42 in 2015 – a great improvement. Of these, 71% took voluntary HIV tests (2015: 74%).

We offer on-site TB screening and treatment to employees with the illness. All individuals who test positive are given sick leave during the infectious period and their health is closely monitored throughout their recovery. We also screen colleagues in areas affected by the disease and complete TB questionnaires with employees during their routine clinic consultations.

Respect for human rightsRespect for human rights lies at the heart of being a good corporate citizen. Everything that TSAM does as a business is aligned to the Constitution of South Africa and labour protection legislation, as well as to our internal code of conduct which ensures the utmost protection of and respect for human rights in South Africa.

Going forward, we are planning a transformation project aimed at promoting better understanding and inclusivity in the TSAM workplace.

Number of employee cases

201620152014

214234

% of TB patients who took

voluntary HIV tests

201620152014

717489

Looking aheadAs with last year, our training and

development priorities over the next 12 months will include planned spending on black participants to meet

legal requirements. In addition, we will continue our investment in apprenticeships, learnerships for able-bodied and disabled trainees,

and our skills programme for unemployed learners.

We will continue to provide study assistance support for education development, graduate trainees and in-service trainees. Our focus will also cover soft skills through our global content, Toyota-specific and legislative

training programmes.

To enhance our safety training, we have planned Kiken Yochi (danger prediction) training for 2017, with the particular intention of reducing the number of

maintenance-related injuries. Preventing injuries is not only about avoiding accidents, but on predicting the danger. A Kiken Yochi activity is therefore to

predict danger, and take action to avoid the danger that causes injury.

Our health and wellness priorities in the coming year will include the launch of a TSAM-wide automated healthcare system to manage all patient

files electronically. This is expected to equip the company to further improve the quality and timing of care it provides to

its employees. With the same goal in mind, we also plan to introduce a patient electronic

appointment system.



socialcontributionactivitiesAs a responsible corporate citizen, we believe it is our duty to invest time and resources into strengthening our local communities. Not only do our community support initiatives in TSAM’s areas of operation help to improve lives at grassroots level, but they are also helping to build an equitable and prosperous future for all South Africans.

TMC’s two main pillars – Kaizen (continuous improvement) and respect for people – encourages us to respect diverse cultures and customs, while guiding Toyota’s contribution to economic and social development through corporate donations. TSAM ensures that the corporate social investment (CSI) programmes that we are involved in have an empowering, sustainable and measurable impact on the intended beneficiaries.

Highlights• TSAMinvestedR17.3millionin

communities during 2016

Challenges• Therearealotofdeserving

projects that we would like to get involved in; however, due to restrictive budgets, we cannot assist them all


Community supportWe use two channels to invest in our communities: the Toyota South Africa (TSA) Foundation and our Corporate Social Investment (CSI) Department. In both channels, our approach is based on TMC’s global focus areas: environment, road safety, local needs and, primarily, education.

Our education initiatives through the TSA Foundation support early childhood development and primary education projects. As the basis for a sustainable future, we prioritise education and skills development with a view to empowering people to be independent, self-reliant and ultimately themselves to be contributors to the well-being of society.

Our CSI programme focuses on education, civic and community service, and health and human service projects. In addition, TSAM supports environmental and road safety initiatives through smaller campaigns and ad hoc contributions managed by various departments and divisions.

TSAM’s CSI policy ensures efforts and expenditure are effectively and proactively co-ordinated and managed, to the best advantage for the company, beneficiaries and other stakeholders.

the tsa FoundationThe TSA Foundation was established by Dr Albert Wessels, TSAM’s founder, in 1989 with support from a donation from TMC. Dr Wessels was passionate about education and specified that the Foundation should support primary school education projects in the fields of mathematics, science and technology. The Foundation receives almost all of its annual funding from TSAM. In 2016, it spent R7 million on projects.

Toyota TeachAround 95% of the TSA Foundation’s community investment is earmarked for its flagship Toyota Teach primary schools project. Toyota Teach has benefited more than 250 schools and 25 000 learners since inception. The project takes a whole-school approach, improving the quality of education at primary schools in KwaZulu-Natal. It spent R6.7 million on the programme in 2016.

In 2016, the Foundation implemented a new intensive mentoring and coaching approach as part of the programme. The concept was introduced for a first period of nine months at two of the nine schools supported by Toyota Teach and the impacts are already positive. For example, the schools have found that the presence of mentors at the schools on a weekly basis has assisted in addressing curriculum challenges straightaway. A report-back session by the schools in April 2017 indicated that challenges are being addressed, and teachers trained through the programme were maintaining their progress and working at the current curriculum expectations.

The Toyota Teach project has now completed a four-year cycle with nine schools in the Umlazi district, which finished at the end of 2016. External evaluators then determined what the impact of the project was on the schools. They found, among other results, that:

• Schoolfunctionalityhasincreasedfrom43%to87%.The schools have systems in place.

• Thegeneralethosofteachershaschanged;forexample,teachers are in class, teaching and absenteeism has decreased dramatically.

• Teachersaremoreconfidentadheringtothecurriculumrequirements and implementation is taking place in a meaningful way.

• Morecurriculumcoverageistakingplace.

• ThegradeRlearnersaremoreschoolreadyandgrade1teachers can start with the curriculum in the first term.

• Learnersaredoingmoreworkintheirexercisebooksandtheir overall results have improved.

• Learnerswhohavebarrierstolearninghavebeenbettercatered for as teachers were shown how to develop learning programmes for these learners.


soCiety | soCiaL ContriBution aCtivities (continued)

tsaM supports rally to readIn 2016, TSAM proudly sponsored R67 000 towards the Eshowe Rally to Read in KwaZulu-Natal, bringing library books to rural schools in dire need of resources.

This is our 18th year participating in the Rally to Read and a team of eight TSAM staff members were able to visit Ngedlesi Primary School and Inyathi Primary School on behalf of TSAM.

Being one of the smallest schools in the Rally, Ngedlesi Primary School teachers have been provided with the necessary additional educational training and skills development. The results of this have been noticeable, with many of these teachers’ students from grades R and 1 being able to read on their own.

At Inyathi Primary School, teachers agreed that the Rally to Read project has greatly enhanced their work, as previously they were struggling to plan proficiently and to implement all prescribed teaching methodologies.

Corporate social investmentTSAM’s CSI programme began in 1972 with the formation of the Albert Wessels Trust. Its objectives are to:

• Supportcommunitydevelopmentand elements of innovation that focus on people and create value in society towards transformational change

• Empowerruralandlocalcommunities

• ReinforceTSAM’scommitmentto sustainable community development by ensuring a consistent approach to CSI that aligns with the business’s strategic aims

• EnsureTSAMcanmeasurereturnon investment from its social investment programmes

In 2016, our CSI Department employed one full-time person and reported to the General Manager Corporate Affairs.

TSAM’s project support is intended to have a meaningful impact through medium- to long-term relationships with the projects we fund. Below is a summary of some of the CSI projects we supported in 2016:

• Junior Achievers (Johannesburg) is an enterprise development programme in Tembisa offered to disadvantaged learners. In 2016, 40 learners participated in the programme. In addition to financial support, TSAM donated 670 mugs to the project, which the learners designed with their own artwork and then sold to the local community, making a profit of almost R600 for themselves.

• Khalipha ECD Crèche: TSAM donated early childhood development materials to the crèche to get learners ready for school, as well as soft toys for babies.

• Tembaletu Trust offers maths and science tuition to learners in disadvantaged schools.

employee involvementWe encourage our employees to get involved by donating money and goods to various initiatives and drives throughout the year. In 2016, they were actively involved in supporting the Santa Shoebox initiative, which donates gifts to underprivileged children and orphanages around Durban, Sandton and Atlas Road.

Through automatic payroll deductions, employees can contribute to the Ubuntu Community Chest programme, supporting organisations involved in HIV/Aids initiatives, child care, crime prevention, job creation, empowerment of the disabled and elderly care. The company matches these donations Rand for Rand.

in-kind donationsIn addition to our financial contributions, TSAM provides a number of in-kind donations such as vehicles and used equipment from our facilities. In 2016, we donated vehicles to a number of organisations, including: Bobby Bear (which assists rape victims); KZN Cerebral Palsy (which assists children with cerebral palsy and autism) and Durban Life Line (which offers counselling and HIV/Aids testing).

Other donations included food hampers, old furniture and computers to schools and youth projects that we support, including ICARE, the Tino Tech Funda Youth Project and schools supported by Toyota Teach. We also gave old carpets to the Sandton SPCA.


safer trucks and safer roadsHino is a proud supporter of FleetWatch, a magazine and industry partner that monitors, discusses and reports on all aspects of the South African trucking industry. It covers topics such as fleet management and safety, vehicle insurance and finance, driver health and training, effective vehicle maintenance, overloading and transportation of dangerous goods, and the impact of heavy duty transport on the environment. FleetWatch provides Hino with an important platform to educate our dealers on these and many other relevant issues within the trucking industry.

In October 2016, in partnership with Hino, the SA Road Federation (SARF) and the Road Transport Management System (RTMS), FleetWatch hosted its first Brake & Tyre Watch event dedicated specifically to employees, truck operators and dealers. Ordinarily, it is traffic officials who are trained to assess truck roadworthiness, and so this event is the first of its kind aimed at educating the wider truck industry about these aspects of truck and road safety.

In-house, Hino continues to provide fleet owners with free driver orientation to instil safe and efficient practices. In 2016, we trained 125 drivers from 25 companies in the principles of safety, weight distribution and maintenance.

initiatives for improving traffic safetyToyota’s ultimate goal is zero casualties from traffic accidents. To achieve that, the development of safe vehicles is, of course, important but it is also essential to educate people, namely drivers and pedestrians, and to ensure safe traffic infrastructure including traffic signals and roads.

Towards achieving a safe mobility society, TMC has promoted an integrated three-part initiative, involving people, vehicles and the traffic environment, as well as promoting the pursuit of real-world safety in Toyota vehicles by learning from actual accidents and incorporating that knowledge into vehicle development.

TSAM works actively with government and all road safety agencies and initiatives, including the SA Guild of Motoring Journalists (Committee for Active Road Safety). We also offer advanced driver training courses to both companies and individuals, to show our commitment to actively promoting road safety.

In January 2017, we introduced speed limit governors on our heavier vehicles. New vehicles sold between 3 500 tonnes and 9 000 tonnes, such as the Quantum, are now limited to 100 km/h. Vehicles heavier than 9 000 tonnes are limited to 80 km/h.

Integrated Three-part Initiative

peopleLectures, etc. to raise awareness of traffic

safety

vehiclesDevelopment of technologies for

accident avoidance and driver/passenger

protection in a car collision

traffic environment

Information on traffic jams, and

maintenance and management of traffic

lights and roads


As part of our Olympic sponsorship, TSAM is proud to be home to Tyrone Pillay – a Paralympic athlete.

Tyrone is a tech manager in our IT Department in Durban, is a Paralympic shot-putter. He won a bronze medal at the Rio Games in 2016 and a gold at the All Africa Games. “I was about to retire,” says Pillay, “but Toyota’s Olympic partnership has inspired me to continue. It’s the first of its kind. I love that we at Toyota really can make a difference in the world – and that is exactly what the Paralympics stand for.”

soCiety | soCiaL ContriBution aCtivities (continued)

Creating an enriched societyToyota is looking forward to the number of opportunities that will be offered to enrich society through its Olympic partnerships. We believe that sport and mobility go hand in hand, and that sport is an important way of bringing people together equally and creating an enriched, affluent society.

TSAM also sponsors a number of other sports and sporting events around South Africa. Toyota is the principal sponsor for the Toyota Cheetahs, the Kaizer Chiefs and the Toyota Cycle Lab club, as well as the Warrior Race, South Africa’s largest obstacle course race series. Toyota is also the main vehicle sponsor and longstanding partner of the Comrades Marathon.

ever better

MOBILITY FOR ALL

Toyota gives freedom and joy of mobility to

all the people by facing social problems

Transmit excellence of mobility

Propose future mobility communities

ever better

TOYOTABeloved and heartful global Toyota

ever better

SOCIETYToyota works hard to

achieve an ever-better and affluent society

Create social legacy

Support to para-sports in each country with

Paralympic rights, etc.

Credit: Getty/As seen in Toyota Connect

Looking aheadGoing forward, we will continue

to grow and build upon the progress made in the Toyota Teach project and, more broadly, to empower

local communities, enhancing the commitment of TSAM to building sustainable communities and a

sustainable society.


environmental management has always been a core focus at toyota. since the inception of the toyota earth Charter (introduced in 1992), environmental measures and guidelines have progressively improved and strengthened. the toyota environmental Challenge 2050 guides what we need to do to meet our environmental goals at a local, national and global scale.

ENVIRON-MENT

Ch

aLL

en

Ge

20

50


Our approachIn 2015, TMC introduced its first long-term environmental plan: the ambitious Toyota Environmental Challenge 2050. Through this challenge, Toyota aims to achieve zero environmental impact and move towards contributing to a better society through net positive impact.

The six challenges within Challenge 2050 are aligned with four important themes: low carbon, recycling, harmony with nature and environmental management. Collectively, these themes and challenges form the backbone of TSAM’s five-year environmental action plans. The current plan runs from 2016 to 2020.

Material issues and risksThis year, as part of aligning TSAM’s Sustainability Report to TMC’s Sustainable Management Report, we have aligned our three most material environmental themes, namely emissions reduction, resource efficiency and creating an environmentally friendly society, with the six challenges of the Toyota Environmental Challenge 2050, which constitute our material environmental issues.

Material theme Material issue: Toyota Environmental Challenge 2050

Emissions reduction

• Challenge1:newvehiclezeroCO2 emissions • Challenge2:lifecyclezeroCO2 emissions • Challenge3:plantCO2 emissions

Resource efficiency

• Challenge4:minimisingandoptimisingwaterusage• Challenge5:establishingarecycling-basedsociety

and systems

Society in harmony with nature

• Challenge6:establishingafuturesocietyinharmony with nature (including banned chemicals and substances of concern)

61

65

68

Significantly, this plan and the 2050 Challenge are intentionally cross-cutting by design. We believe that achieving the objectives will require the contribution of each department, function and team in their own way, and will work closely with our employees and business partners accordingly.

Material environmental risks

Durban Both Johannesburg

• Effluent/storm water management

• VOC emissions• Chemical

management

• Energy consumption• Water consumption• Logistics CO2

• Substances of concern

• Waste management

• Dealer environmental risks

• Potential impacts on adjacent wetland at Boksburg Service Parts Warehouse

• Brand/corporate image


ENVIRON-MENT

Eco awareness Improving our environmental performance and ensuring we meet the 2050 challenge begins with our employees. Accordingly, we work hard to raise their awareness of environmental issues through regular ECO-awareness communications. These serve to share our philosophy, performance results, expectations and tips across the entire workforce. June is designated as Environmental Month in Toyota and it is celebrated through various environmental awareness initiatives at all our operations.

Our production plants are ISO14001-certified. The most recent recertification in our three-year cycle occurred in 2016. We are updating our management system in line with the ISO14001:2015 revision for our next recertification.

A similar level of commitment to reduce the impact of their operations is expected from our suppliers and dealers.

StructuresTSAM’s South Africa Environmental Committee (SAEC) is chaired by the CEO (who is responsible for environmental performance). The committee comprises executive managers from various operations and functions. Its remit includes oversight of performance against targets, the efficacy of our environmental management systems, legal compliance, mitigation of environmental risks and ensuring consistency and alignment with global initiatives. Three function-specific environmental working groups support the SAEC, specifically: (i) Manufacturing; (ii) Manufacturing Support; and (iii) Marketing and Sales.

Toyota Earth Charter


Toyota Environmental Challenge 2050

TMC’s Sixth Environmental Action Plan

Toyota Environmental Committee

South Africa Environmental Committee (SAEC)

tsam’s Group safety, health and environment Department

Manufacturing Support

Environmental Working Group

Marketing and Sales

Environmental Working Group

Manufacturing Environmental Working Group

TSAM’s Fourth Environmental Action Plan (2016 – 2020)


emissionsreduction

Highlights• EstablishedPlant2050Zero

CO2 strategy

• RooftopsolarPVinstallations:our Johannesburg facilities achieved a 5% reduction in electricity use and associated CO2 emissions in 2016

• ConvertingfromfluorescenttoLED lighting

Challenges• Costofinstallations

• EncouraginghigherlevelsofISO14001 compliance among smaller/ancillary suppliers

• ThetransitioningoftheQuantum production line, with its resultant additional production days, increased energy usage and thus emissions

Challenge 1: new vehicle zero CO2 emissions challenge

Promoting Development of Next-generation Vehicles with Electric Power and Widespread Use According to Their Features

Developing Technologies to Achieve the Leading Fuel Efficiency Performance

Toyota has decided to go beyond global expectations for emissions reduction and challenge itself to reduce vehicle CO2 emissions by 90% based on 2010 levels, by 2050.

To realise this, in addition to mileage improvement of engine-driven vehicles, Toyota is promoting the development of next-generation vehicles with low or zero CO2 emissions – hybrid vehicles (HV), plug-in hybrid vehicles (PHV), electric vehicles (EV), and fuel cell vehicles (FCV) – and working to accelerate the spread of these vehicles. These eco-friendly vehicles can start making a contribution to society only when they come into widespread use.

Toyota will also co-operate with relevant stakeholders to provide support necessary for building the infrastructure for widespread adoption of EVs and FCVs. TSAM currently tracks CO2 emissions of all vehicles based on average weighted CO2 figures. How we tackle meeting this challenge in the near future will in large part be directed by the global strategy.

Hybrid vehicles in south africaHybrid vehicles (HV) play an important role in emissions reduction. HVs are available from our A segment vehicles (e.g. Yaris) through to premium luxury vehicles (e.g. Lexus). The most popular are our Prius models, which are becoming increasingly popular globally.

South Africa does not see as high an uptake of HVs as other markets, in part due to the lack of national incentives to support sales. Therefore, TSAM has an important role to play in driving education of the public about fuel consumption and other environmental benefits that accrue from using HVs.


environMent | emissions reDuCtion (continued)

Challenge 2: life cycle zero CO2 emissions challenge

Promoting Environmental Management in Product Development (Eco-VAS)

Pursuing Increased Transport Efficiency and Reducing CO2 Emissions in Logistics Activities

By life cycle zero CO2 emissions challenge, we mean efforts to completely eliminate CO2 emissions not only while driving our vehicles and during their production, but also in the processes of parts manufacturing, logistics operations and dealers.

For instance, we are developing and expanding our use of materials with lower CO2 emissions during vehicle production, aiming to reduce the quantity of materials and number of parts used in each vehicle. We are also adopting more recycled materials and enhancing initiatives aimed at designing vehicles for easy disassembly. This means working with our suppliers, dealers and with all the stakeholders within our logistics network to reduce emissions impacts.

suppliersIn 2016, TSAM launched the third updated iteration of our Green Purchasing Guidelines to suppliers. Based on the six key elements of the 2050 challenge, these guidelines communicate our requirements for providing safe and clean products. Suppliers are encouraged to embrace the challenges and begin implementing solutions, and they are expected to provide monthly reporting updates to TSAM on their progress. We have piloted this reporting programme with 15 of our major suppliers, applying the principle of yokoten (sharing) of good Kaizen ideas to other suppliers.

All suppliers are expected to achieve ISO14001 certification and TSAM actively supports them in fulfilling this requirement. In 2016, 112 of our suppliers were certificated (or recertificated). This is fewer than in 2015 (138) due to a decrease in the overall number of TSAM suppliers, but our target was achieved.

For 2017/18, we aim to increase the percentage of suppliers with ISO14001 certification by 17.8% to 132, although this may be a challenge as encouraging higher levels of compliance among some of our small suppliers who provide ancillary services, such as cleaning or landscaping, can be difficult.

suppliers2017

target2016

target2016

actual 2015 2014

Number of ISO14001-certified suppliers 132 112 112 138 136

DealersThrough our Dealer Environmental Risk Audit Programme (DERAP), dealers receive assistance and guidance on minimising their environmental impact. In addition to promoting initiatives linked to the proper disposal of waste and treatment of waste water, we also address other environmental issues such as the management of chemical products, ozone-depleting substances and dealership gardens.

Dealers are certified on ECO I when compliance is achieved on the five DERAP fundamentals. This is validated through biannual audits and verified by TSAM’s after-sales managers. As part of ECO I, dealers are required to have an environmental policy, and to appoint a person responsible for environment within their dealerships.

To achieve ECO III (the advanced DERAP standard), dealers are required to implement more stringent environmental controls, and must record and submit all required environmental indicators (for example, electricity and water consumption, or specified waste data) monthly to TSAM. These results contribute to the points dealers earn through our Customer Service Development Programme (CSDP).

All Toyota and Lexus dealers have achieved ECO I certification; 61% have achieved ECO III certification, up from 55% in 2015. We are targeting 67% certification by end-March 2018. Hino dealers are


2017target

2016target

2016actual

2015actual

ECO I-CERTIFIED DEALERS

Toyota 202 198 199 195

Lexus 17 15 16 15

Hino 66 65 65 64

ECO III-CERTIFIED DEALERS

Toyota 130 – 115 104

Lexus 17 16 16 15

Hino 10 – – –

loGistiCs2017

target2016

target2016

actual 2015 2014

Logistics emissions: logistics control division (kilotonnes CO2) 6.7 7.4 7.51 5.97 6.8

Logistics emissions: vehicle logistics division (kilotonnes CO2) 41.71 44.4 47.16 47.8 44.47

Service parts (kilotonnes CO2)12.1

(excluding air) 15.99 16.77 15.77 16.9

expected, at this stage, to achieve ECO I certification, and 100% have achieved this goal.

All dealers are encouraged to fit LED lights to reduce electricity consumption. Some go beyond this in their environmental initiatives, each in their own way, such as in George where solar panels have been installed.

In light of Toyota’s 2050 Environmental Challenge, and ever-changing international environmental standards, TSAM will be reviewing and revising the Dealer ECO standards in 2017, with the aim of further strengthening these standards.

The emissions resulting from our logistics operations relate to the transport of vehicles, service parts

and components to and from our network of business partners.

Road transport is the mainstay of our logistics network, but we are actively transitioning much of our transport to the rail network, which moves goods at a far lower carbon footprint. Rail transport has proved to be 70% more CO2-efficient in some cases. In addition, trains help to remove trucks from South Africa’s roads, lessening congestion and wear and tear on the nation’s ageing road infrastructure. On average, each train has the potential to replace 10 trucks from the road. While we have made good progress in moving vehicle transport to rail, this year we have also begun to investigate the feasibility of parts transport using the same mode of transport.

As a result of these efforts, our logistics teams reduced their CO2 emissions from 47.8 kilotonnes in 2015 to 47.16 kilotonnes in 2016. However, this was above our target of 44.40 kilotonnes. Our emissions were also above target and, in fact, increased for both our logistics control division and service parts. Various factors contributed to these increases: larger volumes of units, strike situations and a number of emergency deliveries.

We are therefore making even further efforts to reduce our emissions. We have re-examined our parts delivery routes to consolidate loads where feasible, and integrate return transport planning. In 2016, various truck modifications were made and drivers trained to promote greater efficiency on the roads.


environMent | emissions reDuCtion (continued)

Challenge 3: plant CO2 emissions challenge

CO2 Emission Reduction in Production Activities

CO2 is also generated during the vehicle manufacturing process. The two main pillars of our strategy to achieve zero CO2 emissions at our plants are improvement of manufacturing technology and switching to different forms of energy.

To cut CO2 emissions, our aim is to simplify and rationalise the manufacturing process to shorten it and reduce time. We are also introducing mechanisms that do not use energy, and adopting a number of renewable energy sources.

TSAM uses three forms of energy in our operations: electricity, liquefied petroleum gas (LPG) and methane gas. The volume of CO2 we emit is directly linked to our consumption of these energy sources.

We did not achieve our targets for overall emissions, nor carbon intensity during 2016. This is most immediately because the impact of transitioning the Quantum production line continues to be felt: 18 additional production days increased energy usage and thus emissions.

However, we are proud of the progress we did achieve. In 2016, we spent R15 million on plant CO2 reduction. All of this cost was absorbed and not passed on to the customer.

At Prospecton, our goal is to reduce annual CO2 output from 144 000 tonnes in 2016 to 97 000 tonnes by 2025. A budget of R400 million (R200 million to 2020; R200 million to 2025) has been set aside for energy projects that will achieve this.

As part of our efforts to achieve our emissions goals, TSAM has implemented rooftop solar PV projects in Johannesburg (Atlas Road) and Durban to provide electricity. Phase 1 at Atlas has resulted in a 5% reduction in electricity. Phase 2 has been implemented and a further 4% reduction is expected. Similarly, phase 1 in Durban has resulted in a saving of 259 tonnes CO2 between November 2016 and March 2017; the annual saving is expected to be 547 tonnes CO2.

Fluorescent lighting has been converted to more efficient LED lighting at our Durban premises, resulting in savings of 68.7 tonnes CO2. The plan is to roll this out to all plants. We have also converted our electric geysers to heat pumps in Durban, saving 285 tonnes CO2.

2017target

2016target

2016actual 2015 2014

Production emissions (kilotonnes CO2) 135.4 136.3 140.7 123.8 121.5

Production units (’000) 121.5 135.6 138.6 118.6 146.9

Carbon intensity (kg CO2/vehicle manufactured) 1 114.05 1 005.4 1 014.78 1 043.84 826.43

“toyota has decided to go beyond global expectations for emissions reduction.”


resourceefficiency

Highlights• Achievedallwater-reduction

targets despite disruptive external production factors

• Overallwaterconsumptionwasreduced by 29 472 kl in 2016. Dependence on municipal water at our Atlas plant has been reduced by more than 60% over three years

• Newcentrifugetechnologyatour Plastics Plant has resulted in a four-tonne reduction in waste produced

Challenges• Fluctuatingproduction

numbers, as well as disruptive factors such as strike action, negatively affect our ability to reduce our water use and promote other efficiency initiatives

Challenge 4: challenge of minimising and optimising water usage

Reduce Water Consumption in Production Activities

As the world’s population climbs, demand for water will increase. Given the relatively finite supply of fresh water, the percentage of the global population suffering water shortages will increase. Access to reliable supplies of clean, safe water is a critical issue to South Africans given the water scarcity the country faces.

In automobile manufacturing, a lot of water is used in painting and other processes. Consequently we feel it is our responsibility to use the resource responsibly. We continue to set rigorous targets and measures designed to reduce the water consumed in the production of Toyota, Lexus and Hino vehicles.

Our two measures to achieve this reduction are first, a comprehensive reduction of the amount of water used; and, second, significant water purification before returning it to the earth. Measures that we have implemented to achieve this include rainwater harvesting and reuse of waste water through recycling within the manufacturing process.

In 2016, water consumption performance was affected by the same disruptive factors impacting electricity consumption and carbon emissions. Despite this, we successfully achieved our water-saving targets through a series of initiatives that included rainwater harvesting, reuse of cooling tower blowdown water, low-flow shower heads and tap restrictors, and quickly responded to leaks.

One of the greatest environmental risks facing our Prospecton plant remains contamination of the surface water that surrounds it. To ensure that no chemicals, materials or

2017target

2016target

2016actual 2015 2014

Water consumption (kl) 689 625 731 166 694 059 685 910 633 072

Water intensity (kl/vehicle manufactured) 5.68 5.39 5.01 5.78 4.28


environMent | resourCe effiCienCy (continued)

contaminated water flow into this water system, we apply a poka-yoke system, which is Japanese for ‘absolute control’. This system has helped to prevent any incidents of water contamination.

In total, we spent R3.2 million on water-related initiatives during 2016 and reduced our overall water consumption by 29 472 kl. Our initiatives are also achieving long-term success. At Atlas, for example, by optimising rainwater collection systems, introducing a borehole, and landscaping with indigenous plants, our dependence on municipal water has been reduced by over 60% over three years.

Part of our success lies in efforts made to educate and inform employees about South Africa’s chronic water shortages and how to manage water wisely at home, particularly during June – Toyota’s Global Environment Month.

tMC 2016 Global eco awardIn order to incentivise employees to come up with innovative environmental solutions TSAM holds an internal competition each year. The top two entrants are entered into the global TMC competition. In 2016, the Plastics Plant in Durban won this award for the water reduction Kaizen in the injection moulding process.

The improvement reduces water used in the Plastics Plant chiller units (used to cool the injection moulding machines for bumper manufacture) with alkaline water which is produced in-house at our Paint Plant. Additional benefits of this Kaizen activity include reduced corrosion, reduced system cleaning and flushing, stable mould temperatures, improved bumper quality and stable production (reduced downtime due to maintenance). Implementation of this Kaizen also eliminated the need for chemical treatment of the chiller unit.

We have implemented the activity in all the injection moulding machines at the Plastics Plant as well as the Bumper Paint Mix chiller unit.

“We continue to implement

rigorous targets and measures

to reduce water consumed in the

production of our vehicles.”


Challenge 5: challenge of establishing a recycling-based society and systems

Reduce Consumption of Dwindling Natural Resources Through Use of Renewable Resources and Recycled Materials

Achieve Industry-leading Levels in Easy-to-dismantle Design for Effective Resource Recycling

Overseas Rollout of Original Recycling Systems for End-of-life Vehicle Resources

Contribute Worldwide Through End-of-life Vehicle Treatment and Recycling Technology Developed in Japan

Reduce Waste and Use Resources Efficiently in Production Activities

Reduce Packaging Materials and Use Resources Efficiently in Logistics Activities

Batteries from HVs pose an environmental threat. Consequently, TSAM has implemented a plan to recover batteries and dispose of them appropriately. Recovery rates increased by 2% in 2016, to 88% by the end March 2017; the target is to ensure a 100% recovery in 2020. We are furthermore aiming to implement a battery recycling project (as implemented by Toyota in Europe) during the course of 2017.

An increasing global population is accelerating the large-scale exploitation of the world’s natural resources. Disposal is already unable to keep pace with the amounts of generated waste, resulting in large-scale environmental pollution, and this trend will only worsen.

In order to improve resource efficiency towards a recycling-based society, initiatives are needed in four key areas:

(1) Utilising eco-friendly materials

(2) Making use of parts for longer

(3) Developing recycling technologies

(4) Recovery of materials from end-of-life vehicles

Toyota aims to establish the ultimate recycling-based society and will promote the Toyota Global Car-to-Car Recycle Project globally, turning end-of-life vehicles back into useful resources for the production of vehicles.

While South Africa is relatively undeveloped in this space, TSAM has implemented a number of measures to improve waste management. Our objective is to use our resources so efficiently that we send zero waste from our operating activities to landfill.

In 2016, we again surpassed our waste intensity target producing just 18.26 kilograms per unit produced. This was in large part due to our focus on implementing centrifuge technology at our Plastics Plant which dewaters the sludge produced there. It has resulted in a four-tonne reduction in waste. We plan to roll this technology out to our other plants.

Further savings were made by TSAM’s focus on extending the life cycle of pallets through ‘pallet harvesting’. In doing so, we have saved 149 tonnes of packing material. We plan to extend the focus to box harvesting in 2017. At Atlas, food waste is converted to compost through the Bokashi method; the success of this initiative will see it being rolled out to our Sandton offices in 2017.

2017target

2016target

2016actual 2015 2014

Waste to landfill (tonnes) 2 507 3 064 2 532 2 853 3 087

Waste intensity (kg/vehicle manufactured) 20.63 22.60 18.26 24.06 21.00


societyin harmonywith nature

Highlights• Wehavecollaboratedwith

BirdLife SA to instal a number of solutions that encourage biodiversity in and around TSAM’s buildings

• Fiftynewtreeswereplantedin 2016 around our plants and buildings

Challenges• Thenewpaintcolours(and

their testing) of the new Fortuner and Hilux made it difficult to achieve our target of volatile organic compounds emitted in respect of body paint

• Largeinitialcapitalexpenditure required for many environmental efficiency projects

Challenge 6: challenge of establishing a future society in harmony with nature

Promote Expansion of Nature Conservation Activities Connecting Communities

Boost Grant for Environmental Activities Connecting to the World

Boost Contribution to Environmental Education Connecting to the Future

If humans and nature are to coexist into the future, we need to conserve the rich natural systems in all regions. To Toyota, activities such as planting trees at our various plants, environmental conservation activities in surrounding areas, and environmental education to enrich the lives of communities in each region are very important. We promote these kinds of activities at group, regional and organisational levels.

TMC created the Toyota Biodiversity Guidelines (a voluntary policy initiative)

in March 2008. They consist of TMC’s basic philosophy on biodiversity-related initiatives with the following three action items:

(1) Contribution through technology

(2) Collaboration and co-operation with society

(3) Information disclosure

At TSAM, we have entered into a diverse range of partnerships including those with specialist environmental NGOs. We also engage in greening projects related to our footprint; of particular note is the work we do in planting trees.

Community/partnershipsWe have partnered with and supported three significant environmental NGOs through our Today for Tomorrow Programme: the World Wildlife Fund (WWF), Conservation SA, and BirdLife SA. The latter two organisations have, for example, each received a Toyota Hilux for their transportation needs in often rugged terrain. We have also collaborated with BirdLife SA in respect of installing solutions that encourage biodiversity in and around TSAM’s buildings, and we are working with WWF towards becoming a contributing partner in their grassland project.


Over the last few years, our Arbour Day activities have become more structured, and we have focused specifically on going into schools. We also continue to support Earth Hour.

Beyond our own activities, TSAM encourages broader environmental efforts and awareness. We encourage our dealers to plant trees in their communities; we sponsor the Warrior Race which is proudly zero footprint on the environment; and we encourage the use of recycling bins at the Cheetah’s stadium in Bloemfontein.

Greening our footprintThere is a focused imperative to transition the green spaces at all of our buildings, by promoting the use of indigenous plants and removal of alien vegetation. To this end, 50 trees were planted in September 2016 in and around our plants and buildings; our target for 2017 is 100 trees. We also do ‘event greening’ where, for example, the flower arrangements are indigenous, the events are water-wise, and organic food suppliers are used.

view of wetland looking towards toyota view of dam area looking north

atlas wetland area

TSAM, together with neighbouring landowners, has been involved in

the management and monitoring of the wetland area adjacent to the Atlas

Warehouse. The condition of the wetland has significantly improved, and supports pristine birdlife. Annual evaluations and sampling are conducted to keep track

of its condition, and invasive alien eradication programmes are

in place.

basic Concept of the initiativesCognisant of the importance of biodiversity and based on the Guiding Principles at Toyota, we are addressing biodiversity issues such as the automobile and housing businesses, new businesses, and contributing to resolving social issues with the aim of realising enhanced quality of the environment and prosperous societies, and achieving sustainable

development.

Contribution through

TechnologyToyota is pursuing

the possibilities of biotechnology,

afforestation technology, and environmental

technology with the aim of balancing biodiversity and

corporate activities.

Collaboration and Co-operation with

SocietyToyota seeks to build collaborative and co-operative relationships with a wide range of

organisations involved with biodiversity

throughout society, including governmental

bodies, international organisations, and non-

profit organisations.

Information Disclosure

Toyota voluntarily discloses its initiatives relating to biodiversity

by synchronising corporate activities and the outcome of such initiatives with the aim of sharing information broadly

with society and thereby contributing to the development of a sustainable society.


environMent | soCiety in harmony With nature (continued)

banned chemicals and substances of concernTo make our manufacturing process and end products as safe as possible, we replace potentially harmful substances with more benign equivalents wherever we can. Our Zero-use Policy articulates our approach to banned chemicals and substances of concern (SOC). As part of our Green Purchasing Guidelines, we expect our suppliers to avoid using SOCs in their products and services.

At the end of 2016, the International Material Data System (IMDS) listed 1 152 banned substances, up from 1 122 in 2015. TMC has a global G-Cats system which identifies any non-complying materials that any Toyota plant may use, which are listed in the IMDS, and escalates them automatically for resolution. TSAM became part of G-Cats in 2016; and since then four of our employees have undergone training on the system by experts from Japan, Europe and the USA.

We work closely with our suppliers to ensure none of these substances are used in components that we use to build our vehicles, or anywhere in our

production processes. Responsibility for our screening and verification system belongs to TSAM’s Chemical Management Task Team, which reported zero incidents involving banned substances during 2016. The number of spills reported also remained at zero.

During the year, we continued to work towards reducing the volume of volatile organic compounds (VOC) that we use in our painting processes. Although VOCs are not banned, they can still have a negative impact on people’s health and their environment.

In 2016, we reduced use of VOCs across the board and surpassed our targets in the bumper paint and Quantum paint. We were still slightly above target for VOCs emitted in respect of body paint; this is still due to new paint colours associated with the new Fortuner and Hilux models.

“if humans and nature are to

coexist into the future, we need

to conserve the rich natural systems in all

regions.”

2017target

2016target

2016actual 2015 2014

Volatile organic compounds emitted (g/m2 body paint applied) 19.30 19.50 19.90 20.56 19.86

Volatile organic compounds emitted (g/m2 bumper paint applied) 156.60 249.00 159.90 185.85 218.90

Volatile organic compounds emitted (g/m2 Quantum paint applied) 30.00 31.00 29.99 – –


Looking aheadGoing forward, we intend to further strengthen employee

awareness of Toyota’s environmental imperatives by installing live screens at Atlas to show electricity consumption and solar power-

generation information. To reduce our electricity costs and associated carbon footprint we are also planning projects to reduce peak demand, such as

installing sensor lighting in our warehouses.

TSAM is currently studying a water recycling and treatment project in our paint facilities. With our paint shop producing 14% of total waste water, this project could reduce the

output by 10%. However, the large capital expenditure required to implement the project will be a factor in the final decision as to whether to implement.

In Sandton, we will implement the Bokashi composting project to reduce food waste going to landfill. Garden irrigation systems will be linked to a borehole on this site, to reduce reliance on municipal water supply, and low-flow shower installations are planned to

further reduce consumption.

In partnership with Conservation SA we will launch a sustainable farming project in October 2017 given the importance we see in sustainable farming being

the way of the future. And, excitingly, as part of TMC’s focus on mobility solutions at the 2020 Olympics to be held in Tokyo, TSAM is gearing

up to push the use of hybrids in the southern African market.


performancesummaryShareholders

2016 2015 2014

total domestic sales: toyota, Lexus and hino (units) 117 071 119 014 127 534

Passenger car sales: toyota and Lexus (units) 113 525 63 911 67 997

Light commercial vehicle sales: toyota (units) 36 609 51 132 55 693

medium commercial vehicle sales: hino (units) 2 112 6 116 2 278

heavy commercial vehicle sales: hino (units) 1 367 1 546 1 566

export units: toyota 53 322 45 041 64 789

Customers and qualityCompetitive customer experience (%) 2016 2015 2014

toyota 93.0% 90.9% 92.0%

Lexus 93.0% 91.2% 91.4%

Business partnerssuppliers (page 31)

2016 2015 2014

number of iso14001-certified suppliers 112 138 136

Dealers (page 34)total dealerships 2016 2015 2014

toyota 198 198 191

Lexus 17 17 12

hino 65 65 64

Kodawari-certified dealers: toyota199

(target 199)186

(target 184)161

(target 159)

Kodawari-certified dealers: Lexus (80% certification)13

(target 15)0

(target 4)0

(target 4)


Employees2016 2015 2014

headcount (full-time employees) 6 927 8 539 8 051

fatalities 0 0 0

total injury frequency rate 1.62 1.85 2.80

dti Broad-based Black economic empowerment (BBBee) contribution level 8 8* 5

* Restated

Social contribution2016 2015 2014

total social investment (rm) 17.3 14.3 25.4

Environmental stewardship2016 2015 2014

Production emissions (kilotonnes Co2) 140.7 123.8 121.5

Carbon intensity (kg Co2/vehicle manufactured) 1 014.78 1 043.84 826.43

Water intensity (kl/vehicle manufactured) 5.01 5.78 4.28

Waste intensity (kg/vehicle manufactured) 18.26 24.06 21.0

volatile organic compounds emitted (g/m2 body paint applied) 19.90 20.56 19.86


scrupulous integrity is the cornerstone of tsaM’s approach to business, which requires strict adherence to a clear set of systems, policies and codes; from compliance with international and south african legislation, regulations and standards, to upholding the values and principles of tMC (and applying them in a locally relevant manner). this rigorous approach ensures we achieve business success in a manner that protects our stakeholders’ long-term interests while safeguarding the environment and society.

GOVER-NANCE

Ch

aLL

en

Ge

20

50


Material theme Material issue

Governance• Approachandstructures

• Compliance

Ethics

Risk management

76

79

80


approachand structures

BoardOur board of directors provides ongoing oversight and guidance to the company on matters of strategic importance. Chaired by the President and CEO, the TSAM board comprises South African and Japanese executive directors. The Toyota South Africa (TSA) board comprises executive and non-executive directors from both countries.

In addition to representing TMC on the TSAM and TSA boards, our Japanese board members play an important role by sharing information, expertise and new perspectives with South African colleagues.

When TSA became wholly owned by TMC in 2008, TSAM’s executive committee was reconstituted as the TSAM board. It receives leadership and oversight from the TSA board, whose members ratify financial statements and major decisions taken by the TSAM board. It also relies on input, when necessary, from executives responsible for oversight of certain strategic topics or areas. In periodic executive and cross-functional meetings, employees may deliver input directly to the board.

The TSA directors are the final arbiters of the company’s internal financial controls. These are designed to provide reasonable assurance that financial statements are reliable, assets are accounted for, and

misstatements and losses are detected and prevented. During the year under review, the board feels that these systems and processes functioned adequately.

TSA and TSAM directors are prepared for their roles by undergoing annual training through the Institute of Directors. These sessions cover responsibilities, liabilities and specifications of their fiduciary duty, including ethical responsibilities. They are particularly helpful for TMC directors who may be less familiar with the terms of South African legislation.

We recognise that there is benefit to be derived from a board that is diverse in race, gender, nationality and experience, and are striving to improve the representation of black and female directors. The board also evaluates its composition annually to ensure an appropriate mix of skills and experience.

The board composition ensures a balance of authority, precluding any one director from exercising unfettered powers of decision-making. Our directors are individuals of a high calibre with diverse backgrounds and expertise; they ensure independent judgement and broad deliberations in the decision-making process.

Committeesremuneration CommitteeThe Remuneration Committee reports to the TSA board. It comprises members from both TMC and TSAM and meets as and when necessary. Its mandate is to ensure that remuneration policies attract and retain critical skills, align with the company’s strategy and drive performance. The Succession Planning Committee supports the Remuneration Committee in building a strong talent pipeline through incentivisation and development.

audit, Corporate Compliance, social and ethics CommitteeIn line with the Companies Act, TSA extended the mandate of the Audit and Corporate Compliance Committee to include oversight of social and ethical issues in 2012. In addition to its previous responsibilities, the committee oversees social and economic development, corporate citizenship, the environment, consumer relationships, labour and employment, health and public safety. Committee members are selected for their experience and knowledge and are kept informed by representatives from various areas of the business who provide updates on strategic issues. The committee continues to focus on issues related to social responsibility, employment equity, skills development and health services.


tsaM executive committeesOur executive committees are responsible for overseeing the operations of TSAM’s various divisions and functions. These include Sales and Marketing, Manufacturing, and Corporate Services and Finance. In 2016, two new executive committees were added: Manufacturing Support and Human Resources.

Corporate Services and Finance Exco

Sales and Marketing Exco

Human Resources Exco

Manufacturing Support Exco

Toyota Motor

Corporation Board

Manufacturing Exco

Toyota South Africa

Board

TSAM Board

Risk Management Committee

Remuneration Committee

Audit, Corporate Compliance, Social and Ethics

Committee

Key focus areasIn addition to our continuous focus on risk management (see page 80), during 2016 the board also focused specifically on three key issues:

• Protectionofpersonalinformation(POPI)

• CybersecurityandITsystemstrength (a major risk to all companies internationally)

• KingIVcompliance

popiWe are in the process of putting in place the necessary systems, policies, procedures and culture to comply with the comprehensive personal protection requirements of POPI. Getting these basics is particularly important as compliance has to be ensured across our whole value chain: all employees, and our dealer network.

Governance of itCybersecurity and cybercrime are issues that affect all business globally and TSAM is no exception. To address this ever-present and growing risk, TSAM is in the process of establishing our own security operations centre, in order to check logs and analyse trends on a consolidated dashboard. This allows us to pick up risks early, which increases the chance of prevention.


We are constantly revitalising and updating our systems; in doing so, we increasingly ensure alignment with TMC’s systems. The strength of being part of the TMC global system is that TSAM can be informed in real time of global problems, thus offering better, quicker protection.

We have also continued to raise awareness and clarify expectations among employees, which includes training for all employees on common risks and safe practices in the workplace. While we have not had any breaches or losses related to cybercrime, we remain vigilant and will continue our efforts to protect our confidential information and technology from potential threats.

King ivGood corporate governance is very important for sustainable development, not only for the individual company as in TSAM, but also for the economy as a whole. Therefore, TSAM strives for a high level of governance and, as such, good governance is continuously promoted within TSAM.

ComplianceAs always, TSAM continues to implement measures that ensure adherence to all relevant legislative and regulatory frameworks impacting the business, the industry and the country. Selected legislation and our response to each is detailed alongside.

TSAM prides itself on being a good South African corporate citizen and assists regulatory bodies, such as the Competition Commission, by disclosing any relevant necessary information as and when requested to do so.

GovernanCe | aPProaCh anD struCtures (continued)

legislation, regulation and standards

Companies Act No. 71 of 2008

The board’s mission is to operate in the best interest of the company and all its stakeholders. In doing so, directors are both agents of the shareholder and trustees of the company. TSAM is subject to the provisions of the Companies Act, the company’s memorandum of incorporation and any other applicable laws and regulatory provisions in accordance with the recommendations of the Code of Governance Principles for South Africa.

Protection of Personal Information Act No. 4 of 2013 (POPI)

POPI is aimed at regulating the processing of personal information, protecting persons (both natural and juristic) from the abuse of personal information and providing rights and remedies to victims of the unlawful processing of personal information. TSAM has taken adequate security measures to ensure compliance.

Consumer Protection Act No. 68 of 2008

The Act promotes a fair, accessible and sustainable marketplace for consumer products and services. TSAM through regular communication and training activities ensures that all stakeholders, including the dealer network, prohibits certain unfair marketing and business practices and encourages responsible consumer behaviour.

Employment Equity Act No. 55 of 1998

The Act promotes equal opportunities and fair treatment to all and to implement measures to protect those disadvantaged in the past by unfair discrimination.

TSAM’s employment equity plan to achieve equity in the workplace sets out the objectives, procedures and responsibilities that TSAM is undertaking.

Broad-based Black Economic Empowerment Act No. 53 of 2003

TSAM supports BBBEE, a government policy to advance economic transformation and enhance the economic participation of black people in the South African economy.

Occupational Health and Safety Act No. 85 of 1993

The Act safeguards the health and safety of people in the workplace and includes stipulations for protecting persons using machinery. Health and safety remains a focus area at TSAM.

Looking ahead

In the year ahead we will provide increased and improved cybersecurity

systems and protocols. Coupled with this, education of employees on the importance

of customer information and tight IT security will be enhanced. Legislative

and regulatory amendments will continue to be monitored and

responded to timeously.


ethicsConducting business ethically and respecting people is an important part of how we earn and preserve the trust of our stakeholders. As such, we ensure that we conduct our business according to the strictest ethical code and do our utmost to create a safe, transparent working environment.

TSAM requires all employees and business partners to adhere to its code of conduct, which aligns to TMC’s global code of conduct. Upon joining TSAM, all new employees, graduates and contractors are required to acknowledge receipt of the code. Our dealers and suppliers are obliged to adhere to TSAM’s own ethical standards in terms of our dealer and supplier agreements and standards, and this is strictly enforced to manage any possible risk to the Toyota brand.

Whistle-blowingIf a breach of ethics occurs, employees are empowered to raise the matters through various avenues. Primarily, issues can be escalated through line management. We also have a whistle-blowing guidelines policy that outlines the procedures for reporting suspected instances of corruption and ensures that employees are not unfairly penalised for coming forward.

TSAM subscribes to ‘Tip-offs Anonymous’, an independent whistle-blowing service that enables employees to report illegal actions and ethical misconduct. Tip-offs can also be submitted via phone, fax and e-mail. All are actively investigated, followed up and resolved by John Piek, Senior Manager: Security and Investigations, which allocates the matter for investigation where appropriate. In 2016, we received 31 tip-offs. Of these, 81% appeared to be either false or no evidence could be found to substantiate the claims. In the remaining cases:

• CR15/10/2016,employeewasdismissed for dishonesty in terms of dishonesty

• CR02/11/2016,correctiveactiontaken against employee for alcohol-related offence

• CR08/11/2016,employeewasdismissed for theft

• CR05/11/2017,correctiveactiontaken against employee for conflict of interest

• CR05/07/2017,employeewasdismissed for dishonesty

• CR05/06/2016,correctiveactiontaken against employee for drug-related offence

For customers, we encourage calling our Customer Care Centre to offer feedback or raise issues. See page 28 for detail on our customer care programmes.

TSAM did not incur any fines during the year.


riskmanagementWe are exposed to a wide range of risks and opportunities as a result of the complexity of our operations and the forces that continue to transform our business environment. These risks span labour and politics, global economics and the environment.

At the beginning of 2016, TSAM took the decision to align its approach to risk management with TMC’s Toyota Global Risk Management Standards (TGRS).

TGRS defines risk as the effect of uncertainties in meeting the

Expectations of ToyotaPotential impact if we fail to deliver

Ultimate effect to the achievement of business objectives

Customers • Provisionofgoodproductsand services

• Lossofcustomers• Badreputation

• Reputation• Lawsand

regulations• Business

continuity• Finance

Employees • Provisionofopportunitiesfor social contribution, self-realisation and growth

• Stableemploymentrelationship

• Goodworkingenvironment/conditions

• Declineofquality,productivity• Occurrenceoffraud,

scandals• Lossofemployees

Business partners

• Anequalbusinessrelationship that enables mutual prosperity

• Impacttobusinesscontinuitydue to bankruptcy

• Declineofquality

Shareholder • Continuousgrowth• Timelyandproper

disclosure of operating results and financial situation

• Lossofcapitalallocationsupport

Community/Global society

• Contributiontothelocalcommunity

• Protectionofthenaturalenvironment

• Beingagoodcorporatecitizen

• Compliancewiththelaw

• Badreputation• Administrative/Judicial

punishment

Stakeholders

expectations of stakeholders while heading towards achievement of the corporate vision.

We have successfully implemented our new risk management structure. As we finalise the alignment process, we have already benefited from the effective global system. Risk management roles and responsibilities have been better defined and communicated, and risks are addressed at operational as well as strategic levels. We are also confident that our risk reporting structures and systems have been improved.

The five steps of TGRS risk management:

1. Risk identification

2. Risk evaluation

3. Risk integration

4. Countermeasure

5. Monitoring


TSAM Exco

TMCTSA Board

Audit, Risk and Compliance Committee

Regional risk reporting

Key risk report to Exco

Divisional risk report

Strategic risk report

Divisional risk reports and information

Risk Management Committee

(SVPs and VP as required)

Divisional Excos

VP Finance (RMC Chair)

Toyota Financial Services/

Guardrisk/Cataler

CRO/ Head of Risk

Risk secretariat (1 x full-time equivalent

supporting risk reporting)

Divisional/Functional Risk

Managers Champions

Compliance

Internal Audit

risk management structure


GovernanCe | risK manaGement (continued)

Risk Context Response

Legal and Compliance

TSAM is subject to a wide range of legislation which it monitors to ensure compliance. Any breach could result in fines or sanctions that affect the company’s profitability and may have adverse reputational consequences

Proactively monitoring input and operational implementation plans and frameworks on emerging legislation. Increase resource allocation to the different compliance units. Increased engagement with business leaders in SA to advocate for effective policies

BBBEE The changes to the BBBEE codes requires accelerated transformation and specifically focused at black ownership of the company. Failure to achieve such targets may impact our sustainability and competitiveness. This is particularly important given that we are part of a multinational structure

Active oversight of scorecards. BBBEE Obeya reviews with senior executive management. Clear initiatives in place to meet employment equity targets. Supplier development initiatives planned

Data breach/Cybersecurity

There is a notable increase in cyberattacks globally where some companies have been operationally impacted as a result of these. The integrity and confidentiality of our information could be compromised should we experience a data breach or cybersecurity attack

We have implemented security operations centre and global threat intelligence centre to monitor and respond to data breaches and cyberthreats. Ongoing information Security awareness programmes. Improved infrastructure security to meet global standards

Currency volatility The significant aspects of this risk includes the impact of the Rand volatility against major currencies on the pricing of imported CBUs, and CKD products. This impacts the competitiveness and profitability of our domestic vehicle business. The volatility of the cross-rates between the US Dollar and Euro also impacts our CKD exports

We have developed a localisation strategy to complement our current localisation efforts of our CKD parts. Presently we have three phases of which phases 1 and 2 have been approved and/or implemented. Strict pricing reviews of our products against foreign currency movements. Diversification of our portfolio from a geographic perspective as we export to Africa and Europe while supporting the domestic market

Safety critical defects

The failure of safety critical parts could lead to injury and/or loss of life which we take very seriously. This may have an adverse reputational impact on our brand

We have engaged a robust global campaign process to rectify faults at recall. In addition to correcting the faults we also implement remedial action plans to apply lessons learnt to prevent reoccurrence. We conduct regular audits on safety critical parts and processes

Toyota South Africa Motors toyota Building | stand 1 | Wesco Park | sandton | 2146 www.toyota.co.za twitter: @toyotasa instagram: toyota_sa facebook: www.facebook.com/toyotasouthafrica

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