Key Sustainability Issues (Materiality)

The Toyota Tsusho Group has identified the Key Sustainability Issues (Materiality) that it needs to be aware of as it pursues the realization of its corporate philosophy and Global Vision to clarify those social issues that it needs to focus on based on its management strategies. In the process of identifying those issues, we engaged in repeated discussions while taking into consideration the opinions of management and other internal and external stakeholders.

The Toyota Tsusho Group's Materialities correspond to 11 of the SDGs. The company is achieving sustainable growth and contributingto solutions to social issues and the realization of the SDGs byeach employee engaging in business activities with an awareness ofthese Materialities. To clarify the objectives, we have been settingMateriality KPIs since 2020.

The Toyota Tsusho Group has been setting Materiality Key Performance Indicators (KPIs) since 2020 to provide concrete indicators of how our business activities are contributing to achieving the SDGs. We will continue to apply the PDCA cycle to solutions to social issues and undertake business with the degree of achievement of these KPIs in mind at all times.

When setting the KPIs, numerous discussions were carried out with the sales divisions, including the division CEOs, to reflect the approaches for solving social issues through business operations based on the Materialities and the SDGs in the policies of each sales division. Furthermore, the Sustainability Management Committee reflected the opinions of management and outside directors in the KPIs. To indicate the direction the Toyota Tsusho Group should take, we either quantified and set quantitative targets for representative themes of our respective Materialities or identified qualitative targets with the expectation of soon switching to quantitative targets, making clear the actions that contribute toward solving the issues.

Furthermore, these Materialities are not intended to be unchanging, and they are reviewed periodically by the Sustainability Management Committee, taking into consideration changes in the group’s business environment and other factors, such as changing international trends and needs, and are appropriately revised. In a Sustainability Management Committee meeting held in the fiscal year ended March 31, 2022, greenhouse gas emissions reduction targets announced in July 2021 were approved for monitoring as Materiality KPIs.

We incorporated into our employee evaluation indicators “contribution to the development of a sustainable society and action taken with an awareness of our Materialities” to encourage individual employees to take action with an awareness of the need to solve social issues. Sustainability lectures are held on an ongoing basis. In the fiscal year ended March 31, 2022, we invited a guest from the sustainability department of a leading company to give a lecture to our management and employees on that company’s initiatives, and more than 600 people attended. Training on sustainability and Materialities is also conducted for new employees, including mid-career hires.

The Toyota Tsusho Group's Key Sustainability Issues (Materiality)

Process of Identifying Key Sustainability Issues (Materiality)

①Issue Identification ②Prioritize Issues with Stakeholders ③Validation ④Identify Our Materialities ⑤ Setting KPIs ⑥ Initiatives ⑦ Review of Progress and Contents

Issue Identification

  • We referred to guidelines such as CSR and ESG guidelines (GRI Standards, ISO 26000, United Nations Global Compact, FTSE, and MSCI) and the standards of Toyota Environmental Challenge 2050, focusing on the 17 goals and 169 targets of the SDGs, which are considered to comprehensively cover global social issues. From these, we identified and organized social issues that affect the company.
  • We checked that these organized social issues aligned with our corporate philosophy, behavioral guidelines, Global Vision, and Mid-term Business Plan, and identified 43 social issues.

Prioritize Issues with Stakeholders

Through questionnaires and dialogue with stakeholders both inside and outside the Toyota Tsusho Group regarding the identified 43 social issues, we prioritized expectations and requests for the group, as well as the importance of these social issues to the group, and created a Materiality matrix.

Stakeholders

Internal
Interviews with individual sales divisions, and questionnaires administered to all Toyota Tsusho employees, CSR staff in Japanese-affiliated companies, and overseas staff
External
Interviews with Japanese institutional investors, and questionnaires administered to general investors

Narrowing Down

We created proposed materialities using a materiality matrix, focusing on social issues with a high level of importance inside and outside the Company.

The materialities identified are not the only materialities which the Group will address. Instead, they are the materialities identified as being the most important for the Group.

Validation

Confirm the suitability of the identification process and the proposed materialities.

Discussion Participants

  • Discussion among management and division CEOs (current sales division CEOs
  • Individual interviews with outside directors

Main Opinions from Participants

  • It is noteworthy that the materialities are prepared after conducting a well-established process.
  • This is no longer a time in which countries and governments can accomplish whatever they want on their own. It is necessary for society to change, and the Company needs to be aware of changing its systems and programs. It is necessary to refer to the knowledge of NGOs, NPOs, and other organizations.
  • When viewed from the perspective of the materialities, we need to start a discussion on businesses that will become contradictory, businesses that should be slowed down, and businesses that we should terminate in the future. I want to establish materialities that will lead to an image of a set of guidelines for the future.
  • It is necessary to change employee awareness so that we can expand perspectives from the Company's existing method of creating business by focusing on resolving customer problems and shifting from social issues that are global problems to a concept of business creation. Accumulating "quick hits" in the form of successful experiences will likely generate a virtuous cycle.
  • The more amicable the language the vaguer it becomes, and this can give the impression that ultimately nothing will be done. So we need to use sharp language and adopt innovations.
  • For employees, if the individual topics are narrowed down too far, the next step is difficult. But, if they are too general, it is difficult to know what to do. It is necessary to organize topics in a way that makes it easy for employees, as they are the ones who are to act.

Identify Our Materialities

Our Materialities were approved following discussions by the CSR Committee (currently, the Sustainability Management Committee) at meetings held in March 2018. Our Materialities were explained and reported to the directors and Audit & Supervisory Board members at a Board of Directors' meeting.

Setting KPIs

Initiatives to solve issues were set as KPIs in 2020 to track progress on the identified Materialities.

  • *For the KPI as for each matreriality, please see「Initiatives to Address Key Sustainability Issues」

Initiatives

We implemented a Materiality-based approach to solve social issues through business operations in the policies of each sales division and incorporated it into our business activities.

We established the specialized Task Force for Promoting Carbon Neutrality in April 2021 to accelerate efforts to address climate change. In April 2022, the Carbon Neutrality Promotion Department was formed.

Review of Progress and Contents

At the Sustainability Management Committee, the sales division CEOs report on the progress made in their respective divisions.

They will be reviewed periodically, and Materialities and KPIs will be revised as appropriate, taking into consideration changes in the Toyota Tsusho Group's business environment, international trends and needs, and issues that emerge during the PDCA cycle.

KPI