Toyota s approaches to conflict minerals issues

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Gabriel Roger Paul
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1 Toyota s approaches to conflict minerals issues Toyota (Toyota Motor Corporation and its subsidiaries) is taking various measures to realize protection of human rights. *Toyota s overall efforts to protect human rights are shown in a Web page below. At present, various inhumane activities have been reported in some parts of the world, including massacre and abduction of civilians by armed forces, looting, and drafting of child soldiers. And forces engaging in such activities are coming under severe international criticism. It is said that funding inhumane activities by armed forces is the money they earn through illegal exploitation of mineral resources. In particular, armed forces are said to be profiting from the smuggling of such resources extracted illegally in the Democratic Republic of the Congo, a resource-rich country located in the central part of the African Continent. Toyota recognizes that t violation of human rights in conflicted areas, environmental destruction, illegal extraction of natural resources and the issue of conflict minerals that have become funding sources for armed forces all these have become a serious social issue under the supply-chain network. Based on that recognition, Toyota has been taking actions through our business to solve the above mentioned issues. Toyota has been conducting a full-fledged study on the use of conflict minerals and activities of smelters since May A report summing up the study the use of conflict minerals during January-December of 2013 was compiled and submitted to the U.S. Securities and Exchange Commission on May 30, Toyota aims to become a company that does not procure and use Tin, Tantalum, Tungsten and Gold (3TG), the origin of which is the DRC or its surrounding countries and extracted illegally in violation of human rights. For that purpose, Toyota ota will work together with parts suppliers, automotive industry organizations and other relevant organizations.

2 Toyota s policy on conflict minerals Toyota has adopted Policies and Approaches to Conflict Minerals Issue a set of guidelines the company is supposed to refer to in tackling conflict minerals issues. Based on the guidelines, Toyota is dealing with the issues. Meanwhile, the company revised the Toyota Supplier CSR Guidelines in 2012, asking its suppliers to engage in material procurement in a responsible manner. Toyota's Policies and Approaches to Conflict Minerals Issues Toyota and its subsidiaries promote obtainment of materials with full deliberation and care to avoid the procurement or usage of materials which are unlawful or which are obtained through unethical or otherwise unacceptable means. We recognize that the issue of the conflict minerals originating in the Democratic Republic of the Congo or an adjoining country is one of the significant social issues among supply chains. We aim at procurement and usage that are free from conflict minerals originating in the Democratic Republic of the Congo or an adjoining country and relating to illegal conduct including human rights infringement. To realize such procurement and usage, we conduct inquiries tracing back through our supply chains and confirm if conflict minerals are used. In addition we take appropriate steps to discontinue procurement of materials that can cause social problems or finance armed groups if such usage is detected. Based on mutually beneficial relationships, we ask our suppliers to understand our policies and approaches and to promote responsible material procurement. The link to our policy relating to conflict minerals is included below:

3 Excerpt from the Toyota Supplier CSR Guidelines ( Responsible Material Procurement ) Obtain materials with full deliberation and care to avoid the procurement or usage of materials which are unlawful or which are obtained through unethical or otherwise unacceptable means (such as conflicts minerals*). We expect suppliers to take appropriate steps to discontinue procurement of these materials if usage is detected. *Minerals originating from the DRC and neighboring countries that have directly or indirectly contributed to the financing of armed groups. TOYOTA Supplier CSR Guidelines

4 Establishment of an in-house system, industry-to-industry collaboration, and participation in Public-Private Alliance for Responsible Minerals Trade (PPA) In 2011, Toyota launched a cross sectional task force in charge of dealing with conflict minerals issues. Consisting of representatives from relevant departments within the company, the team, formally called the Conflict Minerals Task Force, has begun considering what actions to be taken regarding conflict minerals. Also in 2011, Toyota set up a working group on conflict minerals jointly with the JAPIA *1. The move represented the domestic automotive industry's industry-wide efforts to cope with issues associated with conflict minerals. In 2012, Toyota and parts suppliers belonging to the JAPIA joined hands in conducting a trial-based survey on conflict minerals used in their products, kicking off their preparations for launching full-fledged investigation into the issues. In 2013, the Japan Conflict-Free Sourcing Working Group was established by automakers and companies belonging to the JEITA *2. Main activities undertaken by the Japan Conflict-Free Sourcing Working Group include the investigation of identify regarding firms engaging in smelting in conflicted areas and making visits to organizations representing smelters. The association has been also pressing for smelters to obtain a certificate confirming that minerals they use in their products are DRC conflict free. Toyota's efforts to work with other industry groups on the issue of conflict minerals are not limited to activities in Japan. Toyota has been working globally to deal with the issue. For example, the company has participated in a working group set up by the AIAG *3, a U.S. group tasked with setting code of conduct for the auto industry. Toyota has been also cooperating with the CFSI *4 through activities of each working group. In addition, Toyota has been taking part in the Public-Private Alliance for Responsible Minerals Trade ( PPA ), a multi-sector initiative led by the U.S. government, auto industry groups and citizen groups to help the DRC break the link between minerals trade and armed forces. Parties participating in the PPA are promoting responsible minerals trade that is free from material procurement in conflicted areas including the DRC and its surrounding countries. Through the participation in the PPA, Toyota is prepared to support global efforts to realize responsible minerals trade. Below are specific measures being taken under the PPA.

Conducting of 2013 survey In May 2013, Toyota launched a full-scale survey on the use of conflict minerals in products of its suppliers.

Specifically, more than 7,000 suppliers operating in Japan and overseas for all kinds of businesses undertaken by Toyota, including automobiles and marine transportation equipment, were asked to

For the survey, Toyota has adopted the Electronics Industry Citizenship Coalition/Global e-sustainability Initiative (EICC-GeSI) Conflict Minerals Reporting Template, which has been widely used by

5 Conducting of 2013 survey In May 2013, Toyota launched a full-scale survey on the use of conflict minerals in products of its suppliers. Since then, the survey has been conducted globally, covering its subsidiaries operating both in Japan and abroad. Specifically, more than 7,000 suppliers operating in Japan and overseas for all kinds of businesses undertaken by Toyota, including automobiles and marine transportation equipment, were asked to check if conflict minerals have made their way into the supply chains of their products. For the survey, Toyota has adopted the Electronics Industry Citizenship Coalition/Global e-sustainability Initiative (EICC-GeSI) Conflict Minerals Reporting Template, which has been widely used by the electronics industry for the efficient and effective survey. Before the survey began, Toyota also held a briefing session for suppliers while formulating a manual detailing how to fill in the survey sheet and developing a tool used to compile survey results. Also, Toyota supported a briefing session co-sponsored by JAPIA and JEITA. In addition, Toyota has been doing its due diligence regarding identification of the origin of minerals being used by its suppliers, and their distribution and production processes in line with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. TOYOTA Suppliers Meeting JAPIA/ JEITA Suppliers Meeting (@ TOYOTA)

6 Results of 2013 survey The 2013 survey results were incorporated into Form SD and Conflict Minerals Report and has been filed to SEC. The report has also been posted on Toyota s Website. Because supply chains of automobile parts are broad and complex, smelters and mines from which minerals bought by Toyota suppliers originated were not identified in a large number of cases covered by the 2013 survey. We have collected several hundred names of smelters and recycling firms for each metal, including those obtained CFS certificates. But some of them could not be identified whether they are smelters or recycling firms in light of publicly accessible Web information. Therefore, identity for some smelters and the place of origin for some minerals were not confirmed.

7 Future efforts Toyota aims to become a company which does not use conflict minerals originating from the Democratic Republic of the Congo (DRC) or an adjoining country that were mined and sold under the control of armed forces to finance conflict and violation of human rights, as materials for their products. Toyota has pledged to become DRC conflict free in collaboration with suppliers. Toyota finds it necessary to establish the environment that enables implementation of due diligence. For that environment to be created, Toyota will gather information on smelters and lobby to organizations of smelters, while working with industry and other groups. Following are steps to be taken by Toyota regarding issues related to conflict minerals. Improve a reasonable country of origin inquiry ("RCOI") survey and due diligence. Improve the measures of the RCOI survey based on feedback from major Tier-1 suppliers. Conduct awareness-raising activities for suppliers such as providing conflict minerals survey-related materials including guidance manuals, holding sessions on a regular basis in cooperation with JAPIA and continuing to communicate and exchange opinions with trade partners with direct business. Encourage smelters/refiners to participate in CFSP through the industry organizations such as AIAG and JAPIA. Continue industry-wide cooperation such as contribution to CFSI through AIAG and participation in PPA. *1 Japan Auto Parts Industries Association *2 Japan Electronics and Information Technology Industries Association *3 Automotive Industry Action Group *4 Conflict-free Sourcing Initiative

8 Overview of Industry-to-industry collaboration USA Japan Automotive Industry AIAG Automotive Companies (TOYOTA etc) Japan Conflict Free Sourcing WG JAPIA Conflict Minerals WG Electronics Industry EICC / GeSI (CFSI) JEITA members Industry groups (Gold, Tin, Tungsten, Tantalum)

Basic Philosophy regarding Human Rights

Respect for Human Rights 07-01 Basic Philosophy regarding Human Rights The Guiding Principles at Toyota and the Toyota Code of Conduct (established in 1998; revised in 2006), which consolidates Toyota