Working Toward the Mobility Society of the Future

Message from the President The Source of Our Value Creation: What Makes Us Toyota Value Creation Story: Working toward the Mobility Society of the Future Business Foundations for Value Creation Corporate Data >Message from the CSO > Roundtable Discussion with the Outside Directors > Dialogue with Institutional Investors on Corporate Governance > Corporate Governance Message from the CFO > Capital Strategy > The Environment > Vehicle Safety > Quality and Information Security > Intellectual Property and Privacy >Value Chain Collaboration Human Rights Diversity and Inclusion > Human Resource Development >Health and Safety and Social Contribution Activities Risk Management and Compliance Risk Management and Compliance Risk Management Fundamental Approach Amid a period of tremendous change in the con- ditions and priorities of the automotive industry, including the push toward carbon neutrality and CASE, Toyota is constantly taking on new chal- lenges and has been working to reinforce its risk management structure to handle the correspond- ing increase in uncertainty. Toyota has appointed a Chief Risk Officer (CRO) and Deputy Chief Risk Officer (DCRO) charged with global risk manage- ment. The CRO and DCRO are working to pre- vent and mitigate the impact of risks that could arise in Toyota's global business activities. Beneath the CRO and DCRO are Regional CROS appointed to handle risk management in specific regions. At head office departments (such as Accounting and Purchasing), risk management by function is assigned to chief officers and risk managers of individual divisions, while at in-house companies, risk management by product is assigned to the company presidents and risk managers of individual divisions. This structure enables coordination and cooperation between the regional head offices and sections. Business Continuity Management In preparation for large-scale disasters, such as earthquakes and floods, Toyota formulates Business Continuity Plans (BCPs) for the rapid res- toration of business operations using limited resources. Toyota works to constantly improve the practical effectiveness of its BCPs through the implementation of a PDCA cycle, including training. These activities constitute our Business Continuity Management (BCM), promoted through coordina- tion among employees and their families, Toyota Group companies and suppliers, and Toyota. Through this process of BCP formulation and review, we aim to develop risk-resilient organiza- tions, workplaces, and individuals. Building a Disaster-resilient Supply Chain Toyota provides disaster recovery support in the following order of priority: (1) Humanitarian aid; (2) Early recovery of the affected area; (3) Restoration of Toyota's operations and production. Since the Great East Japan Earthquake, we have worked with suppliers in each country and region to build a disaster-resilient supply chain by sharing supply chain information and implementing disaster- readiness measures to ensure prompt initial response and early recovery. Compliance Fundamental Approach The Guiding Principles at Toyota state that Toyota shall "honor the language and spirit of the law of every country and region, and undertake open and fair business activities to be a strong corporate citi- zen of the world." Toyota believes that by adhering to this principle in its actions, it can fulfill its corpo- rate social responsibility and ensure compliance. The Toyota Code of Conduct outlines the basic frame of mind that all Toyota personnel should adopt. It sets forth concrete guidelines to assist them in upholding the Guiding Principles at Toyota and doing their part to ensure that Toyota carries out its corporate social responsibility. A booklet containing the Toyota Code of Conduct is distrib- uted to all employees, including seconded and dispatched employees, as part of efforts to ensure compliance. To promote compliance awareness from top management down to each individual employee, Toyota implements a variety of compli- ance education initiatives. Toyota Code of Conduct Bribery and Corruption Prevention Measures Toyota adopted the Anti-bribery Guidelines for internal divisions and business partners in 2012 to promote the eradication of bribery and corruption. In line with the Guidelines, we strive to prevent bribery and corruption. Taxation Anti-bribery Guidelines Since its founding, Toyota has aspired to enrich peoples' lives through car making and to enrich local economies by creating employment and TOYOTA MOTOR CORPORATION paying taxes as a corporate presence firmly root- ed in local communities. Toyota seeks to achieve sustainable financial performance through the Toyota Production System (TPS) and cost reduction and is commit- ted to its responsibility to making appropriate tax payments as the most basic form of social contri- bution in the communities in which it operates. Tax Policy "Speak Up" Hotline Toyota's "Speak Up" Hotline enables quick and appropriate responses to workplace- and work-related concerns, complaints, or questions that employees and other relevant parties may have. We promote awareness of the hotline using the Company intranet and various other media. Consultations can be submitted through a law firm, the Company website, email, telephone, or other means. For topics related to employees or workplaces, the hotline is also open to third par- ties, including employees' family members and business partners, in addition to employees. The hotline can also be used anonymously. The content of a consultation is investigated with care to ensure that hotline users who wish to remain anonymous cannot be identified. If the results of the investigation indicate an issue, a response is implemented immediately. (Hotline consultations handled in FY2022: 727) Checks to Enhance Compliance Every year, we implement checks, including at global subsidiaries, to enhance compliance. Fields to be checked are selected by assessing risk lev- els and importance to Toyota. In FY2022, checks were carried out to examine compliance with the Antimonopoly Law, bribery/corruption prevention, compliance with the Act on the Protection of Personal Information, and other top- ics. Issues or matters requiring improvement iden- tified through checks are incorporated into the next fiscal year's action plans to ensure ongoing improvement and engagement. 54 INTEGRATED REPORT Certification Testing Misconduct at Hino Motors On March 4, 2022, consolidated subsidiary Hino Motors, Ltd. confirmed and publicly gave public notice of past misconduct related to its applica- tions for certification concerning the emissions and fuel economy performance of its vehicle engines for the Japanese market. A special inves- tigation committee consisting of independent out- side experts commissioned by Hino investigated the matter and found that the misconduct was longstanding. In September 2022, the Ministry of Land, Infrastructure, Transport and Tourism issued a correction order and revoked the type approval for engine models found to be noncom- pliant with emission performance standards. In October 2022, Hino submitted a Recurrence Prevention Report to the Ministry and published a plan for reforms to ensure that such misconduct does not occur again. We believe that the source of the problem was deep-rooted shortcomings in Hino's corporate culture. Management did not fully understand or appreciate the front-line situation and misplaced management priorities by neglecting the develop- ment of compliance awareness and establish- ment of a sound culture while pursuing the expansion of revenue and sales. In this context, Hino lost sight of its approach to vehicle manu- facturing. Going forward, Hino will implement the planned reforms throughout the company and continuously improve and strengthen its efforts through periodic reviews in conjunction with out- side experts. We believe that these measures will not pro- duce immediate results, so Hino must make per- sistent and continuous efforts over time to be reborn as a company worthy of the trust of its stakeholders. Toyota will continue supporting Hino so that the measures announced will be effective. Specifically, Toyota will support Hino in areas and operations where it can, including work related to engine certification for light-duty trucks, as the company has requested. Furthermore, Toyota will share its accumulated know-how with Hino in such areas as responding to suppliers affected by the issue. The Toyota Group regards legal compliance as the foundation of management. We will spare no effort to regain the trust of customers and to pre- vent recurrences.