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 Corporate Data for Value Creation 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 policies (purchasing subsidies, supplier support, battery recycling systems, etc.) are advanced in a unified manner. Initiatives must be implemented in coordination with various stakeholders, such as national governments and industry organizations. In its global business activities, Toyota will coor- dinate with national governments to establish infrastructure for promoting electrification while implementing electrified vehicle strategies that contribute to reducing CO2 emissions throughout the entire vehicle life cycle. Initiatives in the Production Field In the production field, we have announced that we aim to achieve carbon neutrality at global plants by 2035, and we are implementing preparations to face such risks as carbon taxes. We are promoting the reduction of CO2 emissions through compre- hensive energy-saving conservation and the intro- duction of renewable energy and hydrogen at plants. We have already achieved 100 percent renewable electricity use at all plants in Europe. Reinforcing Strategic Resilience Toyota will prepare measures to respond to natu- ral disasters, such as formulating (BCPs, strength- ening supply chains by enhancing information. gathering, and improving communication. Working together with not only the automobile industry but all industries, Toyota will implement initiatives that are both practical and sustainable, continuously striving to ensure compatibility with the society of the 1.5°C or less future storyline. To demonstrate progress and validate Toyota's strategies, we will appropriately disclose informa- tion regarding various ESG assessment indicators and enhance dialogue with stakeholders, includ- ing institutional investors. We believe that this will enable stable fund procurement and sustained corporate value enhancement. Media Briefing on Batteries and Carbon Neutrality (September 7, 2021) ► Media Briefing on Battery EV Strategies (December 14, 2021) ► Risk Management a) The Organization's Processes for Identifying and Assessing Climate-related Risks Toyota has a Company-wide risk management system that covers all risks related to its corporate activities and conduct, including climate change. This system is called the Toyota Global Risk Management Standard (TGRS). All risks, including climate change, are identified and assessed based on the TGRS. Risk assessment is carried out based on the two perspectives of magnitude of impact and vul- nerabilities to clarify the substantive financial or strategic impact on the Company's business. The magnitude of impact is assessed compre- hensively based on the four elements of finance, reputation, violation of laws and regulations, and business continuity. Financial impact is assessed on a five-point scale using the ratio to sales as an indicator. Reputation, violation of laws and regula- tions, and business continuation are also assessed on a five-point scale. Vulnerabilities are assessed based on the two elements of countermeasures and clarity of responsible organizations. These assessments are comprehensively exam- ined to reach a comprehensive assessment of the level of seriousness of risks on a four-point scale. b) The Organization's Processes for Managing Climate-related Risks Once risks by region, function (manufacturing, sales, etc.), and product are identified by each division and assessed from the perspectives of magnitude of impact and vulnerability according to the TGRS, each region and each group mutual- ly cooperates and supports one another to imple- ment a prompt response. The group chief officers and in-house company presidents supervise the activities of the in-house companies and, at the subordinate level, the general managers supervise the activities of divisions and implement and mon- itor countermeasures. Furthermore, climate-related risks and oppor- tunities are identified and assessed by the Environmental Product Design Assessment Committee and Production Environment Committee and then deliberated by the relevant divisions and officers. The Environmental Product Design Assessment Committee moni- tors the status of efforts to deal with such issues as fuel economy regulations and procurement, while the Production Environment Committee does the same for such issues as direct opera- tions, including CO2 emission regulations on plants and water risk. Meetings of these two committees are held when an important event arises with the participa- tion of executive- or general manager-level mem- bers of relevant divisions, such as technology, environment, finance, purchasing, and sales. These committees assess risks multiple times a year. Important risks and opportunities that require prompt response are reported as needed to the Board of Directors Meeting, where response measures are determined. c) How Processes for Identifying, Assessing, and Managing Climate-related Risks are Integrated into the Organization's Overall Risk Management As described above, the processes using the TGRS constitute a Company-wide risk manage- ment system that covers all risks and opportuni- ties related to corporate activities and conduct, including climate change. At the meetings of the Environmental Product Design Assessment Committee and Production Environment Committee, which bring together members from relevant divisions, climate-related risks and opportunities are identified and assessed, and countermeasures are examined. Metrics and Targets a) Metrics Used by the Organization to Assess Climate-related Risks and Opportunities in Line with Its Strategy and Risk Management Process Toyota recognizes that setting multiple metrics to comprehensively manage climate-related risks and opportunities is an important measure for adaptation to and mitigation of climate change. As such, Toyota's metrics include not only the amount of CO2 emissions but also other elements deeply related to climate change, such as energy, water, resource recy- cling, and biodiversity. These metrics are systematically incorporated into the following targets as the "six challenges." • The Toyota Environmental Challenge 2050, a long-term target for 2050 The 2030 Milestone, a medium-term target for 2030 • The Seventh Toyota Environmental Action Plan, a short-term target for 2025 Toyota aims to achieve carbon neutrality by 2050 based on the following three "zero challenges." The Life Cycle Zero CO2 Emissions Challenge, cover- ing Scope 1, 2, and 3 along with voluntary initiatives The New Vehicle Zero CO2 Emissions Challenge, focused on TtW* of Category 11 of Scope 3. The Plant Zero CO2 Emissions Challenge, cover- ing Scopes 1 and 2 at production bases and some non-consolidated affiliates (Scope 3) Furthermore, Toyota announced in 2021 that it will aim to achieve carbon neutrality at plants by 2035. Internally, certain carbon prices are used as indicators to examine capital investment and other activities. * TtW: Tank to wheel. CO₂ emissions during driving (CO2 emis- sions during the production of the fuel and electricity are not included; TtW emissions are zero for BEVS and FCEVs b) Scope 1, Scope 2, and, if Appropriate, Scope 3 Greenhouse Gas (GHG) Emissions, and the Related Risks Scope 1, 2, and 3 emissions from 2019 to 2021 were as shown in the following table. In addition, through the sale of electrified vehicles, as of March 2022, Toyota had achieved a cumulative CO2 emission reduction effect of approximately 162 million t-CO2. TOYOTA MOTOR CORPORATION 42 INTEGRATED REPORT