Komatsu's Commitment to Environmental,
Societal and Governance (ESG) Management

In April 2016, Komatsu announced its new Mid-Range Management Plan, with a target date of March 2019, under which the Komatsu leadership team reinforced the company's commitment to ESG-focused management. Following this announcement, Komatsu began internal discussions to determine what ESG activities should be emphasized globally, re-examine our Community and Social Responsibility (CSR) priorities, and evaluate how we can more clearly connect to the Sustainable Development Goals (SDGs) established by the United Nations. Out of the discussions emerged common themes that have been at the heart of our organization since the beginning.

The Foundation of Our Philosophy

Komatsu's CSR themes embody the philosophy that has been handed down through the generations from our founder Meitaro Takeuchi.

Takeuchi was born in Japan in 1860. He was entrusted with the management of several local mines by his father, who was a politician and businessman.

In 1902, Takeuchi began full management of the Yusenji Copper Mine, traces of which currently remain in Komatsu City in Ishikawa Prefecture. Inspired by the leading-edge technologies he saw in Europe, Takeuchi also began focusing his efforts on developing industrial technologies locally. Takeuchi believed “a mine will become depleted when it is completely excavated, but the more you train in industrial manufacturing technologies, the more power you will obtain to create new industries.” This conviction led him to establish a machinery company, initially called Komatsu Iron Works, as a maintenance company for mining equipment.

In 1921, Komatsu Iron Works was spun off as an independent entity from its parent company and began operating as Komatsu Ltd. Takeuchi said he established the company in Komatsu City instead of Tokyo to repay the contributions received from the community and to avoid an adverse impact leading to the decline of the community if the mines closed.

The core of Komatsu's philosophy includes contributing to the sustainability of local economies through technology development and job creation.

Yusenji Copper mine (around 1908)

What will happen to the people working in the mine site, if Yusenji mine is closed? Will this lead to the decline of the community?

This thought led Meitaro Takeuchi to establish Komatsu Iron Works (later, Komatsu Ltd.)

Lifetime Devoted to Nurturing Talent

Throughout his lifetime, Takeuchi maintained a fervor for nurturing engineering talent. He sent engineers to study in the United States and various countries in Europe, and in 1917 he established an internal school for engineering trainees. He handpicked young people from farming villages in the local region and provided them with education in basic technologies. This private Komatsu Industrial School of Youth continued operation until 1973.

Before nurturing engineers inside the company, Takeuchi also sought to raise the level of industrial technology skills for his entire country. He was a strong contributor to the faculty of the Science and Engineering department at Waseda University in Tokyo and later established a technical high school in his birthplace of Kochi Prefecture. In1957, Komatsu opened a joint training school for technicians of supplier companies.

According to Takeuchi, “Human resource development is the foundation of industries and enriching the nation.” The passion for developing industry and nurturing human resources is part of Komatsu's global DNA.

Komatsu's founder Meitaro Takeuchi
(1860-1928)

Manufacturing industry enriches the nation.

Human resource development is the foundation of industries and enriching the nation.

Ideas of Meitaro Takeuchi

  • We should strive to manufacture products that are technologically challenging, which our nation has never manufactured before
  • Technology depends on people, and the company depends on people
  • We must repay the contributions received from the community

Corporate Philosophy

  • Globalization
  • Quality first
  • Technology innovation
  • Human resource development

The Passion Continues

27 years after Takeuchi's death, Komatsu exported its first products overseas, marking the beginning of the company's globalization era. In the early 1970's Komatsu began international production for the first time and continued to broaden and localize its global operations through the 1980's.

In each region, Komatsu not only focused on employing and developing people, we localized operations and management and worked to cultivate deep partnerships with local suppliers. Honoring Takeuchi's strong conviction that a company should help a community thrive, Komatsu's policy is to never exit a market once we enter it.

Komatsu also continued to hone capabilities in production technologies and product design during this time. These efforts were the basis of our focus on creating Dantotsu (Unrivaled) Products, pursued by Komatsu since 2003.
While innovation activities continue to develop local human resources, Dantotsu Products, Services and Solutions improve safety on jobsites, operate in environmentally responsible ways and enhance a community's quality of life.

Throughout this period of global development, the philosophies emphasized by Takeuchi - technology innovation, human resources development and community support - have invariably permeated Komatsu's core business activities.

Accelerated CSR Activities

Beginning in the 1990's, Komatsu began rapidly promoting initiatives in various CSR fields. Based on the dual perspectives of “company and society” and “company and employees,” a group of executives formed The Committee to set a vision for being both a strong company and an excellent corporate citizen.

In 1992 Komatsu established the Earth Environment Committee and announced the Earth Environment Charter. Komatsu positioned initiatives for the earth's environment as a top priority in its management practices. In 2015, Komatsu established medium- and long-term targets spanning our products, entire lifecycle to reduce CO2 emissions and is making active efforts to attain these goals.

The Board of Auditors was established in 1994 to ensure corporate governance, the International Advisory Board (IAB), a management advisory body, was established in 1995 and the Board of Directors was reorganized with the introduction of the Executive Officer System in 1999. In parallel, Komatsu strengthened its structure by publishing the Komatsu Code of Worldwide Business Conduct, currently in its 9th edition.

During this time, Komatsu also focused efforts on local human resources development. Group companies worldwide worked to build local technical, engineering and business skills both to support the organization's needs and to better their communities.

“We must repay the contributions received from the community”
Our founder's vision to co-exist and grow with the community is alive

The KOMATSU Way Global Institute/
The Waku-waku Komatsu Kan (Kids' Pavilion)

In 2011, as part of a project for our 90th anniversary, a facility was established in Komatsu City where our employees from around the world gather for global conferences and training. This facility does not have a canteen or lodging function, so local hotels and restaurants benefit from visitors to the Institute. At Kids' Pavilion, which is a replica of our first headquarter building, retired Komatsu employees provide a place for next generation growth by facilitating science classes for local elementary school children.

Grow with Our Suppliers

Our suppliers who support Komatsu's quality and reliability are our equal partners and we strongly believe that our relationship should be a “win-win. For this reason, we provide support for their continuous improvement in quality, safety and environmental aspects in ways such as opening our safety “dojo” facilities for their usage, and provide support in various certifications. For human resource development, we provide support such as inviting next generation management to participate in Komatsu's management training programs. Products at Awazu Plant, one of our main plant located in Komatsu City, are comprised of 60% components procured from our local suppliers. Our suppliers form an industrial cluster contributing to the development of the region.

The Intersection of Ideas: Three CSR Themes and Our Founder's Philosophy

In its 2010 Environmental & Social Report, Komatsu adopted the message “Komatsu recognizes that the business activities are in fact CSR activities.”

In 2011, a high-level materiality analysis was conducted to identify the critical economic, environmental and social issues that could best be addressed through Komatsu's strategy and core business activities. The analysis led us to tighten our focus on three CSR themes:

  1. Enhancing Quality of Life - expresses our intention to contribute to the sustainability of customers' businesses by leveraging our innovation to provide safe products, services and solutions that enable high productivity and have little environmental burden.
  2. Developing People - is our initiatives for developing our employees, developing talent at our distributors and suppliers, and also leveraging our know-how to cultivate human resources in the local community.
  3. Growing with Society - refers to activities that support coexisting harmoniously with society. Besides responsibilities that we must naturally fulfill, such as governance and compliance, these activities include implementing initiatives for earning the trust of stakeholders, activities for building trusting relationships with suppliers, and efforts toward disaster reconstruction support and community support.

These three CSR Themes allow Komatsu teams globally to honor Meitaro Takeuchi's founding philosophies while leveraging our strengths to innovate technology, develop human resources and live in harmony with our local communities.

One hundred years have passed since Komatsu Iron Works was first established, but the ideas of Meitaro Takeuchi continue to be handed down on a global scale and form the fabric connecting all of Komatsu.

Moving Forward

In early 2016, business and CSR leaders across the globe began discussing the best ways to further ESG in connection with our Mid-range Management Plan. The teams reviewed how ESG management aligns with our core business practices, the strategic goals we should pursue and how Komatsu's CSR activities link to the international Sustainable Development Goals (SDGs) established in 2015 by the United Nations.

Sustainable Development Goals (SDGs)

The SDGs, officially known as The 2030 Agenda for Sustainable Development is a set of 17 goals with 169 targets covering a broad range of sustainable development issues, which was adopted at the U.N. General Assembly in September, 2015.
http://www.un.org/sustainabledevelopment/sustainable-development-goals/

SDG Goals and Selection Process

Based on the discussions, we did a thorough analysis to compare the 17 SDG goals and their accompanying 169 SDG targets with our CSR activities and themes. We evaluated 1) whether there is a relation, and 2) the depth of the relation.

For example, one of our CSR activities is providing products and services that contribute to infrastructure development and improve the quality of life. For each SDG goal and target, we compared our activity:  For example, for SDG Goal #1, we compared as follows;

<Example 1> SDG Goal #1 (No poverty)

  • SDG Target 1.1 (By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day).
    In this instance, we did not see a direct relation.
  •  
  • SDG Target 1.5 (By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters), we believe there is an indirect relation, and thus colored the cell light blue to indicate the connection. (Refer to ① in the Chart 1)

In the same manner, we compared as follows;

<Example 2> SDG Goal #9 (Industry Innovation and Infrastructure)

  • SDG Target 9.1 (develop quality, reliable, sustainable and resilient infrastructure, including regional and trans- border infrastructure to support economic development and human well-being). We colored the cell rich blue because there is a strong relation with our key theme. (Refer to ② in the Chart 1)

The same process was followed for all SDG targets and all of Komatsu's CSR activities. On Chart 1, the number in the cell represents the SDG target(s) where there is a relation, and the color (dark/medium/light) indicates the depth of the relation (direct or indirect).

【Chart 1:Komatsu's CSR key themes and SDGs】

According to the team's analysis, five SDG goals have a strong relationship with Komatsu's three CSR Themes.

The five SDG goals are:

#8
Decent Work and Economic Growth
#9
Industry Innovation and Infrastructure
#11
Sustainable Cities
#13
Climate Change
#17
Partnerships

Chart 2 explains how Komatsu's business and CSR activities contribute to the five SDG goals and targets that have the strongest ties to Komatsu's business.

By focusing on these five SDG goals, Komatsu contribute to all the SDG goals comprehensively since it is proved that each SDG goal is mutually intertwined. Our next steps are to engage with additional internal and external stakeholders, share this information and follow the Plan-Do-Check-Act method to validate the analysis and establish an action plan.

Following this analysis, we are now reviewing what additional opportunities exist for Komatsu to make an increased contribution to the achievement of the SDGs, focusing on SDGs 8, 9, 11, 13, and 17. We will prioritize opportunities that contribute to the SDGs by creating value for stakeholders and shareholders, and will communicate progress in future Komatsu reports.

【Chart 2: Co-relation between SDG Goals and Komatsu Business/CSR】

【Chart 3:Discussions and dialogues on Komatsu's ESG initiatives】

Date Topic Description
May to September, 2016

Identify strengths and value for business and society (Work with external experts)

  • Interview with management and presidents of overseas affiliates
  • Internal discussions regarding what strengths and long term value the company contributes towards society
December

ESG Meeting with Investors

  • Explanation of Komatsu's history and ESG strategies and initiatives
  • Receiving commitments/requests for information on long term targets and process in selecting SDGs
December

CSR Committee Meeting

  • Discussions on the relation between ESG and CSR Themes, SDGs and responding to requests given at ESG Meeting
January

Global CSR Meeting

  • Discussion with 30 participants in charge of CSR from overseas subsidiaries on Komatsu's global ESG initiatives, SDGs, challenges and opportunities
February, March

CSR Steering Committee Meetings (3)

  • Discussed and authorized Komatsu's target SDGs and explanation of selection process

A Story of Success: The relationship between SDGs and the UNIDO - Komatsu partnership in Liberia

(Mr. Stavros Papastavrou)

The United Nations Industrial Development Organization (UNIDO) is a specialized agency of the UN that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability. My name is Stavros Papastavrou and I am working with UNIDO as a Project Manager for Liberia. I am driven by a strong belief in education and industry's role in bringing about sustainable development. I work to ensure that vocational training increasingly meets the needs of industry, with a big goal in mind: getting young people into decent jobs.

The 2030 agenda for sustainable development recognizes the role of the business sector in development. As the main driver of economic growth and job creation in many developing countries, the business sector is a key partner for UNIDO. Private investment and business sector involvement in accelerating development is crucial as stipulated by the Sustainable Development Goal (SDG) 17, which calls for partnerships to solve today's development problems

The project “Promoting youth employment in the mining, construction and agriculture sectors”, funded by the Government of Japan, aims to help young Liberians access the labor market by developing their skills in the operation and maintenance of heavy-duty machinery. These skills are necessary across all sectors. However, developing youth skills requires first that the quality of teaching and learning improves. Our partnership with Komatsu Ltd. was key to supporting one of Liberia's first vocational schools. Komatsu helped to establish a training facility with modern equipment and curricula. It provided technical support on safety training, donated a hydraulic excavator as well as trained instructors on hydraulic excavator operations and on maintenance subjects in Japan and South Africa.

This cooperation with Komatsu is at the core of the SDGs. It shows how important it is for industry to engage in promoting inclusive and sustainable industrial development. With no doubt, the project has contributed to supporting SDG 9 “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”, notably by raising industry's share of employment in Liberia.

40% of our graduates have entered the labor market

Together, we have also contributed to SDG 8 “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”. With the support of Komatsu, the project has been able to upgrade the skills of the Liberian workforce: a total of 150 youth have graduated in courses that match the needs of industry. The project has also been effective in terms of generating employment opportunities for Liberian youth. 40% of our graduates have entered the labor market, either as full-time or part-time employees. This will give a boost to Liberia's efforts in achieving economic transformation.

Komatsu's leadership in technology, human resource development and community support are key ingredients necessary to achieve the UN's SDGs. At Komatsu and UNIDO we can be proud that our partnership is closely aligned with SDG 8, 9 and 17 and we are able to combine our strengths to achieve transformation in the countries where we are working.

Stavros Papastavrou
Project Manager, Liberia
United Nations Industrial
Development Organization