Business Ethics of Toyota

BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBITY OF TOYOTA

BUSINESS ETHICS Reflects the behavior of a business firm Fair Dealing of a business house with the rest of the world Helps a business to grow Creates healthy competition.

HISTORY Not known to most people . . TOYOTA has a diverse history. Sakichi Toyoda invented Japans first Power loom soon advancing to the Automatic Loom with the help of his son Kiichiro Toyoda setting up Toyoda Automatic Loom Works in 1926. The patent rights for this were sold for 100,000 pounds and with which the foundation of Toyota Motor Works was laid by Kiichiro Toyoda who was also an innovator like his father. Thus , Established in 1937 , Toyota has come to be known as the Worlds Number One Automaker today.

INTRODUCTION TOYOTA MOTOR CORPORATION is a Japan-based multinational company headquartered at Toyota City, Aichi , Japan with its presence in six continents and vehicles sold in 170 countries and regions. In 2010 it was the worlds largest automobile manufacturer by production and is the worlds ninth largest company in the world by revenue. Apart from the Automobile and Finance segments , the company also operates in Other Segment involved in design, manufacturing and sale of housing as well as the information and communication business. Toyota is ever expanding its non-automotive business by entering sectors such as biotechnology, marine, web based vehicle information networks, aerospace and even robotics.

VISION Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile. We will meet our challenging goals by engaging the talent and passion of people, who believe here is always a better way. Your Satisfaction Our Commitments

MISSION Practice ethics and transparency in all our business operations. Touch the hearts of our customers by providing products and services of superior quality at a competitive price. Cultivate a lean and flexible business model throughout the value chain by continuous improvement. Create a challenging workplace which promotes a sense of pride, ownership, mutual trust and teamwork. Create an eco-friendly company in harmony with nature and society

GUIDING POLICIES Honor the language and spirit of the law of every nation and undertake open and fair business activities to be a good corporate citizen of the world. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in their respective communities. Dedicate our business to providing clean and safe products and to enhancing the quality of life everywhere through all of our activities. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide. Foster a corporate culture that enhances both individual creativity and the value of teamwork, while honoring mutual trust and respect between labor and management.

FIVE MAIN PRINCIPLES OF TOYODA Always be faithful to your duties, thereby contributing to the company and to the overall good. Always be studious and creative, striving to stay ahead of the times. Always be practical and avoid frivolousness. Always strive to build a homelike atmosphere at work that is warm and friendly. Always have respect for spiritual matters, and remember to be grateful at all times.

TOYOTA CODE OF CONDUCT The Toyota Way and the Toyota Code of Conduct serve as important guiding tools when implementing our daily business operations to realize the Guiding Principles at Toyota. Toyota Way (issued in 2001) describes the values and methods to be shared for the people of the global TOYOTA organization. The present Toyota Code of Conduct (originally issued in 1998, revised in 2006) seeks to provide a basic code of conduct and to serve as a model and compass. It also provides detailed explanations and examples of the actions and issues that we must be aware of when carrying out actual business activities (including in our jobs and daily business operations) and living in our global society.

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TOYOTA WITH EMPLOYEES Through our communication and dialogue with the company, people working for TOYOTA strive to build and share fundamental value of Mutual Trust and Mutual Responsibility. Creating a Harmonious and Lively Work Environment - Acting with integrity and in line with sound social norms

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ACTIVITIES IN THE COMPANY Compliance with Laws and Regulations - With sound social norms in mind Use and Management of Assets and Confidential Matters - Ensuring asset maintenance and confidentiality management Insider Trading -Act as an investor with sound common sense Activities Promoting Safety - Enhancing vehicle safety Environmental Preservation Activities - Building environmentally and people friendly vehicles Research and Development Activities - Developing vehicles from the standpoint of our customers Procurement Activities -Reasonable and

sincere transactions Production and Distribution Activities

- Building vehicles that win customer trust and faith Sales Activities - Winning the trust of customers and dealers Overseas Business Activities - To become a global company trusted worldwide Profitability Enhancement Activities - Building a stronger profit foundation

III.

SOCIETY AND TOYOTA Corporate Communication Activities - Communicating facts in an accurate and timely fashion

- Being Open and Fair Philanthropy and Community Relations

- Becoming a corporate citizen trusted by international society Shareholder Relations - Respect for shareholders benefit Government Relations - Maintaining proper and transparent relations Political and Religious Activities - Moderate participation Traffic Safety Education Activities - Improve traffic safety awareness of society as a whole Disaster Prevention and Crime Prevention Activities - Creation of a safe society

THE TOYOTA EARTH CHARTER The Toyota Earth Charter was formulated in 1992 and revised in 2000. It embodies Toyotas comprehensive approach to environmental issues and it is based o the guiding principles at Toyota.

BASIC POLICY Contribution towards a prosperous 21st Century society Pursuit of environmental Technologies Voluntary Improvement plan to address environmental issues Working in cooperation with society

ACTION GUIDELINES Always be concerned about the environment Business partners are partners in creating better environment Actively participate in social activities as a member of society Disclose information to facilitate better understanding

TOYOTA ENVIRONMENT MANAGEMENT SYSTEM The Toyota EMS holds the key to environment management efforts across Toyota affiliates and at TKM alike. Toyota EMS concept is applied to drive a continuous performance improvement cycle in line with corporate policies and strategies and site specific objectives. The key elements of the EMS system are : 'compliance/no complaints' 'environment risk mitigation'.

The System has been used effectively in order to achieve the objectives of environment policy. It forms the backbone of our commitment towards reducing our carbon footprint and we have been re-certified for ISO 14001:2004.

WHISTLE BLOWER POLICY As a company which encourages and respects professionalism honesty, integrity and ethical behaviour, a "Whistle Blowing System" is in place at Toyota Motors to give an opportunity to all stakeholders to fearlessly report any unethical behavior noticed by them.

ETHICAL RESOURCE CONSUMPTION ELECTRICITY TKM's electricity consumption in the production area has decreased as compared to last year. By the end of 2010, the average amount of energy required to produce a vehicle decreased by 8.3 percent to 493 kWh per vehicle. In 2010-11, TKM focused on energy saving activities along with optimum plant capacity utilization. WATER Specific water consumption for production decreased by 12 percent within a year, to reach a minimum of 2.9 m3 per vehicle. TKM continued to target the elimination of unnecessary water usage through kaizen and by the implementation of best process technology such as membrane bioreactor (MBR) and reverse osmosis(RO) treatments that allow the recycling of wastewater. STEEL TKM's objective in reducing Steel wastage is to reduce the carbon footprint from steel manufacturing. As a result of an in house study and brainstorming sessions they came up with ideas to increase steel yield ratio : the ratio of steel that goes into the making of the automobile to the total steel procured. A three-tier solution was devised that consists of kaizen or continuous improvement at various levels. The changes implemented have led to the reuse of approximately 180 tonnes of steel and a significant reduction of CO2 emissions every year. LIQUEFIED PETROLEUM GAS Serving as the prominent primary energy source for heating in ovens and boilers , Toyota has been able to sustain a decreasing per unit consumption trend. Optimization of oven start-up and shut down has been one of the path-breaking improvements that were taken up. Thus ensuring maximum possible reduction of energy use.

WASTE MINIMISATION TKM aims to achieve zero hazardous waste to landfill consistent with the Toyota earth charter. We have been sending hazardous wastes to co-process at the cement plant to realize the philosophy of "zero hazardous waste to landfill".

ESTABLISHMENT OF SOLAR SLUDGE DRYING FACILITY TKM has been disposing its hazardous wastes through an innovative process of coprocessing at ACC Cement kiln at Wadi, Gulbarga. Unwanted excess moisture content in the hazardous waste sludges pose load in terms of higher Hazardous Waste volumes and cost of disposal. To reduce this TKM has implemented both source moisture reduction kaizens and establishment of zero energy consuming Solar Sludge Drying Facility, which works on the principle of Greenhouse Effect and reduces excess moisture by up to 40%.

EXAMPLES OF INITIATIVES THE GREAT EAST JAPAN EARTHQUAKE Support groups were allocated to transport aid supplies, reconstruct facilities, procure materials such as power generation and support production management . Delivery of Procured water and daily commodities was undertaken o the affected areas by utilizing parts/ Components Delivery Service System through Toyotas Secure transport routes. TOYOTA AFFORESTATION Toyota initiated afforestation activity as a part of Sustainable Plant initiative in 2009. It was done to spark eco mind concept among team members . The entire concept is of Potential Natural Vegetation to create the perfect forest with native species so as t create biodiversity and aid food chain and ecology.

HYBRID SYNERGY DRIVE Toyota's hybrid synergy drive is a series parallel hybrid system and adopts the best of series hybrid and parallel hybrid system. Hybrid synergy drive is a combination of electric motor and a gasoline engine and selectively uses the same to take advantage of their key attributes. Hybrid synergy drive delivers excellent fuel efficiency, exceptional quiteness, low emissions meeting world's most stringent regulations without compromising on performance an driveability.

TOYOTA HYBRID SYSTEM II The Toyota Hybrid System II (THS-II) uses the motor to start up the vehicle and operate it at low speeds, and then switching seamlessly to the engine when a certain speed has been reached. One of the main characteristics of the THS-II is that it can also be operated as an electric vehicle. Another characteristic of THSII is that it employs a regenerative brake system that converts the kinetic energy generated during deceleration into electricity when the brakes are applied and recovers and stores that energy for reuse as a source of drive power.

PLUG IN HYBRID A Plug-in Hybrid is a hybrid vehicle which can also recharge batteries directly from household electricity as an electric vehicle. It is an evolution through integration of hybrid and electric vehicles. Plug-in Hybrid "regeneration system" restores electricity from heat energy which was generated from braking thus delivers better fuel efficiency than a conventional hybrid even with empty batteries. In addition to reducing CO2 emissions and gasoline consumption it also offers the additional economic benefit of reduced total fuel costs, including the cost of gasoline and electricity.

REVOLUTIONARY PRIUS The name PRIUS is the Lat word for prior or before. Its the worlds first mass produced gasoline-electric hybrid car. Sold in more than 5 countries and with the 2nd generation Prius Toyota filed 530 patents. It is the most fuel efficient gasoline car currently sold, and also rated as one of the cleanest vehicles sold in the US. It is certified as an Advanced Technology Partial Zero Emission Vehicle The 3rd generation Prius is made from plant derived ecological bioplastics made from cellulose instead of petroleum. For the 3rd generation Prius ,Toyota filed over one thousand patents.

SOCIAL PERFORMANCE ROAD SAFETY : Toyota Safety Education Programme (TSEP an interactive learning programme on Road safety specially designed for the children in the age group of 10-15 years. CIVIC AND COMMUNIT-Y SANITAT ION PROGRAM : TKM achieved total sanitation of 6 villages in and around Bidadi plant, constructing 310 individual households' toilets. Also to overcome the acute water shortage faced by the residents of Ramanagara town, Toyota has constructed two water tanks with a total capacity of 1.5 million liters. EDUCATION AND SKILL DEVELOPMENT: Toyota Technical Training Institute is one of the brightest outcomes of this aspect of the company. Books and Bags Distribution: every year Toyota Kirloskar Motor distributes books and bags to local government school children. Toyota Technical Education Programme (TTEP): TTEP is aimed at imparting advanced skill training on automobile technology to the students of Industrial Training Institutes. HEALTH AND SAFETY SERVICES : Toyota supported two health camps and around 1000 people benefited from this camp. ART AND CULTURE :Toyota Classics: Toyota Classics is a live musical concert performed by an international orchestra. The objective of the concert is to contribute to the local culture by bringing the world's leading classical ensembles and orchestras to the people of Asia.

ENVIRONMET INITIATIVES GREEN PURCHASE : TKM has adopted the 'Green Purchasing Guidelines' policy which includes the environmental criteria in every purchasing decision .

In addition to meeting traditional expectations of quality, service and price we give preference to suppliers and products with better social and environmental credentials. REDUCTION IN USE OF SUBSTANCES OF ENVIRONMENTAL CONCERN : Toyota's global standard promotes the elimination of substances of environment concern.

Cadmium, Lead and Mercury have been eliminated from almost all parts of the Innova, Corolla and Fortuner. This aims at creating a better and safe environment for the future generations to come

GO GREEN MOVEMENT GREEN BUILDINGS : Toyota has adopted the Green Building concept at the new dealership at Sahibabad and upcoming dealership at Noida to reduce these impacts.

The green buildings incorporate the following green features: Use of energy efficient and eco friendly equipment Use of recycled and environmental friendly building materials Quality indoor air quality for human safety and comfort Efficient use of water Use of renewable energy Effective controls and building management Effective use of existing landscape

SAVE INDIAS COAST : Indias coastal area stretches approximately 6000km wide, of which just half remains undestroyed. This is being considered as one of the biggest disasters facing Indias envi ronment . Toyota has partnered with NDTV for the Save Indias Coastline initiative for the conservation and restoration efforts of the coasts. NDTV -TOYOTA Coastal Express yacht travelled along Indias coastline to report on the facts and impacts on beaches. The Yacht travelled on a 45 day campaign and covered 8-10 major coastal areas and helped transform several beach stretches. The initiative aims to petition the government to take action to save Indias beaches.

NDTV GREENATHON The NDTV-Toyota Greenathon is an event conceptualized to raise money to support the initiative Lighting a Billion Lives. It aims at providing solar power to villages without electricity. Over 300 million people in the India lack access to electricity. The Greenathon is a 24-hour live telethon played across the NDTV network. In Year 1, it raised funds to light up 56 villages and in Greenathon 2, the event reached 115 villages. The latest edition was implemented with a high benchmark and with increased efforts and planning it turned out to be bigger and greener than the previous editions as it expanded its reach internationally. Total no. of villages adopted: 580Total Donations in Rupees : 11.6 Crore Total no. of lives lit : 1.43 Lakh

ETHICAL ISSUES OF TOYOTA TOYOTA ADMITS TO PURPOSELY NEGLECTING SAFETY CONCERNS AND DELAYING RECALL INVESTIGATIONS TO SAVE MONEY Toyota has finally admitted to engaging in unethical behavior when it comes to investigating the safety of its vehicles. In a 2009 presentation called, "Wins for Toyota Safety Group," it shows that in 2007, Toyota purposely and repeatedly delayed safety regulations by avoiding defect investigations and obstructing government inquiries into safety concerns. New documents show the financial benefit of delay. In the presentation, Toyota said : a phase-in to new safety regulations for side airbags saved the company $124 million and 50,000 man hours. delaying a rule for tougher door locks saved $11 million." DERIVATION In a situation like this it is easy to see that something went wrong, but how can things go so wrong. Instead they somehow found a way to justify negotiating with the government to make their problems disappear. However, consumers have found themselves victims of a PR spin game in which Toyota would recall a limited amount of vehicles at certain times of the year to avoid a massive recall. At the same time, Toyota was producing new vehicles with known safety flaws and advertising their vehicles to be the safest and highest quality vehicles on the road. What this goes to show is that Toyota conspired with NHTSA, the government department responsible for crash test ratings, to falsely improve Toyota's safety record while hiding NHTSAs and the Department of Transportations inadequancies. The larger problem with this scandal is that it has created a precedent for corruption and unethical behavior when it comes to the safety of vehicles that so many of us use and depend upon everyday.

FATAL CASES An off-duty CHP officer and three members of his family were killed on the road in a Toyota Car and many have raised questions about what the true cause may have been. At first Toyota issued a statement pointing to the installation of an improper floor mat from another vehicle, as we previously reported as the cause of the crash. Then just one month after the crash involving the Saylor family, Toyota issued the largest call in company history, affecting 3.8 million vehicles dating back to 2004. Hence, many believe to be a flawed design with the highly computerized engine control system which lacks a fail-safe mechanism for emergency situations. Safety experts also pointed out the fact that modern brake-assist systems result in in minimal stopping power. According to The National Highway Traffic Safety Administration there is still an open investigation into sudden acceleration events involving Toyota vehicles.

BIGGER PICTURE We now have a situation, in which we must now question the validity of all safety scores given out not only to Toyota vehicles but to all motor vehicles. Every company that engineers and manufactures a product strives to save costs, so this doesn't blow us away. What does shock us is how irresponsible and uncaring the governments that we employ to represent and serve us, continue to fool and cheat us. This problem is reminiscent of what tobacco companies did to smokers during the latter half of the last century. Tell the consumer your product is safe, make them feel at ease while using it, and derail the government and whistle-blowers who are trying to show just how dangerous your product is.

UNETHICAL BEHAVIOUR OF TOYOTA There have been many academic studies done on Toyota and articles created. Toyotas manufacturing plants back home in Japan resembles some of the worst sweat shops in the world. Their operations have been described as "slavery" and "human trafficking". Toyota has thousands of "karoshi" claims each year. This term means "over worked to death". Their plants have very high suicide rates as well. And when an injury has occurred to an employee, on the job they are layer off, and receive no compensation. Toyota is well known for their union busting, which has destroyed many small countries all around the world. Reducing the standards of living amongst the countries citizens.

CASE STUDY There are already 1800 instances in the US where employees at the Kentucky plant have been injured, fired, and they disappear from the compensation pay roll. This happens at a rate of 400 Americans per year working at Toyota. Toyota builds their plants in the poorest states to take advantage of the lowest wages in the country. Many workers have been kept on as temporary workers for over 4 years. Their goal is to lower the average wages in America, and Honda seems to be backing them.

Toyota is one of the worlds most profitable corporations, yet the more profits they make, the more they lower worker wages. So essentially Toyota uses the cheapest materials, and the poorest workers to manufacture them.

LESSON Another piece of evidence that Toyota lost an internal focus on its value promise comes in Toyotas reactions to its quality issues. Toyota fixed new cars being produced without recalling cars in the field, delayed communicating quality issues to customers and regulators and made many misstatements to the public. Toyotas historic value promise for sure didnt drive these decisions. Rather, Toyotas reactions have raised frustration and reduced perceived reliability of the Toyota brand, the opposite of its value promise. The lesson : Growth often destroys brands. As companies get larger, C-Suite leaders lose the pulse of the business at the same time that communication channels to the C-Suite become convoluted or blocked. Growth and profits become aims, while delivering on the value promise becomes secondary or even forgotten. A disconnection arises between what is promised and what is then delivered that erodes brand equity. CONCLUSION Hopefully Toyota will learn the lesson that a business value promise must drive all internal actions and decisions. The idea is to solve problems as a team by looking at the symptoms, understanding the business context, and identifying the root causes. It will take an incredible communicator to instill a singular focus on the value promise all over again, a focus Toyotas founder created and his son and grandson lost. Meanwhile, Ford and Hyundai are driving their cars and messaging right through the hole Toyota left in the market.