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2011 Sustainability Report

Toyota do Brasil

Toyota is publishing its Sustainability Report for the third year running. A fundamental element in guaranteeing transparency, the report makes the company’s long-term commitments public, presenting targets for socio-environmental improvement and for producing vehicles with the superb environmental performance and quality associated with the Toyota brand, recognized in the more than 170 countries in which it operates.

Toyota has a profound link with Brazil, the first country outside Japan in which, over fifty years ago, it installed a plant, as well as home to the largest Japanese community outside Japan.

In 2009, the company went one step further towards consolidating this relationship with the creation of the Fundação Toyota do Brasil. This foundation is focused on extending the boundaries of learning and supporting important projects to aid recovery of the Atlantic Rainforest and Brazilian fauna.

In 2012, Toyota plans to further strengthen its links with Brazil with the installation of another plant in Sorocaba (São Paulo) to manufacture a new vehicle. This initiative is fully aligned with the Toyota production model based on the pillars of quality and continuous improvement and will expand the number of models on offer to Brazilian consumers.

Introduction

Toyota 2011 Sustainability Report

Content

02 Message from the president

04 Profile

08 Results and outlook

12 Corporate governance

16 Business conduct

18 Strategic vision

22 Customers

26 Dealers

30 Suppliers

34 Employees

44 Fundação Toyota do Brasil

50 Environmental management

62 Product quality

70 GRI Information

1

Message from the President

also in the state of São Paulo. The new plant will be a model of eco-efficiency, in line with the ecofactory concept employed in Toyota units in Japan. The plant has been designed to maximize efficiency, using equipment that will enable reduced energy consumption and very low levels of CO2 and volatile organic compound emissions for our industry.

The first major action marking this initiative was the planting of 80 thousand Atlantic Rainforest native tree seedlings, the start of what is intended to be a green belt around the factory. On a rainy Sunday in October 2011, over 4 thousand people planted the seedlings, in a telling demonstration of the strength and commitment of the Toyota community.

I took over at Toyota do Brasil in January, 2011. It is an honor for me to be here at such a special moment, and I feel reinvigorated to be part of the winning team that has built up Toyota’s presence in the country with successive production and sales records.

Since our arrival in Brazil in 1958, with the installation of the company’s first unit outside of Japan, we are now taking our third major step towards expanding Toyota’s local presence. In 1962, we built a factory in São Bernardo do Campo in São Paulo. 1998 saw the inauguration of the Indaiatuba plant in São Paulo for production of the Corolla.

We are now building a new manufacturing unit in Sorocaba,

Quality in everything we do

2 Toyota • 2011 Sustainability Report

The vehicle that will be produced in Sorocaba is a compact model, designed especially for markets such as Brazil and focused on consumers who have never had the chance to own a Toyota before. This constitutes a new challenge for the company, and we are preparing our dealer network, training sales teams and expanding our service systems to guarantee maintenance of the quality standards our consumers have come to expect.

Another important milestone in 2012 will be the introduction of the Prius in Brazil. Launched in 1997, the Prius was the first hybrid vehicle in the world. Its high technology and lower environmental impact have made it a best-seller, triggering the expansion of more eco-friendly vehicles worldwide. We expect to see the same effect now in Brazil.

These major events have been supported by excellent results in recent years, with growing sales in Brazil despite an increasingly challenging environment, characterized by greater competition and an unstable external conjuncture. In 2010, Toyota’s sales increased 7% against 2009, a year which had already seen growth of 16% over 2008, offering forceful evidence of the credibility and trust our brand instills in customers.

We are fully aware that none of this would have been possible without our employees, suppliers and dealers, true partners in this ongoing development. We thank the Toyota community for its support and dedication, which encourage us to set our sights ever higher.

We are also aware of the great responsibility involved in ensuring that the major investments we have planned for Brazil bear fruit. For this reason, we strive to grow our business while driving socio-environmental improvement and reducing impacts on society. Promoting balance between the cycles of industry and nature is a commitment Toyota has assumed worldwide and formalized in our 2050 vision. To make this happen, we invest in innovation and in continuous process improvement. We present these initiatives and future improvement targets in this annual report.

I hope you enjoy reading it. Shunichi Nakanishi President Toyota Mercosul

3

Profile Toyota do Brasil GRI 2.1, 2.2 and 2.6

A relationship of trust with the country built over five decades makes Toyota do Brasil (TDB) a strategic asset in Latin America


Toyota’s relationship with Brazil can be summarized in one word: trust. The durability and quality of its products are a byword in the automotive sector, underpinning its robust performance in the market, with vehicle sales of almost 100 thousand in 2010. In 1958, Brazil was the first country to receive a Toyota plant outside Japan, marking the beginning of the brand’s international expansion.

After more than five decades of investments, Toyota do Brasil (TDB) has consolidated its status as a strategic element in the company’s development, with almost 4,000 people employed in its units in Brazil – in São Bernardo do Campo (SP), Indaiatuba (SP) and Guaíba (RS) –, as well as its office in the city of São Paulo. TDB currently manufactures the Corolla sedan – Toyota’s leading product in Brazil and worldwide, with more than 33 million units sold since 1966.

Privately owned, TDB allies environmental concern with the prospect of growth in Brazil in line with Toyota Motor Corporation (TMC) global guidelines. A new plant is scheduled to open in Sorocaba (SP) in the second half of 2012, in which a new compact model for the Brazilian market will be produced.

The unit, which will employ 1,500 people and have a production capacity of up to 70 thousand cars per year, will be the first Toyota ecofactory in the country. This concept entails a new form of development based on best practices in resource management and waste and emissions control (read more on page 58).

The outlook for Brazil in the coming years is promising. According to a survey of more than 12 thousand Toyota customers, developed by the consultancy Prime Action and conducted by Ibope Inteligência in the first half of 2010, the level of satisfaction with the company’s vehicles is 98%. The study, which measured a series of items from product quality to dealers and post-sale service, showed how sound the brand is in the country, in spite of the recalls in the United States and Brazil, which affected consumer confidence in Latin America.

With the entry in the mid-sized compact segment, the company expects to increase customer numbers in Brazil, driven by the challenge of meeting the demand for competitively priced vehicles that offer Toyota’s international standards of quality.

Half a century in Brazil

5

Timeline in Brazil

Launch of Bandeirante jeep

Toyota starts to import the Hilux from Argentina

Production of the Bandeirante, one of the most popular Toyota vehicles ever, is discontinued

Inauguration of Guaíba Distribution Center in Rio Grande do Sul, to oversee distribution of the SW4 and Hilux vehicles manufactured in Argentina

Scheduled start up of operations in Sorocaba plant, manufacturing new Toyota vehicle

Inauguration of Indaiatuba plant

in the state of São Paulo and

start up of Corolla production

Creation of Toyota Mercosul, integrating

management of Toyota in Brazil and Argentina

Work starts on building new factory, in Sorocaba (SP)

Toyota commemorates 50

years in Brazill

Inauguration of first plant, in São Bernardo

do Campo (SP)

Toyota opens an office and its first

vehicle assembly line in São Paulo (SP)


Head officeFounded by the Toyoda family in 1937, the Toyota Motor Corporation (TMC) is one of the ten largest companies in the world according to the Fortune Global 500 ranking. In 2010, it was the largest vehicle manufacturer for the third year running, with 8.42 million vehicles commercialized, growing more than 8% compared with 2009.

The company, which employs more than 315 thousand people, manufactures the Toyota, Lexus, Daihatsu and Hino brands and trades on the Tokyo, Nagoya, Osaka, Fukuoka and Sapporo stock exchanges in Japan, as well as the New York (USA) and London (UK) exchanges. With production units in 26 regions and countries, TMC vehicles are commercialized in 170 countries.

In addition to the Corolla, Toyota commercializes other vehicles such as the Hilux pickup truck, the Camry sedan and the Prius – the first and best-selling hybrid vehicle worldwide. Launched originally in 1997, the Prius will be commercialized in Brazil in 2012 (read more on page 69).

AWARDS

The most sustainable brandGlobally, when it comes to sustainability Toyota is a company that walks the talk. In the Best Global Green Brands Ranking, an annual study published in mid-2011 by Interbrands, one of the largest brand consultancies worldwide, the company was ranked the “most sustainable brand” of the year.

The result is based on observation of company performance and the perception of its consumers in six categories: governance, stakeholder engagement, operations, supply chain, transportation and logistics, and products and services.

The study involved around 10 thousand consumers in ten markets, including Brazil, the United States, Japan and India. TMC’s investment in new products such as hybrid vehicles and its leadership role in driving socio-environmental responsibility in the automotive sector were also determinant in the result.

GRI 2.5, 2.7 and 2.8

GRI 2.10

7

Economic performance

In line with the expansion of the Brazilian economy, Toyota do Brasil achieved yet another sales record. From January to December 2010, it sold 99,570 units, 7% more than in 2009

A year of achievements

Toyota do Brasil’s sales growth is in line with company expectations as it prepares to launch a new compact vehicle in the Brazilian market.

For the second year running, the Corolla was the leader in the mid-size sedan segment. Market share was over 31%, with around 55 thousand units sold – 1% up on 2009. This result, below the 9% increase for the previous year, reflected the preventive recalls undertaken by the company but also shows an excellent recovery of the company’s image after the incident.

The Toyota Hilux has led the mid-size diesel pickup segment since 2005. 2010 sales totaled 33,666 units, 9% up on the previous year. The performance of the SW4 sports utility vehicle was even better, with 8,104 units sold in the period, an increase of almost 40% in the year.

Among the imports, the company sold 1,951 units of the compact sports utility RAV4, an increase of 124% compared with 2009. The recent launch of a two-wheel drive version helped consolidate the model in the market. The Camry luxury sedan sold 694 units, 29% up on the previous year.

In 2010, the Toyota Motor Corporation was the world’s largest vehicle manufacturer with sales of 8.42 million units. TDB’s share of the Brazilian automobile market is 3%, but the company has plans to grow in the coming years. Toyota has invested some US$ 900 million in its Brazilian operations in the last decade and is investing another US$ 600 million in its new plant in Sorocaba (SP), with the start up of operations scheduled for 2012 (read more on page 58).

PRODUCTION GROWTH

2007

2009

2008

2010

34,4

6319

,335

21,7

2845

,642

30,9

9555

,033

54,6

03

33,6

66

Corolla

Hilux

Profile


The Toyota head office in Japan has announced plans to grow its share in emerging markets such as Brazil. These have attracted attention due to their robust performance during the 2008 international financial crisis and their ongoing economic expansion, accompanied by increased purchasing power and urban growth.

Vehicle production in Brazil has broken successive records over the last decade, with a 14.3% increase in 2010 alone. Data from Anfavea, the Brazilian automobile sector association, showed sales of 3.52 million units of domestically-produced automobiles, light commercial vehicles, buses and trucks – exceeding the 3.45 million units projected for the year. December 2010 was the sector’s best ever in the country, with 381.6 thousand vehicles sold, a 30.2% increase over the same month of the previous year.

Expansion, however, is expected to slow down in coming years. Factors such as the natural disaster in Japan in March 2011, which affected the operations of diverse car manufacturers, including Toyota, have led to a projection of stable production in the fiscal year without exceptional growth.

Even so, companies in the sector are expected to expand and diversify their activities. Anfavea estimates that vehicle manufacturers will invest more than US$ 11.2 billion in Brazil between 2010 and 2012. Toyota’s investment in the new plant in Sorocaba and in improvements to its existing units is a reaffirmation of the company’s belief in the country’s future. This is best exemplified by the launch of its new compact vehicle which, aimed at a new market segment, will attract new consumers and build on the loyalty the company’s high standards of quality and reliability inspire.

Aware that vehicles impact mobility and the quality of air, among other factors, Toyota expects to enlarge its market share by commercializing higher quality, lower impact vehicles – produced to the standards that make Toyota a global benchmark in production efficiency and reduced environmental impact.

Market outlook

INVESTMENTS BY VEHICLE

MANUFACTURERS IN THE

COUNTRY SHOULD REACH

R$ 11.5 bIllIon

IN 2012

SouRce: AnfAveA

9

Corolla: market leader undergoes constant renewal

Leader of the mid-size sedan category, the Corolla is Toyota’s principal model in both the Brazilian and global markets. Having completed 45 years in the market in 2011, the vehicle has undergone continuous visual and technical reformulations, remaining abreast of sector trends and often leading them. The challenge of combining leading edge technology and comfort while maintaining the vehicle’s visual identity is a defining factor of the 2012 Corolla, launched in March 2011.

With its bold design, the new model’s major differentials are new headlights, LED sidelights, alloy wheels and a new front grill, giving it a sportier look.

In terms of performance, in addition to the 2.0 Dual VVT-i 16V Flex engine used in the top of the range Altis model, the Dual VVT-i system has been adopted in the 1.8 16V engine equipping the XLi and GLi versions. This offers improved engine performance while significantly reducing fuel consumption and tailpipe emissions (read more below).

Power in the XLi and GLi versions has also been increased from 136 to 144 horsepower (with ethanol), and they have been equipped with a new six-speed manual transmission that prioritizes fuel economy. The XEi and Altis models offer 153 horsepower and a smoother, more precise four-speed automatic ECT (Electronic Control Transmission) gearbox. Another important innovation providing greater comfort and a superior driving experience is the paddle shift system for faster gear changes in the XEi and Altis versions.

Important safety features reinforce the principles of durability and product responsibility pursued by Toyota. Disc brakes on all four wheels are available on all versions of the Corolla, and the GLi, XEi and Altis models also offer ABS and EBD for improved stability.

The Corolla Altis is equipped with xenon low beam headlights that turn on automatically and can be adjusted for height, providing greater contrast at night. This version also comes with a camera that turns on automatically when reverse is engaged, providing the driver with a view from the rear of the car in the inside rearview mirror.

best buy

For three years running the Corolla was elected the Best Buy in its segment in the publication Guia Quatro Rodas. The survey takes into account price, depreciation, the cost of insurance, service and parts, as well as standard equipment and consumer satisfaction.

In the Best Cars award, the Corolla was also the winner in the Mid-Size Sedan category. In the 2011 edition, the recently launched 2012 model was elected best vehicle in its category by readers of the magazine Carro.

GRI 2.10

Profile


Economical sedan

The Corolla is also a reference when it comes to fuel economy. Since voluntarily joining Inmetro’s Brazilian Labeling Program (PBE) in 2009, Toyota has been investing in improving and reducing the vehicle’s fuel consumption.

In the 2011 listing, the XLi and GLi models submitted for evaluation by Inmetro were classified as “A” on a scale from “A” to “E”. The sedan had previously been rated C, which led to adaptations to improve the vehicle’s performance. In the 2010 Inmetro tests, the Corolla’s consumption was 12.4 km per liter of gasoline; highway consumption with automatic transmission was 13.3 km per liter in the 2011 PBE test, a more than 7% increase in fuel efficiency.

Lower fuel consumption also means lower emissions of gases such as CO2, which intensify the greenhouse gas effect and lead to global warming and climate change. Other environmental benefits include all interior fittings in resin and a central console made of TSOP (Toyota Super Olefin Polymer), a recyclable material developed especially by Toyota. As a result, customers acquiring a Toyota vehicle can be sure it has been manufactured responsibly in accordance with the strictest quality and environmental standards (read more about the Corolla on page 62).

The Corolla family

Xli 1.8 Dual VVT-i 16V Flex engine Height/depth adjustable steering column

Gli 1.8 Dual VVT-i 16V Flex engine ABS and EBD brakes

XEi 2.0 Dual VVT-i Flex engine Four-speed super ECT automatic transmission with paddle shift

Altis 2.0 Dual VVT-i Flex engine Automatic xenon headlights with height adjustment Rearview camera activated by reverse gear

11

Corporate governance

Due to the scale of its global activities, best corporate governance practice is a priority for Toyota in promoting balanced and responsible development in the regions in which it operates

Transparency, ethics and conduct

In line with the company’s strategic vision, Toyota do Brasil’s management structure ensures that decision-making is in compliance with local legislation and regulations, as well as with directives from headquarters in Japan. This offers customers, employees, partners and communities the assurance that company management is in accordance with international standards of transparency.

GRI 4.1 and 4.2

Since 2003, management of Toyota in Brazil and Argentina has been integrated in Toyota Mercosur under a single president. This enables a more dynamic and flexible administration adapted to regional needs and resources, as well as effective integration of the two subsidiaries’ operations, which also supply products to the Caribbean and Mexico.

All decision making processes are formalized in the document Authorization Policy for Toyota Mercosur, which sets forth the boundaries and responsibilities for each group. Toyota Mercosur’s highest governance body is the Board of Directors (BOD), comprising the president, the Finance, Commercial and Industrial vice presidents, and a secretary.

Led by the president of the company, the BOD is responsible for developing and executing the subsidiary’s strategic planning, as well as monitoring its performance through monthly meetings. Decision-making occurs in three ways depending on the relevance of the subject: a sole decision of the BOD; a local decision that is communicated to the head office, Toyota Motor Corporation (TMC); or a decision pre-approved by TMC.

The analysis and communication of projects and the preparation of proposals to improve operations are also the remit of the Executive Committee Meeting, which consists of diverse groups that provide support for the BOD in monthly meetings. Known as Function Meetings, these groups cover diverse subjects (Finance, Commercial, Corporate and Procurement, among others) and study proposals aligned with the corresponding areas with a view to driving operational improvements.

Profile


GRI 4.1 4.3 and 4.7

Composition and renewal of members

The BOD and the Executive Committee Meeting are structured to enable direct relations with the TMC head office, without however limiting their autonomy.

The composition of the BOD is determined by Toyota do Brasil bylaws and head office guidelines. The group comprises the company’s statutory directors and a secretary. There are no independent members. Membership also depends on each director’s performance. This structure may be modified in the event of a vacancy or a specific organizational need.

Generally, the composition of the board is reviewed in an annual meeting between the president of Toyota Mercosur and the TMC Board. The Executive Committee Meeting comprises statutory and non-statutory directors responsible for the diverse company areas. They are nominated by the BOD and approved by head office. The overriding criteria for selecting these members is professional competency. Membership may be reviewed annually, as with the BOD.

When relevant changes are made to these structures, these are communicated to the internal audience as well as to relevant external stakeholders such as dealers, suppliers and sector associations.

Percival MaianteHuman Resources and

Corporate Planning Director

Tsuneo ItagakiSenior Vice President,

Manufacturing

Luiz Carlos AndradeSenior Vice President,

Corporate and Commercial

Shunichi NakanishiPresident, Toyota

Mercosur

Hideaki HayashiSenior Vice

President, Finance

13

Evaluation and remuneration criteria

Every year, senior management members are submitted to a two-dimensional appraisal (results and behavioral), which takes into account the achievement of individual targets, contribution to company performance and members’ personal skills – leadership capacity, for example –, as well as alignment with Toyota Way principles.

The process, which includes a self-appraisal, is identical to the one applied to all company employees, and may lead to a change in position or remuneration, in accordance with the hoshins (strategic planning attributed to the organization’s different sectors and employees) established.

With the exception of the president of Toyota Mercosur and some statutory directors, who receive variable remuneration in accordance with their competencies and their performance, remuneration for the BOD and Executive Committee members is fixed in accordance with the salary stipulated in their respective work contracts.

GRI 4.5 and 4.10

Transparency and audits

There is a series of instruments designed to ensure transparency, ethical decision making, compliance with legislation and regulations and accountability. TDB has an Internal Audit area, an Ethics Committee and an Ethics Channel, as well as its Code of Conduct, Internal Regulations and Authorization Policy, which guide all operational processes and provide the organization with ethical guidelines. These policies and procedures set forth the attributions and responsibilities of each position in the units.

Audit processes are determined locally in conjunction with head office, with a view to ensuring that the subsidiary’s internal processes and information are transparent and reliable. In accordance with the TMC model, the company adopts the guidelines set forth in the Sarbanes-Oxley (SOX) Act, a North American standard for guaranteeing and verifying the security of management processes.

Responsibility for maintaining internal controls and procedures for financial statements lies with the TDB senior management, which must periodically check their efficiency and effectiveness.

The company is also subject to an annual external audit to verify management processes and point out opportunities for improvement. TMC conducts formal assessments during sporadic visits to the country, the last being in 2007.

Code of Conduct

Another document guiding TDB best governance practice is the Code of Conduct which sets forth the conduct required of employees in their work, covering situations such as conflicts of interest, respect for diversity and human rights, business and government relations. The document was revised in 2010 to reinforce Toyota standards of conduct in Mercosur (Brazil and Argentina).

Available on the intranet, the Code is reinforced through training and internal communication channels like posters, signs and banners. Upon joining TDB, employees are given the Internal Regulations and an abridged copy of the Code of Conduct, a complete version of which is also available in each sector. The Code is also presented in the company’s induction program.

Annually TDB organizes activities to instruct managers, supervisors and employees in the operational areas on how to identify and report suspected breaches of the Code in the workplace. In 2010, the company carried out information security training for all employees, providing practical examples of applications of the Code in their professional routines.

Profile


Ethics Channel

Open to all employees, this is a channel for reporting unethical behavior or suspected fraud.

The Ethics Channel is used to report conflicts of interest, suspected disclosure of confidential information, theft and unwarranted use of company property. The Toyota Ethics Committee, consisting of managers from the Legal, Administrative, Human Resources and Audit areas, receives and reviews all reports.

Once the Committee has reviewed a report it is channeled to the Human Resources area and the Presidency for appropriate action in accordance with company guidelines. Should the report concern the president or a vice president of the company, the Committee is directed to refer it to the head office in Japan for review and action.

GRI 4.6. and 4.8

15

The Toyota Way

The creation of the Toyota Way in 1935 laid the groundwork for its current position in the market: a company intent on the quality of its products, capable and ready to deal with challenges, whose production system created an industrial paradigm by managing costs, processes and methods, focused on efficiency and minimizing waste.

Toyota management principles are centered on continuous improvement - or kaizen, to use the original Japanese expression. To put this into practice, the subsidiaries, in line with the strategic planning (hoshin) established by the head office, invest in training to instill this culture of striving for continuous improvement among employees.

GRI 4.8

GRI 4.8 and 4.11

Toyota preserves and propagates its values in the regions in which it operates. Continuous improvement, adaptation to the consumer’s needs - based on the Customer First principle – and respect for people are the pillars of the Toyota Way, which guides all the company’s processes and decision making

Business conductPillars of the Toyota Way and underlying concepts Continuous improvement Challenge – building a long-term perspective, facing challenge with courage and creativity, to make our dreams come true.

Kaizen – continuously improving our business operations, focused on innovation and evolution.

Genchi genbutsu (“going to the source”, in Japanese) – seeking and finding concrete facts to make the right decisions, sparing no effort to build consensus and reach targets.

Respect for peopleRespect – making every effort to build understanding and mutual trust.

Teamwork – stimulating the personal and professional growth of each employee, sharing development opportunities and maximizing individual and team performance.

Similarly, the Toyota mission and values are incorporated into the activities of managers and business partners.

Another crucial point is respect for people. Understanding that employees’ creativity and growth potential are fundamental for the company, Toyota seeks to establish ties of mutual trust and respect between leaders and employees and offer growth opportunities within its units. Superior employee performance results in more efficient operations and higher quality products and, consequently, encourages kaizen at all levels and in all sectors.

Profile


GRI 4.8 and 4.11

GRI 4.11

Toyota Production System

Reducing costs, improving production and preventing losses throughout the process are basic goals for any manufacturer. For Toyota, however, they are rules established in the Toyota Production System or TPS, which pursues customer satisfaction through a system designed to meet customer needs in the shortest time, in precisely the right measure and at the lowest possible cost.

Applied in all the company’s subsidiaries, the TPS has been studied and applied in different companies worldwide. It is based on the creation of the Toyota Way and its application to vehicle production lines in the 1930’s. The main differential of this management philosophy, which was a basis for the widely disseminated lean manufacturing production model, was a focus on reducing costs, eliminating waste and optimizing processes.

This involves investing in a system which undergoes constant renewal by means of continuous improvement (kaizen). The policy is also aligned with Toyota’s global socio-environmental management principles, promoting the more responsible use of resources and materials in production routines.

Systematic training is used to engage employees at Toyota plants and units in the principles. In the TPS, worker participation is seen as fundamental since, in addition to the strategic decisions taken by management, company growth also depends on identifying problems and improvement opportunities in the production process, which is directly related to the capacity leaders, supervisors and employees have to observe and suggest improvements that reduce waste and costs.

Business partners such as suppliers are also encouraged to adopt TPS criteria and standards. For Toyota, it is fundamental that they be aligned with the company’s quality, cost reduction and waste elimination policies in order to maintain its standards, benefiting customers and partners, not to mention the environment.

Combating waste

In the TPS, waste is any part, stage or element of production that does not add value and only increases the cost of the product. One of the pillars of the system is that reduced spending on production must not compromise product quality but rather improve it.

Central concerns are the reduction of excess production and operational, logistics, warehousing and assembly costs. An example of waste elimination is a measure that Toyota has adopted since the beginning: the production of inputs according to demand. Therefore, instead of producing on a large scale and running the risk of having excessive stocks on hand, vehicle assembly inputs are supplied in line with market needs and characteristics. Vehicle production follows the same philosophy; they are produced and placed in the market in accordance with the demand identified by the company.

TPS core criteria Quality Assurance – Only quality units proceed to later processes, preventing bottlenecks further down the chain.

Quality Control – Adapt to variations in demand, both in quantity and variety.

Respect for the Human Condition – Stimulate individual creativity and innovation potential and value team work. Inspire trust and mutual respect between employees and management.

Integrated philosophies

Just in Time Production – Produce and transport only what is necessary, at the right time and in the right quantity

Jidouka – The concept proposes 100% quality in part production. It is also a basic principle to not allow a defect to proceed unidentified through the system. Whenever there is an anomaly, the employee should stop production until the defect has been remedied.

17

Commitment to quality of life

With the slogan “Open the Frontiers of Tomorrow”, Toyota’s 2020 Global Vision was released at the end of 2007 and has determined the company’s actions in all the regions in which it operates since then. The principle of sustainable development in the relationship between industry and the environment is put into practice through continuous improvement (kaizen) and combating the three “mus”, muda (waste), muri (overload) and mura (variation). Using these as a basis, numerous actions and campaigns reinforce efficiency and socio-environmental responsibility in company units.

This commitment is extended to more relevant stakeholders. Through

In tune with the global movement to combat actions that interfere with the climate and ecosystems, Toyota’s 2020 Global Vision strives for harmony between the cycles of nature and industry

Strategic vision

GRI 4.8 and 4.11

Toyota 2020 Global Vision

Cycles of natureAll people and communities are subject to the natural cycles of the earth. Toyota always strives to prevent monozukuris (industrial products) from upsetting environmental balance in any way.

Cycles of industryNew industrial cycles create new values. For this reason, Toyota is committed to driving the development of more sustainable industries. Toyota’s mission as it heads towards 2020 is to reexamine the relationship between its activities and nature to help promote a harmonious balance between the cycles of nature and industry.

measures such as Derap audits and training to promote ISO 14001 certification, dealers are required to collaborate in reducing environmental impacts (read more on page 26). The company also provides training to drive supplier awareness and commitment to environmental management certification and waste and emission reduction through adoption of the Toyota Production System (TPS) guidelines (read more on page 30).

By using these mechanisms, the company intends to develop a production chain that seeks viable production solutions and uses resources in a manner that will ensure the integrity of ecosystems and a healthy environment.

Profile


GRI 4.8

GRI 4.8

Strategic planning – hoshin

Toyota policies and principles are incorporated into a strategic management model originating from the TMC head office in Japan. This is extended to company subsidiaries, taking into account regional contexts before being applied in the diverse operations. Based on the Toyota Way and the principles set forth in the company Code of Conduct, specific hoshins (strategies) are developed for each region – which, in turn correspond to parts or stages of the company’s long-term planning.

More than just a philosophy or vision, the hoshins are applied at all levels of production in Toyota – thus they are translated by the senior management of the subsidiaries into specific actions aimed at their particular universe. These strategies are then communicated to operational employees, supervisors and managers. Each individual then incorporates them into their professional routine to ensure that Toyota achieves its objectives and targets and plays a leading role in society.

For the fiscal year that began in the first half of 2011, a strategic global priority was recovery from the catastrophe in Japan in March, focused not only on resuming the operations directly affected by the disaster, but also on supporting Japanese society in general. Another crucial element was reinforcing consumer credibility in the wake of the company recalls undertaken in 2009 and 2010.

There are regional hoshins for Latin America, the Middle East and Africa. The priority for these regions is to grow the company in emerging market segments, winning over new customers and developing regional strategic plans that incorporate the economic and cultural realities of the countries involved. Consequently, TDB’s hoshins for 2011 were focused on consumer confidence and operational expansion.

Global Hoshin 2011-2012

Joint work on rebuilding the operations and businesses affected by the natural catastrophe in Japan

Recovery of TMC’s image and consumer confidence

Development of unique vehicles and services, as well as investment in new businesses and vehicles

Establishment of a supply, production and sales system appreciated by customers, especially in emerging countries

Review of governance and human resources based on a regionalized management model

Expansion of internal and external communications

Increase in competitiveness and operational capacity in Japan

Regional Hoshin (latin America, Middle East and Africa)

Set up and carry out a plan to introduce new products in emerging countries, focused on young and/or lower-income consumers

Prepare future strategic plans for subsidiaries and companies

Build regional development strategy taking into account cultural and economic realities

Build a supply chain that enables the “Consumer First” concept

brazilian Hoshin (Toyota do brasil)

Build consumer confidence in the wake of the recalls

Reinforce values expressed in the Toyota Way and engage employees

Increase efficiency and strengthen operation, with a focus on the new unit in Sorocaba

19

Action Plan: new five-year plan

One of the main tools for tracking Toyota’s environmental commitment is its five-year Environmental Action Plan, which is based on the company’s Global Vision and proposes a series of measures and targets to reduce the impact of activities on a global and local level.

After reaching the targets set forth in the 2006-2010 Action Plan – the fourth on a global level –, Toyota has established a new plan for the period from 2011 to 2015. Again the goals established focus on environmental management and on continuous improvement in production, sales, supply, purchasing, logistics and community relations processes affecting not only the company, but also important stakeholders.

Putting the 2020 Global Vision into practice, the latest targets seek to further develop measures already in place and to establish closer monitoring of the company’s socio-environmental and production chain indicators.

The main improvements over the last five years have been in logistics, with the calculation of emissions arising from product and part transportation, packaging control and the reduction of emissions in the production process. A series of important kaizens has also been implanted to drive greater occupational safety and product quality (read more on page 50).

GRI 4.8

GRI 4.12, 4.13 and SO5

Government relations and participation in formulating public policy

Toyota’s relations with public authorities are characterized by transparency and active participation in seeking viable solutions for issues related to its business. Always ethical and compliant with legislation, the company is active in discussions on public policy related to the automotive sector.

With formal representation via leadership positions in sector associations such as Anfavea, the Brazilian automobile industry association, and AEA, the Brazilian Automotive Engineering Association, Toyota advocates its positions and contributes to debates on urban mobility, global warming and industrial activity.

Topics currently under discussion include adaptation of the automobile sector to the new Brazilian national solid waste policy (law 12.305/10), which comes into force in 2012; Brazil’s bill of law on vehicle recycling, currently the subject of debate in the legislative sphere; and multi-sector initiatives to improve air quality in large urban centers.

In conjunction with another automobile manufacturer (Fiat), organizations such as Petrobras, the Agência Nacional do Petróleo (ANP) and the University of São Paulo (USP), Toyota recently joined the Auto Oil program. This is an international initiative organized by environmental bodies, auto makers and research centers from a number of countries to gather data on vehicle performance through research and tests on the Brazilian vehicle fleet, the objective being to reduce emissions and environmental impacts and improve quality of life in urban centers.

The objective is to go beyond existing legislation and propose new reduction parameters and targets based on more technical criteria. Although the program was implanted in Brazil in 2008, the initial studies began only in 2011. Currently in its second phase overseas, Auto Oil has been in place in Europe, the United States and Japan since 1997, receiving support from bodies such as the Japan Petroleum Energy Center (JPEC) and the European Parliament.

Profile


GRI 4.14 and 4.15 OUR STAKEHOLDERS

brand builders

Individuals and/or companies having a direct or indirect impact on the construction of the company’s image

Employees

Suppliers

Advertising agencies

Banco Toyota and TCFA (Argentina)

Dealer Associations (Abradit and Actra)

TMC/Shareholders

Toyota subsidiaries

Dealers

Customers

brand endorsers Individuals and/or companies whose opinion influences others with respect to company values and perceptions of the organization

Press

Universities

Opinion leaders

Employees’ families

Customers

NGOs

Sector regulators

Public authorities that influence company activities through laws, regulations, standards and guidelines

Government authorities

Sector representatives

Individuals and/or companies representing social or commercial interests associated with the brand

Sector/trade associations (Anfavea in Brazil, and Adefa in Argentina)

Financial community

Insurance companies

Competitors

Unions

Stakeholder relations

Representing TDB and Toyota Argentina, Toyota Mercosur initiated a brand management process in the two countries in 2008. The main objective was to identify the relationship between the brand and its main stakeholders as a basis for building additional value.

Stakeholders are individuals, audiences or communities directly or indirectly related to the company. The survey identified at least four main groups, their roles and expectations from their relationship with the company (see figure).

In line with a global Toyota management principle, TDB always puts the customer in first place. This is why a large part of the company’s relationship actions are aimed at this audience. However, other partners in the production chain, government bodies and sector associations also merit the company’s attention.

Every year, Toyota organizes events and conventions for dealers and suppliers. Annual training programs, evaluations and incentives to improve environmental management constitute another area in which the company invests in strengthening relations with these partners (read more on pages 26 and 30).

21

Customers A relationship of trust

In line with the Toyota Way, the customer care area sees customer criticisms and comments as opportunities for reflecting on the company’s role in promoting respect for people in the automobile industry.


Lifelong satisfaction

Years of experience in the most diverse markets worldwide have lead Toyota to develop its own unique way of dealing with customers. Brazil is no different. Charged with the mission of reflecting the voice of the consumer in ongoing process improvement, the Customer Relationship Department monitors, evaluates and implements improvements at every stage of the process of acquiring a Toyota vehicle – from the first contact with the dealer network, to the actual purchase and post-sale service.

The recent targets set for the area (and achieved) include more comprehensive training for dealers’ Customer Service teams and improving the toll free telephone service for customers with the inclusion of a specialized team of engineers. Currently the company has 12 third-party attendants, as well as 15 specialized engineers on its customer service team.

Due to misgivings generated by the recalls overseas, calls to the service increased by more than 160% compared with the previous two years, reaching 7,500. The additional hires made necessary by this upsurge in demand created a new challenge for the company: meeting its improvement targets while providing a rapid crisis response.

The results were positive. Some targets proposed for 2010 were exceeded: one was that 80% of the calls should be answered within 20 seconds. By the end of the fiscal year, the rate was 95%.

95% OF CALLS ARE

ANSWERED IN UP TO 20 seconds

RAPID RESPONSE

Average time for dealing

with complaints (days)

2007

2009

2008

2010

12

7

10

2

23

Customers

Specialized customer care

The demand from some customers for attendants with more in-depth product knowledge led Toyota to expand its customer care service, including engineers on the telephone support staff. With market experience and clear communication skills, these professionals answer more complex questions related to mechanical problems or technical issues. At the end of 2010, the team achieved a record in the time taken to provide solutions (the average response time in this case is 48 hours).

ASSISTANCE FOR TOYOTA CUSTOMERS

Attendance by category 2008 2009 2010Sales 80,570 94,710 99,471CPUS (paid attendance in dealer network) 782,557 798,529 922,880Incidents 53,480 45,820 46,182Information 45,364 37,296 37,893Complaints 8,116 8,524 8,289

Part of the team is dedicated to more critical cases, which include the application of genchi genbutsu – that is personal attendance for customers with safety-related questions representing a potential risk and requiring a physical inspection. In 2010, there were approximately 280 cases of this nature in Brazil, a number inflated by customer concerns about the Corolla recalls overseas.

This specialized team will be increased by 2012 to meet the demand for personal attendance and further reduce waiting time.

Similarly the two-day deadline established for responding to customers questions was reduced to just one day. For the coming years, the department’s target is to reduce the number of complaints by 10%. To achieve this and also to prepare for the launch of the company’s new compact vehicle, the customer care service will be expanded. Another focus is expanding Toyota’s presence in relationship networks and digital media.

Following the vehicle recalls in 2009 and 2010, it became clear that good customer relations also depend on a consistent response by the company to complaints and doubts aired by users on the internet, in particular in relationship networks, since these directly affect the company image.

Developments at dealers

Toyota also prepares its dealer network by providing training sessions for dealer customer care attendants every two months. Dealer attendants and advisors (post-sale managers) are selected and take part in a standardized training program whose content ranges from relationship techniques to consumer rights and obligations. In the final stage, the participant undergoes practical training in which the group has to deal with critical issues taken from real-life situations. 314 people received training in 2010.


Lifelong satisfaction

Monitoring satisfaction rates is essential in maintaining good customer relations. For this reason, the Sales, Post-Sale and Customer Care areas evaluate each stage of the vehicle purchase process.

One of the main tools in this process is the Customer Satisfaction Rate. Undertaken by the Sales area since 2007, this is a daily survey of customer perceptions, the results of which are made available to dealers, speeding up decision making related to customer requirements.

This telephone survey is conducted by Ibope and is applied to some 14,000 people per year. Customers evaluate dealer facilities, sales staff and consultants’ performance, vehicle delivery and service quality. The results show that overall satisfaction among customers acquiring a Toyota vehicle continues to grow, reaching 9.58 in 2010 (see table).

This information is essential in enabling Toyota to track the evolution of its dealer network and assess the efficiency of training and the Toyota Sales Way (TSW), a service quality program for dealers (read more on page 26).

Using similar methodology, since 2008 Ibope has conducted a post-sale survey to measure customer satisfaction with the maintenance services provided by dealers. On average, 12 thousand people take part in the survey. After exceeding the target set for 2009 with a score of 9.27, the score increased to 9.37 in 2010, in line with the annual target.

The telephone service is also evaluated. Until 2010, the actual attendant was the only one responsible for this evaluation, rating the clarity and recording details of the information provided. Now users also rate the service. In 2011, these data will be consolidated and cross-referenced to provide a more detailed picture of how customer relations are handled over the telephone.

Consolidating all this information helps Toyota to measure the quality of the service offered to customers and to develop new strategies to drive continuous improvement in these processes.

Learning and improving

The impact of the overseas recalls and the preventive recall in Brazil also affected TDB’s relations with customers and enabled immediate service improvements through post-sale communication channels.

2008

9.08

9.31

2007

9.21

8.97

2010

9.33

9.58

2009

9.24

9.42

CUSTOMER SATISFACTION RATE

Sales Post-sale

GRI PR5

GRI PR5

Given the significant increase in the number of calls and the nature of the doubts voiced by users, the company immediately moved to drive continuous improvement by introducing a Smart team - which stands for Swift Market Analysis Response Team, investigation teams deployed in the markets affected by the recalls, in Brazil (read more on page 62).

Even though there were no impacts on the quality or safety of the Toyota vehicles manufactured and sold in Brazil, the subsidiary realized that rapid restoration of confidence on a local and global level depended on a quick crisis response with transparent, standardized service.

New attendants were hired to meet the demand and a team of engineers was set up especially to undertake genchi genbutsu and investigate user complaints on the spot. This personal service, which has been maintained, is specifically for when doubts or complaints are related to important safety items – such as brakes, airbags, acceleration or vehicle handling.

Alleged cases of spontaneous acceleration, for example, widely publicized during the recall, were analyzed in person by the team. In none of the cases were any defects found in the vehicles, reflecting the findings of NASA, the US National Aeronautics and Space Administration, which did not detect any electronic defects in the global recall. Some 280 customers were attended nationwide during 2010.

84% OF CUSTOMERS

RECOMMEND TOYOTA

25

Dealers Commitment and quality

In addition to product quality, a close relationship between the company and the dealer network is fundamental. With 136 dealerships in 26 states and the Federal District, Toyota dealers play a key role in maintaining the company image in Brazil.


The Toyota dealer network plays an active role in driving the company’s growth in Brazil. For this reason, the company has a series of policies, as well as training and incentive programs for managers, consultants and executives in the dealer network to ensure service aligned with the Customer First principle that guides Toyota’s actions.

All new dealers undergo six months training prior to opening to ensure the right leadership skills and maintain standards. The main guidelines governing this relationship are also set forth in the Code of Conduct, valid for the entire Mercosur region.

In addition to providing excellent service, dealers are expected to help reduce environmental impacts and promote sustainable development in their regions. In 2011, Toyota started to monitor dealers’ energy and water consumption, as well as CO2 emissions

Relationship based on partnership

and hazardous waste generation. Based on the initial results, Toyota intends to maintain detailed records and improve its dealers’ environmental performance.

Evolution, targets and challenges

One of TDB’s major challenges is to ensure uniform quality in sales services across more than 130 dealers. Customer facing consultants and managers participate in the Sales Training Program which since 2008 has improved commercial relations by training talented professionals in the Toyota Way and ensuring increased employee retention.

The training combines classroom modules with e-learning; costs are split between the dealers, represented by the Toyota Dealers Association (Abradit), and TDB. Course content ranges from technical data, product information and differentials to negotiation techniques, sales approach and customer service. There are three levels of certification: basic, expert and master.

In 2010, more than 65% of the consultants and 76% of the managers in the dealer network had basic level certification, while 20% and 36% respectively were rated expert.

The main instrument for indirect measurement of the degree of integration between Toyota and its dealers is the consumer satisfaction rate. This shows that the program has helped the company to exceed its targets. The score achieved by the dealer network rose from 9.21 to 9.58 between 2008 and 2010 (read more about customer satisfaction on page 25).

27

Derap requirements

Have a person responsible for environmental questions at each dealer.

Have an environmental policy, a declaration of compliance with the legislation in force and a commitment to implant environmental improvements.

Handle hazardous waste adequately (such as oil, filters and batteries).

Use oil water separators.

Use vehicle air conditioning gas recycling equipment to prevent emissions of gases harmful to the ozone layer.

Communicating with the teams

Developing and maintaining communication channels with the dealer network is also an integral part of Toyota’s relationship policy. The main platform for communication and e-learning is a portal accessible to registered users. This provides access to information, to company principles and to training of a more technical nature that does not require the presence of an instructor.

TV Toyota is used to transmit advertising and sales campaigns, chats, live transmissions, institutional and industry information and messages from the board. In 2010, the company launched Radar Toyota, a video training tool that explores the company’s products and the profile of its customers.

Forming new dealers

Initiated in 2007, the Toyota Dealer Management Program is one of TDB’s main resources for ensuring the continuity and development of its dealer network. Having the status of an MBA (Master of Business Administration) program since 2010, the course is run by the Instituto de Ensino e Pesquisa (Insper) in São Paulo and focuses on providing training in the management, technical and strategy areas for executives and successors at dealers. By the beginning of 2011, four groups totaling more than 120 students were either in progress or had already graduated from the program.

The program propagates company values and guidelines to ensure coherent application of management techniques and an exchange of experience and practice. The curriculum was prepared by Insper with input from Toyota and the Brazilian dealers association Abradit. The disciplines covered range from strategy, corporate social responsibility and macroeconomics to more routine subjects such as retail marketing management, corporate finance and sales management. The lecturers are carefully selected and trained in the Toyota principles under the supervision of TDB. The program includes classes in Los Angeles (USA) and an immersion course in Japan.

Derap: an incentive for environmental management

Toyota promotes its Dealer Environmental Risk Audit Program or Derap worldwide to help the dealer network adopt environmental impact reduction and risk management measures. By March 2011, the program had been adopted by 89% of the Brazilian network (119 dealers). The aim is to have all dealers certified by 2012.

Also known as Toyota Environmental Standards, Derap is coordinated by the Post-Sale area and drives dealer awareness of the importance of controlling risks and mitigating environmental impacts. Toyota has established a timetable whereby all 126 dealers will be fully compliant with Derap requirements (see figure) by March 2012. The remaining seven dealers are currently engaged in remodeling or adapting their facilities to ensure compliance with the program.

The program involves training and an audit phase to check compliance. Any gaps in the requirements are indicated to the dealer so that kaizen may be applied, enabling the dealer to carry out the necessary adjustments and receive certification.

Dealers


Quality training and monitoring programs

Another way that Toyota do Brasil drives improvement and monitors the quality of the services provided by dealers is through the Toyota Sales Way (TSW) program to train and certify dealer sales teams. In the first half of 2011, 126 of the dealerships in Brazil had been certified, with a further four undergoing certification.

The main purpose of this training is to increase customer satisfaction by ensuring standardized, people-focused service, improving the buying experience in accordance with Toyota Way principles. TSW certification is valid for one year, after which the dealer is audited before certification is renewed.

Toyota also runs its Skill Contest in the Post-Sale area. This is a contest designed to embed excellence in professional routines and award dealer employees exhibiting the best performance in their areas of competence.

PERCENTAGE OF DEALERS

CERTIFIED IN THE TOYOTA

ENVIRONMENTAL PROGRAM

2010

2011

73%

89%

ISo 14001

To further strengthen environmental commitment, Toyota also advises its dealers to obtain ISO 14001 certification, the main form of formal recognition of environmental management systems for companies. Although not mandatory, certification is seen as a differential in the sector, boosting the image of Toyota and the dealer network.

There are two training courses per year for managers. These present environmental management concepts and the standards to be adopted. At the end of 2010, 39 of the dealers had ISO 14001 certification, in line with the target established. This number should increase to 49 by March, 2012.

Audits

The TDB Environment team performs periodic audits on the dealers who already have Derap certification.

The companies are submitted to 12 annual environmental management audits which examine wastewater treatment and waste disposal, among other items.

The participants – technicians and service consultants working in the dealer network – are subject to a selection test with theoretical and practical components. The final stage tests the employees’ capacity to solve problems in service situations. The exercise includes dialogs with customers and solving mechanical problems in a vehicle. The evaluation criteria go beyond technical criteria to encompass the quality of the service provided by the consultant or salesperson and alignment with Toyota principles. In 2010, the 16th Skill Contest was held in São Paulo, with three technicians and three service consultants receiving awards. The prize is a trip to Japan, during which the winners learn more about the company’s history, values and operations.

29

Suppliers Constant learning

To guarantee product quality and reinforce responsibility in its actions and impacts in the diverse markets in which it operates, Toyota, through its Purchasing area, seeks to forge closer links with suppliers and embed its values and principles throughout the production chain.

GRI HR6 and HR7


Joint evolution

Toyota do Brasil’s relations with its suppliers are based on the company’s Purchasing policy, which sets forth essential performance and continuous improvement guidelines for these partners, constantly encouraging them to upgrade their businesses. Before initiating a relationship with a new supplier, Toyota evaluates its quality and logistics processes, costs, management capacity and readiness to meet the company’s demands.

TDB then trains these partners to incorporate continuous improvement, reduce waste and monitor their environmental performance. Suppliers of parts and inputs considered essential undergo training in the Toyota Production System (TPS), as well as in safety and quality standards.

The environmental Purchasing Guide, published in 2007, and corporate Social Responsibility, launched in 2009, also encourage partners to adopt best socio-environmental practices.

Consisting of approximately 100 companies, the Toyota supplier base is formally represented by Brasa (Brazilian auto-parts suppliers association) – which partners in executing training and mediating relations with the company. Toyota staff frequently visit partner units to exchange experiences and help implement improvements. The company also organizes an annual supplier convention, presenting awards for the best quality and improvement initiatives.

Supplier training

Toyota promotes an annual training course for suppliers, jishuken, which encourages them to learn how to improve routines, prevent waste and environmental damage while reinforcing and guaranteeing production.

Consisting of theoretical classes with practical applications and projects, this training is divided into three levels: basic, advanced and ji-kotei kanketsu (process quality assurance). In 2010, 43 companies took part in this initiative, the same number as the previous year.

Through kaizen, suppliers not only reduce costs, thereby strengthening their relations with Toyota, but also standardize production, solve operational problems and, more importantly, eliminate muda (waste), muri (overload) and mura (variation), becoming leaner and more efficient in the process, in line with Toyota standards.

31

Reinforcing best social practice

Complementing the guides disseminated through the supply chain, 47 suppliers took part in a training program organized by the Automotive Industry Action Group (AIAG), supported by Toyota do Brasil, Ford and GM, aimed at driving awareness of the importance of best social responsibility practices.

An international organization founded in 1982, AIAG promotes training and process improvement measures in the automotive supply chain. With a specific focus on issues such as slave labor, human rights and employee health and safety, the program consisted of a single theoretical stage held in the second half of 2010. The second stage is being planned for the second semester of 2011.

Challenge: adopting ISO 14001

Toyota asks its suppliers to obtain ISO 14001 or alternative third-party environmental certification to attest the existence of an environmental management system. The objective is to ensure that the company’s commitment to reduce and control environmental impacts is extended throughout its value chain.

After establishing 2009 as a target for 100% ISO 14001 compliance for suppliers and achieving a rate of 76%, the Purchasing area decided to extend this deadline to the second half of 2011. By March 2011, 78% of the supplier base had been certified.

Partner optimizes production

The decision to combat the three “mus” – muda (waste), muri (overload) and mura (variation) – helped one Toyota do Brasil supplier to significantly reduce wasted time and space at its plant in Barueri, São Paulo.

The kaizen involved standardizing one of the supplier’s product lines. Upon identifying the mura, caused by the need for intermediate stocking of products during the production process, employees decided to streamline the distribution of activities and accelerate the part finalization process.

This led to the elimination of the product stocking stage – previously unfinished products were deposited in boxes and only finalized on the weekend. The result was a 10 m² reduction in the stock area and a weekly saving of 60 man/hours of labor.

Suppliers

SUPPLIER CERTIFICATION RATE

Certified Suppliers (%)

2004

2006

2005

2007

2008

2009

2010

54

50

59

75

76

77

78


Responsible development in Sorocaba

More than just an intelligent manner of cutting costs, installing as many suppliers as possible around the company’s plants constitutes a commitment to regional development and the reduction of environmental impacts from the transportation of parts and inputs. This trend, which began in the Indaiatuba plant, has been key in the construction of the new Sorocaba factory.

Since approval of the plans and start up of construction work on the plant, different areas within Toyota have been negotiating with suppliers. Currently eleven producers of high volume parts essential to the end product, such as brake hoses, exhaust systems, fuel tanks, seats and windows, among others, are building plants in the supplier park annexed to the Toyota plant. Another supplier specialized

in waste management will also be installed on the site. In line with Toyota standards, all these suppliers must obtain ISO 14001 certification and apply strict environmental management models in their processes. A further 63 companies installed in Indaiatuba (SP) and other Brazilian municipal districts will supply the new plant.

Another concern has been the adoption of TDB safety standards in supplier civil construction works. Toyota’s Safety area is in contact with the companies responsible for these constructions, ensuring they comply with the directives of the Toyota safety manual. Safety inspections are carried out periodically at the works to prevent and minimize accidents.

Purchasing Policy

Purchasing area guidelines are dictated by factors such as quality, logistics and costs; supplier location is not a formal selection criterion. For Toyota, a local employer is understood to be one with a head office in Brazil. The principles governing the purchasing policy are presented below:

Fair competition and open-door policyNegotiation with suppliers is an open policy with no restrictions as to the size or nationality of the company. Selection is based on commercial considerations which take into account quality, technology and on time delivery

Mutual benefit based on trustToyota seeks to develop relationships with suppliers based on the premises of trust, mutual development and open dialog and communication

Driving the vitality of the local economy through local purchases: good corporate citizenshipToyota uses its production to participate actively in the economic development of the regions in which it operates. Consequently, the company seeks to purchase parts, materials, equipment and other inputs from local suppliers, generating a return for the region.

Streamlining the purchasing system

Accelerating Purchasing area activities without compromising quality is a challenge Toyota meets with constant innovation. Since 2011, a new system has enabled this process to be conducted online.

Implanted at the end of the first quarter, the platform permits the online approval of purchases, quotes and price modifications. Validation is also more rapid: all approvals, except those by the general manager, can be executed by means of electronic signature.

GRI EC6

33

Employees Partners in development

Training and programs encourage employees to drive improvement and be partners in identifying opportunities for Toyota to evolve

GRI EC7


Teamwork and respect for people

With a historical link to the consolidation of Brazilian industry in the 1960s, Toyota recognizes and values the role people play in driving its evolution and consolidation as a reference in quality and reliability. For this reason, the company constantly reassesses and refines its relations with these key stakeholders through documents, policies and strategies that are periodically reviewed by the company’s Human Resources area.

Based on competency development and the company’s continuous improvement (kaizen) culture, from the moment an employee joins the company, he or she is integrated into the work environment based on the principles of the Toyota Way and the Toyota Production System methodology.

The Induction Manual and Internal Regulations provide workers with information on guarantees and responsibilities, as well as work guidelines and the communication channels through which they relate with leaders and managers, make suggestions or report irregularities. The Human Resources Planning and Development process monitors the analysis and achievement of targets, appraisals, dialog and the ongoing growth in the potential of TDB’s internal audience.

Headcount grew 20% in 2010, exceeding 4,000, driven by increased production.

Although the company has no formal policy for hiring people resident in the vicinity of its facilities, this in fact is what happens. In 2010, 54% of the company’s senior management (general managers and directors) were local residents, the same percentage as the previous year.

35

Employees

TOTAL EMPLOYEES – TDB 2011*

Functional level Men Women

President and Vice Presidents 5 0

Directors 10 0

Managers 52 0

Heads / coordinators 184 21

Technical staff / supervisors 193 1

Administration 649 283

Operational 2,440 9

Third parties 13 8

Apprentices 97 45

Trainees 0 0

Interns 4 18

ToTAl 3,647 385

*Data from January to August

EMPLOYEES BY TYPE

OF CONTRACT

*Data from January to August

2

3,645

Fixed term

Permanent

Total 3,647

4

381

Total 385

Toyota employee profile

PERCENTAGE OF EMPLOYEES, BY FUNCTIONAL CATEGORY AND AGE GROUP – 2010

Functional categoryUnder

30 yearsBetween

31 and 50 yearsOver

50 years

Board 0% 70% 30%

Directors 0% 81% 19%

Administration 33.5% 61.5% 5%

Production 44% 54% 2%

Apprentices 100% 0% 0%

Interns 100% 0% 0%

ToTAl 42% 55% 3%

TOTAL EMPLOYEES

2010

2011

3,32

9

4,03

2

GENDER BY REGION

6 2

3833,641

GRI LA1


Full time

Part time

EMPLOYEES BY TYPE

OF EMPLOYMENT

Total 3,647

3,643

4

18

Total 385

367

PERCENTAGE OF EMPLOYEES, BY FUNCTIONAL CATEGORY AND GENDER – 2010Functional category Women MenBoard 0% 0%Directors 0% 100%Management 0% 100%Administration 23% 77%Production 0.40% 99.60%Apprentices 32% 68%Trainees 0% 0%Interns 100% 0%ToTAl 9% 91%

PERCENTAGE OF DISABLED

WORKERS, BY FUNCTIONAL

CATEGORY – 2010

3%

9%

Administration 9%

Production 3%

TOTAL 5%

Turnover

NUMBER OF DISCHARGES

Men 249 159

Women 52 31

NUMBER OF HIRES

Men 290 400

Women 28 45

BY AGE GROUP

Turnover rate (%) Under 30 years

Between 30 and 50 years

Over 50 years

2010 9.74 8.15 11.86

2011 5.89 4.51 4.58

number of discharges

2010 125 161 15

2011 91 93 6

Hiring rate (%)

2010 79.25 19.50 1.26

2011 75.73 23.15 1.12

number of hires

2010 252 62 4

2011 337 103 5

TURNOVER RATE (%)

2010

20102011

2011

8.01%4.65%

18.84%9.67%

HIRING RATE (%)

20102011

87.97%82.65%

20102011

12.03%17.35%

BY GENDER

Diversity

CONCERNING TO BLACK EMPLOYEES,

THE DISTRIBUTION IS:

Men

Administration: 1%

Production: 2%

Apprentices: 2%

Women

Administration: 0,15%

Production and apprentices: 0%

GRI LA2

37

Training

Toyota Business Practices (TBP) is one of TDB’s main training tools. In addition to standardizing processes, TBP is a methodology that detects, analyzes and solves problems, being part of the company’s strategy to make employees partners in identifying process improvement opportunities, a Toyota Way principle.

TBP is standardized globally, but is deployed in distinct ways throughout the subsidiaries. It consists of a more theoretical stage, which covers the Toyota Way principles and the application of these concepts to facility and plant routines. The second stage involves the direct application of the concepts learned. The process is finalized when the employee develops a solution for a problem related to his or her area, with support from managers and leaders.

Focus on leadership

The New Leader Development Program, designed to develop talent to assume leadership roles in the different areas and units, prepared 55 team leaders and 33 new area heads in 2010.

The program, which is held periodically, includes both theoretical training and a period of on-the-job development, that is, practical experience overseen by immediate supervisors.

Improvements have been introduced in the evaluation and training process since 2009, one of which was the reinforcement of the roles and responsibilities of leaders and supervisors.

Preparing for Sorocaba

The new plant in Sorocaba (SP), scheduled to be inaugurated in the second half of 2012, is already involved in the process of incorporating around 1,500 new employees into the company’s production methods and values.

Since 2009, the Human Resources and Government Relations areas have been in contact with educational institutions, public authorities, sector associations and other bodies to ensure that the installation of the Toyota industrial park contributes to the region’s development.

The New Leader Development Program has been investing in preparing leaders at Indaiatuba. Employees showing the greatest potential will be relocated to Sorocaba to coordinate the induction and adaptation of new employees.

Toyota do Brasil ended the fiscal year with 96% of its managers and 90% of employees having TBP certification. Although below the initial target established by the head office in Japan of training 100% of the company’s employees by March 2011, the rate was considered positive by the local Human Resources area because it is very close to the initial projection given the challenges faced by the market as a whole - and the other subsidiaries - from 2008 on.

Employees


QC Circle

One of Toyota’s fundamental principles is seeking opportunities for continuous improvement (kaizen) throughout its basic routines. Since 1980, the QC Circle has been applied to drive training, innovation, team work, improved decision making and developing leaders at company facilities.

Based on the PDCA concept (Plan-Do-Check-Act), groups of employees get together to draft a direct improvement to their routine activity. They identify improvement opportunities, plan and implant measures and then analyze the results over a six-month period. The activity results in important kaizens, developing employees’ autonomy and decision making capacity.

The teams normally concentrate on safety, quality and environmental improvements at the plants. There is an annual convention in Brazil to present the best projects. These then compete at the Toyota Mercosur convention, with the regional winners later participating in a global TMC encounter in Japan.

The main purpose behind the QC Circle is to develop sector leaders capable of achieving consensus, taking important decisions and driving improvements in company processes based on careful observation of work routines.

Interchanges

Inter-Company Transference (ICT) is another program aimed at driving employee development. Employees work at the Toyota Motor Company in Japan for a period of up to three years, gaining more in-depth experience in the company culture.

Between April 2010 and March 2011, five employees were inducted in the program to spend a year in Japan. Another 27 employees spent from one to 11 months in the country.

There are also interchanges with the Toyota subsidiary in Argentina, designed to promote sharing of best practices and learning between the Mercosur units.

Climate survey

Climate surveys are important for measuring employee satisfaction.

After the last two climate surveys, conducted in 2006 and 2009, the Human Resources area will organize a new satisfaction survey in the second half of 2011. In the last survey, employees gave TDB a score of 5.7 (on a scale from zero to ten), which led to the reformulation of certain internal processes and stages of the actual survey.

Among the kaizens implanted based on employee demands are alterations to benefits in the company health plan and the creation of the Toyota Previ pension plan.

39

Guaranteed communication

Employees have channels to facilitate dialog with managers and enable their active participation in the company’s evolution. “2-Way Communication”, one of the principles of Human Resources Planning and Development, permits better use of internal resources and the establishment of objectives and targets between leaders and their subordinates. Performance appraisal and guidance on the fulfillment of jointly established targets are part of the concept, which is applied as a communication tool in internal TDB processes.

The “2-Way Communication” method is also part of the employees’ annual appraisal process. Through this process, each worker’s personal and performance objectives and targets are discussed and evaluated jointly with their managers as a means of establishing consensus and driving continuous improvement.

Other formal internal communication channels include the Ethics Channel – which receives reports and indications that are channeled to the Internal Audit area (read more in Corporate Governance) –, periodic meetings in the production areas with the involvement of leaders, that report on results and demands and convey them to the other employees in the area, as well as e-mails sent via the intranet.

There are other internal communication tools, such as the notice boards and monthly newsletter Toyota Informa, as well as corporate Message – a communication sent to leaders and employees by the Human Resources area twice a year detailing market outlook, challenges and Toyota do Brasil’s annual hoshins (strategic planning).

Greater proximity

Objectives in internal communication for 2011 are aligned with the company’s desire to forge closer links with employees – in particular steel workers directly involved in part and vehicle production industrial processes. The intention is to expand the range of effective communication channels with these workers. One of the main projects is the Open House, which should be resumed in fiscal 2011.

Discontinued in 2008 for management reasons, the event involves opening the factory gates so that employees and their families can familiarize themselves with Toyota’s processes, practices and investments. The main objective is to showcase the company’s efforts to improve quality of life for employees. The event always underscores opportunities for improvements, presenting indicators showing the company’s current status and growth prospects in the people management area.

no lay offs

As a question of principle Toyota does everything in its power to avoid layoffs following events that temporarily destabilize its production chain. After the recalls, for example, there were no significant layoffs at the plants in Brazil. Through kaizens, costs were reduced – in areas such as energy consumption – and processes were optimized in the plants, as a means of reducing the event’s impact on operations in the country.

Similarly, after the earthquake and tsunami in Japan in March 2011, the decision was taken to stop operations at plants worldwide in the event of shortages of parts or materials imported from TMC. This helped cut to costs, maintain profitability and, by extension, guarantee employees’ jobs. In Brazil, these stoppages occurred on four days at the Indaiatuba plant, affecting production workers.

Employees


Sensor prevents propagation of defects on Indaiatuba assembly line

Leader of the bodywork team and responsible for kaizens in the sector, Sergio Cardoso, 36, has worked at the Indaiatuba (SP) plant for ten years. His concern for implanting the level of quality assurance set forth in the Toyota Production System (TPS) led him to develop a system for preventing defects in the gearbox transmission housing.

The improvement was deployed at the end of 2010 and was awarded the best Quality category project in the 2011 Suggestions Program. According to Sergio, there is an apparatus in the bodywork sector in which nuts are welded to the transmission console. However, there was a risk of parts being welded incorrectly or even omitted completely – a fact which would only become evident later in the assembly area.

Instead of a check being carried out only by the operator, the kaizen proposed placing a sensor to check the welding on the nuts. If there is a defect, the surrounding clamps do not close, preventing the part from proceeding to the assembly line and causing a bottleneck. “Thinking about improvements is an opportunity to grow and transcend the daily production routine”, says the team leader.

Suggestions Program

To encourage employees to participate actively in the company’s evolution, Toyota has run its Suggestions Program since the 1990’s. This is a means of proposing operational improvements focused on safety, the environment, quality of life, productivity and cost reduction.

Employees simply send their proposals to their supervisor. If a proposal is approved by management, the kaizen is implanted and the proponent receives a bonus. The program was reformulated in 2009, incorporating more objective assessment criteria and a revised bonus structure.

These changes led to an increase from an average of 1,900 suggestions per month at all units in 2008 to 2,500 in 2010. The total number of suggestions for the year was in excess of 30 thousand.

Dialogs with employees indicated that certain aspects of the program needed to be modified in the administrative area. The review of these processes was established as a hoshin for fiscal year 2011.

Union relations

Toyota believes in open dialog with the unions representing its workers – the ABC Steelworkers Union and the Campinas Steelworkers Union – with a view to arriving at consensus.

In addition to employee salary adjustments, the unions are invited to discuss all situations affecting employees and working conditions, including employee profit share plans.

One of TDB’s current major challenges is preventing stoppages and strikes that affect production. From September 16 to 21, 2010, a stoppage at the Indaiatuba plant was terminated with an agreement for a salary increase of 10.5%, plus a bonus payment of R$ 2,200.

The Labor Relations area has established an ongoing dialog with union leaders, informing them of any relevant decisions taken by the company, even when these do not affect union policy, such as administrative changes or employee transfers. Despite the fact that the collective bargaining agreements do not establish a minimum notification period, normally employees are informed of organizational changes with at least three weeks’ notice.

Approximately 95% of the employees (3,866) are covered by collective bargaining agreements. The remaining 5% are essentially executive level employees (department heads and higher) not subject to union supervision. The company seeks to guarantee employee rights, including freedom of association and collective bargaining. In 2010, there were no cases in which these guarantees were threatened. Additionally, all metal workers are allowed to vote in the annual collective negotiations, whether they are union members or not.

GRI LA4 and LA5

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Private pension plan

Two important changes resulted in an increase in benefits for Toyota do Brasil employees. The first was the creation of Toyota Previ, a company private pension program; the second was the extension of the health plans provided by the company.

Under study since 2006, Toyota Previ is the result of TDB’s desire to provide both new and old employees with the possibility of financial support upon retirement. Like a private pension fund, the system is subsidized by the company, which matches the contributions made by employees from their salaries. For every 1% an employee invests from his or her salary, Toyota makes a matching contribution of 1%.

benefits

Toyota offers its employees benefits such as a health plan and maternity and paternity leave. Life insurance, coverage in case of invalidity, pension fund and dental plan are voluntary benefits available to all employees. Meal vouchers are given to employees only at the São Paulo unit, because all the others have canteens.

In 2010, Toyota offered employees greater flexibility with the company health plan. Now employees may choose between two plans offered by different companies and extend coverage to family members at special rates.

The benefits above are offered to fulltime workers. Interns, third-parties, temporary and part-time workers are not entitled to the same benefits.

Admission to the program began at the end of 2010, and the financial contributions were initiated in January of the following year. At the time, around 80 talks were organized at the company units to provide employees with information on the plan. Employees who joined the plan before the end of the year received a contribution from TDB proportional to the number of years they had worked in the company. Even if the employee leaves the company, he or she has the option of continuing to participate in the program.

By the end of fiscal 2010, 64% of the employees had joined the program.

GRI EC3

GRI LA3

Employees


Health: improvements in ergonomics

Since 2007, Toyota do Brasil has been developing mechanisms to improve work place safety and well-being for employees in accordance with the OSHMS or Occupational Safety and Health Management System. Based on the international OHSAS 18.001 safety standard, the methodology involves a series of requirements that enable effective risk management and protection for employees in the working environment.

Risk reduction, the core concern, is made possible via a six-stage process: an activities survey, risk evaluation, improvements to equipment and activities, organization of operational standards, education and training, observation of activities and feedback to employees.

Instruments such as safety patrols – in which employees and leaders carry out inspections to identify risks and opportunities for kaizens –, monthly safety meetings, accident and fire prevention commissions (CIPA in the Portuguese acronym), as well as internal occupational accident prevention weeks (SIPAT in Portuguese) support this methodology at TDB facilities.

Kaizens and process modifications aimed at reducing risks in the period between 2007 and 2010 enabled Toyota to turn its attention to occupational hygiene and issues such as noise, exposure to harmful agents, among others, that affect employee quality of life – as well as ergonomics, more complex stages in the provision of a healthier workplace.

Also in 2010, a workplace exercise program was initiated in the plants, and the occupational medicine area was restructured with the incorporation of specialized professionals. The aim here, in addition to treatment, is prevention and monitoring of risks. Such measures help combat ergonomics risks.

Other measures aimed at improving quality of life and promoting health were: influenza vaccinations for employees at all units; campaigns to measure arterial blood pressure and glycemia. Future plans include programs to prevent and combat chronic diseases, drug use and smoking.

Greater safety in the plantAs a result of the Suggestions program and observations made by leaders and Safety area professionals, a number of kaizens were implanted to reduce the risk of accidents. One of the main ones was the elimination of forklift trucks at diverse stages of the industrial process at the plants. The production area, for example, substituted the vehicle with conveyor belts, handlifts and towing equipment, the result of a process begun in 2009, with the physical separation of employees from equipment traffic areas by barriers.

Improvement reduces ergonomics risk

The advance in combating ergonomic risks in the workplace at Toyota is an achievement that the Safety area shares with the employees who promote kaizens in their operations.

Through the QC Circle, stamping press operator Lucas Viana Nascimento, 26, helped minimize risks in parts movements at the São Bernardo do Campo plant in São Paulo.

The improvement involved moving the Hilux body in the stamping area. A survey established that the positioning of one of the presses in relation to the parts caused some of the workers to suffer from back pains due to the weight of the body and the way it was transported on the assembly line.

The reorganization of the parts, which are now secured and transported in a more orderly manner in boxes, reduced ergonomic risks as well as production costs. “With the new method, the cost of the part was reduced by R$ 0.74 per vehicle. Additionally, the strips used to tie the pieces are now reutilized, and the physical space necessary for the operation has been reduced”, says Lucas.

GRI LA8

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Fundação Toyota do Brasil: new prospects

2010 was a year of learning for the Foundation - rather than expanding project sponsorship, in the coming years the focus will be on increasing employee and management involvement in its activities, in line with the organization’s global environmental guidelines


Balancing the cycles of industry and nature

Created at the beginning of 2009, the main objective of the Fundação Toyota do Brasil is to centralize and align the company’s socio-environmental investments, ensuring greater effectiveness. In fiscal 2010, the foundation underwent internal reformulation to modify future activities.

An evaluation of the first two years of activities concluded that the Foundation should have a more participative role in the programs it supports, rather than acting merely as sponsor. Furthermore, it was decided that many minor initiatives having similar scopes and objectives, such as reforestation and the recuperation of conservation areas, should be aligned.

Consequently, a number of projects were reformulated based on the PDCA (Plan-Do-Check-Act) concept to increase their effectiveness. A new investment plan was also drafted with an emphasis on developing self-sustaining long-term programs.

There was a reduction in investment compared with the first cycle of activities, which ended in March 2009, due to the reevaluation of the Foundation’s initiatives during fiscal 2010. The main focus was on local activities, that is, the work being done in communities and areas near Toyota units in Brazil. The priorities included the Environmental Awareness (Ambientação) and Toyota Nature Trails programs.

Principles and policies

Since its creation, the Fundação Toyota do Brasil has developed a series of socio-environmental principles aimed at ensuring alignment with TDB and TMC environmental guidelines.

The Foundation’s bylaws emphasize three main areas: defense of the Brazilian biomes – mainly the Atlantic Rainforest –; education as a vehicle for promoting citizenship and environmental responsibility; and the provision of relief and humanitarian aid for natural catastrophes and public calamities affecting the country.

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These priorities define social investment policy and guide the decisions of the Curatorial Council and Executive Board, which maintain close relations with the corresponding areas in Toyota do Brasil, as well as having company representatives as members.

After concentrating investment in environmental defense, in future projects the Foundation intends to prioritize education and expand its partner network, which currently comprises the NGO SOS Mata Atlântica, the Instituto Arara Azul, the Museu da Pessoa, as well as ICMBio (Instituto Chico Mendes de Conservação da Biodiversidade) and the NGO SOS Pantanal, the last two having joined the group in 2011.

Dissemination and engagement

The initiative to sensitize multiple stakeholders around the question of socio-environmental preservation and development has produced significant results in recent years. For example, in 2009 the Fundação Toyota do Brasil was instrumental in the formation of the Abradit (Toyota dealer association) Social Responsibility Committee.

Members of the committee are thus able to monitor and disseminate the best social responsibility actions developed by dealers, driving increased awareness and engagement throughout the country.

Fundação Toyota do brasil

Values –Toyota do Brasil’s Corporate Social Responsibility policy seeks to defend and conserve the environment in Brazil, promoting sustainable development and education and enabling the exercise of citizenship by the Brazilian people.

Mission – To promote sustainability through environmental and educational actions that benefit Brazilian society and its cultural wealth, reaffirming Toyota do Brasil’s values and commitment to the country’s social development.

Toyota and the Atlantic Rainforest

Since its creation, one of the Foundation’s priorities has been the preservation of the Atlantic Rainforest – one of the most degraded biomes in the country. Ranging over 17 states, only 8% of the original area is intact. In partnership with the Fundação SOS Mata Atlântica, the Toyota and the Atlantic Rainforest program promotes preservation of the biome on the environmental, educational and social fronts. Investments in 2010 totaled R$ 330 thousand.

As part of the reformulation of the Fundação Toyota do Brasil’s investments and actions, three of the five initiatives sponsored under the Atlantic Rainforest Project – reforestation in the Ilhéus region in Bahia, support for environmental preservation areas and public awareness campaigns on dates such as Tree Day - were combined and transformed into a single, larger scale project aligned with the Foundation’s objectives: the Toyota Costa dos Corais Environmental Preservation Area (APA Costa dos Corais).

Society


Blue Macaw Project

Supported by Toyota since 1990, the Blue Macaw Project involves preserving one of the bird species most at threat from extinction in the country. Based in Mato Grosso do Sul’s Pantanal region, the program developed by the Instituto Arara Azul monitors some 5,000 birds on 47 farms in the area. The foundation increased its investment in this project by 41% in 2010.

Since its creation, the Fundação Toyota do Brasil has contributed to the maintenance of a research and study center in Campo Grande (MS), where the project is based, as well as training programs and workshops for students and scientists.

The company also provides logistics support in the form of three 4-wheel drive Hilux vehicles, which enable the teams of biologists to circulate on the unpaved roads in the region. The fleet was renewed in 2009, and the trucks receive periodic servicing.

Results in 20 years

Due to illegal smuggling of the species and environmental damage, there were only 1,500 specimens of the Blue Macaw in the region when the project began in 1990. By the end of 2010, this number had increased to around 5,000. The number of nests on record (both natural and artificial ones created by the teams) has increased from 48 to 619; the area monitored has also grown from 47 thousand hectares to more than 400 thousand hectares, covering 47 farms, compared with only 13 in 1990. There has been a direct impact on the ecosystem because the bird influences other animal and plant species in the region, helping maintain the balance of local biodiversity.

Local memory

A partnership between the Fundação Toyota do Brasil and the Museu da Pessoa, the Local Memory project, initiated in 2007, is aimed at reviving and valuing cultural and community memory among school students in the municipal districts of São Bernardo do Campo, Indaiatuba and Sorocaba in São Paulo and Guaíba in Rio Grande do Sul. With support from the São Bernardo do Campo municipal education department, the project has been extended to participants on a youth and adult education program.

During the school year, the students carry out research and critical reading activities, which also promote digital inclusion. At the end, they produce a project about local development based on the history of residents of the regions in which the participating schools are located.

The material produced by the students is exhibited at the end of the year. Moreover, teachers in the municipal school network help disseminate local culture and memory, expanding the scope of the program. To broaden the reach of the action, it is promoted in different schools every year.

In four years, more than 260 teachers and 5,300 students have benefited from heightened perception and acquisition of historical and cultural knowledge. In the 2010 school year, a further 62 teachers and 1,356 students from 48 schools participated in the program.

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Society

Environmental defense and education on the Costa dos Corais

As part of the reformulation of the Fundação Toyota do Brasil’s socio-environmental projects, a number of initiatives will be combined in a single project with a broader scope and longer lasting impact on socio-environmental preservation and education. In fiscal 2011, TDB will initiate its Toyota Costa dos Corais Environmental Preservation Area sustainable development project in a protected area of over 413 thousand hectares located between the states of Alagoas and Pernambuco.

The initiative embodies the Foundation’s proposal to assume a more active role in the execution of environmental protection and education programs rather than acting merely as sponsor. Under study since the beginning of 2010, the program is directed at the Costa dos Corais region and will impact the population of ten municipal districts, seven in Alagoas and three in Pernambuco. The project is being developed in partnership with SOS Mata Atlântica and ICMBio (Instituto Chico Mendes de Conservação da Biodiversidade), an organization linked with the Environment Ministry and charged with implanting, managing and monitoring conservation areas in Brazil.

This conservation area is the site of the second most important coral reef in the world. Its mangrove swamps, fisheries, tourist industry and a significant population of manatees under threat of extinction, as well as 185 species of fish, make it one of the most important focuses for the preservation of Brazilian biodiversity.

Humanitarian aid

The Fundação Toyota do Brasil is also committed to participating in campaigns and initiatives to provide humanitarian relief and aid in the event of natural disasters.

The campaign for victims of the earthquake in Japan at the beginning of 2011 mobilized Toyota globally in the provision of support for those affected. Although Toyota do Brasil did not participate formally, employees wishing to donate money were encouraged to do so through Bunkyo, a Japanese-Brazilian cultural association, which made an account available specifically for this purpose.

Also at the beginning of 2011, heavy rainfall and floods in Rio de Janeiro caused more than 900 deaths in the state. A campaign was organized to donate materials in the São Bernardo do Campo, Indaiatuba and São Paulo units, supported by the Foundation and TDB. The campaign raised 2.7 metric tons of water, non-perishable foods, powdered milk, as well as personal care and cleaning products, which were sent to the Rio de Janeiro Civil Defense authorities for distribution in the affected region.


Local projects

Ambientação or Environmental awarenessWith support from the local government, this program has been in place in Indaiatuba since 2008, promoting the application of Toyota Business Practice (TBP) methodology in municipal schools. With guidance from the foundation in the application of the methodology, school principals learn to appreciate the importance of conscious consumption of natural resources, identifying and solving energy and water related problems, as well as implementing selective garbage collection.

Each school has the target of reducing consumption of these resources by 5% and implanting a waste management system. The results are evaluated by representatives from Toyota, the local government, water and energy utilities and universities. In 2010, 69% of the participating schools achieved or exceeded their target. More than 48 thousand people were reached by the program during the year.

Toyota nature TrailsHeld annually in Guaíba, Indaiatuba and São Bernardo do Campo, the project consists of a full day of cultural activities and socio-environmental workshops focused on preserving the Atlantic Rainforest. These include planting native tree seedlings and a tent of senses, which stimulates contact with the typical flora and fauna of this biome.

New attractions were incorporated into Toyota Nature Trails in 2010 to increase the number of participants, resulting in a total audience of 90 thousand people, compared with 52 thousand in 2009.

In preparation for the start up of operations in Sorocaba, São Paulo, the Foundation will organize Toyota Nature Trails in this city as of March, 2012.

Viva a MataIn May 2010, Toyota took part in the event SOS Viva a Mata, held in São Paulo’s Ibirapuera Park, an exhibition of initiatives and projects in defense of the Atlantic Rainforest. Some 85,000 visitors attended the three-day event.

The programming, supported by the Fundação Toyota do Brasil, which had a 36 m² stand at the event, was a tribute to International Biodiversity Year and consisted of a series of exhibitions, talks, debates, workshops, displays and theater plays.

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Environmental management Enhanced monitoring

As its fourth Environmental Action Plan ends, Toyota reaffirms its commitment to sustainability and improves monitoring of indicators


Continuous improvement

Internationally committed to reducing environmental impacts, Toyota develops and applies process improvements using a system that aligns global guidelines with its managers’ and employees’ capacity to innovate and exceed targets. The Toyota Environmental Management System (EMS) is based on three pillars that underpin all its activities: zero legal non-conformance/complaints; minimization of environmental risks and improved environmental performance.

Fulfillment of these objectives is driven by planning, with results measured by the Toyota Environmental Action Plan, the fourth version of which covered the period from 2006 to 2010.

The action plan, which is reviewed every five years, sets forth short and medium term targets ranging from the consumption of natural resources such as energy and water, to waste generation and harmful gas emissions. Incorporating company growth projections, the plan covers all the subsidiaries and establishes targets for each.

Environmental improvements are also driven by the Toyota Production System (TPS) and the Toyota Way, which embed the principles of continuous improvement (kaizen) and combating waste (muda).

Environmental Management System

All Toyota operations worldwide follow the Environmental Management System (EMS). This system incorporates Toyota Way principles, ISO 14001 standards and the company’s socio-environmental guidelines, establishing three action fronts for proper environmental management.

The pillars

1. Zero legal non-conformance/complaints

2. Minimization of environmental risks

3. Improved environmental performance

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In the five-year period that ended in the last fiscal year, Toyota do Brasil made important advances in mitigating its impacts, in monitoring indicators and in engaging its extended production chain in the company’s environmental care efforts. In five years, there was a 5% increase in energy efficiency (consumption dropped from 4.77 to 4.56 GJ per vehicle produced) and a 7% improvement in water consumption (from 3.77 to 3.53 m³/vehicle) ); similarly, waste generation per vehicle decreased by 12% (from 18.15 to 16.21 kg/vehicle), and volatile organic compound (VOC) emissions per vehicle decreased by 34% (from 53.99 to 40.36 g/m²). Internal engagement and ongoing dialog with company partners, such as dealers and suppliers, ensured that TDB achieved its targets.

The main accomplishments include the introduction of monitoring of CO2 emissions from parts and vehicle logistics and control over use of packaging. Exceeding targets, units such as São Bernardo do Campo were able to reduce energy and water consumption by 7% from 2009 to 2010, against a goal of 1%.

Targets for 2011-2015

4% reduction in energy consumption against a 2008 baseline 4% reduction in VOC emissions against a 2008 baseline 4% reduction in waste generation against a 2008 baseline 4% reduction in water consumption Sustainable industrial activities Zero cases of legal non-conformance and complaints Zero accidents 5% reduction in CO2 emissions against a 2009 baseline 5% reduction in packaging waste against a 2009 baseline ISO 14001 certification for all suppliers Monitoring of CO2 emissions throughout the supplier network Full legal compliance throughout network, including waste management and compliance with changes in automobile recycling legislation

Derap (Dealer Environmental Risk Audit Program) certification for 85% of dealer network

ISO 14001 certification for 40% of the dealer network Maintenance of key performance indicator records for ISO 14001 certified dealers

Annual publication of Sustainability Report

Environmental management

An important advance has been the publication of the Environmental Purchasing Guide, a socio-environmental analytical tool used in contracting partners since 2007. The alignment of suppliers and dealers with the Toyota Global Vision increased in function of the company’s requirement of environmental certification such as ISO 14001, as well as commitment to improving resource consumption, emissions and waste generation indicators (Read more in Suppliers and in Dealers on pages 26 and 30).

These results helped shape the targets for TDB’s new action plan for the period 2011 to 2015. Plans for the future include updating the Environmental Purchasing Guide, ongoing reductions in resource consumption, emissions and waste generation indicators, control of materials used in the production of packaging and the elimination of Substances of Concern, already prohibited in the production process, in vehicles and replacement parts.


The company strives to introduce measures to constantly reduce its energy consumption, making its processes more efficient and mitigating production impacts.

Whereas in 2009 energy consumed per vehicle produced was reduced from 4.23 to 4.11 GJ, consumption increased to 4.56 GJ in 2010. However, this figure remained within the TDB target of 4.82 GJ for the end of the fiscal year (March 2010).

This increase was due mainly to the installation of a new forge in the São Bernardo do Campo plant, which automated and modernized the process.

To improve eco-efficiency the company introduced simple but high impact kaizens, such as reducing lighting and air conditioning in the buildings at the São Bernardo do Campo plant during lunchtime and shift changeovers, as well as automating energy cut off in some sectors Other kaizens were implanted, such as adjustments in the stamping sector that eliminated the use of a transporter when unnecessary. In the bodywork sector there was a reduction in the power of the manual spot welding machines. In the paint shop, improvements to the paint application hose enabled faster and more efficient operation..

InDIRECT EnERGy BOuGHT AnD COnSuMED

2009 2010

Sources (GJ) GJ/vehicle (GJ) GJ/vehicle

Non-renewable 124,823 1.88 126,661 1.96

Renewable 148,061 2.23 168,020 2.60

TOTAl electrical energy bought 272,884 4.11 294,681 4.56

PRIMARy FuElS

2009 2010

Sources (GJ) GJ/vehicle (GJ) GJ/vehicle

Natural gas 108,224 1.63 111,151 1.72

lPG 16,599 0.25 15,510 0.24

Hydroelectric 148,061 2.23 168,020 2.60

TOTAl 272,884 4.11 294,681 4.56

TARGET ACHIEVED: 4.82

EnERGy REDuCTIOnS – 2010

Energy saved GJ/vehicle GJ*

Improvements in conservation and energy efficiency 0.014 958

Process redesign 0.010 657

Equipment modernization 0.015 958

TOTAl 0.039 2,573

* Scope: TDB (Indaiatuba, São Bernardo do Campo, Guaíba and CEnu)

GRI En26 GRI En4

GRI En4

GRI En5

Energy consumption

These and other measures led to savings of 2,573 GJ at the Indaiatuba, São Bernardo do Campo, Guaíba and CEnu units. Efforts will be maintained, and the target for the next period is a 1% reduction in consumption compared with fiscal 2010.

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For the second year running, Toyota do Brasil’s water consumption reduction measures resulted in record efficiency. In 2010, water consumption per vehicle produced was 3.53 cubic meters (m³) – against 3.60 m3 in 2009. The gain in efficiency is directly related to the kaizens suggested by employees and applied to plant and facility routines. The Suggestions and QC Circle programs, together with periodic muda (waste) reduction campaigns contributed to improvements.

The target for the fiscal year ending March 2012 is to achieve a consumption of 3.48m3/vehicle, further driving eco-efficiency in the production process. This will entail the reuse of water and more widespread monitoring.

WATER COnSuMPTIOn By SOuRCE – 2010

Source m³/vehicle TDB (m³)

Ground water 2.8 180,945

Supplied by public or private utilities 0.73 47,175

TOTAl 3.53 228,1202007

2009

2008

2010

OnGOInG REDuCTIOn

(M³/VEHIClE)

Target achieved

3.56

4.15

3.63.

72

3.53

All the water used in the São Bernardo do Campo and Indaiatuba plants is processed in effluent treatment plants and then returned to the public network in the same or better condition than when it was withdrawn. This measure, in compliance with environmental legislation, will be expanded in Sorocaba – where the intention is to treat all industrial effluent for reuse in operations, reducing overall water consumption.

GRI En8

GRI En26

Main improvements São Bernardo do Campo Reduction in frequency of cleaning of paint booth decreased the amount of water used in this process from 12 thousand to 6 thousand liters per month. Overall, water consumption at the unit decreased 12%.

Indaiatuba

Automated purging of the cooling tower also resulted in savings of 2,390.4 m³ of water.

new water efficiency record



Supervisor’s kaizen reduces water consumption

Since joining Toyota as an apprentice in 1996, Paulo Roberto de Oliveira, 29, has been looking for ways to reduce waste in his daily routines. The Suggestions Program provided a channel for Paulo, currently a production supervisor in the Hilux machining sector, to put this culture of continuous improvement into practice.

One of his recent kaizens helped economize water at the São Bernardo do Campo plant in 2010: a reduction in water consumption in the machine workshop paint booths. “Previously we disposed of the water used to clean paint sludge every week. Analyzing the process, I realized that we could introduce periodic pre-cleaning. The booths are now washed every two weeks and water consumption has decreased from 12 m³ to 6 m³ per month.”

In 2004, Paulo was invited to a TMC convention in Japan to present a project to reduce the number of defective parts in fuel tank assemblies. One of the supervisor’s objectives is to continue to look for kaizens in his area’s processes. “In addition to feeling appreciated as an employee, I am doing my bit to preserve the environment.”

A decade ago, Toyota decided it was essential to include the reduction of volatile organic compound (VOC) emissions in its socio-environmental planning through improvements in its plants and units – particularly at Indaiatuba (SP), which produces most of the products in Brazil.

Directly related to poorer air quality, these volatile compounds are associated with the nitrogen oxide (nOx) expelled in processes using natural gas. The main harm caused is the formation of ozone (O3), which can damage the human respiratory tract.

Still used in the industrial process, the VOCs are emitted during the production of Toyota vehicles by the solvents and paints used in the painting stage. A number of improvements have led to a gradual reduction in emissions of these compounds in Toyota’s activities.

In fiscal 2010, Toyota beat the target established for the period and achieved an emission volume of 40.36 g/m², the lowest rate per unit produced since the company began

VOC EMISSIOnS (G/M2)

2007

2009

2008

2010

Target achieved

43.79

52.2

3

44.5

4

45.1

7

40.3

6

GRI En19

Commitment to air quality

Main improvements

Indaiatuba Reduction in time spent washing vehicle painting robots adopted in 2009, decreasing the amount of solvent used for each car produced by 0.23 liter.

The improvement averted 13.403 t/year of VOC emissions.

Improvements reduced CO2 emissions by 61.83 metric tons, due to savings in energy consumption and the use of lPG.

GRI En18

to record environmental impacts in Brazil. The target for next year is 38.75g/m². TDB does not emit substances harmful to the ozone layer.

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Waste generated in Toyota’s production processes is managed through a policy that prioritizes reuse. Currently more than 95% of the company’s waste is recycled. A small percentage is treated before being returned to nature and an even smaller proportion is disposed of in landfills.

To ensure ongoing reduction in materials wastage, Toyota do Brasil sets targets for two areas: Production and logistics – entailing, respectively, waste from the production process and from packaging.

In 2010, the company was unable to meet its target of reducing the waste generated per vehicle produced from 15.56 to 15.34 kg. Due to operational problems in the paint sludge moisture reduction equipment, this figure increased to 16.21. However, an 11% reduction was obtained with packaging. The company is working with a target of a 1% reduction in waste for fiscal year 2011, which ends in March, 2012.

In the vehicle and part production area, the focus is on treating wastewater and returning it to the sewage system or rivers free of substances harmful to health and the environment. During this process, however, a sludge containing diverse toxic substances is formed. This is sent to other companies for use as fuel in high temperature kilns.

Improvements are being made in managing non-recyclable materials with standardization scheduled for 2012. The aim is to use this waste in co-processing, whereby the material is burned and its ashes incorporated into materials such as cement.

HOn-HAzARDOuS WASTE – 2010

Destination Metric tons

Composting 164

Recycling 12,325

landfill 242

TOTAl 12,731

HAzARDOuS WASTE – 2010

Destination Metric tons

Recovery 196

Co-processing 283

TOTAl 479

WASTE GEnERATIOn (kG/VEHIClE)

2007

2009

2008

2010

Target 2011

notachieved

15.34

19.0

8

15.5

6

16.6

7

16.2

1

Waste generation



logistics waste

The transportation of parts constitutes a significant proportion of the company’s solid waste generation. To ensure correct management of the cartons and padding used to ensure secure transportation, the logistics area implants kaizens to reduce the size and weight of packaging, and improve packing, prioritizing the use of returnable materials.

Changes and improvements introduced in 2010 reduced the volume of waste the area generates by 11%. The total for the year was around 1,167 metric tons, down from 1,312 tons the previous fiscal year.

The figures indicate that the target of a 5% reduction in the volume of packaging discarded by 2012, using 2009 as a baseline, will be met. This is the result of innovations suggested and applied by the employees themselves, aware of the need to mitigate environmental impacts in company routines.

Main improvements

Installation of dress components on robots, reduction of size of cloths used for cleaning and more efficient use of materials led to a 39.15 metric ton reduction in waste.

Use of reagents reduced wastewater treatment plant sludge volume.

Improved sorting of waste, reducing volume disposed of in landfills.

Emissions: more responsible logistics

Toyota constantly strives to reduce emissions from the transportation of vehicles, components and replacement parts between suppliers, plants and dealers and the country’s borders (ports and border crossings) in the case of exports.

A logistics committee consults with the Environment area to develop annual reduction targets for waste and carbon emissions (CO2).

Main improvements

Monitoring of freight transporters and preventive servicing of trucks used in transportation.

Use of biodiesel by entire truck fleet.

Increase in capacity of trailers used to transport imported vehicles from the port of Santos (SP) to Indaiatuba (SP) – from six to eight units each.

Increase in capacity of trailers used to export vehicles to Argentina – from ten to eleven units each.

GRI En26

Honorable mention for logistics improvement

TDB’s measures to ensure more responsible product transportation in the country are recognized by society. The project “Reduced CO2 emissions in logistics activities” received an honorable mention in the 16th edition of the Fiesp Environmental Merit Award, organized by Fiesp, the São Paulo state federation of industries.

Divided into internal and external logistics actions, the project described the kaizens applied in diverse areas – from the transportation of parts and vehicles to dealers to product transportation within company facilities in Brazil. Toyota received the same award the two previous years.

The company’s target is a 5% reduction in CO2 emissions by 2012 – using as a baseline fiscal year 2009, when emissions totaled 38,592 metric tons. This volume increased in 2010, with a total of 60,756 metric tons from road transportation and 7,167 metric tons from maritime freight. However, kaizens helped maintain the number below the area’s expectations for the year.

The measures taken to reduce impacts include more efficient loading, the development of lighter, higher capacity packaging, and more efficient route planning for product distribution and the delivery of parts from suppliers.

57

Combating harmful substances

In line with Toyota global guidelines, TDB eliminated a series of substances which are harmful to the environment and human health from its production processes, even though these are permitted in Brazil.

These substances of concern, known as SoCs, are lead, mercury, cadmium and chromium, and their elimination from the vehicle and part manufacturing process in Brazil was initiated in 2008.

As a target for the fifth Action Plan, the TDB Environment area has established the monitoring and elimination of the SoCs still still existent in some replacement part suppliers’ production processes. This measure will make vehicle disposal and recycling less harmful to the environment.

Sorocaba: new model for industry

A new vision of manufacturing is guiding the idealization of the new Toyota plant in Sorocaba, São Paulo, where a compact model for the domestic market is to be produced. Based on the ecofactory model developed by the Toyota Motor Corporation in Japan with high levels of socio-environmental efficiency, the Brazilian subsidiary intends to contribute actively to social and economic development, reducing potential environmental impacts - aligned with Toyota’s 2020 Global Vision and the Environmental Action Plan.

The reduction targets are similar to those applied to the other plants but stricter: from the start-up of operations, CO2 and volatile organic compound (VOC) emissions will be reduced to a minimum, rainwater will be reused, all waste and effluents will be reused or recycled, with zero disposal in landfills – and logistics will be optimized to generate the smallest possible impact, resulting in a less expensive and more efficient operation.

After carrying out the environmental impact study for the plant - which incorporated the main ecofactory guidelines – and receiving the permit, in 2009 Toyota do Brasil initiated contacts with the 11 major suppliers it wanted installed in its Sorocaba industrial park – with the dual purpose of reducing vehicle emissions and optimizing operations. Construction was begun in July, 2010 (Read more on page 30).

Due to the need to hire an additional 1,500 employees, the company is in regular contact with educational institutions and will initiate the hiring process at the beginning of 2012. To ensure their induction into the Toyota culture, leaders with operational experience will be brought from the Indaiatuba unit. Priority will be given to local labor.



The company also participated in the studies on the impact the plant will have on traffic in the municipal district. Together with the local government, structural and traffic changes have been defined to facilitate access to the industrial park, the Castello Branco highway and the center of Sorocaba.

In line with legislation, Toyota will provide environmental compensation for the installation of the plant, investing the equivalent of 5% of the cost price – around R$ 4.96 million – in a municipal park, the Parque natural Municipal Corredores da Biodiversidade. Sorocaba’s first conservation area, the park was developed by the municipal environment department with support from Toyota environmental consultants.

TDB intends to complement these compensatory actions with voluntary actions to promote sustainable development in the district. The main measure is Morizukuri (literally “create forest”) – a project to plant trees using an unprecedented method developed by Akira Miyawaki, a professor at the yokohama national university and director of the Japanese Center for International Studies in Ecology, to create a green belt around the industrial park. The technique reduces the average growth time for a forest from between 100 - 200 years to 10 - 20 years. The method has already been applied at TMC plants in Japan, India and Thailand. Planting will be undertaken with the voluntary participation of company employees and their families, as well as suppliers and dealers, and will be initiated in the second half of 2011. Eighty thousand trees will be planted in the first stage of the project.

GRI En30

InVESTMEnT AnD SPEnDInG On EnVIROnMEnTAl PROTECTIOn – TDB (2010)

Spending on waste disposal, emission treatment and mitigation R$

Waste treatment and disposal 1,002,600.00

Emission treatment (e.g.: spending on filters, agents) 16,000.00

Depreciation of equipment, spending on materials, maintenance and operational services and personnel

954,098.71

Spending on preventive measures and environmental management

R$

Personnel used in education and training 6,000.00

External environmental management services 376,128.93

External certification of management systems 30,065.54

Additional spending on installation of cleaner technologies (e.g.: additional costs besides standard technologies)

69,927.00

Spending on environmental protection R$

Spending on remediation 654,000.00

TOTAl 3,108,820.18

59

4 53

Sorocaba plant Environmental Differentials

WATERWith a closed-loop water

reuse system, consumption

will be reduced by more than 50%

CO2 EMISSIOnSMore efficient processes

such as wet-on-wet painting technology and the elimination

of the primer coat oven will reduce electricity and natural gas consumption, resulting

in a 35% decrease in emissions

MAnAGEMEnTISO 14001 – The ISO 14001 international standard mandates the inclusion of an environment policy, monitoring mechanisms and periodic audits in the environmental management system. It also requires the identification of diverse impacts on the business and the establishment of continuous improvement targets. The Sorocaba plant should initiate operations in compliance with system requirements and receive certification in early 2013. Check out the main differentials of the new Toyota plant in Brazil.

CO2

Technologies that will enable the reduction of CO2 emissions:

Electrical energy1. Servo presses The plant will use pneumatic presses instead of conventional ones, resulting in a 40% reduction in energy consumption and lower noise levels.

VOCThe substitution of

organic solvent with water

will reduce Volatile Organic Compound (VOC)

emissions by 60%.

6


2

1

GREEn BELT

The planting of native tree seedlings will help reconstitute local biodiversity. Use of the Miyawaki planting technique will enable trees to

grow ten times faster.

WASTE

TDB Principle: Zero Landfill

No waste will be disposed of in landfills. Recyclable

materials will be prioritized. Hazardous waste will be used

as raw material and energy for cement kilns.

2. Compact equipments with lower energy consumption Compact ovens will raise the efficiency and reduce energy consumption

natural Gas3. Straight heating systemElimination of steam generation, in substitution to straight water heating. This process raises the efficiency of operations.

4. 3 Wet SystemUse of 3 Wet painting System technology allows removal of part of the process and eliminates intermediary drying oven.

VOCs5. Use of water-based paint, in substitution of organic solvent, will reduce VOC emissions.

6. The 3 Wet System technology will also contribute for lower VOC emissions.

LOGISTICS11 major parts suppliers, responsible for 78% of the transported volume, will be at an approximate distance of 600m from the plant. This will reduce the fuel consumption and also CO2 emissions.

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Product quality Safety and reliability

Toyota guarantees vehicle quality and reduced environmental impacts through process control

GRI PR1


Thinking ahead

An essential element for the well-being and daily lives of many people and cities, vehicles, no matter who makes them, also present risks, such as accidents, mechanical failures, as well as environmental impacts, particularly in urban environments. Fully aware of this, Toyota strives to improve its processes to ensure the quality, performance and safety of its products and to reduce potential impacts.

In 2010, TDB inaugurated its first Emissions laboratory to conduct research into new technologies and perform certification tests. With respect to tailpipe emissions, the Corolla and the Hilux pickup have emission levels far below the volume permitted in the country – the Corolla, for example, emits only 5.8% of the nitrogen oxide (nOx) and 9.6% of the carbon monoxide (CO) allowed by law. The Hilux emits only 3.28% and 5.85% respectively of the permitted limits of these gases.

The company also guarantees driver and passenger safety with a series of procedures that sustain and constantly refine Toyota production quality. The quality area maintains a constant dialog with the production and vehicle regulatory areas, seeking to innovate ahead of the competition and offer customers a series of mandatory and optional safety items.

Main safety items

Disc brakes on all four wheels

ABS and EBD brakes (Altis, XEi and Gli versions)

Side airbag (Altis and XEi version)

Xenon low beam headlights (Altis version)

Parking sensor (Altis version)

Progressive deformation of bodywork

Anti-crush window sensor

Pretensioned seatbelts

63

The first sedan in the market to have a double frontal airbag (before this was mandatory), stainless steel exhaust pipe and ABS brakes on all four wheels as standard equipment, each new version of the Corolla innovates. The 2012 model, for example, offers disc brakes on the four wheels for all four versions, as well as ABS and EDB systems in the Gli, XEi and Altis versions, ensuring better braking and steering control in emergency stops.

To make night driving safer and enhance driver comfort, the Altis version has automatic xenon low beam headlights with height adjustment and a washing system.

The Corolla is designed to deform progressively in the event of an accident, meaning the passenger cage offers improved protection due to the capacity of the side columns and roof to absorb impacts during a collision. In parallel, damage to external victims is also minimized.

The steering column also has an impact absorption system, minimizing damage through progressive deformation. Another differential in the XEi and Altis versions is the side airbag, offering protection for driver and passengers in the event of a lateral collision (read more about the Corolla on page 10).

Product quality

Quality control: a Toyota hallmark

Toyota’s commitment to the quality, reliability and durability of its products is recognized worldwide, the result of efforts to proof its production against operational defects, as well as preventing, combating and reverting errors in the production chain.

To ensure a rapid response and boost customer confidence after the recalls that affected principally the north American, Asian and European markets in 2010, TMC formed the Special Committee for Global Quality.

Chaired by Toyota’s global president, Akio Toyoda, and with representatives from all company subsidiaries, the committee is not only a response to the incidents, but also a means of restoring the relationship between the company and its major external stakeholders – customers, suppliers and dealers –, reinforcing bonds of trust and engaging employees worldwide in guaranteeing the highest standards of reliability in vehicle production.

Through the areas involved, which range from Quality and Regulatory to Post- Sale and Customer Relations, the committee monitors the entire production chain with a focus on driving continuous improvement and respect for people.

Another customer facing action was the implementation of SMART (Swift Market Analysis Response Teams) in Brazil. This is a team consisting of consultants and specialists which carries out an in-depth analysis of all customers complaints and queries as a means of putting genchi genbutsu (going to the source of facts) into practice and identifying user demands (Read more on page 22).

GRI PR1


Vehicle safety

upon learning of customer complaints about problems involving involuntary acceleration in its vehicle at the end of 2009 and beginning of 2010, the Toyota head office in Japan did everything in its power to assist customers and elucidate the cases, commanding an investigation into more than 4,000 vehicles and developing a global plan to attend those affected.

Safety and quality tests were carried out in parallel by three united States bodies, the national Highway Traffic Safety Administration, the national Academy of Sciences and nASA. Toyota engineers and consultants undertook in-depth studies of the vehicles alleged to have had accidents or suffered from spontaneous acceleration with a view to restoring customer confidence.

After ten months of tests, at the beginning of 2011, the government investigation conducted by the uS Department of Transportation was concluded and no electronic fault associated with the supposed problem of sudden unintentional acceleration was found in Toyota vehicles.

Tests done by nASA scientists showed that the reported incidents, which led to the recall of 8 million vehicles in the united States alone, were related to mechanical problems originating in the accelerator, which could accidentally get caught on determined types of vehicle floor mats.

From the start Brazil was relatively unaffected by the recall because the Corolla produced in the country does not use the same equipment, neither does it receive parts from the same suppliers. Toyota do Brasil, however, monitored the investigations closely. As soon as the problem with the mat, an accessory, was identified, the company made the decision to recall vehicles manufactured after April 2008.

The intention was to explain the use of the accessory to Corolla owners and advise them to change non-genuine mats – which present a greater hazard because they are not part of the vehicle’s original design. This question was also reinforced in the owner’s manual as a preventive measure. By March 2011, 117,428 vehicles had responded to the recall in Brazil.

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new preventive recall

Constant monitoring of vehicle performance and quality control led to a preventive recall in February, 2011. This was for certain units of the Corolla, including XlI, Gli, XEi, SEG and Altis models produced between March 2008 and December 2010. Tests and monitoring led TDB to identify a small manufacturing defect in the hose of the cold-start system which increased the possibility of the formation of fissures and small leaks.

Although no cases were reported officially, Toyota concluded that there was a remote possibility of fire in the event of a spark occurring close to a leak. Additionally, reaction between gasoline and the material used in the gasoline tank ring could generate contaminants.

The recall involved the substitution of the hose for a more resistant one not subject to leakage. The campaign was conducted through the media and required the establishment of a task force in the dealer network to substitute the part, under the supervision of Toyota do Brasil.

More information on the recall is available on the Toyota website (www.toyota.com.br).


GRI PR1

Vehicle recycling

Currently one of the major challenges for Brazilian industry is adapting to the country’s new solid waste policy, sanctioned in August 2010 after two decades of discussion in the legislative sphere. The bill requires a series of changes in waste disposal by August 2014.

The main difference from existing legislation is in responsibility for the disposal of materials. The new policy stipulates that all manufacturers are responsible for managing the waste generated by their activities – which exposes the automotive sector to the special challenge of having to recycle vehicles, a practice not yet disseminated in Brazil.

Although not specifically considered solid waste in the wording of the policy, vehicles are generating controversy – a bill of law under discussion in the national Congress seeks to classify them as such. However, in conjunction with Anfavea, the Brazilian automobile industry association, and AEA, the Brazilian Automotive Engineering Association, Toyota do Brasil is preparing for the possible implementation of a vehicle recycling policy in the country.

Recyclable components in the Corolla

1. Seats (urethane foam and fiber) – acoustic isolation material for vehicles

2. Windows (glass) – tiles

3. Hood (steel) – engines and aluminum products

4. Wiring (copper) – copper products, engines (cast aluminum supports)

5. Engine oil (oil) – alternative fuel for boilers and incinerators

6. Radiator (aluminum) – industrial ingots, aluminum products

7. Cooling liquid (ethanol) – alternative fuel for boilers and incinerators

8. Fenders (resin) – fenders, internal fittings, toolboxes, etc.

9. Battery (steel and aluminum) – steel products, aluminum products

10. Bodywork (steel) – automobile parts, steel products

11. Trunk (steel) – automobile products, general products

12. Tires (rubber) – raw material, alternative fuel for cement kilns

13. Doors (steel) – automobile parts, steel products

14. Catalytic converter (precious metals) – catalytic converters

15. Transmission oil (oil) – alternative fuel for boilers and incinerators

16. Wheels (steel and aluminum) – automobile parts, general steel products, aluminum products

17. Suspension (steel and aluminum) – general steel products, aluminum products

under global TMC guidelines, there is a recycling project for the Corolla that is fully integrated with the production process. In several countries in which this is a legal requirement, the company undertakes recycling, assuming responsibility for dismantling the vehicle at the end of its life cycle.

To facilitate this process, the company elaborates instructions for dismantling automobile components and specific guidance on the composition, recycling and reuse of parts and components and the removal of fuel residues.

For example, all the interior fittings of the Corolla are made of resin and the central console is made of TSOP (Toyota Super Olefin Polymer), a recyclable material developed especially by Toyota to reduce environmental impacts.

67

Reverse logistics

Since 2008 Toyota has been implanting a reverse logistics program in partnership with its dealers to ensure the adequate disposal of materials and waste harmful to the environment.

The program currently covers batteries and oil filters. When changed at a Toyota dealer, these items are returned to the manufacturer for appropriate disposal. Some dealers have extended this practice to air conditioning gas - which is collected with specific equipment. In the future TDB intends to extend reverse logistics to tires changed at dealers.

Collection of these components from the dealers involves the same logistics structure used in parts distribution, thus avoiding additional greenhouse gas emissions.

Emissions laboratory: advances in regulation

At the end of 2010, Toyota do Brasil inaugurated its first emissions laboratory at the Indaiatuba plant. The uS$ 10 million facility will serve as a base for the local development of new technologies to carry out certification tests and controls in domestic production.

Previously, these procedures were undertaken by TMC or TDB suppliers. now six especially trained Toyota employees are responsible for emission controls in domestic production. The certification process is under evaluation by the São Paulo state environmental authority Cetesb and is scheduled to come into operation in 2011.

Vehicle emission control

Toyota strives to continually improve the environmental performance of the vehicles it commercializes in the country, the Dual VVT-i Flex engine, for example, equips all versions of the Corolla.

In addition to improved performance, this technology alters the compression ratio, or the mixture of air and fuel necessary for combustion. The lower the gasoline or ethanol consumption, the lower the tailpipe emissions, meaning a reduction in the company’s impacts on society and the environment.

These and other technologies have led to a significant improvement in the Corolla’s performance in its category. Recently the Corolla Xli and Gli were rated “A” in the Inmetro PBE classification, a significant improvement from its previous “C” rating.

With respect to the diesel-powered Hilux pickup, through sector associations Toyota is talking to the government to find viable solutions for mitigating impacts. In Brazil, the reduction in the amount of sulfur permitted in diesel fuel will come into force in 2012 as the result of a term of commitment signed by government bodies, the automobile industry and the Federal Public Prosecution Department in 2008.

GRI PR1

Product quality


According to the government, from January 2012 gas stations will be equipped to sell diesel fuel with up to 50 parts per million (PPM) of sulfur, compared with the current levels of 500 PPM in large cities and 1,800 PPM in rural regions in the country.

Before the agreement was signed, Toyota international already had technology enabling vehicles to use lower sulfur content diesel because the standard to be adopted in Brazil is in place in markets such as Europe. The TDB Regulatory Affairs and Quality areas negotiated the transfer of this technology to Brazil for adaptation to the engines using diesel containing up to 500 PPM, thus enabling the Hilux to use both grades of fuel. The Argentinean-made Hilux vehicles commercialized in Brazil will be adapted from April, 2012.

Since 2002, Conama, Brazil’s national Environmental Council, has been gradually introducing targets to reduce sulfur levels in diesel, with tests in bus fleets in municipalities such as Rio de Janeiro and São Paulo. The objective is to reduce impacts on air quality. When liberated by the combustion of the diesel fuel, the sulfur interacts with oxygen producing sulfur dioxide (SO2), which is harmful to human health and the environment.

launch of the Prius in Brazil in 2012

The first vehicle with both a gasoline and electric engine ever to be produced on a commercial scale, the Prius will be available in Brazil in 2012. Currently in its third generation - the first was launched in 1997 –, global sales of the car now exceed 2.3 million units, with more than a million commercialized in the united States alone.

Having supplied some units to Brazilian research institutes, Toyota do Brasil is now planning to import the Prius. The company is preparing its dealer network to inform consumers about hybrid technology and the reduced environmental impact it enables.

The Prius has two engines: a 1.8 liter gasoline unit and an electric one with an output equivalent to 80 hp, which is sufficient to power the car at speeds up speeds up to 50 kph. Above this speed or in re-acceleration, both engines work in tandem. Compared with a gasoline-powered vehicle in the same category, the Prius emits approximately 40% less carbon gas.

Other differentials also reduce consumption, for example, the air conditioning compressor is powered by electricity generated by the battery; the combustion engine turns off automatically at low speeds; and during braking part of the kinetic energy generated recharges the battery.

Recycling

- The Prius is 95% recoverable

- The vehicle is 85% recyclable

- 95% of the high voltage battery components may be reused

Environmental information on the dashboard

The Prius dashboard display helps drivers maximize efficiency, indicating energy and accelerator use in real time so driving and acceleration can be adjusted to minimize fuel consumption.

Fuel consumption and energy recovery is presented in one to five minute intervals, providing instantaneous information on efficiency and driving style.

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About the Report

This is the third year running that Toyota do Brasil is publishing its Sustainability Report. The publication presents the company’s main measures to increase production efficiency and offer quality vehicles with a lower environmental impact, as well as the socio-environmental initiatives it supports through the Fundação Toyota do Brasil as a means of contributing to Brazilian society.

Aligned with the company’s commitment to continuous improvement, this year’s report has advanced in its adhesion to Global Reporting Initiative (GRI) indicators, reaching self-declared application level B on a scale from C to A.

The company is constantly evolving in terms of transparency and the reduction of socio-environmental impacts; however, these take time to measure.

GRI Information

GRI 3.1. 3.2; 3.3; 3.4; 3.5; 3.6; 3.7; 3.8; 3.9 and 3.10

More needs to be done, and with each new publication Toyota is learning, identifying new targets and challenges to enhance management and drive ongoing improvement.

The result was the collection of 30 indicators: 12 environmental, 14 social and 4 economic. As in previous years, the content took into account sector publications and the annual report of the Toyota Motor Company (TMC), TDB’s parent company in Japan.

The scope for the indicators included all the company’s operating units during the period from April 1st, 2010 to March 31st, 2011. When a different period is referred to, this is informed in the footnotes to the tables. The information covers all the company’s activities in the country and does not present limitations or reformulations that could significantly affect understanding.


1. STRATEGy AnD AnAlySIS

Profile Description Report Page

1.1 Declaration by president. Partial 2

1.2 Declaration of main impacts, risks and opportunities. Partial 2

2. ORGAnIzATIOnAl PROFIlE

Description Report Page

2.1 name of organization. Total 4

2.2 Products and services, including brands. Total 4 and 11

2.3 Operational structure. Total 4

2,4 location of organization’s headquarters. Total 4

2.5 Countries and region in which organization operates. Total 4 and 7

2.6 nature of ownership and legal form. Total 4

2.7 Markets served. Total 4 and 7

2.8 Scale of organization. Total 4

2.9 Changes in reporting year. Total 4

2.10 Awards received. Total 7 and 10

3. REPORT PARAMETERS


3.1 Reporting period. Total 70

3.2 Date of previous report. Total 70

3.3 Reporting cycles. Total 70

3.4 Contact details. Total Inside cover

3.5 Definition of content. Total 70

3.6 Report boundary. Total 70

3.7 Specific limitations to scope of report. Total 70

3.8 Basis for elaboration of report regarding other installations that might significantly affect comparability between periods.

Total 70

3.9 Data measurement techniques and bases of calculations. Total 70

3.10 Restatement of information from previous reports. Total 70

3.11 Significant changes in comparison with previous years. Total 70

3.12 GRI summary. Total 71

3.3 External assurance. Total 70

4. GOVERnAnCE, COMMITMEnTS AnD EnGAGEMEnT


4.1 Governance structure of organization. Total 12 and 13

4.2 Presidency of governance body. Total 12

4.3 Percentage of non-executive independent members. Total 13

4.4 Mechanisms for shareholders to make recommendations to board. Partial 14 and 15

4.5 Relationship between remuneration and economic and socio-environmental performance. Total 14

4.6 Processes to prevent conflicts of interest. Total 14 and 15

4.7 Qualifications of members. Partial 13

4.8 Internal values, codes and principles. Partial 14-20

4.9 Responsibility for implanting economic, environmental and social policies. Partial 12

4.10 Board self-assessment processes. Total 14

4.11 Explanation of whether and how the organization applies the precautionary principle. Partial 16-17

4.12 Charters, principles and initiatives. Total 20

4.13 Memberships of associations. Total 20

4.14 list of stakeholders Total 21

4.15 Basis for identification and selection of stakeholders. Partial 21

4.16 Approach to engaging stakeholders. Partial 21

4.17 Main stakeholder themes and precautions. Partial 21

Remissive IndexConsult the table below to locate Toyota do Brasil’s financial, environmental and social indicators in accordance with the Global Reporting Initiative (GRI) model.

71

PERFORMAnCE InDICATORS

ECOnOMICS

Performance Indicators


DMA Approach to managing economic performance Partial 8 and 9

EC2 Financial implications, risks and opportunities due to climate change. Partial 18-20

EC3 Fulfillment of pension plan and benefits obligations. Partial 42

Market presence

EC6 Policies, practices and proportion of spending on local suppliers. Total 33

EC7 Procedures for local hiring and proportion of senior management recruited from local community in important operating units.

Total 35

EnVIROnMEnT



DMA Management approach to environmental performance Total 50-61

Energy

EN4 Indirect energy consumption by primary source. Total 53

EN5 Energy saved due to improved conservation and efficiency. Total 53

EN6 Initiatives to supply low energy consumption products and services and resulting reduction.

Partial 69

EN7 Total In 2010, TDB reduced indirect energy consumption by 16,744.39 GJ through optimization of seating in employee transportation and route optimization. Read more on page 53.

Water

EN8 Total water withdrawn by source. Total 54

EN18 Percentage and total volume of water recycled and reused. Total 55

EN19 Emissions of substances harmful to the ozone layer, by weight. Total 55

Emissions, effluents and waste

EN21 Total water discharged, by quality and destination. Total 55

EN22 Total weight of waste, by type and disposal method. Total 56 and 57

EN23 number and total volume of significant spillages. Total There were no significant spillages at TDB plants in 2010.

Products and services

EN26 Initiatives to mitigate environmental impacts. Total 53, 54, 57

General

EN30 Total investment and spending on environmental protection. Total 59

SOCIAl PERFORMAnCE – lABOR PRACTICES AnD DECEnT WORk



DMA Approach to employee performance management Partial 34-43

Employment

lA1 Total number of workers, by type of job, work contract and region. Total 36

lA2 Total turnover and turnover rate of employees by age group, gender and region. Total 36

lA3 Benefits provided for full time employees and not for temporary or part time employees, discriminated by major operation.

Total 42

Relations between workers and management

lA4 Percentage of employees covered by collective bargaining agreements. Total 41

lA5 Description of notices provided (periods and procedures). Total 41

Health and occupational safety

lA8 Education, prevention and risk control programs. Partial 43

Diversity and equality of opportunity

lA13 Breakdown of senior management and boards, and proportion by group and gender. Total The company is compliant with the minimum quota of 5% disabled employees; it does not maintain company diversity indicators. Read more on pages 36 and 37.

Informações GRI


SOCIAl: HuMAn RIGHTS



DMA Approach to Human Rights performance management Partial 30-33

Non discrimination

HR2 Percentage of contracted companies and critical suppliers submitted to human rights related assessment and measures taken.

Total Toyota does not have human rights clauses in its General Purchase Contract, applied to approximately 100 significant suppliers. TDB reviews contracts in accordance with requests from its head office. Read more on pages 30-33.

Freedom of association and collective bargaining

HR6 Significant operations and suppliers identified as posing a significant risk of child labor and measures taken towards abolishing child labor.

Partial 31

HR7 Significant operations and suppliers identified as posing significant risk of forced labor and measures taken towards eliminating all forms of forced labor.

Partial 31

SOCIAl: SOCIETy



DMA Management approach to social performance Partial 57

Public policies

SO6 Policy on financial contributions to political parties or institutions. Total Toyota does not make donations to political parties.

SOCIAl: PRODuCT RESPOnSIBIlITy



DMA Approach to managing product performance Partial 62-64

Communication and marketing

PR1 Phases of product and service life cycle in which impacts to health and safety are assessed with a view to improvement, and percentage of products and services subject to these procedures.

Partial 63

PR5 Practices related to customer satisfaction, including survey results. Total 25

PR6 Compliance with legislation, standards and voluntary codes. Partial 68

CreditsOVERAll COORDInATIOn Toyota do Brasil; CORPORATE COMMunICATIOn AREA George Alberto da Costa e Silva; PROJECT COORDInATIOn Juliana Dias; GRI COnSulTInG, COPy AnD EDITInG Report Comunicação; TRAnSlATIOn Raymond Maddock; GRAPHICS PROJECT, lAyOuT AnD GRAPHICS PRODuCTIOn Report Comunicação; PHOTOS Ricardo Corrêa; COVER IlluSTRATIOn AnD InFOGRAPHIC Félix Reiners TyPOGRAPHIC FAMIly univers.

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