Toyota has 14 manufacturing locations across North America where team members produce 12 vehicles:

the Lexus RX 350 and the Toyota Avalon, Camry, Corolla, Highlander, Matrix, RAV4, Sienna, Sequoia, Tacoma, Tundra and Venza. Our newest plant, where we build the Corolla, opened in Blue Springs, Mississippi, in November 2011. We also have 41 sales and logistics locations across North America, including sales offices, port facilities on both coasts, and vehicle and parts distribution centers that serve both the manufacturing plants and our network of 1,850 dealerships.

In the process of manufacturing and transporting over one million vehicles each year in North America, Toyota uses raw materials, energy and water; we manage large tracts of land where our manufacturing facilities are located; and we occupy offices in a number of dif ferent cities. All of these activities result in impacts to the environment. These impacts increase when our production levels increase, in particular when we bring a new plant or a new shop online, as we did in Blue Springs.

The Japanese concept of monozukuri means more than manufacturing; it also means building people. We want to develop team members who take ownership in their jobs, share the aspirations of Toyota's Global Vision, and work for their communities and the world at large. Such individuals must take part in REFLECTION
The Japanese word hansei, translated loosely as reflection, is what happens when one of our employees stops to examine a completed project. Hansei is both an intellectual and emotional introspection. The employee must recognize the gap between the current situation and the ideal, take responsibility for finding solutions, and commit to a course of action. When a project finishes at Toyota, we use hansei to evaluate what went well and what did not. We then methodically try to preserve what went well and create countermeasures for what did not. These lessons are incorporated into the standard process so that when we repeat it, we improve over the last time. Finally, we share these insights with our colleagues so that they can learn as well, in a process we call yokoten.
hansei
, the Japanese concept for reflection. Hansei is both an intellectual and emotional experience. It requires an individual to recognize a problem and be open to both positive and negative feedback. It also requires and empowers the individual to voluntarily take personal responsibility for fixing the problem and to commit to a specific course of action to improve the process so that the problem does not happen again.

Hansei has helped us find ways to improve our environmental performance, even when the economy was in a downturn. We cannot allow what we have learned to be lost, and the process of reflection encouraged by the Toyota Way ensures that we learn from both our successes and our failures.

We strive to reduce all of our environmental impacts. Toyota Motor Corporation (TMC), our parent company in Japan, has identified emissions of volatile organic compounds, energy consumption, waste generation, water use and biodiversity as key areas of focus for Toyota locations around the world. We have established targets across our various functions to address these issues. In North America, we have also identified green buildings as an area of importance. Our approach, as well as our performance, in all of these areas are described in the following sections.

AIR EMISSIONS

Air pollutants such as particulate matter, nitrogen oxides and volatile organic compounds (VOCs) react with sunlight to form smog. Smog has been linked to a number of health issues and is particularly prevalent in dense urban areas with heavy traffic, industrial activity and sunny, warm climates.

Toyota's painting operations generate the majority of our VOC emissions. We are working hard to minimize our emissions.

We have a North American Manufacturing VOC Working Group that studies aspects of the vehicle body painting process to find ways to reduce VOC emissions. Hansei, or reflection, is a process used by the working group to review progress and identify the remaining gap between the target and actual results, and it is this group that takes responsibility for examining the issue and finding solutions. Group members review painting operations as a whole, as well as the components of the process to find big and small opportunities for improvement, or kaizen. We benefit from sharing best practices and transfer of knowledge, or yokoten, from one plant to the next.

TARGET AND PERFORMANCE

Target: Maintain VOCs from the body paint process at manufacturing plants at 13.9 g/m2 in FY2012 (achieved)

Toyota's North American plants measure grams VOCs emitted per square meter of vehicle surface area coated (g/m2). Our target in fiscal year 2012 was to maintain VOC emissions at an average 13.9 g/m2 for all North American plants. We met this target and achieved average VOC emissions of 13.7 g/m2.

There are many factors to consider when setting VOC targets, including fluctuations in production volumes, model change activity and the introduction of different painting methods. In addition, our data gathering methods have improved over the last couple of years. Although we have been successful in meeting, and even exceeding our VOC target, we are working hard to assure that our annual results are consistent and that we can continue to find ways to reduce our emissions.

Over the last decade we have reduced VOC emissions by 61 percent, from 35.0 to 13.7 g/m2. This achievement is the result of the combined efforts of Toyota team members at the plants and at the headquarters facilities in Japan and the United States. Team members at the plants have made continuous improvements to equipment work practices (e.g. purging lines, cleaning equipment, reducing overspray) to reduce chemical usage and resulting VOC emissions. Team members at the headquarters facilities have improved designs to equipment such as paint cartridge robots. The use of cartridge robots has resulted in the elimination of paint lines, which reduces the amount of wasted paint and the purge necessary to clean the paint lines and allows for more precise painting. Recently, Toyota has been moving paint applicators (spray guns) closer to the car to further reduce overspray.

VOC Emissions

Biodiversity

Biodiversity refers to the variety of animal and plant life on Earth. The diversity of living organisms, and the habitats in which they live, are crucial for the functioning of ecosystems and the resources and benefits they provide—fresh water, fertile soils, medicines, shelter and recreation, to name a few examples. Because the well-being of species living within an ecosystem are so interlinked, human activities can have great influence—both positive and negative—on biodiversity.

Since the company's founding, Toyota has believed in the pursuit of growth that is in harmony with nature. This philosophy is in our Earth Charter and is evident in the attention we pay to minimizing our environmental impacts. Our approach to protecting biodiversity centers on the habitats that exist within the 21,000 acres of land owned by our North American manufacturing and R&D facilities in the United States, Canada and Mexico.

Spotlight: Toyota's Nature Trails

Our plant in Georgetown, Kentucky, is located on 1,300 acres in Scott County. This is Toyota's largest assembly facility outside of Japan. The plant has the capacity to assemble over 500,000 Camry, Camry Hybrid, Avalon and Venza vehicles and manufacture 600,000 engines each year. In the "backyard" of this facility is the Environmental Education Center | Nature Trail, developed to promote environmental education through hands-on learning opportunities and ultimately to demonstrate how manufacturing can co-exist with nature. This mission is shared with the 40,000 visitors that tour the plant each year, including thousands of students from across Kentucky and neighboring states, and even from other parts of the world.

The Georgetown plant began its nature program in 2006 by setting aside 50 acres of wetlands, prairies and woodlands. The nature trail opened a year later to provide visitors an opportunity to learn about Kentucky's natural treasures and how Toyota works hard to protect them. Today, the plant's wildlife team actively manages 62 acres of habitat and has 340 acres of unmanaged habitat available for wildlife on the site.

The ultimate goal is to return a portion of the set-aside land to its native habitat. Kentucky cane, one of North America's few native bamboo species, has been planted along the trail and is maintained by clearing weeds from the area to reduce competition. Once established, the cane will provide a healthy home for migratory birds and small mammals.

Two endangered plants—Short's goldenrod and Running Buffalo Clover—can also be found on the property. In 2009, 44 Short's goldenrods were planted, nurtured in a greenhouse, and moved to the nature trail. These plants are highlighted during educational tours. In 2011, the U.S. Fish & Wildlife Service provided several endangered Running Buffalo Clover plants. Ground was carefully selected and prepared, as the plants require a specific combination of sun and shade to flourish.

Toyota's partnership with the U.S. Fish & Wildlife Service has been instrumental in the recovery and restoration of these species. "We have been working with Toyota through our Partners for Fish and Wildlife Program for a few years now, and it's a partnership that we greatly enjoy," said J. Brent Harrel, Kentucky Private Lands Coordinator for the U.S. Fish & Wildlife Service/Kentucky (ES) Field Office. "The Partners for Fish and Wildlife Program is a voluntary private lands program to conduct habitat restoration. We work with the Kentucky Department of Fish and Wildlife Resources and Toyota on many things. It is important to form these partnerships and work together to do great things for the environment and for our children. It is our hope that we can do many more things with Toyota in this realm in the future."

Team members at the Georgetown plant have found creative ways to share all they've learned on the nature trail about ecosystems, biodiversity and endangered species. About 2,000 students visit the Environmental Education Center | Nature Trail each year. Between the tours of the plant and the use of the environmental education center, students, scout groups and the community are shown Toyota's vision of how industry and the environment can coexist.

The Georgetown plant partnered with Mary June Brunker, a volunteer at the Environmental Education Center and professor at Midway College in Lexington, Kentucky; Bluegrass PRIDE (which stands for "Personal Responsibility In a Desirable Environment"); and teachers from local high schools to create a Web-based curriculum for fourth through 12th grades. This curriculum is used with students touring the plant to help them better understand Toyota's corporate commitment to the environment. The curriculum focuses on the same environmental issues highlighted along the nature trail: water quality and conservation, solid waste, energy and air quality.

Bluegrass PRIDE has been providing environmental education since 2001 for 18 counties in the Central Kentucky area. According to PRIDE's Deputy Director, Maxine Rudder, "Toyota has had a tremendous impact on increasing awareness of the importance of environmental stewardship in communities far beyond Scott County, Kentucky."

During Earth Week in 2012, Toyota's Georgetown plant celebrated the fifth anniversary of the Environmental Education Center | Nature Trail. Six students from Liberty Elementary School in Fayette County attended the anniversary celebration to deliver a presentation about the water quality studies they had participated in at the plant during the 2010-11 school year.

Also as part of the celebration, 75 second-grade students from Northern Elementary, a local Scott County school, visited the nature trail and participated in an Environmental Field Day. Activities were led by guest organizations such as the Louisville Zoo, Kentucky Department of Fish and Wildlife Resources and the University of Kentucky Cooperative Extension, among others.

"Everyone had a great day," said Tara Krebs, second-grade teacher at Northern. "It was wonderful to see the students, adults and parents discover a different aspect of Toyota. Not everyone knows that the nature trail is here. Toyota is so involved in our community and they put such time and thought into making this land beautiful. This is a wonderful outreach opportunity. We wish we could go every year!"

These activities have had a positive impact on school children and the local community. Through the process of hansei, or reflection, we have identified what works and what could be improved at the nature trail at our Georgetown plant, and are looking to apply yokoten to transfer best practices to other Toyota locations. In addition to the Georgetown plant, we have nature trails to enhance habitat and foster education among team members and surrounding communities at Toyota's North American manufacturing headquarters in Erlanger, Kentucky, and at our assembly plant in Princeton, Indiana.

Toyota's manufacturing headquarters in Erlanger, Kentucky, recently built its own nature trail and celebrated the grand opening during Earth Week 2012. Team members are working on posting educational signs and installing bird boxes, a pollinator garden, a butterfly pond and a wildflower meadow—all ideas that used yokoten to transfer knowledge from the Georgetown plant in true Toyota fashion.

Toyota's assembly plant in Princeton, Indiana, has also developed a nature trail. In addition, they have planted thousands of trees and plan to reforest much of the site with native species. Tree planting activities are taking place in five phases, at the end of which 200,000 trees will have been planted on the site.

Toyota's manufacturing facilities in Cambridge and Woodstock, Ontario, are in the process of constructing nature trails, as wells as pollinator gardens—a natural area that is inhabited by native plants and species to increase the productivity of the area. Pollinator gardens provide a safe place for species to flourish, especially animal pollinators like butterflies. This idea was also shared as a yokoten from the Georgetown plant, who won a Pollinator Protection Award in 2011 from the Wildlife Habitat Council and North American Pollinator Protection Campaign (NAPPC).

This award is due in part to the efforts of Frances Jansen, a team member at the Georgetown plant who wrote to Kentucky's Governor, Steve Beshear, to suggest he proclaim the third week in June as "Pollinator Week." Pollinator Week has grown to be an international celebration of the valuable ecosystem services provided by bees, birds, butterflies, bats and beetles. Kentucky is now one of 27 states with this event.

PARTNERSHIP: WILDLIFE HABITAT COUNCIL

Our partnership with the Wildlife Habitat Council (WHC) began at our Georgetown plant. In 2008, it became the first Toyota plant to obtain certification to the Wildlife Habitat Council's Wildlife at Work and Corporate Lands for Learning programs. In 2010, the plant was one of three sites nominated as "Corporate Habitat of the Year" by WHC, and recently, the plant achieved a three-year recertification.

The Wildlife Habitat Council's Corporate Wildlife Habitat Certification/International Accreditation Program recognizes commendable wildlife habitat management and environmental education programs at individual sites. Certification criteria are stringent. Sites must demonstrate that programs have been active for at least one year with a management plan that lists goals, objectives, prescriptions and complete documentation of all programs. The Certification Review Committee, a panel of WHC wildlife biologists and staff, reviews the materials for certification eligibility and recognizes deserving projects under an appropriate category.

The Wildlife Habitat Council is a nonprofit group of corporations, conservation organizations and individuals dedicated to restoring and enhancing wildlife habitat. WHC works with corporations and other landowners to create tailored voluntary wildlife habitat enhancement and conservation education programs on corporate facilities and in the communities where they operate. We recently decided to work with WHC on identifying a common habitat enhancement theme for our North American manufacturing plants. With our plants working towards a common goal of preserving and protecting the environment for "all" of Toyota's neighbors—human as well as plants, animals and the land itself—our efforts will have the greatest impact.

Energy & Greenhouse Gases

Energy, greenhouse gases and renewable energy—these three issues are closely related. The consumption of energy is a major contributor to greenhouse gas (GHG) emissions. Energy efficiency measures, along with the use of renewable energy such as wind and solar, reduce the GHG emissions associated with energy consumption. We discuss each issue below.

Energy Consumption

Most of the electricity consumed in North America is generated from fossil fuels, such as coal and natural gas. These resources are non-renewable, meaning they cannot be naturally replenished for consumption. All forms of electricity generation have some level of environmental impact. Burning fossil fuels to generate power can lead to air emissions, impact water bodies, produce waste and disturb large areas of land if mining is involved to obtain natural resources. These impacts, combined with the rising cost of energy, make energy efficiency a high priority for companies in all industry sectors.

Energy consumption refers to the amount of electricity and natural gas used to power our facilities. As a large energy consumer, Toyota is constantly looking for ways to be more efficient in our operations, both to minimize the impact our energy use has on the environment and to reduce cost. In North America, Toyota's manufacturing plants are our largest energy consumers, and they have set a strategic goal to become the leader in energy performance in North America. To accomplish this goal, we are investigating new technologies and identifying kaizen opportunities to deliver incremental improvements, then using the concept of yokoten to transfer lessons learned and best practices from one facility to another.

We use other concepts of the Toyota Way, including hansei, or reflection, to help us identify successes and failures, as well as new opportunities. We also rely on the creativity of our employees, a Toyota Way principle known as souikufu. Bethany Giordano, Facilities Water and Energy Specialist at our plant in Georgetown, Kentucky, has been running an annual energy reduction contest for the last few years. The contest, this year called the "Green Machine," encourages team members to find innovative ways to reduce energy consumption. Ten shops—two paint shops, two assembly areas, stamping, bodyweld, plastics, powertrain, quality control and die manufacturing—participated in fiscal year 2012. This year's "Green Machine" champion was the Powertrain shop; they reduced the number and size of motors on their coolant systems and installed higher-efficiency motors. In all, the competition resulted in energy savings of over 26,600 MMBtus and $14,400 in reduced energy costs during fiscal year 2012. (MMBtu means Million British Thermal Units and is a way of combining electricity and natural gas into a single measure of energy consumption.)

We are proud to report that Bethany Giordano was nominated by her Toyota peers and selected by the Association of Energy Engineers for the 2012 Young Professional Energy Engineer of the Year Award (Region III). Bethany is a member of the Association of Energy Engineers (AEE), Southwest Ohio Chapter. AEE is a professional organization of energy engineers, energy managers, energy technicians and energy consultants. AEE members operate and manage power facilities, implement energy efficiency and renewable energy technologies, and educate customers and employers about ways to reduce energy usage, costs and pollution.

Bethany has been a Specialist at Toyota's Georgetown, Kentucky, plant for 10 years. She was the Volunteer of the Year at the Georgetown plant and is involved in the Girls in Engineering program that introduces female students to engineering at an early age.

Bethany is also a Certified Energy Manager (C.E.M.); she co-leads and participates in the plantwide Energy Management Organization. She provides engineering support to plant shops on energy reduction activities, engineering problem solving analysis, and countermeasures for Utility Area Systems including compressed air, instrument air and chilled water systems. She analyzes electrical and mechanical systems to develop methods for improving dependability, efficiency, operating practices and maintenance costs. She works with management and skilled team members to develop countermeasures and set direction.

Toyota is proud of Bethany's accomplishments and her recognition of those accomplishments by the AEE.

ENERGY STAR® AWARDS
In 2012, Toyota's North American manufacturing division (Toyota Motor Engineering & Manufacturing North America) received an ENERGY STAR® Sustained Excellence award for the eighth consecutive year. The U.S. Environmental Protection Agency (EPA) selects organizations for this award that have exhibited exceptional leadership year after year in the ENERGY STAR program. Toyota's North American manufacturing division was recognized for its role in:

  • Decreasing absolute energy use by nine percent.
  • Influencing the company's supply chain by continuing to train Tier 1 suppliers to conduct internal plant energy assessments known as Treasure Hunts. Thirty-three companies benefitted from the training in 2011.
  • Supporting the ENERGY STAR Auto Focus Group actively for over 10 years.
  • Conducting new research for expanded benchmarking of assembly and powertrain plants.
  • Completing the analysis on the reduction of air intake to ovens in paint shops with a pilot installation planned for 2012. A preliminary analysis across North America indicates a savings potential of 95,300 MMBtus, equivalent to 28 million kilowatt-hours or 31,000 tons of CO2 emissions, when implemented in all paint shops.
  • Motivating energy savings through monthly energy contests and the annual Toyota Summer and Winter Shutdown Energy Reduction Challenges.

The U.S. EPA began Industrial Round Tables in 2002. In 2003, Toyota was a leader in approaching the ENERGY STAR program to form the ENERGY STAR Auto Focus Group. The focus group brings together energy experts from all North American automotive manufacturers to compare best practices and discuss technological developments for energy reduction.

The Auto Focus Group developed the first industrial Energy Performance Indicator (EPI) for assembly plants, defined as welding, painting and assembly operations located in the same location. The EPI normalizes energy consumption for vehicle size and location to show how efficiently a specific plant is performing. Plants that perform in the upper quartile (top 25 percent) based on the EPI are recipients of the ENERGY STAR Plant performance award.

Toyota's Georgetown plant has been a recipient of the ENERGY STAR Plant award every year since the award began. (Note: There is a small discontinuity in awards due to a request from ENERGY STAR to align awards with calendar years). Within the Georgetown plant, there are two assembly lines. Line 2 has won six consecutive awards—the most recent in 2012—and Line 1 has won five. During this time frame, the Georgetown plant has used energy management techniques such as adjusting start and stop times, making minor equipment modifications, and implementing major kaizens to reduce total consumption. Since beginning its energy management program, the plant has reduced its energy consumption per vehicle from over nine MMBtus per vehicle to less than six MMBtus per vehicle.

Eight Toyota plants also achieved the ENERGY STAR Challenge for Industry, designed to recognize individual industrial sites. Any manufacturing site whose company is an ENERGY STAR partner is eligible to enroll in the Challenge for Industry. Sites take the challenge by signing up to improve their energy efficiency by 10 percent in five years. These eight Toyota sites have achieved the challenge for an average energy intensity reduction of nearly 24 percent:

  • Bodine Aluminum in St. Louis, Missouri
  • Bodine Aluminum in Jackson, Tennessee
  • Toyota's plant in Buffalo, West Virginia
  • Toyota's plant in Huntsville, Alabama
  • Toyota's plant in Princeton, Indiana
  • Toyota's plant in San Antonio, Texas
  • Toyota's plant in Woodstock, Ontario
  • Toyota's plant in Cambridge, Ontario

Ten plants are currently taking the challenge, working to achieve a 10 percent reduction. They demonstrate our commitment to continuous improvement.

Our efforts to reduce energy consumption continue in our sales and distribution operations. In the United States, six of these facilities have been recognized with ENERGY STAR awards:

  • Headquarters building in California
  • Toyota Customer Services building in California
  • Toyota Financial Services building in California
  • Toyota Plaza in California
  • Gramercy Plaza in California
  • North American Parts Center Kentucky

The award for the North American Parts Center Kentucky required advanced collaboration with EPA program administrators to overcome the challenges in applying the program criteria to a large warehouse facility. Through this partnership, the ENERGY STAR program gained experience that helped them apply the program to more varied facility types.

STRATEGY: ADIABATIC HUMIDIFICATION
Adiabatic humidification refers to humidifying the air without the need for additional heat. In fiscal year 2012, when the North America-wide adiabatic humidification project began, we predicted the project would reduce energy consumption by more than 550,000 MMBtus—equivalent to 161 million kilowatt-hours or 211,000 tons of CO2, and a little more than five percent of total consumption from our manufacturing division.

Paint shops represent over 60 percent of the energy consumption for Toyota's North American manufacturing division. Air for the spray painting process must be maintained at specific temperature and humidity levels to ensure paint adhesion and quality. The standard paint process consumes natural gas, steam and chilled water to reach these set points. Winter temperatures require large amounts of energy, first to heat the air and then to add moisture.

Hansei, or reflection, helped us better understand the humidification process. Previously, we used pre-heat, wet water walls and steam humidification to get moisture content to the correct point, and then we fine-tuned temperature using chilled water coils and steam reheat. Steam was used at two points—once to humidify and once to reheat—to reach the final set point. Steam is an inherently inefficient means of heating process systems. The overall efficiency of steam delivery from a central boiler plant to the point of use often hovers around a mere 50 percent. So we targeted the elimination of centralized steam plants to improve overall energy efficiency.

High-pressure water atomization, using pumps to pressurize the water to over 900 psi and special nozzles to generate extremely fine misting, can raise this system efficiency to over 90 percent. The gas burner on the paint air supply house combined with the high-pressure water atomization system allows Toyota to create necessary humidity control inside the air supply house, which significantly improves efficiency. The increased energy efficiency is seen throughout the year. The adiabatic humidification also provides cooling in the summer, which saves significant amounts of chilled water.

Another improvement was to utilize "window" control instead of traditional set point control. The window is created based on the wide range of temperature and humidity conditions acceptable for applying paint. By using a larger window, energy use is reduced significantly.

Our plant in Georgetown, Kentucky, has completed installation of the adiabatic system in Plant 1 and the Plastics shop, and will complete the Paint 2 shop during fiscal year 2013. Also during fiscal year 2013, we will complete systems at the paint shops at our plants in Woodstock, Ontario, and Princeton, Indiana; and we will complete a pilot at our plant in San Antonio, Texas. Remaining plants and plastics shops will be completed during fiscal years 2014 and 2015.

Target and Performance

2012 Target: Reduce energy consumption at manufacturing plants to 7.28 MMBtus per vehicle (achieved)

Toyota's North American manufacturing facilities set a target to improve energy efficiency to 7.28 MMBtus per vehicle produced. We achieved this target, thanks to kaizens implemented at a number of our plants. For example:

  • Our plant in Delta, British Columbia, is responsible for die design, development and manufacturing of aluminum wheel products for Toyota. Last year, team members recognized that the more energy-efficient equipment installed in a recent expansion was not being fully utilized. The heat treat oven and paint booth were not running at their full capacity. By reorganizing and adding casting equipment, and relocating and adding machining capacity, the equipment and processes are now fully utilized. Older, less efficient equipment was shut down. The entire project led to an absolute energy savings of 590,000 kilowatt-hours.
  • Toyota's plant in Huntsville, Alabama, piloted the use of ultra constant discharge (UCD) lighting in team member parking lots in 2011. By replacing high pressure sodium (HPS) lighting with UCD lighting, energy use was reduced by 69 percent, saving the plant over 40,400 kilowatt-hours per year. The life expectancy of UCD lighting is 20,000 hours, compared to only 12,000 for HPS. Because of the UCD lighting's energy efficiency and better light quality, the remaining HPS lighting on the plant's campus will be replaced during fiscal year 2013. The plant in Alabama is the first Toyota facility to use UCD lighting. Now that the performance of UCD lighting has been confirmed, we will begin yokoten and share this knowledge with other Toyota facilities.
  • In July of 2010, Bodine Aluminum was contacted by the Missouri Department of Natural Resources (MDNR) about participating in the "Energize Missouri Industries" program. This program was designed to provide companies with the opportunity to realize measurable energy savings while reducing energy costs and improving market competitiveness. Matching grants were available for up to 50 percent of the cost of certain projects through funding received by the MDNR from the American Recovery and Reinvestment Act of 2009. Out of the 196 companies who applied, Bodine Aluminum was one of only 45 companies to receive a grant.

    The company was selected to replace its current thermal oxidizer with a regenerative thermal oxidizer (RTO). The original thermal oxidizer was connected to the sand reclamation system and was used to control emissions of volatile organic compounds (VOCs) from the sand/resin mixing operations. The unit was 90 percent efficient for the destruction of VOCs, but only 50 to 75 percent energy efficient. The unit consumed approximately 1.3 MMBTUs of natural gas per hour of operation. The replacement RTO reduces VOC emissions by 98 percent and is 97 percent energy efficient. It consumes 0.36 MMBTUs of natural gas per hour of operation, a significant decrease from the previous system that amounts to a 73 percent reduction in energy use. Other benefits include waste reduction due to increased sand life, lower potential for odor due to improved VOC destruction, and lower maintenance costs.

In addition to kaizens identified and implemented, we continue to evaluate additional improvement opportunities for the future. During fiscal year 2012, we completed an evaluation of energy reduction opportunities implemented in the paint shops in fiscal year 2010. This evaluation provided internal benchmarking, identified differences in equipment efficiency and measured actual energy efficiency against ideal performance.

To date, the energy evaluation has identified reduction opportunities totaling over 643,500 MMBtus, equivalent to 188 million kilowatt-hours—approximately six percent of annual energy consumption in Toyota's North American manufacturing division. From this evaluation, Toyota identified two specific reduction opportunities—oven air flow reduction and pre-heating RTO combustion air—that we plan to implement in all North American assembly plants during fiscal years 2013 through 2015.

Energy Consumption

Spotlight: Savings from Lighting Retrofits

Toyota consumes over one billion kilowatt-hours of electricity each year, some of which lights our facilities. Toyota's largest manufacturing facility in North America opened in Georgetown, Kentucky, in 1986. With over 6,200 team members assembling Camry, Camry Hybrid, Avalon and Venza, Toyota is the third largest employer in the commonwealth of Kentucky. The Georgetown plant consumes a lot of electricity—approximately 375 million kilowatt-hours—to assemble 500,000 vehicles and manufacture 600,000 engines each year.

Lighting technology has changed significantly in the 25 years since this facility was constructed. In 2003, we started investigating the replacement of old lighting fixtures. The metal halide lights were inefficient and took over 10 minutes to warm up, which meant they were rarely turned off. The goals of the investigation were to find energy savings, improve light levels and obtain team member buy-in. As part of this process Toyota worked with several suppliers to develop a fixture that met our needs.

In 2005, pilot lighting was installed at four of our manufacturing plants to highlight the improved lighting and energy reduction capabilities of high-bay fluorescent lighting. At the same time, Toyota team members participated in training at the GE Lighting Institute in Cleveland, Ohio, and evaluated a new high-bay fluorescent fixture that GE Lighting had developed. Using Toyota Way concepts, including hansei, Toyota team members identified more than 25 ideas for kaizen to improve the quality of the fixture and lower its cost. Following training, team members from Toyota's Georgetown plant led investigations into developing a new high-bay fixture.

One of the difficulties was finding a design with an occupancy detector that could detect movement 25 feet away—the distance between the light and the assembly floor. "We worked for almost three years with a lighting company and a fixture company to develop the fixture that we needed for our application," said David Absher, Manager, Environmental Engineering and Energy Management at the plant. "Both companies took input from us and incorporated it into the final design. The result was the introduction of new products that Toyota and other manufacturers can use in high-bay lighting applications that are very energy-efficient."

We ultimately installed T-8 high-output fluorescent lamps, which are used at a number of our facilities in North America. Each time we relamp, we replace 1,000 to 3,000 fixtures (1,000 fixtures have about 6,000 lamps).

T-8 high-output fluorescent lamps became Toyota's North American manufacturing standard, meaning they are used any time a plant undertakes a relamping project. We also made a decision to eliminate the practice of providing process light from overhead. Lights are now installed where they are needed rather than to light the entire building.

The West Virginia plant was the last plant to upgrade high-bay lighting. The plant had 2,000 high-efficiency fluorescent lights installed with motion sensors to ensure lights are off during weekends and between shifts. Each light saves 158 kilowatt-hours per month; changing 2,000 lights at this one location is the equivalent of taking 280 houses off the power grid.

The time and effort to find and develop the right light fixture and lamp were well spent: Across North America, lighting retrofits at Toyota's manufacturing plants have resulted in annual savings of 17 million kilowatt-hours and 10,000 tons of greenhouse gas emissions, enough to power 1,500 households.

In addition to lighting retrofits at our manufacturing facilities, we have also completed lighting retrofits at some of our North American sales and logistics sites. By replacing T-12 lamps with T-8 lamps in our sales headquarters office in Toronto and at the Toronto parts distribution center offices, we are saving about 420,000 kilowatt-hours annually. We plan to replace lights in the Toronto parts distribution center warehouse in 2012. In addition, all U.S. parts distribution facilities are in the process of upgrading to advanced lighting systems using high-output T-5 lamps with motion and daylight sensors.

Partnership: Mexico's Environmental Leadership Program for Competitiveness

In 2011, Mexico's Secretary of Environment and Natural Resources invited leading companies to join its "Environmental Leadership Program for Competitiveness," a nationwide effort to encourage companies to reduce their environmental footprint. Toyota's plant in Tijuana, Mexico, was selected to be a regional group leader in Baja California and has been working with 11 companies on projects that reduce energy consumption, greenhouse gas emissions and water use. This is an innovative way to share best practices and encourage companies to work together for the benefit of environmental protection.

Toyota's Tijuana plant implemented three projects during fiscal year 2012 that reduced annual electricity consumption by one million kilowatt-hours and natural gas usage by 16,000 MMBtus, and avoided almost 2,000 tons of carbon dioxide emissions. Under Toyota's leadership, the 11 Baja California companies identified 19 projects that resulted in:

  • Water savings of 36,000 cubic meters (9.5 million gallons) per year.
  • Energy savings of 5.4 million kilowatt-hours per year.
  • Avoided emissions of 3,700 tons CO2 per year.

In addition, Toyota's Tijuana plant received a Clean Industry Certificate from Mexico's Federal Agency for Environmental Protection (PROFEPA) for the second time in a row. PROFEPA awards Clean Industry Certificates to companies implementing hazardous waste management systems, wastewater and water recycling programs, and environmental security measures that allow them to comply with standards through PROFEPA's voluntary audit program. Each certificate is valid for two years.

Greenhouse Gas Emissions

Greenhouse gases (GHGs) include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs) such as refrigerants, perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). These gases (along with water vapor) trap heat in the Earth's atmosphere and cause the greenhouse effect. This is a natural occurrence that helps regulate the temperature of our planet. But over the last 20 years, scientists have raised concerns that human activities are causing levels of greenhouse gases to increase at a faster rate than at any other time in human history. Predictions vary, but an increase in the greenhouse effect could cause global temperatures to rise, leading to long-term impacts to the environment and human health.

Toyota is concerned about the possible impacts of climate change and is committed globally to a "low-carbon society." Energy use at Toyota's assembly plants is our main source of GHG emissions. As described in the Energy Consumption section, our plants carefully manage energy use and have found innovative ways to reduce consumption and corresponding GHG emissions. We are also looking into renewable energy as a means of reducing our carbon footprint.

Target and Performance

2012 Target: Reduce GHG emissions at manufacturing plants to 0.80 metric tons CO2 per vehicle (achieved)

This year, we are reporting our GHG data in a different manner. In prior years, we reported GHG emissions from Toyota's manufacturing facilities in the United States only, as we were participating in the Department of Energy's Climate VISION program. This program has ended.

Our fiscal year 2012 target was to reduce GHG emissions from energy consumption at our North American manufacturing plants to 0.80 metric tons CO2 per vehicle produced. This target is in line with our energy consumption target. We surpassed this target and achieved 0.78 metric tons CO2 per vehicle produced.

Many of the kaizens discussed in the Energy Consumption section contributed to our success. Energy management activities either implemented or in the implementation phase are predicted to further reduce Toyota's manufacturing CO2 footprint by more than 380,000 tons per year.

Manufacturing CO2 Emissions

Three of Toyota's North American manufacturing plants were subject to EPA's Mandatory GHG Reporting rule. Individual plant data for our plants in Kentucky, Texas and Indiana are available on the U.S. Environmental Protection Agency's website through its online data publication tool.

We are also disclosing GHG emissions from Toyota's North American companies as a consolidated inventory. Toyota's North American GHG inventory measures GHG emissions from the consumption of electricity and natural gas at plants, logistics sites and owned and leased office space, as well as from fuel consumption by in-house trucking operations and third-party carriers, employee commuting and business travel. The methodology used to calculate emissions is based on The GHG Protocol® developed by the World Resources Institute and the World Business Council for Sustainable Development. The process of preparing this consolidated inventory has helped us better understand where GHG emissions occur and has facilitated information sharing across Toyota's North American companies.

GHG Inventory Results

REDUCING GHG EMISSIONS IN LOGISTICS
Fuel consumption from the transport of Toyota production parts, service parts and vehicles is a significant source of GHG emissions. Our logistics operation is committed to improving fuel efficiency and reducing transportation-related GHG emissions. One way they demonstrate this commitment is through EPA's SmartWay® program. Our in-house completed vehicle trucking carrier (Toyota Transport) has renewed their membership in SmartWay as a carrier, and our division that manages third-party trucking and rail carriers is a shipper member. Launched in 2004, SmartWay is an EPA program that reduces transportation-related emissions by creating incentives to improve supply chain fuel efficiency.

Initiatives such as driver education, idling reduction and the installation of various aerodynamic equipment have contributed to a combined annual fuel savings of almost 160,000 gallons per year from our in-house service parts and vehicle logistics trucking operations. This translates to over 1,600 tons of GHG emissions avoided per year. In 2012, Toyota is upgrading trucks for its fleet and will see even more improvements in fuel economy and emissions, including a targeted six percent reduction in GHG emissions per ton-mile traveled (a ton-mile is one ton of freight transported one mile and is a common unit of measure for logistics).

Much of our part and vehicle transport activity is conducted by third parties. Because our activities influence the GHG emissions of these third parties, our U.S. sales and logistics operation tracks these emissions and has been working with third-party carriers to reduce GHG emissions from transportation activities.

We conducted research with one of our production parts logistics partners on how aerodynamic equipment installed on trucks could improve fuel economy. We began testing this equipment in 2008, and have since installed the equipment on a number of Toyota's logistics trucks. As a result, there has been a five percent improvement overall in fuel economy. A number of our third-party carriers have also implemented this equipment on their fleets.

At our newest plant in Blue Springs, Mississippi, Toyota is partnering with R.J. Corman Switching Co. to reduce the impact of our rail operations there. R.J. Corman Switching uses a 1,400-horsepower RP14BD GenSet locomotive to provide rail-car switching. The GenSet will enable Toyota to reduce locomotive fuel consumption here by 35 to 55 percent.

Renewable Energy

Renewable energy is energy that comes from natural resources such as sunlight, wind, biomass and geothermal heat. Renewable energy replaces conventional fuels primarily in electricity generation and transportation fuels. There is strong public support for promoting renewable sources such as solar power and wind power. Climate change concerns, coupled with rising oil prices and government support are driving renewable energy legislation, incentives and commercialization.

Toyota supports the development of renewable energy sources and has been expanding the use of renewable energy as a means of reducing our carbon footprint and our reliance on non-renewable energy sources. We are evaluating applications of solar, geothermal and stationary hydrogen fuel cells, as well as the purchase of green power either directly from a utility company or through renewable energy credits. Through hansei, or reflection, on our pilot applications, we are learning what works and what doesn't and where additional opportunities lie.

SOLAR
Our first renewable generation project began in 2002 with the installation of a 536-kilowatt photovoltaic (PV) system at our U.S. sales headquarters South Campus in Torrance, California. Since going online, this system has generated over 5.1 million kilowatt-hours of electricity. We also have rooftop PV systems at parts distribution facilities in California and New Jersey that generate a total of 3.8 megawatts of electricity.

Toyota's North American manufacturing plants have been experimenting with different applications of PV systems since 2008. Three locations have tested solar applications:

  • Our plant in Huntsville, Alabama, installed a five-kilowatt system to understand basic information on installation costs, true power output and operational expenses.
  • Our Blue Springs, Mississippi, plant installed solar panels on light poles in the visitor parking lot. A battery is used to store energy during daylight hours and a sophisticated battery management system ensures lighting levels meet required standards based on occupancy sensors. This location was selected to provide a showplace for this lighting technology and permits Toyota to evaluate this solution to parking lot lighting needs.
  • A fountain at the Environmental Education Center | Nature Trail at our plant in Georgetown, Kentucky, is powered by a solar panel, providing an opportunity to educate visitors about solar power and renewable energy.

GEOTHERMAL
In addition to solar power at the Blue Springs plant, we have been studying a geothermal application for providing chilled water required by the air compressor. Designs for a geothermal well field consist of 15 geothermal wells and a chiller to provide 20 tons of chilled water to a compressed air dryer on weekends. The central chilled water would be provided by several 2,000-ton chillers that consume approximately 1,500 kilowatts per hour. Once implemented, anticipated energy reduction potential is over one million kilowatt-hours per year. If this system works as anticipated, we will complete yokoten, or transfer and adapt this system to other manufacturing facilities in North America.

HYDROGEN FUEL CELL
Toyota's U.S. sales headquarters installed a 1.11 megawatt stationary hydrogen fuel cell to generate electricity and reduce utility costs. The fuel cell became operational in 2012 and uses hydrogen produced off-site from natural gas. To offset the greenhouse gas impacts of the hydrogen production, an equivalent amount of landfill-derived methane gas is purchased and put into the natural gas pipeline.

The fuel cell uses Proton Exchange Membrane (PEM) technology, which is similar to the technology used in Toyota's fuel cell hybrid vehicle (FCHV). PEM fuel cells are used in Toyota vehicles because they can be turned on and off quickly. Using similar technology to responsively provide electricity to our sales campus during peak demand periods demonstrates another reliable use of this technology. This is the largest PEM fuel cell in the world and is the first application of its kind.


GREEN POWER PURCHASES AND RECS
We also support the expansion of renewable power through the direct purchase of renewable energy from our electricity providers as well as through renewable energy credits (RECs). The vehicle distribution center in Portland, Oregon, and the Lexus Training Center in Dallas, Texas, purchase renewable power directly from green power utilities.

In contrast to direct renewable power purchases, RECs are tradable commodities that represent proof that a certain amount of electricity was generated from an eligible renewable energy resource. When we purchase RECs, we specify the type of generation (typically wind) and the location from which the RECs are generated. In particular, we seek to purchase RECs from generating facilities that are NOT in a state that has Renewable Portfolio Standard (RPS) requirements to help increase market demand for renewable generation. We purchase RECs for our regulatory affairs office in Washington, D.C., and training centers in Florida, Arizona and California.

Spotlight: Renewable Energy Projects at Our Sales and Logistics Sites

In our sales and logistics division, we have used four methods to reduce the environmental impacts of our energy consumption. The primary focus is on energy efficiency—reduce consumption by optimizing building systems operations and energy efficiency projects, such as the lighting retrofit projects outlined above. Although not universally applicable at every one of our facilities, we also look for opportunities to purchase renewable energy directly from local utilities, install on-site renewable generation, and purchase Green-e certified renewable energy credits (RECs). We consume a total of 91 million kilowatt-hours of electricity annually, and we currently support over seven million kilowatt-hours of renewable energy generation through a number of projects.

Renewable Energy at Our Sales and Logistics Sites

Green Building

"Green building" refers to sustainable practices throughout a building's life cycle, from siting to design, construction, operation, maintenance, renovation and demolition. The objective of green building practices is to reduce the overall impact of the built environment on human health and nature by efficiently using energy, water and other resources; protecting occupant health; and reducing waste and pollution.

According to the Environmental Protection Agency (EPA), the buildings in which we work, shop, play and educate our children in the United States use about $200 billion worth of electricity and natural gas each year. EPA estimates that if the energy efficiency of commercial and industrial buildings in the U.S. improved 10 percent, Americans would save about $20 billion and reduce greenhouse gases equal to the emissions from about 30 million vehicles. In fact, the energy used by commercial and industrial buildings in the United States is responsible for nearly 50 percent of our national emissions of greenhouse gases that contribute to global climate change.

Toyota has over 37,600 employees working in office space, distribution centers and manufacturing plants across North America. Green building principles help us design, build, renovate and manage these spaces in a more sustainable manner.

Toyota's sales and logistics division, Toyota Motor Sales, U.S.A., Inc. (TMS), has been a member of the United States Green Building Council (USGBC) since 2002. The USGBC administers the Leadership in Energy and Environmental Design (LEED®) program, a pointbased program that promotes a whole-building approach to sustainable construction and remodeling. LEED certification provides independent, third-party verification that a building was designed and built using strategies aimed at achieving high performance in key areas of human and environmental health: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. Through this membership and through other avenues, we have provided advice on sustainable facilities development and operations to a number of organizations, including Yellowstone National Park, surrounding communities, nonprofit organizations and other corporations.

While we do not apply for LEED certification in all cases, we do use integrated design principles and incorporate sustainable elements in each building design phase. We learn from each project as we reflect on what worked and what could have been improved. Hansei, or reflection, ensures we continue to learn from our experiences and apply this learning to future projects.

We also apply green building principles when we construct our assembly plants. Prior to beginning construction on a new assembly plant or a major expansion of an existing plant, Toyota develops an "Eco-Plant Plan" that maps out the use of best available technology to minimize environmental impacts and meet or exceed regulatory requirements. Each plan contains operational performance targets for energy use, emissions of volatile organic compounds (VOCs), waste generation and water consumption. These plans consider best practices and are tailored to local conditions.

After the plans have been developed and approved, audits are conducted throughout the construction and trial phases to verify that the plan has been followed. Most recently, Toyota implemented an eco-plant plan for our newest manufacturing facility in Blue Springs, Mississippi (opened in 2011).

Performance

A total of 11 Toyota and Lexus facilities have achieved LEED certification. Ranging from office space to vehicle distribution centers, these facilities represent Toyota's continued efforts to improve the design and efficiency of all operations.

Our U.S. sales headquarters South Campus in Torrance, California, is Toyota's first LEED-certified building. South Campus had its grand opening in 2003 and is certified to LEED Gold. Since 2003, over five million kilowatt-hours of grid power use have been avoided through the use of our rooftop photovoltaic system. This facility formed the basis for our expertise on green building and is frequently toured by business partners and community members wanting to learn more about green building principles.

Our most recent site to achieve LEED certification is the Kansas City Technical Training Center in Missouri. The technical training center is located at the region sales office and provides classrooms and training bays for Toyota dealer technicians. The Kansas City Technical Training Center integrated the following LEED elements into construction to achieve Gold certification:

  • More than 953 tons—99 percent of construction waste—was diverted from landfill through salvage or recycling.
  • Extensive native vegetation rain gardens and swales treat 100 percent of parking lot and roof stormwater runoff, removing 95 percent of pollutants.
  • Automatic lighting controls and use of natural light reduce electrical demand by almost 25 percent.
  • Dual flush toilets, waterless urinals and efficient fixtures reduce water consumption by 66 percent, saving 49,800 gallons of water annually.

Toyota's North American Facilities With LEED Ratings

Waste Minimization

Waste refers to everything from office trash to cafeteria scraps and industrial waste. If waste is generated, then natural resources were consumed: The more waste that is generated, the more resources are consumed. And, if waste is not managed properly, it can pollute the environment and impact human health.

Waste minimization practices help us conserve the natural resources needed to make our vehicles, which in turn help us manage costs. These practices also help us find the best solution for processing the waste we generate: We work with our business partners to find ways to reuse or recycle what we can; we compost cafeteria waste in locations where composting is feasible; our waste is used as fuel in waste-to-energy facilities; and we divert as much as we can from going to landfill.

Creating a recycling-based society is one of the action guidelines in the Toyota Earth Charter. In North America, we see our efforts to accomplish this as key to being a good neighbor in the communities where we live and work. To further encourage recycling in our society, we partner with other businesses and nonprofit organizations to find outlets for our waste, as well as to help them find better ways for managing their own waste.

WASTE REDUCTIONS AWARDS
In 2011, the U.S. Environmental Protection Agency (EPA) selected Toyota's U.S. sales and logistics division, Toyota Motor Sales, U.S.A., as the WasteWise Large Business Partner of the Year for our efforts to reduce waste and increase recycling. We are the only Large Business in the nation to receive this distinction.

This follows on and surpasses our Waste Reduction in the Workplace Gold Achievement Honorable Mention award that we received in 2010. The WasteWise Awards are the result of a team effort—23 sales and logistics sites participate in the program. Through these efforts, Toyota Motor Sales:

  • Reduced 36 million pounds of waste (63 percent).
  • Recycled 18.8 million pounds of waste (33 percent).
  • Recovered energy from 1.1 million pounds of waste (two percent).
  • Sent only one million pounds of waste to landfill (two percent).

In addition to WasteWise, three of Toyota's California parts distribution facilities were recognized in 2011 by the Waste Reduction Awards Program (WRAP) administered by the California Integrated Waste Management Board. This program recognizes California businesses and nonprofit organizations for their outstanding waste reduction efforts. Since the WRAP program began in 1994, Toyota has won a total of 70 awards, including two WRAP of the Year awards.

Targets and Performance

2012 Targets: Reduce non-saleable waste from manufacturing plants to 17.80 kilograms per vehicle (missed); Achieve zero waste to landfill (achieved by 10 of 14 plants)

Non-saleable waste is waste that we pay to dispose (such as by incineration, landfill or converted to energy). We set a target to reduce non-saleable waste at our manufacturing plants to 17.80 kilograms per vehicle, a two percent reduction from fiscal year 2011 levels. We missed this target; our volume of non-saleable waste increased to 18.78 kilograms per vehicle. The primary reason for missing the target is that we performed a number of "spring cleaning" and plant refurbishment activities during planned non-production times last year. These cleaning events normally would have happened over the course of a longer time period, but we took advantage of the non-production times to complete these activities early.

Despite missing this target, our plants found numerous ways to reduce the amount of waste they generate. Team members examine processes closely to find opportunities for reduction. They take personal responsibility for finding solutions, and their creativity and commitment lead to our successes.

For example, team members at our plant in West Virginia identified a kaizen, or continuous improvement, to reduce coolant waste. The plant recycles steel and aluminum chips that contain residual coolant. During storage at the recycling facility, coolant drips off the chips and is collected and disposed. Last year, the recycler had to pay to dispose of 100,000 gallons of coolant.

To minimize the amount of coolant sent to the recycler, team members installed a sloped false bottom into a 20-yard roll off box with a filtering screen at the front. This allows the coolant to drain by a valve in the front of the box into a 30-gallon tote. The coolant is then recycled into the plant's coolant system. This innovative solution eliminates a waste stream and significantly reduces the amount of new coolant Toyota needs to purchase each year.

Many other waste materials, like plastic wrap, paint solvents, used oil and packaging materials, are recycled. Our Kentucky plant recycles engine block modules, the steel shipping containers used by our parent company in Japan to ship engines to the United States.

Virtually 99 percent of all scrap steel generated by Toyota plants is recycled. Toyota's Kentucky plant uses an intricate system that turns scrap steel from the stamping process into reusable product. Scrap steel—in the form of approximately 600-pound cubes—is returned to the mill and is eventually put back into the production process as steel coils. In addition, when doors are made in the stamping process, there is steel from the window area left over. We send these squares of topquality steel to sub-suppliers, who in turn use our steel as their raw material. From this steel, the suppliers make internal structural pieces for the vehicles made at the Kentucky plant.

Nonsaleable Waste

ZERO WASTE TO LANDFILL
We have an annual target to achieve zero waste to landfill at our North American manufacturing plants. Ten of our plants achieved zero waste to landfill in fiscal year 2012, meaning they sent no waste directly to landfill. (Some waste is sent to incineration and waste-to-energy facilities; those facilities may send the resulting ash to landfills if no beneficial use can be found.)

Our zero waste to landfill metric is driven by the Toyota Production System, where the elimination of muda, or waste, in all aspects of business is a main objective. Toyota's parent company in Japan has challenged plants worldwide to send zero waste to landfill. While this has not resulted in the elimination of all waste, it has required significant focus on all three "R's": Reduce, Reuse and Recycle. Countless kaizens, or continuous improvements, help us get closer to the elimination of all waste.

Our plants use tools (such as color-coded waste bins and signs) to assist team members in segregating waste types and maximizing the number of waste streams that can be recycled. Some of our noteworthy achievements include:

  • Our plant in Huntsville, Alabama, has been zero waste to landfill since the start of production in 2003—this is the first of our plants to be zero waste to landfill from the start of production.
  • Toyota's two largest North American manufacturing plants—in Georgetown, Kentucky, and Cambridge, Ontario—have achieved zero waste to landfill for over five years. Both of these plants compost waste from their cafeterias. At the Georgetown plant, the compost is used for grounds maintenance and in a greenhouse, where team members grow produce to donate to local families in need.

Many of our non-production sites also pursue zero waste to landfill. At our Canadian sales offices, 96 percent of their waste was diverted from landfill in calendar year 2011. This was achieved by recycling, reusing and composting, and no waste was incinerated.

Our U.S. sales and logistics locations achieved a 90 percent recycle rate in fiscal year 2012. Eight of these locations are zero waste to landfill facilities. Last year, the parts and vehicle distribution centers diverted 97 percent of their waste from landfill and recycled almost 20 million pounds of material.

Logistics Recycling

Spotlight: Packaging Reductions

Toyota's North American Parts Operations division uses over 60,000 reusable metal shipping containers in place of cardboard and wood pallets, up from only 30,000 just a few years ago. These returnable containers are used between selected North American parts distribution centers and vehicle distribution centers, dealers and suppliers. The returnable containers are also used increasingly for shipments to Canada, Mexico and Puerto Rico. Over 120 of Toyota's North American suppliers also use returnable containers.

More than 95 percent of the North American parts at Toyota's Kentucky and Texas plants are currently received in returnable packaging. This direct reuse of containers helps to conserve our natural resources and keeps waste out of landfills.

During fiscal year 2012, we saved 37 million pounds of wood and 13 million pounds of cardboard due to the use of returnable shipping containers. Since the use of these containers began in 2001, our cumulative savings amount to over 129 million pounds of wood and 48 million pounds of cardboard, as well as packaging cost savings approaching $1 billion.

Returnables Program Savings

Partnership: Jackson County Development Center

Since 2004, team members from our plant in Buffalo, West Virginia, have been collecting and baling plastics to donate to the Jackson County Development Center. The center sorts and sells the plastics, using the income to provide training and employment opportunities to the disabled.

In 2008, team members visited the Jackson County Development Center to see how the plastics were sorted, and we found that quite a bit of trash was mixed with the plastics. So we figured out how to better segregate waste streams to decrease the amount of trash that goes to the center.

This genchi genbutsu, or "go, see and find facts to analyze the root causes," is one of the five practices of the Toyota Way: To make correct decisions, you must go to the source of an issue and observe. Determining the facts increases the likelihood of identifying problems and their root causes.

Since 2009, the Jackson County Development Center has been selling plastic donated by Toyota to PTI, Incorporated. PTI grinds, melts and forms the plastic into flying discs (similar to Frisbees®). Toyota buys the flying discs from PTI to hand out during local events. The flying discs help Toyota team members who volunteer at schools and other local events teach children about recycling and what each of us can do to help protect our world.

In recognition of Earth Day in 2011, team members from the plant visited 20 fifth graders from Leon Elementary School in Leon, West Virginia, to discuss the environment and what each of us can do to help protect our world. Our presentations focused on simple things like "reduce, reuse and recycle." We also brought a Toyota Prius to the school for the students to see and talked with them about its ground-breaking technology. Each student went home with a Go-Green Earth Day T-shirt and a flying disc made of recycled plastic from the plant.

"Children are asked to recycle, but they almost never see the results of their labor," said George Vickers, a Specialist in Environmental Engineering at Toyota's West Virginia plant. "We give them a tangible example of our own plastic recycling. The kids love the flying discs, and we love the opportunity to teach sustainability with a fun toy they can easily relate to."

Water

There is growing concern about the availability of sufficient fresh water to sustain our planet in the coming decades. In North America, we are concerned with the declining quality of fresh water sources and scarcity during droughts.

Water issues concern the communities around us, and a number of our North American manufacturing sites have experienced water-related stresses firsthand. In Georgetown, Kentucky, drought conditions have caused restrictions on water use and have led to the need for increased chemical treatment of harder water. In Troy, Missouri, Bodine Aluminum, one of Toyota's casting plants, drilled its own well to reduce dependence on city water during summer droughts. Conditions such as these are expected to worsen over time unless countermeasures are undertaken.

Toyota globally considers water to be one of its priority environmental issues. When evaluating water across our North American operations, we consider many things such as how much water we use, how much water we discharge, the quality of the water we discharge, use of recycled or reused water, and stormwater management. To help us manage the wide array of water-related issues, Toyota has a North American Water Group, where a consensus approach is used to identify general direction and set targets.

Our water management strategy focuses on a 3Rs Analysis—Reduce, Reuse and Recycle. In the water conservation pyramid, reduce is the foundation and provides the most opportunities for improvement at the lowest cost. It is the fundamental first step in water management. Reuse is in the middle, with recycling at the top. Reuse may require only simple filtration to utilize a process wastewater stream for makeup to another nearby process, whereas recycling is the most costly and difficult to implement of the three "R's." Our long-term strategy focuses on "renewable" water—using innovation to make recycling more viable.

THE TOYOTA WAY: KAIZEN WATER BLITZ
A water blitz is one of the tools we use to find opportunities to reduce water use. A kaizen is Japanese for change for the better and, along with standardized work, is a key element of continuous improvement. Kaizens are often small changes to a process that, when added together, significantly improve results. A successful kaizen relies on the involvement of all employees, a willingness to change and communication. When applied in a blitz format, individual kaizens are identified and quickly addressed, rapidly removing waste or inefficiencies.

A "kaizen water blitz" is conducted by a team of experts while spending a week at a host plant studying the processes that use water, understanding usage and finding ways to make improvements. "Low hanging fruit" and obvious ideas for kaizens are generated in this blitz format, and also inform the next step of the improvement process.

The next step is called a jishuken, or in-depth study, of our largest water users. We generate a water balance—the volume and quality of water coming in to a process, and the volume and quality going out—looking at water use from all angles. We study each process that uses water to look for inefficiencies and opportunities. By understanding the chemical components in the water, we can find uses for waste streams at other nearby processes that we may not have identified in the blitz. We understand how and why water is used and develop reduction strategies, keeping product quality in the forefront every step of the way.

STRATEGY: STORMWATER MANAGEMENT
Stormwater is rainwater and melted snow that runs off streets, parking lots and other impervious surfaces. When stormwater is absorbed into the ground, it is filtered and ultimately replenishes aquifers or flows into streams and rivers. Impervious surfaces such as pavement and roofs prevent precipitation from naturally soaking into the ground. Instead, the water runs rapidly into storm drains, sewer systems and drainage ditches. If unattended, there is potential for debris, chemicals, sediment or other pollutants to accumulate and contaminate streams and rivers.

Toyota is concerned about the impact our operations have on local water bodies. Because of the potential for stormwater to contaminate local streams, we start managing stormwater even before our plants are built. As our plants are designed, we evaluate how water will flow across the property and establish best practices to minimize the risk of contamination from our operations.

Many of our plants were built decades ago, and periodically we need to re-examine our management practices to ensure we are still minimizing risk. We wanted to evaluate our situation across North America and find ways to improve that go beyond compliance with local, state and provincial requirements and federal regulations.

During the course of last year, engineers from headquarters visited all 14 North American manufacturing plants plus three design and research centers to conduct a stormwater risk assessment. At each location, these engineers were joined by a member of the facilities group and a member of the environmental department. Together, they reviewed stormwater permits and site drawings to understand how water flows through the site and where water is discharged from the site.

The risk assessment team performed three activities as part of a genchi genbutsu, or "go, see and find facts to analyze the root cause": a roof walk, a perimeter walk and a site drive. During the roof walk, the team evaluated rooftop equipment such as exhaust fans, HVAC units and roof-mounted cooling towers; if this equipment leaks on the roof, run-off has the potential to reach roof drains and eventually make its way to stormwater retention ponds. The team then walked the building perimeter to evaluate equipment, tanks and containment areas. During the site drive, the team examined areas where water leaves the site, in particular sluice gates at stormwater retention ponds. These activities helped the team understand where and how contamination of stormwater could occur. Each point of potential contamination was rated based on the level of possible impact to the environment and possible frequency of occurrence.

The team applied concepts of the Toyota Way throughout the assessment, including the practice of hansei to examine the current situation and identify the problem. Results of the risk assessment will be used in creating a North American plant stormwater master maintenance plan and an updated internal standard operating procedure to reduce the risk of leakage. These plans and procedures will be rolled out in fiscal year 2013.

Target and Performance

2012 Target: Reduce water usage to 0.92 kilogallons per vehicle at Toyota's North American manufacturing plants (achieved)

Toyota's assembly plants are our biggest users of water. Our sales and logistics sites use water primarily for landscaping and sanitation; these volumes are insignificant compared to the volume of water used for cooling and painting at our assembly plants.

Toyota's manufacturing plants set a target to reduce water usage to 0.92 kilogallons per vehicle in fiscal year 2012. We exceeded this target and reduced water usage by two percent, to 0.90 kilogallons per vehicle.

At Toyota's plant in Long Beach, California, water use in the cooling tower was fluctuating from month to month. Mechanical failures that occurred after production hours ended went undetected and were causing spikes in water use. Team members installed a system that tracks water parameters in real time and sends an email alert if there is an issue. A number of parameters are monitored including pH level, temperature, turbidity, polymer consumption and average circulation rate. Installing this system has led to a 59 percent reduction in water use, from over 6,300 gallons per day to just over 2,500 gallons per day. We saved 1.2 million gallons of water during fiscal year 2012. We also reduced our chemical use by 67 percent, since we weren't treating as much water. We used only 55 gallons of water treatment chemicals in 2011 compared to 165 gallons in 2010.

Water Use

Spotlight: Water Savings at Our Plant in Cambridge, Ontario

Toyota Motor Manufacturing Canada (TMMC) has vehicle assembly plants in Cambridge and Woodstock, Ontario. Toyota produces the RAV4 and RAV4 EV in Woodstock, and the Toyota Matrix, Corolla and the Lexus RX 350 in Cambridge.

Fresh water supplies are coming under increasing pressure, and the Region of Waterloo in Ontario is concerned about adequate water supplies to serve the region in the future. Ontario is projected to grow by an additional 3.3 million people by 2031. This growth rate could put much greater demands on local water resources.

At the same time, scientists are predicting that climate change will create greater uncertainty for water resources. They foresee more severe and unpredictable weather events, flooding and drought. Climate change models suggest that water levels in the Great Lakes will be more variable. They could decline significantly due to higher evaporation rates and less snow and ice cover in winter. Warmer temperatures could also drive up water demand, particularly during summer.

Managing Ontario's water resources to achieve more sustainable use isn't just good for the environment—it's essential for Ontario's economic prosperity. The Great Lakes Region, for example, accounts for 95 percent of the province's farm income, while fishing and shipping add more than CAD$7 billion annually to Ontario's economy.

The region of Waterloo launched the Water Efficient Technology (WET) program as a way to provide incentives to manufacturers to reduce water use. The region hopes to decrease water consumption by more than 6,800 cubic meters (1.8 million gallons) per day through this program.

The Cambridge plant is Toyota's second largest water consumer in North America. In 2007, engineers recognized that TMMC would have difficulty meeting the long-term North American water reduction target for fiscal year 2011.

One of the reasons for high water consumption in Cambridge is the way the water treatment plant works. The water treatment plant's reverse osmosis (RO) units use membrane-technology filtration methods to remove minerals from municipal water to produce ultra-pure water for the painting process. These units reject 25 percent of the incoming municipal water to the sewer as concentrate water. The rejected concentrate is the facility's largest water consumer at 500 cubic meters (132,000 gallons) per day. Recycling this lost concentrate water was seen as the best opportunity to reduce the volume of water used.

Team members at the plant spent two years researching solutions to the problem. They began with hansei—examining the issue closely, taking responsibility and committing to finding a solution. Four RO system manufacturers were asked to provide options, but none could offer a solution that didn't involve the use of cleaning chemicals, generate huge amounts of sludge, or cause instability in the overall process.

Instead, team members, led by John Goodfellow and Rob Coveney, designed and installed a Reverse Osmosis Concentrate Recovery System that uses a brackish water membrane. A brackish water membrane was chosen for the system because the main RO concentrate water that was discharged to the sewer water closely resembles seawater. This RO system was initially designed to recover up to 40 percent of the facility's rejected concentrate water, and through experimentation we found we could recover 50 percent.

Reverse Osmosis System

Toyota has two patents pending on this process, one for recovering heat from air compressors to optimize the RO feed water temperature (if the feed water is too cold, the RO membranes close up and reject more water), and one for predicting when the RO membranes should be cleaned so the membranes don't get damaged.

Thanks to the innovative thinking of John and Rob, this system has had overwhelming success. In the first two years of operation, Toyota saved 36,000 cubic meters (9.5 million gallons) of water per year, or 100 cubic meters per day. This is enough water to supply the daily requirements for an estimated 154 homes. The plant also saves almost $77,000 in municipal water costs each year. With a one-time incentive of almost $36,000 from the Region of Waterloo's WET Program, the project payback was just one year.

The permeate (good water) from the recovery RO is fed back into the feed water of the main ROs. After determining that the water quality was stable, the Cambridge plant began feeding recovered permeate directly into the process water. After optimization, the recovery RO now saves one month of the plant's water, or 50,000 cubic meters (13.2 million gallons) annually.

TMMC received a Water Efficiency Excellence Award from the Region of Waterloo; this is the largest project supported by the WET program.

We are working on transferring and adapting the RO concentrate recovery system to our plant in Georgetown, Kentucky, our largest water consumer in North America.