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AS WE CONTINUE TO GROW, we are guided by our culture and principles that stress sustainable growth. Our Earth Charter requires that we strive for zero emissions in all areas of our business. This means that we build our vehicles with sound environmental standards in mind. In order for our growth to be in harmony with the environment, we look to decrease waste generation and increase recycling throughout the life cycle — in design, manufacturing and distribution.

Improving resource use means more than just recycling. It also means using more renewable resources and using natural resources more efficiently. To be successful in improving our resource use, we implement many kaizens to reach our targets for designing vehicles with more renewable resources, reducing waste across our operations and reducing our water use. These kaizens are then shared with other employees so that good ideas can be implemented across the company. Our Guiding Principles encourage this type of collaboration by promoting a corporate culture that values teamwork.

Our targets in the areas of vehicle design, waste and recycling, and water consumption are described in this chapter.

DESIGNING VEHICLES USING RENEWABLE RESOURCES

When we design a vehicle, we try to increase our use of renewable resources. Using renewable resources makes the vehicle easier to recycle at the end of its life. In North America, we introduced soy oil-based polyurethane foam for passenger seats in both the Corolla and the Lexus RX during 2007. Toyota added the Matrix and RAV4 to the list of vehicles utilizing soy-based seat foams in the summer of 2008. Using soy in polyurethane seat foams lowers the amount of petroleum used for production and reduces the carbon footprint of each vehicle. We worked with suppliers to include 5% of the natural soy material in the seats without impacting performance. We are now working closely with our suppliers to further expand the number of vehicle applications and to increase the level of soy being used in our flexible polyurethanes.

Along with soybeans in seats, Toyota is aggressively developing a North American vision that incorporates all aspects of biorenewable materials in future vehicles. Among other materials, Toyota is investigating expanding the use of PLA, a plastic made entirely from corn, and natural based fabrics for vehicle interiors. PLA is currently being used in very few automotive components, but is used in many disposable goods such as drink cups and food packaging. Toyota will continue to evaluate materials from renewable resources in order to introduce additional environmentally preferable parts in our vehicles. (Target 6.1)

WASTE REDUCTION AND RECYCLING IN OUR OPERATIONS

We work to reduce waste and increase recycling across our operations. Below, we describe our progress against targets in these areas.

Manufacturing

The 5Rs — refine, reduce, reuse, recycle and recover energy — have been the key to waste reduction efforts in our manufacturing plants. We have reduced nonsaleable waste (nonhazardous waste plus materials Toyota pays to have recycled) to just under 22 kilograms per vehicle. In the second year of our Five-Year Action Plan, we have already exceeded our target of reducing this waste to 30 kilograms per vehicle. (Target 7.1)  We will continue efforts to further reduce this waste (please see Figure L). In addition, our plants in North America have maintained near-zero waste to landfill (defined as a 95% or greater reduction in waste to landfill from 1999 levels). (Target 7.2)

Our plant in Indiana has implemented a number of waste management kaizens, including:

• Sending wastewater treatment sludge to a cement kiln in Cape Girardeau, Missouri, to be used as material replacement in the cement. This practice diverts 768 tons per year of waste from incineration.
• Recycling polyester tube wipes from the paint shops that are not heavily used. The tube wipes are used on the sealer line in the plant's paint shops. This practice reduces the plant's nonhazardous waste by 700 pounds per month.

In addition, the cafeteria at our Fremont, California, plant replaced plastic tableware with tableware made from potato starch, a biodegradable material. Many of the plates and bowls are also made of biodegradable bagasse (a fibrous starch from sugar cane).

Canadian Assembly Plant Implements Numerous Waste Reduction Kaizens

Our assembly plant in Cambridge, Ontario, has reduced waste by re-thinking processes and working with suppliers to use returnable service part packaging. For example, we replaced the type of fuel tank installed in vehicles at the plant, which formerly required painting before installation. With the switch, the fuel tanks no longer need to be painted, eliminating 35,000 kilograms of paint-related waste each year. The plant also installed LED screens to replace printed instructions, eliminating 25,000 kilograms of waste paper each year from the paint shop.

In addition, process waste from the injection mold machines is ground up and reused. The molds are replaced and repaired offline. This reduces the amount of waste scrap generated during repairs. These efforts have reduced plastic waste by more than 15,000 kilograms each year.

The plant has also worked with more than 250 suppliers to expand the amount of returnable packaging used for supplies and parts delivered to the plant. Now 99% of North American-sourced part numbers are delivered in returnable packaging, reducing wood pallet waste by 86% and cardboard waste by 63% from 1999 levels. Bumper service parts were added to the program in January 2008, which will eliminate 104,000 cardboard boxes and 24,500 skids each year at the plant.

Because of these efforts, along with initiatives to reduce energy and air emissions, the assembly plant won a Canadian Council Ministry of Environment Pollution Prevention Award in 2007. The plant was selected for the award by a panel of representatives from government, industry and environmental nongovernment organizations for finding and implementing innovative ways to safeguard the environment. Also, the assembly plant was listed as one of "Canada's Most Earth Friendly Employers" by the editors of "Canada's Top 100 Employers." Toyota is one of the top 100 employers in Canada that has been successful at integrating environmental values as part of its culture.

Nonproduction Facilities

At our nonproduction facilities, including our design centers and our manufacturing headquarters campus, we are working toward our target of zero waste to landfill. (Target 7.3)  At our manufacturing headquarters in Erlanger, Kentucky, employees worked with a vendor to recycle more than 10,000 pounds of electronic waste, including phones, laptops, monitors and printers.

Our powertrain evaluation and tuning facility in Gardena, California, won a Waste Reduction Awards Program (WRAP) award in 2007 from the California Integrated Waste Management Board for their waste reduction efforts. The facility achieved a recycling rate of 82% — a 10% improvement from the previous year, and prevented over 300,000 pounds of materials from going into landfill.

Sales and Logistics

Toyota's sales and logistics division is responsible for transporting parts and vehicles across North America. In addition to the greenhouse gas impacts of shipping by rail and truck (discussed in the Energy and Climate Change chapter), our logistics operations also generate waste. Two of the largest waste streams from these operations are packaging and cafeteria waste. As we ship increasing numbers of parts and vehicles each year, we manage our environmental impacts by setting targets to reduce the amount of waste we generate, reduce waste that we send to landfills, and increase our recycling rate. In the U.S. , our sales and logistics division recycled over 89% of all waste generated in FY2008. Eight of our U.S. locations are zero waste to landfill facilities, diverting 100% of their waste from landfills.

We also look for ways to promote recycling in our communities. For the past few years, several Toyota locations have organized “E-Waste Roundups” on Earth Day for Toyota employees to bring electronic waste from home to be recycled. These roundups give the materials a second useful life, and also keep toxic materials out of landfills.

Recently, these roundups have been combined with efforts to collect clothing and eyeglasses. During this year's events, almost 6,000 pounds (2,800 kilograms) of clothes, eyeglasses, batteries, cell phones and other electronic equipment were collected at the Canadian headquarters in Toronto, Ontario, while over 45,000 pounds of consumer electronics were rounded up at the Torrance, California, headquarters facility.

Sales Offices

Toyota's U.S. sales division headquarters focuses on kaizens that reduce the overall amount of waste produced and increase the recycling rate of the remaining waste. In FY2008, the U.S. sales headquarters campus exceeded its target of recycling 65% of its waste, by recycling 75%. (Target 7.4)  The campus was able to maintain zero waste to landfill.

Toyota's Canadian main sales campus has a target to divert 95% of its waste from landfill by FY2010. We diverted 91% of our waste in 2007, and anticipate achieving the diversion target by FY2010. (Target 7.5)  In addition, we are expanding our waste diversion efforts to our parts distribution centers. Our Toronto facility, for example, now has a composting program and our Vancouver facility recently began recycling wax paper.

At our Canadian sales headquarters, we also have a target to reduce paper consumption by 25% per person by FY2010 from a baseline year of 2004. With the help of the Smart Print Solution, as well as increased awareness and training, we have achieved our target ahead of schedule and reduced our paper consumption 28% since 2004. (Target 7.6)  The Smart Print Solution controls excessive paper consumption. Training has also encouraged employees to reduce toner consumption through a variety of software and hardware options. This program has been implemented in all office areas at our Canadian headquarters.

Parts Distribution

Our parts logistics operation has been growing as we distribute an increasing number of parts across North America each year. We are managing our impact on the environment from this activity, partly by reducing the amount of waste we send to landfill. In the U.S. , we set a target to reduce nonregulated waste sent to landfill by 33% by FY2011, from a FY2006 baseline. In FY2008, the parts centers exceeded this target. (Target 7.7)

One of the largest components of nonregulated waste sent to landfills is lunchroom waste. In 2007, the parts distribution center (PDC) in Portland, Oregon, implemented a composting program. The city of Portland provided the facility with signage for compost areas, a list of vendors to purchase supplies from, and information about the Cedar Grove Composting Facility. The parts center now uses four 65 gallon compost roller cans and two 25 gallon compost lunchroom cans. BioBags, which decompose in a controlled composting environment in 10-to-45 days, are used as liners in the lunchroom compost cans. Over 1,000 pounds of lunchroom waste have been diverted from landfill since the program's inception.

Parts Packaging

Toyota's parts operation uses over 30,000 reusable metal shipping containers in place of cardboard and wood pallets. Returnables are used between the centralized parts center and the PDCs, between the PDCs and dealers for dedicated deliveries, between suppliers and the parts center, and between the parts center and vehicle distribution centers. The metal shipping containers are returned to the nearest PDC and reused. These returnables are also used increasingly for shipments between the U.S. and Canada . Recently, Toyota began using returnable containers to ship Sequoia and Corolla floor mats. Material savings from the Corolla alone add up to 22,275 pounds of corrugated cardboard and 31,500 pounds of wood. In FY2008, the returnable container program saved 13.9 million pounds of wood, 4.4 million pounds of cardboard and $13.5 million.

In addition, Toyota has improved packaging on a number of products to reduce the overall amount of materials needed to ship Toyota parts. For example, we have continued to improve the packaging configuration for the FJ Cruiser roof rack. First, we went from packing one roof rack per container to packing two. Now, we package them disassembled. These efforts combined cut the packaging size in half and save almost 81,000 pounds of corrugated cardboard and 57,000 pounds of wood. In the process, we also avoid shipping 15 inbound trailer loads and six outbound trailer loads to Mexico . In addition to reducing the amount of waste generated, greenhouse gas emissions associated with transporting these parts also decreased by almost 78 metric tons.

Vehicle Distribution

Our vehicle distribution centers (VDCs) in the U.S. have a target of recycling 90% of their waste by FY2011. In FY2008, we achieved this target. (Target 7.8)  Our target now is to maintain this recycling rate. In addition, our VDCs have a target disposal rate of 0.25 pounds or less per vehicle processed. Our VDC in Fremont, California, built a new production shop and renovated the existing facility. Of the 2,841 tons of material generated during this project, less than 1% was sent to a landfill. The Fremont facility won California's 2007 Waste Reduction Awards Program (WRAP) award for its waste management practices.

WATER CONSUMPTION IN OUR OPERATIONS

Maintaining a clean supply of drinking water is becoming an increasingly difficult challenge. A growing number of experts agree that water shortages are going to be more frequent in the next 10-20 years, especially in the western portion of the U.S. , unless we begin to take action now. At Toyota, we are taking steps to conserving water across our operations in North America. Below, we describe our progress against targets in this area.

Manufacturing

We look for opportunities to reduce water usage and reuse water in our manufacturing processes. We conducted a kaizen “water blitz” this past year at four of our plants. The blitz focused on finding improvements in system efficiencies of utility systems and identifying other operational kaizens that reduce water consumption. We are also piloting water reduction projects at two of our plants.

Our water use per vehicle produced was adversely affected this year because production volumes decreased while the amount of water consumed remained fixed. Water consumption remained fixed partly due to a summer drought that contributed to higher evaporation rates in the cooling towers. We are still exceeding our target of reducing water use at our North American manufacturing plants to 0.98 kilogallons per vehicle, by FY2011 (please see Figure M below). (Target 8.1)  We are evaluating our water target based on production projections at current plants, and at new plants and expansions that will be completed during the FY2011 Action Plan.

Reducing Demand on Local Water Supplies in Texas

Our assembly plant in San Antonio, Texas, was designed with a high-tech water filtration system that allows for 100% utilization of recycled water for its production line and 95% utilization for its overall operations. This utilization reduces the plant's demand for potable water from the local system by almost 292 million gallons each year, reducing the impact of plant operations on the community. Our plant in Texas won a Water Saver Award from the San Antonio Water System.

Redesigning Our Processes in West Virginia to Reduce Water Consumption

Periodically, our plant in West Virginia performs stress tests on engines. During these tests, engines are heated and then rapidly cooled by flooding them with cold water. The water is subsequently treated and discharged. The plant is in the process of implementing a kaizen to replace this system with a recirculating water cooling system that would allow the water to be reused. Once implemented, the new system will reduce the water used by the tests by more than 99% and save 1.3 million gallons of water each year. Furthermore, this improvement will reduce the volume to the wastewater treatment plant by 8,000 gallons for each day of the engine stress tests.

Sales and Logistics

While water consumption is not our most significant environmental impact, we are starting to measure it and find ways to reduce it. In FY2008, we completed our evaluation of water consumption at all U.S. sales offices and logistics sites. (Target 8.2)  We will establish a baseline and subsequent water reduction target during FY2009. In the meantime, individual facilities are working to reduce their water consumption and encouraging their employees to do the same. The San Francisco Parts Distribution Center partnered with the East Bay Municipal Water District to install water spout limiters on facility restroom and breakroom faucets. The Water District also donated two low flow filters for each Parts Center employee to install in their homes. Each filter reduces water flow from approximately 2.5 gallons per minute to one-half gallon per minute.

Our Canadian facilities are on track to meet our target to reduce water consumption by 10% by 2010, from a baseline of 2004. (Target 8.3)  Irrigation of the grounds is the most significant contributor to water consumption. In 2006 we installed new moisture sensors, and in 2007 reconfigured all of the watering zones and replaced the sprinkler heads with more efficient units. As a result of the work done on the system in 2006 and 2007, we anticipate a reduction in water consumption in 2008.

LOOKING AHEAD

Over the next three years, one of our biggest challenges to meeting our action plan targets is to find ways to manage our water consumption, even as we expand our facilities.