Strategy

ENVIRONMENTAL SUSTAINABILITY STRATEGY

In 2015, the company announced the Toyota Environmental Challenge 2050 (Challenge 2050) – a set of six visionary challenges that seek to make a game-changing contribution to some of the critical environmental issues facing the world today, including climate change, water scarcity, resource depletion, and species and habitat loss. Challenge 2050 was developed by Toyota Motor Corporation and applies to all Toyota affiliates globally.

Through Challenge 2050, team members across the company, in every region of the world, are working to put Toyota’s global vision of Respect for the Planet into action. Challenge 2050 unites us all with a common purpose – to be more than just good stewards of the environment and to create positive changes beyond our facility boundaries.

Within Toyota Motor North America (TMNA), we developed a regional environmental sustainability strategy to align Toyota’s global vision and Challenge 2050 with our regional focus areas – Carbon, Water, Materials and Biodiversity. These focus areas in turn provide the framework for our five-year environmental action plans.

In each focus area, we are working towards minimizing environmental impacts and, through outreach activities, towards a net positive impact on society and the planet. To further elaborate on our strategy for achieving Challenge 2050, we issued position statements in 2018. These statements were updated in December 2019 and represent our regional roadmap for attaining sustainable development by 2050.

PRIORITY ISSUES

Our parent company, Toyota Motor Corporation (TMC), conducted a global "environmental materiality analysis"¹ as part of developing the Toyota Environmental Challenge 2050. TMC evaluated global trends, risks and opportunities, including the United Nations (UN) 2030 Agenda and the 17 Sustainable Development Goals (SDGs), and identified the following serious environmental issues facing society and the planet: extreme weather phenomena attributed to greenhouse gas emissions, aggravated air pollution in cities, water shortages due to population growth, resource depletion, ecosystem fragmentation, and biodiversity loss. TMC then evaluated the importance of these issues to Toyota and external stakeholders. As a result of this process, TMC identified six material environmental issues:

CO₂ emissions from new vehicles
CO₂ emissions from vehicle manufacturing
CO₂ emissions from upstream activities and end-of-life treatment of vehicles
Water stewardship
Materials management
Biodiversity protection

TMC addresses these six issues in the Toyota Environmental Challenge 2050.

TMNA's process in North America followed a similar path. Our identification of environmental priority issues aligns with TMC’s but consolidates the three CO₂ emissions challenges into a single issue we call "Carbon." We also call out the importance of outreach: sharing our know-how to achieve a net positive impact by 2050. The priority environmental issues in North America are our four focus areas – Carbon, Water, Materials and Biodiversity – as well as Outreach.

We continue to manage other environmental issues, including air quality and green building, and remain dedicated to compliance with all applicable environmental laws and regulations. See "Performance" for information on our activities and progress in these areas.

See the feature story "Contributing to the UN Sustainable Development Goals" for information on how Toyota's environmental sustainability activities are supporting the UN's 2030 Agenda and SDGs.

PRIORITY ENVIRONMENTAL ISSUES FOR TMNA (MATERIALITY)

¹Materiality, as used in the context of this report and our materiality review process, is different than the term as used and defined in the federal securities laws. For purposes of this report, TMNA uses the Global Reporting Initiative (GRI) definition of materiality, which is based on two dimensions: (1) the significance of the organization's economic, environmental and social impacts (both positive and negative), and (2) their substantive influence on the assessments and decisions of stakeholders (GRI Standard 101: Foundation, 2016). Thus, issues deemed material for purposes of this report, and for purposes of determining our environmental sustainability strategies, may not be considered material for purposes of federal securities laws.

TARGETS

TMNA's Sixth Environmental Action Plan (EAP) for fiscal years 2017 to 2021 put us on a path to achieving the Toyota Environmental Challenge 2050 (Challenge 2050). The final results for the Sixth EAP targets are provided below.

TMNA Environmental Action Plan, FY2017-2021

FY2021 Target	Status	FY2021 PROGRESS & FINAL RESULTS
CARBON
Foster accelerated adoption of electrified vehicles		Supported the company’s global commitment to offer an electrified version of Toyota and Lexus vehicles by 2025. In addition to the electrified vehicles highlighted in previous reports, in FY2021, we introduced the Lexus NX 450h+ PHEV. Announced an all-electric concept vehicle: Toyota bZ4X SUV Concept. Issued a 6th Green Bond to fund the acquisition of new retail installment contracts and operating lease contracts financing certain Toyota and Lexus hybrid electric vehicles. Actively participated in industry groups that promote the development and deployment of hydrogen applications and fuel cell electric vehicles. Continued partnerships with Shell, FirstElement Fuels, and others to expand hydrogen fueling infrastructure.
Reduce absolute GHG emissions from North American operations 15%		Reduced absolute CO₂ emissions by 22% compared to the FY2016 baseline. Installed additional on-site solar and announced a virtual power purchase agreement that together are expected to reduce annual CO₂ emissions from North American operations by 76,000 MT.
Reduce GHG emissions intensity from logistics 5%		Reduced GHG intensity from owned and third-party U.S. parts and vehicle logistics by 6% compared to the FY2016 baseline. Began operating 10 zero-emissions Kenworth/Toyota fuel cell electric heavy-duty trucks at the Ports of Los Angeles and Long Beach.
WATER
Prioritize and implement water stewardship plans for facilities in water-stressed areas		Mapped North American sites with updated version of Aqueduct^™ and prioritized two sites for developing water stewardship plans. We began developing the plans during fiscal year 2022.
MATERIALS
Reduce the use of packaging materials		Continued to expand the use of returnable shipping containers for service parts and accessories. Between 2017-2020, this program has saved 65.1 million pounds of cardboard and 171.6 million pounds of wood.
BIODIVERSITY
Participate in regional biodiversity activities that support wildlife corridor(s)		Toyota has 17 sites with gardens that support monarch butterflies and other pollinators. These gardens provide food and shelter and are located along the monarch's migration path. TMNA partnered with Suppliers Partnership for the Environment to launch the Pollinator Project Challenge. Participating companies, including auto manufacturers and suppliers, have planted 206 pollinator gardens
Target Achieved Target Partially Achieved Target Missed

LOOKING AHEAD

The Toyota Environmental Challenge 2050 is guiding our efforts to build a better, smarter, more sustainable future. We break the Challenge 2050 vision down into incremental, five-year environmental action plans (EAPs). This is how the company is working to drive change – step by step to help achieve carbon neutrality and a net positive environmental impact at a global level.

This report marks the end of TMNA's Sixth EAP and the start of the Seventh EAP. The Seventh EAP runs from fiscal years 2022 to 2026. Our targets address greenhouse gas emissions, water use, plastics reduction, and habitat restoration. Click here for more information about TMNA’s Seventh EAP, including a complete list of targets.

ENVIRONMENTAL SUSTAINABILITY GOVERNANCE

TMNA's Sustainability and Regulatory Affairs (SRA) division handles Product Environmental and Safety Regulation, Energy and Climate Research, Environmental Sustainability, Enterprise Chemical Management, and Engine Certification and Compliance.² The Environmental Sustainability (ES) group of SRA is responsible for developing short-, medium- and long-term sustainability strategies for TMNA, including planning and target setting in alignment with the Toyota Environmental Challenge 2050, which includes developing consolidated five-year environmental action plan goals and targets. ES is also responsible for developing the annual North American Environmental Report. ES reports progress on these activities to the North American Executive Committee (NAEC).

ES facilitates an Environmental Sustainability Directors Committee and Working Group as coordinating mechanisms for TMNA. Both are comprised of environmental experts and representatives from various divisions:

Sustainability and Regulatory Affairs
Research and Development
Procurement
Corporate Communications
Compliance and Audit
Logistics
Enterprise Strategy
Real Estate Property Services
Environmental & Facilities
Legal
Toyota Canada Inc. (TCI)
Parts Supply Chain Operations
Manufacturing Engineering Division

Representatives from these divisions also participate in focus groups that concentrate on specific environmental issues, such as water or biodiversity. These focus groups report to the Environmental Sustainability Working Group and help implement environmental action plan targets, perform benchmarking and data gathering activities, and raise awareness among team members and external stakeholders.

²Separately, TMNA's Environmental & Facilities (E&F) division handles facility environmental and safety regulatory compliance.

ENVIRONMENTAL SUSTAINBILITY GOVERNANCE IN NORTH AMERICA

CARBON