Komatsu formulated its CSR themes in 2010, placing CSR activities as the ones to respond to social needs through core business, upon much discussion on defining initiatives that would both be of value to society and to Komatsu.
Also, in the Mid-Term Management Plan announced in April 2019, we touch upon the growth strategy in our core business in relation with our CSR themes, and are striving for sustainable growth through a positive cycle of improving earnings and solving ESG issues.
In addition, even in social contribution activities that do not aim at direct profitability, we strive to contribute to society in a way that draws on the strengths of our core business through initiatives aligned with our CSR themes.

Komatsu's procedure to identify CSR material issues

In 2010, with the support of Business for Social Responsibility (BSR), a nonprofit organization, Komatsu undertook a materiality assessment to accomplish the following objectives:

1. Identify a set of CSR issues and prioritize these issues by their relevance to our business and importance to our stakeholders
2. Define a set of global CSR themes and activities

From an extensive list of CSR issues, we selected those relevant to Komatsu as a construction/mining and industrial equipment manufacturer. We then evaluated CSR issues based on their importance to our business. To understand the relevance of CSR issues to our business, we interviewed senior executives across our company, including the heads of regions outside Japan. These interviews helped us in understanding the degree to which CSR issues impact our business priorities and operations. We then evaluated CSR issues based on their importance to our stakeholders. To understand the relevance of CSR issues to our stakeholders, we reviewed external reports, viewpoints, and public statements published by governments and policy makers, issue experts and advocates, media, suppliers, and customers. We also took into consideration the BSR's view of stakeholder importance.

Evaluating CSR issues

We evaluated CSR issues based on the degree of importance to our business shown on the horizontal axis, and the degree of importance to our stakeholders shown on the vertical axis.

The CSR issues of more importance to both businesses and stakeholders are placed in the top right quadrant. We narrowed our focus to sixteen material issues across six categories. By focusing on these material issues that have the most impact on our business and stakeholders, we believe that we are in a strong position to leverage our core strengths as an equipment manufacturer, and create lasting social impact going forward.

Komatsu's CSR and SDGs (Sustainable Development Goals)

In light of the emphasis on corporate efforts towards ESG (Environmental, Social, Governance), Komatsu announced the Mid-range Management Plan in April 2016 which stated that Komatsu places emphasis on ESG. In incorporating ESG into the Mid-range Management Plan, we re-examine the relationship between Komatsu's business and CSR initiatives, reveal the direction we are currently taking, and how Komatsu's CSR activities link to the SDGs (Sustainable Development Goals) adopted by the United Nations as a common goal aimed at by the international community.

SDG Goals and Selection Process

Based on the discussions, we did a thorough analysis to compare the 17 SDG goals and their accompanying 169 SDG targets with our CSR activities and themes. We evaluated 1) whether there is a relation, and 2) the depth of the relation.

[Table 1: Komatsu's CSR priority areas / Priority activities and SDG goals]

For example, one of our CSR activities is providing products and services that contribute to infrastructure development and improve the quality of life. For each SDG goal and target, we compared our activity:　 For example, for SDG Goal #1, we compared as follows;

<Example 1> SDG Goal #1 (No poverty)

• SDG Target 1.1 (By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day)
  In this instance, we did not see a direct relation.
• SDG Target 1.2 (By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions)
  In this instance, we did not see a direct relation.
• SDG Target 1.5 (By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters), we believe there is an indirect relation, and thus colored the cell light blue to indicate the connection. (Refer to ① in the Table 1)
  In the same manner, we compared as follows;

<Example 2> SDG Goal #9 (Industry Innovation and Infrastructure)

• SDG Target 9.1 (develop quality, reliable, sustainable and resilient infrastructure, including regional and trans- border infrastructure to support economic development and human well-being).
  We colored the cell rich blue because there is a strong relation with our key theme. (Refer to ② in the Table 1)

The same process was followed for all SDG targets and all of Komatsu's CSR activities. On Table 1, the number in the cell represents the SDG target(s) where there is a relation, and the color (dark/medium/light) indicates the depth of the relation (direct or indirect).

According to the team's analysis, five SDG goals have a strong relationship with Komatsu's three CSR Themes. By focusing on these five SDG goals, Komatsu contribute to all the SDG goals comprehensively since it is proved that each SDG goal is mutually intertwined.

The five SDG goals are

Table 2 explains how Komatsu's business and CSR activities contribute to the five SDG goals and targets that have the strongest ties to Komatsu's business.

[Table 2: Co-relation between SDG Goals and Komatsu Business/CSR]

Our next steps are to engage with additional internal and external stakeholders, share this information and follow the Plan-Do-Check-Act method to validate the analysis and establish an action plan.

Following this analysis, we are now reviewing what additional opportunities exist for Komatsu to make an increased contribution to the achievement of the SDGs, focusing on SDGs 8, 9, 11, 13, and 17. We will prioritize opportunities that contribute to the SDGs by creating value for stakeholders and shareholders, and will communicate progress in future Komatsu reports.