025 gloria blue nega

Management of sustainability

Materiality analysis

Materiality analysis

Materiality analysis

In recent years, our external environment has undergone intense change and there is more and more uncertainty. We need to enhance our foundation for sustainable growth, taking trends like digital transformation, carbon neutrality as well as diversity and inclusion as business opportunities, and to resolve social challenges through our business activities.

In recognition of these issues, we reviewed the materiality from November 2020 to February 2021, before the development of our current mid-term management plan, to strengthen our ability to respond to changes in the external environment and business risks.
In order to create a positive cycle of ESG issue resolution and earnings improvements in accordance with the growth strategy in the mid-term management plan, we will also reflect our materiality initiatives into our growth strategies.

Komatsu's procedure to identify material issues

In the process of developing the materiality, we took the following steps with support from a third party, namely, Business for Social Responsibility (BSR), a US non-profit.

1.Identification of sustainability issues

We identified 46 sustainability issues that have a significant impact on corporate value creation and business performance in the medium to long term using past materiality analysis, international targets and standards, reporting frameworks, management philosophy and strategy, key stakeholder issues, and so on.

2.Evaluation of issue items

We interviewed internal and external stakeholders regarding the sustainability issues identified and evaluated and mapped them from two perspectives: business importance and impact on sustainability (importance to stakeholders + environmental, social, and economic impact).

  • External interviews : institutional investors, WBCSD, environmental organization (WWF), human rights NPO (BHRRC), customers, and suppliers.
  • Internal interviews : worldwide executives (directors, executive officers including global officers).

3.Identification of materiality

From this analysis, we selected areas of particular significance to both business importance and impact on sustainability. We subsequently identified the following six areas of materiality: [Employees], [Human rights], [Customers], [Ethics/Governance], [Communities], and [Environment].

Materiality
[Employees]
  • Occupational safety and health and wellbeing
  • Employee engagement and job satisfaction
  • Diversity and Inclusion
  • Skills development and workplace retention
[Human rights]
  • Respect for human rights
[Customers]
  • Provision of solutions
  • Product safety and quality
[Ethics / Governance]
  • Governance
  • Compliance
[Communities]
  • Contributions to local communities
[Environment]
  • Development of low-carbon/low-emissions products, solutions and business models
  • Resource recycling and remanufacturing
  • Reduction of energy usage and GHG emissions
  • Forest conservation through business activities

Additionally, we have identified [Environment], [Customers], [Employees] and [Ethics/Governance] as our priority issues given their business importance and high impact on sustainability. To create a virtuous cycle of profit improvement and ESG issue resolution, we reflect the activities of these four areas in our growth strategy.

4.Relationship between materiality, sustainability policy, and the SDGs

We will continue to contribute to society through our business activities per our sustainability policy established in 2021.
In identifying materiality, in addition to consistency with the sustainability policy, we have also verified consistency with the Sustainable Development Goals (SDGs), and have selected 10 goals from the 17 SDGs that are particularly relevant to Komatsu Group's materiality.

Sustainability policy Relationship with SDGs Materiality
With people
  • Gender equality
  • Decent work and economic growth
  • Reduced inequalities
  • Partnerships for the goals

[Employees] [Human rights]

  • Diversity and Inclusion
  • Skills development and workplace retention
  • Employee engagement and job satisfaction
  • Occupational safety and health and wellbeing
  • Respect for human rights
With business
  • Industry, innovation and infrastructure
  • Sustainable cities and communities
  • Responsible consumption and production
  • Partnerships for the goals

[Customers][Ethics / Governance]
[Communities]

  • Provision of solutions
  • Product safety and quality
  • Governance
  • Compliance
  • Contributions to local communities
With the Planet
  • Affordable and clean energy
  • Industry, innovation and infrastructure
  • Responsible consumption and production
  • Climate action
  • Life on land
  • Partnerships for the goals

[Environment]

  • Development of low-carbon/low-emissions products, solutions and business models
  • Resource recycling and remanufacturing
  • Forest conservation through business activities
  • Reduction of energy usage and GHG emissions

5. Resolution by the Board of Directors as a mid-term management plan

The above materiality was reviewed for consistency with our sustainability policy and the SDGs. The Board of Directors then resolved to address materiality through growth strategies in order to create a positive cycle of resolving ESG issues and improving earnings.

In order to ensure to resolve ESG issues steadily through our growth strategies, we have set KPIs for key initiative activities and monitored their achievement. The progresses of these activities is disclosed in the Komatsu Report (Integrated report).

Furthermore, to respond flexibly to changes in the business and management environment, we will continue to regularly conduct materiality analysis regularly (at least once every three years) to reflect company-wide business risks and opportunities n our management.

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