Materiality

Management of sustainability

Materiality

Komatsu positions the resolution of social issues through business activities as our fundamental stance under the Sustainability Policy.
We have identified 18 items across six areas as the important issues, or materialities, that Komatsu should address.

Background to materiality identification

Komatsu positions the creation of new customer value, based on our purpose, as the foundation for generating a positive cycle of solving social issues and improving profitability. This approach serves as the core concept of the Strategic Growth Plan to achieve sustainable growth. In 2024, in conjunction with the formulation of the current Strategic Growth Plan, we reviewed the materialities that our company should address.

The review adopted the concept of double materiality, which evaluates both financial impact and social and environmental impact. Komatsu analyzed both business impact and social and environmental impact. We incorporated these items in the priority initiatives of the Strategic Growth Plan.

Going forward, Komatsu will undertake regular materiality analyses and reflect the identified sustainability-related business risks and opportunities in management initiatives to respond flexibly to changes in the operating and management environment.

Process of revising materialities

Komatsu reviewed its materialities through the following process, with third-party support from Business for Social Responsibility (BSR), a U.S.-based nonprofit organization.

1) Identification of sustainability issues

We compiled a list of 39 items based on previous materiality assessments, international goals and standards, reporting frameworks, management philosophy and strategies, and issues considered important by stakeholders.

2) Evaluation of issues based on double materiality

We interviewed 26 internal and external stakeholders regarding the identified sustainability issues. Drawing on qualitative insights from these interviews, our public disclosures, and publicly available risk information, we evaluated and mapped each issue from both social and environmental perspectives and business perspectives, assessing each in terms of its potential impact and likelihood.

3) Identification of materialities

Based on the evaluation outcomes, we identified 18 materialities with a particularly large impact across six areas: employees, human rights, customers, ethics and governance, communities, and the environment.

4) Board of Directors’ approval of the Strategic Growth Plan, including materiality

We confirmed the alignment of the identified materialities with our Sustainability Policy and the SDGs. The Board of Directors then approved these items and incorporated them into the Strategic Growth Plan as key issues to address in pursuit of sustainable growth through a positive cycle of solving social issues and improving profitability.

We also established key performance indicators (KPIs) to measure the progress and results of initiatives aimed at solving social issues for each materiality. We will disclose progress on these KPIs in the Komatsu Report.

External: Institutional investors, the United Nations Development Programme, environmental organizations (Global Environmental Forum), customers, suppliers, and others
Internal: Officers (Directors and Executive Officers, including Global Officers)

Importance assessment mapping

Materiality map

Specific challenges

●Employees	❶Occupational safety and health, well-being ❷Talent acquisition, skills development, retention ❸Fair labor practices ❹D&I
●Human rights	❺Respect for human rights
●Customers	❻Customer value creation through workplace optimization ❼Product safety and quality ❽Value chain continuity ❾AI and DX ❿Business strategy to ensure competitive edge and profitability
●Ethics and governance	⓫Privacy and data protection, cybersecurity ⓬Governance aligned with business changes ⓭Compliance
●Communities	⓮Contribution to local communities
●Environment	⓯Climate change ⓰Resource circulation ⓱Nature positive ⓲Preserving forests through business activities

komatsu csr, DFF Inc.

Risks and opportunities for identified materialities

Komatsu identified major risks, opportunities, and policy directions through the materiality assessment process. We reflected these items in the development of priority initiatives under the Strategic Growth Plan.
We established KPIs for these initiatives and disclose progress in the Komatsu Report. Refer to the appropriate page for KPIs for solving social issues.

	Major risks	Major opportunities	Policy direction
Employees	Labor shortages caused by difficulties in talent acquisition and employee outflow Impact on employees from lack of appropriate occupational health and safety and fair labor practices	Improved retention through diverse talent acquisition, utilization, and capability development Improved retention through enhanced occupational health and safety and fair labor conditions	Ensuring talent acquisition through greater recognition and strengthening global talent development Strengthening partnerships and driving innovation through external collaboration Enhancing occupational health and safety and well-being
Human rights	Negative impact on employees and corporate reputation due to child and forced labor Negative impact on employees and corporate reputation due to harassment	Enhanced corporate credibility through proper human rights due diligence	Strengthening human rights due diligence upstream, within Komatsu, and downstream
Customers	Loss of trust from customers and society due to insufficient product safety or quality Supply chain instability caused by political, economic, or natural disruptions Risk of failing to contribute to customers due to changes in technology or market conditions	Minimizing the impact of changes in the external environment and continuing to provide a stable supply to customers Improving productivity and efficiency through AI utilization and digital transformation (DX)	Providing solutions that optimize customer construction and fleet management Providing solution-integrated products equipped with automation and other advanced technologies Ensuring business continuity and expanding cross-sourcing and multi-sourcing Enhancing productivity and creating value through AI and DX across all areas
Ethics and governance	Legal issues and reputational damage resulting from lack of corporate ethics Loss of trust from customers and society due to inadequate data management or cybersecurity	Greater business opportunities through enhanced governance that matches the globalization and diversification of business	Ensuring appropriate privacy and data protection and cybersecurity Enhancing governance in response to changes in business
Communities	Legal violations and damage to corporate reputation caused by infringement of the rights of local communities and indigenous peoples	Building trust and ensuring business continuity through charitable and volunteer activities in local communities	Respecting the rights of local communities and indigenous peoples at all business sites Active contributions to local communities, including disaster recovery support
Environment	Increased costs and damage to corporate reputation resulting from insufficient action on climate change Loss of business opportunities due to failure to meet customer demand for low-carbon products	Maintaining competitiveness and enhancing social reputation by meeting customer expectations for low-carbon products Contributing to forest conservation and establishing new business pillars through more efficient forestry operations using forestry machinery	Developing business models for low-carbon products and solutions Expanding the forestry machinery and reman businesses