１．Support for those obtaining environmental management certifications

We have requested all member companies of the Midori-kai in Japan and China to obtain certifications for environmental management systems (EMS), such as ISO14001 and Eco-Stage, and provided them with instructions and support for obtaining the certifications. In Japan, all 156 member companies have obtained the certifications, and we began to check the renewal status of the certifications in 2018. In China, a total of 60 companies have already obtained the certifications. We encourage Midori-kai companies in U.S., Europe and Thailand to obtain similar certifications, aiming to ensure that 95% of these suppliers (including all manufacturers and excluding trade companies) have been certified by the end of FY2024.

Over ten years have already passed since the Midori-kai members in Japan obtained the certifications. Like in the case of the safety and health activities, it is important to follow-up the status of the certifications in each company's business activities. To realize this, we started environmental audits for the outsourcing companies of the Midori-kai from 2021, and 4 companies were audited by 2022. Through written surveys on compliance with environment-related laws and regulations, etc. and on-site inspections at each company's offices, we will inspect how EMS has taken root on site and link the results to our support for their improvement in the future. Since FY2022, we have expanded check sheet-based voluntary verification to all Midori-kai outsourcing companies in Japan and have held study sessions on environmental laws and regulations. We will continue to increase the number of onsite audits, especially for companies bearing anticipated risks.

Environmental audits

2. Responding to climate change: reducing greenhouse gas emissions in the supply chain

Komatsu has set a mid-term ESG target of 50% reduction in CO₂ emissions in products and production (compared to 2010) by FY2030 and promotes improvement activities. In recent years, we have emphasized the importance of reducing CO₂ emissions in the entire supply chain related to its own business, and worked to reduce CO₂ emissions from manufacturing process of purchased parts and materials, which account for about 10% of indirect CO₂ emissions (Scope 3) other than Scope 1 and 2.
From 2012 to 2016, in response to tight power supply and demand and the steep increase in electricity costs following the Great East Japan Earthquake, we began to roll out activities to reduce the power consumption of 96 Midori-kai companies in Japan by setting a target reduction in electricity consumption of at least 15% compared to 2010. Despite comparative obstacles due to large fluctuations in production volumes and new capital investments, we almost achieved our target by the end of FY2016. As a result of the expansion of these activities across all our suppliers, some suppliers won the ECCJ Energy Conservation Grand Prize Award. Since 2017, we have worked to maintain and improve the level of reduction through independent improvements at each company. Since FY2019, we have also been providing concrete support for the reduction of CO₂ emissions in all kinds of energy use, including electricity, heavy oil, and gas, targeting the top ten highest-emitting casting, forging, and heat treatment companies. From FY2023, we have requested that all of 156 Midori-kai companies set mid- and long-term reduction targets in accordance with the SBT and implement tangible improvement activities. In particular, for 93 Midori-kai companies that serve as sub-contracted suppliers, we have set a common target of reducing CO₂ emissions by 20% from the FY2022 level on a basic unit basis by FY2030 and have begun CO₂ emissions reduction activities. With the start of activities in FY2022, we introduced our latest case studies of improvements. We will continue to promote CO₂ reduction through technical exchange meetings and other activities in which our improvement promotion division and the Midori-kai committee collaborate. Progress of each activity is monitored through periodic CO₂ emissions surveys and SAQ questionnaires.

Changes in electric power consumption
(Midori-kai 93 companies)

Independent practitioner's assurance

Change in CO₂ emissions
(Midori-kai 93 companies)

Independent practitioner's assurance

3. Addressing water risks

We are inspecting 135 offices of 96 Midori-kai members in Japan to understand their general water risks, including the above-mentioned flood and tsunami risks, location environments, potential and actual water intake/discharge capacities, water quality, and how they address these issues. We also use Aqueduct in these analyses.
In response to these investigations, we have been conducting activities to reduce water consumption since FY2017. In these activities, the top ten companies in the consumption of clean water are considered to be model companies and we present Komatsu improvement examples and provide guidance on improvement through on-site visits, with a target of 15% reduction of water consumption by FY2021. In FY2018, the target was achieved. Since then, we have voluntarily stayed aware of the amount of water used and have extended the activities to other Midori-kai companies through the distribution of improvement examples from Komatsu and ten other companies. We have also conducted environmental audits and confirmed compliance with the Water Pollution Control Act and other water-related laws and regulations since FY2020.

Changes in clean water consumption by the top 10 largest water users in the Midori-kai

4. Responding to environmental regulations in China

The basic goal of the environmental regulations in China is the elimination of three things: exhaust gases, discharged water, and solid waste. However, when operating under those regulations, the regulations and standards set forth by each local government have priority. Regarding discharged water from plants, to address the aggravated water pollution in rivers and lakes, the standards for BOD/COD (Biochemical Oxygen Demand/Chemical Oxygen Demand), which are indexes of amounts of organic substances in discharged water, are especially strict when compared to the country-wide standards in Japan, and there is an increasing number of cases where centralized water treatment systems for discharged water, etc. need to be installed.
Komatsu checks the regulatory compliance status of the Midori-kai members in China on a regular basis.

In addition, in China, extremely tough environmental regulations were imposed in 2015, mainly in the coastal areas, aiming to improve air pollution issues (PM2.5) drastically. As a result, companies engaging in businesses such as painting, welding, casting and plating are required to take thorough measures to reduce exhaust air, smoke and soot (including VOCs). Working together with member companies of the Midori-kai in China, we provide support for complying with the regulations, including the installation of facilities. As a result of measures taken by the companies, 18 companies had been certified as exempt from the regulations (as green companies) as of March 31, 2022. We will continue to work with each company to reduce risks to our business continuity.
 

5. Dealing with biodiversity

In 2011, Komatsu established “the Declaration of Biodiversity by Komatsu”, a declaration that we will work for the reduction of environmental impact through our business activities and for the conservation of biodiversity through our social contribution activities. Receiving support for our policies from Midori-kai members in Japan and other countries, we are conducting community contribution activities in cooperation with them, such as environmental conservation. We have also provided educational programs and encouraged the companies to implement their own endeavors in accordance with their unique situations and geographical locations since FY2021. We request each company to report on the details of their efforts annually.

Support for construction and environmental conservation of the Yusen-ji copper mine in Komatsu City, Ishikawa prefecture