Chairman Dialogue

Takeshi Uchiyamada Chairman, Toyota Motor Corporation x Mizue Unno Managing Director, So-Tech Consulting Inc.

Toyota's Approaches to the Creation of a Sustainable Value with Regard to Cars, Local Communities, and Management

Takeshi Uchiyamada Chairman, Toyota Motor Corporation x Mizue Unno Managing Director, So-Tech Consulting Inc.

By carrying out the Toyota Global Vision, Toyota aims to be a company that remains a necessary presence in future society. Toyota invited Ms. Mizue Unno to discuss what kind of company Toyota seeks to become with Chairman Uchiyamada, who became the chairman of the CSR Committee in June FY2013.

What Kind of Company Do We Want to Be? The Answer Is in the Toyota Global Vision

Uchiyamada: Our founder Sakichi Toyoda saw his mother working nights weaving cloth and invented the automatic loom to make her life easier. It was the long-held wish of Kiichiro Toyoda, who launched the automotive business, that cars be manufactured by Japanese people. Since its foundation, Toyota's entrepreneurial spirit has long been based on the strong desire to serve and make positive contributions to people and the country, rather than on financial goals. When I was in junior high school, I decided that I wanted to work for a car company because I dreamed of seeing families driving around town in cars that I created. This dream was fulfilled long after I started working for Toyota. I had very nearly forgotten it when I was put in charge of development of the Prius. This was my first and last chance, and some people questioned whether it was practical to appoint a person with no experience as a car development chief engineer. Unno: It was my impression that the hybrid was developed by experts in car planning and development.

Unno: It was my impression that the hybrid was developed by experts in car planning and development.

Takeshi Uchiyamada Chairman, Toyota Motor Corporation

Uchiyamada: When I asked my supervisor why I had been appointed, I was told that the missions of the project were to create a "vehicle for the 21st century" and to change development techniques, and also that I was the right person for the job because I was not familiar with prior development methods. Later, global business expanded and the company enjoyed solid growth, but we were affected by the repercussions of the Lehman Brothers bankruptcy and a series of recall-related issues in North America that shook customer trust and confidence. We asked ourselves what we can do to restore Toyota, unify all global team members, and make a fresh start. It was based on this concept that we adopted the Toyota Global Vision under the leadership of a foreign officer from North America.

In the Global Vision, we answer the question "What kind of company do we want Toyota to be?" by pursuing three objectives: Always Better Cars, Enriching the Lives of Communities, and a Stable Base of Business. "We will not become a company that pursues numerical targets." "We will make always better cars." We decided to become this kind of company through the efforts of all employees. Make better cars, receive heart-felt gratitude from customers and local communities, use that feedback to solidify our management foundations, and make the next better car. this is the goal of the Toyota Global Vision, and pursuing this is our mission. As it turns out, we announced the new vision internally just two days before the Great East Japan Earthquake. I felt that the vision served as a basis for employee thinking as we fought desperately to achieve recovery and revitalization from the disaster.

To Be Rewarded by the Smiles of Customers -Starting from Making "Always Better Cars"

Unno: What measures have you taken to penetrate the Vision and put it into practice globally?

Uchiyamada: The driving force is "always better cars." Since he was appointed, President Akio Toyoda has been continuously telling us that we need to "make better cars." What he means is that making better cars is not an issue that concerns just development and design, but all employees. including those in production, purchasing, sales, management, and advertising.should think about what they can do to contribute to making better cars. When we ask "what is a better car?", however, this is a difficult question to answer. Everyone's opinion is different. To address this issue, we created four major categories: cars specialized to meet tastes and sensibilities of customers (such as sports cars); mass production vehicles; vehicles with a social purpose (such as ambulances and firefighting vehicles); and next-generation vehicles. Our idea of "better cars" is vehicles that enthrall customers and spur their desire to own them. The pursuit of always better cars, requires one to think without limit.

Unno: The result is being rewarded with the smiles of customers, as indicated in the Toyota Global Vision. Toyota has adopted development structures on a country and regional basis in order to adequately respond to each requirement and demand. This also must be an approach for making "always better cars."

Uchiyamada:There are things that we must not change, and other things that we need to change in different countries and regions. Sports cars, for example, must not be changed according to the region. The sports car is a vehicle whose value from the customer's perspective is the same everywhere in the world. In contrast, Innovative International Multipurpose Vehicles (IMV)* are positioned as "cars for the people"in emerging markets and are unique to each region based on specific characteristics and needs. In the case of mass production vehicles such as the Corolla, the name is the same, but the vehicles are different from those in Japan and are tailored to regional characteristics based on feedback from local customers.

Toyota's global strategy models, so named with the aim of creating multipurpose vehicles that can meet the various needs of customers around the world.

Business Initiatives that Can Develop with Local Communities and Create Community Value

Unno: The Vision also carries Toyota's aspirations to contribute to "enriching the lives of communities." CSR is about businesses taking action within their operations toward sustainable development, and therefore, in conjunction with making always better cars, it is also important to adopt a posture of active engagement in community development. There is a growing public awareness to turn interests towards corporate behavior and whether a well as the products and services provided.can be trusted.

Mizue Unno Managing Director, So-Tech Consulting Inc.
Takeshi Uchiyamada Chairman, Toyota Motor Corporation

Uchiyamada: An essential condition of our business activities is that they be accepted by the local community, and our objective is to develop together with the community. We believe that there is absolutely no contradiction between the sustainability of Toyota and the sustainability of the local community. One example is our plant construction. Once we build a plant, it establishes permanent ties within the community. Toyota has never closed a plant because of internal circumstances. This is something we can be proud of. Our plants have a close connection to not just the people who work there, but also suppliers and their families and many other people in the wider community. They are a presence with substantial impact. Therefore we always conduct business with an awareness of these numerous stakeholders.

Unno:That's exactly the Toyota Way, the foundation of Toyota Visionary Management.

Uchiyamada:Approaches to manufacturing are without a doubt different in Japan and other countries and regions. In Toyota's case, however, its approach to manufacturing is the same in Japan and every other country. This is why we make considerable efforts within the company to find ways of gaining an accurate understanding of Toyota's concepts overseas too, and we manufacture cars without changing those concepts.

Ensuring Accountability for Stakeholders in the Midst of Global Diversity

Unno: Toyota is highly commended for considerable accomplishments made within the company as well as a series of community initiatives in various areas such as human development. At the same time, however, such efforts by Toyota may not be conveyed effectively to external stakeholders. At times, there is an impression that the company is rather forcing its own ideas on interested parties. I believe that, in addition to undertaking various initiatives in many countries and regions, interpreting those efforts by clarifying the rationales will facilitate broader understanding of Toyota.

Uchiyamada: It is true that there has long been a culture within Toyota of "If people simply look at our cars, they'll understand, so all we need to do is to continue making cars to the best of our ability"and of not publicizing our positive actions.

Unno: We can possibly understand each other without communicating things directly in Japan, but sensibilities and ways of thinking vary in other countries. If you don't engage in dialogue with people, they won't understand what you're trying to convey. The key is to engage in communication with local stakeholders in ways that differ from those used in Japan. Just as adequate communication in an accountable manner and responses to consumers as already conducted for marketing strategies of automobiles, the company should also have stakeholder strategies adapted to local communities and regions. I have high expectations for better accountability concerning Toyota's unique efforts as an automobile company to enrich the lives of communities.

Takeshi Uchiyamada Chairman, Toyota Motor Corporation

Uchiyamada: We promote activities that we believe will be useful to society, and we have a tendency to believe that it is important for people to understand our actual practices. However, we reaffirm the significance of accurately conveying to society what we value. We need to listen to the frank assessments of people outside the company and adopt innovations to our ways of communicating with local communities.that is what I've felt from talking to you.

Unno: This is stakeholder dialogue and is referred to as "engagement." Many companies have means for listening to customer feedback concerning products and services and use that information to make improvements. I think it is also necessary to have a means of listening to the opinions of key local stakeholders about your local business activities and use such information in management. When a certain local concern occurs, these individuals will likely become crucial Toyota supporters. Toyota has executed leadership and is taking various actions in collaboration with companies in non-automobile businesses. What is the direction that Toyota is pursuing with respect to mobility that goes beyond the existing automobile community?

Uchiyamada:Our mobility initiatives are characterized not by completely new concepts, but rather, by extensions and evolutions of existing concepts to make intensive advances. Within that process, we are identifying and addressing the issues that need much greater attention. This starts with hybrids. This is not a matter of technology.automobile manufacturers have responsibilities to address 21st century issues such as those related to resources and the environment. This was our starting point. At that time, we pursued higher fuel efficiency, but now, new questions related to population issues and the development of emerging nations, of how society will use energy and how cars fit into the system as a whole have emerged. The F-Grid* concept that we are undertaking in eastern Japan is not just about grid power management, but also about plants using electric power generated by in-house power generators and supplying that energy to key facilities of local communities during emergencies. The concept will verify how we can effectively use a grid that is made up of power that flows downward from the conventional grid and upward from regional power sources. Plug-in hybrid vehicles are also an important element of the F-Grid, and we are conducting research in collaboration with local communities on how cars can be used as part of a sustainable society's systems without any negative impact on society or energy.

Unno:In other words, Toyota is utilizing its technologies and expertise as an automobile manufacturer and working with people in various fields and with diverse perspectives to address social issues.

Uchiyamada: We are creating opportunities for Toyota to disseminate information on its current thinking regarding the environment. We hold an Environmental Technology Forum for members of government and the media once every two years and explain in considerable detail our current thinking and the direction that our research is taking. We also make proactive proposals concerning energy policy. We are making considerable efforts to achieve understanding of our energy policies, separate from the issue of whether our proposals are immediately reflected in actual policy.

* The "F" in F-Grid stands for "factory"

Mizue Unno Managing Director, So-Tech Consulting Inc.

Listening to Stakeholders to Become a More Transparent Company

Unno: Finally, I note that Toyota introduced external directors this fiscal year. Would it be fair to say that in addition to having a transparent board of directors, Toyota believes that it is also important to incorporate stakeholders' commitment in the key stages of the decision-making process?

Uchiyamada: We introduced external directors not just to secure mechanisms, but also to examine individual actions from diverse perspectives and obtain advice. We have had external corporate auditors for a long time, and an organization known as the International Advisory Board has been convened which consists of advisors to global Toyota selected from all around the world. In each country and region, we have systems for viewing things from outside in individual managing companies. It is best to have mechanisms where governance is undertaken automatically in day-to-day operations, and we have various people observing our operations to complement those mechanisms. I believe that this is fundamental. There were some within the company who believed that all internal matters should be handled by internal personnel who deeply understand our company, but when awareness inside the company is different from that in society in general, external personnel can point this out to us. We made the decision based on the belief that this is the most important thing.

Unno: I also have experience as an external director. When an outsider points out something critical, even if it doesn't lead to immediate change, I feel that it brings the significant ef fect of inspiring management to stay focused.

Uchiyamada: With regard to our accountability to regional stakeholders, we will also consider carefully what is being asked of us and that we should convey more critical information and become an even more transparent company.

Mizue Unno Managing Director, So-Tech Consulting Inc.
Takeshi Uchiyamada Chairman, Toyota Motor Corporation x Mizue Unno Managing Director, So-Tech Consulting Inc.

Thank you for your many valuable opinions. We will continue putting Toyota Visionary Management into practice, and you can look forward to additional measures intended to achieve sustainable growth of society and the planet.

Mizue Unno, Managing Director, So-Tech Consulting Inc.

Unno was responsible for marketing strategy and environmental business development at Roland Berger Japan. Since the foundation of So-Tech Consulting in 1996, she has been active in the development of corporate environmental and sustainability strategies and has built a worldwide network of experts. Her strengths focus on creating sustainable value and implementing global CSR for Japanese businesses.