As the world's second-largest car manufacturer, Toyota is committed to tackling environmental issues. Our approach is both long-term and holistic. The total life cycle of the product, from design and use of materials to end-of-life recycling, is examined for environmental impact - as seen in this report - as are socio-economic aspects, such as the health and safety of our employees, and the communities in which Toyota operates.

Toyota's response to the challenges of promoting environmental excellence involves total commitment from management and employees. Toyota's managerial values, business methods, values and beliefs are collectively known as The Toyota Way. The Toyota Way, which grew out of Toyota's Guiding Principles (see diagram) is supported by two main pillars: Kaizen (Continuous Improvement) and Respect for People. These two pillars support five key concepts to make up The Toyota Way: Challenge, Kaizen, Genchi Genbutsu (going to the source to make correct decisions), Respect, and Teamwork.

All Toyota employees are expected to embody these values in their daily work, including environmental protection activities. To "respect" the environment, we go to the source to identify and analyse problems ("Genchi Genbutsu"), move forward to "challenge" conventional ideas and old habits, to improve further ("kaizen") through "teamwork."

The framework provided by The Toyota Way enables our company to respond to, among other things, the environmental challenges at various stages of the life-cycle of a vehicle. These include greenhouse gas emissions, waste reduction, increased recycling and the banning of hazardous substance use in parts and components. These challenges will have inevitable consequences for Toyota's organisation and employees, and we must balance them with our desire for future growth. In 1992, the Toyota Guiding Principles were established in direct response to the international initiatives agreed to at the Rio 'Earth Summit.' This summit focused on the potential for a clash between trade and environmental rules, and resulted in a statement of principles about forest management, conservation and sustainable development.

The Toyota Guiding Principles are a cornerstone of our corporate management philosophy. These principles were updated in 1997, to ensure they continue to provide Toyota with a clear path towards achieving sustainable development.

These principles have been explored and developed in Toyota's Global Vision 2010, adopted in April 2002, which proposes a series of long-term policies on the theme of "Innovation into the Future." Toyota's Global Vision 2010 guides management in its response to long-term social changes, combining consideration for the environment, the benefit to our customers of value-added products and the encouragement of our employees through shared prosperity and social involvement.

Based on the Guiding Principles, which codify Toyota's business spirit, the Toyota Earth Charter (adopted in 1992 and revised in 1997) embodies a comprehensive approach to global environmental issues. It outlines Toyota's basic policy and action guidelines towards effective environmental management and improvements. The Toyota Earth Charter underlines a commitment to environmental excellence, not only through broad principles, but in concrete examples of what can be done through action guidelines. In connection with the Toyota Guiding Principles and the Toyota Earth Charter, a European Environmental Policy was developed as a means of linking principles, goals, targets and action plans with management structures and systems.