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Toyota: More Horsepower Needed

By Michelle Bernhart (True Blue Communications) on August 06, 2010 at 3:45pm.

Content:
Toyota Motor Corporation seems to have as many operating companies as it does makes of cars. No fewer than 18 of Toyota’s global entities have posted their reports on CorporateRegister.com, and 16 of these have published 2009 or even 2010 reports. (Compare this to Honda, with reports for four entities, Nissan with two and Isuzu with one.)

Toyota, it seems, likes to report. It doesn’t like to do so with much consistency across the multinational corporation, however. Some are GRI reports, ranging from application levels of A+ to undeclared, while others haven’t appeared to follow any formal guidance. Likewise, some of the reports have undergone assurance by large firms, some by individual experts, and some not at all. The language used to title and describe these reports and the practices they detail is equally diverse. Some Toyota organizations are implementing “sustainability” while others are addressing “CSR”, “environment and community” or “citizenship”. Whatever the label, the organization has a lot to say on the subject, and it seems to recognize the value of local specificity in its reporting, even if reporting efficiency is non-existent. But wouldn’t the company’s sustainability reporting practices - and overall approach - benefit from better internal alignment? After all, “The Toyota Way”, which includes principles such as respect (“to respect others and the environment, to build trust, and to take responsibility”), is known even outside the company as a guiding force in the company’s industry leadership. 

This review covers the latest offering from Toyota North America, the “2009 Environmental Report - Challenge, Commitment, Progress”, the North American company’s ninth annual such report. With a picture of a gleaming new Prius hybrid on the cover, the report makes clear that Toyota’s sustainability priorities are as much about the products it offers as any operational improvements. The company clearly articulates its perspective on this: “Toyota’s concept of sustainable mobility in North America is part of our vision of a future where mobility meets the needs of people and society without sacrificing environmental values”. Regular e-updates to the annual report continue the trend, boasting the latest hybrid sales milestones or car energy efficiency recognitions.

The report covers the company’s progress toward its 2011 Environmental Action Plan objectives in six key areas: energy and climate change, recycling and improved resource use, substances of concern, air quality, environmental management and cooperation with society (the latter being a somewhat puzzling name for philanthropy and volunteering). Although the report provides ample evidence of good environmental improvements in vehicles as well as operations, it fails to deliver some of the fundamental performance data readers have come to expect from these reports. Notable, for example, is the lack of greenhouse gas emissions data for Toyota’s operations. Although the report notes that Toyota North America completed its first inventory in 2008 and that U.S. emissions have been tracked for a large division since 2000, results are not included here. All we get is: “Toyota’s North American manufacturing facilities consume more than $147 million of energy annually, resulting in 1.1 million metric tons of CO2 emissions per year”. How many megawatts or gigajoules of energy are we talking about? And what other greenhouse gases?

Notably, the report provides a fairly detailed overview of environmental responsibility throughout the Toyota vehicle life cycle, but acknowledges, with regret, that the economic downturn resulted in abandonment (at least temporarily) of a comprehensive system that the parent company in Japan had developed to measure and reduce the environmental impact of a vehicle across its entire life cycle.

Communication:

The six focus areas provide a sturdy foundation for this clearly written, if somewhat plodding, report. Context, too often absent from sustainability reports, is evident, although it sometimes has the effect of a car sales brochure, such as in the graphical comparisons of Toyota car and truck average fuel economy and CO2 emissions with industry standards. But, hey - can Toyota help it if the company has produced some of the most fuel-efficient and cleanest-running vehicles on the roads of North America?

Goals and targets are clear and largely measurable (e.g., “Using FY2002 as a base year, reduce total energy usage of manufacturing facilities/operations in North America by 27% per vehicle produced to 6.3MMBTU/vehicle produced”). The report also makes it easy to compare performance over time, with graphs that include 6 to 9 years of performance against the company’s target, and a numerical summary of improvement included right on the graph.

Overall performance is presented in an easy-to-read consolidated summary early in the report. This self-assessment is enhanced by cross-references to the pages where readers can find explanations about why certain targets are not “on track”, were “missed” or have been “suspended”. In a stroke of design genius, the report includes a snapshot of each related section of the summary performance table on the page where it is explored in more detail. This adds subtly—but effectively - to the report’s cohesion and overall readability. Explanations for any missed targets are generally good, but the report falls a bit short in telling readers what will be done to get back on track. For example, in a discussion of energy consumption at certain Canadian facilities, the report offers, “A growing number of employees and conversion of storage space to office space may be contributing to increased energy usage. We are currently not on track for meeting our target, but we continue to look for opportunities to reduce our usage”. This is neither a satisfying explanation nor an inspiring plan for the future.

Occasionally, the otherwise straightforward and quantitative report lapses into a stupor. Concluding each main section is a particularly lame statement called, enticingly enough, “Looking Ahead”. The section on energy and climate change finishes with this rather empty statement: “Over the next two years, the biggest challenge we continue to face in meeting our action plan targets is to find ways to make our products and our manufacturing operations more energy efficient, both in response to climate change legislation and consumer demand”. A similarly obvious statement ends the section on recycling and resource use: “Over the next two years, one of our biggest challenges to meeting our action plan targets is to find ways to manage our water consumption”. No doubt, but where’s the Toyota ingenuity in that vague approach? 

Credibility: 

Even so, the report comes across as transparent and earnest, although more detail is needed on several indicators, including GHG emissions from Toyota’s operations (not just the vehicles they produce) and water consumption, among others. The report earns points with this reviewer for expressing its candid views on key topics such as climate change regulation and the company’s preference for a single, industry-wide standard for VOCs in vehicle cabins, unhealthy source of the beloved “new car smell”.

Toyota directly employs almost 41,000 people in North America, which is a lot of internal stakeholders. Unfortunately, the report makes no mention of any attempts to collect employee feedback or engage them as key sustainability stakeholders. The report does note that in 2009 the company set up an “internal environmental library to house environmental information in a searchable format”, but this is a long way from actually exchanging ideas and information with employees. For the public, the company has established an online report survey, but the link appears to be broken. Finally, because Toyota has chosen to report only on environmental issues, the company’s performance on the workplace, human rights, and other social issues is not covered - which is a shame because, as just one example, Toyota operates several recognized programs in both internal and supplier diversity (even though readers won’t necessarily guess that from the demographics of the executives profiled in this report).

Credibility also would be enhanced by using the GRI guidelines and through assurance, which a number of Toyota North America’s peers have done for their reports.

As a postscript, it’s worth noting that this report was published before the mass recall of Toyotas with sticking accelerators, although next year’s report will almost certainly address this issue.

Recommendations:

1. Consider using GRI to help stakeholders understand the company’s broader sustainability responsibilities (i.e., not just environmental issues) and more fully report on the key performance indicators the company already monitors.
2. Consider using assurance to further drive internal accountability and enhance credibility.
3. Strengthen stakeholder engagement reporting, especially with respect to what is being done internally.

Michelle Bernhart is the founder of True Blue Communications LLC, which helps organizations strengthen sustainability performance, achieve strategic objectives, enhance brand, and manage risk through credible and engaging communications. www.truebluecomm.com