Process of Identifying Materiality Issues

①Issue Identification ②Prioritize Issues with Stakeholders ③Validation ④Identify Our Materialities ⑤ Setting KPIs ⑥ Initiatives ⑦ Review of Progress and Contents

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

1. Issue Identification

We referred to guidelines such as CSR and ESG guidelines (GRI Standards, ISO 26000, United Nations Global Compact, FTSE, and MSCI) and the standards of Toyota Environmental Challenge 2050, focusing on the 17 goals and 169 targets of the SDGs, which are considered to comprehensively cover global social issues. From these, we identified and organized social issues that affect the company.
We checked that these organized social issues aligned with our corporate philosophy, behavioral guidelines, Global Vision, and Mid-term Business Plan, and identified 43 social issues.

Emerging risks

About Emerging Risks

Our company refers to ISO/TS 31050 (Risk Management - Guidelines for Emerging Risk Management to Enhance Resilience) in addressing emerging risks.
In line with our medium-term management plan, we are pursuing business expansion into regions such as the Global South. In doing so, we anticipate the following emerging risks:

Geopolitical Risks

In expanding our business in the Gondwana region (including Africa and India) as outlined in our Mid-Term Business Plan, we anticipate geopolitical risks such as regime changes triggered by military coups or civil wars. If realized, these factors could lead to the invalidation of legal contracts, freezing of infrastructure investments, and unexpected shifts in diplomatic policies, potentially causing project disruptions or increased withdrawal costs. As mitigating actions, we actively diversify our operational bases geographically to reduce risk exposure, while continuously updating and formulating our Business Continuity Plans (BCPs).

Cybersecurity, Technological, and Supply Chain Risks Associated with Digital Advancement

With the rapid advancement of digital technologies, the strategic importance of digital infrastructure (in-vehicle software, data centers) is surging. Concurrently, we face emerging risks including sophisticated cyberattacks, stricter global regulations, and supply chain fragmentation of advanced semiconductors due to geopolitical tensions. These factors could delay vehicle shipments and market launches due to delayed regulatory compliance or vehicle type approvals by our partner OEMs, thereby reducing our trading and export volumes, or inflating alternative component procurement costs across our global value chain. As mitigating actions, we are strengthening and evaluating our Cyber Security Management System (CSMS) across the Group, while diversifying our procurement routes to establish a highly resilient and decentralized supply chain that is less susceptible to trade and regulatory restrictions.

These and other risks are comprehensively assessed and discussed within our Investment and Financing Committee and Investment and Financing Council, where decisions regarding business development are made.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

2. Prioritize Issues with Stakeholders

Through questionnaires and dialogue with stakeholders both inside and outside Toyota Tsusho regarding the identified 43 social issues, we prioritized expectations and requests for the company, as well as the importance of these social issues to the company, and created a Materiality matrix.

Stakeholders

Internal: Interviews with individual sales divisions, and questionnaires administered to all company employees, CSR staff in Japanese-affiliated companies, and overseas staff
External: Interviews with Japanese institutional investors, and questionnaires administered to general investors

Narrowing Down

Using a Materiality matrix, we created a Materiality proposal, focusing on social issues with a high level of importance inside and outside the company. While we are also addressing items that were not included in the proposal, those established as our material issues are items that we have identified as being the most important for the Toyota Tsusho.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

3. Validation

The suitability of the identification process and the proposed material issues was confirmed.

Discussion Participants

Discussion among management and division CEOs (current sales division CEOs)
Individual interviews with outside members of the Board

Main Opinions from Participants

It is noteworthy that the materialities are prepared after conducting a well-established process.
This is no longer a time in which countries and governments can accomplish whatever they want on their own. It is necessary for society to change, and the Company needs to be aware of changing its systems and programs. It is necessary to refer to the knowledge of NGOs, NPOs, and other organizations.
When viewed from the perspective of the materialities, we need to start a discussion on businesses that will become contradictory, businesses that should be slowed down, and businesses that we should terminate in the future. I want to establish materialities that will lead to an image of a set of guidelines for the future.
It is necessary to change employee awareness so that we can expand perspectives from the Company's existing method of creating business by focusing on resolving customer problems and shifting from social issues that are global problems to a concept of business creation. Accumulating "quick hits" in the form of successful experiences will likely generate a virtuous cycle.
The more amicable the language the vaguer it becomes, and this can give the impression that ultimately nothing will be done. So we need to use sharp language and adopt innovations.
For employees, if the individual topics are narrowed down too far, the next step is difficult. But, if they are too general, it is difficult to know what to do. It is necessary to organize topics in a way that makes it easy for employees, as they are the ones who are to act.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

4. Identify Our Material Issues

Our material issues were approved following discussions by the CSR Committee* (currently, the Sustainability Committee) at meetings held at the end of March 2018. Our material issues were reported at a Board of Directors meeting.

*Members at the time of 2018
President & CEO, Executive Vice President, CSO, CFO, Sales Division CEO, etc.
Two outside directors also participated as advisors

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

5. Set KPIs

KPIs were set in 2020 to track progress on the identified material issues.
When setting the KPIs, numerous discussions were carried out with the sales divisions, including the division CEOs, to reflect the approaches for solving social issues in the policies of each sales division. Furthermore, the Sustainability Committee reflected the opinions of management and outside members of the Board in the KPIs.
Quantitative/qualitative targets were set as an expression of the direction we should aim for.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

6. Initiatives

Materiality elements were reflected in the business strategies of each sales division.
We established the specialized Task Force for Promoting Carbon Neutrality in April 2021 to accelerate efforts to address climate change. In April 2022, the Carbon Neutrality Promotion Department was formed.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

7. Review of Progress and Contents

At Sustainability Committee meetings, the sales division CEOs report on the progress made in their respective divisions.
The material issues and KPIs are reviewed periodically and revised as appropriate, taking into consideration changes in Toyota Tsusho's business environment, international trends and needs, and issues that emerge during the plan-docheck-act (PDCA) cycle.

Review of KPIs

Materiality and Materiality KPIs are confirmed periodically by the Sustainability Committee to ensure their suitability in light of changes in the environment and are revised if necessary.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

Materiality Issues