Toyota’s 2009 report gives subtle clues to the extraordinary corporate crisis that was about to unfold

Few people predicted the calamitous events that have overtaken Toyota in recent months. After decades building a brand known for quality, the company appears to have lost control of its own agenda. If sustainability reports are worth having, they must forewarn of or at least raise the issues the company might be facing.

None of the major banks’ sustainability reports identified their over-exposure to unsafe lending before the credit crunch. Did Toyota’s sustainability report published in September 2009 contain the necessary clues to the issues that subsequently humbled the company?

To recap briefly: fears that faults mainly in acceleration or braking functions of various Toyota models are putting drivers at risk have led to recalls of millions of cars globally. The company has faced an increasingly hostile media, especially in the US where company president Akio Toyoda was grilled by Congress in February.

Toyota’s report leads on environmental issues. Product quality is first covered on page 51 under Relations with Customers. Toyota states “it is important that automakers offer vehicles with high levels of quality” and it hopes to “achieve zero customer complaints” by implementing quality improvements. The report, therefore, does acknowledge the issue and includes a diagram showing that the company’s “customer first” programme begins with preventing defective products from leaving Toyota. But a single page on this subject out of 84 is not enough to be convincing.

The safety section concentrates on advanced accident prevention technology such as airbags and the latest seatbacks. It does not discuss the safety implications of faulty parts.

A willingness to disclose past failures and transparency about current performance are the indicators of good management. An astute reader of the report might have spotted the omissions and concluded that Toyota had taken its eye of the quality ball. But most readers probably concluded that a company with such a good reputation had simply elected to focus on even bigger sustainability challenges.

There is also no mention of the fascinating and well publicised fact that Toyota has a policy allowing individual workers to shut down an assembly line if they notice a quality defect. Has the culture been difficult to reproduce as the company has grown outside Japan? The report doesn’t help us understand these challenges.

What the report most needs is a materiality assessment. This would have been highly informative and its absence teaches us something about the company. The lesson: pay as much attention to what is missing from reports as what is in them.

But for recent events, Toyota’s sustainability report would have impressed. It covers the company philosophy, the environment, relations with stakeholders and economic aspects in reasonable detail.

A large proportion of the report is dedicated to the priority it rightly places on developing environmental technologies, including hybrid vehicles, although it is a little heavy going with complex charts. It also provides an enlightening discussion on improving conventional engines, the potential and limitations of electric vehicles and the need to partner with wider society to reduce CO₂ emissions.

Absolute omission

Toyota is also working to reduce emissions and other environmental impacts of its own operations. It reduced CO₂ emissions per sales unit by 32% between 2001 and 2007, surpassing its goal of a 20% reduction. The report explains that production efficiency at Toyota plants then dropped because of the fall in production accompanying the economic crisis.

The credibility of this section would be greatly enhanced if Toyota were to publish the absolute CO₂ emissions of its operations and rise to the challenge of setting a quantified reduction target.

The company has tried to make its report more interesting with a series of “think pieces” at the front of the report. The first of these – Return to the Starting Point – explains the company’s 70-year history and emphasises its core values: putting the customers first and ensuring that all employees understanding manufacturing. It seems innocuous until you stop to wonder why it made this the first item in the report. What was management concerned about?

One single sentence is offered as explanation. “There is now felt to be a need to return again to Toyota’s origins.” Perhaps it was difficult for the company to admit to problems in public. But the prescience of this sentence is now apparent.

Katie Loden is a consultant at sustainability strategy and communications consultancy Context.
katiel@econtext.co.uk
www.econtext.co.uk

Snapshot

Follows GRI? No
Assured? Independent review from Deloitte Tohmatsu Evaluation.
Materiality analysis? No
Goals? Yes
Targets? Some
Stakeholder input? No
Seeks feedback? Yes
Key strengths? Interesting discussion on hybrid vehicles.
Chief weakness? Needs to get back to basics and redress the balance of issues.
Pleasant surprise? Learning about iki-iki (creating a workplace that allows all production staff to work dynamically and vigorously).