3 Society and Environmental Considerations in the Supply Chain

Symbiosis with the Global Environment
CSR Promotion in the Supply Chain

4

What are the expectations of TDK and on what
points can TDK be praised in terms of promoting CSR in the supply chain as a whole? We
invited Mr. Masaki Wada of Energetic Green foran exchange of opinions.

TDK has formulated the TDK Environmental Charter as the environmental policy of the TDKGroup as a whole. TDK recognizes that symbiosis with the global environment is an importantmanagement issue and aims to contribute to sustainable development. To realize this goal,
TDK has formulated an environmental vision called TDK Environmental Action 2020 and is conducting activities with the target of becoming the first company in the electronic components
industry to achieve carbon neutrality.

TDK’s Aim of Achieving Carbon Neutrality

Masaki Wada
CEO, Energetic Green

CO2 emissions from production activities (environmental load) – Reduction of CO 2 emissions through products(environmental contribution) ≤ Zero

From 2001, Mr. Wada worked for companies related to sporting goods and apparel, and was active
mainly in relation to the problem of human rights
in the supply chain. From June 2013, he became
involved in a foreign national training program ata public-interest foundation, and in August 2014,
was appointed as co-representative of Energetic
Green, where he conducts CSR-related researchand consulting.

CO2 emissions fromproduction activities(environmental load)

reduction
efforts

Reduction of CO2 emissions
through products (environmental contribution)

Date of implementation: May 11, 2015

n Mr. Wada’s Main Opinions and Proposals

Efforts of TDK as a Supplier
As audit requests from customers continue to increase, theburden on TDK sites of responding to those requests can be expected to increase in the future, too. Regarding human rights andlabor in the workplace, regardless of industry it is certain specificissues that are likely to be questioned, such as forced labor, childlabor, and long working hours. Therefore, it is important to gather
your own survey results prior to requests and be ready at all times
to submit material if an inquiry is received.
At present, I hear that TDK is making attempts to standardize
records at its sites, such as the contents and results of external
and internal audits conducted so far and countermeasures, andplans to disclose this information. That is a wonderful effort. It isan effective means of avoiding future risks and also has muchsignificance in terms of continuing to respond to customer requests. I definitely hope that you will actively promote this measure.
Furthermore, when preparing to establish an overseas
site, TDK makes a checklist of items that should definitely be
implemented and conducts a feasibility study including not only
quality, equipment, cost, and so on but also the CSR perspective. This is an excellent approach as well. I hope that TDK wellunderstands the importance of conducting operations on thebasis of the 4Gs and acts accordingly. (Known as the “four gen
principles” in Japanese, the 4Gs are go to the source, go down to
the factory floor, grasp the actual situation, and get together withlocal employees.)

Efforts of TDK as a Buyer
When you have so many suppliers, it is difficult to conduct selfassessment questionnaires, audits, and improvement guidance
in a uniform manner. So priority is important. It is essential for
TDK to clarify its guidelines taking into account such factors as
dependence on suppliers.
TDK currently conducts CSR audits on suppliers and is putting a lot of effort into audit training, so now you have reached
the stage where you must ask yourselves what should be the aim

beyond that. The concept of capacity building is going to become increasingly important. This means including the perspective of growing together in improvement guidance for suppliers
and supporting the strengthening of the supplier’s organization
through guidance. As one aspect of information disclosure, it
might be a good idea to include the guidance provided on eachmatter in future reports.

CO2 emissions fromproduction activities

Reduction of CO2 emissions
through products(environmental load)(environmental contribution)

1,068

thousand t-CO2

Environmental load involves many factors, such as resource and water use, but we realize that the biggest factor
at TDK is CO2 emissions from production activities. That is
why we are making efforts to reduce these emissions.

1,251

thousand t-CO2

Environmental contribution involves many factors, suchas the use of renewable energy, but we realize that thebiggest factor at TDK is the reduction of CO2 emissions
through products. That is why we are making efforts to
expand the scope of emission-cutting products.

Required Role in the Industry as a Midstream Company
Since TDK is a midstream company, you are able to view the supply chain from the perspectives of both supplier and buyer. It isessential at all times to have an understanding of what is trending
in the supply chain. It might also be a good idea to team up withNPOs and NGOs and seek their guidance on the latest humanrights issues and CSR audits.

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TDK CSR REPORT 2015

It is unfortunate that so far midstream companies have notshown a strong presence in compiling self-assessment questionnaires and so on. As globalization proceeds, it will be unavoidable for midstream companies to firmly express their thoughts. I
hope that TDK will strengthen collaboration in the industry andacross other industries and formulate standards so that you cantake the initiative in international society.

TDK CSR REPORT 201530

4 Symbiosis with the Global Environment

Reduction of CO2 Emissions from Production Activities(Environmental Load)

Increasing the Reduction of CO2 Emissions
through Products (Environmental Contribution)

The TDK Group engages in capital investment and energy-saving activities at each site in order to reduce CO2 emissions fromproduction activities.

In order to increase its environmental contribution, the TDK Group is promoting visualization as a contribution of its technologicalachievements in product development and manufacturing.

Achievements in FY 2014

Achievements in FY 2014

TDK Environmental Action 2020 sets the target of reducing the TDKGroup’s global CO2 emissions to less than one million tons by March
2021.* As a result of the continued promotion of energy-saving activities
at production sites around the world, CO2 emissions amounted to 1.068
million tons in fiscal 2014, which was under the fiscal year target of 1.07
million tons.

Voice

Promoting Energy Saving
through Cross-Sectional
Communication

TDK Environmental Action 2020 sets the target of increasing the reduction of CO2 emissions through products to more than 1.0 million tons byfiscal 2020. In fiscal 2014, this environmental contribution amounted to1.251 million tons through the expansion of applicable power supply
products and efforts to establish calculation criteria for flash memories,
aluminum electrolytic capacitors, and lithium ion polymer batteries.

*Applicable to sites at the time of compilation of TDK Environmental Action 2020 that commenced
activities in fiscal 2011.

Trends in the Reduction of CO2 Emissions through ProductsTrends in CO2 Emissions from Production Activities (Global)
72
kt-CO2 1,095

1,110

1,103

1,190
127

1,251

1,269

(kt-CO2)

201

236

1,000

886

1,000

1,031

1,063

1,068

0

2011

2012

2013

2014

(FY)

Note: The light green parts of the graph indicate emissions at plants that were newly added after
compilation of TDK Environmental Action 2020.

Example from the Kofu Plant in JapanAs a replacement for outdated turbo refrigerating machines which
produce chilled water for use in production and clean room air conditioning, TDK’s Kofu Plant introduced highly efficient machines andalso reviewed the system for transporting chilled water, boosting heat
quantity visualization, increasing the variability of chilled water flow, andintroducing free cooling* in the winter. The resulting reduction of CO2
emissions amounted to 999 tons per year.
*Free cooling is a system for producing chilled water for air conditioning and production equipmentthat uses a chilling tower to make use of the low external air temperature in the winter.

More than 30 years have passed since theKofu Plant was built, and on the occasion of
the replacement of outdated equipment, it
was decided to promote energy-saving activities. In the promotion of these activities,emphasis was placed on communication.
The Kofu Plant consists of many divisions, socross-sectional communication among themwas essential. When repairing buildings andproduction equipment, repeated discussions
were held with the users, who asked whether
the energy saving would have any adverse
impact on manufacturing conditions and also
voiced their requests and opinions, such as“Wouldn’t it be better like this?” and “Costs
would be lowered even more if we did it likethis.” These discussions clarified the merits
for both sides and improved the process.
Through these activities, the participants became aware once again of the importance of
creating an atmosphere in which related parties can communicate and air their opinionsfrom their respective standpoints. In termsof contributing to the environment as well,the Kofu Plant intends to continue its role asa company that “contributes to culture andindustry through creativity.”

1,015

321

The energy-saving subcommittee at TDK’s Kofu Plant

2010

498

500

500

0

2011

2012

2013

2014

(FY)

*The light green parts of the graph indicate new efforts made possible by the completion of criteria for
calculating environmental contributions.

Example from TDK-Lambda UK Ltd.
TDK-Lambda UK Ltd. calculated the environmental contribution of its
products on the basis of the method for calculating the environmental
contribution of power supply products implemented at TDK-Lambda
Corporation. The company’s power supply products are used in not
only industrial equipment but also medical devices, such as CT scanners. The resulting reduction of CO2 emissions amounted to 83,000
tons per year.

Voice

Visualization ofEnvironmental Contribution
Leads to Further Design
Innovation

A major feature of the power supply products of
TDK Lambda UK Ltd., which are used in medical applications and measurement equipment,is that the settings and composition can beeasily changed to match the varied input-output
conditions of the application. Selecting the best
power supply product for the application has
an impact on energy efficiency throughout theentire lifespan of the product, 10–15 years, andleads to improvements in the final product’senergy consumption.
What I noticed in our efforts to calculate
the environmental contribution is that even areally small improvement in product design canhave a colossal impact on the environmental
contribution of the final product. Our company
receives much praise from customers for supplying the most appropriate power supply
products, and from now on, we will also search
for ways to further improve energy efficiency inproduct design, manufacturing, and operation.
We want to continue taking on challenges sothat we can always surpass the expectations of
our customers.

Tim Puttick
Production Manager,
TDK-Lambda UK Ltd.

Products of TDK-Lambda UK Ltd.

For medical
purposes

Industrial
equipment

Data centers

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TDK CSR REPORT 2015

TDK CSR REPORT 201532

4 Symbiosis with the Global Environment

Dialogue with an Expert

Third-Party Opinion

Toward Compilation of the
Next Environmental Vision
TDK Environmental Action 2020 set fiscal 2020 as the target year
for achieving carbon neutrality, but the goal was reached aheadof schedule in fiscal 2014. So we have reached the stage where
we should stipulate the next target of our activities. TDK invited
Mr. Keisuke Takegahara, director of the Environmental Initiative& Corporate Social Responsibility Support Department at theDevelopment Bank of Japan, Inc. and a leading figure in the fieldof environmental finance in Japan, for a talk with Mr. Tetsuya Kuwashima and Mr. Ryo Yokoyama of the Safety and Environment
Group of Manufacturing HQ.

Date of implementation: May 8, 2015

Industry-Wide Efforts to Establish International Standards
The first point to be confirmed in the discussion was that in-house
understanding and cooperation are essential to promote the two
objectives of reducing CO 2 emissions and increasing TDK’s environmental contribution. Mr. Kuwashima explained confidently that“our activities are steadily spreading, and we are shifting fromthe stage of calculating reductions and contributions in eachbusiness division to positively calling on sites to put them into
practice.” In order to make employees understand the value ofthese environmental contributions and to feel the significance of
their own efforts, he said, it is important to have an external assessment of TDK’s contributions and to feed that back to sites.
In addition, the participants agreed that in order for TDK toreceive an appropriate assessment, it is essential for the industry to have rational standards that can serve as a foundation.

Mr. Yokoyama resolutely remarked, “If companies in the industry
all have their own standards, even if we shout about consideration
for the environment, there will just be confusion. Standardization
is essential. International standards formulated under the leadership of the Japanese electric and electronic industries have been
issued, and guidance for electronic component manufacturers
compiled on the basis of these standards in collaboration withJEITA [Japan Electronics and Information Technology Industries
Association] has taken shape at last. Now we must publicize thisguidance globally.” Mr. Takegahara highly praised the fact that
TDK is calculating and disclosing its environmental load andenvironmental contribution according to globally acceptable
criteria.

Going beyond Carbon Neutrality to Create Even Higher Value
Mr. Takegahara commented, “TDK’s environmental activities are
extremely advanced and unparalleled by other companies. Now
that you have realized carbon neutrality, the next point is how tocreate value not only environmentally but socially as well.” Citing
the example of wearable devices, Mr. Kuwashima spoke of thepotential, saying, “Electronic components account for most of thetotal weight, so if they can be made lighter and smaller, that partcan be allotted to other useful functions, which will increase the

Keisuke Takegahara
General Manager,
Environmental Initiative &Corporate Social Responsibility Support Department,
Development Bank of Japan,
Inc.

Mr. Takegahara joined the Japan Development Bank (now the Development Bank ofJapan, Inc.) in 1989. He was stationed for a
total of six years in Frankfurt, Germany anddeveloped the DBJ’s environmental rating
loan scheme and is a leading figure in thefield of environmental finance in Japan.

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TDK CSR REPORT 2015

convenience of the final product. In that sense, I think there isroom for quantification of our social contribution.”
As for the future, Mr. Kuwashima said enthusiastically, “Thetarget set in TDK Environmental Action 2020 was so ambitiousthat people in the company asked whether it could really beachieved at first. The next environmental vision must set targets
with the same impact, and we must display the hallmark of TDK
in executing it.”n Mr. Takegahara’s Main Opinions and Proposals
Carbon neutrality is generally discussed
in terms of individual products and individual efforts, but TDK has achieved realcarbon neutrality after building an internationally acceptable framework. This istruly outstanding. To put it another way,
TDK’s positive impact on society in environmental terms grows in proportion to
the spread of its products in society andthe increase in its sales. This is a powerful

message to both investors and society.
In addition, TDK is conducting
M&As. If a company comes under the
TDK Group umbrella, that company also
adopts TDK’s standard environmental
countermeasures, which in turn leads toa curbing of the environmental load in theworld. I think TDK should be more awareof this form of contribution and broadcast
it to society.

This year’s TDK CSR Report clearly reflects the efforts by
TDK to evolve its CSR initiatives from a medium- to longterm perspective to the next stage in the process.
As a case in point, take diversity. It can naturally besaid that TDK has stressed the importance of diversity
over the years. With the fact that further clarification ofthis stance is underscored in the company’s newly formulated TDK Value. Also contributing on that front, thisyear’s report is truly outstanding in content. I particularly
encourage readers to closely examine the section entitled“Thinking about Diversity as a Growth Strategy.” It is pointed out that simply bringing together people of all different
genders, nationalities, and other external traits does notamount to real diversity. Since people are all unique, “Ifyou have two or more people, you have diversity.”
An absolute precedent for diversity to contribute to
growth is said to be “a corporate culture in which all employees think and act with a respect for diversity.” Global
HR Department General Manager Andreas Keller correctly states “consolidating and sharing the ‘One TDK’ spirit.”
Proceeding in that context, I also encourage reading of
the “TDK Progress on the Threshold of Its 80th Anniversary” and the statement of the company’s vision in Vision
2035. That information definitely provides a more accurate grasp of the significance in this vein. The effective
sharing of vision is the underlying premise for diversity tofunction correctly. It is likewise imperative that such vision
be coordinated to stay in close step with the changes of
the company. Such initiatives are precisely what TDK has
implemented this year.
Yet another commendable point of this year’s report
are the efforts to incorporate outside opinions from a wide
range of perspectives, effectively addressing diversity,
nonfinancial information disclosure, the supply chain, andother important topics. With regard to the supply chain,progress can be seen in the issuance of improvement
guidance to 13 suppliers and in other forms. With oneof the next steps in the process consisting of capacity

building, as Mr. Masaki Wada points out, I look forward to
the inclusion of such efforts in upcoming reports.
For the environment, I first want to give high marks tothe achievement of carbon neutrality. The report touches
upon the endeavors undertaken at the Kofu Plant (whichhave proven to be extremely important in supporting
the push to arrive at such neutrality) in its introductionof that unit’s activities: “The Kofu Plant consists of many
divisions, so cross-sectional communication among themwas essential.” The essence of this suggestion is not
limited to the environment, but can definitely be applied
to the full scope of CSR. Such cross-sectional dialogue,
which by its very nature expands beyond divisional lines,
is certainly one of the most vital keys in carrying CSR at
TDK to the next stage in its development.
Next, regarding contributions to the world by technology, it was with great interest that I read the article“TDK’s Vision for Future Society”—and especially thecommentary on technology being applied in the medical and healthcare fields. It is described how sensing
technology can support the mobility of people with disabilities, thereby helping to ease the weight of burdens
involved in nursing care. I was pleasantly surprised by thegreat potential impact of such technology on society. In
that regard, it is obvious that demands will continue to beleveled for unrelenting technical development. Looking
ahead, in the event of the need for institutional improvements when such technology is actually deployed in ourdaily lives, I certainly hope that TDK will play an active rolein the ensuing rule-making process. I say that because
the creation of rules are necessary for linking social technical innovation to the social demands for such advances.
To TDK, I look forward to clear recognition of where
the inadequacies in the company’s in-house CSR initiatives lie. That awareness should then be strategicallychanneled into the mission of fulfilling the social responsibilities consigned to TDK on the road to making Vision2035 a working reality.

Toshihiko Fujii
Consulting Fellow,
Research Institute of Economy, Trade and Industry

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