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Environmental Management Sustainability Report 2007 Third-Party Comment and Editorial Postscript Comments Upon Reading the Kobe Steel Group's Sustainability Report 2007 Katsuhiko Kokubu Professor, Graduate School of Business Administration, Kobe University Profile Professor Katsuhiko Kokubu received his doctorate in business administration in 1990 from the Graduate School of Business Administration at Osaka City University. He served as an assistant professor at Osaka City University and Kobe University before assuming his present post in 2001. Specializing in social environmental accounting and environmental administration, he founded the Institute for Environmental Management Accounting, which utilizes his research results. He has served as a member of the Ministry of the Environment's Study Committee on Reforming Environmental Accounting Guidelines, and as the chairperson of the Working Committee on the Development and Dissemination of Material Flow Cost Accounting commissioned by the Ministry of Economy, Trade and Industry. More Complete Information on Management and Organizational Systems One feature of the Kobe Steel Group's Sustainability Report is the inclusion of extensive information concerning corporate governance, compliance, environmental management, and risk management, and other aspects of their management and organizational systems. This can be properly seen as a reaction to the air emission problem that was detected at their steelworks in 2006, reflecting their efforts to strengthen their management system and adopt a variety of countermeasures. Many company officers, including the president, vice-presidents and managing directors, have expressed their views on these matters from their own perspectives, indicating the seriousness with which the Group is addressing environmental concerns. The report includes four pages of detailed explanations concerning the air emission problem and describes the various follow-up measures that have been adopted. It will be important for them to study the results of these measures and to ascertain how their actions are being viewed by local communities. Report of Environmental Performance by Business Segment The report provides information on environmental performance by major business segment, with graphs that make it easy to trace the changes that have occurred over time. A new section has been added in this year's report that provides information on "Material Balance" in the Iron & Steel Sector, which marks a significant advance in environmental performance reporting. Detailed information is provided not just on efforts to combat global warming but also on what steps are being taken to lighten the environmental burden in such areas as air and water quality, noise, odors, and soil quality. One can tell from this that the Kobe Steel Group is genuinely working to reduce its environmental impact on local environments. There are times, however, when a little more detailed information would be helpful. For example, they claim that they are among the most energy-efficient companies in the world when it comes to their manufacturing processes, but this statement would have more impact if it was accompanied by specific figures. Setting Quantitative Targets Although the report makes it easy to understand the conditions surrounding Kobe Steel's environmental performance, there's still room for improvement with regard to setting and achieving targets for the Group as a whole. For example, it explains that the Group is working to achieve industry targets for combating global warming, but it would be nice to see Kobe Steel pursue environmental protection by reestablishing these targets as their own, clarifying the specific steps they are taking to achieve them, and conducting self-evaluations that compare their current status with their goals. Also, because they are releasing information sector by sector, their content would have more immediate impact if the executives in charge of environmental protection for each segment were to add their own evaluations and comments on future prospects. Introducing the Perspective of Materiality Looking at global trends in CSR reports, increasing emphasis is being placed on prioritizing CSR activities. This ranking process is called "materiality," and is becoming the global standard for CSR reports. Looking at the Kobe Steel Group's report from this perspective, it seems that there could be improvement in choosing priorities and ensuring their appropriateness. If we can clearly see how the Group stands on its overall CSR activities, how their efforts reflect social conditions and the needs of stakeholders, and where they are currently focusing their attention, next year's Sustainability Report will have even more value. * The Third-Party Comment does not contain opinions concerning the accuracy of the information included in this report. Editorial Postscript We have strived to make the Sustainability Report 2007 easy to read so that all of our stakeholders can more deeply understand the Kobe Steel Group's corporate activities. Especially with respect to the environmental report, we included a new "Material Balance" section so that readers can get a good overview. Also, as in last year's report, we included the air emissions incident that occurred at our Kakogawa Works and Kobe Works in May 2006, with explanations of the countermeasures we've taken to prevent recurrence. Despite our best efforts, this report no doubt still has shortcomings. We hope readers will share their opinions with us so that we can make further improvements in next year's edition. Secretariat and Publicity Department, Kobe Steel, Ltd.