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Environmental Management Sustainability Report 2007 Status Report on Countermeasures Taken in Response to Air Emission Problems In May of last year, we discovered that air emissions exceeded statutory limits at our Kakogawa Works and Kobe Works. These lapses had a negative impact on the residents living near the works and damaged public confidence in us. We are rebuilding our environmental management system and adopting various policies both to prevent recurrence and achieve stronger environmental control. We will continue to implement the countermeasures and make further improvements. Measures Related to Facilities and Technologies Of the 117 facility- and technology-related countermeasures planned to prevent recurrence of regulatory lapses and ensure the safety of electric power generation at Kakogawa Works and Kobe Works, 73 had been completed as of the end of March, 2007. All of the measures planned for implementation in FY2006 have been completed. We will continue to implement the remaining measures as planned. Status and Overview of Main Countermeasures Renovating the environmental management system Completed in March 2007; new system began operating in April 2007. Automating combustion control in boilers Steadily being implemented; scheduled for completion in March 2009. Improving equipment that delivers desulfurized material to Boiler No. 6 Renovation completed in January 2007. To begin operation after test runs. External desulfurizer at Boiler No. 6 Detailed study completed; scheduled to begin operation in April 2008 Introducing low-NOx burners in boilers and annealing furnaces Steadily being implemented; scheduled for completion in March 2009. Installing desulfurizer in sintering plant Detailed study completed; scheduled for completion in April 2010. Enhancing the cleaning and water-spraying systems Introducing cleaning trucks and adding more rain guns; completed in March 2007. Installing more dust collectors Installation of one new dust collector completed in March 2007; renovation of one dust collector completed. Four additional collectors to be installed by the end of March 2009. Installing anti-dust and anti-wind nets Installation of an anti-dust net on the north side of the Kakogawa Works site completed in March 2007. Installation of a windbreak net on the south side of the materials yard will be completed by December 2007. Improving Equipment That Delivers Desulfurized Material (Coal) to Boiler No. 6 To prevent excessive SOx concentrations at Kakogawa Works, we installed a device that reliably delivers coal in set amounts to the boiler furnace, and added a second wall to the bunker. These steps resulted in greater equipment reliability. Also, because it is now possible to automatically control the proper amount of coal being introduced into the furnace, any abnormality, such as a drop in the flow of coal, can be detected earlier. Anti-Dust Measures Countermeasures are being taken at Kakogawa Works to more tightly seal dust-generating locations and install anti-dust nets. We have also set target values (the values forecast from the countermeasures being taken) for the amount of dust allowed to fall on areas surrounding the works. Sealing locations that generate dust Before countermeasures After countermeasures Before countermeasures After countermeasures Countermeasures for dust on roads Better water sprinkling Introduction of large road-cleaning vehicles Installing anti-dust nets Anti-dust net installed on north side of site Renovating the Environmental Management System To increase the transparency of environmental measurement data that is sent to administrative agencies, we upgraded the environmental management system at Kakogawa Works. The system is now monitored by a third party so that data and programs cannot be changed by Kobe Steel personnel. Also, because the measurement data is processed and stored on a server located at Kakogawa City Hall, we have secured the data's transparency. The system also allows our environmental department in the head office to constantly monitor the data being sent to the Kakogawa city government. Diagram of New System Educational Countermeasures In the wake of the air emission problem, we have implemented the following educational countermeasures. -We've organized "compliance top seminars" aimed at top executives in all Group companies. This helps to raise their consciousness of the environment and provide a source of basic knowledge of the issues concerned. We also sponsor onsite training and e-learning programs for employees at all operating locations. To date, more than 10,000 people have participated in these programs. - Focusing on teaching the importance of environmental management, we have developed education and training programs for each personnel level. Participants have researched applicable laws and precedents, formulated reports and engaged in similar training activities. - For environmental management staff, we hold annual Kobe Steel Group environmental and disaster prevention conferences where participants can share information and improve their competence by reviewing relevant laws, ordinances and pollution prevention agreements. - To raise environmental awareness and increase the number of certified personnel, we require all of our environmental management staff and technical staff that work with equipment that is regulated by environmental laws and ordinances to take the national Pollution Control Manager test. In FY2006, 453 people took the test. - In addition to the educational programs cited above, lectures are held at Kakogawa Works. We also require all Kakogawa employees to make "individual environmental statements," and create workplace discussion groups where they can engage in frank discussions. Similarly, at Kobe Works, the General Manager of the works provides compliance education to managers and auditors and presents lectures. E-learning screen Environmental education and training Compliance Top Seminar Strengthening Environmental Control In the wake of the air emission problem, we have reconstructed our environmental control system and strengthened our environmental control. - The director in charge of Group-wide environmental matters has been given the power to stop facility operation. - To improve coordinated environmental control with operating locations, the environmental department in the head office implements surveys on the status of environmental control at each Company location. - In addition to the written audits conducted in the past, we have secured the participation of outside consultants to organize onsite surveys conducted by the Environmental Control and Disaster Prevention Department and the Audit Department to ensure that operations strictly adhere to relevant laws and ordinances. - The environmental control systems at Kakogawa Works and Kobe Works have been reviewed. At the same time, the environmental control sections were expanded and given the power to stop operations at either location if deemed necessary. In addition, a system is being installed at Kakogawa Works that permits around-the-clock monitoring of environmental data from plants operating inside the Works. - All regulations and operating standards related to environmental control have been completely reviewed. A total of 106 revised or new regulations have been adopted to date at the Head Office, Kakogawa Works and Kobe Works in an ongoing improvement program. Environmental Control and Auditing Actively Disseminating Information to the Public Public Monitoring, and Publication of Environmental Information on our Website 1. Public Monitoring We have installed monitors in Kakogawa City Hall, Harima Town Hall, Hamanomiya, Befu, and other local neighborhood halls in Hyogo Prefecture that provide the public with real-time information concerning overall emissions (hourly emissions of SOx and NOx) from Kakogawa Works. Similar monitors have also been installed for Kobe Works in Nadahama Science Square and Nadahama Garden Baden, where environmental data can be viewed by the public. Public monitor installed at Kakogawa City Hall 2. Website (http://www.kobelco.co.jp/english/about_kobelco/csr/environment/) Every month, we post on our Japanese website environmental data concerning Kakogawa Works and Kobe Works, including monthly average values and monthly maximum values for the amounts and concentrations of air emissions. Examples of information disclosure on website Environmental information on steelworks Example of environmental data disclosure at Kakogawa Works Environmental Hotline for Local Residents We have established toll-free phone numbers for both Kakogawa Works and Kobe Works for public inquiries concerning the environment. The graph below shows the number of calls received and a breakdown of call content by month. Volume of Calls Received on the Environmental Hotline Content of Calls Received on the Environmental Hotline Explanatory Presentations for Local Residents To promote public understanding of our environmental preservation efforts, we give explanatory presentations aimed at local communities and governments. Between July and November, 2006, we gave five presentations in communities surrounding Kakogawa Works and Kobe Works. Similarly, from May 2006 through March 2007, we gave a combined total of 28 presentations to local governments. Reporting the Status of Countermeasures to Relevant Administrative Agencies (As of the end of April 2007) In August and November 2006, and again in April 2007, we held improvement verification conferences with the Hyogo prefectural and Kakogawa municipal governments and posted the results on our website. We also periodically submit reports to the Chubu-Kinki Industrial Safety and Inspection Department of the Nuclear and Industrial Safety Agency under the Ministry of Economy, Trade and Industry (six times), Kakogawa City (seven times) and Kobe City (five times). Regarding Kobe Works, we submitted our final report to Kobe City in May 2007.