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Environmental Management Sustainability Report 2007 Basic Policy and System for Environmental Management The Kobe Steel Group has formulated a Basic Policy for Environmental Management and promotes management that takes the environment into account in all aspects of corporate operation. We have also rebuilt our environmental management system in the wake of the air emission problem discovered last year at our steelworks. Basic Policy for Environmental Management: Increasing Corporate Value Through the Implementation of Sound Group Environmental Management In our quest to be an advanced, environmentally responsible corporate enterprise, the Kobe Steel Group is committed to: 1. Engaging in environmentally friendly production practices 2. Contributing to the environment through products, technologies and services 3. Coexisting and harmonizing with society By these means, we will fulfill our corporate social responsibilities while increasing our corporate value. Diagram of Medium-Term Group Environmental Management Policies Environmental Goals To promote environmentally responsible Group operation, we formulated a Medium-Term Environmental Management Plan that defines six focus areas: 1) thorough commitment to environmentally friendly manufacturing practices; 2) contributing to the environment through our products, technologies and services; 3) disclosing environmental information; 4) coexisting and harmonizing with society; 5) achieving participation of all employees in environmental programs; and 6) thorough pursuit of risk management. Hiroshi Sato Executive Vice President, Kobe Steel, Ltd. Chairman, Environmental Management Committee Strengthening the Foundation of Environmental Management and Steadily Promoting Environmentally Friendly Management Practices Throughout the Group The Kobe Steel Group's Fiscal 2006-2008 Medium-Term Business Plan identifies the following as one of the Group's fundamental policies: Increasing corporate value through the implementation of Group environmental management. Accordingly, we have practiced environmental management on a Group-wide basis in all aspects of our business activities in an effort to reduce the environmental burden we impose, implement measures to counter global warming, and contribute to a healthy environment through our products, technologies and services. In May 2006, however, we discovered that emissions at our steelworks exceeded the regulatory limits. Taking this infraction very seriously, we have strongly committed ourselves to prevent similar lapses from occurring. To that end, we are working as an integrated whole and continually strengthening our environmental control methods, which provide the foundation for environmental management. In this way, we will earn back society's trust. As the Chairman of the Environmental Management Committee, I am personally committed to strengthening the ties between production divisions and environmental control departments throughout the entire Group, and ensuring strict compliance with all laws and regulations. In our efforts to counter global warming, we are of course taking steps to reduce carbon dioxide emissions and will continue to follow our long-term vision of using our technologies and R&D capabilities to find new solutions. We will also continue to focus on raising the environmental awareness and sensitivity of all Kobe Steel Group employees, while striving to be an environmentally advanced corporate group. Group Environmental Management System In the past, the Kobe Steel Group promoted its environmental operations through the Environmental Management Committee. In response to last year's air emission problem, we newly established the Environmental Administration Committee. The Environmental Administration Committee studies the implementation of measures mainly on the air emission incident and the management of environmental policies. The Committee provides provides reports and recommendations to the Board of Directors, as well as to the Executive Council when appropriate. The Committee includes experts from outside the Kobe Steel Group. Meanwhile, the Environmental Management Committee maintains close contact with the Environmental Administration Committee and creates subcommittees dedicated to efficiently studying designated themes, such as global warming countermeasures. Environmental Management Committee (August, 2006) Environmental Administration Committee (March, 2007) Company-Wide Environmental Management System Building an Environmental Management System The Kobe Steel Group has obtained ISO14001 certification, as well as certification through the Japanese Ministry of Environment's Eco-Action 21*1 and the Kobe Environmental Management System (KEMS)*2 of the Kobe Environmental Forum. We are continually and effectively engaged in complying with all relevant laws and regulations, with the aim of improving the environment. Because of the excessive emissions discovered at our Kakogawa Works and Kobe Works, certification at these two facilities was temporarily suspended on May 24, 2006. After we reconstructed our environmental management system and studied and implemented other measures to prevent recurrence, however, certification was reinstated in November 2006. In February 2007, Kobe Special Tube Co., Ltd. received ISO 14001 certification for its Chofu-Kita Plant. Eco-Action 21 certification was obtained by Hanshin Yosetsu Kizai Co., Ltd. in January 2007 and by the Amagasaki Office of Kansai Coke and Chemicals Co., Ltd. and the Kanto Logistics Center of Kobelco Logistics, Ltd. in March 2007. Operating Locations That Have Received Environmental Management System Certification Sector/Company Operating Location EMS Type Date of Certification Iron and Steel Kakogawa Works*3 ISO14001 February 1998 Kobe Works*3 ISO14001 August 1998 Takasago Works*3,*4 ISO14001 March 1999 Welding Ibaraki Plant ISO14001 July 2001 Fujisawa Industrial Operations*3 ISO14001 April 2007 Saijo Plant EA21*1 February 2005 Aluminum & Copper Moka Plant*3 ISO14001 December 2000 Chofu Works*3 ISO14001 March 2001 Daian Plant*3 ISO14001 December 2002 Machinery & Engineering Takasago Works*3,*4 ISO14001 March 2002 Harima Plant ISO14001 June 2002 Machinery & Engineering Head Office ISO14001 June 2002 Technical Development Group Kobe Corporate Research Laboratories EA21*1 First half of 2007 (planned) Group Companies That Have Received Environmental Management Certification Group Company Scope of Certification Type of EMS Date of Certification*5 Kansai Coke and Chemicals Co., Ltd. Kakogawa Plant ISO14001 March 1998 Head Office EA21*1 November 2005 Amagasaki Office EA21*1 March 2007 Kobelco Eagle Marine Engineering Co., Ltd. Kure Plant, Takasago Office (overall certification as Eagle Industry Co., Ltd.) ISO14001 June 2006 Shinko Kobe Power, Inc. Shinko Kobe Power Station ISO14001 August 2002 Shinko Special Tube Co., Ltd. Chofu-Kita Plant ISO14001 February 2007 Shinko Logistics, Ltd. Kobe Office, Amagasaki Logistics Center KEMS*2 February 2005 Marine Transport Department ISO14001 February 2006 Kanto Logistics Center EA21*1 March 2007 Nippon Koshuha Steel Co., Ltd. Head Office, Osaka Branch, Nagoya Branch, Kita-Kanto Sales Office, Toyama Sales Office, Toyama Plant, NK Mex K.K., NK Seisen K.K. ISO14001 October 2006 Shinko Engineering & Maintenance Co., Ltd. Within Kakogawa Works (certified as part of Kobe Steel's Kakogawa Works) ISO14001 February 1998 Within Kobe Works (certified as part of Kobe Steel's Kobe Works) ISO14001 August 1998 Within Takasago Works (certified as part of Kobe Steel's Takasago Works) ISO14001 March 1999 PRO-TEC Coating Company Head Office, plant ISO14001 December 1996 Kobe Welding Wire Co., Ltd. Former Fukuchiyama Plant ISO14001 October 2002 Shinko Taseto Co., Ltd. Certified as part of Kobe Steel's Fujisawa Industrial Operations ISO14001 April 2007 Shinko Welding Service Co., Ltd. Certified as part of Kobe Steel's Fujisawa Industrial Operations ISO14001 April 2007 Hanshin Yosetsu Kizai Co., Ltd. Okayama Plant EA21*1 January 2007 Shinko Kobe Welding Co., Ltd. Head office, Tokyo Branch Office, Nagoya Sales Office, Okayama Sales Office (Certified as part of Shinsho Corporation) ISO14001 October 2000 Shinko-North Co., Ltd. Head Office, Kasumigaura Plant, Tokyo Branch, Osaka Branch ISO14001 July 2005 Shinko Fab Tech, Ltd. Certified as part of Kobe Steel's Chofu Plant ISO14001 March 2001 Shinko Leadmikk Co., Ltd. Head Office, plant (Moji) ISO14001 April 2005 Shinko Daian Sohgo Service Ltd. Certified as part of Kobe Steel's Daian Plant ISO14001 December 2002 Shinko Metal Products, Co., Ltd. Head Office, plant EA21*1 April 2007 Shinko Moka Sohgo Service, Ltd. Certified as part of Kobe Steel's Moka Plant ISO14001 December 2000 Niko-Aluminum Industries, Ltd. Certified as part of Kobe Steel's Moka Plant ISO14001 December 2000 Kobelco & Materials Copper Tube, Ltd. Hatano Plant ISO14001 June 2000 Singapore Kobe Pte. Ltd. Head Office, plant ISO14001 July 2005 EarthTechnica Co., Ltd. Yachiyo Technical Center ISO14001 September 2000 Takasago Plant (Certified as part of Kobe Steel's Takasago Works) ISO14001 March 2002 Kobelco Sanki Service Co., Ltd. Certified as part of Kobe Steel's Takasago Works ISO14001 March 2002 Shinko Techno Engineering Co., Ltd. Certified as part of Kobe Steel's Takasago Works ISO14001 March 2002 Shinko Inspection & Service Co., Ltd. Certified as part of Kobe Steel's Takasago Works ISO14001 March 1999 Shinwa Wood Works, Ltd. Takasago Plant (Certified as part of Kobe Steel's Takasago Works) ISO14001 March 1999 Kobelco Research Institute, Inc. Kakogawa Laboratories (Certified as part of Kobe Steel's Kakogawa Works) ISO14001 February 1998 Shintetsu Laboratories (Certified as part of Kobe Steel's Takasago Works) ISO14001 August 1998 Takasago Laboratories (Certified as part of Kobe Steel's Takasago Works) ISO14001 March 1999 Sputtering Target Division, LEO Division, Applied Chemistry Division, Material Evaluation Division, Electronics Division, Engineering Mechanics Division, Kanmon Laboratories ISO14001 February 2004 Fujisawa Laboratories (Certified as part of Kobe Steel's Fujisawa Industrial Operations) ISO14001 April 2004 Kobelco Construction Machinery Co., Ltd. Development & Production Division (Hiroshima) ISO14001 November 2001 Kobelco Cranes Co., Ltd. Okubo Plant ISO14001 March 2001 Kobelco Eco-Solutions Co., Ltd. Head Office, Technical Research Laboratory, Harima Plant, branches and other operating locations ISO14001 December 1999 Shinko Engineering Co., Ltd. Head Office, plant (Ogaki) ISO14001 February 1999 Shinko Electric Co., Ltd. Toyohashi Plant ISO14001 December 1998 Ise Plant (including Toba) ISO14001 January 1999 Genesis Technology, Inc. Nishiwaki Plant, Tokorozawa Plant, Kyushu Plant, Kobe Office ISO14001 March 2004 Shinsho Corporation All operating locations in Japan ISO14001 October 2000 Shinko Real Estate Co., Ltd. Building Management Dept. KEMS*2 December 2006 *1 Eco-Action 21 is a certification and registration system for environmental management established by the Ministry of the Environment. Based on ISO14001, it provides a more convenient approach to environmental management. *2 The Kobe Environmental Management System (KEMS) was established by the Kobe Environmental Forum to make it easier for companies to take concrete steps to protect the environment while reducing costs. *3 Includes Group companies. *4 Takasago Works received expanded certification in 2002. *5 When multiple sites have received certification, the date shown is the earliest certification date. Fujisawa Industrial Operations Work began in April 2006 on obtaining ISO 14001 certification, which was received on April 26, 2007. Related organizations that fall within the scope of certification include the onsite Welding Company's Technical Development Department and Welding System Department, and four Kobe Steel Group companies: Shinko Taseto Co., Ltd., Shinko Welding Service Co., Ltd., Taseto Co., Ltd. and the Fujisawa Laboratories of Kobelco Research Institute, Inc. With certification, Fujisawa Industrial Operations has become even more closely involved with environmental management issues. Fujisawa Industrial Operations Shinko Special Tube Co., Ltd., Chofu-Kita Plant Full-scale work on obtaining ISO14001 certification began in February 2006. Environmental improvements included the formulation of a list of environmental laws and ordinances, a checklist for emergency situations, and other activities that culminated in the obtainment of ISO14001 certification on February 15, 2007. With this as a starting point, ongoing efforts are being made to improve the environmental management system. Chofu-Kita Plant