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Environmental Management Sustainability Report 2007 Relations with Customers and Business Partners To maintain the trust of our customers and business partners, and to ensure that we supply products and services that provide complete customer satisfaction, the Kobe Steel Group has achieved widespread certification of the ISO9000 international standard for quality management systems and implements thorough quality control. We are committed to quickly responding to the diverse needs of our customers. Development and Supply of Reliable, Superior Products and Services The Kobe Steel Group develops and supplies reliable, superior products that meet the needs of our customers. The examples shown below represent a partial list of recent steps we have taken to ensure customer satisfaction. Kobe Steel Facilities Compliant with the ISO9000 Series Facility Name Date of Compliance Kakogawa Works Titanium Plant October 1994 Plate Mill June 1995 Wire Rod Mill December 1996 Sheet Mill November 1997 Kobe Works   March 1997 Takasago Works Steel Casting and Forging Plant January 1994 Titanium Plant December 1999 Steel Powder Plant January 1998 Machinery Plant September 1992 Equipment Plant March 1996 Ibaraki Plant   March 1998 Moka Plant   December 1998 Chofu Works   September 1999 Daian Plant   September 1997 Harima Plant Standard Compressor Plant April 1999 Kobe Steel Group Companies Compliant with the ISO9000 Series Company Name Facility Date of Compliance Kobelco Eagle Marine Engineering Co., Ltd. All March 1994 Shinko Engineering & Maintenance Co., Ltd. All November 1998 Shinko Wire Company, Ltd. Amagasaki Plant July 2000 Onoe Plant February 1997 Ceratechno Co., Ltd. Headquarters, Akashi Plant April 2005 Bizen Plant April 2005 Nippon Koshuha Steel Co., Ltd. Toyama Works January 1996 Kansai Coke and Chemicals Co., Ltd. Kakogawa Plant March 2005 Sakai Steel Sheets Works, Ltd. All (titanium products only) April 2005 Sanwa Tekko Co., Ltd. Inuyama Plant June 2002 Shinko Special Tube Co., Ltd. Chofu-Kita Plant November 1992 Shinko Bolt, Ltd. Headquarters and all branches December 2002 Tesac Wirerope Co., Ltd. All April 1999 Shinko Actec Co., Ltd. Hidaka Plant September 2004 Shinko Welding Service Co., Ltd. Headquarters December 2005 Kobelco & Materials Copper Tube, Ltd. Hatano Plant April 1998 Thailand Plant November 2000 Malaysia Plant September 1996 Sun Aluminium Industries, Ltd. All September 1999 Shinko-North Co., Ltd. All June 1999 Shinko Metal Products Co., Ltd. All April 1995 Niko-Aluminium Industries, Ltd. One dept. at Moka Plant December 1998 Shinko Leadmikk Co., Ltd. All April 2000 Shinko Inspection & Service Co., Ltd. Headquarters December 2005 Kobelco Research Institute, Inc. Applied Chemistry Division January 2003 Material Evaluation Division January 2003 Electronics Division January 2003 Engineering Mechanics Division January 2003 LEO Division January 2003 Kanmon Laboratories January 2003 Sputtering Target Division February 2003 Kobelco Construction Machinery Co., Ltd. Hiroshima Plant February 1998 Kobelco Cranes Co., Ltd. Okubo Plant December 1998 Kobelco Eco-Solutions Co., Ltd. Headquarters February 1997 Harima Plant October 1996 Technical Research Center February 1997 Shinko Engineering Co., Ltd. Main plant, all branches December 1995 Shinko Electric Co., Ltd. Toyohashi Plant July 1995 Ise Plant June 1995 Genesis Technology Inc. Nishiwaki Plant November 1995 Tokorozawa Plant February 1997 Kyushu Plant May 2002 Japan Superconductor Technology, Inc. Seishin Plant July 2005 Educational Materials on Welding Techniques Win Minister of Health, Labour and Welfare Award Welding requires a high degree of technical skill. As experienced welders grow older, the need has emerged for educational programs that will help to transmit this skill to the next generation. Kobe Steel and Shinko Human Create worked together to develop practical teaching support materials that provide practical instruction on basic movements, operations and applications for covered arc welding to novice welders. These materials won the Minister of Health, Labour and Welfare Award at the 2006 National Vocational Training Materials Contest. Using moving images and illustrations, they explain the correct, practical welding process and highlight commonly made mistakes. Receiving the Minister of Health, Labour and Welfare Award World's Strongest Aluminum Alloy Kobe Steel has developed a new aluminum alloy with a tensile strength of 780MPa. This is not only the strongest aluminum alloy in the world, but also in the top class for specific strength* among metal materials. Furthermore, it has 1.4 times the formability (ductility or breaking elongation) of high-strength titanium alloy or maraging steel. Although still in the development phase, we are aiming to establish the manufacturing technologies needed for mass production to supply the market with this lightweight, strong, and easily processed aluminum alloy. * Specific strength: The value derived by dividing strength by density. The higher the value, the greater potential for reducing weight. Sample bars made of new aluminum alloy World's First Coated Steel Sheet That Effectively Combats Sick House Syndrome With the higher functionality and greater diversity of interior materials used today, coupled with more tightly sealed construction, there's been an increase in the emiisions and accumulation of formaldehyde in modern buildings, leading to "sick house syndrome." To alleviate this problem, Kobe Steel has developed Kobe Precoat Air Breeze, the world's first prepainted steel sheet designed specifically to absorb and dissolve formaldehyde. Intended as an interior material, it is used to make such elements as partitions, doors, and ceilings. High Strength Hot-Dip Galvanized Steel with World-Class Formability for Automotive Applications In the auto industry, two seemingly conflicting needs have become increasingly apparent: the need for greater structural strength to enhance passenger safety and the need for lighter weight to reduce the burden on the environment. In this context high tensile-strength steel has become an essential material for the car frame. Unfortunately, increased strength is usually accompanied by a loss in formability. Kobe Steel has overcome this drawback by using a new hot-dip galvanizing process that allows the introduction of new chemical elements that ideally control the metallic structure and dramatically improve formability. Rapid, Flexible Response to Customer Needs To provide our customers with timely information, we have promoted the use of IT to facilitate information sharing among our various divisions (sales, manufacturing, technology, quality assurance, etc.). In the Iron and Steel Sector, for example, we have introduced a comprehensive database system that promotes information sharing between the production and sales divisions, and a web-type process computer that facilitates communication between manufacturing plants and production control departments. Similarly, the Machinery & Engineering Company uses the Q-Net system to share customer concerns and complaints with all relevant parties to provide rapid feedback to product development departments. Through these and other activities, we can rapidly and flexibly achieve our corporate goals of developing and supplying reliable, superior products and developing technologies and products that are appropriately tailored to different regions and countries, while continuing to raise our customers' satisfaction level. Diagram of Kobe Steel's Comprehensive Database System and Web-Type Process Computer Pursuing Appropriate Export Operations Kobe Steel is committed to the pursuit of appropriate export operations. In particular, we have formulated "Trade Management Program Regulations to Ensure Safety (Shinko Program)," which provide the foundation for our export activities. Based on these regulations, we strictly adhere to restrictions on the export of products that have the potential for military use through rigorous in-house monitoring, and confirm customers' use of our products in compliance with the "Catch-All System" introduced by Japan's Ministry of Economy, Trade and Industry in April 2002.* Kobe Steel is the focus of these efforts, which are also disseminated throughout all of the companies in the Kobe Steel Group. Each Group company creates its own system for ensuring the safety of its trading practices and the appropriateness of its export operations in accordance with the specific content of its business. We also promote complete employee understanding of the EU's Restriction of Hazardous Substances Directive (RoHS), which came into force in July 2006. In addition, we encourage employees to raise their awareness of export safety issues through "e-learning" and other programs, while continually nurturing a keen sense of international trends. * Catch-All System: A system that restricts the export of any goods or technologies that are known to have potential use in the development of weapons of mass destruction, or concerning which the exporter has received notification from the government restricting export. Material Procurement Policy Kobe Steel undertook a complete revision of its purchasing rules for all Group companies in FY2004 to ensure that it meets social obligations for environmental protection and stricter compliance requirements. Our purchasing rules state that procurement activities must be sensitive to relevant social developments and requirements, and must take into consideration environmental protection and the conservation of resources. When quality is unlikely to be compromised, efforts should be made to procure products that have minimal environmental impact, such as recycled materials. In keeping with this policy, Kobelco Green Procurement Guidelines are applied to the purchase of paper and other stationery products, as well as computers and other office equipment. For example, criteria for selecting stationery products include a high percentage of recycled content and a lower level of whiteness. For computers, criteria include low energy consumption during use, automatic stand-by or shut-down mode when left idle for a certain period of time, low energy consumption in stand-by mode, and the incorporation of recycled plastic. For copiers, criteria include low energy consumption during use, and the ability to reuse and recycle parts after the copier's service life has ended. Overseas Production With a policy of "meeting local needs locally," the Kobe Steel Group has actively promoted overseas production since the 1960s. As part of this policy, we bolster local facility capacity in response to customer needs and pursue the development of technologies and products that are tailored to the regions and countries in which we operate. Global Supply Network for Steel for Suspension Springs Japanese automakers operate factories in many countries throughout the world and need a stable supply of high-quality steel material. To meet this need, Kobe Steel has licensed its technology to steel makers in North America and Europe for the production of its suspension spring steel. Through this arrangement, we have established a supply network in Japan, the United States and Europe that meets the global procurement needs of our automotive customers. Boosting Production of Aluminum Forgings for Use in U.S. Automobile Suspensions Kobe Aluminum Automotive Products LLC (KAAP) was established in Kenucky, USA in May 2003 to make aluminum alloy forgings used in the suspensions of vehicles manufactured in North America. Beginning production in June 2005, it has operated efficiently with an output of 190,000 forgings per month. Because of concerns that production capacity would be inadequate by the first half of fiscal 2008, however, we are making additional investments with the aim of ensuring a stable supply to satisfy growing demand. In April 2008, KAAP's production capacity will increase to 280,000 forgings per month. KAAP opening ceremony Chinese Production of Welding Robot Systems   China is expected to continue its infrastructure development at a rapid pace. Our automatic welding robot systems join steel sheet and plate used in a wide variety of equipment and structures necessary for infrastructure development, including construction machinery, steel frames, railway cars, and bridges. The high efficiency of these systems makes them highly attractive in an environment of increasing interest in high-quality, stable welding processes that conserve energy. Kobe Steel already has an affiliate in China called Kobe Welding of Tangshan Co., Ltd., which was established in a joint venture with China's Tangshan Kaiyuan Electric Co., Ltd. Our newest project is the establishment of a business collaboration agreement with Tangshan Kaiyuan Auto Welding System Co. Ltd., which is a member company of the Tangshan Kaiyuan Electric Group, to manufacture, sell and service welding robot systems. Plans are in place to jointly establish a local maintenance system that will meet the growing needs of customers. Signing of collaboration agreement