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Third-Party Comment and Editorial Postscript

Comments on Reading the Kobe Steel Group's Sustainability Report 2009

Katsuhiko Kokubu
Professor Katsuhiko Kokubu 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 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.
A Firm Resolve to Strengthen Compliance
When I was asked to write this section for the Kobe Steel Group, I had the opportunity to ask Kobe Steel president Hiroshi Sato about the current state and future prospects of the Group's social and environmental activities. Taking responsibility for the inappropriate support that Kobe Steel had given to local council member candidates, the previous president had resigned, which was an extremely weighty and significant event for the company. However, Mr. Sato has shown his determination to make this unfortunate lapse a turning point to bolster a firmer commitment to compliance. It was my feeling that he is genuinely striving to create a corporate culture that is highly sensitive to compliance issues. I am reminded of the air emission incident that occurred several years ago. As a result of the initiative taken by top management at that time, the company has succeeded in achieving an acceptable standard. This makes me very hopeful that a similar success will be achieved with regard to compliance.
Social Contributions During an Economic Crisis
The unprecedented economic crisis that hit last year has had a strong negative impact on companies' CSR activities. Despite this, the Kobe Steel Group has strengthened its program of contributing to society through rugby. Support given to high school rugby players in particular has apparently had an educational effect and represents one way in which companies can contribute to society through investment in the next generation. The Group's efforts to utilize previously unused resources, as described in the Report's special feature, are an example of how the main business activities of a corporation can also result in a beneficial social contribution. This type of advancement ties in with support to developing countries and can be considered very important on a global level. Because the question of how companies can contribute to social development is one of the most important CSR issues, I would like to see the Kobe Steel Group give it priority and promote it within its CSR management system. I believe the key to such an approach will be the creation of a management process that incorporates CSR management goals, targets and evaluations.
Long-Term Vision for Tackling Environmental Issues
The Kobe Steel Group has taken an active approach toward dealing with environmental issues, as evidenced by its response to the air emission incidents, global warming countermeasures, and efforts to recycle resources. To reduce the burden placed on the natural environment, it will become more and more necessary to improve the business processes themselves. The iron and steel industry is a process industry, and it is no simple matter to review and revise the processes used in such a field. However, in order to operate in an environmentally responsible manner that addresses global environmental limitations, it is essential to carry out environmental management practices based on a long-term vision. It is my hope that the Kobe Steel Group will play a leading role in this endeavor.
Efforts to Communicate
This Sustainability Report is a means of communication. In that sense, it's good that it includes the results of the survey that was conducted among readers. Because a steel company maintains a close relationship to the local community in which it operates, I hope that steps will be taken to further encourage two-way communication by creating various opportunities for dialogue, such as community meetings dedicated to reading the Report.

*The Third-Party Comment does not contain opinions concerning the accuracy of the information included in this report.
Editorial Postscript
The 2009 Sustainability Report contains expanded coverage of activities we believe are of interest to our stakeholders, including the strengthening of our compliance system, our relations with customers and business partners, and the consideration we give to the environment when we conduct R&D and manufacture our products. In the special feature at the beginning of the Report, we describe how we have developed effective ways to utilize previously unused resources, such as low-grade iron ore and coal, and introduce some of the Group's unique technologies that enable us to make a positive contribution to society. We have also newly instituted a readers' opinion and evaluation page at the end of the Report with the intent of fostering true two-way communication. We look forward to receiving further frank opinions from readers in our effort to make the Report more comprehensive.

Secretariat and Publicity Department
Kobe Steel, Ltd.