Holding Basic Distribution Policy Briefings

Participation in White Logistics Movement and Efforts to Improve the Logistics Environment

Toray Industries participates in the White Logistics Movement,¹ an initiative designed to ensure the provision of the stable logistics necessary for consumers’ lives and for industrial activities, while also contributing to economic growth. In line with the declaration of voluntary activities given below, the Company is actively working to improve the logistics environment based on mutual understanding and cooperation with business partners and logistics companies.

1. 1 In response to the growing shortage of truck drivers in Japan, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), Ministry of Economy, Trade and Industry (METI) and Ministry of Agriculture, Forestry and Fisheries (MAFF) are working together to encourage the participation of shipping and logistics companies. The aim is to improve the productivity of truck transportation and raise logistical efficiency, while looking to realize a fairer labor environment, thereby making it easier for women and drivers over the age of 60 to work in the industry.

Initiative	Details
Cooperate with the logistics improvement and proposals	Seriously work on eliminating incidental work, etc. that leads to increased duty hours of truck drivers.
Use pallets, etc.	Expand use of packing styles (pallets, etc.) that enables loading using forklifts to reduce cargo loading time.
Extend lead time	Secure sufficient lead time corresponding to the transportation distance.
Take legal compliance status into account	Give utmost priority to assess compliance status with relevant laws upon selecting logistics companies for signing agreements.
Actively utilize logistics vendors engaged in working style reforms, etc.	Actively utilize logistics companies engaged in work-style reforms, improvement of transportation safety and logistics quality.
Suspend, discontinue, etc. of operation in case of adverse weather, etc.	Give utmost priority to the truck driver's safety in the event of adverse weather, earthquake, etc.

Improving Logistics Productivity by Using Smart Pallets

As part of its White Logistics initiatives, Toray Industries, Inc. is the first in the industry to use smart pallets equipped with active tags developed by UPR Co., Ltd. Typically, pallets must be replaced with different pallets during transportation and storage to prevent their loss or outflow, and the loaded products must be reloaded each time. Smart pallets, on the other hand, do not need to be replaced, since the coming, going, and inventory of pallets can be managed from a distance with the embedded active tags. Adoption of these smart pallets allows Toray’s products to go on the same pallet from production to storage, transportation, and use by the customer. This has eliminated cargo handling work by truck drivers and warehouse personnel, shortened loading and unloading time, improved the working environment, and increased logistics productivity. Moreover, the Company is reducing CO₂ emissions related to pallet recovery by using its packaging materials recovery system to recover empty pallets.
In recognition of the Company’s contribution to reducing the environmental impact and the burden on transportation companies, Toray Industries jointly received, with UPR Co., Ltd., the Special Award in the Fiscal 2020 Green Logistics Partnership Conference Award for Excellent Business Operators.² In fiscal 2021, Toray Industries and UPR jointly received the Sustainable Activity Award in the 22nd Logistics Environment Award³.

1. 2 An award, presented by the Ministry of Economy, Trade and Industry, the Ministry of Land, Infrastructure, Transport and Tourism, and others, that recognizes businesses for their remarkable contributions to the establishment of sustainable logistics systems by reducing environmental burdens in the logistics sector or improving productivity in terms of distribution.
2. 3 An award, presented by the Japan Association for Logistics and Transport, that recognizes groups, companies, and individuals who are contributing to the development of the logistics industry by reducing environmental impact. This includes conducting outstanding environmental preservation or awareness-raising activities, or pioneering technological development in the logistics field.

Various Effects of Toray Industries’ Use of Smart Pallets

Initiative	Effect
・Reduce CO2 emissions related to pallet recovery	83% reduction (by 197 t-CO2/year)
・Reduce product loading and unloading time	75% reduction (by 23,788 hours/year)
・Improve efficiency of office work	100% reduction in work time (by 1,584 hours/year)
・Reduce truck standby time	38% reduction (by 5,947 hours/year)
・Reduce distribution accidents (broken bags)	35% reduction (by 148 incidents/year)

Toray Group is working hard to reduce CO₂ emissions in transport. These initiatives include reducing transport distances, shifting modes of transport to those which have less environmental impact such as sea and rail (modal shift), and raising transportation efficiency.
In fiscal 2021, at Toray Group (only specified consigners⁴ in Japan), CO₂ emissions from distribution activities⁵ were 30,400 tons, up 3,500 tons (13.2%) from the previous fiscal year, due primarily to an increase in transport volume.
Meanwhile, CO₂ emissions intensity⁶ decreased significantly for Toray Industries and Toray Advanced Film due to the fact that the denominator, a relevant transport-related index⁶, rose by more than the CO₂ emissions concerned. The change in Toray Group’s CO₂ emissions intensity was 91.0 in fiscal 2021, taking the fiscal 2014 level (set at 100) as the base, an increase　of 3.9% from the previous fiscal year (fiscal 2020).
In fiscal 2021, Toray Industries’ CO2 emissions from distribution activities totaled 26,800 tons, up 3,100 tons (13.0%) from the previous fiscal year. This increase from the previous fiscal year was primarily due an increase in the transport volume for fiber, textile, resin and film products. It outweighed efforts for full-load transport, increased loading rates and reductions in inefficient transport, which resulted in a 230-ton emissions reduction.
Toray Industries’ CO₂ emissions intensity from distribution activities decreased by 4.0% year on year (from fiscal 2020) because the increase in net sales exceeded the increase in CO₂ emissions. Over the past five years, however, CO₂ emissions intensity decreased an average of 1.3% per year. As a result, Toray Industries is meeting its legal mandate as a specified consigner to reduce energy consumption intensity by an average of at least 1% every year over the medium- and long-term.
Toray Group will continue to seek CO₂ emissions reductions by pursuing environmentally responsible distribution.

1. 4 Toray Industries, Inc. and Toray Advanced Film Co., Ltd., which have annual cargo transport totaling 30 million ton-kilometers or more, are “specified consigners” under Japanese law. In addition, Toray Building Materials Co., Ltd. is no longer designated a specified consigner, which it had been until fiscal 2020, as its total transport volume was less than 30 million ton-kilometers in fiscal 2021.
2. 5 CO₂ emissions from distribution activities refers to “CO₂ emissions related to the transportation of cargo entrusted to freight carriers” stipulated in the Act on Rationalizing Energy Use (Revised Energy Conservation Act)
3. 6 CO₂ emissions from distribution activities ÷ the following transport-related indexes
   Toray Industries, Inc.= Net sales
   Toray Advanced Film Co., Ltd. = Shipping volume
   Specified consigners are required to endeavor to meet the legal mandate to reduce CO₂ emissions intensity by an average of at least 1% every year over the medium- and long-term.

CO₂ Emissions Reduction in Distribution Activities (Toray Industries, Inc.)

Details of initiatives	CO2 Reduction (1,000 tons)
Full-load transport, increased loading rates, and strategic positioning of warehouses, etc.	0.052
Reduction of inefficient transport, revision of inventory storage locations, and loading at the nearest port, etc.	0.178
Total	0.230

Expanding Collection and Reuse of Packaging Materials

Toray Group is establishing a global framework to collect and recycle packaging and shipping materials that are included with products used by customers.
The value of these materials collected by Toray Industries in fiscal 2021 was 720 million yen, an increase of 70 million yen (10.2%) from the previous fiscal year. The volume of the materials collected increased due to the growth in shipment volumes for fibers, textiles and films. In order to reduce the amount of new material purchasing, the Group internally shares information on the inventories of used shipping materials being collected, such as temporary inventories at collection centers.

Toray Industries laid out its commitment to environmentally friendly distribution in its Basic Distribution Policies (established in December 2004), in which it aimed to balance consideration for the environment in the distribution process with better competition achieved by cost-cutting. Toward this end, the Company has actively pursued modal shift (switching from trucks to rail and ship transport). In addition, modal shift is also effective as a measure to address the recent vulnerabilities in truck transport caused by a shortage of drivers. Toray Industries set a modal shift target of 40% to be achieved by fiscal 2022 and has been actively promoting initiatives to achieve this goal.
The modal shift rate for January to December 2021 decreased by 5.0 points from the previous year to 27.1%. With the increase in rail transport demand in Japan in 2021, transport by truck increased due to the difficulty of securing containers for rail transportation and the increase in the number of cases where lead times for rail transportation were unacceptable. Shipping volumes for products that are usually transported over long distances by rail also decreased due to the COVID-19 pandemic.
Toray Group will continue pursuing modal shift in diverse product and materials transport and will work more closely with distribution partners. Through these efforts, the Group will promote environmentally responsible distribution while taking into consideration the environmental impact of the distribution process.

Acquisition of Eco Rail Mark and Eco Ship Mark

Toray Industries implements measures to prevent or minimize the damage caused by natural disasters such as typhoons and heavy rains, which have been increasing in frequency in recent years. It does this by continually investigating and identifying natural disaster risks at external warehouse sites in Japan, and by implementing response measures together with warehouse operators.
In fiscal 2021, the Company ascertained the natural disaster risks at its 44 main external warehouse sites. This was determined based on the structure of the warehouse buildings and the site environments, using tools such as hazard maps issued by the national and local governments. Eight sites were determined to be at high risk, and on-site inspections were conducted to confirm the actual situations. Based on the results of the investigation, Toray made proposals to the external warehouse operators concerned regarding tangible and intangible mitigation measures. The measures were discussed and improvements were made.
In fiscal 2022, Toray will further increase the number of sites to be inspected and continue promoting risk mitigation activities.

Toray Industries is working on a project to improve transport quality. The Company works with distribution partners to improve distribution quality and safety and to reduce the incidence of problems by sharing accident analysis data and distribution quality enhancement reports, conducting on-site inspections and holding quality control meetings with partners. Partners that make outstanding contributions to improving quality are recognized through annual awards⁷ These initiatives are aimed at reducing the number of problems such as those involving breakage, and reducing transport delays and incorrect shipments of Toray products.

1. 7 Distribution-partner companies receiving awards in fiscal 2021 (alphabetical order):
   Kintetsu World Express, Inc., The Sumitomo Warehouse Co., Ltd., Daisei Warehousing & Transportation Co., Ltd., Toto-Soko, Nagahama-Reizou, Nippon Express Co., Ltd., Fukui Logistics Corp., Meiko Trans Co., Ltd., Meitetsu Transportation Co., Ltd., Mitsubishi Logistics Corp., Yamada transport Co., Ltd.

Distribution Incidents

Due to the adoption of straight-through pallet transportation with smart pallets, accidents during pallet transshipping and those caused by defective pallets remained at a low level in fiscal 2021, like in the previous year. However, an increase in the number of shipments compared to fiscal 2020 resulted in a corresponding rise in the number of logistics accidents. While promoting straight-through pallet transportation, Toray Group will continue working with partner companies to improve distribution quality.

Logistics Efforts for Security Trade Control

In order to ensure thorough compliance with security trade controls relating to the export of its products, Toray Industries provides ongoing security trade control training to external warehouses where regulated items are stored. In fiscal 2021, in addition to explaining security trade control measures to eight sites belonging to six companies, important points were highlighted regarding the handling of regulated items, based on past near-miss incidents. Through this training, Toray once again stressed the importance of managing and handling regulated products appropriately.

Recommending that Distribution Partners Acquire Third Party Certification

Toray Industries recommends that its distribution partner acquire external certifications such as ISO 9001, ISO 14001, Green Management Certification⁸ and G Mark.⁹ These certifications require companies to achieve legal compliance, improve quality, and practice environmental conservation in distribution processes. Toray Industries also pursues CSR initiatives in collaboration with distribution partners.

1. 8 Certification is awarded by the Foundation for Promoting Personal Mobility and Ecological Transportation to companies that demonstrate a certain level of environmental improvement activities based on a manual for implementing green management (business management with a low environmental impact)
2. 9 A system that recognizes companies that meet certain criteria and demonstrate excellent safety, based on an assessment by the Safety Evaluation Committee established by the Japan Trucking Association of proactive initiatives for legal compliance and safety recommended by the Ministry of Land, Infrastructure, Transport and Tourism

Yellow Card Emergency Response Measures

Drivers of shipping vehicles carry a yellow card¹⁰ detailing emergency measures to be taken to minimize damage in the event of an accident. Toray Industries has also established an emergency communication system and carries out emergency training. In the unlikely event of such an accident, the Company has procedures in place enabling the necessary staff to be dispatched as swiftly as possible to the accident site for assistance.

1. 10 A Card listing the names of any hazardous substances, applicable laws and regulations, hazardous properties, procedures in case of accident, emergency reporting and contact information, methods for minimizing the spread of damage, and other relevant information.

Initiatives to Prevent Overloading

The overloading of trucks causes vibration, noise, damage to roads and facilities, and also creates driving hazards. Consequently, Toray Industries is putting considerable effort into the prevention of overloading.

Compliance and Security Measures for Importing and Exporting

As a measure to ensure the legality and safety of imports and exports as part of Toray Group's expanding global operations, a US subsidiary of Toray International, Inc. enrolled in the Customs-Trade Partnership Against Terrorism (C-TPAT)¹¹ with the aim of strengthening global supply chain compliance. In order to realize more efficient imports and exports of materials and to strengthen supply chain compliance and security measures, Toray Group is also encouraging its worldwide distribution partners to obtain Authorized Economic Operator (AEO)¹² status.

1. 11 A voluntary program introduced by United States Customs and Border Protection in November 2004. The aim of the program is ensure and strengthen security through the global supply chain, based on international cooperation with private operators importing goods into the US.
2. 12 A status implemented by the EU in December 2006 that gives priority in customs procedures to importers and exporters with a high level of compliance for cargo security. The Japanese Customs Act was also revised in 2007, and a similar qualification system was established to provide priority in customs procedures to highly compliant operators.

Toray Group Logistics Company Acquires “Good Workplace Certification” (FY2021)

“Good Workers Rights Certification Obtained by Toyo Logistic Service”