Komatsu

Report
2021
Contents

A Century of Creating the Workplaces Resolution of ESG Issues through

of the Future Growth Strategies
01 Our Brand Promise 38 Komatsu’s CSR Themes and Mid-Term
02 Our Identity Management Plan KPIs
04 Brand Promise as Explained by Global 40 Enhancing Quality of Life
Officers –Providing Products Required by Society
–Creating value together 44 Developing People
06 100 Years of Komatsu 46 Growing with Society
–History of Resolving Issues in Response to –Social Contribution Activities
Social Needs 50 Message from an Outside Director
08 Overview of Business 52 Corporate Governance
10 Komatsu’s Strengths
–In-House Development and Production of
Components Corporate Profile
–Linking every Workplace through IoT 64 Directors and Audit & Supervisory Board
–Global Production System Members
13 Business Segments 68 11-Year Summary
70 Non-Financial Highlights
71 External Evaluations and Index Inclusion
Top Management’s Views on Komatsu’s 72 Corporate Information
Management Issues and Strategies for 73 About Komatsu Report
the Next Century
14 Message from the President
20 Message from the CFO

Evolution of Business Model for

Creating the Workplaces of the Future
26 Special Feature : Komatsu’s Vision for the Cautionary Notice regarding Forward-Looking
Workplace of the Future Statements
This report contains predictions, plans, forecasts, and other
–Komatsu Future 203X
forward-looking statements that have been judged by
–Collaboration with Partners for
management to be rational based on the information avail-
Accelerating Creation of Workplaces of the
able at the time of publication. Factors that may cause
Future actual results to differ materially from those predicted by
–Pursuit of 2050 Carbon Neutrality such forward-looking statements include, but are not limited
34 Mid-Term Management Plan to, changes in economic conditions or product demand in
(FY2019–FY2021) major markets, foreign exchange rate fluctuations, domestic
DANTOTSU Value or overseas regulatory revisions, or changes to accounting
FORWARD Together for Sustainable Growth standards or practices.

Reporting Period: April 1, 2020–March 31, 2021

•T  his report also includes information on activities after the reporting period in order to provide readers with the latest
information.
• “ FY2020” refers to the period from April 1, 2020 to March 31, 2021, unless otherwise noted.

Editorial Policy
Komatsu Report 2021 was published for the purpose of providing clear explanations for all stakeholders on
Komatsu’s medium- to long-term business strategies and the virtuous cycle generated as the Company
resolves environmental, social, and governance (ESG) issues through its business. In preparation of this
report, we referenced the International Integrated Reporting Framework released by the International
Integrated Reporting Council and the Guidance for Integrated Corporate Disclosure and Company-Investor
Dialogue for Collaborative Value Creation: ESG Integration, Non-Financial Information Disclosure, and
Intangible Assets into Investment released by the Ministry of Economy, Trade and Industry.
A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

A Century of Creating the Workplaces of the Future

Our Brand Promise

Our Brand Promise 

“Creating value together” is the promise Komatsu makes to its customers and all other stakeholders.
Together with you, we can new value and work toward a sustainable future. The emphasis on “together”
indicates the importance we place on partnership.

Our Story 

Our roots stretch back more than 100 years to a lush forest near Komatsu City in
Ishikawa Prefecture, Japan that was once home to a copper mine vital to the sur-
rounding community. The mine’s closure in 1920 could have meant the end for
community residents dependent on the jobs, but instead it was a new beginning.

The owner of the mine and our founder, Meitaro Takeuchi, was an entrepreneur
with an extraordinary humanitarian vision, committed to enhancing the commu-
nity’s quality of life, developing future generations and growing with society.
Meitaro Takeuchi,
Determined to bring industrial technology to his country, Takeuchi created a new
Founder
company by nurturing the skills of the people in the local community.

Takeuchi’s vision and strong guiding principles stood the test of time. Through the years, Komatsu’s contin-
ued investment in core capabilities and strategic acquisitions have connected smart, diverse people and
cutting-edge technologies with a shared belief that partnerships are the best way to solve challenges and
meet society’s needs.

As the world grows and evolves, the people who power modern society and develop the world’s infrastructure
count on partners they can trust to empower them and create value.

Web Komatsu 100 years of “creating value together”

https://www.youtube.com/watch?v=q6nbmp5tFwM&t=0s

Yusenji Coal Mine, Komatsu’s

predecessor

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 A Century of Creating the Workplaces of the Future

Our Identity

01 Our Identity
Komatsu has defined its corporate identity by reflecting on its corporate growth built by its forerunners and its relations with society.
Specifically, Komatsu has articulated its mission and vision as its purpose, together with its values. The corporate identity also incorpo-
rates pieces that have been created over the Company’s history: founding principles, The Komatsu Way, Komatsu’s Worldwide Code of
Business Conduct, and strategies including the mid-term management plan. As our business and stakeholders diversify further, we will
strive to deliver this promise through our global operations.

Our Identity 

Our Purpose 

Creating value through manufacturing and technology innovation

to empower a sustainable future
where people, businesses and our planet thrive together.
Our history has been a century of facing and overcoming challenges, and “manufacturing and technology innova-
tion” has been at the heart of all the things we do at Komatsu. As we enter our new centennial, we will continue to
uphold this spirit as we continue to create value together with our partners.
With this spirit we aspire to help create a future where people lead safe, healthy and peaceful lives in harmony,
enabling us all to thrive together.

Concept of Values 

Ambition Perseverance Collaboration Authenticity

With a Even when the Creating value To earn and
“challenging spirit” work is difficult, we comes from maintain trust, we
and without fear of remain committed teamwork, always act with
failure, we innovate to our promises inclusion, respect, sincerity, integrity
and always aspire and reliably carry diversity and a and honesty,
to do more them through win-win approach and communicate
to completion to all relationships with transparency

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 A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Our Strategy and Action 

Strategy

Management Principle

Management Corporate Social

Strategy Responsibility
ation Authenticity
e comes To earn and maintain trust,
, inclusion, we always act
sity and a with sincerity, integrity Founding Principles The Komatsu Way Worldwide Code
oach to all and honesty, and of Conduct
hips. communicate transparently.

Action

Management Principle

Management Principle shows our basic stance regarding business administration.

Management Strategy
Our current mid-term management plan is DANTOTSU Value – Forward Together for Sustainable
Growth (FY19-21), envisioning safe, highly productive, smart and clean workplaces of the future.

Corporate Social Responsibility

We believe that our very business is Corporate Social Responsibility. The work that we do directly
supports the growth and improvement of our communities and society in general.

Founding Principles
“Global Expansion,” “Quality First,” “Technological Innovation,” and “Employee Development.” These
are the founding principles laid out by our founder, Meitaro Takeuchi (1860-1928), and they continue
to be upheld by our organization to this day.

The Komatsu Way

The Komatsu Way was developed to convey our shared values and practices across different c
­ ultures,
customs and generations.

Komatsu’s Worldwide Code of Business Conduct

Compliance with the rules of business community is considered a top priority at Komatsu. The rules
are not limited to laws and regulations but also include rules that are generally recognized and
respected in society.

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 A Century of Creating the Workplaces of the Future

Brand Promise as Explained by Global Officers—Creating Value Together

Pursuit of a Sustainable Society Together

Kiyoshi Mizuhara The founding of Komatsu 100 years ago was unique in that the purpose
Director and Senior Executive Officer was to sustain the local community and to make it a hub of economic
Chief Marketing Officer (CMO)
President, Construction Equipment
growth. Meitaro Takeuchi, our founder, already knew that talent and technol-
Solution Division ogy were the keys to producing quality, which he was determined to bring to
the global market.
Since those days, our operations have grown extensively but the found-
ing principles serve us to this day. At the same time, as our relationship with
customers, distributors, suppliers and other stakeholders grew, a deep
appreciation of working in partnership was born. We know that we owe our
insights and expertise to the people who work together with us to enable a
better and sustainable future.
In this anniversary year, we established our identity, articulating our mis-
sion, vision, and values, and integrating the Management Principle, The
Komatsu Way, and other existing strategy and action items. Guided by our
identity, we will work globally to deliver our brand promise of “Creating value
together.”
Thank you for choosing us to be your partner in creating a future where
people, businesses and the planet thrive together. With the belief that we
are stronger, wiser, and better together, we look forward to continuing with
you on this journey of creating value together.

02
Brand Promise as Explained by Glo

Creating valu
Globally Unified Komatsu Global Officer
The launch of our new Brand Strategy is an exciting and hugely motivating
initiative that unites all Komatsu employees toward a sustainable future. Our
Michael Blom
brand promise, “Creating value together,” is a single unifying statement that
Executive Officer
embodies who we are as a company and what we strive to achieve, in busi- President & MD,
ness and the world we live in. With a foundation forged over 100 years behind Komatsu South Africa (Pty) Ltd.
us, we now look toward the future and create a truly sustainable tomorrow
—together!
As a global unified Komatsu, our core values, Ambition, Perseverance,
Collaboration and Authenticity, will define and guide us over the next 100
years as we deliver on our promise to bring value to all our stakeholders in the
most sustainable and authentic way.
We are committed to living these values in all that we do—having a
­challenging spirit, persevering through tough times, collaborating with all our
stakeholders, and always being authentic and true to ourselves. We are
excited and committed to Creating value together and are extremely proud to
be part of the One Komatsu family!

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 A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Global Officer
Path for Success in the Next 100 Years
A brand is much more than just a logo on our buildings or our shirts. It’s Rodney Schrader
really a promise we make to every stakeholder about the experience they Senior Executive Officer
Chairman & CEO,
can expect when working with us. It’s the experience on our websites, in Komatsu America Corp.
every customer meeting and in how we use our data. Our brand is present
every time someone sees our logo, wears our merchandise, visits our parts
counters, operates our machines or talks to us on the phone.
If you think about it, a brand is created by employees, who live and emu-
late the brand through all their interactions and through the products, ser-
vices and solutions they create and support.
For me, Komatsu’s brand is about collaboration and partnering with our
customers for a high-value, seamless experience with us that creates a
feeling of connection and belonging they can rely on. By clearly establishing
our brand promise, strategy and standards in our centennial year, I believe
we’ve set an even more compelling path for success in the next 100 years.

obal Officers

ue together
Globally Consistent Brand Strategy
As our operation became more and more global and diversified, it was necessary to define and create
a consistent brand strategy globally. On the occasion of the 100th anniversary, we took the opportu-
nity to clarify our identity in a way that is easy to grasp. Through our new branding strategy, we will be
able to better express our values to our customers as well as to stakeholders.
We will refocus our commitment to our founding principles, “Global Expansion,” “Quality first,”
“Technological Innovation,” and “Human resource development,” with a renewed consistency in our
communication. The Komatsu Way shows us how to understand our customers and become a reli-
able partner that moves forward together with them. As a management strategy, we will continuously
seek to create safe, highly productive, smart and clean workplaces of the future.
With a challenging spirit, a teamwork approach, sincerity and commitment, we promise our
­stakeholders to “create value together” to empower a sustainable future for people, businesses and
our planet.

Global Officer

Göksel Güner
Chief Operating Officer, Komatsu
Europe International N.V.

Komatsu Report 2021 5

 A Century of Creating the Workplaces of the Future

100 Years of Komatsu—History of Resolving Issues in Response to Social Needs

100 Years of Komatsu

History of Resolving Issues in Response to Social Needs
1921 Development of agricultural
Founding aspiration:
Challenge tractor for the first time in Challenge Challenge for global quality
Engage in meaningful work to benefit Japan
the nation
Komatsu Ltd. was established from Komatsu
1931 1961
Produced Japan’s first tractor Project “A” to meet the industry giant’s
Iron Works Ltd. (est. 1917), which manufac-
In response to a request market entry
tured mining machines, developed by Meitaro
Takeuchi, founder of Komatsu Ltd., for use in from the Ministry of In the 1960s during the
the Yusenji copper mine. Based on a firm belief Agriculture and Forestry, internationalization of
that developing the machinery industry in rural Komatsu took on the Japan’s economy, the
areas and promoting its growth, as well as challenge of developing a world’s largest construc-
looking to transcend national boundaries with farm tractor in Japan. tion equipment manufac-
high-quality products, Meitaro Takeuchi began While competitors gave turer decided to enter the
manufacturing at Komatsu Ltd. with an eye to up this challenge at the Japanese market. In order
international markets, even when he founded prototype stage, Komatsu continued its efforts with to compete against this strong rival, Komatsu under-
Komatsu. The next year, Komatsu absorbed a strong commitment to developing a unique took the Project “A” quality improvement project with
Komatsu Electric Steel Mills, building the product that others could not imitate, and finally a Company-wide commitment to improving every-
foundation for integrated production from completed Japan’s first tractor. Subsequently in thing, including a single screw, and developed a
steel castings to machining and assembly, 1932, Komatsu released the “G25 tractor” high-quality vehicle for mass production within about
which has resulted in one of Komatsu’s equipped with its own newly developed engine as only two years. In the process, Komatsu introduced a
strengths today. an improved version of the product. quality control (QC) method ahead of competitors.
The idea of incorporating QC in the manufacturing
process has been passed down through the genera-
Meitaro’s Guiding Principles
tions to the company of today.
• Global Expansion
• Quality First • Increased the level of our • Achieved global quality on par
• Technological Innovation technologies with a U.S. manufacturer,
• Employee Development Value Built the foundation for devel- Value contributing to customers’
Meitaro Takeuchi, Founder oping and producing con- improvement of their work-
struction equipment in Japan place productivity

History of Consolidated Global Management

Net Sales and Demand for 7 Major Products
(Demand, Units)
600,000
■ Japan ■ North America ■ Europe ■ Other ■ China ■
Consolidated net sales (right scale)

1999
Komatsu Cummins Chile and
Komatsu Middle East
450,000
1997
Komatsu Southern Africa

1995
1989
Bangkok Komatsu
Komatsu Europe International

300,000
1988
Komatsu Dresser
1971
1982 1985
Komatsu Singapore
Komatsu Indonesia Komatsu UK
1970 1978
Komatsu America Komatsu Australia
1977
150,000
Komatsu Brasil
1967
Komatsu Europe

0
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Competition with Foreign Companies Expansion of Exports Expansion of Overseas Production

Diversification
6 Komatsu Report 2021
 A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Improvement of overseas sales and Solutions for worksite

Improvement of produc-
Challenge service operations. Establishment of Challenge Challenge problems, such as labor
tivity and safety of mining
overseas production operation shortages and safety

1967  .V. Komatsu Europe S.A:

N 2008 2015
Komatsu’s first overseas subsidiary Succeeded in the world’s first com- “Smart Construction”:
1975 First offshore production in Brazil mercial deployment of the Creating a workplace of the future
Autonomous Haulage System (AHS) “Smart Construction” is a
Pursuing higher levels of quality and reliability in its products,
Komatsu led the world solution service that
Komatsu steadily grew exports centered on large-scale bull-
by deploying the AHS create safe, highly pro-
dozers. N.V. Komatsu Europe S.A., Komatsu’s first overseas
at a copper mine in ductive, smart and clean
subsidiary in Belgium, was established in 1967 for the purpose
Chile. By equipping construction sites of the
of enhancing overseas after-sales services. The years that
dump trucks with a future by connecting all
followed saw the reinforcement of our export foundation
high-precision GPS, kinds of data available at
through the establishment of numerous overseas subsidiaries,
an obstacle detection construction sites through the use of ICT. By
including Komatsu America Corp., Komatsu Singapore Pte. Ltd.,
sensor, and a variety of controllers for the fusing the 3D terrain data obtained by using
and Komatsu do Brasil Ltda. We began producing our first
central management of their operation in the drones with ICT construction equipment,
made-overseas bulldozers in Brazil in 1975. We proceeded to
main control room, Komatsu achieved Komatsu has increased the efficiency of the
augment our overseas production network, setting up produc-
24-hour unmanned operation of the dump process, from surveying to inspection, and
tion bases in Indonesia in 1982, in the United States and the
trucks. The AHS contributes to substantially has also “visualized” the process, thereby
United Kingdom in 1985, and in Thailand, China, and India in the
increasing on-site productivity and safety contributing to the solution of problems at
1990s. These bases furnished a global production platform for
and solving the issue of labor shortages. construction sites.
hydraulic excavators, dump trucks, wheel loaders, and other
major products.

• Built overseas distributor networks and • Improved safety, • Achieved optimization of

achieved the provision of global quality reduced costs, and construction while striv-
Value • Expanded local contributions through Value alleviated operators’ Value ing for “safe, highly pro-
human resource development and burden at customers’ ductive, clean and smart
employment around the world mining sites workplaces of the future”

2017
Komatsu Mining
(Net sales, Billions of yen)
3,000
2006 Web eBook offering more information on the
Komatsu India and 100 years of Komatsu
Komatsu CIS https://www.komatsu.jp/en/com-
2001
Komatsu (China) pany/history/ebook/HTML5/
pc.html#/page/1
2,250

Web Re-opening of Komatsu no Mori

museum for nurturing children together
with the community
https://www.youtube.com/
watch?v=vWnddb9Ux3E
1,500

750

0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Year)

Selective Focus and Global Consolidated Management

(DANTOTSU Product → DANTOTSU Service → DANTOTSU Solution)
Komatsu Report 2021 7
 A Century of Creating the Workplaces of the Future

Overview of Business

In the pursuit of sustainable growth, companies are expected to build robust yet flexible earnings structures that respond
to changes in the operating environment while addressing the increasingly more important ESG issues. With the strength
of the manufacturing platform it has forged over the years, Komatsu will respond to social needs by linking customers,
distributors, partners, and communities and all Komatsu workplaces through its DANTOTSU excellence.

Major Inputs Research and Development Procurement and Production

Production / Logistics Business Activities and Strengths (Construction and mining equipment operations)
Komatsu production bases: 81*
Parts distribution bases: 42*
* As of April 1, 2021
Capital investment: ¥86.1 billion

Intellectual Properties
Development bases: Nine mother • In-house development and produc- • Collaboration with suppliers (Midori-
plants and Asia Development Center tion of key components kai) enabling the following:
R&D expenses: ¥73.8 billion underpinning product performance
1. “Monozukuri” (improvement of
(3.4% of net sales) (engines, hydraulic components, power product quality, reliability, and
Utilization of information: Equipment trains, etc.) P.10 competitiveness)
with Komtrax: Approx. 650,000 units 2. Stable supply of high-quality
• Accelerated technological innovation
achieved by merging core Komatsu materials
• Linking plants (visualization) utilizing
Human Resources technologies with external insight
ICT P.11
(Open innovation) P.26
Number of consolidated employees: • Cross-sourcing: Flexible global pro-
• Digital transformation P.32
61,564 duction and procurement systems that
• Product development systems tailored are resilient to demand and foreign
to global market needs exchange fluctuations P.12
Partners • Mother plants structure enabling
Machine population over past 10 improvement of QCD (Quality, Cost,
years: Approx. 570,000 units* Delivery)
* Estimate of construction equipment operational at • Skill transfer and TQM (Total Quality
customer workplaces based on aggregate 10-year Management)
sales volumes
Sales and service distributors: 205
distributors in 144 countries
(construction, mining and utility
­equipment business) Climate change impacts—Total CO₂ emissions: 22.1 million tons
Suppliers: Approx. 2,700
Shareholders: 184,661
Initiatives for Resolving ESG Issues

Environment Enhancing Quality of Life

—Providing Products Required by Society—
Energy use: 7.8 PJ
Including renewable energy use: 0.7 PJ
Note: 1 PJ (petajoule) = 1015 J (joules)
Water use: 3.2 million m3
Steel (iron) use: 999,000 tons Developing People

Finance
Consolidated net sales: ¥2,189.5 Growing with Society
billion
Operating income: ¥167.3 billion
Free cash flow: ¥191.0 billion
Total assets: ¥3,784.8 billion
Responsible Corporate Behavior

Note: Amounts are either for FY2020 or as of March 31,

2021, unless otherwise noted.

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Operations at Customer Workplaces Product Cycles

Products Services Solutions

• DANTOTSU • Enhancement of maintenance Construction equipment • Global supply of

Product: Unrivaled contract services •S
 mart Construction high-quality used
products in terms
of environment,
• Improvement of QCD (Quality,
P.11 P.32
equipment, etc.
Targets
Cost, Delivery) achieved • Remanufacturing
safety, ICT capaci- through close alignment of Mining equipment and rebuilding* for FY2021
ties, and sales forecasts and produc- • Autonomous
productivity P.33
tion of spare parts Haulage System
• Full lineup of
Accomplishment
Construction equipment * Systems for selling used
P.8
construction and • Utilization of information engines, transmissions,
mining equipment and other components

• Product creation
acquired through Komtrax
P.11
that have been repaired to
be of the same quality as
of targets of
focused on quality
and reliability
Mining equipment
• Utilization of information
new products
Mid-Term
acquired through Komtrax Plus Management
• Detailed support from directly
owned distributors Plan
“DANTOTSU Value—

• Global distributor network FORWARD Together for

• Cultivation of distributor personnel • Brand management Sustainable Growth”

CO₂ emissions from product use: 19.0 million tons (86% of total) Pursuit of
Ongoing Growth
Over the Next
100 Years

P.44

The Komatsu Way P.44

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 A Century of Creating the Workplaces of the Future

Komatsu’s Strengths

In-House Development and

01
Komatsu’s Strengths

Production of Components
Komatsu develops and produces major components in-house. Through this approach, the
Company is able to generate technological innovation while improving the durability and
reliability of components. We are convinced that a dedicated focus on components will
enable us to further heighten the functionality and quality of these components and ulti-
mately reach new pinnacles of customer satisfaction. This conviction will continue to guide
the evolution of Komatsu components.

Benefits of Komatsu’s Approach Toward In-House Development and Production of Components

1. Ongoing technological innovation

2. Stable, global supply of components with standardized quality that is not affected by demand
fluctuations
3. Ability to develop component restoration businesses (please see page 33).
4. Predictive maintenance capacities achieved by attaching sensors to components

Major Components

Engine Powertrain Hydraulic Equipment Electronic Device Power Electronics

• Transmission • Pump • Controller • Power generator motor

• Torque converter • Motor • Monitors • Capacitor
• Axle • Valve • Sensor • Inverter
• Swing motor • Cylinder
• Final drive

Sources of Components Used in Mid-Sized Hydraulic Excavator

Controller
Cylinder Monitor Cab
Sensor/Antenna
Main valve

Main pump
Arm, Boom, Bucket

Engine

Radiator

Exterior

A: Components supplied from Japan

Revolving frame
B: Components purchased in centralized manner from global market Swing circle Track shoe/roller Final drive
C: Components procured locally Track frame

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Linking every Workplace

02
Komatsu’s Strengths

through IoT
A deep understanding of workplaces can cast light on various issues, and these issues
must be addressed through innovation. Komatsu has continued to pursue such innovation
by linking workplaces through IoT.

World of Linkage through IoT

1. Komtrax Komatsu began its quest to track construction equipment information with IT in the late 1990s. This
quest led to the development of the Komtrax construction equipment operation management system
Tracking of Construction in 1998. This system collects GPS positioning information and operation information to be confirmed
Equipment Information remotely. As of June 30, 2021, Komtrax was installed on 650,000 pieces of equipment around the
world. Komtrax supplies information that helps customers improve productivity, such as that pertaining
to position, operating time, equipment abnormalities, and fuel consumption, and can be used to
manage equipment from locations removed from workplaces. Moreover, installing Komtrax makes it
possible for Komatsu to continue providing customers with support throughout the entire lifespan of
their equipment through means such as proposing the ideal timing for part replacements and mainte-
nance and facilitating trade-ins of used equipment. In 2021, Komtrax was updated for the first time in
20 years to improve its functionality with new features such as the ability to use data from Komtrax in
other applications.

2. Smart Construction Komatsu launched Smart Construction in 2015 as an initiative for tracking process information. This
solution uses drones to perform 3D measurement and digitization of workplaces and ICT-intensive
Tracking of Process equipment to optimize work processes through a digital twin methodology in which a digital work-
Information place is synchronized with its physical counterpart. As of June 30, 2021, Smart Construction had
been used to track information at more than 14,000 workplaces in Japan. In April 2020, we began
offering four new IoT devices and eight applications for accelerating digital transformation using
Smart Construction. Going forward, we look to expand usage of Smart Construction in highly
IT-literate markets, such as those of Europe and the United States.

3. Kom-mics Komatsu is applying its IoT workplace linkage approach to its own production sites through Kom-
mics, a system developed to track production equipment and processing statuses so that this infor-
Linking of Production mation can be used to drive improvements. In FY2019, Kom-mics won the Prime Minister’s Prize in
Sites with IoT the manufacturing and production process categories of the Eighth Monodzukuri Nippon Grand
Awards. This system has also been introduced at the facilities of partners, allowing the solutions
AI Abnormality Equipment
Operation Tracking Detection Maintenance

groups of Komatsu factory production technology divisions to offer support for improving productiv-
ity. Moreover, we commenced external sales of this system in April 2021 with the aim of contributing
Operating
Data to the development of Japan’s manufacturing industry with a particular focus on promoting the
digital transformation of the production sites of small to medium-sized companies.
Process
Tool
Information Outcome
Data 3D Data Utilization

Machine Processing Welding Work, Jigs, Tools

Komatsu Report 2021 11

 A Century of Creating the Workplaces of the Future

Komatsu’s Strengths

Global Production System

03
Komatsu’s Strengths

Komatsu began exporting construction equipment in the 1950s, ahead of other Japanese companies. We
then began full-fledged overseas production in the 1970s with the aim of mitigating foreign exchange and
customs risks. Today, Komatsu boasts a construction equipment production network comprising 12
bases in Japan and 69 bases overseas.
Acting in accordance with our basic policy of conducting production close to demand, we produce
more than 70% of 20- and 30-ton hydraulic excavators, mainstays in our construction equipment lineup,
overseas. Through local production, we aim to achieve four goals: (1) gain trust from customers, (2)
reflect local needs in products, (3) quickly address quality issues, and (4) shorten lead times.
Quality craftsmanship is imperative to success in overseas production. To foster such quality, plants in
Japan have been positioned as mother plants with the responsibility of providing instruction to overseas
child plants to guarantee that they can deliver the expected level of quality in their craftsmanship. The
in-house development and production of key components supports Komatsu’s ability to provide uniform
levels of quality on a global basis.
Furthermore, Komatsu has nine mid-sized hydraulic excavator production sites around the world, which
it uses to practice cross-sourcing in response to demand fluctuations. We are able to engage in such
cross-sourcing because each of these production sites uses the same blueprints and can deliver the
same level of quality. Cross-sourcing has the added benefit of improving corporate resilience by
functioning as a business continuity provision for hedging against unforeseen circumstances.
Komatsu’s global production system is supported by our commitment to putting quality first and
enables us to deliver products that satisfy customers in terms of quality, delivery turnaround, and costs.

Global Cross-Sourcing Scheme for Hydraulic Excavators

Development of a framework for supplying markets worldwide from production sites across the globe

Cross-sourcing between overseas production sites

Sourcing from Japan

Komatsu Manufacturing Rus

Komatsu UK

Komatsu America Chattanooga Plant Komatsu Shantui Construction Machinery

Komatsu Changzhou Construction Machinery Japan

Komatsu India Bangkok Komatsu

Komatsu Indonesia

12 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

A Century of Creating the Workplaces of the Future

Business Segments
Net Income Attributable to Komatsu Ltd. /
Consolidated Net Sales Operating Income / Operating Income Ratio Return on Equity

397.8 256.4
2,725.2
2,444.8
¥2,189.5 billion
14.7%
250.7
153.8
¥167.3 billion
14.6% ¥106.2 billion
10.3%
7.6%
8.6% 5.8%

FY2018 FY2019 FY2020 FY2018 FY2019 FY2020 FY2018 FY2019 FY2020

FY2020 Construction, Mining and Utility Equipment Business Sales

Breakdown of Net Sales by Segment (to Outside Customers) by Region

Strategic Markets Traditional Markets

53% 47%
Africa 5% Japan 15%
FY2020 Consolidated FY2020
Net Sales 2% North America 23%
¥ 1,961.2 billion
Middle East

¥ 2,189.5 billion Oceania 12% Europe 9%

Asia 7%

China 7%

CIS 6%

Latin America 15%

Construction, Mining, and Utility

Equipment Business ¥ 1,961.2 billion
Komatsu supplies a wide range of products, services, and solutions including construction and mining
equipment for use in construction and mining workplaces around the world as well as forklift trucks, forest
machines, recycling equipment, and tunneling machines. We have established a position as the interna-
tional leader in the construction and mining equipment field by delivering unrivaled quality and technologi-
cal innovation together with this full lineup.
Dump truck

58.3 billion
Retail
Finance ¥
Komatsu conducts a retail finance business aimed at helping reduce customers’ funding burdens
and otherwise assisting in the purchase of its products. Our strengths in this field include the preven-
tion of overdue debt through effective utilization of Komtrax (location information, operating status infor-
mation, engine locks, etc.) technologies, swift credit screening, and competitive financing
conditions. These strengths have enabled us to build long-term relationships with customers.

169.9 billion
Industrial Machinery
and Others ¥
The industrial machinery and others business stands alongside the construction, mining, and utility equip-
ment business as a core business of Komatsu. Offerings in this business include the large presses used
to mold automobile hoods and side panels as well as sheet-metal machines, machine tools, and light
sources for semiconductor lithography systems (excimer lasers). In this business, we also contribute to
the business activities of various customers through production of specialty equipment for Japan’s
Ministry of Defense. Large press

Komatsu Report 2021 13

 Top Management’s Views on Komatsu’s Management Issues and Strategies for the Next Century

Message from the President

Komatsu will remain committed to quality and reliability as it

Hiroyuki Ogawa
President and Chief Executive Officer seeks to create value through manufacturing and technology
Representative Director
innovation to empower a sustainable future where people,
­businesses, and our planet thrive together by developing ideal
workplaces through ongoing responses to the needs of society
and of customer workplaces.

Komatsu’s Course for Responding to Workplace Needs

Komatsu was established in Komatsu City, Ishikawa Prefecture in holders who have supported and aided us thus far.
1921, the Company has faithfully exercised its management Komatsu’s main construction and mining equipment prod-
principle, which entails committing ourselves to quality and ucts are used at infrastructure and natural resource develop-
reliability and maximizing the total sum of trust given to us by all ment sites and other workplaces that contribute to social
stakeholders and society. We have continued striving to develop foundations. Our business is founded on responding to work-
ideal workplaces by responding to the needs of customers and place needs through the provision of high-quality services that
society over the century that followed. This dedication has customers can use with peace of mind over the long term as
enabled Komatsu to reach the 100th anniversary of its founding, well as finely tuned services offered across product lifecycles
which we celebrated this year. Please allow me to express my and solutions that fundamentally resolve customer workplace
sincere appreciation to the customers, shareholders, distribu- issues. Today, Japan faces issues surrounding its dwindling and
tors, suppliers, business partners, employees, and other stake- aging workforce. Looking at the world as a whole, workplaces are

14 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

being impacted by rising concerns over climate change and preventive maintenance. We are thereby able to propose the ideal
other increasingly serious environmental issues. These factors timing for equipment overhauls or parts replacements. In this
are creating a strong need to improve the safety and productiv- manner, Komatsu develops a business that does not end with
ity of workplaces. Meanwhile, the COVID-19 pandemic is the sale of products but rather extends providing value to our
prompting construction workplaces to seek ways of preventing customers across the entire value chain (please see page 10).
workers from coming in close contact with one another, stimu- Another key factor augmenting the unique strengths of
lating a rise in demand for automated equipment. Komatsu is its ability to combine solutions such as its
Komatsu will work to actively address such changes in the Autonomous Haulage System (AHS) and Smart Construction. It
operating environment while pursuing ongoing growth by con- is crucial to develop a business model through which we provide
tinuing to act based on its commitment to quality and reliability solutions to resolve customer issues and also supply products
over the next century. The strengths we have fostered as a man- that are highly compatible with those solutions. This is especially
ufacturing company thus far will be central to this pursuit. important given that newer manufacturers are growing in techni-
I would now like to explain Komatsu’s strengths in a little cal prowess, meaning that we can no longer succeed purely by
more depth. An important policy of the Company is to develop improving the performance of our products.
and produce the key components that support the quality and Komatsu looks to create value through manufacturing and
reliability of its products in-house. This policy makes it possible technology innovation to empower a sustainable future where
for us to take a flexible, component-level approach toward people, businesses, and our planet thrive together. My approach
improving the durability of construction equipment as well as toward achieving this goal will include manufacturing activities
toward the planning of construction equipment that accommo- that pursue the quality and reliability Komatsu has pursued over
dates contemporary needs related to the electrification and the past century. This is the course that Komatsu must take in
automation of equipment. Moreover, we equip components with the future.
sensors that can gather data to be used to predict component
lifespans through Komtrax (Komatsu Machine Tracking System).
Predicting component lifespans makes it possible to perform

Impact of the COVID-19 Pandemic on Business

The ongoing COVID-19 pandemic made for a challenging oper- the sales front, meanwhile, we sought to maintain a consistent
ating environment characterized by economic stagnancy in supply of products, parts, and services to customers. To this
FY2020. Throughout this pandemic, the Komatsu Group has end, distributors used online venues to continue sales activities
placed as its top priority the health and safety of its customers, while utilizing a combination of regular commuting and telecom-
business partners, community members, employees, and their muting. Other measures included revising supply routes and
families as we took steps to prevent the spread of the virus shift structures. Operations are gradually returning to normal in
based on government policies in the relevant countries. various regions. At the same time, however, COVID-19 case
Moreover, we worked to fulfill our responsibilities to customers numbers have once again begun rising in some regions. It will
involved in businesses that support social infrastructure (essen- therefore be prudent to carefully monitor trends in the pandemic
tial businesses) by continuing to supply products, parts, and as we move forward with our business activities.
services to customers while implementing thorough measures As for the increased impacts of the COVID-19 pandemic on
to prevent the spread of COVID-19. markets, construction and mining equipment demand rose
Cross-sourcing of products and parts and global procure- throughout FY2020 in China, where the pandemic was quickly
ment have long been an element of our approach toward brought under control and where the government has been
absorbing the impacts of demand and foreign exchange rate implementing economic stimulus measures. In other regions,
fluctuations (please see page 12). We were thereby able to adapt demand was down until the second quarter, but steady recovery
when the pandemic forced us to halt production, primarily at in demand was seen centered on construction equipment in the
overseas plants, in April and May 2020; by procuring from alter- third quarter and beyond as overall market demand picked up in
native sources and reallocating inventories, we managed to conjunction with the resumption of economic activities.
minimize the impacts of these halts on overall production. On

Komatsu Report 2021 15

 Steady Progress in Priority Initiatives Leading Up to Final Year of
Mid-Term Management Plan

The DANTOTSU Value – FORWARD Together for Sustainable developing platforms for optimizing mining operations along with
Growth three-year mid-term management plan is slated to con- systems for remote operation of large-scale hydraulic excavators
clude with FY2021. (PC7000). At the same time, we have commenced initiatives for
Looking first at the progress of our priority initiatives up to responding to the rising global concern regarding climate
FY2020, we have been accelerating the promotion of digital change, such as verification tests for electrified small and
transformation at construction workplaces with our “Smart medium-sized hydraulic excavators and the development of
Construction Digital Transformation” solution. Specifically, we electrified super-large dump trucks for mining applications.
have been soliciting this solution’s ability to optimize customers’ Meanwhile, efforts to develop sustainable, cyclical businesses
construction procedures while using the Smart Construction included promoting smart forestry and the mechanization of
Retrofit Kit to endow conventional construction equipment with processes encompassing the planting, cultivating, and harvest-
ICT functionality in Japan. In the mining business, more than 350 ing of trees in the forestry machinery business. FY2020 also saw
AHS units were installed as of March 31, 2021. We are also the start of operations at a new remanufacturing factory in South

State of Progress of Focused Activity Items and Challenges for the Next Term and Onward

Three Growth Strategies Examples of Activities

• Launched “Smart Construction Digital Transformation”

• Started installation of Smart Construction Retrofit Kit for hydraulic excavators and application for
mini excavators
FY2020 • Achieved a total of 352 dump truck units operating under the Autonomous Haulage System (AHS)
achievements • Succeeded in proof of concept verification test for remote operation of a large-scale ICT
1. Value Creation by bulldozer for mining using commercial 5G
Means of • Started a joint proof of concept verification test for electrification of small- to mid-sized
construction equipment
Innovation
• Promote market expansion and global launch of “Smart Construction Digital Transformation”
Challenges for
solution
the Next Term
• Develop a new open technology platform for mining
and Onward
• Develop technologies for automation, autonomous operation, electrification, and remote control

• Commercialized the product models under development aimed at complying with

regulations, increasing product capabilities, and being the “DANTOTSU No. 1 in Asia”
FY2020 • Expanded the forest machinery business (efforts into silviculture growing and cultivating
achievements forest crops and smart forestry)
2. Growth Strategies • Introduced the new FE25-2 and FE30-2 models of electric forklift trucks
• Developed and launched manufacturing equipment for electric vehicle (EV) batteries
Based on Business
Reform • Improve the market position of the hard rock mining business
Challenges for • Build a new business model using next-generation Komtrax
the Next Term • Continue to promote value chain reforms
and Onward • Reform the industrial machinery business (expansion of synergy with the construction
equipment business and growth by capitalizing on core technologies)

• Selected for “DX Grand Prix 2020”

FY2020
• Constructed a new remanufacturing plant in South Africa to strengthen value chain operations
achievements
3. Structural Reforms • Started construction of new seal ring factory at Himi Plant

for Growth Challenges for

• Promote work process reforms using ICT and IoT
the Next Term
• Promote next-generation plants and plants with zero impact on the planet and workers
and Onward

16 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Africa as part of our remanufacturing (“Reman”) business, another awarded the Company with A ratings for both climate change
sustainable, circular business. In our underground soft rock and water risks. FY2021 will be the final year of the mid-term
mining business, we sold unprofitable product lines and reorga- management plan, and we will thus be steadily yet boldly advanc-
nized our production network to optimize production capacity as ing the priority measures defined for the plan’s three growth
part of our structural reforms. strategies with the aim of developing a corporate constitution
In regard to environmental, social, and governance (ESG) that is able to withstand the changes in market demand. We will
initiatives, smooth progress was made in measures for accom- do this while prioritizing measures by examining the cost perfor-
plishing our CO2 emissions reduction and renewable energy use mance and strategic value of each measure.
targets. These efforts led to the selection of Komatsu for inclu-
sion in the Dow Jones Sustainability Indices. In addition, CDP

Further Growth and Overseas Expansion Driven by Smart Construction

and Partnerships

Smart Construction was launched in 2015 as a solution for thereby realizing drastic improvement in the safety, productivity,
addressing social issues such as those related to the aging of and environmental performance of the entire workplace.
operators and labor shortfalls in Japan. This solution gave rise to Seeking to further accelerate this steady evolution in Smart
a solutions business aimed at drastically improving workplace Construction, we reached an agreement in April 2021 to estab-
productivity by organically linking entire workplaces through ICT. lish a joint venture company named EARTHBRAIN Ltd. together
Moreover, Komatsu launched “Smart Construction Digital with NTT DOCOMO, INC., Sony Semiconductor Solutions
Transformation,” a solution comprising four new IoT devices and Corporation, and Nomura Research Institute, Ltd.
eight new applications, in April 2020. While the previous version EARTHBRAIN also looks to facilitate the further growth of
of Smart Construction only digitized part of the construction Smart Construction by accelerating its deployment in the princi-
process (“vertical digitization”), these new IoT devices and appli- pal overseas markets of Europe, the Americas, and Australia.
cations will allow for digitization of the entire process (“horizontal
digitization”). This will enable workplace operations to be opti-
mized by synchronizing the real workplace with its digital twin,

Identification of material issues (materiality) for the future based on input from a
wide range of stakeholders

In light of the massive changes seen in the operating environ- developments such as the COVID-19 pandemic; and human
ment, Komatsu revised its material issues for the first time in a rights issues. Environmental and energy issues are also a top
decade to clarify the priorities it should emphasize in pursuing priority, meaning that sustainability, climate change, and decar-
sustainable growth over the next century. bonization will be a key focus going forward. The move toward
The need to develop low-carbon and zero-emissions prod- carbon neutrality is accelerating on a global scale. Japan as well
ucts is much greater than it was 10 years ago. Evolving corpo- has announced its goal of realizing a decarbonized society by
rate governance systems and accommodating diversity have achieving a state of carbon neutrality by 2050. Komatsu will
also become more important. At the same time, we are pressed carefully consider its approach toward tying carbon neutrality
to address issues in areas where global trends have changed initiatives to business growth, or, in other words, how it will
significantly in comparison to the projections of the mid-term achieve sustainable growth by generating a positive cycle of
management plan. Examples of such issues include economic resolving ESG issues and improving earnings as described in the
sanctions and trade friction, such as those arising out of the mid-term management plan.
conflict between the United States and China; risks of

Komatsu Report 2021 17

 Komatsu’s Long-Term Vision forwards Achieving Carbon Neutrality in 2050

Under the current mid-term management plan, Komatsu has be advancing technology and other development projects in
defined the targets of reducing CO2 emissions by 50% com- preparation for the commercialization of such equipment.
pared with 2010 and of raising the ratio of renewable energy use In addition to products, we are also looking to contribute to
to 50% by 2030. These targets are to be accomplished using carbon neutrality through solutions like Smart Construction and
equipment that improves productivity, conserves energy, and AHS that help realize massive improvements in the productivity
reduces environmental impacts at production sites and solutions of, and subsequently reductions in the CO2 emissions from, cus-
for increasing the productivity of customer workplace. Efforts to tomer workplaces.
accomplish these targets are moving forward smoothly. Another focus will be the forestry machinery business.
The technical hurdle needing to be cleared in order for Komatsu aims to develop this business into a cyclical business
Komatsu to work toward the long-term target of achieving that underpins forestry. To this end, we are promoting smart
carbon neutrality by 2050 is massive. At the same time, electri- forestry, which entails using machinery and ICT for processes
fied equipment is a market that will not be truly viable until further encompassing the planting, cultivating, and harvesting of trees.
down the line, and there are some emerging countries that have Such machinery includes logging machines as well as machines
not introduced exhaust gas regulations. However, carbon neu- that flatten logged land and machines that automatically plant
trality initiatives are accelerating centered on developed coun- trees on the flattened land. Moreover, achieving carbon neutrality
tries, and it is likely that needs related to carbon neutrality will by 2050 requires that we focus both on reducing CO2 emissions
arise in strategic markets* in the future. Accordingly, it is crucial and on absorbing the CO2 that is emitted. For this reason,
for us to develop a clear technology roadmap for working toward Komatsu’s forestry machinery business has significant potential
carbon neutrality. to contribute to society by supporting and accelerating the
In terms of products, we have made consistent efforts to forest regeneration cycle. The forestry machinery market is cur-
reduce fuel consumption and improve efficiency. Going forward, rently growing by about 3% a year, and we therefore believe that
however, it will be important to augment these efforts by working our forestry machinery business presents significant potential for
to electrify and automate equipment. Komatsu has already had future growth.
success in developing equipment with reduced environmental *P
 ositioning of markets by the Komatsu Group:
Traditional markets: Japan, North America, Europe
impacts, including mid-sized hybrid hydraulic excavators and Strategic markets: China, Latin America, Asia, Oceania, Africa, Middle East, CIS
diesel–electric super-large wheel loaders and dump trucks, and
we look to further build upon these technologies going forward.
At the same time, we anticipate that there will be a need to For more information on Komatsu’s carbon neu-
develop equipment that is able to accommodate any drive trality initiatives, please refer to Special Feature :
Komatsu’s Vision for the Workplace of the Future
source, including fuel cells and hydrogen engines, in the future.
(page 26).
Accordingly, an important challenge over the next three years will

Creation of Ideal Workplaces Together with Stakeholders over the Next Century

Over the next century, Komatsu will continue to commit to quality Financial Disclosures, and other initiatives as we work to fulfill
and reliability, as it has done over the past century. Seeking to our obligations to society and the environment as a global
create ideal workplaces, we will generate new value through company. I continue to thank all of our stakeholders and ask for
manufacturing and technological innovation to help shape a your ongoing support.
future where people, businesses, and our planet thrive together.
This is the approach we will take in accomplishing our ultimate
goal: achieving sustainable growth together with all of our
stakeholders.
We will also proactively participate in the United Nations
Global Compact, the World Business Council for Sustainable Hiroyuki Ogawa
Development, the Task Force on Climate-related President and Chief Executive Officer

18 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Online Meetings with Individual Shareholders (Japanese only)

In the past, Komatsu has held briefings in locations across Japan as venues through which it can explain the circumstances
surrounding the Company and its future course directly to shareholders. In FY2020, however, these briefings took place online
for the purpose of preventing the spread of COVID-19. In FY2021, we plan to hold an online meeting with shareholders as
detailed below. At this meeting, members of senior management will provide an overview of the Komatsu Group and discuss the
progress of our mid-term management plan as well as the Company’s interim financial outlook and full-year financial outlook.

Details of FY2021 Online Meeting with Individual Shareholders (Plan)

Time and Date 7 pm–8 pm(JST), December 14, 2021 (Tuesday)

The viewing website and viewing methods will be described in the interim business reports scheduled for
Method distribution in early December 2021 (in Japanese only) and the Shareholder Events section of our corporate
website (in Japanese only). The briefing will be viewable from computers, smartphones, and tablets.

Attendance
Open to shareholders of the Company as of September 30, 2021
Requirements

1. Explanation of mid-term management plan progress, interim financial results, and full-year financial
outlook
Agenda
2. Question and answer session

*The meeting will be held only in Japanese. The materials in English will be posted on Komatsu's corporate website after the meeting. Please visit our website at Interview with the
President section of Investor Relations.

Reference
FY2020 Online meeting with individual shareholders

Presenters
Hiroyuki Ogawa, President and Chief Executive Officer
Takeshi Horikoshi, Senior Executive Officer and CFO

Web For videos and materials from the FY2020 online shareholder briefing, please refer to the Shareholder Events section of our corporate website
(in Japanese only).
https://www.komatsu.jp/ja/ir/shareholder/event

Video Interviews with the President

Web Videos of interviews with President Hiroyuki Ogawa have been made available on Komatsu’s corporate website covering topics including Komatsu’s strengths,
future outlook, and mid-term management plan progress.
https://www.komatsu.jp/en/ir/library/interview-movie

Komatsu Report 2021 19

 Top Management’s Views on Komatsu’s Management Issues and Strategies for the Next Century

Message from CFO

Takeshi Horikoshi
Director and Senior Executive Officer
CFO

Komatsu was born in Ishikawa Prefecture, Japan in 1921. Over the predecessors navigated these changes by building foundations for
century that followed, Komatsu has grown into a global company financial and capital strategies that remain viable even today.
targeting net sales of ¥3 trillion and overseeing a corporate group Komatsu’s resilience to maintain a certain performance in the current
comprising 254 other companies (212 consolidated subsidiaries and challenging operating environment caused by the COVID-19 pan-
42 affiliated companies accounted for by the equity method) as of demic is thanks to our predecessors. Let me express the sincere
March 31, 2021. appreciation I feel for the efforts of our predecessors as I explain
The Company’s operating environment has continued to trans- some of the innovative practices they introduced.
form over the years, and our accounting and finance department

1. Transformation of Business and Response of Accounting and Finance

Departments
(1) Business Strategies Leading to Selection and within the Company who suggested that we scale back construction
Concentration equipment operations to the point of half of total net sales. The
Today, more than 80% of Komatsu’s net sales come from overseas. concept of a conglomerate discount did not exist at the time, and
However, this was not always the case; up until the 1960s the major- Komatsu was thus driven to develop new businesses and diversify its
ity of sales were generated in Japan. It was in the 1970s that we operations in the same manner as other companies in Japan.
began our full-fledged expansion into overseas markets. At this time, We changed course after the turn of the century, moving away
Komatsu took the approach of engaging in M&A activities while from the diversification of our business to instead practice selective
honing its technologies for serving these markets to bolster its prod- focus. Komatsu thus began concentrating management resources
uct lineup and reinforce the foundations for its export businesses. on its construction, mining, and utility equipment business as well as
Initially, overseas sales were mainly composed of exports from on the industrial machinery and others business that it had continued
Japan. However, we began ramping up local production in overseas since its founding and in which it could expect synergies with the
markets in the 1980s in order to accommodate the growth of over- aforementioned construction, mining, and utility equipment business.
seas demand and account for the rising value of the yen. In the late There were three reasons behind this change in strategy. The first
1990s, when we were augmenting our global distributor network, was the fact that we recorded the first operating loss in FY2001
overseas sales completely surpassed domestic sales. since our founding. The second was that the concepts of cost of
In the 1990s, demand grew stagnant in our traditional markets of capital and return on equity (ROE) were starting to become main-
Japan, the United States, and Europe as these markets matured. This stream. The third was that Komatsu’s electronics business began to
trend gave rise to a widespread belief that growth could not be antici- place significant stress on the Company’s management in the late
pated in the construction equipment market. In fact, there were many 1990s. Maintaining and pursuing growth in the electronics business

20 Komatsu Report 2021

 A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

required massive investments, in amounts that accounted for the funds from overseas markets. Furthermore, we have established the
majority of capital investments in any given year, despite the business American depositary receipt program for convertible corporate
itself not even generating 10% of total net sales. Based on a careful bonds issued in the United States in 1967, and this program contin-
examination, the decision was reached to implement structural ues to contribute to improved convenience for overseas investors
reforms that entailed the gradual sale of Komatsu Construction and increased recognition for the Company even today. In terms of
Co.,Ltd, Advanced Silicon Materials LLC, Komatsu Electronic Metal Co., tax, Komatsu began examining advance pricing agreements (APAs)—
Ltd., and outdoor power equipment business of Komatsu Zenoah Co. ahead-of-time tax payment agreements based on appropriate trans-
and so on. fer pricing methodology—in conjunction with an increase in
Throughout this process, Komatsu’s accounting and finance investment in a joint venture company (currently, Komatsu America
departments acted in accordance with the Company’s business Corp., a wholly owned subsidiary), established in 1988 with Dresser
strategies. For example, the Company began disclosing consolidated Industries, Inc., of the United States. We reached our first APA
financial statements based on generally accepted accounting prin- between Japan and the United States in 1996, and then proceeded
ciples from the United States in 1963 with the goal of procuring to expand the scope for which these agreements were used to include

■ Domestic sales ■ Overseas sales

History of Komatsu’s Business Strategies and Earnings and Performance Management ■
Operating income ratio Exchange rate
■

(¥/USD) 1971 (%)

360 Smithsonian Agreement 20
1985
Plaza Agreement
240 Fixed exchange rate system
(¥360 to USD1) 1973
15
120 Floating exchange rate system

0
10
(Billions of yen) FY2001
3,000 First operating loss
since founding
5

2,000

1,000
–5

0 -10
1960
1960 1970
1970 1980
1980 1990
1990 2000
2000 2010
2010 2020
2020 (FY)

Business Expansion of overseas

Centered on Japan Expansion of Exports Diversification Selective Focus and Global Consolidated Management
strategies production

Managerial accounting based on full-cost accounting Managerial accounting based on direct-cost accounting Growth
Profitability

Earnings management ROE

Efficiency
Performance management ROIC
Financial
Borrowing limit management, net debt-to-equity ratio position

countries such as Australia and Belgium. Eventually, these APAs come to operation management system as a standard feature on the Komatsu
account for around half of the Company’s overseas sales on a non- products that serve as collateral for our retail finance products. Today,
consolidated basis. we work to safekeep our credits by taking advantage of our strengths,
The retail finance business was separated from the construction, Komtrax technologies (location information, operating status informa-
mining, and utility equipment segment in 2016, making for the tion, engine locks etc.), and the retail finance business plays a role of
Company’s current three business segments. In the retail finance promoting sales of construction and mining equipment.
business, we provide financial products for the users of Komatsu
products. This business dates back to 1988, when we established a (2) I mprovement of Corporate Value through
joint venture with Dresser Industries, Inc. At this time, we also incorpo- Structural Reforms
rated into the Group a retail finance company under the control of When undertaking business reorganizations and M&A activities in
Dresser Industries, Inc. (currently, Komatsu Financial Limited accordance with our policy of selective focus, we have always
Partnership). We were cautious in expanding our retail finance busi- emphasized creating beneficial situations for sellers and purchasers
ness up until the early 2000s. However, we began developing this as well as for the employees who would be relocated as a result of
business in countries outside of the United States in 2004 in conjunc- the transaction in question.
tion with the introduction of the Komtrax construction equipment Potential M&A transactions are examined by looking at the

Komatsu Report 2021 21

 importance to business strategies and comparing return on invest- results. Komatsu currently boasts net sales surpassing ¥2 trillion.
ment (ROI) and weighted average cost of capital (WACC) to make a Organic growth was a major part of this accomplishment, but we
decision of investment. Furthermore, we focus on compatibility with cannot deny the significant contributions from M&A activities. As part
the culture of the acquired company to better integrate processes of post-merger integration, we work to ensure that the anticipated
and facilitate a sense of cohesion. After closing the acquisitions, we synergies are realized and that a sense of cohesion is achieved. It is
regularly monitor their contributions to improving our group-wide therefore not uncommon for the employees not to know the fact of
corporate value as we compare ROI and WACC of the acquired com- the acquisition after several years.
panies, and check on synergy effects on consolidated business

2. Enhancement of Financial and Capital Strategies

(1) Profitability and Efficiency Policies managerial accounting practices, in which unit costs vary by produc-
Under the current mid-term management plan, Komatsu has defined tion volume, to incorporate the direct-cost accounting practices used
four consolidated performance targets for growth (sales growth rate), overseas, in which costs are calculated centered on variable costs.
profitability (operating income ratio), efficiency (ROE), and financial Accordingly, new managerial accounting practices were implemented
position (net debt-to-equity ratio). The process of trial and error that in 2002, in which definition of variable costs and fixed costs have been
has brought us to where we are today is intrinsically linked to the M&A standardized on a global basis. This change allowed us to respond to
activities described in the “Transformation of Business and Response fluctuations in demand (sales) through swift action. These standards
of Accounting and Finance Departments” section above. were also incredibly simple and easy to understand for overseas
Through the acquisitions of overseas companies conducted after employees, and, since their introduction, the separation of costs from
the 1970s, together with technologies and other assets, Komatsu growth has become the foundation for Komatsu’s cost management
absorbed overseas managerial accounting practices that differed from approach. With these standards, we have been able to entrench
the full-cost accounting practices traditionally used in Japan. A sharp throughout the Group a policy of reducing costs while conducting
drop in sales after the 1997 Asian financial crisis made us recognize growth investments and thereby curbing increases in fixed costs even
our weakness, ratio of selling, general and administrative (SG&A) as sales rise.
expenses to sales, that was behind our rivals and eventually led to an Next, I would like to talk about how we manage the performance
operating loss in FY2001. This weakness made structural reforms for of subsidiaries. Komatsu is a manufacturer of construction and
cutting fixed costs, through means such as reducing the number of mining equipment and industrial machinery, and it thus has a multi-
subsidiaries, a pressing task. As the Company shifted toward selective faceted business model encompassing development, manufactur-
focus in its business strategies, we reviewed our traditional full-cost ing, sales, and retail finance. Accordingly, ROE, an indicator that

Performance Management KPIs

Comprehensive KPIs for managing consolidated performance KPIs for management of subsidiaries with vari-
(Mid-term management plan targets) ous business models (Financial leverage components
covered by management of borrowing limits)
Net income attributable to
Operating income ÷ Net sales
Komatsu Ltd. ÷ Net sales
ROE Profitability ROIC

• Separation of costs from growth

Net income attributable to
Komatsu Ltd. • Exhaustive fixed cost management Operating income

Invested capital (= Working capital + Tangible fixed assets)

Shareholders’ equity
Net sales ÷ Total assets Net sales ÷ Invested capital

Asset Efficiency

• Working capital: Inventory/receivable turnover periods (slow-moving inventories, overdue receivables)

• Tangible fixed assets: Assessment of investment

Net sales ÷ Shareholders’

equity
Financial
Leverage

• Consolidated-basis optimization of fund procurement

• Management of net debt-to-equity ratio based on business characteristics

22 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

comprehensively accounts for profitability, asset efficiency, and interest rate fluctuations.
financial leverage, is used for consolidated basis management. To address funding risks, we seek to reliably procure funds by
However, trying to apply ROE as a management indicator for each securing diverse funding sources and maintaining balanced distribu-
subsidiary would lead to inequity as capital levels can be different tions of direct and indirect, short-term and long-term, and variable
based on factors such as differences in business models and legisla- interest rate and fixed interest rate borrowings. The Company has
tive environments in the countries where subsidiaries are located. In also implemented a global cash management system that links
addition, the construction and mining equipment business is highly Japan and other countries of operation to complement regional-
volatile, making effective management of receivables and inventory basis funding activities and improve consolidated funding efficiency
assets imperative. Based on these considerations, we have been under normal circumstances while also serving as a safety net by
using ROIC for internal management purposes since 2017 to com- allowing funds to be distributed to overseas subsidiaries from the
plement prior profitability management practices. Operating income head office in Japan in emergency circumstances.
is used as the numerator when calculating ROIC while the total of We believe it is important to maintain a sound financial position in
working capital and tangible fixed assets, which represents how order for us to achieve sustainable growth while being free from
invested capital is utilized, is used as the denominator. Defining ROIC changes in market demand. The net debt-to-equity ratio is monitored
in this manner allows us to provide timely feedback to the divisions as an indicator of financial soundness on a consolidated basis while
responsible for investments with regard to issues and the extent of borrowing limits and financial benchmarks are set and managed on
improvement. Each subsidiary reports graphs indicating changes in an individual-subsidiary level. On March 31, 2021, the consolidated
ROIC on a monthly basis to track their conditions. net debt-to-equity ratio was 0.35. This ratio is 3.69 when looking at
Inventory assets are accounted for ROIC, and maintaining an the retail finance business alone, but this level is still within the prede-
appropriate level of inventories requires coordination between sales termined acceptable range for leverage. We are working to mitigate
and production divisions. Komatsu has therefore developed a culture foreign exchange rate and interest rate fluctuation risks by matching
of mutual coordination and check between sales and production lending and funding currencies and interest rates and periods. At the
divisions, and HANSEI, a coined word from the initials of sales (Han- same time, we are utilizing the aforementioned Komtrax technologies
bai) and production (Sei-san) in Japanese, has long been familiar in to safekeep our credits.
Komatsu. As a result of coordinated efforts between sales and pro- Furthermore, the Company thoroughly enforces risk manage-
duction divisions, we have in place global HANSEI operation centers ment policies across the Group. We therefore do not utilize schemes
exactly for the purpose of advancing improvement activities targeting only for the purpose of minimizing tax payments in global operations
both of these areas. Specifically, a center for equipments was estab- (appropriate taxes are to be paid based on our business), nor do we
lished at Osaka Plant in April 2011 and a center for parts was set up maintain cash holdings at branches and sites (to eliminate compli-
at Oyama Plant in July 2015, where we are increasing the accuracy of ance risks) nor holding shares in listed companies (to mitigate stock
demand projections and sharing information in an integrated manner price fluctuation risks).
to maintain appropriate inventory levels on a global basis while pre-
venting loss in sales opportunities. (3) G
 roup-Wide Dissemination of Financial and
In this manner, one of Komatsu’s strengths is its ability to create Capital Strategies
and expand free cash flow from the perspectives of both profitability Komatsu has proceeded to accelerate its growth through M&A activi-
improvements (separation of costs from growth) and efficiency ties. However, we did not initially have a clear policy for shareholding
improvements (inventory management). structure. It was therefore not uncommon situation that subsidiaries
were investing in companies in respective region where Japanese
(2) Financial Position and Risk Management Policies headquarters also had investments, even as recently as the mid-
There were cases in which the head office would practice speculative 2000s. This changed in 2007, when we implemented a policy of
asset management back in the days when production was centered consolidating investments in overseas Group companies within
on Japan. However, we later put a stop to speculative financial activi- regional headquarters for the purpose of more efficiently utilizing
ties in conjunction with the globalization of our business, instead capital and strengthening governance. At that time, we appointed a
choosing to focus on improving our financial position and hedging total of five regional headquarters, one for the Americas, including
risks on a group-wide basis. Latin America, one for Europe, one for China, one for Indonesia, and
Our basic policy for managing foreign exchange rate and interest one for other parts of Asia. These five companies provided funding
rate fluctuation risks is to apply natural hedges through ordinary opera- and other back-office support in their respective regions while also
tions. For example, manufacturing products in locations close to the furnishing a check function backed by investment. In the years that
markets where they will be sold allows us to match sales and costs on a followed, Komatsu went on to acquire various global companies and
currency basis , and procuring funds on a regional basis allows for such business, such as Partek Forest AB (currently, Komatsu Forest AB)
currency matching with regard to assets and liabilities. For risks that and Joy Global Inc. (currently, Komatsu Mining Corp., that made it
cannot be covered through natural hedges, we utilize financial products difficult for these five companies to cover the expanded business.
(derivatives) for mitigating the impacts of foreign exchange rate and This development prompted us to redefine our regional holding

Komatsu Report 2021 23

 Shareholding Structure and Matrix Management
–Performance management by responsible business division and shard services by regional headquarters–

Oversight of worldwide
Group companies by respec-
Komatsu Ltd.
tive responsible business
divisions of Komatsu Ltd.

Regional Africa/Near
North Latin
Europe/CIS China Asia Oceania and Middle
Investment in subsidiaries:
headquarters America America
2 companies 1 company 3 companies 1 company East Consolidated by region,
12 companies 1 company 2 companies
2 companies investment in conglomer-
ates by regional headquar-
ters in the same region as
Regional conglomerate head office
subsidiaries

Head office Horizonal axis: Ongoing

Acquired oversight of acquired con-
conglomerates glomerates by respective
Head office head office

Vertical axis: Enhancement of management streamlining through shared back-office

support (compliance, legal affairs, finances, human resources, ICT, etc.) provided by
regional headquarters

companies in 2019 to better match the actual circumstances of our three-year plan. Instead of numerical targets, we have therefore
business, leading us to have the current 12 regional headquarters. To chosen to set the more abstract targets of achieving a growth rate
manage the performance of this expanding scope of companies, the above the industry’s average for growth and the industry’s top level
responsible business divisions of Komatsu Ltd. oversee companies for profitability and financial position.
belonging to their respective business areas. Meanwhile, the head The decision to set a target for growth (net sales growth rate) in
office of acquired conglomerates are responsible for overseeing the the mid-term management plan is based on our strong commitment
businesses of their worldwide subsidiaries while the 12 regional to continue growing through a combination of organic growth and
headquarters manage funding on a regional basis and offer back- inorganic growth by means of M&A activities. Growth rates are also
office support. This setup makes for a matrix management approach. indicators for measuring our position within the industry. Our growth
Today, approximately 70% of Komatsu Group employees are target is aggressive and significant pressure on Komatsu’s manage-
working overseas. We have thus adopted globally standardized rules ment team, but this pressure is necessary to prevent us from falling
and simplified management procedures for core financial and capital into a state of overall decline.
strategies, and these practices have been entrenched throughout The operating income ratio is also an important indicator for dem-
the Group via the aforementioned matrix. This approach is taken to onstrating the meaningfulness of a company. We have set a target for
make our practices easier to understand for employees in operating this indicator based on our responsibility as the industry leader. In the
divisions worldwide and to facilitate the integration and cohesion of late 1980s, Komatsu caused damage to its own market by becoming
acquired companies and businesses. involved in excessive price wars due to an overemphasis on its share
in the domestic market. Based on this experience, we made the dif-
(4) Pursuit of Further Growth ficult decision to raise prices as we focused on our core business after
Komatsu has not established numerical targets for growth, profitabil- recording an operating loss in FY2001. Combined with the aforemen-
ity, and financial position in its mid-term management plan. We had tioned cost management practices, this approach has enabled us to
set such targets in the past. However, demand is incredibly volatile in improve our operating income ratio. Today, we emphasize profitability
our business; in the mining equipment business, for example, when developing marketing strategies, whether these be for our tradi-
demand can fluctuate by nearly 30%. As a result, past numerical tional markets or for strategic markets.
targets have lost their meaning in the first year of the respective In our integrated reports, we have disclosed key performance

24 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

indicators (KPIs) linked to environmental, social, and governance opportunity for stakeholders to develop an understanding of
(ESG) issues for the various projects for advancing the growth strate- Komatsu and thus helped expand our investor base. Going forward,
gies of the mid-term management plan (please see pages 38 and we will continue to examine the possibility of issuing green bonds
39). These KPIs are a very viable tool for directly confirming the and other ESG-related bonds in conjunction with Companywide
progress and benefits of these projects. In addition, the accounting initiatives for achieving carbon neutrality and electrifying equipment.
and finance departments began aiding in the accomplishment of the We will also track financial indicators along with ESG and other KPIs
targets for these KPIs through the issuance of Komatsu’s first green to achieve sustainable growth through a positive cycle of improving
bonds in July 2020. The rising global concern for ESG factors is and stabilizing earnings and solving ESG issues.
impacting the financial market, specifically through stricter regula-
tions for sustainability-related disclosure by financial institutions and
the need to implement and popularize ESG scoring frameworks.
Amid this trend, the issuance of green bonds served as a new

Use of Funds Procured through Green Bonds

Use of funds

Item Amount (millions of yen)

Procurement amount (July 2020) 10,000

Use in FY2020 ▲6,854

Investment in rental equipment assets for popularizing ICT-intensive model (▲4,137)

Of which, refinancing 0

 onstruction of energy-saving facilities and installation of biomass generation

C
(▲2,717)
­facilities at domestic factories

Of which, refinancing 0

Balance as of March 31, 2021 3,146

Two of allocated eligible projects have been in operation, technical center at Ibaraki Plant since October 2020 and test laboratory No.3
at Oyama Plant since January 2021.
Allocation of ¥10.0 billion worth of funds procured through green bonds to be completed within FY2021.

Technical center (at Ibaraki Plant) Test laboratory No.3 (at Oyama Plant)

Web
Details on green bonds are available on Komatsu’s corporate website.
https://komatsu.disclosure.site/en/themes/191

Komatsu Report 2021 25

 Evolution of Business Model for Creating the Workplaces of the Future

Special Feature: Komatsu’s Vision for the Workplace of the Future

Komatsu Creating value through manufacturing

and technology innovation to empower

future
a sustainable future where people, busi-
nesses and our planet thrive together
Komatsu has released videos illustrating the safe, smart,

203X
clean, and highly productive workplaces of the future it
aims to create. We hope you will take a look at these
videos to see the workplaces we are working to create
together with all stakeholders.

https://www.youtube.com/watch?v=-ikOXOy
Web ZpH0&list=PLl09JNAS3JlEL7iTnOAM674O6
ZHKn6qZe&index=3

Formation of Komatsu GHG Alliance Together with Four Major Mining Companies
For the purpose of accelerating the reduction of greenhouse gas emissions from mining operations, Komatsu has founded the Komatsu
GHG Alliance together with major mining companies that are also its customers. The founding members of the alliance are Rio Tinto plc,
BHP Group Limited & Plc, National Copper Corporation of Chile (Codelco), and Boliden AB—global top-class, industry-leading mining
companies. The alliance will serve as a framework for the co-creation of value with customers through which we will accelerate the
development of a power agnostic concept truck that can run on a variety of power sources.

Founding Members of Komatsu GHG Alliance

Name Head Office

Komatsu Tokyo, Japan

Rio Tinto plc London, United Kingdom

BHP Group Limited

Melbourne, Australia
& Plc

National Copper
Corporation of Santiago, Chile
Chile

Boliden AB Stockholm, Sweden

Power agnostic development truck undergoing testing at test site (Arizona, United States)

26 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Collaboration with Partners for Accelerating the Creation

of the Workplaces of the Future
Komatsu is collaborating with partners that share its values to accelerate
the creation of the workplaces of the future.

Utilization of NTT DOCOMO’s 5G Service

Komatsu’s First Time Achieving Continuous Discharge of Soil by Improving

Automatic Loading Control as well as Remotely Switching to Multiple
Construction Equipment Units in Operation

PC200i-11 hydraulic excavator being

operated remotely from control pod Please refer to the following video for a demonstration of the
(Ishikawa Prefecture) Web automation and remote operation technologies.
https://www.youtube.com/watch?v=S2me-S4G0PE

In its pursuit of the commercialization of construction and mining equipment automa-

tion and remote-control technologies, Komatsu has succeeded in verification tests of
an automation technology that achieved the continuous discharge of soil by means of
automatic loading control as well as remote control technology that enabled remotely
Komatsu Field Test Department linked
through 5G services (Oita Prefecture)
switching to multiple units in operation via 5G services provided by NTT DOCOMO, INC.

Collaboration with Proterra of the United States

Start of Proof of Concept Tests for Electrification of Small and Mid-Sized

Hydraulic Excavators
Komatsu has signed a collaboration agreement with Proterra Inc. of the United States,
to receive the supply of Proterra’s lithium battery systems with the aim of electrifying
its small and mid-sized hydraulic excavators (for developing battery-powered con-
Conceptual image of electric excavator
struction equipment). Proterra is a leader in commercial vehicle electrification tech-
nologies that delivers battery systems and electrification solutions to help heavy-duty
and commercial vehicle manufacturers around the world electrify their vehicles.
Komatsu plans to advance proof of concept tests starting in 2021 and move forward
with the development of battery systems suited to small and mid-sized hydraulic
excavators, which have higher output requirements, with the goal of commencing
mass production sometime between 2023 and 2024. Based on this agreement,
Komatsu will receive high-performance batteries and peripherals that Proterra has
developed with its state-of-the art technology accumulated over its years of operation
as a manufacturer of electric transit vehicles while also collaborating with this com-
pany as one of its strategic partners of joint proof of concept tests.

Commencement of Joint Development with Honda Motor

Development of Micro Electric Excavators Powered by Swappable Honda

Mobile Power Pack Batteries and Establishment of Battery-Sharing System for
Civil Engineering and Construction Industries
Komatsu has concluded a basic joint-development agreement with Honda Motor Co.,
PC01 micro electric excavator (prototype) Ltd., aimed at electrifying its micro excavators (less than one-ton class) with swap-
powered by the Honda Mobile Power Pack
pable Honda Mobile Power Pack batteries, and establishing a battery-sharing system
that enables mutual use of Honda Mobile Power Packs among different construction
equipment and other equipment for the civil engineering and construction industries.
Under this agreement, the two parties will work to electrify Komatsu’s PC01 micro
excavator by equipping it with Honda Mobile Power Packs and an electrified power unit
(eGX). The PC01 micro excavator is commonly used very close to people, trees, and
flowers for pipe-laying work, gardening, agriculture, livestock, and other applications.
Komatsu is working to launch the PC01 micro electric excavator by the end of FY2021.
* Honda Mobile Power Pack and eGX are registered trademarks of Honda Motor Co., Ltd.
Honda Mobile Power Pack

Komatsu Report 2021 27

 Evolution of Business Model for Creating the Workplaces of the Future

Special Feature: Komatsu’s Vision for the Workplace of the Future

Pursuit of 2050 Carbon Neutrality

Komatsu’s mid-term management plan, which has FY2021 as its final year, puts forth the targets of reducing CO2
emissions by 50% from the level in 2010 and increasing the rate of renewable energy use to 50%, both of which
are to be achieved by 2030.
Continuing down the path of these goals, Komatsu has decided to pursue carbon neutrality by 2050 to capital-
ize on the future business opportunities that this pursuit will create. Specifically, the prominent trend toward a
carbon-free society itself has been positioned as a business opportunity, and we aim to realize DANTOTSU Value
(a positive cycle of resolving ESG
Mid-Term Management 2050
issues and improving earnings through Plan Targets 2030 Carbon neutral

the creation of value for customers) by CO2 emissions 50% reduction (from 2010) Virtually Zero
taking advantage of this opportunity. Rate of renewable energy usage 50% 100%

CO2 Emissions Across the Supply Chain for Komatsu Products

Komatsu calculates CO2 emissions across the supply chain for its products on an annual basis in accordance with the guidelines of
Japan’s Ministry of the Environment.
The most significant source of CO2 emissions from across the supply chain was product use (Scope 3, Category 11), which accounted
for roughly 90% of total emissions, while emissions from corporate activities (Scope 1 and Scope 2) only represented 2% of all emissions.

Breakdown of CO2 Emissions Across

the Supply Chain  irect greenhouse gas emissions from business operator (fuel combustion,
D
Scope 1: industrial processes)
Raw Komatsu
Indirect greenhouse gas emissions from use of electricity, heat, and steam
materials Scope 1+2 Scope 2: supplied by other companies
Scope 3,
Category 1
Indirect greenhouse gas emissions not accounted for by Scope 1 or Scope 2
22 million Scope 3: (emissions from other companies related to a business operator’s activities)
Product t-CO2 Scope 3 is divided into 15 categories including Category 11: Use of sold products.
use Category 11 includes the total expected lifetime emissions from all products sold in
(FY2020)
Scope 3,
Category 11
the reporting year.

Komatsu’s Carbon Neutrality Initiatives

Komatsu’s carbon neutrality initiatives will not be limited to cutting emissions from its bases (Scope 1 and Scope 2) and from the use of its
products (Scope 3, Category 11). Rather, we are broadening the focus of our initiatives to target customer workplaces in their entirety. With this
focus, we will seek to reduce CO2 emissions from society by evolving our Smart Construction solution and otherwise optimizing customer
workplace.
We have also positioned our forestry machinery business, which supports a sustainable forest management cycle of planting, culti-
vating, and harvesting, as well as our remanufacturing (Reman) operations, which entail the restoration and reuse of components, as
cyclical businesses that contribute to reductions in CO2 emissions from society. Accordingly, these businesses will be strengthened as
part of our carbon neutrality initiatives.

Mid-Term Management Plan Target Komatsu’s Initiatives

50% reduction in CO2 Safe, highly productive,
emissions* smart and clean workplaces of
Pursuit of carbon neutrality at Komatsu production bases
the future

Development of products that reduce environmental impacts

(%) (product improvements)
100
Provision of solutions that improve customer workplaces
(process improvements)
Reduction of CO2 emissions through forestry
Carbon neutral machinery business
50
Net zero emissions
Reduction of CO2 emissions through Reman operations

2010 2030 2050 (Year)

Identify business opportunities associated with carbon neutrality to drive Komatsu’s growth strategies

*Calculation Policies and Assumptions for CO2 Emissions Reduction Target of Mid-Term Management Plan

Mid-Term Target for 2030 Calculation Policies and Assumptions

50% reduction in CO2 Emissions from production Annual per internal production value emissions calculated using all energy consumed by production bases in the reporting year
emissions from 2010 Emissions from product use Annual per work volume emissions calculated based on products sold in the reporting year

28 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Pursuit of 2050 Carbon Neutrality Scope 1 Scope 2

01 Carbon Neutrality at
Komatsu Bases

After achieving a 50% reduction in CO2 emissions from 2010 in 2030, we will work to achieve net zero CO2 emis-
sions (carbon neutrality) from our production activities by 2050. In addition, we will deploy the relevant technologies
at material suppliers and other partners to help them also achieve carbon neutrality in their operations.
In implementing its policies for carbon neutrality initiatives at production bases, Komatsu will prioritize energy
conservation initiatives for reducing energy consumption through production technology innovation, then energy
generation initiatives for producing renewable energy in-house, and lastly, purchases of renewable energy.

• Reduction of Energy Consumption through Exhaustive

Productivity and Efficiency Improvements

1 We will exhaustively reform and improve the efficiency of energy-

intensive processes, such as casting, forging, and heat treatment
Energy processes.
Conservation
• Upgrades to High-Efficiency Next-Generation Structures

Whenever an aged structure built more than 50 years ago is replaced
in the future, Komatsu will replace it with a zero emissions structure Rendering of next-generation melting
furnace using superinsulation
that uses sustainable energy.

• Introduction of Cutting-Edge Renewable Energy Facilities

(Solar Power, Biomass Power, and Others)
Komatsu will embrace cutting-edge renewable energy facilities
through means such as using lightweight, high-efficiency solar panels
when installing solar power generation facilities to greatly increase
per-area efficiency and generation capacity.
2
Energy • Effective Utilization of Generated Energy through High-Efficiency
Storage Batteries New Komatsu Forest AB factory with roof covered
Generation in solar panels (scheduled to be completed in

The output of solar power and other renewable energy systems can
August 2021 in Umeå, Sweden)
vary greatly as a result of weather. For this reason, storage batteries
are imperative to the reliable use of such systems. Komatsu is actively
employing the latest storage battery technologies to ensure that it can
utilize energy generation systems to the greatest extent possible.

3
• Purchase of Green Power, LNG Gas, and Other Carbon Credits
Purchase of CO2 emissions that cannot be curbed through energy conservation
Green Power, LNG and energy generation will be offset through the purchase of certified

Gas, and Other green power or carbon credits.

Carbon Credits

Biomass boiler at Ibaraki Plant

2050 Carbon Neutrality

Komatsu Report 2021 29

 Evolution of Business Model for Creating the Workplaces of the Future

Special Feature: Komatsu’s Vision for the Workplace of the Future

Pursuit of 2050 Carbon Neutrality Scope 3

02 Carbon Neutrality from

Product Use
1 Two-Pronged Approach of Improvements in Products and Processes
Komatsu is adopting a two-pronged approach toward reducing the amounts of CO2 emitted during the use of its products. The
first prong is improvements to products. Initiatives in this regard will include increasing the work efficiency of equipment,
pursuing steadfast improvements in fuel efficiency, and transitioning from diesel and other internal combustion engines
to cleaner power sources, including hybrid and electric engines and fuel cells. The second prong is improvements to pro-
cesses. Specifically, we look to lower CO2 emissions by optimizing customers’ workplace operations and processes in
order to reduce the amount of equipment needed along with the operating times of this equipment.

Komatsu seeks to contribute to carbon neutrality, at both construction and mining workplaces, through a combination of
efforts to reduce CO2 emissions by means of highly efficient equipment and measures for improving workplace
efficiency via smart plans, instructions, and management.

Transition from Carbon Neutral

Level 5 to Carbon Negative
Processes (Improvement of Efficiency throughout All Workplace Processes)

Optimization of
Processes
•H  igher environmental performance and productivity
Smart plans, instructions, and (products)
management for all workplace
• Optimization of operations across workplaces
processes
(processes)
Level 4
Automation of
Process Planning

Level 3
3-Dimensional
Process Planning

Steadfast fuel efficiency

improvements
Level 2 Hybrid / Energy recovery Energy Efficiency
3-Dimensional systems Equipment
Topographical Map Smart Construction use rate
Low-Emissions Equipment
Hybrid Smart Construction

Level 1
3-Dimensional
Design Data
Products (Improvement of Equipment Efficiency / Reduction of CO2 Emissions)

Level 3
Level 1 Micro-Mix Level 4
Level 2 Level 5
Conventional Processes Internal Hydrogen Full Electric
Energy Recovery Fuel Cells
Combustion Combustion Plug-In/Battery
Energy Recovery

30 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Pursuit of 2050 Carbon Neutrality Scope 3

2 Development of Products That Reduce Environmental Impacts

(Product Improvements)
The workplace conditions under which construction and mining equipment developed and produced by Komatsu is used can
vary based on model and output. Accordingly, we are incorporating cutting-edge technologies to eliminate CO2 emissions from
products by model and by output class. At the same time, we are sharing our roadmap for carbon neutrality with external devel-
opment partners and customers while making steady progress based on this map.

Surface mining
■H ydrogen fuel, biofuel,
e-fuel internal combustion On-site generation and hydrogen fuel
■ Fuel cells
■ Electric (battery/plug-in) Underground mining
■H ybrid
Protection of underground miners’ health
■D iesel internal combustion Extent of reduction from 2010

Halved CO2 Urban civil engineering Reductions from product

emissions in 2030
improvements in 2050
(50% reduction in CO2 Use of urban electricity infrastructure
emissions from 2010)

General civil engineering

Electrified equipment for reducing environmental impacts

Reductions from process

improvements in 2050

Carbon neutrality in 2050

(100% reduction in CO2 emissions from 2010)

2020 2025 2030 2035 2040 2045 2050

Komatsu will create the safe, highly productive, smart and clean workplaces of the future to contribute to the
Voice realization of a carbon-neutral society.
Komatsu has declared its goal of achieving carbon neutrality by 2050 along with its commitment of halving the CO2
emissions from product operation by 2030. In the past, we have achieved massive success in improving the fuel
efficiency of our products by developing and producing major components in-house and combining these compo-
nents in an optimal manner. We also launched the world’s first hybrid hydraulic excavator for sale in 2008. We will continue to
pursue such improvements to product fuel efficiency in the future. However, we also realize that achieving carbon neutrality will
require us to go further to adopt new drive sources. Construction and mining equipment is used for a variety of applications and
under a wide range of conditions, meaning that we need to select a power source that is ideal for each piece of equipment in
order to meet customer expectations. We are currently ramping up development of products that use drive sources that do not
emit CO2, like batteries and fuel cells. In this regard, we began offering rentals of the PC30E-5 electric mini excavator in Japan in
April 2020. We have also announced plans for joint development of micro and mid-sized hydraulic excavators together with
external partners, and we are committed to developing various models through mutually beneficial win-win relationships
together with highly capable partners going forward. Komatsu is also examining the possibility of utilizing e-fuel and
other new fuels that are compatible with conventional internal combustion engines. Another area being examined is
hydrogen engines that use hydrogen as fuel. Meanwhile, we established the Electrified Equipment Development
Center in April 2020. This center is playing a central role in efforts to develop electrified equipment.
In addition, we are evolving solutions to improve efficiency at customer workplaces and consequently reduce
CO2 emissions. For example, we provide solutions that utilize digital technologies to create a digital twin to be used
for tracking workplace conditions and thereby optimizing workplace procedures. Moreover, we will apply automated
operation, remote operation, and other sophisticated digital technologies to develop procedures that are more
efficient than conventional procedures. These new procedures will be utilized to reduce the amount of personnel
and equipment needed at workplaces while also shortening construction periods in order to achieve massive
decreases in workplace CO2 emissions. In this manner, Komatsu is evolving products and solutions to create safe,
highly-productive, smart and clean workplaces of the future in order to contribute to the realization of a
­carbon-neutral society.
Seiichi Fuchita
Senior Executive Officer
President, Development Division
Komatsu Report 2021 31
 Evolution of Business Model for Creating the Workplaces of the Future

Special Feature: Komatsu’s Vision for the Workplace of the Future

Pursuit of 2050 Carbon Neutrality

3 Provision of Solutions That Improve Customer Workplaces

(Process Improvements)
Smart Construction is a solution that contributes to the optimal deployment of construction equipment, dump trucks for trans-
porting dirt and materials, and all other equipment. This solution can be applied to Komatsu construction equipment as well as to
that made by other companies. Optimizing all processes throughout a workplace makes it possible to reduce the amount
of equipment needed, cut back on operating and idling time, and lower workloads, thereby contributing to reductions in
fuel consumption and consequently CO2 emissions.

Smart Construction promotional website (Japanese only):

Web
https://smartconstruction.komatsu/

The “Smart Construction Digital Transformation” solution introduced in April 2020 expanded upon the partial digitization
of construction processes achieved by the previous version of Smart Construction (“vertical digitization”) by allowing for
digitization of all processes (“horizontal digitization”). This solution thus enables worksite operations to be optimized by
synchronizing the actual workplace with its digital twin, thereby realizing drastic improvement in the safety, productivity,
and environmental performance of the entire worksite.

Please refer to the following video for more information on the “Smart Construction Digital Transformation”
Web solution.
https://www.youtube.com/watch?v=S2me-S4G0PE&t=312s

Customer Construction Process

Surveying Planning Construction Inspection

Traditional
Analog Process

“Vertical digitization”: Digitization of individual construction processes (previous Smart Construction)

Drone 3D measurement / Construction simulation / Digital 3D construction / Management with Drone 3D finished landform
Visualization task preparation ICT-intensive equipment and apps inspection
Digital
Solution

Transformation
(“DX”) Process

“Horizontal digitization”: Digitization and connection of all processes to optimize entire construction process—the “digital transformation of construction”
(“Smart Construction Digital Transformation”)

In April 2021, Komatsu established EARTHBRAIN Ltd., a joint venture company, together
with NTT DOCOMO, INC., Sony Semiconductor Solutions Corporation, and Nomura
Research Institute, Ltd. EARTHBRAIN will be tasked with furthering the evolution of Smart
Construction while also deploying this solution overseas. In addition, EARTHBRAIN will combine the insight, expertise,
and technologies of its four owners through means such as providing services that impact all equipment and vehicles at
construction worksites to create a next-generation Smart Construction solution that will accelerate the digital transfor-
mation of construction workplaces.

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Pursuit of 2050 Carbon Neutrality

03 CO2 Emissions Reduction from

Timber is a resource that is incredibly important for supporting

Forestry Machinery Business
people’s lives and industry. The forest resources from which timber is Introduction of New Tree Improvement in Productivity and
Planting Products Safety in Harvesting and Extracting
harvested have been maintained through a sustainable cycle of
Planting Harvesting
planting, cultivating, and harvesting by human hands.
At the same time, trees absorb CO2 from the atmosphere as part of
Planting
their growth process, and it has been shown that younger, more rapidly
growing trees absorb CO2 at higher rates than older trees. For this 育林
D61EM-23M0 PC130F harvester
reason, harvesting trees that have grown to a certain extent and replac- automated tree
Sustainable (forest machine
planter Forestry based on hydraulic
ing them with new trees is a process with the potential to limit global excavators)
Harvesting Cultivating
warming. By supporting forest management cycles as a cyclical busi-
ness, Komatsu aims to help mitigate global warming while contributing
to the realization of a carbon-neutral society.
Komatsu is working to mechanize forestry operation processing,
Land preparation Extracting
including planting, cultivating, and harvesting trees, to contribute to D85EX subsoiling machine Forwarder 895
Forest forwarder usable on slopes
sustainable forestry. In the realm of planting, we have developed
subsoiling machines and automated tree planters based on our
Please refer to the following video for an illustration of the
bulldozers, and we are currently supplying these machines to the Brazilian Web
D61EM automated tree planter in operation, which was
market. These machines have transformed the process of planting trees, introduced into the Brazilian market:

which had previously been performed by people under the heat of the https://www.youtube.com/watch?v=00FNm4-gqwo

blazing sun, making it possible to plant 900 trees in one hour with exceptional speed and precision.
Komatsu is also promoting smart forestry, which entails digitally linking all forestry processes. In our smart forestry approach, we look to
contribute to safe and highly productive forestry by supplying solutions that, for example, use drones to measure forest density and tree height and
thereby make it possible to perform forestry procedures merely by inputting into machines such information as the lengths of timber and the type
of trees required by the market.

Pursuit of 2050 Carbon Neutrality

04
Komatsu Group is engaged in global remanufacturing (“Reman”) operations in
CO2 Reductions through
Reman Operations
which it restores the engine and transmission components collected during
regular replacements to the same status as if they were new so that these
products can once again be sold on the market. Restoring these products
entails a process with various steps including disassembly, washing, parts
replacement, reassembly, painting, and shipping inspections.

Benefits for Customers

• Guaranteed quality and performance on a level with new products
• Lower prices than new products
• Shorter equipment downtimes through supply of appropriately
stocked Reman components
• Resource conservation and waste reduction through component
reuse and recycling

Reman operations are made possible by Komatsu’s in-house development

and production of key components. Moreover, these operations are based
on the principles of the 3Rs (reduce, reuse, and recycle) as they help cut back on waste by restoring and reusing components and thereby
contributing to reductions in CO2 emissions.

Komatsu Report 2021 33

 Evolution of Business Model for Creating the Workplaces of the Future

Mid-Term Management Plan (FY2019–FY2021)

DANTOTSU Value
FORWARD Together for Sustainable Growth

Komatsu’s External Environment 

Today, protectionism is growing around the world, and multipolarity is becoming evident. We are also witnessing growing concerns
over climate change. As the external environment is changing dynamically, in the construction, mining, and utility equipment busi-
ness, we assume gradual growth of the demand in the medium to long term, but the volatility will remain high in the short term. In
the industrial machinery and others business, we anticipate a structural change in demand in the automobile manufacturing indus-
try, mainly resulting from ongoing progress toward electric vehicles. In addition, we anticipate assured growth in demand in the
semiconductor manufacturing industry over the medium to long term, while a temporary adjustment phase is also expected.
Achieving sustainable growth in this environment will require growth strategies that are not affected by demand fluctuations.

Changes in the External Environment and of ESG Issues 

Politics & economy Technologies

• Multipolarization of the world • Further spread of IoT, AI,
• Emergence of protectionism and big data
• Growth of emerging economies • The progress of electric and
autonomous vehicles

Environment & energy Society & values

• Climate change • Acceleration of diversity in
• Growing demand for energy, advanced countries
foods and water • A decline of working-age
• Decarbonization & population
renewable energy • Achievement of a recycling-
oriented society by accelerating
the pace of sharing
• Growing pursuit and needs for
safety and comfort

Expectations of achieving

Our Tasks in the Growth 1. To solve ESG issues through the growth strategies of
Strategies our core business

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Demand for Construction and Mining Equipment 

Sustainable
Period of the previous plan Period of the mid-term management plan
growth
•V alue creation by means of innovation
• Growth strategies based on innovation
• Growth
 strategies based on business
• Growth strategies of existing
reforms
businesses
• Structural
 reforms for growth
• Structural reforms designed to rein-
force the business foundation Growth above the industry’s
average by focusing investment
Sales / Demand

in growth areas

Demand recovery for mining equipment

and in emerging economies

Assumed range of
demand change
We assumed demand recovery would start in We assume gradual growth in the mid to
FY2019 in the previous plan. long ranges, but volatility will remain high
(Actually it started in FY2017.) in the short range.

FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 ~

Construction, Mining, and Utility Equipment Business Sales (to Outside Customers) by Region
Performance of the mid-term
(Billions of yen)
management plan
3,000

2,466.6
2,500
2,267.3 Africa
Strategic 2,205.9
Middle East
1,961.2
2,000 Oceania Markets

54%
Asia
1,566.3
China
1,500
CIS
Latin America
Traditional
1,000 Europe
Markets
North America
500

Japan
46%
0
FY2016 FY2017 FY2018 FY2019 FY2020

a sustainable society

2. T
 o promote sustainable growth based on our profit structure which is free
of changes in the external environment and market demand

Komatsu Report 2021 35

 Evolution of Business Model for Creating the Workplaces of the Future

Mid-Term Management Plan (FY2019–FY2021)

Overview of the Mid-Term Management Plan 

The mid-term management plan sets forth the future vision Komatsu should aspire to and hope to accomplish as it approaches
and moves beyond the 100th anniversary of its founding in 2021. As part of this vision, we seek to become a company that can
help realize the safe, highly productive, smart, and clean workplaces of the future together with customers while generating a posi-
tive cycle of resolving ESG issues through the creation of value for customers and improving earnings.

Management Principle 
Make commitment to Quality and Reliability and maximize corporate value (the total sum of trust from society and all stakeholders)

2021
100th
anniversary Backcasting
Growth strategies and management targets by backcasting
and beyond
the roadmap to our future vision

Previous Plan Mid-Term

(FY2016–FY2018)
Management Plan Future Vision
(FY2019–FY2021)
• Growth strategies based on ESG Solutions
innovation
• Growth strategies of existing Three Pillars of Growth Positive cycle = Sustainable growth
businesses
• Structural reforms designed to
Strategies
reinforce the business 1. V
 alue creation by means Workplaces of
foundation the future: Safe,
of innovation
highly productive,
2. G
 rowth strategies based smart and clean
Integration of KMC on business reforms
(FY2017) 3. S
 tructural reforms Positive cycle = Sustainable growth
for growth
Improvement of earnings

• Optimization platform and solutions business strategies

Value creation Smart Construction, Autonomous Haulage System (AHS), and platforms

1
(LANDLOG and IntelliMine)
by means of • Automation, autonomous operation, electrification and remote-controlling of
construction, mining and utility (compact) equipment
innovation • Smart forestry and agriculture

• KMC integration synergies and business reinforcement

• Value chain reforms and redefinition of the aftermarket business
Growth strategies  Preventive maintenance by applying IoT and AI, and Lifecycle support under serial
number-based management; logistics reforms; and next-generation key components

2 based on business
• Next-generation Komtrax
• Stronger focus on aggregate & cement, forestry, agriculture and other segments

reforms • Efforts for “DANTOTSU No. 1 in Asia” and in the growing markets of India and Africa
• Reforms of the industrial machinery business (Expansion of synergy with the construction
equipment business and growth by capitalizing on core technologies)

Structural • Business reforms by means of ICT and IoT

• Structural reforms of development operations Model based development
3 reforms for Open innovation
• Connected plants with Zero impact on environment and workers
growth • Global human resource development

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Management Targets of the Mid-Term Management Plan and Related Performance 

FY2019 (First year of the plan) FY2020
Management Target
Indicator Performance Performance

Growth • Growth rate above the industry’s average Sales growth rate ▲10.3% ▲10.4%
Operating
Profitability • An industry’s top-level operating income ratio 10.3% 7.6%
income ratio
Efficiency • 10%-level ROE ROE 8.6% 5.8%
• Keep a fair balance between investment for growth and shareholder
Financial Net debt-to-
return (including stock buybacks), while placing main priority on 0.43 0.35
position equity ratio
investment
Shareholder Consolidated
• Set the goal of a consolidated payout ratio of 40% or higher 57.7% 48.9%
return payout ratio
Reduction of CO2
emissions from △14% △14%
• Reduction of environmental impact product use
CO2 emissions: Decrease by 50% in 2030 Reduction of
Reduction of CO2
from 2010 environmental
emissions from △32% △33%
Renewable energy use: Increase to 50% of impact
production
ESG total energy use in 2030
Rate of renewable
11% 13%
energy usage
Selected for DJSI
Evaluation by Selected for DJSI Selected for DJSI
Evaluation by external (World & Asia Pacific)
external
organizations CDP A-List CDP Climate Change: A CDP Climate Change: A
organizations
(Climate Changes and Water Risk) CDP Water Risk: A– CDP Water Risk: A

• ROA: 1.5%–2.0% ROA 1.5% 1.2%

Retail finance
business Net debt-to-
• 5.0 or under for net debt-to-equity ratio 3.80 3.69
equity ratio

Concepts and Stance of the Mid-Term Management Plan 

The mid-term management plan defines three pillars of growth strategies: 1) value creation by means of innovation, 2) growth
strategies based on business reforms, and 3) structural reforms for growth. By prioritizing investment on growth areas based on
the three pillars of growth strategies, we will seek to achieve sustainable growth through a positive cycle of improving earnings
and solving ESG issues that is resilient to fluctuations in demand.

Expectations of society and stakeholders Growth Strategy Aligned with Management Principles

Stakeholders Maximize Corporate Value which is the Total Sum of Trust

Enhance Corporate Brand

Communities

Solutions for ESG issues

Sustainable growth
Customers ESG Solutions

Positive cycle = Sustainable growth

Employees
Three Pillars of Growth
Distributors Strategies
Suppliers Shared growth based on 1. Value creation by means of
innovation
growth strategies 2.Growth strategies based on
business reforms
3. Structural reforms for growth
Business partners

Positive cycle = Sustainable growth

Shareholders
Investors Sustainable increase of Improvement of earnings
earnings

Komatsu Report 2021 37

 Resolution of ESG Issues through Growth Strategies

Komatsu’s CSR Themes and Mid-Term Management Plan KPIs

Komatsu seeks to help resolve ESG issues by promoting the three pillars of growth strategies defined in the new mid-term
management plan. We strive to realize a positive cycle of sustainable growth through improvements of earnings and reso-
lutions to ESG issues. Our initiatives include reducing environmental impacts to combat climate change and supplying

ESG Solutions through

CSR Themes Key Initiatives under Mid-Term Management Plan
Three Pillars of Growth
Reduction of CO2 emissions (in comparison to FY2010)
• Reduction of CO2 emissions from product use (fuel-efficiency equipment, hybrid hydraulic
excavator, rate of Smart Construction use, enhancement of ICT-intensive construction, mine
automation, and underground mining equipment)
• Reduction of CO2 emissions from production (plants with zero impact on environment and
workers)
Plants with zero impact on environment and workers
• Rate of renewable energy use (including purchase of renewable energy)
• Provide products, service and solutions • Work environment burden coefficient (particle matter density)
contributing to sustainable development of • Water consumption
Value chain reforms and redefinition of the aftermarket business
infrastructure, natural resources and circular • Spare parts sales
environmental protection (remanufacturing • Reman component lifespan (compared to new components)
and forestry). Actual value: Average operating time from the nth to the n+1st overhaul order

Enhancing Assurance of mine operation safety and productivity

• Improve productivity, efficiency, safety and • AHS units’ population (promotion of mining platform business)
Quality of Life environmental impact (lower CO2 emissions DANTOTSU Product, DANTOTSU Service, and DANTOTSU Solution
• ICT-intensive equipment introduced (United States, Europe, and Australia)
and higher ratio of renewable energy use) • Sites adopting Smart Construction
—Providing Products through innovations, such as automation in Automation, autonomous operation, electrification, and remote-controlling of equipment

Required by Society— the entire value chain. 1. Automation of construction equipment

2. Automation, autonomous operation, and remote operation of mining equipment

•M
 ake commitment to DANTOTSU Value which
will realize a better Earth and future by means 3. Automation of utility equipment

of technology and reliability (creation and

• Enhancement of mining equipment and hard rock mining businesses
maximization of customer value).
Agricultural solutions and smart forestry

• Creation of construction equipment demand in agricultural field

• Smart forestry projects

IoT and ICT work reforms
• Sales in Kom-mics platform business (visualization of production equipment operation)
Development of a diverse workforce with a high level of productivity and technical skills
• Enhancing employee engagement

• Work process reforms through expansion of diverse and flexible workstyles

• Promotion of The Komatsu Way (global dissemination of The Komatsu Way)

• Develop a diverse workforce with a high level
of productivity and technical skills. Strengthening and development of diverse talent with a global perspective to help achieve
sustainable workplaces

Developing • Strengthen and develop diverse talent with a • Revision of role of Japan in global management
global perspective to help achieve
People ­sustainable workplaces. • Foundations for global measures (systems, frameworks)
• Empowerment of female employees ((1) non-consolidated ratio of female employees,
(2) non-consolidated ratio of female managers, (3) consolidated ratio of female managers (Japan))
• Develop talent with cross-value chain • Rate of employment of people with disabilities (comply with requirements in Japan)

capabilities. • Support for regional human resource development for job creation (regional human resource
development with Cummins Inc.)

Development of talent with cross-value chain capabilities

• Cultivation of Smart Construction consultants (capable of proposing solutions using ICT to
improve productivity and safety throughout construction workplaces)
Resolutions to social issues through collaboration with stakeholders

• Promotion of industry–government–academia collaboration as well as of collaboration with

customers

• Offer resolutions for social issues through • Shareholders and individual investors (shareholder meetings, shareholder factory tours, individual
investor meetings)
collaboration with stakeholders.
Growing with
Society • Act as a responsible corporate citizen ensur-
ing corporate governance, compliance, and
• Institutional investors (ESG meetings)

human rights.
• Communities (business site fairs)

• Employees (meetings)
Action as a responsible corporate citizen addressing corporate governance, compliance, and human rights
• Occupational health and safety, support for establishing environmental and safety systems at
suppliers, response to Japan’s Corporate Governance Code (corporate governance reports),
evaluations of effectiveness of Board of Directors, internal control, and internal audits

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

high-quality, high-performance products, services, and solutions ensuring safety. KPIs have been set to guide these
­initiatives for solving ESG issues through our core business.

FY2019 KPI Performance FY2020 KPI Performance FY2021 KPIs Strategies Relevant SDGs

14% reduction 14% reduction 16% reduction (in comparison to FY2010)

33% reduction 33% reduction 40% reduction (in comparison to FY2010)

11% 13% 15%

10.7% reduction 24% reduction 30% reduction (in comparison to FY2018)
49.4% reduction 52% reduction 55% reduction (in comparison to FY2010)

3% increase 8% decrease 11% increase

26,866 workhours (134% of new components) 19,106 workhours (95% of new components) 20,000 workhours (100% of new components)

221 units 352 units 380 units (aggregate)

1,361 units 1,288 units 1,590 units (per year)

2,440 3,348 4,850 (per year)

Test introduction of hydraulic excavators for automated

Verification tests conducted on user sites In-house verification tests
loading
Preparations advanced to launch mining bulldozer with Domestic pretest of bulldozer with level 3 automation,
Entry into mining bulldozer market (level 4 automation)
level 2 automation preparation for proof of concept test in Australia
Development of peripheral safety technologies for Entry into retrofit market for installing peripheral safety
Development of technology for automated forklifts
supporting automation functions in preparation for automation
Advancement of development projects for expanding
Expansion of product series (drills, LHD) Four models Expansion of product series
product series

Japan: Commencement of verification tests at five Japan: Development and market evaluation of agricultural
Japan: Expand lineup of agricultural loaders
agriculture business operators ATT
Indonesia: Increase number of users of agricultural
Indonesia: Started mass production and sales of D31PLL Indonesia: Confirmation of feasibility of D21 agricultural
techniques employing agricultural bulldozers
agricultural bulldozer bulldozer for direct rice planting applications
10 19 50

865 units 1,447 units 1,900 units (including for internal use)

Scheduled for FY2020 Preparation for survey in FY2020, global survey in April 2021 Improvement of global surveys and indexes
(1) 1,950 workhours per person/year (1) 1,920 workhours per person/year Total workhours of less than 2,100; introduction of
(2) Commencement of trial in August 2019 (2) Revision of telework system in August 2020 telework system (Japan)
• Training hours: 31,625 hours (aggregate hours for all • Training hours: 33,188 hours (aggregate hours for all
Training hours and number of participants (Disclosure of
participants) participants)
results)
• Number of participants: 1,461 in Japan, 307 overseas • Number of participants: 1,527 in Japan, 0 overseas

• Revision of domestic retirement, wage, and retirement Shifting of human resources to projects and improvement
Human resource system revisions started in Japan benefit systems in April 2021 activities; globalization of organizations on by-function
• Introduction of elective retirement and R&D staff systems basis
Preparations advanced for introduction Commencement of domestic data linkage Introduction

(1) 12.3%, (2) 7.2%, and (3) 4.5% (1) 12.3%, (2) 7.7%, and (3) 4.9% (1) 12.5%, (2) 10.0%, and (3) 5.0%

2.58% (non-consolidated) 2.82% (non-consolidated) Above 2.3% (legally mandated rate)

• Human resource development program launched in Chile
• Ongoing support in Chile, South Africa, and Australia
• Ongoing support provided in Peru, South Africa, and
• Establishment of scholarship program for students in Chile Chile, Australia, South Africa, others
Australia
and Peru as part of COVID-19 relief program
• Participants’ success in finding employment tracked

396 626 430 (aggregate)

•P  osting of past activity documents on Group portal

•S  hared information on activities in 14 regions on rotational
Examination of cutting-edge tools through activities with Promotion of Brand Management and activities creating
basis
domestic customers and regional dissemination value for customers
•C  ontinuation of activities by headquarters team targeting
three customers (two civil engineering, one aggregate)
• Shareholder meetings: 2 times • Shareholder meetings: 1 time (held online)
• Shareholder factory tours: 10 times • Shareholder factory tours: 0 (canceled due to COVID-19
• Individual investor meetings: 7 times pandemic, factory tour videos shared on official Komatsu Number of meetings held (Disclosure of results)
• Certain factory tours and meetings canceled due to YouTube account)
impacts of global COVID-19 pandemic • Individual investor meetings: 4 times (held online)
•E  SG-related meetings: 4
11 (ESG-related meetings) •P  articipation in conferences: 1 (meetings held with 18 Number of meetings held (Disclosure of results)
investors)
Business fairs at nine factories (Awazu, Osaka, Ibaraki,
Kanazawa, Tochigi, Oyama, Koriyama, Shonan, and Himi);
All factory fairs canceled due to COVID-19 pandemic One fair held at each of nine factories per year
canceled only at Shonan Plant due to impacts of Typhoon
Hagibis
34 (30 in Japan, 4 overseas) 29 in Japan (canceled overseas due to COVID-19 pandemic) Number of meetings held (Disclosure of results)

Establishment of Human Rights Policy, disclosure in Revised Komatsu Code of Worldwide Business Conduct Ongoing improvements made in reflection of relevant laws
integrated report Human rights e-learning programs, etc. and regulations and social expectations

Komatsu Report 2021 39

 Resolution of ESG Issues through Growth Strategies

Enhancing Quality of Life—Providing Products Required by Society—

Komatsu announced its endorsement of the TCFD’s recommendations in April 2019. Accordingly, we have been assessing
the risks and opportunities that climate change presents for Komatsu and conducting related scenario analyses. At the
same time, we practice constructive dialogue with stakeholders while advancing initiatives for combating climate change.

Strategies 
Risk and Opportunity Identification
A total of 16 climate change-related risks and opportunities (TCFD). We then assessed internal factors, which impact sales
were identified for Komatsu, primarily in relation to construc- and earnings, and external factors, which affect projected
tion equipment operations, based on the recommendations of scenarios. Through this process, the 16 risks and opportuni-
the Task Force on Climate-related Financial Disclosures ties were grouped based on four major themes.

Risks and Opportunities and Groupings

16 Risks and Opportunities Four Major Themes

• Coal demand fluctuations • Reduced coal demand

Changes in
• C hanges in reputation among customers and • Increased resource demand related to
resource demand
investors electric equipment

•E
 nvironmental regulations
•T
 rend toward electric equipment
Transition to • More stringent fuel regulations
•S
 ubsidiaries for renewable energy and energy
low-carbon • Progress in electrification and next-
conservation projects
products generation technologies
•S
 ubstitute fuel technologies
•N
 ext-generation technical services (new market)

•C  arbon prices
• Rising manufacturing costs due to higher
•P  opularization of renewable energy technologies
Manufacturing carbon prices*
•R  aw material prices
costs *CO2 taxation measures for reducing
•E  nergy prices
emissions
• Recycling

• More frequent abnormal weather events

• Increased precipitation amounts and flood
• Increased precipitation amounts and weather
risks due to abnormal weather
patterns Natural disasters
• Higher demand in conjunction with
• Higher average temperatures
national resilience plans
• Rising sea levels

Business Risks and Opportunities Based on Sustainable Development Scenario and Stated Policies
Climate Change Scenarios  Scenario of the International Energy Agency (IEA).
To gauge the potential impacts of climate change-related risks The risks and opportunities pertaining to specific ESG
and opportunities on Komatsu’s business, we performed sce- themes and Komatsu’s strategies for addressing these risks
nario analyses of the Company’s four major risk and opportu- and opportunities are described on the following page. Should
nity themes. For these scenario analyses, we defined a 2°C a scenario targeting more substantial greenhouse gas emis-
scenario and a 4°C scenario based on the Fifth Assessment sions reductions be issued, Komatsu will be expected to
Report of the Intergovernmental Panel on Climate Change address stricter regulations and accelerate the development
(Representative Concentration Pathways 2.6 and 8.5) and the of new technologies in accordance with this scenario.

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Changes in Resource Demand

Risks Opportunities
• Rapid transition from fossil fuel-powered equipment to electric
• Regulation of power generation using fossil fuels equipment
2°C • Massive reductions in coal production volumes under IEA • Higher demand for copper and other resources necessary for electric
scenario scenarios equipment (motors, batteries, fuel cells, etc.)
• Reduced sales to coal-related customers by Komatsu • Increased sales to copper and other relevant mining-related customers
by Komatsu in conjunction with trend toward electric equipment
• Limited regulation of coal in developing nations • Trend toward electric equipment less pronounced than in 2°C scenario
4°C • Coal production volumes in 2030 in line with current levels • Higher demand for copper and other resources necessary for electric
scenario under IEA scenarios equipment
• Reduced appetite for investment in coal mines • Rise in investment for streamlining mine operations
Exploration of business opportunities arising from climate change through value creation by means of innovation and
growth strategies based on innovation
• Increased metal resource demand in conjunction with transition to electric equipment—Expansion of underground mining
equipment operations
Strategies
• Contribution to sustainable forestry—Provision of equipment and systems for streamlining processes spanning from afforestation to logging
• Contribution to rehabilitation of closed mine sites and greenification of deserts—Forest restoration projects at closed mine sites and
forest machine operations
• Transition to circular economies—Expansion of equipment restoration (“Reman”) business

Transition to Low-Carbon Products

Risks Opportunities
• Rising demand for electric equipment, fuel-efficient equipment,
and biomass fuel-powered equipment
• Higher development and capital investment costs due to • Higher sales in traditional areas due to success in developing
emissions restrictions low-carbon products
• Reduced sales due to inability to cater to customer • Higher sales due to ability to swiftly respond to change in focus
electrification demands toward low-carbon products in strategic markets where shift to
2°C • Substantial changes in technology development and low-carbon products was slow
scenario competitive climate including market entry by new • Growth of equipment restoration (Reman) operations driven by
competitors transition to cyclical economy
• Long-term diminishment of technological edge as customers • Increased demand for Smart Construction and other solutions
begin leading drive component development and with emissions-reducing benefits
manufacturing projects • Increased product reliability due to securing stable supply
sources for high-quality components for storage batteries and
other major components
Komatsu is advancing initiatives aimed at accomplishing its CO2 emissions reduction targets for 2030 while facilitating the
transition to the low-carbon products the world demands.
•D
 evelop electrification systems for construction equipment
•D
 evelop power sources and high-efficiency components compatible with carbon neutral fuels
•D
 evelop high-energy-efficiency equipment
Strategies •D
 eploy Smart Construction and other solutions on a global scale
•C
 ontribute to cyclical businesses through forestry machinery and Reman businesses
Please refer to the following pages for information on Komatsu’s efforts to transition to low-carbon products.
• Pages 28–33: Special Feature: Komatsu’s Vision for the Workplace of the Future
• Pages 26, 27, and 43: Examples of low-carbon products

Manufacturing Costs

Risks Opportunities
• Taxation of fossil fuels and CO2 emissions
2°C •T  ransfer of higher product purchase prices to Komatsu • Increased competitiveness through production technologies that
scenario •R  ising power fees and energy costs following investment in reduce CO2 emissions
power generation facilities with low CO2 emissions

Strategies  itigation of cost increases by achieving CO2 reduction and renewable energy targets defined in the mid-term
•M
management plan

Web Please refer to the following website for information on recent CO2 emissions reduction activities:
https://komatsu.disclosure.site/en/themes/149

Natural Disasters

Risks Opportunities
• Increased frequency of heavy rain and floods due to abnormal
weather
4°C • Risks of disaster damages to Komatsu plants at high risk of
• Increased demand for flood-control works
scenario flooding
• Component supply delays following damages to suppliers from
disasters
Strategies • Institute heavy rain and flood countermeasures across the value chain

Komatsu Report 2021 41

 Resolution of ESG Issues through Growth Strategies

Enhancing Quality of Life—Providing Products Required by Society—

Governance 
Komatsu views climate change as an important management issue, and targets for combating climate change have
been incorporated into its business strategies. Discussions regarding climate change are held at meetings of the
Sustainability Promotion Committee and the Risk Management Committee, and these committees make suggestions
to the Strategy Review Committee and report to the Board of Directors, thereby furnishing a system of appropriate
oversight. Meanwhile, the Executive Meeting fulfills the function of managing progress toward targets.

Climate Change-Related Reporting and Deliberation System

Board of Directors

Strategy Review Committee Report

Suggest
• Sustainability Promotion Committee
• Risk Management Committee
Executive Meeting

Major Discussion Items Related to Climate Change

Name Chairperson Major Discussion Items Related to Climate Change
• Report from Earth Environment Committee
Chairman of the Board • Reports from research, development, and product planning divisions and the Chief
Board of Directors and Representative Technology Officer
Director • Reports from production and procurement division
• Mid-term management plan progress report
•G
 rowth strategies for major plants (including climate change-related matters)
Strategy Review Committee President
•R
 eport from Environmental Affairs Department
•P
 rogress in regard to product development and production system
Executive Meeting President
•C
 limate change lectures by external specialists

Name Chairperson Major Discussion Items Related to Climate Change

• Initiatives for addressing ESG issues
Sustainability Promotion • Deliberations and reports regarding important environmental matters and key performance
President
Committee indicators (KPIs)
• CSR activity reports
Executive officer
Risk Management Committee supervising general •R
 eports on responses to natural disaster risks
affairs
Note: Earth Environment Committee and CSR Committee were integrated from FY2021.

Risk Management 
Please refer to page 60 for information on the Company’s risk management systems.

Indicators and Targets 

Climate Change-Related Indicators and Targets

Indicators Targets

CO2 emissions from product use Decrease by 50% in 2030 (Base year of 2010, basic unit)
CO2 emissions from production Decrease by 50% in 2030 (Base year of 2010, basic unit)
Rate of renewable energy use 50% in 2030

42 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Resolution of ESG Issues through Growth Strategies

Message from the President of the Sustainability Promotion Division

Examples of Low-Emissions Products

Announcement of Fully Electric and Remote-Controlled Mini Excavator

Concept Machine Powered by Lithium-Ion Battery

Komatsu has announced a fully electric (non-hydraulic drive) and exclusively remote-con-
trolled mini excavator powered by lithium-ion battery, as its next-generation concept machine
for the future.
Fully electric and remote-controlled mini
Designed to lay the foundations for commercialization of fully electric construction equip- excavator concept machine powered by
lithium-ion battery
ment of the future, this concept machine for a fully electric 3-ton class (bucket capacity: 0.09
m3) mini excavator is based on Komatsu’s accumulated technological expertise in electric
forklifts and mini excavators, and incorporates new technologies, such as lithium-ion batteries
and electric cylinders which utilize no hydraulics.

Japanese market’s Launch of PC78USE-11 Wired Electric Excavator

In July 2021, Komatsu launched its PC78USE-11 wired electric excavator in the Japanese
market. The PC78USE-11 was developed for customers wanting to use an electric hydraulic
excavator continuously over long periods of time. This product capitalizes on Komatsu’s accu-
mulated technology to deliver the same level of performance as engine-driven equipment while
boasting zero emissions along with massive reductions in noise and heat emissions. These
features make the PC78USE-11 an eco-friendly wired electric excavator of the small to mid-
PC78USE-11 wired electric excavator
sized class.

Message from the President of the Sustainability Promotion Division

In May 2021, Komatsu celebrated the 100th anniversary of its founding. In conjunc-
Voice tion with this momentous occasion, the Company integrated its Corporate
Communications Department, Environmental Affairs Department, CSR Department,
Diversity Promotion Group, and Demining and Reconstruction Project to form the
Sustainability Promotion Division.
Komatsu’s basic policy for Corporate Social Responsibility (CSR) has always been to contribute to
society through its business. This spirit of pursuing coexistence with communities has been passed
down since our founding a century ago. The three-year mid-term management plan slated to conclude
with FY2021 describes our goal of achieving sustainable growth through a positive cycle of solving ESG
issues and improving earnings, and various initiatives are underway to achieve this goal. Furthermore,
we clarified Komatsu’s corporate identity in light of the 100th anniversary of its founding, defining our
purpose as creating value through manufacturing and technology innovation to empower a sustainable
future where people, businesses and our planet thrive together. This move sent a clear message of how
we intend to contribute to the realization of a sustainable society while also achieving business growth
for Komatsu. Our operating environment is constantly changing, and the pace of this change is acceler- Mitsuko Yokomoto
Senior Executive Officer
ating. To respond to this change, I look to further build upon the Komatsu Group’s sustainability manage-
President, Sustainability Promotion
ment approach. By maintaining the strengths we have fostered over the past century, we will position Division
change as an opportunity, boldly tackling new challenges to make Komatsu a more resilient company.
Since establishing the Komatsu Earth Environment Charter in 1992, Komatsu has maintained a proactive stance toward addressing climate change
and other environmental issues. Moreover, we put forth the target of halving CO2 emissions from 2010’s level by 2030 in the current mid-term manage-
ment plan, which was launched in FY2019. Komatsu has also endorsed the recommendations of the Task Force on Climate-related Financial Disclosures
(TCFD), and we are advancing a strategy for combating climate change based on assessments and scenario analyses of climate change-related risks and
opportunities. Furthermore, Komatsu Report 2021 features our declaration of our goal of achieving carbon neutrality in 2050 and provides information on
the new initiatives that this declaration entails.
I also hope to ensure that Komatsu is always a company at which employees can feel proud, motivated, and empowered in their work. For this reason,
I believe that promoting diversity and inclusion, the drivers of innovation, is also an important role of the Sustainability Promotion Division. Acting in accor-
dance with Komatsu’s management policy of “maximizing the trust given to us by our stakeholders and society through a commitment to quality and
reliability,” I will continue striving to help us live up to the demands and expectations of society.
Komatsu Report 2021 43
 Resolution of ESG Issues through Growth Strategies

Developing People

Founder Meitaro Takeuchi established Komatsu Ltd. in Komatsu City, Ishikawa

Prefecture roughly a century ago. Having witnessed Europe’s cutting-edge tech-
nologies at that time, Takeuchi put forth the four management principles of global
expansion, quality first, technological innovation, and human resource develop-
ment. The commitment to the development of human resources, an invaluable
asset to Komatsu, lives on in the Company today.
Komatsu’s global engineers active in various fields

Employees Supporting Japan Overseas Japan Overseas

Komatsu as a Global Company  32% 68% 6% (13) 94% (200)

Komatsu develops its operations around the world,
and approximately 70% of its employees are not
Japanese. Accordingly, developing human
resources that are rooted in the communities they Number of Number of
Employees Consolidated
serve while promoting mutual acceptance of the
61,564 Companies
values and cultures of various countries and regions
is becoming increasingly important. Operations (consolidated) 213
around the world must be instilled with Komatsu’s (as of March 31, 2021) (as of March 31, 2021)

manufacturing competitiveness, which includes the

values that support Komatsu and workplace
improvement, driven by employees.

The Komatsu Way 

The Komatsu Way is the very DNA of Komatsu, an expression of the strengths of Komatsu, the beliefs supporting
these strengths, the basic attitudes, and the patterns of behaviors established based on the experiences of our
predecessors as they proceeded to tackle the challenges facing them.
Komatsu seeks to develop its operations on a global scale and to become a stronger company and grow. To
accomplish these objectives, it will be crucial for us to transmit The Komatsu Way to employees with different
cultures and customs around the world and to implement these principles in a manner that aligns employees
along the same vector. In 2020, an English-language e-learning program pertaining to The Komatsu Way was
launched, and we completed the translation of the third version of The Komatsu Way into nine languages, posing
us to further entrench this doctrine throughout our global operations.

1 Leadership/Top Management 2 “Monozukuri ” for All 3  rand Management

B
Leaders must be directly involved in the Employees (Customer Value Creation
workplaces and manage businesses with Komatsu aims to pass on the manufac- Activities)
an emphasis on contributing to the entire turing competitiveness, perspectives, Komatsu defines “Brand Management” as
Group, including distributors and suppli- and values that, based on total quality all the activities that “make Komatsu indis-
ers. We have also defined guidelines for management, have continued to drive pensable to our customers.” This objective
leaders related to actively engaging in Komatsu’s competitiveness and support is accomplished by visiting customer
regular board meetings, communicating its growth. We look to transmit these workplaces to understand the ideal state
with stakeholders, complying with rules of principles through a joint effort encom- of these customers and to build relation-
the business community, managing risks, passing all internal divisions as well as our ships that enable us to work together with
and grooming successors for manage- suppliers, distributors, and other partners them to help achieve their goals through
ment positions. and to continue promoting involvement concerted efforts by the Group and its
by all of these parties. distributors.

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Global Engineer Cultivation and Empowerment 

In the 2000s, resource demand began surging, stimulating growth in Komatsu’s mining
equipment business and simultaneously creating a need for the cultivation of staff that can
provide ongoing support at active customer workplaces around the world. To address this
need, Komatsu looked beyond Japan, with its shrinking workforce, to seek out human
resources overseas. As part of this undertaking, we adopted English as our official
Company language and turned our attention to the Philippines, where we were able to find
human resources that were highly proficient at adapting to overseas assignments. We thus
commenced a recruitment campaign aimed at acquiring talented human resources that had
New building of Komatsu Philippines Corporation
graduated from local technical universities in this country.
The Komatsu Human Resources Development Center was established in November 2008
as a venue for recruiting and cultivating such talent and was later incorporated locally as
Komatsu Philippines Corporation in November 2019. To date, this company has hired more than
150 engineers as it has proceeded to expand its systems. The training program at Komatsu
Philippines involves a six-year curriculum comprising a 17-month basic product and service
course, a seven-month training period at factories in Japan, and four years of training at over-
seas mines. Individuals who have completed this program are officially hired as global engineers.
Today, global engineers are active in more than 20 countries worldwide, using their
Global engineer providing online training
experience and technical knowledge to make contributions at active customer workplaces on fuel-efficient operation
as well as at domestic service process improvement divisions and as technical training
instructors teaching distributors.

AI Education for Developing Key Personnel for AI Field Coordination 

Artificial intelligence (AI) technologies are used in various fields for purposes such as maximizing
Requirements of Key AI
the value of customer operations and reforming in-house processes. The speed of progress in AI Coordination Personnel
technologies is increasing exponentially. For this reason, it is crucial for us to develop in-house
Communication
capacities for addressing the AI-related issues seen in specific business fields and to coordinate Technical Skill
Skills
with external partners boasting advanced technologies.
Based on this recognition, Komatsu launched dedicated programs for cultivating key personnel Customer-
Business
in the AI field in 2019 with an eye to future expansion in the scope of coordination with external Oriented
Perspective
Perspective
partners in this field. These programs include a basic program, which gives participants the ability
to experience the process that spans from the definition of issues from a customer perspective to
theme planning, and an advanced course, in which participants actually address issues through writing software. Through these two pro-
grams, we develop human resources capable of identifying pertinent themes from customer-oriented and business perspectives and
playing a central leadership role in internal and external coordination.

Global Engagement Survey 

Continuous employee engagement is imperative to the ongoing growth of a company.
For this reason, Komatsu conducted a global engagement survey in April 2021 with the Ongoing Corporate Growth
aim of periodically tracking and analyzing trends in employee engagement to gain an
understanding of the constantly changing issues in this regard to be reflected in human Vision
Strategic and
Competitive
Advantage
resource measures. This survey targeted both domestic and Group companies. Continuous
Engagement
Taking the form of an anonymous online questionnaire, the survey featured ques- Organizational
and Operating Leadership
tions on such engagement-related topics as vision, strategic and competitive advan- Structures

tage, leadership, and corporate culture and workplace environment. Corporate

Culture and Human
The results of the survey were analyzed by region and by organization to clearly Workplace Resources
Environment
identify the strengths of Komatsu and the issues it faces. This information will be
reflected in human resource measures and training and education programs to help
make Komatsu a place where employees feel motivated and empowered.
Komatsu Report 2021 45
 Resolution of ESG Issues through Growth Strategies

Growing with Society—Social Contribution Activities

Komatsu recognizes that social contributions to the communi- directly aimed at generating earnings. Based on this definition,
ties in which it conducts its business activities are an important we seek to contribute to society in a manner that leverages the
corporate responsibility. Komatsu defines the social contribution strengths of our core business.
activities as activities related to its three CSR themes that are not

Social Contribution Activities in FY2020 

The following chart shows expenditures for social contribution activities by the Komatsu Group, aggregated
based on six general categories.
Academic and Industry–Academia
Collaborations  26% Human Resource Development  15%
FY2020

Culture & Sports  25%

Social Contribution
Expenditures Local Community Support  24%
(Consolidated)


Disaster Relief 9% ¥1,628 million Environment  1%

Type of Social Contribution Expenditure

Employee Expense related to Expense related to

Cash contributions Total
dispatchment and providing own facilities events for the
time contributions for public use community
¥582 million ¥142 million ¥172 million ¥732 million ¥1,628 million

Commencement of Agricultural Support Project Following Demining Project 

Since 2008, Komatsu has been engaging in collaborative efforts other equipment are being deployed to provide agricultural sup-
with the authorized nonprofit organization Japan Mine Action port. Komatsu’s ICT-intensive bulldozers use ICT technologies to
Service (JMAS) to support the demining of anti-personnel land- automatically control blades, making them highly effective at level-
mines in Cambodia and other areas threatened by these weapons ling farmland (creating a flat surface with no uneven areas). In
and to help rehabilitate former mine field sites through the con- FY2020, such equipment was used to level approximately 13
struction of roads, bridges, elementary schools and other facilities. hectares of farmland, earning much praise from farmers for the
These activities were expanded in 2016 to support the removal of contributions to increased rice harvests. We intend to expand the
unexploded ordnance in Laos. In this country, we are supplying scope of this farmland support going forward.
Komatsu equipment, free of charge, along with technical guidance Please refer to the following video for more information on
to assist in the machine-based removal of unexploded ordnance the Demining and Reconstruction Project.
from cluster bombs. The next step in these activities came in
Please refer to the following video for more information on the
2020, when we commenced an agricultural support project in Web
Demining and Reconstruction Project.
https://www.youtube.com/watch?v=OTHFyzCQAmo
Cambodia through which bulldozers, hydraulic excavators, and

46 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Business and Human Rights 

1. Human Rights Policies The Human Rights Policy was incorporated into the Komatsu
Komatsu established its Human Rights Policy in September Code of Worldwide Business Conduct as part of the 2021 revision
2019, thereby declaring its commitment to conducting its busi- to disseminate this policy to Group employees around the world.
ness in a manner that is compliant with internationally accepted
standards pertaining to respect for human rights throughout its 2. Human Rights Due Diligence
global organization. Based on this policy, processes have been The following human rights due diligence process is imple-
established to prevent or mitigate negative impacts on human mented on an ongoing basis in order to identify human rights
rights and to allow for corrective measures to be instituted issues in our business activities and to formulate specific plans
should it be found that the Company was directly or indirectly for addressing these issues.
involved in activities that had a negative impact on human rights.

(1) Human Rights Risk and Impact Assessments

Risk assessments are conducted to identify and assess human rights risks with the potential impact on our business activities. The
following assessments have been performed thus far.

With the assistance of external specialist Business for Social Responsibility (BSR), assessments were conducted to evaluate human rights risks per-
2014
taining to the construction equipment, mining equipment, and forestry machinery businesses being developed on a global scale.

The aid of BSR was once again enlisted for our second human rights assessment, which was carried out while referencing the Universal Declaration of
2017
Human Rights and the United Nations Guiding Principles on Business and Human Rights.

With support from external specialist CSR Europe, a systematic human rights risk assessment of our global operations was conducted covering down-
stream areas of our construction equipment, mining equipment, and forestry machinery businesses (equipment and replacement part sales). Given the
2020
characteristics of Komatsu’s businesses, relevant issues such as pertaining to discrimination based on ethnicity, race, or national origin; compulsory
labor; freedom of association; and fair work conditions were assessed, and potential risks and priorities were identified by business and by region.

(2) Screening (4) Deployment Across Supply Chain

In its global operations, Komatsu has implemented a screening Komatsu is promoting awareness regarding its CSR procurement
system for checking and restricting transactions with counter- guidelines among suppliers for the purpose of ensuring that they
parties designated on sanction lists and in other documents. In respect human rights. Furthermore, in FY2020 we began issuing
addition, the Company complies with trade embargoes and other self-assessment questionnaires with regard to CSR activities to
provisions of international regulations. Going forward, we will tier-1 suppliers in Japan and overseas in order to further spread
investigate the possibility of expanding the scope of this screen- awareness of CSR across our supply chain. The target of the
ing to include responsible sales approaches and policies. FY2020 questionnaire was the 156 Midori-kai member compa-
nies that are major suppliers of Komatsu in Japan. To date,
(3) Application to Employees and Distributors responses have been received from 77 companies.
Komatsu administers e-learning programs to employees to Please refer to the following website for more information.
ensure that they are aware of its human rights policies and to https://komatsu.disclosure.site/en/themes/185
raise awareness of its measures for preventing and mitigating
negative impacts on human rights. After introducing these pro- Topics
grams targeting all employees in Japan and the United States in
Human Rights Initiatives in Myanmar
July 2020, we have been expanding the scope of application with
Myanmar has been judged as a region presenting significant potential risks.
the aim of providing education on a global basis.
Accordingly, since 2019 we have been calling upon external specialist
The Company does not maintain capital tie-ups with most of the
organizations to aid us in practicing due diligence in this region while
distributors that supply its products and services around the world.
engaging in discussions for identifying threats and formulating response
However, we do coordinate with these business partners. Specifically,
measures. Based on the results of such discussions, it was decided that
a requirement to pledge to respect human rights in business activities
we would not sell mining equipment units to jade mines in Myanmar from
has been included in distributor contracts, and we discuss with dis-
2019 onward. In addition, we have halted operations at mining equipment
tributors the possibility of them conducting voluntary due diligence
repair subsidiaries in this country, and the process of liquidating these
checks and establishing human rights policies based on the charac-
subsidiaries is underway. Going forward, we will continue to coordinate with
teristics of their respective regions and businesses. dealerships and external experts in Myanmar to formulate effective mea-
sures for ensuring respect for human rights in our business.

Komatsu Report 2021 47

 Resolution of ESG Issues through Growth Strategies

Growing with Society—Social Contribution Activities

Employee-Driven Social Contribution Project

One World One Komatsu
Komatsu defines CSR as activities to respond to social needs encourages employees to take close-at-home action in their
through its core business and works to achieve sustainable daily lives, such as cutting back on water use and turning off
growth together with society by addressing environmental, lights in unoccupied rooms.
social, and governance (ESG) issues. The Komatsu Group Moreover, to promote further action, we have developed an
launched the One World One Komatsu employee-driven social exclusive platform that can consolidate the efforts of employees
contribution project as the first global initiative in which all across the Group. This new platform can be easily accessed by
Komatsu Group employees around the world can take part in logging in via a computer or smartphone. Furthermore, the plat-
conjunction with its 100th anniversary. form transcends national and language barriers to connect
Based on themes pertaining to the environment and sus- Komatsu Group employees around the world, to nurture a sense
tainability, which are shared global issues that are highly related of unity as they work for a common goal, and to promote activi-
to our business, the One World One Komatsu project ties designed for a sustainable planet.

Four Themes of One World One Komatsu Employee Impact

Total actions completed 100,158

Participating teams 344
(As of August 5, 2021)
CO2 emissions Water preservation Renewable energy Waste reduction
reduction

48 Komatsu Report 2021

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FULL
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A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

One World One Komatsu Program Uniting

Topics
Employees in Worldwide Sustainability Effort
First launched as a pilot program in August 2020, the Company’s first
global CSR initiative, One World One Komatsu, grew rapidly in its first
year. Through the One World online platform, Komatsu employees are
encouraged to take sustainable actions that, when done collectively, transform into a global
movement to support environmental responsibility.
Despite the fact that it was launched during a global pandemic, One World brought
employees together, virtually, within the platform. The program’s environmentally-focused
challenges encourage Komatsu team members to focus on different sustainability priorities
over the course of the year to earn points for completing related activities. Employees
can share photos and comments about what they learned, encourage one another by
commenting on each other’s activity and share inspiration for the future through One
World’s idea boards. Caley Clinton
While expanding One World program access to all areas of the Company in 2021, Senior Manager, PR CSR and Content
Komatsu Mining Corp. and Komatsu
Komatsu’s global CSR team leveraged the platform to achieve two other firsts for the
America Corp.
Company: Komatsu’s first global day of volunteer action for Earth Day and the launch of its
first worldwide sustainability competition for employees.
Completed environmental
On April 22, 2021, Komatsu employees around the world took part in the Company’s actions of Earth Day challenge
24-hours of Earth Day challenge, completing environmental actions those shown to the ❶ Planting more than 14,000 trees
right: and native species
Working individually or in small groups, as required by ongoing COVID-19 restrictions at ❷ Picking up more than 3,500 bags
that time, employees recorded their efforts in the One World platform, and submitted of trash
❸ Volunteering more than 15,000
photos and videos to be used for global watch parties that highlighted submissions from
hours collectively
around the world.

Web
To view videos from Komatsu’s global Earth Day celebration :
https://www.youtube.com/watch?v=rrf7QzwtyZQ&list=PLl09JNAS3JlEgHkUWebDvJlCWaJaQqm3L

The results of the global day of action were tallied up and reported out in time for the United Nation’s World Environment Day in June, at
which point an internal contest for employees was launched. The One World One Komatsu sustainability contest offers employees the
opportunity to compete in up to 10 categories for a chance to attend an awards ceremony planned for March 2022 in Japan.
Categories include some dedicated to competitions within the One World platform, while others encourage employees to think
creatively about sustainability or recognize a colleague for environmental responsibility.

Web Watch a video of an overview of the Company’s CSR initiatives :

https://www.youtube.com/watch?v=ul99s-eO4p4&list=PLl09JNAS3JlGOCkNiCo8St7zLm6DUrcLC&index=6

Komatsu Report 2021 49

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

■ Message from an Outside Director

Promoting discussion to
identify areas needing
change in pursuit of
­sustainable growth—
Cutting a strong start for
growing over the next
century

Makoto Kigawa
Outside Director

Strengths and Issues of Komatsu as a 100-Year-Old Company

I believe that Komatsu’s strengths can be seen in its unshakable and innovativeness that are also strengths of Komatsu. Another
brand image, which was fostered through action based on the strength is the corporate constitution that Komatsu has shaped
management principle of “maximizing the trust given to us by our through exhaustive business structure reforms advanced based
stakeholders and society through a commitment to quality and on the keyword of DANTOTSU since the turn of the century.
reliability,” as well as in the human resource development initia- These strengths have led to a sense of confidence that suc-
tives based on The Komatsu Way (please see page 44) that sup- cess can be achieved by adhering to Komatsu’s approach.
port this brand power. Despite the fact that, today, about 70% of However, if this confidence turns into overconfidence, it might
Komatsu’s employees are of non-Japanese nationality, The threaten to make the Company overly conservative in the face of
Komatsu Way is embraced by employees around the world and change. I therefore think there is a need for discussion to clarify
has permeated all corners of the organization. The Komatsu which aspects of Komatsu should be carried forward through the
Group truly is a united global organization, and the strength of next century and which should be changed.
this unity forms the foundation for the manufacturing capabilities

Constructive Discussion at Board Meetings and Potential for Increased

Diversity to Improve Corporate Value
As a Director, I believe that I have an important role to play by chains being disrupted due to extreme circumstances, which, in
providing advice pertaining to business strategies to the execu- addition to the current COVID-19 pandemic, could include natu-
tive team based on an understanding that I am charged with ral disasters, political conflicts, or other such issues. Given such
supervising the executive function. For example, I have manage- risks, it is another important role of directors to confirm the cur-
ment experience related to the logistics industry. In 2020, we saw rent conditions while also pointing out potential future risks and
a sudden jump in the price of marine transportation, and the offering advice in relation to these risks.
resulting disruption to the parts supply chain has become a I believe that Komatsu’s Board of Directors has an incredibly
social issue. We have been able to confirm that, at the moment, conducive atmosphere for encouraging open discussion and
there have been no serious obstructions to local production or sees frank exchanges of opinion. Board meetings begin with a
supply chain disruptions stemming from soaring parts transpor- report from President Ogawa in which he explains the circum-
tation costs. Regardless, we must address the risk of supply stances within the Company and any issues that he has

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

identified. These reports are great for helping outside directors of Komatsu’s Board of Directors or the evaluations of its effec-
understand what is going on inside of the Company. I quickly tiveness. The June 2021 revision to Japan’s Corporate
adopted this approach and implemented these reports for board Governance Code has created a need for even more robust
meetings at Yamato Holdings Co., Ltd., where I am representa- corporate governance. I think that the diversity of the Board of
tive director. In addition, the president himself accurately Directors will be key to realizing this more robust governance.
explains issues at Board meetings, which does a lot for the ease Komatsu is evolving with the times. For example, it appointed a
of discussion. One particular example of this ease of discussion non-Japanese Outside Director in 2020. However, if the
that comes to mind is the acquisition of Joy Global Inc. (cur- Company were to evolve further, with an eye to the type of Board
rently, Komatsu Mining Corp.), which moved into the final deci- membership that will be required in the future, it could create a
sion phase shortly after I became an Outside Director in 2016. Board of Directors that would allow decision-making and over-
What makes this episode so memorable is how brisk and unre- sight functions aimed at improving corporate value to be exer-
strained the discussion was, even among Outside Directors, cised based on more diverse input and opinions. I think the
despite the late stage of the process. When a matter has been decision to prepare and disclose a skill matrix detailing the
discussed a number of times, it is common for new opinions to expertise of Outside Directors and Outside Audit & Supervisory
stop being heard at later stages of discussion. A company that Board Members will help the Board of Directors become more
is able to engage in such a high degree of discussion is defi- effective while driving the evolution of corporate governance at
nitely a healthy company. the Company.
At the moment, I have no complaints about the composition

Changes in Komatsu’s Operating Environment, Issues, and Expectations for

the Next Mid-Term Management Plan
The current mid-term management plan was formulated based on low environmental impacts.
discussions that took place when President Ogawa was still a The third category of risks is competition risks in solutions
senior executive officer. I believe that there would be no issues businesses, such as those pertaining to Smart Construction.
with transferring the basic framework of the current plan onto the Komatsu’s solutions businesses are currently at a stage in their
next. However, the speed of change in the operating environment growth in which it is time for the technologies and expertise
today exceeds that when the current plan was formulated. Komatsu has developed in Japan to be deployed in overseas
Accordingly, it will be important to implement the next plan, while markets. The Company is currently the frontrunner with regard to
making flexible revisions. Moreover, we are currently seeing such solutions. However, if Komatsu is to maintain its competi-
increased political and economic instability along with massive tiveness in this area, it will need to bring its levels of quality in line
changes in people’s values. Now is thus a crucial time when it with international standards. This will be incredibly important, so I
comes to ensuring Komatsu can cut a strong start for growing hope Komatsu will do what needs to be done. It is unlikely that
over the next 100 years. Komatsu will see a sudden change in the competitive climate in
When formulating the next mid-term management plan, there its core manufacturing operations. However, outside of these
are largely three categories of risks that will need to be consid- operations, in service and solutions businesses, which are more
ered. The first is geopolitical risks. In recent years, we have seen closely connected to end users, it is possible that there may be
an increased trend toward countries implementing policies solely changes in competitors. Rivals with business models that had
for the benefit of their own national interests, giving rise to geo- not been anticipated might also appear. Moreover, this is not an
economic risks. These risks could manifest in forms such as trade era in which a company can be competitive in the solutions busi-
restrictions or tariffs; in areas related to financial markets, digital ness on its own. The degrees to which Komatsu will pursue alli-
transformations, or intellectual properties; or even as acts of ances and to which it will boldly move forward on its own will be
cyberterrorism or other extreme circumstances. It is therefore important elements of strategies.
vital to discuss these risks before they materialize. At the same time, a change of perspective could reveal that
The second category of risks is climate change risks. It can be these risks actually represent business opportunities. I therefore
expected that coal businesses will become less prosperous in the think it is important that Komatsu, with its exceptional manufactur-
future. This situation will create a need for Komatsu to consider ing capabilities, identify new areas, areas in which it must change,
how to develop its mining equipment business, which caters to and its strategies for these areas and accelerate its efforts as to
such coal businesses. At the same time, the Company must ramp not become overly conservative.
up development of electric equipment and other products with

Komatsu Report 2021 51

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

Basic Stance on Corporate Governance

To become a company which enjoys more trust from all stakeholders, the Company is working to strengthen corporate
governance, improve management efficiency, advocate corporate ethics and ensure sound management on a group-wide
basis. To further improve the transparency of management for its shareholders and investors, the Company discloses
information in a fair and timely manner and actively engages in investor relations activities by holding meetings with
­shareholders and investors.

Corporate Governance Framework 

At the Company, the Board of Directors is positioned as the System in 1999, the Company has separated management
core of corporate governance, and to improve the effectiveness decision making and supervisory functions from
of discussions at meetings of the Board of Directors, the executive functions to the extent permitted by laws and
Company has worked to put in place a system to ensure regulations, and while appointing both Outside Directors and
thorough discussions of important management matters and Outside Audit & Supervisory Board Members, limits the Board
prompt decision making, and reform their operational of Directors to a small number of members.
aspect. Having introduced the Executive Officer (Shikko Yakuin)

Corporate Governance of the Company (As of June 30, 2021) Figures in represent the number of meetings in FY2020.

General Meeting of Shareholders

Elect / Discharge Elect / Discharge Elect / Discharge

15 Audit 15
times times
Audit & Audit reports
Accounting Auditors
Supervisory Board Office of (Audit corporation)
(Standing 2 / Outside 3) Corporate
Board of Directors
Auditors’ Staff
(Standing 5 / Outside 4) Recommend Nomination 2
Collaboration times
Advisory Committee
Advise / Suggest
Audit International Compensation Advisory 1
Advisory Board Recommend Committee time
Elect / Discharge /
Supervise Report /
Submission

Executive Functions

President and CEO

Internal
Auditing Major Committees
Dept. Product Safety Committee
Strategy Review Committee
Compliance Committee
Risk Management Committee
Export Control Committee
Komatsu Group’s Global Operations Sustainability Promotion
Internal audit Committee
Executive Officers and Global Officers 57
• Japan 30 Disclosure Committee
• Global 27 (including 19 foreign nationals)

Collaboration

Decide on the details of the items including election and discharge / Confirm suitability or independency of the Accounting Auditors

Recommend
Audit reports

52 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Activities of the Board of Directors 

The Company holds Board of Directors’ meetings periodically at ensure transparent and objective management.
least once every month. The Board of Directors deliberates and In FY2020, Outside Directors and Outside Audit &
makes resolutions on important matters, determines manage- Supervisory Board Members held meetings at which these out-
ment policies of Komatsu, and rigorously controls and super- side officers shared opinions regarding management issues from
vises the execution of duties by all members of the executive their objective and independent standpoints. Discussions with
management team including Representative Directors. Of the the President were also arranged to foster shared recognition.
nine (9) Directors on the Board, four (4) are Outside Directors to

Board of Directors’ Meeting Attendance and Agenda Item

Characteristics of Komatsu’s Board of Directors
Numbers in FY2020 (April 1, 2020–March 31, 2021)
• Monthly reports from the CEO (recent important items and other topics)
Outside Directors 100%
• Monthly reports from the CFO (performance, order trends, borrowings, etc.)
Attendance
• Annual proposal plans and follow-up Outside Audit & Supervisory
100%
Board Members
• Multiple discussions on important items (deliberation → resolution)
• Business reports to Board of Directors covering nearly 100% of sales- Reports 41
Agenda item
generating activities
numbers
•Proactive expression of opinions by Audit & Supervisory Board Members Deliberations, Resolutions 33
in addition to Directors
Free discussion 3 times
• Opportunities for free discussion at Board of Directors' meetings

Evaluation of the Effectiveness of the Board of Directors 

The Company is working to improve the effectiveness of the Board of Directors and performs annual evaluations and analyses of the
effectiveness of the Board of Directors for this reason.

Evaluation Process

Survey Collection of survey Discussion among Report of discussion

After discussion by the Board of results from all Directors Outside Directors and results, evaluation and
Directors on the method to be used and Audit & Supervisory Outside Audit & analysis of effectiveness,
for FY2020 evaluation, based on the
method applied in the previous year
Board Members Supervisory Board and discussion of the
and the results thereof, the Company Members based on matters for improvement
conducted a survey out of consider- survey responses at meeting of the Board of
ation for the nature of an effective
Board of Directors.
Directors

Survey topics:
• Composition of the Board of Directors •S tructure through which important matters are
• Contents of agendas reported, proposed, and followed up
• Straightforward and meaningful discussions • Succession plans for CEO
• Provision of information and presentation of • Other items
agendas by executives

Outline of the Results 

The assessment shows a generally high level of achievement for With respect to the conducting of Board meetings, positive
each item and confirms that there were no serious problems con- evaluations were received with regard to the arrangement of
cerning the effectiveness. The Company received excellent evalua- online meetings in response to the COVID-19 pandemic, but
tions for various factors, such as the following: the timely sharing of there were a few suggestions for improvement pertaining to the
issues, problems, and other information provided in monthly need to expand the range of specific strategic themes discussed
reports by the President himself in Board meetings and the fact that and to the nature of regular reports on business execution. The
Board members followed up the implementation status of resolu- Company will make those improvements and work to make the
tions made by the Board of Directors based on regular reports. Board of Directors further effective in the future.

Komatsu Report 2021 53

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

Corporate Governance Reforms 

The Company has proceeded to implement reforms to its corpo- execution of duties. As a means to supplement executive func-
rate governance system in order to ensure effective and ade- tions, the Company established the International Advisory Board
quate performance of matters related to decision making, (IAB) in 1995. Through the IAB, the Company aims to secure
management and supervision, such as separation of corporate objective advice and suggestions from experts from Japan and
management from business execution, enhancement of corpo- abroad about how to function as a global company by exchang-
rate management decision making by the Board of Directors, ing opinions and holding discussions. Going forward, the
strict management and supervision of business execution, mea- Company will pursue increases to the effectiveness of the Board
sures undertaken by Outside Directors to improve transparency of Directors while appointing Outside Directors to ensure trans-
and objectivity of management, and measures undertaken by the parency and soundness and promoting openness and account-
Audit & Supervisory Board to appropriately audit Directors’ ability in management.

Board of Directors

1999: 2003: 2005: 2017: 2021:

28 members 8 members 8 members 10 members 8 members 9 members
(0 Outside Directors)
(1 Outside Director) (2 Outside Directors) (3 Outside Directors) (3 Outside Directors) (4 Outside Directors)

Audit & Supervisory Board

3 members 1994: 2006:

(1 Outside Audit &
Supervisory Board
4 members 5 members
Member) (2 Outside Audit & Supervisory Board Members) (3 Outside Audit & Supervisory Board Members)

Other organizations and systems

Executive Officer System

(1999)

Global officers
(2016)

Compensation Advisory Committee

7 outside members, 1 standing member
4 outside members, 1 standing member
(1999) (2020)

Nomination Advisory Committee

(2015)
3 outside members, 2 standing members

International Advisory Board

(1995)
3–4 domestic and overseas experts

Hitech & Innovation International Advisory Board

(2015)
4–6 overseas experts

Compliance Committee
(2001)
Members of senior management and labor representatives

Composition of Directors and Audit & Supervisory Board Members (As of June 30, 2021)

Internal Outside Internal

Outside Audit &
5 3 2
4 Supervisory
Directors
Of whom, Board Members
Of whom,
women 1
non-Japanese 1
Of whom, women 1

54 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Major Activities of Outside Directors and Outside Audit & Supervisory Board
Members in FY2020 
Outside Directors

Makoto Kigawa Mr. Makoto Kigawa previously served as Representative Director at both Yamato Holdings Co.,
Ltd. and Yamato Transport Co., Ltd. He has been actively expressing a wide range of opinions
Attendance of the Meetings
Meeting of the Board of Directors 100%
Major Career at the meetings of the Board of Directors mainly from the standpoint of appropriately monitor- (15 meetings out of the 15 meetings held)
Representative Director at both ing the management strategies of the Company and contributing to the enhancement of the
Yamato Holdings Co., Ltd. and Company’s medium- and long-term corporate value. During FY2020, he accordingly provided
Yamato Transport Co., Ltd. comments based on his rich experience in the business world, particularly concerning such
issues as working from home and other personnel arrangements, competitive strategies
involving ICT, and inventory management. He also served as Chairman of the Company’s
Nomination Advisory Committee and the Compensation Advisory Committee.

Takeshi Kunibe Mr. Takeshi Kunibe has served as Representative Director, President of Sumitomo Mitsui Banking
Corporation and Representative Director and President as well as Director President and
Attendance of the Meetings
Meeting of the Board of Directors 100%
Major Career Representative Executive Officer of Sumitomo Mitsui Financial Group, Inc., and serves as Chairman (11 meetings out of the 11 meetings held)
of the Board of said company. He has been actively expressing a wide range of opinions at the
Representative Director of
meetings of the Board of Directors, mainly from the standpoint of contributing to sustaining and
Sumitomo Mitsui Financial
improving transparency and soundness of management as well as enhancing corporate gover-
Group, Inc.
nance. During FY2020, he accordingly provided comments based on his rich experience in the
Representative Executive Officer
business world, particularly concerning the M&A management system, business plan during the
of Sumitomo Mitsui Banking
COVID-19 pandemic, and ESG initiatives. In addition, he was a member of the Company’s
Corporation
Nomination Advisory Committee and the Compensation Advisory Committee.

Arthur M. Mitchell Mr. Arthur M. Mitchell has worked for many years as a New York state attorney and foreign law
attorney in Japan. He has been actively expressing a wide range of opinions at the meetings
Attendance of the Meetings
Meeting of the Board of Directors 100%
Major Career of the Board of Directors, mainly from the standpoint of mitigating and avoiding risk in the (11 meetings out of the 11 meetings held)
Company’s global business operations and contributing to the enhancement of the
Foreign lawyer of White & Case
Company’s medium- and long-term corporate value. During FY2020, he accordingly provided
LLP
comments based on his international perspective and professional standpoint, particularly
concerning such issues as business alliance strategy, data-related legal compliance, and ini-
tiatives geared to the North American market. In addition, he was a member of the Company’s
Nomination Advisory Committee and the Compensation Advisory Committee.

Note: As Outside Directors Mr. Takeshi Kunibe and Mr. Arthur M. Mitchell were elected at the 151st Ordinary General Meeting of Shareholders held in June 2020, their maximum number of
meetings of attendance is different from that of the other Directors.

Outside Audit & Supervisory Board Members

Hirohide Mr. Hirohide Yamaguchi previously served as Deputy Governor of the Bank of Japan. During
FY2020, based on his professional standpoint, he provided comments at the meetings of the
Attendance of the Meetings
Meeting of the Board of Directors 100%
Yamaguchi Board of Directors and the meetings of the Audit & Supervisory Board concerning such issues (15 meetings out of the 15 meetings held)
as the status of the global economy, demand trends, and audit systems. In addition, he was a Meeting of the Audit & Supervisory Board
Major Career member of the Company’s Compensation Advisory Committee.
100%
Deputy Governor of the
(15 meetings out of the 15 meetings held)
Bank of Japan

Eiko Shinotsuka Ms. Eiko Shinotsuka possesses wide-ranging knowledge and experience in fields such as
economics, labor relations, and law. During FY2020, based on her professional standpoint,
Attendance of the Meetings
Meeting of the Board of Directors 100%
Major Career she provided comments at the meetings of the Board of Directors and the meetings of the (15 meetings out of the 15 meetings held)
Audit & Supervisory Board concerning such issues as utilizing global human resources, envi- Meeting of the Audit & Supervisory Board
Professor Emeritus,
ronmental measures, and employee safety and health management. In addition, she was a
Ochanomizu University, 100%
member of the Company’s Compensation Advisory Committee.
Commissioner, National (15 meetings out of the 15 meetings held)
Personnel Authority, Member of
the Bank of Japan’s Policy Board

Kotaro Ohno Mr. Kotaro Ohno possesses rich experience in the legal profession. During FY2020, based on
his professional standpoint, he provided comments at the meetings of the Board of Directors
Attendance of the Meetings
Meeting of the Board of Directors 100%
Major Career and the meetings of the Audit & Supervisory Board concerning such issues as the compli- (15 meetings out of the 15 meetings held)
ance system, Group company management, and securing human resources. In addition, he Meeting of the Audit & Supervisory Board
Prosecutor-General, Special
was a member of the Company’s Compensation Advisory Committee and an observer of the
Counsel, Mori Hamada & 100%
Compliance Committee.
Matsumoto (15 meetings out of the 15 meetings held)

Introduction of New Outside Directors 

The following one new outside director was appointed at the General Meeting of Shareholders held in June 2021.

Naoko Saiki Ms. Naoko Saiki has considerable knowledge and abundant experience in international affairs, international law, and the field of economics as she
served in positions such as Director-General of the Economic Affairs Bureau and Director-General of the International Legal Affairs Bureau at the
Major Career Ministry of Foreign Affairs.
Director-General, Economic Utilizing this knowledge and experience, her recommendations concerning the overall management of the Company are expected to contribute
Affairs Bureau and International to the enhancement of the medium- to long-term corporate value of the Company. Therefore, the Company nominates her as a candidate for
Legal Affairs Bureau, Ministry of Outside Director.
Foreign Affairs Although Ms. Saiki has no experience in participating in the management of other companies directly, the Company judged that she would be
able to execute the duties of Outside Director adequately because of the reasons above.

Komatsu Report 2021 55

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

Activities of Advisory Committees 

Committee Name Nomination Advisory Committee Compensation Advisory Committee

Chairman Outside Director (Makoto Kigawa) Outside Director (Makoto Kigawa)

4 Outside Directors (Makoto Kigawa, Takeshi Kunibe,
Arthur M. Mitchell, Naoko Saiki )
4 Outside Directors (Makoto Kigawa, Takeshi Kunibe,
3 Outside Audit & Supervisory Board Members (Hirohide
Members Arthur M. Mitchell, Naoko Saiki )
Yamaguchi, Eiko Shinotsuka, Kotaro Ohno)
(As of June 30, 2021) Chairman of the Board
1 external expert (Advisor: Shinji Hatta, Honorary Professor,
President
Aoyama Gakuin University)
Chairperson of the Board
Deliberation, resolution, and reporting to the Board of
Selection of next President and deliberation, resolution, and
Directors and Audit & Supervisory Board on remuneration
reporting to the Board of Directors on human resource devel-
Purpose systems for Directors, Audit & Supervisory Board Members,
opment methods, succession plans, and appointment and
and Executive Officers to ensure objectivity and
dismissal of Directors
transparency
Meetings in FY2020 2 1
• Selection and cultivation of candidates for next President •M
 onthly compensation levels for Directors and Audit &
• Selection of a new Outside Director candidate Supervisory Board Members in FY2021
Agenda items in • Concurrent positions held by Chairman of the Board and •P
 erformance-based remuneration for Directors for FY2020
FY2020 Outside Directors (projections)
• Proposal of Directors and Audit & Supervisory Board •E
 valuation indicators for performance-based remuneration
Members for FY2021, etc. in FY2021

Succession Plans 
One of the items contained in the Code of Conduct for In addition, successors for important domestic and overseas
Leadership/Top Management that has been described in The positions up to and including that of the President are decided
Komatsu Way since its establishment in 2006 is “continue to through the annual implementation of succession plans (see
think about your succession plan.” chart below).
In order to ensure that Komatsu’s management values are Selected successors are assigned to challenging tasks and
transmitted to the next generation, the basic requirements for granted even larger roles in the organization to systematically
candidates for the position of President are discussed and develop them in an environment that encourages the pursuit of
clearly defined by the Human Resource Advisory Committee. mutual growth.

Overview of Succession Plans

Results Feedback

Evaluation and Selection of Human Resource Relocations

Succession Plans
Successors and Cultivation

Oversight of Implementation Process

Board of Directors

Human Resource Advisory Committee

Key Points for Cultivating 1. Foster willpower necessary to overcome challenges by having candidates experience
Leadership/Top Management extremely difficult situations
Successors 2. Nurture organizational operation capabilities needed to unite parties with differing interests
3. Cultivate compliance awareness to prevent misconduct

56 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Remuneration Systems 
In an effort to maintain an objective and transparent remunera- single fiscal year (bonus in cash and the Stock-Based
tion system, the policy and levels of remuneration for Directors Remuneration A) as well as the performance-based remunera-
and Audit & Supervisory Board Members of the Company are tion (Stock-Based Remuneration B) that will reflect the degree of
deliberated by the Compensation Advisory Committee. Taking its achievement of the targets raised in the mid-term management
reports and recommendations into consideration, the remunera- plan, so that it will further contribute to the enhancement of the
tion for Directors is determined by the Board of Directors, and the medium- and long-term corporate value of the Company, by
remuneration for Audit & Supervisory Board Members is deter- linking the remuneration.
mined by discussions by the Audit & Supervisory Board The remuneration for Outside Directors only consists of basic
Members, respectively, within the range previously determined remuneration (fixed remuneration) designed to support their role to
by resolution of the General Meeting of Shareholders. With make recommendations with respect to the overall management
regard to the level of monthly remuneration paid as basic remu- of the Company as a member of the Board of Directors.
neration, comparison by position at other key, globally active Furthermore, the remuneration for Audit & Supervisory Board
manufacturers in Japan is made by the Compensation Advisory Members only consists of basic remuneration (fixed remuneration)
Committee and is reflected in its reports and recommendations. designed to support their independent position with authority to
The remuneration for Directors excluding the Outside audit the execution of duties by Directors without getting fettered
Directors (hereinafter “Internal Directors”) comprises basic remu- by the movements of corporate performance of the Company.
neration (fixed remuneration) and performance-based remunera- The retirement allowance system for Directors and Audit &
tion linked to the Company’s consolidated performance for a Supervisory Board Members was terminated as of June 2007.

Composition of Remuneration of Directors and Audit & Supervisory Board Members

Performance-Based Remuneration Linked to
Basic Remuneration Performance-Based Remuneration for a Single Year
Performance of Mid-Term Management Plan
(Fixed Remuneration) (Monthly Remuneration x 0–24 months)
Internal (Monthly Remuneration x 0–3 months)
Directors Stock-Based Remuneration A
Monthly remuneration x Bonus in Cash (2/3, in Stock-Based Remuneration B
(1/3, in principle)
12 months principle)* Restricted Stocks
Restricted Stocks

Outside Basic Remuneration

Directors and (Fixed Remuneration)
Audit &
Supervisory Monthly remuneration x Not influenced by Company performance
Board Members 12 months

* The upper limit for Bonus in Cash is set at 12 months’ worth of monthly remuneration; the remainder of bonuses is to be paid as Stock-Based Remuneration A.

Performance-Based Remuneration Linked to Performance of Mid-Term Management Plan

The Company will pay Internal Directors the equivalent of a three-month portion of monthly remuneration every fiscal year as remuneration linked to
the period of the Company’s Mid-Term Management Plan by granting restricted stock as stock-based remuneration (Stock-Based Remuneration B). In
deciding Stock-Based Remuneration B, after the expiry of the period of the mid-term management plan, the number of shares on which to lift transfer
restrictions (within a range of 0–100%) will be decided based on the achievement of the management targets of the Mid-Term Management Plan
presented in the following table and as a general rule; the restriction of transfer on the shares will be lifted after three years from delivery.

Management Indicators and Management Targets in Mid-Term Management Plan (FY2019–FY2021)

Management Indicator Management Target
Growth • Sales growth rate • Growth rate above the industry’s average*1

Profitability • Operating income ratio • Industry’s top-level operating income ratio*1

Efficiency • ROE • ROE of 10% or higher

Financial position • Net debt-to-equity ratio*2 • Industry’s top-level financial position

• ROA • ROA of 1.5% to 2.0%
Retail finance business • Net debt-to-equity ratio*2 • 5.0 or under for net debt-to-equity ratio*2
• CO2 emissions: Decrease by 50% in 2030 from 2010
• Reduction of environmental impact Renewable energy use: Increase to 50% of total energy use in 2030
ESG • Evaluation by external organizations •S elected for DJSI*3
(World & Asia Pacific) and for CDP*4 A-List (Climate Changes and Water Risk), etc.

•K eep a fair balance between investment for growth and shareholder return (including stock
Shareholder return • Consolidated payout ratio buybacks), while placing main priority on investment
• Set goal of a consolidated payout ratio of 40% or higher

*1 Relative comparison with domestic and foreign major competitors in the same industry
*2 Net debt-to-equity ratio = (Interest-bearing debt – Cash and cash equivalents – Time deposits) / Shareholders’ equity of the Company
*3 Dow Jones Sustainability Indices: SRI indices generated by S&P Dow Jones of the United States and RobecoSAM of Switzerland
*4 International non-profit organization that advocates the reduction of greenhouse gas emissions and protection of water resources and forests by companies and governments

Komatsu Report 2021 57

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

Major Executive Committees

Committee Name
(Committees indicated with an
Purpose Meeting Frequency
asterisk [*] are chaired
by the President.)

Product Safety Effective promotion of Companywide product safety activities based on basic product safety 2 times a year and when
Committee policies defined in product safety regulations necessary

Discussion on and decision and execution of policies and important measures pertaining to group- 2 times a year and when
Compliance Committee*
wide compliance necessary

Risk Management 1 time a year and when

Primarily discussion and approval of group-wide risk management tasks and risk countermeasures
Committee necessary

Export Control Discussion on and decision and execution of policies and important measures regarding group-wide 1 time a year and when
Committee export control (trade security management) necessary

Formulation of group-wide environmental measures and discussion of progress to facilitate

Sustainability Promotion 1 time a year and when
promotion of environmental preservation throughout the Group and discussion on and execution of
Committee* necessary
group-wide CSR policies and important measures and activities

Discussion and assessment to facilitate accurate information disclosure as required by the Financial
4 times a year and when
Disclosure Committee Instruments and Exchange Act and submission of recommendations to internal information control
necessary
representatives regarding judgments on material developments

Discussion on and decision and execution of policies and important measures regarding human
The Komatsu Way resources, labor affairs, education and human resource development, The Komatsu Way, total quality
2 times a year
Committee* management, employee benefits, and occupational health and safety management for the
Company and the Group

Appointments of Advisors of the International Advisory Board

Komatsu established the IAB back in 1995 for the Board of Directors to incorporate, from external experts, objective
Topics
advice and suggestions concerning management and operations of Komatsu as a global company. The IAB has met
a total of 36 times in the conventional and new organizations combined. In April 2020, Komatsu commenced the 8th
session of the IAB for management with the following new advisors. The term of service for each advisor is set at
three years as a general rule.
Komatsu will continue to incorporate advice and suggestions from IAB advisors with expertise in global business, further improve
management, and strengthen its corporate governance in order to enhance its corporate value.

Advisors of the 8th Session of the IAB for Management (FY2020–FY2022)

Name Current Position and Brief Background

2018–Present Chairman of the Board, Elanco Animal Health

2015–February 2021 Board of Directors, Edgewell Personal Care Company
R. David Hoover 2009–2018 Board of Directors, Eli Lilly and Company
2000–2015 Board of Directors, Energizer Holdings, Inc.
1996–2013 Board of Directors, Ball Corporation (Chairman, 2002–2013)

2015–Present Vice President Commissioner of PT Adaro Power

2010–Present President Commissioner of BFI Finance
Kusmayanto Kadiman
2004–2009 The State Minister for Research and Technology of the Republic of Indonesia
2001–2004 President of Bandung Institute of Technology (ITB)

Chairman of the Board of Directors, F-Secure Corporation

2006–Present
Risto Siilasmaa (He is the founder of F-Secure Corporation.)
2012–2020
Chairman of the Board of Directors, Nokia Corporation

2018–Present Visiting Professor, Ritsumeikan University

Mitoji Yabunaka 2014–2020 Outside Director, Komatsu Ltd.
2008–2010 Vice Minister, Ministry of Foreign Affairs

58 Komatsu Report 2021

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Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Stakeholder Engagement 
In order to gain more trust from all stakeholders, the Company is strengthening corporate governance and top management is practicing
direct engagement with stakeholders.

Share information on the Komatsu Group’s vision and Provide as many opportunities for engagement as
the issues it faces (employees, suppliers, distributors) ­possible and practice proper information disclosure to
Society facilitate understanding of Komatsu

Investors and
Distributors Customers Employees Suppliers Shareholders Mass media Communities
Analysts
Distributor Midori-kai Meetings with Visits from top General Visits to inves- Interviews Meetings with
meetings General meet- the President management Meeting of tors worldwide mayors, gover-
ings with Shareholders Analysts nors, etc.
management Shareholder meetings
meetings Financial results
briefings

Direct Communication by Top Management

Major Investor Relations Activities in FY2020 

To further improve the transparency of management for our continued to provide and enhance communication activities
shareholders and investors, we disclose information in a fair and nonetheless, employing virtual and online venues for events and
timely manner and actively engage in investor relations activities providing access to archived video. In addition, we established an
by holding meetings with shareholders and investors. official Komatsu YouTube account, which is being used for orga-
In FY2020, certain face-to-face communication activities nizing and distributing the latest videos on the Company.
were canceled in response to the COVID-19 pandemic, but we

For Institutional Investors For Shareholders and Homepage

Individual Investors
Financial results briefings* (4 times) Financial information
Small meetings* (7 times) • Financial results briefings
Shareholder meetings* (1 time)
Business briefings* (1 time) • Sales and profits gains reports
Factory tours for shareholders canceled →
Overseas investor relations activities* • Quarterly reports, etc.
Replaced with virtual factory tours and videos
(4 times) Web interviews with the President
Individual investor meetings* (4 times)
Individual meetings* (over 190) (4 times)
Gifts of appreciation for long-term
Komatsu Report, etc.
shareholders
* Held through virtual or online venues

Engagement Topics 
Komatsu holds meetings for institutional investors and securities analysts to deepen their understanding of the Company. The following online
meetings were held in 2020.

Date Meeting Name Attendants Topics

KOMATSU IR-DAY 2020 1. The pursuit of safety and productivity at mine sites
December 16, 2020 90
<Investors Meeting & ESG Meeting> 2. Komatsu’s environmental activities

Web
For materials from meetings, please refer to Komatsu’s corporate website:​ Web
Komatsu’s Official YouTube Channel
https://www.komatsu.jp/en/ir/library/results/2020 https://www.youtube.com/c/komatsu/featured

Komatsu Report 2021 59

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

Risk Management
Basic Principles and Structure for Risk Management 
In addition to the basic policy for risk management to ensure busi- measures in place for each risk, as well as to take control of risks
ness continuity and stable development, Komatsu has established when they arise. The committee regularly reports on its delibera-
Risk Management Rules to correctly recognize and manage risks. tions and activities to the Board of Directors.
Furthermore, we have developed the Basic Manual for Risk Komatsu will establish an emergency headquarters when
Management, which defines the response systems and rules to be serious risks, such as the COVID-19 pandemic, occur and imple-
utilized should a risk materialize along with specific risk items and ment appropriate measures to minimize damage. Other impor-
the divisions responsible for said risk items. This manual is periodi- tant matters to be considered from the perspective of risk
cally revised to ensure that risk management systems are adapted management include corporate governance; compliance;
to the constant changes in the operating environment and in risks. response measures for climate change, pandemics, and other
Komatsu has established a Risk Management Committee to natural disaster risks; and frameworks for preventing transactions
devise relevant policies for the entire Group, review the risk man- with antisocial forces. We continue management efforts related
agement system, and evaluate and improve upon response to these matters.

Risks Surrounding the Company Risk Management System

Board of Directors
Hazard Risk Report as
needed
Review
Risks of natural disasters and regularly President
Report
regularly
other disasters caused by exter-
nal factors
Basic Manual for Risk Management

Risk Management Committee

Operational Risk (When serious risks are exposed: Emergency Headquarters)
Risk Management Rules

Inherent risks associated with

corporate activities such as the Risk Management Committee
Executive Office
violation of laws and scandals (General Affairs Department)
Report
Strategy Risk regularly/
Report as
needed Primary division responsible for each risk
Risks related to significant • Identify and review risk recognition
changes in social situations and • Perform activities to prevent risks and minimize their effects
business uncertainties • Take action when a risk is exposed
Each division and each Group company Report
Financial Risk regularly

Risks related to finance including Expert committees

• Product Safety Committee • Compliance Committee
fluctuations in interest rates and
• Export Control Committee • Sustainability Promotion
stock prices Committee

Response to Climate Change 

Approximately 90% of the CO2 emissions from the lifecycles of production by 2030. This goal will be pursued through exhaustive
Komatsu construction equipment are attributable to product reforms to production processes in order to prepare for cost
operation. Accordingly, we have the potential to help mitigate increases. At the same time, we project that demand may rise for
climate change by providing low-carbon products and solutions copper and other resources necessary for items used to electrify
that have carbon reducing benefits like Smart Construction. equipment, such as motors, batteries, and fuel cells. Seeking to
Conversely, if we do not conform to the regulatory requirements of seize this opportunity, we are expanding our hard rock mining
the relevant countries or with the demands of markets or if we are business (response to transition and opportunity risks).
impacted by rapid changes in resource demand, market entry by Meanwhile, the rise in natural disasters associated with cli-
new competitors, or higher manufacturing costs due to the intro- mate change is creating risks of damages to the Company and
duction of carbon taxes, we will risk suffering future impacts to our its supply chain. We are therefore taking steps to identify the
earnings. To address these risks, Komatsu has set the goal of water-related risks threatening the Company and its supply chain
halving the CO2 emissions from product operation by 2030, and while instituting business continuity plan (BCP) drills and other
R&D activities are being advanced toward the accomplishment of measures to mitigate these risks (response to physical risks).
this goal. We have also set the goal of halving CO2 emissions from

60 Komatsu Report 2021

A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Response to the COVID-19 Pandemic 

To fulfill its responsibilities to customers involved in businesses that (3) Online Provision of Information to Stakeholders
support social infrastructure (essential businesses), the Komatsu In December 2020, Komatsu held its first online shareholder meet-
Group has continued to supply products, parts, and services to its ing. This communication venue allowed management to field ques-
customers while implementing exhaustive measures to prevent the tions in real time and to engage in discussions with shareholders. In
spread of COVID-19. In March 2020, we set up an emergency head- addition, the FY2021 General Meeting of Shareholders was con-
quarters with the president as its chairperson to collect and share ducted in the form of our first live internet broadcast on the day of
information on the COVID-19 pandemic on a global scale and to the meeting.
confirm and deploy response policies. Other online information provision initiatives included the distri-
bution of virtual factory tour videos of the Awazu Plant and the
(1) Business Continuity Initiatives Ibaraki Plant. These videos offer a vivid way to experience
Production at certain Komatsu factories was impacted by factors Komatsu’s production sites by allowing viewers to manipulate their
such as government-instituted lockdowns. However, even prior to viewpoint in 360° so that they can observe the construction equip-
the COVID-19 pandemic, Komatsu has been practicing cross- ment assembly process from whatever angle they please.
sourcing to facilitate flexible production at all factories around the
world to absorb the impacts of regional demand and foreign
exchange rate fluctuations. These efforts also proved effective at
curbing the impacts of the pandemic.
Risks associated with supplies of parts from suppliers were
addressed by prioritizing allocation of inventories along our supply
chain to regions facing shortages. In addition, alternative parts were
developed and alternative suppliers were secured to prevent losses Virtual factory tours
Awazu Plant
of sales opportunities attributable to parts shortages. Web
https://www.youtube.com/watch?v=8rdu3LWaxs0

(2) Workplace Infection Prevention Measures Web

Ibaraki Plant

With the safety and health of customers, partner companies, people https://www.youtube.com/watch?v=3myugOFcSEg

in local communities, and employees and their families as its priority,

the Komatsu Group endeavored to prevent the spread of COVID-19 (4) Prevention of Infection of Customers through
based on the government policies in each country. Construction Workplace Digital Transformation
Specific measures included utilizing our teleworking system to To prevent the spread of COVID-19, the Ministry of Land,
promote teleworking. Approximately 70% of headquarters employ- Infrastructure, Transport and Tourism advises people to avoid
ees engaged in teleworking during the periods of Japan’s state of crowed spaces, closed environments, and close interactions.
emergency declarations. Also during these periods, we canceled or Seeking to help prevent such conditions at construction sites,
postponed domestic business trips, events, trainings, and seminars, Komatsu is promoting its Smart Construction Digital Transformation
and utilized remote methods for all in-house trainings, in principle. solution. This solution uses a digital twin methodology that allows
At production sites, fans were installed and windows were workplace representatives to monitor conditions remotely without
opened to ensure good ventilation, and we also built additional gathering in a single location, thereby helping to prevent the
breakrooms, staggered break times, and took other steps to prevent spread of COVID-19.
the spread of COVID-19 in workplaces.

Safety and health of customers, partner Exhaustive infection prevention

companies, people in local communities, measures Ongoing supply of products and assistance
and employees and their families
necessary to customers involved in businesses
Government policy that support social infrastructure
Acceleration of construction (essential businesses)
and mine workplace digitiza-
Komatsu technologies tion and automation Strategic minimization of infection risks through
provision of new solutions
Coordination with other companies

Dialogue with stakeholders and timely and appropriate information disclosure

Komatsu Report 2021 61

 Resolution of ESG Issues through Growth Strategies

Corporate Governance

Establishing a business continuity plan (BCP) and providing training 

Komatsu has established business continuity plans (BCPs) to standards for frontline sites have been clarified to facilitate swift
ensure the continuity of core operations and to facilitate quick decisions by senior management should a disaster strike.
resumption of operations should they be interrupted. As part of We are focused on not only strengthening the BCPs of
these plans, we hold regular initial response and production resump- Komatsu Group bases but also on strengthening the supply
tion drills based on major earthquake and water damage scenarios. chain system through support of our business partners. Recent
At production bases, we implement measures to reinforce the seis- initiatives to this effect have included holding nationwide semi-
mic resistance of structures and production equipment while imple- nars on initial disaster responses and measures to be taken
menting countermeasures to safeguard against water and wind under normal conditions to build response frameworks led by
damage from concentrated heavy rains and other weather events in experts on these subjects. Several partners were invited to take
order to minimize the impacts of increasingly more severe natural part in these seminars. Going forward, we will continue to pro-
disasters. Moreover, the disaster response reporting chains and mote and further enhance our group-wide BCP initiatives.

1995 2007 2011 2018 2019 2020

Great Hanshin Chuetsu Offshore Great East Japan Heavy Rains in West Typhoon Hagibis 2020 Kyushu floods
Earthquake Earthquake Earthquake Japan
I nitial response  usiness
B Group-wide R econfirmation of natural disaster risks and countermeasure
manual develop- continuity manual deployment of development
ment for ensuring development response I mprovement of BCP implementation procedures at the Komatsu
safety • Preparation of BCPs for measures Group and business partners
• Preparation of disaster specific bases • Installation of equipment • Improvement of BCP implementation procedures at individual bases
response manuals • Establishment of and communications • Support for establishing BCP systems of business partners
• Formulation of headquarters BCP drill infrastructure
risk-related regulations regulations • Establishment of
base-specific BCP drill
regulations B
 CP seminar for partner companies

Reinforcement of Information Security 

Threats such as cyberattacks are constantly growing more sophisti- taken to guarantee that personal information is properly handled.
cated and complex, increasing the importance of information secu- These steps include e-learning programs and internal audits.
rity. Komatsu implements information security measures based on Overseas, we comply with the European Union’s General Data
all applicable laws and regulations as well as internal rules. Protection Regulation and other laws, regulations, and social
expectations in countries and regions of operation in our efforts
(1) Management System to protect personal information.
Companywide information security issues are shared and examined
by the Risk Management Committee through a management system (3) System Measures
overseen by the officer in charge of risk management. The president Komatsu has instituted a multilevel defense system combined
of the Information Strategy Division, who is also the Company’s top with various system measures to prevent unauthorized access
representative for ICT, co-chairs the Risk Management Committee to from outside of the Company, computer virus infections, and
ensure that this committee is equipped to handle highly specialized other threats as well as information leakages resulting from these
information security issues. Critical information security issues are threats. For example, as part of the process of implementing
shared and resolved by this committee. teleworking systems, we installed a rigorous verification system
Should a serious information security incident occur, swift that employs a scheme in which multiple processes are required
reports will be issued to the president, directors, other officers, to access systems from outside of the Company.
relevant organizations, and the Board of Directors to commence
the process of formulating appropriate response measures. (4) Education and Training
The Information Strategy Division, meanwhile, proposes appro- All employees engaged in the handling of information assets are
priate measures for addressing potential information security required to undergo regular e-learning programs. In addition, tar-
risks. These proposals are raised at annual meetings of the geted-attack email drills are held several times a year to entrench
Strategy Review Committee, which comprises the president, procedures for addressing suspicious emails. These drills target
directors, and other officers, so that they can be incorporated companies in Japan as well as certain overseas subsidiaries in
into medium-term ICT investment plans. order to boost the level of information security on a global scale.

(2) Personal Information Protection (5) Information Security Audits

Protecting personal information is a social responsibility. Information security audits of Group companies are performed to
Recognizing this responsibility, Komatsu has formulated and improve the level of information security across the entire Komatsu
disclosed its Personal Information Protection Policy. Steps are Group. In principle, every company is required to undergo an audit
62 Komatsu Report 2021
A Century of Creating the Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
Workplaces of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

at least once every three years as part of an effort to confirm infor- Effective, ongoing support is provided for this purpose. Regular
mation security-related conditions on an ongoing basis. meetings on the status of information security management are
held with applicable affiliates. When necessary, we may present
(6) Initiatives for Improving Information Security items for operational information inspections of information
Across the Supply Chain systems or recommend the use of certain information security
Our information security initiatives are not limited to Komatsu and materials. We thereby aim to promote understanding of the
Group companies; we also request that affiliates across the importance of appropriate information management among all
supply chain with which confidential information is shared during parties that handle confidential information in order to reduce
the course of business activities practice information security risks and better guarantee business continuity.
management in accordance with the Company’s policies.

Compliance 
Komatsu established the “Compliance Committee” to oversee Executive Officer in charge of compliance, and establishment of
compliance, and the Committee regularly reports its discussions the Compliance Department. Through all of these measures, we
and activities to the Board of Directors. Komatsu also establishes work to supervise, educate and train Directors, Audit & Supervisory
a system to ensure all Directors and employees thoroughly Board Members and employees. In addition, Komatsu establishes
comply with business rules as well as laws and regulations through an internal reporting system under which those who are discreetly
a variety of measures, including the provision of “Komatsu’s reporting questionable actions in light of laws and regulations and
Worldwide Code of Business Conduct,” appointment of the business rules will not be given any d
­ isadvantageous treatment.

Process for Compliance Activities

1. Declaration of stance by senior 2. Implement the Code 3. Determine the Current Status 4. Reacting to Contingencies
management
Formulate the Code

Komatsu’s Worldwide Code of Business

Trainings Compliance and risk audits Accidents, incidents
Conduct

Five Principles of Compliance Monthly Newsletter Internal reporting systems

Visualization survey
Statement of Compliance Compliance Portal (Interviews, online surveys) Recurrence prevention measures

(1) Komatsu’s Worldwide Code of Business Conduct (3) Upholding Thorough Compliance
Initially established in 1998, the Komatsu’s Worldwide Code of • Five Principles of Compliance
Business Conduct is now in its 11th edition. The Part 1 of the Code Komatsu is working to cultivate their consciousness of best busi-
primarily provides principles and standards for responsible business ness practices by displaying posters at every business unit of
conduct that Komatsu Group follows in order to fulfill its social Komatsu Group listing The Five Principles of Compliance (the basic
responsibilities such as solving ESG issues. Accompanied by exam- actions of compliance that all Komatsu employees must observe).
ples, Part 2 contains select universally applicable rules which set the
• Global E-Learning Program on Komatsu’s Worldwide Code of
code of conduct that must be followed by all employees of Komatsu.
Business Conduct
Web
Please visit Komatsu website to see the Komatsu’s Worldwide Code of
Business Conduct including the Five Principles of Compliance and other topics. Global e-learning programs are conducted targeting all Komatsu
https://www.komatsu.jp/en/-/media/home/aboutus/
Group employees around the world in order to raise understand-
corporate-identity/kwcbc_11th_en_extra.pdf?rev=425b
393b6d9145bab9897c332bfc8682&hash=8E43993D7E ing of the Komatsu’s Worldwide Code of Business Conduct.
9C66C7035018A90C1BD856 Workers without company email addresses participate in these
programs in a classroom training format.
(2) Internal Reporting Systems
Komatsu has established the Global Compliance Hotline in its HQ • Compliance Newsletter
to offer counselling to and handle reports from employees of Komatsu publishes monthly newsletters “Everybody’s
Komatsu Group companies pertaining to the rules in the business Compliance” in Japan that contains articles explaining important
world. In this way, we strive to detect and correct problems early. In laws and regulations, highlighting the lessons to be learned from
addition, Komatsu companies establish and maintain Regional scandals at other companies, and describing matters pertaining to
Compliance Hotline that properly handles reports of alleged or human rights and the prevention of harassment. Articles on par-
suspected violation of the rules so that whistleblowers can raise ticularly important subjects, such as anti-corruption, antitrust laws,
claims in their native languages. and export control, are frequently republished in this newsletter.
Compliance newsletters are also published at overseas subsidiar-
ies in order to raise awareness on a global basis.
Komatsu Report 2021 63
 Corporate Profile

Directors and Audit & Supervisory Board Members

Directors 
Number of Year(s) in Office 12 years Number of Year(s) in Office 3 years
Attendance of the Meetings of the Board of Directors 15/15 (100%) Attendance of the Meetings of the Board of Directors 15/15 (100%)
Number of Shares of the Company Held Number of Shares of the Company Held
 176 thousand shares  77 thousand shares
Chairman of the Board President and CEO Important Concurrent Positions Held in Other Organizations:  None
Important Concurrent Positions Held in Other Organizations:
Representative Director  Outside Director of Yamaha Motor Co., Ltd. Representative Director Special Interests Between the Candidate and the Company:  None

Tetsuji  Outside Director of Nomura Research Institute, Ltd.

Special Interests Between the Candidate and the Company:  None Hiroyuki 4/1985 Joined the Company
Ohashi 4/1977 Joined the Company
Ogawa 4/2019 Took office as President and Representative Director
(current) CEO (current)
4/2019 Took office as Chairperson of the Board and
Representative Director (current)

Number of Year(s) in Office 2 years Number of Year(s) in Office 2 years

Attendance of the Meetings of the Board of Directors 15/15 (100%) Attendance of the Meetings of the Board of Directors 15/15 (100%)
Number of Shares of the Company Held Number of Shares of the Company Held
 64 thousand shares  44 thousand shares
Director and Senior Important Concurrent Positions Held in Other Organizations: None
Director and Senior Important Concurrent Positions Held in Other Organizations: None
Executive Officer Special Interests Between the Candidate and the Company: None Executive Officer Special Interests Between the Candidate and the Company: None

Masayuki 4/1982 Joined the Company Kiyoshi 4/1983 Joined the Company
Moriyama 6/2019  Took office as Director and Senior Executive Officer
(current)
Mizuhara 6/2019  Took office as Director and Senior Executive Officer
(current)

CMO and President, Construction Equipment

President of Mining Business Division Solution Division

NEW Number of Shares of the Company Held

 24 thousand shares
Important Concurrent Positions Held in Other Organizations: None
Special Interests Between the Candidate and the Company: None
Director and Senior
Executive Officer 4/1985 Joined the Company
Takeshi 6/2021  Took office as Director and Managing Executive
Officer (current)
Horikoshi

CFO

Number of Year(s) in Office 5 years 4/1973 J oined The Fuji Bank, Limited (currently Mizuho Bank, Ltd.) 6/2006  T ook office as Representative Director and Senior Managing
Attendance of the Meetings of the Board of Directors 15/15 (100%) 4/2004  Took office as Managing Director, Chief Risk Officer/Head of Executive Officer of Yamato Holdings Co., Ltd.
Number of Shares of the Company Held None Risk Management Group, and Chief Human Resources 3/2007 Took office as Representative Director and Executive Officer
Important Concurrent Positions Held in Other Organizations: Officer/Head of Human Resources Group of Mizuho of Yamato Holdings Co., Ltd.
 Special Advisor of Yamato Holdings Co., Ltd. Corporate Bank, Ltd. (currently Mizuho Bank, Ltd.) Took office as Representative Director, President and
Outside Director  Outside Director of Seven Bank, Ltd. 3/2005  Retired from Mizuho Corporate Bank, Ltd. Executive Officer of Yamato Transport Co., Ltd.
 Outside Director of Oki Electric Industry Co., Ltd. 4/2005  Joined Yamato Transport Co., Ltd. (currently Yamato 4/2011 Took office as Representative Director, President and
Makoto Kigawa Outside Audit & Supervisory Board Member of The Higo Bank, Ltd. Holdings Co., Ltd.) Executive Officer of Yamato Holdings Co., Ltd.
Special Interests Between the Candidate and the Company: None 6/2005 Took office as Managing Director of Yamato Transport Co., 4/2015 Took office as Chairman of the Board and Representative
Ltd. (currently Yamato Holdings Co., Ltd.) Director of Yamato Holdings Co., Ltd.
11/2005 Took office as Representative Managing Director of Yamato 6/2016 Took office as Director of the Company (current)
Holdings Co., Ltd. 4/2018 Took office as Director and Chairman of Yamato Holdings
4/2006 Took office as Representative Director and Managing Co., Ltd.
Executive Officer of Yamato Holdings Co., Ltd. 6/2019  Special Advisor of Yamato Holdings Co., Ltd. (current)

Number of Year(s) in Office 1 year 4/1976 Joined The Sumitomo Bank, Ltd. (currently Sumitomo Mitsui 6/2017 Took office as Director President and Representative
Attendance of the Meetings of the Board of Directors 11/11 (100%) Banking Corporation, hereinafter “SMBC”) Executive Officer of SMFG
Number of Shares of the Company Held  None 6/2003  Took office as Executive Officer of SMBC 4/2019  Took office as Chairman of the Board of SMFG (current)
Important Concurrent Positions Held in Other Organizations: 10/2006  Took office as Managing Executive Officer of SMBC 6/2020 T ook office as Outside Director (current)
 Chairman of the Board of Sumitomo Mitsui Financial Group, Inc. 4/2007  Took office as Managing Executive Officer of Sumitomo
Outside Director  Outside Member of the Board of TAISHO Mitsui Financial Group, Inc. (hereinafter “SMFG”)
 PHARMACEUTICAL HOLDINGS CO., LTD. 6/2007 Took office as Director of SMFG
Takeshi Kunibe  Outside Auditor of Nankai Electric Railway Co., Ltd. 4/2009  Took office as Director and Senior Managing Executive
Special Interests Between the Candidate and the Company: None Officer of SMBC
4/2011  Took office as Representative Director, President and Chief
Executive Officer of SMBC
4/2017 Took office as Representative Director and President of
SMFG
Retired from Director of SMBC

Number of Year(s) in Office  1 year NEW Number of Shares of the Company Held None
Attendance of the Meetings of the Board of Directors 11/11 (100%) Important Concurrent Positions Held in Other Organizations:
Number of Shares of the Company Held None Visiting Professor, Graduate School of Public Policy, The University
Important Concurrent Positions Held in Other Organizations: of Tokyo
Outside Director  Foreign lawyer of White & Case LLP Outside Director Outside Director, Sojitz Corporation
Outside Director of Sumitomo Mitsui Financial Group, Inc. Outside Audit & Supervisory Board Member, Development Bank of
Arthur M. Special Interests Between the Candidate and the Company: None Naoko Japan Inc.
Special Interests Between the Candidate and the Company: None
Mitchell 7/1976  egistered as attorney at law in New York State, USA
R Saiki
(current) 4/1982  Joined the Ministry of Foreign Affairs (hereinafter “MOFA”)
1/2003 Took office as General Counsel of Asian Development Bank 7/2014  T ook office as Director-General, Economic Affairs Bureau
9/2007 Joined White & Case LLP and Councillor, Cabinet Secretariat
1/2008  Registered as registered foreign lawyer in Japan (current) 10/2015  Took office as Director-General, International Legal Affairs
Registered foreign lawyer of White & Case LLP (current) Bureau
6/2020 Took office as Outside Director (current) 7/2017 Took office as Director-General, Foreign Service Training
Institute, MOFA
1/2019  Retired from MOFA
4/2020 Took office as Visiting Professor, Graduate School of Public
Policy, The University of Tokyo (current)
6/2021  Took office as Director of the Company (current)

 (As of June 30, 2021)

64 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Komatsu’s Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members can be found via the link below.
Web
https://www.komatsu.jp/en/ir/corporate-governance/independence-criterion-standards

Audit & Supervisory Board Members 

Number of Shares of the Company Held NEW Number of Shares of the Company Held
 21 thousand shares  49 thousand shares
Important Concurrent Positions Held in Other Organizations: None Important Concurrent Positions Held in Other Organizations: None
Special Interests Between the Candidate and the Company: None Standing Audit & Special Interests Between the Candidate and the Company: None
Standing Audit & Supervisory Board
Supervisory Board 4/1983 Joined the Company 4/1984 Joined the Company
6/2020 Took office as Standing Audit & Supervisory Board Member Member 6/2021  Took office as Standing Audit & Supervisory Board Member
Member (current)
Yasuhiro (current)
Terumi Sasaki
Inagaki

Number of Shares of the Company Held None Number of Shares of the Company Held None
Important Concurrent Positions Held in Other Organizations: Important Concurrent Positions Held in Other Organizations:
Chairman of the Advisory Board of Nikko Financial Intelligence, Inc.  Professor emeritus at Ochanomizu University
Outside Audit & (currently Nikko Research Center, Inc.) Outside Audit & Special Interests Between the Candidate and the Company: None
Supervisory Board Outside Audit & Supervisory Board Member of Mitsui Fudosan Supervisory Board
Residential Co., Ltd. 4/1993 T ook office as Professor at Ochanomizu University
Member Member 4/2008  Took office as Professor Emeritus at Ochanomizu University
Special Interests Between the Candidate and the Company:  None
Hirohide 4/1974 Joined the Bank of Japan
Eiko (current)
6/2015  Took office as Audit & Supervisory Board Member of the
Yamaguchi 10/2008 Took office as Deputy Governor of Bank of Japan
3/2013  Retired from Bank of Japan
Shinotsuka Company (current)

7/2013 Took office as Chairman of the Advisory Board of Nikko

Financial Intelligence, Inc. (currently Nikko Research Center,
Inc.) (current)
6/2014  Took office as Audit & Supervisory Board Member of the
Company (current)

Number of Shares of the Company Held  None 9/2016  Retired from the position of Prosecutor-General of Supreme Public Prosecutors Office
Important Concurrent Positions Held in Other Organizations: 11/2016 Attorney at law, Special Counsel of Mori Hamada & Matsumoto (current)
 Attorney at law, Special Counsel of Mori Hamada & Matsumoto 6/2017  Took office as Audit & Supervisory Board Member of the Company (current)
 Outside Director of AEON Co., Ltd.
Outside Audit & Special Interests Between the Candidate and the Company:  None
Supervisory Board
4/1976 Appointed as Prosecutor
Member 7/2009 Took office as Vice-Minister of Justice
Kotaro Ohno 7/2012  Took office as Superintending Prosecutor of Tokyo High
Public Prosecutors Office
7/2014  Took office as Prosecutor-General of Supreme Public
Prosecutors Office

(As of June 30, 2021)

Skill Matrix for Outside Directors and Outside Audit & Supervisory Board Members of the Company

Human Rights/
Human
Corporate Finance/ Sales & Resources & Legal Affairs & Risk
Name Environment Global
Management Economics Marketing Human Compliance Management
Resource
Development

Makoto Kigawa ● ● ● ●

Takeshi Kunibe ● ● ● ●
Outside
Director
Arthur M. Mitchell ● ● ●

Naoko Saiki ● ● ● ●

Outside Hirohide Yamaguchi ● ●

Audit &
Supervisory Eiko Shinotsuka ● ●
Board
Member Kotaro Ohno ● ● ●

Note: The skill matrix above is not an exhaustive list of all the expertise, experience and knowledge possessed by Outside Directors and Outside Audit & Supervisory Board
Members of the Company, but presents the fields that the Company wishes each Outside Director and Outside Audit & Supervisory Board Member to focus on in
particular for the supervision of management.

Komatsu Report 2021 65

 Corporate Profile

Directors and Audit & Supervisory Board Members

Executive Officers 

Senior Executive Officer Executive Officers

(Senmu)
GM, Business Reform Department, President, Service Division,
Construction Equipment Marketing Division Construction Equipment Solution Division
Chief Technology Officer (CTO)
GM, Business Process Reform Department
Supervising Research & Development Toru Sunada
Yuichi Iwamoto Keiko Fujiwara
Osaka Plant Manager, Production Division
President, Smart Construction Promotion Division GM, Manufacturing Engineering Development
Center, Production Division
Senior Executive Officers Chikashi Shike
(Jomu) Takayuki Furukoshi
Vice President, Production Division
President, Parts & Reman Promotion Division, President, Aftermarket Business Division,
President, Production Division Production Division Construction Equipment Marketing Division
President, Procurement Division, Production Division
Yasuo Suzuki Kenichi Sato
Supervising Industrial Machinery Business
Chairman of the Board, Komatsu NTC Ltd.
President, Quality Assurance Division Vice President, Development Division
Masaki Nobuhara Masami Naruse Jun Taniguchi
President, Development Division
Awazu Plant Manager, Production Division Ibaraki Plant Manager, Production Division
Seiichi Fuchita Takashi Yasukawa Naoyuki Sakurai
President, Japanese Domestic Marketing,
President, Product Marketing Division President, Defense Systems Division
Construction Equipment Marketing Division
Kosei Okamoto Hiroaki Ohno
Kazuaki Miura
President, Information Strategy Division Vice President, Japanese Domestic Marketing,
GM, Business Coordination Department
Construction Equipment Marketing Division
GM, Komatsu Economic Strategy Research Center Shinji Maeda President, Komatsu Customer Support Japan Ltd.
Masatoshi Morishita Himi Plant Manager, Production Division Hideki Yoshizawa
President, Construction Equipment Marketing Division Norikatsu Nishiyama Vice President, Development Division
Korekiyo Yanagisawa Oyama Plant Manager, Production Division
GM, Vehicle Development Center 2
Development Division
GM, Human Resources Department Hidefumi Obikane Terumasa Imajo
Supervising Education

Koichi Honda Vice President, Development Division

GM, Engine Technical Center,
President, Sustainability Promotion Division Development Division
President, Industrial Power Alliance Ltd.
Mitsuko Yokomoto
Masaki Shinohara
Supervising Legal, General Affairs & Compliance

Hiroshi Makabe

66 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Executive Officers (Global) Note: Executive officers overseas concurrently serve as global officers. 

North America South America China

Senior Executive Officers Senior Executive Officer Senior Executive Officer

Chairman & CEO, Komatsu America Corp. Representative of All Latin America* Operations Representative of All China Operations
President, Komatsu Cummins Chile Ltda. President, Chairman, Komatsu (China) Ltd.
Rodney Schrader Komatsu Holding South America Ltda. *"Latin America”
does not include Brazil.
Takuya Imayoshi
President & CEO, Komatsu Mining Corp.
Vice President, Mining Business Division Yasuji Nishiura
Jeffrey Dawes Executive Officer
President & CEO, Komatsu (China) Ltd.
Technical Director, Modular Mining Systems, Inc. Europe
Vice President, Mining Business Division Quanwang Zhang
Ichiro Nakano
Executive Officers
President and CEO, Komatsu Europe International N.V.
Africa
Executive Officers Tadashi Maeda
Executive Officer
President & COO, Komatsu America Corp. President, Komatsu Forest AB
President & MD, Komatsu South Africa (Pty) Ltd.
Taisuke Kusaba Hiroyuki Umeda
Michael Blom
Executive Vice President and President,
North America R&D Division, Komatsu America Corp.
Asia/Oceania
Technical Director, Komatsu Mining Corp.

Yuushi Oshikawa Executive Officers

Executive Vice President. CFO, Komatsu America Corp. President, PT Komatsu Indonesia

Gary Kasbeer Pratjojo Dewo S.

Executive Vice President & COO, Komatsu Mining Corp. Managing Director, Komatsu Australia Pty. Ltd.

Nozomu Okamoto Sean Taylor

Global Officers 

North America Europe Asia/Oceania

President, Underground and Hard Rock Mining, Chief Operating Officer, President, Bangkok Komatsu Co., Ltd.
Komatsu Mining Corp. Komatsu Europe International N.V.
Charoen Ruengwilai
Peter Salditt Göksel Güner
President, Surface Mining, Komatsu Mining Corp. President & MD, Komatsu UK Ltd.
China
John Koetz Paul Blanchard
President, Komatsu (Shandong) Construction
President & CEO, Modular Mining Systems, Inc. President and MD, Komatsu Germany GmbH Machinery Corp.

Jorge Mascena Ralf Petzold Fangchang Liu

President, Hensley Industries, Inc. Executive Vice President and President, Construction President, Komatsu Shantui Construction Machinery
Division, Komatsu Germany GmbH
John Fiedler Co., Ltd.

Ingo Büscher Dechun Tian

President & MD, Komatsu Italia Manufacturing S.p.A.

David Bazzi

Komatsu Report 2021 67

 Corporate Profile

11-Year Summary

FY2010 FY2011 FY2012 FY2013

Net sales 1,843,127 1,981,763 1,884,991 1,953,657

Operating income 222,929 256,343 211,602 240,495

Operating income ratio (%) 12.1 12.9 11.2 12.3

Income from continuing operations before income
219,809 249,609 204,603 242,056
taxes and equity in earnings of affiliated companies
Net income attributable to Komatsu Ltd. 150,752 167,041 126,321 159,518

Capital investment 97,738 122,038 136,962 179,070

Depreciation and amortization*1 88,442 89,015 88,005 85,837

Research and development expenses 49,005 54,843 60,788 64,479

Total assets 2,149,137 2,320,529 2,517,857 2,651,556

Shareholders’ equity 923,843 1,009,696 1,193,194 1,376,391

Shareholders’ equity ratio (%) 43.0 43.5 47.4 51.9

Net interest-bearing debt*2 459,110 563,814 585,926 513,918

Net debt-equity ratio (times) 0.50 0.56 0.49 0.37

Net cash provided by operating activities 150,402 105,608 214,045 319,424

Net cash used in investing activities (88,509) (124,539) (131,397) (167,439)

Net cash provided by (used in) financing activities (56,365) 18,781 (71,814) (155,349)

Cash and cash equivalents, end of year 84,224 83,079 93,620 90,872

Number of common shares issued (thousands of shares) 998,744 983,130 983,130 983,130

Net income attributable to Komatsu Ltd. per share (yen) 155.77 173.47 132.64 167.36

Cash dividends per share (yen) 38.0 42.0 48.0 58.0

Consolidated payout ratio (%) 24.4 24.2 36.2 34.7

ROA (%) 10.7 11.2 8.5 9.4

ROE (%) 17.2 17.3 11.5 12.4

Exchange rate for the U.S. dollar (yen)*3 85 79 83 100

Exchange rate for the euro (yen)*3 113 110 107 133

Exchange rate for the Chinese renminbi (yen)*3 12.7 12.4 13.2 16.3

Number of employees (persons) 41,059 44,206 46,730 47,208

Overseas employee ratio (%) 55.5 57.5 64.3 61.8

CO2 emissions (thousand t)*4 547 583 468 458

Waste generated (thousand t)*4 111.1 119.5 112.1 101.4

Volume of water used (thousand m3)*4 7,400 6,784 5,737 5,114

*1 Depreciation is the total of depreciation on property, plant and equipment and on intangible assets.
*2 Net interest-bearing debt = Interest-bearing debt – Cash and equivalents – Time deposits
*3 Average exchange rates for the fiscal year
*4 Certain data has been revised and restated

68 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Millions of yen

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

1,978,676 1,854,964 1,802,989 2,501,107 2,725,243 2,444,870 2,189,512

242,062 208,577 174,097 268,503 397,806 250,707 167,328

12.2 11.2 9.7 10.7 14.6 10.3 7.6

236,074 204,881 166,469 291,807 377,471 223,114 162,775

154,009 137,426 113,381 196,410 256,491 153,844 106,237

192,724 160,051 142,006 145,668 179,210 166,552 163,174

100,666 111,174 103,219 132,442 129,860 129,525 130,432

70,715 70,736 70,507 73,625 73,447 74,761 73,840

2,798,407 2,614,654 2,656,482 3,372,538 3,638,219 3,653,686 3,784,841

1,528,966 1,517,414 1,576,674 1,664,540 1,815,582 1,771,606 1,912,297

54.6 58.0 59.4 49.4 49.9 48.5 50.5

481,817 349,081 286,512 663,740 779,890 762,705 666,856

0.32 0.23 0.18 0.40 0.43 0.43 0.35

343,654 319,634 256,126 148,394 202,548 295,181 354,129

(181,793) (148,642) (133,299) (377,745) (187,204) (190,930) (163,057)

(143,983) (173,079) (107,718) 243,949 (3,660) (3,457) (199,667)

105,905 106,259 119,901 144,397 148,479 247,616 241,803

971,967 971,967 971,967 971,967 972,252 972,581 972,887

162.07 145.80 120.26 208.25 271.81 162.93 112.43

58.0 58.0 58.0 84.0 110.0 94.0 55.0

35.8 39.8 48.2 40.3 40.5 57.7 48.9

8.7 7.6 6.3 9.7 10.8 6.1 4.4

10.6 9.0 7.3 12.1 14.7 8.6 5.8

110 121 109 111 111 109 106

140 132 119 130 129 121 123

17.7 19.0 16.2 16.8 16.5 15.6 15.6

47,417 47,017 47,204 59,632 61,908 62,823 61,564

61.0 60.7 62.7 66.7 68.4 68.4 67.5

412 342 384 459 519 404 382

83.2 62.4 83.5 113.1 117.8 95.6 74.2

4,270 3,632 3,362 4,029 3,954 3,564 3,231

Komatsu Report 2021 69

 Corporate Profile

Non-Financial Highlights

Reduction of CO2 Emissions from Product CO2 Emissions Index for Product Operation

Operation
100
100
88 86 86
In the mid-term management plan (FY2019–FY2021), Komatsu
80
has set the target of reducing CO2 emissions from the opera- Target
60
tion of products (construction, mining, and forest equipment) by 50
50% by 2030 (compared to 2010). 40

To evaluate progress toward this goal, we compared the

20
performance of the current year’s products to the products of
0
the reference year (2010) and estimated CO2 reduction rates 2010 2018 2019 2020 2030

through the improvement of fuel consumption and work effi-

ciency. The products of 2020 achieved a CO2 reduction of 14%,
compared to the reference year.

Incidence Rate of Occupational Accidents

Changes in Reman Sales (Base FY2004 = 100) (Frequency Rate of Lost Work Time)

(%) (Frequency rate)

1.95
500 2.0
1.83 1.80
451
1.63 1.66
402 414
400 1.44
1.5
349 355
1.29
304 313
300
270
250 0.88
239 1.0
200 0.73 0.75
0.73
200 0.65
160 168 0.76 0.56
156 0.72
137 0.45 0.47
112 0.5 0.37
100
100 0.28
0.38 0.44
0.31 0.31
0.20
0.16
0 0.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (FY) 2016 2017 2018 2019 2020 (FY)

All industries (Japan)

Construction and mining equipment manufacturing industry (Japan)
Komatsu Group (Japan and Global) Komatsu Group (Japan)
Komatsu (Non-consolidated)

Notes: 1. T
 he data for all industries (Japan) and construction and mining equipment
manufacturing industry (Japan) is provided by the Ministry of Health, Labour and
Welfare.
2. T
 he scope of Komatsu Group (Japan) includes Komatsu Ltd. and Group compa-
nies in Japan.
3. T
 he scope of Komatsu Group (global) includes “Komatsu Group (Japan)” and
overseas production plants.
4. C
 ertain data has been revised and restated.

Number of Global Officers Numbers and Ratios of Female Employees and Female Managers

(People) (People)(%)

32 1,600 16
1,463 1,482 1,486
29
27
26 12.4
12.3 12.3
24 1,200 12
10.6
11.4 11.4
19 19
18
9.1 9.5 9.4
16 800 8

8 400 315 324

4
302
172 178 179

0 0 0
2019 2020 2021 (FY) 2019 2020 2021 (FY)

■ Total ■ National top managers out of total executive officers ■ Number of female employees ■ Number of women junior managers
Data is as of April 1 of each fiscal year. ■ Number of women in management and executive positions (*including junior managers)
Ratio of female employees (right scale) Ratio of women junior managers
Ratio of women in management and executive positions (right scale) (*including junior managers)
Note: Data is as of April 1, 2021, and for Komatsu Ltd. (Japan) on a non-consolidated basis.

70 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

Corporate Profile For more information on the above indexes, please refer to Komatsu’s corporate website:
Web
https://komatsu.disclosure.site/en/themes/133
External Evaluations and Index Inclusion

CDP Climate A-List

Dow Jones Sustainability MSCI Global

Indices (DJSI) Sustainability Indexes*1
CDP Water A-List

ISS-Oekom Euronext Vigeo World 120 FTSE Blossom Japan Index*2

MSCI Japan MSCI Japan S&P/JPX

ESG Select Leaders Index* 1
Empowering Women Index* 1
Carbon Efficient Index

Digital Transformation SBT Grand Prix of the Corporate Value

Stock Selection Improvement Award,
Tokyo Stock Exchange

*1 T
 he inclusion of Komatsu ltd in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names HEREIN, do not constitute a sponsorship, endorsement or promotion of Komatsu ltd by MSCI or any of its
affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.
*2 F
 TSE Russell confirms that Komatsu has been independently assessed according to the index criteria, and has satisfied the requirements to become a constituent of the FTSE Blossom Japan Index. Created by the global index
and data provider FTSE Russell, the FTSE Blossom Japan Index is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE Blossom Japan Index
is used by a wide variety of market participants to create and assess responsible investment funds and other products.

Komatsu Report 2021 71

 Corporate Profile

Corporate Information (As of March 31, 2021)

Name Number of Employees Transfer Agent for Common

Stock/Management Institution
Komatsu Ltd. Consolidated: 61,564
Non-consolidated: 11,795
for Special Account
Head Office
Average age (non-consolidated): 39.8 Mitsubishi UFJ Trust and Banking
2-3-6 Akasaka, Minato-ku, Tokyo 107-8414 Average years of continuous service Corporation
Date of Establishment (non-consolidated): 15.3 4-5, Marunouchi 1-chome, Chiyoda-ku,
Shares of Common Stock Issued Tokyo 100-8212, Japan
May 13, 1921

Common Stock Outstanding and Outstanding Depositaries (ADRs)

The Bank of New York Mellon
972,887,610 shares
Consolidated: ¥
 69,037 million based on 101 Barclay Street,
(including shares of treasury stock)
U.S. GAAP New York, NY 10286, U.S.A.
Number of Shareholders Tel: +1-(201)-680-6825 for international
184,661 calls and 888-269-2377 (888-BNY-ADRS)
for calls within U.S.A.
Number of Shares per Trading
URL: https://www.adrbnymellon.com/
Unit
Ticker Symbol: KMTUY
100

Securities Code
6301 (Japan)

Stock Listings
Tokyo

Major Shareholders
Number of shares held Shareholding ratio
(Thousands of shares) (%)
The Master Trust Bank of Japan, Ltd. (Trust Account) 86,574 9.15
Custody Bank of Japan, Ltd. (Trust Account) 56,175 5.94
SSBTC CLIENT OMNIBUS ACCOUNT
30,574 3.23
(standing proxy: The Hongkong and Shanghai Banking Corporation Limited, Tokyo branch)
JP MORGAN CHASE BANK 385632
27,433 2.90
(standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division)
Taiyo Life Insurance Company 27,200 2.87
Nippon Life Insurance Company (standing proxy: The Master Trust Bank of Japan, Ltd.) 26,626 2.81
THE BANK OF NEW YORK MELLON AS DEPOSITARY BANK FOR DEPOSITARY RECEIPT HOLDERS
25,644 2.71
(standing proxy: Sumitomo Mitsui Banking Corporation)
Custody Bank of Japan, Ltd. (Trust Account 7) 19,748 2.08
Custody Bank of Japan, Ltd. (Trust Account 5) 13,890 1.46
STATE STREET BANK WEST CLIENT - TREATY 505234
13,542 1.43
(standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division)
Notes: 1
 . Shareholding ratio is calculated by subtracting treasury stock.
2. Although the Company holds 27,319 thousand shares of treasury stock, it is excluded from the major shareholders listed above.

Stock Information (including shares of treasury stock)

● Financial................................. 35.0% 340,609,230 shares 176 shareholders

● Foreign.................................... 42.5% 414,201,239 shares 1,074 shareholders
Breakdown of
Shareholders ● Individual and other......... 17.3% 168,315,982 shares 181,862 shareholders
(%)
● Corporate................................. 1.9% 19,375,538 shares 1,404 shareholders
● Securities................................. 3.1% 30,385,621 shares 145 shareholders

72 Komatsu Report 2021

A Century of Creating the Workplaces Top Management’s Views on Evolution of Business Model for Resolution of ESG Issues through Corporate Profile
of the Future Komatsu’s Management Issues and Creating the Workplaces of the Future Growth Strategies
Strategies for the Next Century

About Komatsu Report

We have published our integrated report, Komatsu Report, for our stakeholders to introduce the group's efforts to realize sustainable
growth in corporate value. The Komatsu Report mainly focuses on the value creation business model of working for sustainable growth
by turning a positive cycle of improving earnings (financial indexes) and solving ESG issues (non-financial indexes) as it implements
growth strategies in the mid-term management plan. Separate reports are prepared and disclosed to provide detailed financial informa-
tion and information on environmental and social initiatives.

Structure of Komatsu’s Annual Reports 

Komatsu Report (Integrated Report)

Annual Securities Report ESG Databook

(Financial conditions) (Social activities and Environmental performance)

* Komatsu Report, Annual Securities Report and ESG Databook, in both Japanese and English, are uploaded on Komatsu’s website.
* Komatsu Ltd. issues the Komatsu Report only on the website.

Please refer to “Annual Securities Report” for more Please refer to “ESG Databook” for more information
company and financial information. concerning environmental and social efforts.

• Overview of the Company and Its Consolidated • Stance on CSR Efforts

Subsidiaries • Theme 1: E
 nhancing Quality of Life
• Business Overview (Safety, environmental indexes, etc.)
• Property, Plant and Equipment • Theme 2: Developing People (Diversity, etc.)
• Information on the Company •T
 heme 3: Growing with Society
• Financial Information (Compliance, risk management, governance, etc.)

https://www.komatsu.jp/en/ir/library/
Web Web
https://www.komatsu.jp/en/aboutus/csr
annual-security-report

Komatsu has signed the United Nations Global Compact (UNGC).

Click this link for more information about the Ten Principles advo-
cated by the UNGC and how they pertain to Komatsu’s initiatives.
Komatsu has joined the World Business Council for
https://komatsu.disclosure.site/en/themes/129 Sustainable Development (WBCSD).

Komatsu Report 2021 73

2-3-6, Akasaka, Minato-ku, Tokyo
107-8414, Japan
https://www.komatsu.jp/en
Corporate Communications Department
Sustainability Promotion Division
e-mail: JP00MB_info@global.komatsu