Sustainability Report 2003 - Mitsui · The Pioneering Spirit ... and the United Nations Environment Programme ... Ltd. Sustainability Report 2003. Mitsui & Co., Ltd. Sustainability

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Sustainability Report 2003

Jo in ing Hands w i t h Peop l e and Soc i e t y

Working toward a sustainable society

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1 Mitsui & Co., Ltd. Sustainability Report 2003

Environmental

Business partners

CONTENTS

Company Profile

Corporate Data

President Utsuda’s Message

Mitsui Moving Forward with People and Society

Our Commitment

Case Studies

New Era Ushered in by Nanotechnology — Biomass Ethanol Business

Contributing to a Sustainable Society — Development of Energy Resources

Participating in the Unlimited Development Possibilities in Asia

The Pioneering Spirit

Initiatives for Sustainable Development

Undertaking Public Projects

Corporate Governance and Internal Control

Initiatives for Enhancing Compliance

Employee Relations

Community Relations Activities

Corporate Social Responsibility

Environmental Conservation Policy

Targets and Performances

Environmental Management Systems

Environmental Impact Assessment

Reducing the Environmental Burden in the Office

Developing and Promoting Environmental Projects

Environmental Initiatives

Financial Results

3

5

7

9

11

13

15

17

18

21

25

29

31

32

33

34

35

39

Communications

Third Party Messages

41

42

Economic Performance

Mitsui & Co., Ltd. is expressed as Mitsui in this document.

2Mitsui & Co., Ltd. Sustainability Report 2003

Awareness of corporate social responsibility has been heightened worldwide in recent years. While Mitsui & Co., Ltd. (Mitsui) have published annual reports since our inception and environmental reports since 1997, we believe our stakeholders can be better informed, not only of the company’s financial results of businesses, but also of Mitsui’s overall corporate activities from the viewpoint of contributions to a sustainable world growth. We have, therefore, decided to launch the publication of a Sustainability Report annually, beginning this fiscal year, with a focus on Mitsui’s efforts in environ-mental protection and social contributions.

Since a general trading company engages in such an expansive array of businesses, it is difficult for some to understand operations and activities. With this in mind, we have highlighted some major events and business activities we conducted in FY 2002 in the sec-tion entitled “Our Initiatives for Sustainable Development.” To pro-vide broad coverage of Mitsui’s initiatives for achieving sustainability, we introduce our activities from three aspects of sustainability — eco-nomic, environmental, and social — following GRI* Guidelines. A collation table listing the Guideline items (GRI Content Index) is attached separately to facilitate a cross reference of contents.

Mitsui maintains a close relationship with specific stakeholders, as shown in the figure below, and considers this report an important tool for communicating with them and the general public. We will greatly appreciate comments to be reflected in our future reports.

Scope of coverage:Mitsui & Co., Ltd. and overseas trading subsidiariesJapan: 28 domestic officesOverseas: 74 overseas offices and 93 overseas trading subsidiaries

Reporting period:

FY 2002 (April 1, 2002 — March 31, 2003)

Intended readers:This report is prepared for stakeholders including shareholders/in-vestors, business partners, local residents, government agencies, NPOs/NGOs, and employees.

Reference Guidelines:• 2002 Sustainability Reporting Guidelines, Global Reporting Initiative (GRI)• Environmental Reporting Guidelines (FY 2000 version), Ministry of the Environment of Japan

Next publication: Scheduled for December 2004

Mitsui’s Stakeholders

Economics

Social EnvironmentalEnvironmental

Mitsui & Co., Ltd.Business partnersBusiness partners

Local residents NPOs/NGOs

Shareholders/investors

Public sector/government

agenciesEmployees

Tax

Investment

Dividends

Communication Communication

Buyers/suppliers

Invested/financed

companies

Sustainability Report 2003

*GRI: Global Reporting InitiativeThe Global Reporting Initiative is an organization established in the fall of 1997 primarily by CERES (Coalition for Environmentally Responsible Economies), a US NGO that authored the CERES Principles, and the United Nations Environment Programme (UNEP) to formulate international guidelines for corporate-level sustainability reporting.

Raw materials,products, services,

functions

CompensationLabor Administrative services


Company Profile

Overseas Network

Domestic Network• Corporate Name:MITSUI & CO., LTD

• Date of Establishment:July 25, 1947

• Head Office:2-1 Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004 JapanTEL. +81-3-3285-1111 FAX. +81-3-3285-9819http://www.mitsui.co.jp/tkabz/english/

• Representative:Shoei UTSUDA, President and Chief Executive Officer

• Paid-in Capital:192 billion yen (as of March 31, 2003)

• Number of Employees (consolidated): 9,564 (as of March 31, 2003)(6,264 in Japan and 3,300 in overseas offices and overseas trading subsidiaries)

• Number of Offices and Overseas Trading Subsidiaries:195 offices in 85 countries (as of October 1, 2003)Japan: 28Overseas: 167 (74 overseas offices and 93 overseas trading subsidiaries)

• Major Business Areas:Utilizing our strength of having business locations worldwide and a vast amount of information gathered through them, Mitsui not only engages in the sales, manufacture, export/import, and international trade of products in areas including metal products and minerals, machinery, electronics and information, chemicals, energy, and consumer products and services (retail, foods, textile & fashion, general merchandise, and services) but also carries out diverse activities to provide a wide range of services, explore resources, invest in businesses, and develop technology in new business fields.

Japan 28

Europe 29

Middle East 19 CIS 10

North America 15

Asia 64

Oceania 6

Central and South America 15

Africa 9


Corporate Data

Organization

General Meeting of Shareholders

Board of Directors/Chairman & Executive Director

President & Chief Executive Officer

Corporate Auditor Division

(as of October 1, 2003)

Corporate Planning & Strategy Division

Mitsui Global Strategic Studies Institute

Corporate Administrative DivisionCorporate Communications Division

CFO Planning DivisionGeneral Accounting DivisionFinance DivisionProject Finance DivisionCorporate Risk Management Division

Corporate Management Committee

Corporate AuditorsBoard of Corporate Auditors

Business Process Re-Engineering Division

Business Process Re-Engineering Project Headquarters

Value Creation Hub

Logistics & Financial Business Administrative DivisionFirst Logistics DivisionSecond Logistics DivisionThird Logistics Division

eBusiness Development Department

Transportation Logistics Unit

Iron & Steel Products Unit

Iron & Steel Raw Materials Unit

Non-Ferrous Metals Unit

Electric Machinery, Plant & Project Business Unit

Telecommunications, Transportation & Industrial Project Business Unit

Motor Vehicles, Marine & Aerospace Business Unit

Information Business Unit

Electronics Business Unit

Petrochemicals Unit

Plastics Unit

Performance Chemicals Unit

Inorganic Chemicals Unit

Energy Business Unit

Retail Unit

Foods Unit

Textile & Fashion Unit

General Merchandise Unit

Service Business Unit

Financial Markets Business Unit

SecretariatInternal Auditing DivisionCompliance Administrative DivisionInternational Security Trade Control DivisionGlobal Environment DivisionPersonnel DivisionSecurity Management DivisionLegal DivisionGeneral Affairs Division


Mitsui Moving Forward with People and Society

Humankind lives in a modern world built upon thousands of

years of culture and civilization. While this modern world, with

its diversity, vitality, fluidity, dynamism and rapid change,

offers hope for a better future, it is not without problems of all

sorts, which are complex and difficult to solve. These prob-

lems are occurring in every corner of the world, in the inter-

national, ethnic, racial, religious, environmental, economic,

and societal arenas. As part of this modern world, we, as indi-

viduals, corporations, or other organizations, are totally

dependent on our social and global environments, and can-

not possibly detach ourselves from problems.

For many years, Mitsui & Co., Ltd. (Mitsui) has pursued eco-

nomic activities in a variety of industries and areas of Japan

and the world. We have more than 100,000 business part-

ners worldwide, with over two-thirds of our transactions and

investments transcending national boundaries.

In carrying out these activities, Mitsui employees share

the common values and goals of “challenge and creation,”

“broad- and open-mindedness,” and “contribution to a pub-

lic good” in a proud belief that “Mitsui’s strength lies in its

people.” I always urge our employees to ask themselves if

they are “meeting the expectations of the customers,”

“creating new values,” and “making meaningful contributions

to society.”

We believe that by creating new businesses, new values,

and new relationships, Mitsui will contribute directly and indi-

rectly to 1) expansion of the economic basis of Japan and the

world, 2) sound development of corporations, businesses,

and local communities, and 3) improvement in the quality of

living worldwide.

As a private corporation, it is important for Mitsui to seek rea-

sonable profits. To this end, Mitsui uses appropriate perform-

ance management indexes to undertake and manage busi-

ness activities. These indexes help determine the areas in

which management resources should be allocated and

Mounting Problems on Earth

A Socially Responsible Corporation

Mitsui’s Challenge for Solutions


Our Commitment

whether adequate returns from investments are secured. At

the same time, we operate under an internal system with set

procedures to measure “if our activities are viable under the

scrutiny of environmental assessments” and “whether we

have complied with strict due process.” In order to raise

awareness for the environment and compliance, and instill a

sound perspective in business practices that are employed by

all Mitsui employees engaging in worldwide business opera-

tions, Mitsui provides environmental training and compliance

training on a regular basis.

We are keenly aware of our responsibilities to contribute

to the endeavor for a better future of local communities,

countries, and the international community, and improve

international relationships and the global environment. We

believe we can fulfill our social responsibility as a corporation

by continuing various forms of contributions through our

business activities, protection of the global environment and

compliance, and though our non-profit social contributions.

In this Sustainability Report, we aim to explain the steps

and efforts we undertake in various areas to increase our

mutual understanding with our stakeholders. The Report is

considered a powerful tool to help build a constructive cycle,

and we invite comments from readers so we can incorporate

them into our activities. We will continue to manage Mitsui

with a commitment to raising the transparency of our activi-

ties fulfilling social responsibility through our various activi-

ties, and striding towards our objective to be the “Mitsui that

Moves Forward with People and Society.”

Shoei Utsuda President and Chief Executive Officer

Mounting Problems on Earth

A Socially Responsible Corporation

Mitsui’s Challenge for Solutions


In Brazil, approximately half of the total sugar cane harvest is processed into ethanol.

New Era Ushered in by Nanotechnology

Biomass Ethanol Business

Nanotechnology (nanotech) can be applied to a broad range of fields, allowing for unlimited business opportunities. Work-ing at nano-size, one-billionth of a meter, this technology is giving birth to epoch-making products, in particular, the etha-nol separation technology. This technology, currently under development at BNRI (a Mitsui’s nanotech venture), is expected to greatly promote the use of environmentally-conscious bio-mass ethanol.

Biomass ethanol is produced from plants, such as sugar cane and corn. Unlike the limited resource of fossil fuel, it is a renewable clean energy that neither increases nor decreases the amount of atmospheric CO2. The importance of biomass is therefore increasing worldwide. Various programs are underway throughout the world to use biomass ethanol as automobile fuel. By blending biomass ethanol with gasoline, emissions of carbon dioxide can be reduced, thereby helping to prevent global warming.*

In Japan, the Fuel Policy Subcommittee of the Advisory

Committee on Energy and Natural Resources, which had been examining the permissible amount of alcohol in gaso-line, reached the conclusion that “to be used safely as an automobile fuel, the maximum limit of ethanol to be blended is 3%, and if adding other oxygen-containing compounds to gasoline, the maximum limit of oxygen is 1.3%.” In response, the Agency for Natural Resources and Energy specified the permissible amount of ethanol in gasoline at 3% and added it to a fuels specification regulations, which came into effect in August 2003 along with a revision of the Law on the Quality Control of Gasoline and Other Fuels. Although it is not man-datory the use biomass ethanol in automobile fuel is expected to further expand as a promising measure against global warming.

The ethanol separation technology developed by BNRI is utilized in the ethanol refining process. Distillation and dehy-dration are essential steps in obtaining dehydrated ethanol that can be blended with gasoline. By employing a separation

Vehicles running on ethanol-blended gasoline (Brazil)

Membrane

8


Mitsui & Co., Ltd. Sustainability Report 2003

Ethanol separation and dehydration system

A sugarcane field

membrane with a structure controlled at the nano-level in the dehydration process, it is possible to selectively separate water. This dehydration process with approximately half the energy required by the conventional process, resulted in a low-cost system unparalleled anywhere in the world.

Under a technical liaison with COSAN of Brazil, the world’s largest biomass ethanol producing country, we, at Mitsui, have promoted the introduction of this nanotech refin-ing system. We are also establishing a cooperative biomass ethanol exporting structure together with COIMEX and various ethanol producers

With test operations already completed in Japan, a fullfledged test started in Brazil in April 2003. Demonstration tests and performance evaluations will be conducted over a period of approximately six months before putting it into prac-tical use.

Nanoporous membrane to filter and separate water molecules from ethanol.

* Introduction of biomass ethanol in the worldBrazil: 20-25% biomass ethanol blended gasoline is used for automobiles.U.S.A.: 10% biomass ethanol blended gasoline (E10) has been introduced in 32 states. In the state

of Illinois, 15% blended diesel oil is undergoing performance testing for use in buses.Europe: Biodiesel is mainly used. In Germany, a tax exemption bill for biomass fuel was passed in

June 2002.Australia: In Queensland, state government vehicles began using a blended fuel containing 10%

ethanol (E10) in February 2002.Asia: A bill for adding 5% biomass ethanol to gasoline was passed in India. China started to blend

10% ethanol into gasoline in 3 northern provinces from November 2003.

Alcohol molecule Water molecule

MembraneMembrane


Contributing to a Sustainable Society

Development of Energy Resources

“Molikpaq,” originally an ice-resistant mobile drilling rig which had endured operations in the Arctic Ocean, was converted into a platform for long-term production. Drilling was then conducted to reach petroleum reservoirs 2,500 to 3,000 meters below the sea bottom.

Russian Federation

Sea of Okhotsk

Sakhalin

Yuzhno-Sakhalinsk

Mining area

Worker showing crude oil drilled from the mine

Chief members gathered for the “Development Day Declaration.”

10



Comparison of emissions of greenhouse gases from drilling to burning

Coal

Oil

Natural gas

108.38

(g-C/1,000kcal)(%)

83.63

69.77

Source: Study Report by the Institute of Energy Economics, Japan (August 1999)

Primary energy supply and demand by fuel

1971

2000

2030

18

23

28

49 33

39 38

38 34

In order to meet the rapidly increasing energy demands, the use of natural gas, in particularly liquefied natural gas (LNG), is expected to expand. According to a survey by the Interna-tional Energy Agency (IEA), the ratio of natural gas in the world’s primary energy supply and demand is increasing and this trend is most likely to continue in the future.

As of 2001, the proven reserves of the world’s natural gas were estimated at approximately 5,800 trillion cubic feet, suffi-cient for meeting the world’s current natural gas demands for more than 60 years. Among the main fossil fuels, natural gas is known to emit the least amount of sulfur oxide, nitrogen oxide, and carbon dioxide, which all cause a great stress on the envi-ronment. Thus, as a cleaner energy source, the use of natural gas contributes to conservation of the global environment and to the prevention of global warming. Moreover, the fact that pro-duction centers are geographically dispersed and that major centers are notably located in politically stable countries pres-ents a great advantage in ensuring energy security.

At Mitsui, we have engaged in the Sakhalin-II project as a solution to securing a stable supply of energy. This is a large-scale energy resource development project promoted by the Sakhalin Energy Investment Co., Ltd, established by leading enterprises of Japan, U.K., and the Netherlands. The project targets at the exploitation of both natural gas and crude oil, based on the production sharing agreement between the companies and the governments of Russian Federation and Sakhalin Region. There are two mining areas approximately 15 kilometers off the northeastern coast of Sakhalin in the Sea of Okhotsk. The Piltun-Astokhskoye field has reserves of mainly crude oil and associated gas, while the Lunskoye field has mainly gas and condensate reserves. The combined esti-mated reserves amount to approximately 1.1 billion barrels of crude oil and gas condensate and approximately 17 trillion cubic feet of natural gas.

On May 15, 2003, after many years of feasibility studies and environmental research, chief members of the project gathered in Moscow to announce the “Development Day Dec-

laration” for the Sakhalin-II Project’s second phase of develop-ment. Members present were as follows: President Utsuda of Mitsui; Sir Philip Watts, Chairman of the Committee of Manag-ing Directors, Royal Dutch/Shell Group; Yukio Masuda, Senior Executive Vice President, Mitsubishi Corporation; Deputy Prime Minister Khristenko of Russian Federation; and the late Igor P. Farkhutdinov, former Governor of the Sakhalin Region. With this declaration, the project proceeded to a full-scale development stage aimed at the commencement of a full-year production of crude oil in 2006, and shipment of LNG in 2007.

Sakhalin-II plans to construct the world’s largest class LNG plant, boasting a liquefaction capacity of 9.6 million tons a year at Prigorodonoe the southern end of Sakhalin Island. For securing exports of LNG from this plant, sales activities targeted at Japan and Korea are making steady progress. In Japan, negotiation is under way for concluding an agreement with electric and gas companies regarding a long-term sup-ply. In May 2003, Tokyo Gas Co., Ltd. and the Tokyo Electric Power Company, Incorporated, and later, in July 2003, Kyushu Electric Power Co., Inc., announced that each of them had reached a basic agreement with Sakhalin Energy Investment Co., Ltd. regarding the purchase of LNG.

Meanwhile, there have been concerns regarding the envi-ronmental impact of the large-scale offshore drilling and con-struction of large-size facilities. As part of this project, the effects on the environment, society, and health were evaluated according to internationally recognized procedures. Wide range studies were conducted on it’s impact on the natural environment, cultural heritage, indigenous communities and their cultures, as well as its effect on the local economy and the health of its inhabitants. Results of these impact assess-ments have undergone review by the environmental commit-tees on the Russian side, and were made public by Sakhalin Energy Investment Co., Ltd. in March 2003.

While paying close attention to both short and long-term effects on the local society, we continue to pursue our challenge in providing a stable supply of energy in the Far East region.

(Forecast)

Gas Oil Others

11

Participating in the Unlimited Development Possibilities in AsiaAsia, a center of economic growth, is an important business area to Mitsui. We are involved in and are developing a vari-ety of businesses in Asia, which we believe greatly contribute to the progress of society. China in particular has been attracting worldwide attention in recent years. The country has emerged as a major player in the international arena by hosting the APEC Leaders’ Meeting and gained accession to the WTO in 2001. In coming years, major international events hosted by China, such as the Beijing Olympics in 2008 and the Shanghai World Exposition in 2010, will also help it estab-lish its global presence.

What makes business in China so appealing is its rapid growth in three facets of this country: “Factory China,” “Made in China,” and “Market China.”

China has long been called the “world’s factory.” With an educated abundant workforce, the country holds great advantage as a production site. Technology, parts, and

materials are brought in from Japan, for example, and final products are manufactured in “Factory China.” Throughout China, Mitsui has trading subsidiaries and offices in 18 cities in various fields, including metal products and minerals, chemicals, machinery, goods, food, and textiles.

Today, “Made in China” and “Market China” are gaining greater attention. “Made in China” now symbolizes high-quality products produced by high technology. The country is partic-ularly outstanding in the fields of home appliances and Infor-mation Technology industries, and is number one in the world in the production volume of DVDs. Traditionally, China has enjoyed a reputation for a high level of engineering in such fields as railway freight cars and shipbuilding. Now, bolstered by advanced R&D in biotechnology and optics, and a strong cooperation between the academic and industrial sectors, China’s extremely attractive business opportunities are expanding. By offering Mitsui’s knowledge and experience in marketing and corporate management in these growing

China: a Rapidly Expanding Gigantic Market

A joint company was established with Shanghai Baosteel Group Corporation for processing and distribution of steel products.

Temperature-controlled transporta-tion logistics in Shanghai

TOTO showroom in Shanghai

The Grand-Scale East-West Natural Gas Pipeline


12


enterprises, we are building new forms of business with China.“Market China” represents a vast consumer base of

approximately 1.3 billion people. With a consumer population similar to other developed countries estimated at around 300 million and an expectation of growing to 500 million by the time of the Beijing Olympics in 2008. By comparison, the consumer population numbers 120 million in Japan, 280 mil-lion in the U.S., and 350 million in the enlarged EU, China may well be the world’s largest market by 2008. Moreover, Chinese consumers look to purchase high-quality goods and services, making China most attractive market. While it took Japan 30 years to embrace such consumer trends, China has undergone swift changes in just a few years. For Mitsui, our company’s know-how is opening doors to new business opportunities for Japan and China in food, clothing, housing, transportation (automobile) and many other areas.

China consists of four major regions: Southern China, includ-ing Hong Kong and Guandong Province; Eastern China cen-tering on Shanghai; North and North-Eastern China, includ-ing Beijing; and the Western Region, where China has exerted the most effort toward alleviating the nation’s eco-nomic disparities. In this western region, Mitsui is involved in

a national project, the “Western Region Development.”Whether China is able to continue to grow at its current

pace in the future depends on energy availability. Though China is an oil-producing country, economic growth has turned the country into an oil-importer. Moreover, as the envi-ronmental impact resulting from the use of its abundant coal resources is becoming a concern, China has begun exploiting the use of natural gas, attracting attention as a cleaner energy source than other fossil fuels. Active exploration is being car-ried out to assess the unconfirmed resources sleeping beneath China’s vast land. As part of this effort, the national West-East Natural Gas Pipeline project has begun.

This pipeline project, one of the large-scale projects of the Western Region Development, is planned to span approxi-mately 4000 kilometers, connecting the inland Tarim Basin and Shanghai with what is to become the world’s longest pipeline. By winning contracts to supply products from Nippon Steel Corporation and Dai-ichi High Frequency Co., Ltd., Mitsui has made a great contribution toward moving the plan forward to its realization.

This project is expected to help ensure a stable energy supply and improve air pollution and other environmental problems in China.

A Pipeline Project for Delivering Clean Energy




The Pioneering Spirit

Among a number of issues that I wanted to discuss at the President’s Roundtable, I brought up, in par-ticular, the point that Mitsui is a storehouse of information, and in order to fully exploit this strength of Mitsui, we needed a cross-departmental mechanism that connects the divisions cur-rently being divided vertically into business units, or a system that provides opportunities for informa-tion sharing. In response to this, some participants reported that in their experience, internal training

proved useful. This issue was also on the presi-dent’s mind, and he stated his willingness to con-sider a more active utilization of training programs. To me, this session was very productive, because I was assured that employees and management share the same concerns and that they both are willing to address the issue positively from their respective standpoints.

An active exchange of views brought the President closer to us.

Service Business UnitOutsourcing Services Division

(A participant in the 14th President’s Roundtable meeting)

Harumi Matsuda

A roundtable meeting was attended by mid-ranking employees who shared their passion for the company.

The redesigned CEO’s Page, “UTSUDA.net,” employs a variety of approaches to report the President’s views and the direction of the company (Partially available in English through Intranet).

Let’s create a venue where we can enhance in-house communica-tions, allowing employees to freely exchange their ideas and passions — a variety of initiatives have been launched to realize this aspiration.

In April 2003, the CEO’s Page, a site available on our Intranet, was redesigned and launched as “UTSUDA.net”. The involvement of Mitsui employees in the bid-rigging case in 2002 concerning the construction of a diesel power plant in Kunashiri Island and the les-sons learned from the incident led helped us to recognize the impor-tance of good internal communications. The new site aims to provide employees with undistorted reports on Mitsui’s situation and the views of the President in order to ensure the sharing of common val-ues. Its “Column” section now features interviews with the President conducted about twice a month, in which he reports recent happen-ings and shares his viewpoint. The CEO Mail Box is also set up as a two-way communication channel, allowing everyone to send e-mails directly to the President. The content of the mail is kept confidential. The President reads the e-mails and replies to each of them person-ally. Every day he receives messages that are filled with company spirit, conveying the expectations for Mitsui and offering unreserved opinions and suggestions about work and management.

Also recently inaugurated is the “President’s Roundtable,” a meet-ing that serves as a venue where the President and employees meet

for a direct exchange of ideas. The meeting is held over lunch or after work, and is attended by a small number of employees selected from among many applicants. Since its launch in April 2003, the Roundta-ble has been meeting regularly each month. Participants made such comments as “All of us here frankly voiced our opinion to the Presi-dent. The President went to great lengths to explain his viewpoint,” and “After a while, everyone was relaxed, and spoke what was on our mind in a fairly candid manner. The meeting proved very meaningful in that it gave us an opportunity to have a face-to-face dialogue with management that had hitherto been a remote experience.” Preceding the creation of the Roundtable, the “Agora” meeting was voluntarily organized by employees as a forum to exchange opinions with the same spirit but aimed for enhancing horizontal communications among them. The initiatives described above have lead to the holding of other roundtable meetings such as the ones involving COO of vari-ous business units. Thus, the willingness to discuss the future of Mitsui is steadily spreading throughout the company.

Dialogue between the President and employees, as well as among the employees themselves, help foster a sense of solidarity, which in turn has created an environment conducive to good internal communications. Thanks to this initiative, there is a renewed spirit upsurge of “challenge and creation,” which the company prides over everything else.


Corporate Social

ResponsibilitySeeking a balance between economic, social, and envi-ronmental objectives, and taking up the challenge for the creation of new social values are at the heart of Mitsui’s social responsibility. We make constant efforts to ful-fill customer needs and strive to gain the trust of society by carrying out conscientious corporate activities that har-monize corporate profitability with social responsibility.



ODA is aid provided by the government agencies of developed countries to the governments of developing countries. ODA includes direct assistance- such as donations, loans and technical coopera-tion- and indirect assistance through investment and funding to international development organizations.

*1 ODA (Official Development Assistance)

A mechanism of private-sector-led development and management of social capital. Under this scheme, central and local governments contract out the financing, construction, operation and mainte-nance of public sector projects, which have traditionally been shouldered by national and local governments, to the private sector. The project is handed back to the public sector when the contract expires. PFI enables the public sector to utilize funds, technical expertise and management skills of the private sector, thus offering better and more efficient public services.

*2 PFI (Private Finance Initiative)

Contributing to the World as a Global Company

Undertaking Public Projects

PFI Project: Chowa Municipal Elementary School, Chofu City

Chowa Municipal Elementary School, Chofu City

Laying out fiber optic cables for the backbone route between the cities of Bukhara and Nukus.

ODA Yen Loan Project: Improvement of Communications Infrastructure in Uzbekistan

Everywhere in the world, people work for the betterment of their lives. Governments, corporations and various groups are engaged in activi-ties aimed at bringing affluence to people. Mitsui believes that a sus-tainable society is realized when people around the globe can enjoy a prosperous life with a sound footing in their own culture and ethnicity.

In some developing countries, however, infrastructure is underdeveloped due to a lack of technological strength and a shortage of funds. Mitsui provides support for the attainment of an affluent life style in these countries, for example, through the ODA*1 Yen Loan programs. It also plays a significant role in improving the efficiency of public works by participating in a scheme called the Private Finance Initiative (PFI*2), under which central and local governments at home and abroad contract out all aspects of their projects to the private sector, from construction to operation and maintenance.

In undertaking ODA or PFI projects, it is essential for a company to have the ability to design a comprehensive project with consideration for the culture and customs of the country where the project is going to be implemented. At Mitsui, we capitalize on our extensive expertise to ensure the smooth implementation of projects for the public. At the same time, we particularly make sure that the transparency of the process is maintained in undertaking such public projects.

Mitsui will continue to make contributions to promote projects useful to society, drawing on our information gathering capacity and experience we have acquired in our operations around the world.

Chowa Municipal Elementary School of Chofu City is Japan’s first compulsory education facility constructed under the PFI Law. A Mitsui-led consortium was awarded construction and maintenance service for the project and set up special purpose company, Chowa Elementary School Civil Service Co., Ltd., on March 7, 2001. Follow-ing the completion of the construction and transfer of the school to the city on July 31 in 2002, the joint venture began to provide opera-tion and maintenance services on August 1, 2002. The company will continue to operate until March 31, 2017, when the contract expires. Funds were raised for the construction through project finance.

By utilizing the expertise of private firms, Chofu City not only reduced costs by as much as 30% from the original budget, but also enjoyed the additional advantage of equalizing the financial burden.

In addition to being an education facility, Chowa Elementary School is equipped with a facility for lifelong learning, a public indoor swimming pool, and a municipal library branch. The school has thus proved effective in improving municipal public services.

In view of the past successes, Mitsui’s comprehensive capacity will be sought after in PFI projects involving social infrastructure such as public facilities, ports and harbors, and airports.

Ever since the collapse of the former Soviet Union, Uzbekistan has remained politically and economically the most stable of the five independent nations in Central Asia. Although the nation is blessed with rich mineral resources including crude oil and gold, and produ-ces agricultural crops such as cotton, underdeveloped infrastructure of domestic and international communications presents a major stumbling block to the country’s modernization.

The communications facilities in use in Uzbekistan were from the days of the former Soviet Union. These outdated models inevitably made the domestic communications network unreliable. In partner-ship with NEC Corporation, Mitsui had supplied satellite ground sta-tions and international telecommunications switching equipment. Mitsui and NEC made a successful joint bid for the upgrading of the communications infrastructure in February 1996, a project financed by the first ODA Yen Loan Japan provided to Uzbekistan. The project involved installation of a digital switching system with a 250,000-line capacity, 1,900 kilometers of fiber optic cables and a microwave communications network extending 650 kilometers. The project has not only improved telephone system, but has also eliminated drop-ped connections during domestic and international calls.

Upgrading the underdeveloped communications infrastructure in the northwest regions has produced positive economic effects, for which the project earned high acclaim domestically and interna-tionally. Currently, work on the second project is underway.

16



Controlling ODA-related Business ProceduresTo increase the transparency of the operation process of ODA businesses, a discussion was held regarding a policy for the handling of ODA projects. After much deliberations in August and September of 2002 by the Commit-tee for Discussion of the Handling of ODA Projects, including external legal counselors, the following policy has been adopted.

In accordance with the policy, we will work toward improving the operation process and ensuring that the ODA business control system is firmly rooted.

Anpara B Coal-fired Thermal Power Plant

ODA Projects PolicyODA business dealings (loan programs and technical cooperation projects) should be pursued only after an ODA Business Control System is instituted, thereby ensuring the transparency of operations on each project.

ODA Business Control System1) All projects, regardless of their scale, are controlled under the Special Proce-

dures for Project Approval (Operating units are restricted from pushing ahead with projects on their own authority).

2) An ODA Project Review Committee, including third party participation (consisting of external legal counselors and personnel of Administrative Divisions) is formed.

3) Control by means of the ODA compliance checklist is instituted. Continuous and detailed examinations are conducted quarterly during the process of the entire operation, from the finding of project ideas to the completion of projects under-taken, using a checklist containing more than 90 assessment items.

4) An ODA Project Consulting Desk is established within the International Coopera-tion Dept of the Project Finance Division.

5) This control system also applies to consolidated subsidiaries (about 500 companies).

ODA Business Control System

Application process for Mitsui’s operating units of the Head Office

Application of project proposal

Examination by the operating unit

Project proposal acceptance

Examination by divisions involved

Project proposal approval

Prior consultationProject Finance Division, Business Administra-tive Division, Business Accounting Division, Cor-porate Administrative Division, CRM Division*, Legal Division, external legal counselors

Report

Jointly applied project proposal

ODA Project Review Committee

Corporate Staff Division, General Accounting Division, Corporate Administrative Division, CRM Division, Legal Division, Project Finance Division, external legal counselors

Examination by Operating Units’ joint proposal application

Compliance CommitteeGeneral Managers of

the Responsible AdministrativeDivisions of business units * Corporate Risk Management Division

ODA Loan Project: Anpara B Coal-fired Thermal Power Plant, India

The State of Uttar Pradesh, with a population of 130 million, is an impor-tant area in the northern part of India, where the famous holy places of Varanasi and Agra, the site of the Taj Mahal, are situated. The state was faced with a grave problem of electricity shortage. Anpara is ideal for the thermal power plant site because it has a coal mine and a lake that sup-plies water, which is indispensable to thermal power generation.

After the Indian government completed an environmental impact assessment clearing environmental concerns, the State Electric Board invited the tendering of bids. A consortium made up of Japa-nese and Indian manufacturers — Mitsui, Toshiba Corporation, Mitsu-bishi Heavy Industries, Ltd. and Bharat Heavy Electricals Limited (an Indian government-run company) — subsequently undertook the con-struction of the thermal power plant.

Having utilized Japanese state of art technology, though this proj-ect was massive in scale, entailing installation (including civil works) of 2 units of 500 MW coal-fired boilers, turbine generators and a set of associated equipment such as the substation facility, along with

the provision of a 2-year training program in operations, the work progressed smoothly and the plant was handed over for the commer-cial operation in 1994.

Anpara B Power Plant has consistently operated at an outstand-ingly high annual operating rate of around 80%, and a post-project assessment gave Anpara Plant high marks for its outstanding stabil-ity and reliability.

Thanks to technology information sharing through this project, India now has the capability to build large-scale power stations under their own technologies. Currently, construction of the Anpara C Power Plant is being planned. There is much expectation for fur-ther contributions from Mitsui, which hopes to make a successful bid for the project.


System for Corporate Governance

Board of Corporate Auditors(Five members including 3 outside corporate auditors)

Accounting AuditorsBoard of Directors(Eleven members including 1 outside director)

Corporate governance ensures a corporation to be managed in such a way as to fulfill its social responsibility to various stakeholders. As an approach to corporate governance, we, at Mitsui, ask ourselves “have we fulfilled the objective of corporate governance in the way we manage our businesses,” “are the supervisory and auditing func-tions working properly,” and “are our operations clear and transpar-ent to stakeholders.”

In pursuit of superior corporate governance, we employed the executive officer system in April 2002 to provide a marked distinction between the supervisory and implementation functions. In order to strengthen the supervisory function of the directors, we appointed an outside director at the General Meeting of Shareholders held in June 2003. We also increased the number of corporate auditors to step up the auditing function. Among Mitsui’s five corporate auditors, three are from the outside the company. Furthermore, we established an advisory board though not legally required, in December 2001 to incorporate expert external advice from objective viewpoint. The board consists of four external experts and conducts meetings on a regular basis.

In order to ensure that our management principles will be reflected in every aspect of our corporate activities implemented under the leadership of managing officers, Mitsui actively adopts the “internal control” concept advocated by COSO (Treadway Commission) in the United States. The concept is founded on three pillars: “efficiency and effectiveness of operations,” “reliability of financial reporting,” and “compliance with the law.” Mitsui introduced a system in which each individual, from work sites to management level, regularly self-assesses his or her work, bringing the company’s entire operations under control. A full-time unit has also been established for this pur-pose. Furthermore, to verify that this system is working effectively, the Internal Auditing Division, an independent in-house organization, conducts regular audits concurrently.

Mitsui has been listed on NASDAQ in the United States since 1971 and has issued American Depository Receipts (ADR). It is therefore subject to the Sarbanes-Oxley Act*, which came into effect in the United States in 2002. Mitsui has conducted a group-wide investigation and assessment of the implementation of internal con-trols in the entire company as mandated by the Act, and submitted an affidavit to the US Securities and Exchange Commission (SEC) affirming the effective functioning of Mitsui’s internal control.

CSR and Corporate Governance Formation of an Internal Control System

Corporate reform legislation that incorporates the concept of “internal control” advocated by COSO (Treadway Commission) in the United States. It is a strict law that mandates not only accuracy in accounting disclosures but also disclosure of a corporation’s internal control condition. Therefore, if a corporation violates the Act, not only are the CEO and CFO liable, the auditing firms, securities firms, and related entities in charge of the corporation’s account will also bear legal consequences.

* Sarbanes-Oxley Act

Corporate Governance and Internal Control

General Meeting of Shareholders

Internal Control Taskforce

Internal Control Administrative Structure

Compliance Committee

Internal Auditing Division

President

Business Operating Structure

Member appointment and removal Member appointment and removal

Audit Accounting Audit

Business Operating Organizations

Submission and report of priority issues Supervision

Audit

Member appointment and removal

Corporate ManagementCommittee

Administrative Divisions of business units

Office including branch offices

Overseas trading subsidiaries


Initiatives for Enhancing Compliance

Kazumi NakagawaExecutive Vice President and Chief Compliance Officer

Building a Corporate Structure that “Does Not Create Problems,” “Does Not Tolerate Problems,” and “Does Not Overlook Problems”

Compliance is generally defined as the act of willing adhering to applicable laws and regulations. In management terms, it is broadly interpreted as complying with social, including ethical and moral, norms. When a company’s anti-social behavior is revealed, it will lose its credibility, threatening the existence of the company itself. Therefore, compliance is an important element in management.

* Compliance

Mitsui believes that “credibility” is an indispensable value to maintaining

the growth of a corporation. In this information age, business forms are

various and changing but the importance of credibility to a business has

not changed at all. Compliance* is the key to maintaining credibility,

through compliance with the law, by the corporation and its employees,

and through the adoption of high corporate ethics.

Although a compliance program has been in place since February

2001, we announced a set of compliance enhancement measures

aimed at introducing third party viewpoint, promoting highly transparent

business practices, and enhancing the consciousness of compliance in

employees, based on our review of the 2002 incident relating to the bid

tendering for a diesel power plant facility on Kunashiri Island; therefore

building a corporate structure that “does not create problems,” “does

not tolerate problems,” and “does not overlook problems.” Measures

are also being taken to continue enhancing the ethical standards of

employees including holding of urgent compliance seminars.

As the Chief Compliance Officer, I am committed to taking all neces-

sary steps to ensure that these enhancement measures are fully adopted

by all employees and that compliance truly takes root in our company.


Compliance System As of October 1, 2003

Compliance Liaison Committee

At least one Compliance Manager is appointed to each division or office. Reporting and consultation can be conducted with the Compliance Administrative Division or directly with the external legal counselors.

Chief Compliance Officer (CCO)

Compliance CommitteeMembers: General Managers of the Secretariat, Internal Auditing Division, Compliance Adminis-trative Division, Personnel Division, Legal Divi-sion, General Affairs Division, Corporate Planning & Strategy Division, Corporate Communications Division, Logistics & Financial Business Adminis-trative Division and General Accounting Division, and external legal counsels

Compliance Administrative Division(Secretariat of the Compliance Committee)

External Legal Counsels Consulting Desk

(Anonymous consultation is accepted)

Members: Personnel of Secretariat, Internal Auditing Division, Personnel Division, Legal Division, General Affairs Division, Corporate Planning & Strategy Division, Corporate Com-munications Division, Logistics & Financial Business Administrative Division, General Accounting Division

Unit Compliance OfficersGeneral Managers of Administrative Divisions of 5 Operating Segments (Tokyo Head Office)

ContactPersonnel

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Unit Compliance OfficersGeneral Managers of the Corporate Planning Divi-sions or Administrative Divisions of 3 domestic branch offices

Unit Compliance OfficersGeneral Managers of Personnel Division for Admin-istrative Divisions of Tokyo Head Office and domestic and overseas offices directly controlled by Tokyo Head Office

Compliance Manager at

each division


each division


each division


each division


each division


each division


each adminis-trative division


each domestic office


each overseas office

at associated companies









ContactPersonnel

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Introducing Third Party ReviewTwo external legal counselors have been invited to join our Compli-ance Committee. They will evaluate our businesses from a third-party viewpoint and advise us on our efforts to ensure compliance.

The original members of the Compliance Committee consisted of the Chief Compliance Officer (CCO) and the General Managers of the Secretariat, Personnel Division, Legal Division, General Affairs Divi-sion, Corporate Planning & Strategy Division, Corporate Communica-tions Division, and General Accounting Division. Mitsui further enhanced the Committee’s functional capacity by including the Gen-eral Managers of the Internal Auditing Division, Logistics & Financial Business Administrative Division, and Compliance Administrative Division among the Committee’s members.

Opening Anonymous Reporting and Consultation ChannelsA system has been established to enable employees to report to or consult with the Secretariat of the Compliance Committee through e-mails, using the company’s Intranet. Employees can also use a direct phone line to contact the Secretariat. Those who wish to remain anonymous in their reports or consultations can contact the two external legal counselors through letters, phone calls, or e-mails.

Appointing Compliance Managers in Divisions and Branch OfficesIn order to strengthen the compliance system, at least one Compli-ance Manager has been appointed to each division in the Head Office and in the Osaka, Nagoya, and Fukuoka branch offices. In other locations in Japan and overseas, each office has been assigned one or more compliance managers. Approximately 200 Compliance Managers, appointed by Unit Compliance Officers, are working to promote the understanding of compliance standards with a thorough and expedited enforcement.

Contact personnel responsible for communication were appointed both in Mitsui and associated companies in order to form an effective coordination and communication channel between them. Mitsui also approaches and assists associated companies that do not have compliance programs to formulate codes of conduct for executives and employees and appoint Compliance Managers.

With the intention of consolidating compliance administration and thus enhancing consciousness and awareness of compliance standards, Mitsui set up the Compliance Administrative Division on April 1, 2003 under

the direct supervision of the Chief Compliance Officer. The new division takes on the administrative duties previously performed by members of the various divisions who make up the Compliance Committee.

Internal AuditingInternal auditing is an independent, objective assurance and consult-ing activity designed to add value and improve an organization’s oper-ations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effec-tiveness of risk management, control, and governance processes. Our Internal Auditing Division, through its auditing activity as defined above, provides consulting services to Mitsui and its affiliated compa-nies regarding ways to improve/ cope with irregularities, and further makes recommendations on the ways to prevent frauds and acci-dents. It also conducts environmental auditing of Mitsui’s affiliated companies in collaboration with Global Environment Division.

In Search for a Higher-quality Auditing PerformanceMitsui has implemented various measures to strengthen its auditing activities. Our Internal Auditing Division’s staff was increased to 40 in number in 2002 in order to provide audits to various divisions within Mitsui and its affiliated companies, both domestic and overseas, and to acquire proficiency in coping with the increasingly complicated risks in changing business environment.

In search for a higher-quality and efficient auditing, a team audit-ing system has been introduced, and auditing tools using information technology are being developed. In addition, cooperation with exter-nal experts and auditing firms will also be considered. At the same time, increased support is being made available to facilitate self-auditing at workplaces. With the addition of newly certified auditors, our Certified Internal Auditors have increased in number to 11, join-ing 24 Qualified Internal Auditors and two Qualified Information System Internal Auditors (as of August 1, 2003). We are working to increase the number of qualified personnel every year.

Since FY 2002, Assistant General Managers from different divi-sions and offices of Mitsui have joined in the internal auditing divi-sion as part of a company-wide career advancement program. The objective of this program is to enable Assistant General Managers to actively apply the knowledge, experience, and high ethical standards acquired from their participation in the internal audit activity to their own divisions upon completion of the program.

Enhancing the Compliance System

Strengthening the Compliance Committee

Enhancing the Internal Auditing System

Establishing the Compliance Administrative Division

20



Realizing the necessity to instill the concept of compliance in all employ-ees, Mitsui is implementing a program built upon concrete action plans.

During the period of August 1-23, 2002, Mitsui held 37 urgent com-pliance seminars for all employees at the Head Office. A total of 5,364 employees (99% attendance rate) attended the seminars, showing a high motivation towards compliancy. The branch offices of Osaka, Nagoya, and Fukuoka also held seminars from August 27 to 30. Efforts were made to raise awareness at other offices in Japan as well as overseas offices using training videos.

Compliance training is implemented by taking advantage of all opportunities available in the Human Resources Development Pro-gram, which is sponsored by the Personnel Division.

To instill the consciousness of compliance in every employee, Mitsui set up a compliance program in February 2001 and distributed the “Mitsui Business Conduct Guidelines for Executives and Employees,” designed to enhance the consciousness of responsibility as Mitsui’s employees. In tandem with the December 2002 reform aimed at strengthening the compliance system, the Business Conduct Guidelines was revised. Cur-rently, the April 2003 version is in effect.

The Mitsui Business Conduct Guidelines for Executives and Employ-ees recognizes that business is founded on credibility, and that compli-ance is a prerequisite for maintaining that credibility. The Business Conduct Guidelines gives a concise account of the various systems and manuals, methods of reporting, and consultation for complying with the required laws, regulations, and ethics.

Establishing and Implementing the Compliance Program

Awareness Reform Program

Formulating the Mitsui Business Conduct Guidelines

Urgent Compliance Seminars

Compliance Training

Mitsui Business Conduct Guidelines

Mitsui Business Conduct Guidelines

Compliance Handbook

1. The compliance system2. Explanation of the Mitsui Business

Conduct Guidelines3. Compliance checklist

Compliance Handbook

1. Compliance with the law and respect for human rights

2. Office environment and sexual harassment3. Compliance with antitrust laws, etc.4. Conflicts of interest and distinction

between public and private affairs5. Gift-giving and business entertainment6. Handling of company information7. Compliance with export and import pro-

cedures and various business laws8. Corporate funds and financial reporting9. Contributions and donations

10. Social contribution11. Environmental conservation12. Handling of anti-social groups and

behaviors13. Reporting and penalties

Compliance Training held in FY 2002

MT (general managers) Training

Urgent Compliance Seminars

Core Operation Seminars

BL (business leaders) Training

MMA (Mitsui Management Academy)

Orientation Training for Contract Administrative Employees

New Line Manager Training

Practical Training for Contract Administrative Staff (for temporary staff and contract employees)

Compliance Seminar for Executives

Compliance Seminar for General Managers

Executive Seminar for Personnel Assigned to Asso-ciated Companies

Compliance Seminar (for Compliance Managers in divisions and offices)

Orientation Training for New Hires

Training for Overseas Assignments

Orientation Training for Mid-career Recruitment

July 26 and December 2

August 1-23 (Head Office)August 27-30 (Branch offices of Osaka, Nagoya and Fukuoka)

September 17-18 (Head Office)September 25 (Branch offices of Osaka and Nagoya)

September 18 and December 11

September 6 and February 28

October 1, November 1, February 1, and April 1

Compliance training was implemented in October 16th and 29th and subsequent sessions of New Line Manager Training

May 14 and November 11

November 12

December 6

January 27

March 14

April 1

Once or twice monthly, a total of 18 sessions

Six sessions

Date of implementationType of training

(English edition available through Intranet)

(in Japanese Only)


Corporate growth is not brought about by a simple extension of the past, but entails an active pursuit of innovations and Human Resour-ces that can bring forth newly added values. At Mitsui, we believe that we can contribute to society by nurturing such Human Resources and by appointing the right person to the right position.

In July 1999, the “Job Category System (Shokugun System)” was adopted, replacing the long used “Qualification System.” The new system classifies jobs into six categories, depending on the job con-tents, duties, and the level of management responsibilities.

For each category, competency criteria*1 was introduced to serve as a guide for Human Resources development and as a standard for competency assessment.

Specific objectives are set for each employee: whether he/she has achieved his/her objectives, the degree to which they are ach-ieved, and the process and skill utilized, etc. are evaluated at the interviews held at the beginning, midpoint, and the end of the term. This process increases transparency and fairness in assessment.

The compensation system was also changed to a system that considers the job category, ability, result, and contribution to the divi-sion’s performance to which the employee belongs.

Employees are assigned to job categories, regardless of their gender, based on job functions and responsibilities. In 2001, the first groups of female general managers were appointed. Mitsui makes conscious efforts in appointing employees with capabilities and initiatives to management positions regardless of their gender.

In our employee assessment system, specific job objectives are set up for each employee, and his/her performance is assessed against those objectives that employees and their superiors both agree upon. Interviews are held for this purpose. The assessment is based on self-evaluation, and on clearly defined assessment standards, such as competency criteria, degree of achievement, and contribution to the division’s per-formance. With the feedback of assessment results, the employee can gain a clear picture of his/her strengths and weaknesses.

In order to allow the Personnel Division to monitor the proper implementation of this assessment process, line-manager perform-ance reviews are carried out. The system enables employees to directly voice their opinions to the Personnel Division rather than through their superior, the line manager who conducts their assess-ment. Such reviews shed light on the degree of the shared recogni-tion achieved between the person conducting the assessment and the person being assessed.

Mitsui has extended the retirement age to sixty-three in order to meet the needs of an aging society and to give options to employees who want to continue working for Mitsui.

On the other hand, an early retirement plan is established for employees of certain ages where they can choose from various options made available to match their diverse life plans. There are two options: a retirement equivalent plan and a temporary transfer plan. If an employee chooses the retirement equivalent option, he/she can benefit from premium payment in a lump sum, a pre-mium annual pension, or a bridging pension.

An Employee Relations Department was set up to provide consulta-tion services to employees seeking solutions to worries, anxieties, discontents regarding personnel matters, workplace environment, sexual harassment, etc. Consultation is kept strictly confidential. Licensed counselors see visitors personally. Use of phone and e-mail are also available.

We place great importance on:

• Clarifying “job responsibilities/role” of each employee• Employing a Human Resources development program that

encourages self-development• Employing a transparent and objective assessment system that

facilitates Human Resources development• Employing a compensation system that fairly rewards proven abili-

ties and job results• Expanding options based on the principle of self-initiation and

responsibility• Employing a personnel policy covering associated companies that

emphasizes group-wide consolidated management• Completing a mid-to-long term employment environment

Employee Relations

Enhancing the Value of Human Resources

Assessment System with Emphasis on Communication

Retirement Programs

Employee Relations Department

Personnel System Based on Job Categories

Equal Job Opportunities

“The Strength of Mitsui Lies in Its People”

2000

2001

2002

Fiscal year

7.7%

5.8%

8.8%

Annual job separation rate

Annual Job Separation Rate*2

*2 Job separation rate � 100Number of employees leaving work between January and December

employee as of January 1

Competency Criteria lists for each job category the behavioral patterns considered necessary to improve job results and achieve targets and objectives. There is criteria for six different categories, including “planning,” “implementation,” and “risk management” that are used to analyze the abilities and behavioral traits of employees.

*1 Competency criteria



Training at an Early Stage of Employment

Training of Sound Leaders —Leadership Training—

Human Resources Training and Development

In a broad sense, e-learning is an educational method using information technology, mainly personal computers and the Internet. The contents of educational/training programs are sent to the partici-pant’s personal computers through a network. e-learning makes learning easy without the restrictions of time and location.

*3 e-learning

Concept and Programs for Nurturing Human Resources

Training of International Personnel

Mitsui cherishes the values of “challenge and creation” and “broad- and open-mindedness.” The philosophy of “people developing new business and business developing better people” has always been a part of our corporate tradition. We feel certain that our mission and vision are shared by all employees; that employees nurture them-selves and explore new possibilities, therefore actively supporting their self-development.

The core of Mitsui’s human resources training lies in “self-development” and “on-the-job training.” For the two years after a new employee is hired, the employee undertakes educational assignments. He or she receives on-the-job training and attends core operation seminars to acquire the basic knowledge required as a corporate employee. Dur-ing the first years, after new hires complete the orientation training, they go through basic-terminology testing, core seminars, case stud-ies, and elective seminars, gradually discovering their own aptitudes. Prospective employees are also encouraged to acquire basic knowl-edge by utilizing e-learning*3 to improve skills in information technol-ogy, languages, and calculation.

Since greater importance is attached to the workplace/site, the com-munication between superiors and subordinates as well as the exis-tence of competent superiors at the site are essential. For this rea-son, we provide training in leadership. The New Line Manager Training program aims at heightening self-awareness and teaches managers how to focus on the assessment and education of subordinates and their compliance. Leadership training is also provided for higher positions.

In order to train the next-generation leaders to be capable of international management, we founded the Mitsui Management Academy (MMA) in February 2002. It equips veteran employees with the latest management skills, knowledge, and an understanding of the importance of leadership, teamwork, reforms, and methods for nurturing these qualities.

Mitsui has an overseas dispatch system in place to enable employ-ees in their twenties and early thirties to adjust to different cultures and learn foreign languages overseas. Since 1952, 25 to 30 employ-ees have been sent overseas every year for the course of 2 years

Overseas Studies. In addition, about 60 employees from different divisions are dispatched every year to different countries in the world for a period of one to two years for the course of Overseas Training.

On the other hand, about 3,300 employees working at overseas trading subsidiaries or branch offices are hired locally. Besides com-plying with the hiring and employment policies of various countries, Mitsui also devotes considerable efforts to develop the abilities and job skills of local employees. To promote an international mindset, orientation and basic operations training are provided locally, using materials prepared at the Head Office in Japan. A Japan training program is made available to core personnel. About 40 to 50 over-seas employees are invited to Japan every year for a one-week group seminar and a one-to-three month internship afterwards.

Training Programs

PeriodProgram Frequency per Year

Number ofTraineesper Year

2 weeks—

5 days3 days 2 nights

6 dayshalf day5 days8 days

half day

1 week

3 days 2 nightshalf day

3 weeks3 days 2 nights3 days 2 nights

2 years1 year (in principle)

2 years1 year

2 months2 months

3 days 2 nights � 2

2 days 1 night2 days 1 night

2 weeks1 year

3 weeks8 days9 days

26 days (half a year)

—

—0.5-1 hour1-2 days2 days

oncetwiceonceonceonce

4-5 times3-4 times4 timesonce

4 times

3-4 timestwice

twice3 timestwice

once—

onceonceoncetwiceonce

twicetwicetwicetwiceoncetwicetwiceonce

once

——

18 timesonce

103103103103901070

400100

120

100100

40-509032

25-3050-60

5124

16

44221

20012050

15

200All employees

20080

Introductory EducationOrientation Training for New HiresCore Operation Seminars Terminology Testing

Core SeminarCamp TrainingElectives

Orientation Training for Mid-career RecruitmentOrientation Training for Contract Administrative EmployeesPractical Administration Training

M/M Leader Training

SF Training (discretionary job category transfer training for Staff Category)

Executive Seminar for Personnel Assigned to Associated CompaniesNew Line Manager TrainingLeadership Training

MMABL (Business Leaders) TrainingMT (General Managers) Training

Dispatch SystemOverseas StudiesOverseas TrainingsBusiness School Studies

MBAMIT Sloan FellowHarvard PMDHarvard AMP

Tokyo Gas Cross Industrial Exchange TrainingMitsui Interbusiness Research Institute

Mitsui-juku SchoolManager Exchange Seminar

National Personnel AuthorityForum ’80Nomura School of Advanced ManagementFinance and Accounting SeminarBusiness Investment SeminarBusiness Management Professional Training Seminar

Medium and Small Business Consultant Certification Support Seminar

English TrainingCompliance Seminar (all employees)Training for Overseas Assignments (in principle all employees)SF Category Transfer Support Training (interested employees)

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eral

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lect

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ded

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ning

Prof

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23

Acknowledgment of Human Rights

Safety MeasuresHuman Rights, Occupational Health and Safety, and Employee Welfare

Instilling Health Management Awareness in Employees

In order to contribute to society, we ensure that our employees are equipped with knowledge and understanding of human rights. For the benefit of our employees, we make efforts to create an environ-ment where they can draw a sense of fulfillment and security from their daily tasks. To this end, we have included a course designed to increase the awareness of human rights issues for new hires. Mitsui exercises fair hiring practices, with the proper understanding and recognition of human rights.

To promote the good health of our employees, we have a Health Maintenance Center (a medical clinic and a dental clinic) that regu-larly conducts complete medical checkups. There are 33 contracted physicians. We make it mandatory for employees with overseas assignments to undergo medical examinations before leaving Japan, during temporary homestays and after returning to Japan. Results of the checkups performed at the Head Office and other domestic offi-ces are collectively managed by the Health Maintenance Center to maintain the good health of employees.

People living in modern society are subject to stress in varying degrees. As a preventative measure, Mitsui incorporates a mental health education course into the curriculum of new employee train-ing and subsequent employee training, with the aim of raising employees awareness of mental health. To prevent the impact and aggravation of stress on physical and mental health, a self assessed stress test is offered on the website of the Health Maintenance Cen-ter. Designed to make employees recognize their stress, this program allows them to assess the amount of stress they are under, by simply clicking applicable items. In addition, stress counseling sessions are provided upon request at the consulting room in the Health Mainte-nance Center and the Employee Relations Department.

Mitsui, having locations throughout the world, dispatches employees to every corner of the globe. The safety and good health of our employees and their families is one of our highest priorities of con-cern. We make our efforts on obtaining information about the eco-nomic and public security situations in various countries in a timely manner, to ensure that our employees can work free from worries anywhere in the world.

Being able to live a full life, balancing work and family, is a prerequi-site to realizing a sustainable society. We believe that a company has a social responsibility to guarantee equal employment opportunities and to create a society with equal participation for both sexes. In response to the April 2002 enforcement of the partial amendment to the law concerning the welfare of workers engaged in Childcare or Family Care, Childcare Leave and Family Care Leave, we have revised our welfare and maternity protection plans to provide greater support to employees who have family members in need of care.

These plans are applied to all employees in a fair and just man-ner. Correct understanding and cooperation of all those involved is absolutely necessary.

Childcare Leave ProgramMitsui’s employees who have children (including adopted children) are entitled to childcare leave until the end of the first April after the child has reached the age of one. Employees with a child under 3 are allowed to take nursing time, arrive late for work, or leave work early. Until the child enters elementary school, nursing leave with a maximum of 20 days per year, exemption from late-night overtime and a limit on overtime work is granted.

Family Care Leave ProgramWhen a family member is in need of constant nursing care, family care leave of up to one year is granted. Employees may choose to take family care time while working regular office hours.

Maternity Protection ProgramIn addition to the childcare leave program, the maternity protection schemes, such as menstrual leave, pregnancy leave and maternity leave are also available to female employees.

Self Assessed Stress Program (in Japanese only)

Mental Health

Childcare, Family Care and Maternity Protection Programs


Employee Welfare Programs

Hiring of Disabled Persons

Union representatives and management engage in serious talks.


The purpose of this law is to clarify the duties of employers with respect to employing disabled persons based on the principle of social solidarity, to enhance such employers’ duties based on that principle, and to adjust economic burdens arising out of such employment. Employers are required to employ a number of physically/intellectually disabled persons equivalent to or greater than 1.8% of the workforce.

*4 Law for Employment Promotion of the Disabled

The idea that the elderly, the young, disabled persons and the able-bodied live side by side as equals and enjoy normal lives as members of society.*5 Normalization

Labor Union RelationsThe Mitsui Labor Union, established in 1963 as a trade union under the Trade Union Law, boasts a history of more than 40 years. Union membership numbers approximately 4,500 (membership is open primarily to workers on a career-track who have signed an employ-ment contract directly with Mitsui), with a membership rate of 78%, an exceptionally high number for an open shop, a system where employees can decide whether to join a union. Mitsui fully guaran-tees employees freedom of inducement activities for union member-ship, such as holding meetings outside working hours to explain about the union.

As the representative of its members, the union bargains collec-tively with management for wages and other worker benefits. The negotiation is conducted by 17 members of the Central Executive Committee. Other negotiating bodies include the Overtime Commit-tee, which negotiates for working hours in the interest of protecting employees’ health, and the Labor-Management Committee on the Personnel System, which discusses problems arising from the imple-mentation of the revised personnel system in 1999. Sharing the common goal of making Mitsui a great company, the union and management work hard to improve employee benefits programs and working conditions through direct and assiduous dialogues that respect the positions of each party. In 2002, the union made proposals to improve the childcare and family care leave programs and to create a nursing leave program. They were approved and put into practice. It is one excellent example that shows mutual trust between Mitsui and its union.

Mitsui has various welfare programs to provide employees with a worry-free work environment.

In accordance with the Law for Employment Promotion of the Disabled*4, Mitsui established a special subsidiary, Bussan Service Co., Ltd. in 1981 — the International Year of Disabled Persons. Bussan Service, which engages in printing and mailing operations, has earned an excellent reputation as the trailblazing model case of employment of disabled persons. It is also considered exceptional as employees of the subsidiary work together with Mitsui’s staff in its Head Office building.

Bussan Service has since expanded to encompass the Personnel Processing Division and Training & Development Division. It now plays an important role in the operations of Mitsui’s Personnel Divi-sion and General Affairs Division. We continue to push ahead with normalization*5 that allows disabled and able-bodied employees to work in a collaborative fashion.

Bussan Service Co., Ltd. Postal Service Division provides mail and delivery services for Mitsui.


Japanese Musical Instrument Workshop

Children’s PC ClubSoccer School with professional players

Handicraft display and sales corner“Yume Poketto” (Dream Pocket)

Being a Good Member of the Local Community

Youth Theater Short Performance

Music Education for Elementary and Junior High School Students

Supporting Art Education Programs

Community Relations Activities

Under the basic philosophy of “contributing to the maintenance and development of a sound and vigorous society, through a deep under-standing of the cultures, societies, and people of different nations, consideration for social equity, and building a friendly relationship with stakeholders,” Mitsui actively promotes social philanthropic activities as a good corporate citizen.

While our domestic and overseas offices have been active in par-ticipating in local community activities, we stepped up the effort and established the Community Relations Department in 2000 for more active involvement. Community Relations Department initiates new programs that make a conscious effort to establish good relationship with local communities in addition to our previous donation activities.

We support the “Youth Theater,” a series of art programs designed to foster a rich humanity in young children. This program is run by the Foundation Japan Culture Center for Youths and Children, and has been enjoyed annually by 50,000 children nationwide. Under the revised National Curriculum Standards, the teaching of traditional Japanese musical instruments to students at elementary and junior high schools began in FY 2002. In response, we started supporting the Foundation’s educational programs for traditional Japanese music, “Japanese Melodies” and “Japanese Musical Instrument Workshop,” which encourages learning for students and teachers and provide opportunities for performers. These programs enjoy a favora-ble reputation. The children participating have commented that “It was beyond my expectation” and “The performance was fascinating.”

Since FY 2001, we have sponsored the programs of “Youth Theater Short Performance,” planned by the Foundation Japan Culture

Center for Youths and Children as part of the “Youth Theater,” art appreciation education. The programs give children the chance to directly experience live art, such as music, drama, and traditional arts. These programs target smaller schools that have fewer chances to appreciate art due to low student population and lack of accessibility. During FY 2002, we supported 8 pro-grams (178 performances) that had about 30,000 par-ticipants.

We support community workshops for disabled persons, sponsoring various activities, such as the sale of handicrafts, and the coordina-tion of bazaars. We also provide athletic field for their use, extend invita-tions to Mitsui-backed con-certs, and distribute emer-gency food supplies free of charge. In 2002, at the 25th Anniversary Celebration of KYOSAREN*, we received a Certificate of Appreciation for our supportive activities.

In cooperation with other corporations, we support and participate in the planning and management of the “J-League Soccer Schools” for children, in child care facilities. Collaborating with KIDS, a specified non-profit corporation, and other corporations, we also donate and hold computer classes at these facilities. Our employees actively par-ticipate in the classes as volunteers, deepening the positive relation-ship with children.

Supporting People with Special Needs

Supporting Children at Child Care Facilities

Japan Association of Community Workshops for Disabled Persons, a national organization of community workshops that provide a workplace for those with special needs. * KYOSAREN


As part of our community-based social contribution activities, we held the Mitsui Forest Experience Classroom (co-sponsored by the Japan Environment Association with cooperation from Sagamiko Pic-nicland Co., Ltd.) for the children of Ochanomizu Elementary School. Ten internally recruited volunteers planned and managed the event while the Community Relations Department coordinated the event with external parties involved. The tour drew a total of 180 partici-pants (126 children and 31 Mitsui and other volunteers). Partici-pants enjoyed friendly communication with children through hands-on activities such as “Forest Quiz & Orienteering,” making alimentary yam paste (a traditional Japanese food), postcards, and natural herb dyeing.

Participating as a volunteer leader for planning and managementThrough our participation in this activity as volunteers, we realized that the most meaningful experience for us was in the planning stage. As facilitators of the event, we were impressed by each con-tributor’s commitment and dedication, which we believe guided the project and led to its success. The volunteer spirit was represented by mutual support backed by this commitment, which helped spread the goodwill. In experiencing this spirit, we found the project particu-larly meaningful. We are all grateful to the participants and support-ers. We hope to increase this type of activity within Mitsui.


Forest orienteering

Kayo Inagaki (left) Finance Division Kyotaro Morihisa (right) eBusiness Development Department

Children enjoying nature

“Forest Experience Tour”Mitsui’s Forest Experience Classroom Sponsoring a

“Parent-Child Zazen Workshop”In commemoration of the 750th Anniversary of the Kenchoji Tem-ple, the Tokyo National Museum and Nihon Keizai Shimbun, Inc. held the “Kamakura — the Art of ZEN Buddhism” exhibition. In con-cert with this exhibition, Mitsui held the “Parent-Child Zazen (Zen meditation) Workshop.” Using cultural property, the Okyokan Tea House in the National Museum as the venue for this workshop, we spent some quiet time experiencing the “Zen Spirit” under the tute-lage of a monk from the Zen temple, representative of the Kama-kura Period. The event drew a total of 56 participants, including 29 fourth to sixth graders and their parents, 11 volunteers from Mitsui, and workshop staff. Takai, head of Religious Studies at the Ken-choji Temple, instructed the meaning of Zazen, its sitting positions, and breathing methods. After experiencing Zazen, the parents and children had a relaxing time looking at the exhibitions.

The children who participated in the event had the following comments: “I’m glad to have this once-in-a-lifetime experience,” “The talk by the monk from Kenchoji Temple was interesting,” “I’d like to try Zazen when I can’t concentrate on studying,” “I was impressed by the treasures of the Kamakura Shogunate,” and “I became interested in history.” The parents’ comments are as fol-lowings: “The chance to experience Zazen and to learn about the Kamakura culture is rare and valuable” and “This was the first I heard of Mitsui being involved in these kinds of cultural activities.” We hope that this opportunity to experience Zazen and to view national treasures will interest the children for history and culture.

The Mitsui volunteers commented that “I’m grateful to be able to go into the Okyokan Tea House, an important place that is usu-ally closed to the public” and “I want to participate in future activi-ties sponsored by Mitsui.” We also received many ideas and opin-ions for our community programs.

We’d like to con-tinue our efforts in vari-ous activities, and learn how best to contribute to and communicate with local residents.

Participants experiencing Zazen


Inviting disabled persons to a concert

Mitsui supports Japan Little League Baseball. The ideas behind this are to encourage the spirit of teamwork and fair play, give objectives, and enrich the participants’ lives with exciting experiences, thus nurturing children to become citizens of goodwill and courtesy. Today’s Japan Little League evolved from the Japan Little League Baseball Association that was established in 1964. It was in 1970 that Mitsui and the Fujisankei Communications Group began supporting the organization, which has become today’s Japan Little League. Mitsui’s then-President Mizukami (deceased) was appointed the League’s first Chairman, and later, former President Toshikuni Yahiro (deceased) became the Chairman, serving until October 2001. Presently, Mitsui continues its support and cooperation in operational management by having personnel serve as executive director, director, and auditor.

We create opportunities for foreign students to learn about Japanese lifestyle and culture through the provision of funds and scholarships. The Trade Promotion Foundation supports foreign students in various ways, such as by providing scholarships, and holding foreign trade study meetings, inviting foreign and domestic researchers. In support of the Foundation’s philosophy, Mitsui provides financial support and staff cooperation.

We offer support worldwide for emergency situations caused by natural disasters, such as earthquakes and floods, or by acts of terrorism. In cooperation with our business partners, we provide emergency supplies such as food, clothing, and funding.

In addition to sponsoring several orchestras over the long-term, we also support programs for performances of outstanding artists. Disabled persons are invited to the performances backed by Mitsui with the cooperation of Tokyo Goodwill Bank.

“Family Concert” began in FY2001 as a music education program that provides the opportunity to hear and appreciate classical music to children who are likely deprived of occasions to listen to live music.

The Mitsui Public Relations Committee engages in a variety of activities from a group-wide perspective. The committee introduces the activities of the Mitsui group companies to the public and develops and supports cultural and social welfare activities, such as publishing Mitsui Illustrated, holding the “Friendship Concert,” sponsoring the “Mitsui Golden Glove Award,” and selling handicrafts made by disabled persons at the Friendship Market. Mitsui Public Relations Committee Secretariat: 2-1 Otemachi 1-chome, Chiyoda-ku, TokyoMitsui & Co., Ltd. Corporate Communications Division Tel: +81-3-3285-7557Website: http://www.mki.co.jp/mitsuiPR/english/

The Mitsui Thai Scholarship

The Mitsui Educational Fund (for Australian students)

The Mitsui Kosgoro Fund (for Indonesian students)

The Mitsui Europe Student Program

The Mitsui Canada Fund

The Mitsui USA Fund

The Mitsui-Bussan Scholarship Program for Indonesia

1970

1971

1972

1974

1981

1987

1992

Year of establishmentScholarships and Funds

Contributions for Relief for the Victims of September 11

Donations for Refugees of the Miyakejima Island Eruption

Donation of Medical Equipment and Contributions to Support Anti-SARS Efforts in China

Main Activities

The First Mitsui & Co. Ltd CupTee Ball Tournament Cup

2003 Little League World Series

Supporting Little League Baseball Providing Disaster Relief

Supporting Orchestras and Leading Artists

Sponsoring “Family Concert” — a Music Education Program

Group-wide Activities: Mitsui Public Relations Committee

Supporting Foreign Students

Family Concert in Sasebo


EnvironmentalInitiatives

Mitsui conserves the 39,000 ha of its company-owned forests at 56 locations in Japan. Forests support life by providing habitats to liv-ing things, supplying water, and capturing and seques-tering carbon dioxide. Mitsui considers the protec-tion and nurturing of such irreplaceable assets as one of its most important tasks.



Engaging in businesses aimed at providing industrial solutions to environmental problems

•Promotion of business that solves the problem of global warming

• Promotion of business that contrib-utes to the creation of a sound material-cycle society

•Strengthening project planning and assessment capabilities

•Promotion research and development for “green products”

Coexistence with society

•Preservation of company-owned forests

•Support for a variety of environ-mental conservation projects

Environmental Conservation Policy

One of the most important issues in Mitsui’s business management is its active approach in tackling global environmental problems. In order to achieve sustainable development where both economic growth and environmental conservation are realized, we carry out activities in accordance with three principles.

The first principle is the “reduction of environmental burden and thorough implementation of environmental risk management.” We not only work at reducing environmental burden at worksites but also assess the environmental impact of our businesses. We have made a commitment not to undertake businesses that may create a great environmental burden. Due to the nature of Mitsui’s business activi-ties, a large percentage of environmental burdens we created results

from the manufacture, processing, and transportation undertaken by associated companies. Mitsui has accordingly intensified the envi-ronmental management of associated companies in order to reduce the group-wide environmental impact as a whole.

The second principle is “Engaging in businesses aimed at provid-ing industrial solutions to environmental problems.” Due to the global expanse of our operations, we believe that we can make a considerable contribution by actively engaging in business that mitigates global warming and by building a sound material-cycle society*.

The third principle is “harmonious coexistence with society.” Mitsui protects its company-owned forests at 56 locations in Japan and supports environmental conservation activities carried out by various organizations.

Mitsui is committed to being a good corporate citizen and to con-tribute to society by stepping up activities to conserve the global environment.

Reducing waste by efficiently using resources extracted from nature, and recycling and reusing the remaining waste, a sound material-cycle society controls the consumption of resources and energy and reduces the burden it exerts on the environment.

Working toward Sustainable Development

* Sound Material-cycle Society

Reduction of environmental burden and thorough implementation of environmental risk management

•Implementation of environmental impact assessments for new investments

•Environmental considerations in products and services

•Reduction of environmental burden at worksites

•Environmental considerations in existing businesses (associated companies)

Initiatives to Environmental Problems


1. Basic PhilosophyEnvironmental problems extend beyond national borders and have become global in scale. These problems can exert an adverse impact on future generations and pose a threat to the very existence of humanity. Accordingly, one of our most fundamental responsibilities is to protect our irre-placeable asset, the earth, and to ensure that our planet is handed to future generations in a healthy state.

As a good corporate citizen, Mitsui fulfills this responsibility by designating environmental protection as one of its most crucial management issues, making every effort to realize “sustainable development,” which strives for a balance between economic development and preserving the environment.

2. Basic PoliciesMitsui is active in a wide range of trading activities, along with the development of energy sources and other natural resources for various industries. These include export, import, domestic and offshore transactions in such industrial materials as steel, non-ferrous metals and chemicals as well as in machinery, electronic and industrial products and lifestyle-related products, including foodstuffs, textiles and general merchandise. Mitsui is also involved in various businesses related to the aforementioned activities, as well as telecommunications and IT, service businesses and regional development.

Mitsui appraises business activities from the perspective of environmental protection and seeks to improve these activities while striving to pre-vent pollution.

Mitsui & Co., Ltd. (Mitsui)Environmental Policies

We are maintaining and strengthening our organization to effectively promote environmental protection activities aimed at realizing sustainable development.

We are continuing to educate employees with the intention of making them more aware of the importance of environmental protection.

Mitsui strictly adheres to all environmental protection laws of Japan and those of any country where it does business.

Mitsui assesses the environmental impact of new investments before making a final decision and prepares environmental impact assessments whenever necessary. Mitsui pays special attention to the impact of natural resource development projects on the ecosystem.

Mitsui exercises appropriate influence to ensure that its associated companies carry out their operations with proper consideration for environmental protection.

In business activities that involve the provision of goods and services, with the cooperation and understanding of its business partners, Mitsui promotes activities that consider environmental protection within the broadest possible economic and technical ranges possible. Special attention is paid to the prevention of accidents dur-ing the transportation of products that could have a major detrimental impact on the environment.

Mitsui takes a vigorous approach to environmental management in its offices. The Company not only conserves energy and natural resources but also restricts generation of waste materials, recycles and reuses resources and implements thorough safety management for dangerous substances.

Mitsui believes that realizing sustainable development is contingent on formulating rational and permanent industrial solutions that incorporate environ-mental measures when carrying out economic activities. Acting on this conviction, Mitsui is drawing on its synergic capabilities and is cooperating with domestic and overseas partners to aggressively engage in a wide range of environment-related businesses.

Mitsui is working closely with public agencies, industries and regional communities to carry out environmental protection activities that benefit the global community.


Announced on October 1, 2002

Establishing a Solid Structure1) Maintaining and Strengthening Our Organizational Structure

2) Promotion of Educational Activities

3) Thorough Compliance with Relevant Laws

Approach to Environmental Protection in Business Activities4) Implementation of Environmental Impact Assessments for New Investments

5) Environmental Considerations in Existing Businesses

6) Environmental Considerations in Products and Services

7) Thorough Environmental Management Programs in Offices

Our Relations with Society8) Engaging in Businesses Aimed at Providing Industrial Solutions to Environmental Problems

9) Harmonious Coexistence with Society


The following is a report of the results of environmental activities carried out in FY 2002, in which all targets were achieved. Mitsui will continue to work toward the further reduction of environmental burden in the future.

Targets and Performances

Revised operational organization of environmental management systems in line with company restructuring

Maintained eight Environmental Auditors

Held seminar in August. Added 30 internal environmental auditors (160 in total)

Announced environmental conservation costs

Over 83% of employees at the Head Office and over 99% of employees at domestic offices including branch offices received the training

Trained 57 EMS representatives (March, April)

Independently held at business divisions handling business with significant envi-ronmental aspects

Held the “Current Status of Global Warming and Future Prospects” seminar (July)

146 new employees received environmental education

Implemented once a month, 214 received environmental education

Held study seminar to ensure auditing consistency among internal environmental auditors (Sept.)

Paid 75.93 million yen for consigned recycling costs

Investigated and reported the amounts of chemical substances imported

Continued to use environmental impact assessment procedures in proposals (re-quest for managerial approval) for new investments

Carried out environmental impact assessment on proposals (request for manage-rial approval) for 62 new investments

Continued to follow the guidelines for the waste material recycling business

Implemented the 9th environmental management review of associated companies

Conducted the inspection of 17 associated companies in Japan using external consultants

Conducted the inspection of 5 associated companies in conjunction with inspec-tion by internal auditors

Conducted the inspection of 3 overseas associated companies (Malaysia)

Continued to offer programs supporting associated companies efforts to acquire ISO certification

Conducted environmental impact assessments for all 24 new products registered

Electricity consumption 25.80 million kWh

Total waste 1,500 tons Rate of recycling 73%

Commissioned the Wild Bird Society of Japan to study conservation activities regarding rare wildlife

Donated 2 million yen to the Keidanren Nature Conservation Fund

Donated 2 million yen to the Wild Bird Society of Japan for publishing educational leaflets

Continued corporate social responsibility activities as a WBCSD member

Self-evaluationPrincipal Environmental Policy Categories

Environmental Considerations in New Products and Services

Maintenance and Strength of Organization

Promotion of Educational Activities

Thorough Compliance with Relevant Laws

Implementation of Environmental Impact Assessments for New Investments

Environmental Considerations in Existing Businesses

Thorough Environmental Management Programs in Offices

Engaging in Businesses Aimed at Providing Industrial Solutions to Environmental Problems

Harmonious Coexistence with Society

FY 2002 Environmental Targets and Performances

Target Performance

Revise operational organizations of the environmental manage-ment systems

Maintain the number of Environmental Auditors

Hold internal environmental auditor seminar(s) and increase the number of internal environmental auditors

Continue to announce environmental conservation costs

Offer environmental training to regular employees

Upgrade EMS representatives training

Offer specific environmental training

Hold environmental seminars

Provide environmental education in the orientation training for new hires

Provide environmental education in the training for employees with overseas assignments

Provide training for internal environmental auditors

Comply with the Container and Packaging Recycling Law

Comply with the Chemical Substance Control Law

Follow the environmental impact assessment procedures

Strengthen the environmental management at associated companies

Continue to conduct environmental impact assessment for new products

Electricity consumption 26.44 million kWh

Total waste 1,660 tons Rate of recycling 66%

Promote waste material recycling business

Promote business related to the mitigation of global warming and energy conservation

Utilize company-owned forests effectively

Support various environmental conservation activities

Continued to develop and implement end-of-life home appliances recycling business, end-of-life vehicles recycling business, incineration ash treatment business, and PET bottle recycling business

Participated in the World Bank’s Prototype Carbon Fund, expanded afforestation activities, promoted the commercialization of fuel cell business, and invested in the emissions trading company,CO2e.com.

Self-evaluation rating: : Achieved target : Did not achieve target : No progress


The environmental management system is a fundamental mecha-nism for achieving continuous improvements in environmental activi-ties. Mitsui has established an environmental management system as a measure for addressing the nine areas of challenge identified in its Environmental Policies.

The Environmental Management Committee was established as an advisory body that offers advice on environmental matters to the President (top executive). The committee is chaired by a specially appointed executive officer. It has 25 members consisting primarily of general managers from the Corporate Staff Divisions and the domes-tic offices, and makes decisions on important environmental policies.

The Chief Environmental Officer is charged with the operation of company-wide environmental management systems. Under him, the general managers of the groups at the Head Office and of other domestic offices serve as Environmental Officers, taking ultimate responsibility for the institution of environmental management sys-tems in the groups or offices they supervise. This structure enables the fine-tuned operation of these systems in response to the unique business characteristics of individual groups.

Furthermore, to promote environmental activities on a daily basis, the EMS representative is assigned as an assistant to the officer responsible for environmental management, while one Eco Leader is appointed for every ten or so employees.

All our domestic offices collectively obtained ISO 14001 certification in 1999. We encourage associated companies to introduce environ-mental management systems such as ISO 14001, and provide assis-tance in setting up the systems.

In order to verify that environmental management systems are imple-mented properly, an internal environmental audit is conducted once a year. At Mitsui, eight employees certified as Environmental Auditors and 160 trained as internal environmental auditors conduct the audits.

Environmental Seminars/Employee TrainingRecognizing that raising individual employees’ awareness is vital to effective environmental activities, Mitsui offers environmental semi-nars and training sessions at various occasions.

Training for Internal Environmental AuditorSeminars by the Japan Audit and Certification Organization for Environment and Quality (JACO) are held annually to train employ-ees to become internal environmental auditors. In FY 2002 thirty-one employees were newly trained. For employees already trained as the internal environmental auditor, separate training was offered to foster better understanding of environmental management systems.

Our environmental efforts extend to green purchasing, a practice of preferential procurement of stationery and other office supplies with smaller environmental burden. When purchasing goods, we make sure that our purchases result in less environmental burden follow-ing the Green Purchasing Guidelines established in April 2000.

Promotion of Green Purchasing

Items Subject to Green PurchasingBusiness form papers, tissue paper, toilet tissue, stationery and office supplies, personal computers, printers, facsimile machines, copy machines, office refrigerators, office furniture, lighting fixtures, automobiles, television sets for office use

Environmental Management System Structure

Eco Leaders Eco Leaders

EMSRepresentatives

EMSRepresentatives

DeputyEnvironmental

Officers

DeputyEnvironmental

Officers

Top Executive Environmental Management Committee

Global Environment Division

Eco Leaders Eco Leaders Eco Leaders Eco Leaders Eco Leaders Eco Leaders

EMS Representatives

EMSRepresentatives

EMSRepresentatives

EMSRepresentatives

EMSRepresentatives

EMSRepresentatives

EnvironmentalOfficers







System Structure

Acquisition Status of ISO 14001* Certification

Environmental Education and Awareness-raising Programs


Standards for the environmental management systems were established by the International Organization for Standardization (ISO), with a vision of reducing environmental burdens through continuous improvement. While legally non-binding, ISO 14001 urges individual organizations to set specific numerical targets for environmental conservation and to make voluntary efforts to minimize burdens by independently realizing their environmental policies to the fullest extent possible economically and technologically.

* ISO 14001


Number of ISO 14001-certified worksites of associated companies 46

Internal Environmental Audit Team

President

General Managersof Administrative

Divisions at the CorporateHeadquarters

General Managersof the Business Administrative

Divisions

General Managerof the Business

Accounting Division

General Managersof the Administrative

Divisions ofBusiness Groups

General Managerof the OperationalDivision

General Managerof the OperationalDivision

General Managersof the branch

offices of Osaka,Nagoya, and Fukuoka

General Managersof other

domestic offices

EMS Committee

Executive Vice President

Chief Environmental Officer

Manager of the Environmental Auditing Division

Environmental Audit


Reducing the environmental burden exerted by our business activi-ties, associated companies’ operation, and import, export and sales of goods and services — while monitoring the environmental impact of our daily operations — are of paramount importance. We estab-lished the Guidelines for the Management of Global Environment Conservation in 1993, and launched an initiative to conduct environ-mental impact assessment of new investments, introducing environ-mental management systems at associated companies, and incorpo-rating environmental considerations into products and services.

In tandem with striving to comply with relevant international trea-ties as well as laws in Japan and other countries, we are making our utmost efforts to minimize the impact on ecosystems and the global environment.

Mitsui has introduced a system that requires environmental impact assessment prior to making an investment in new projects. If the results indicate potentially serious environmental impact, counter-measures must be formulated and detailed in the approval request form. Since its introduction in 1993, the system has undergone a number of improvements aimed at increasing effectiveness.

As an environmental consultant for Mitsui, I have visited 63 associated companies in the past three years to conduct on-site inspec-tions of environmental management system operation. I was deeply impressed by Mitsui’s commitment to reducing environmental bur-den in all business areas — from manufacturing, processing and transportation to storage — at its approximately 1,200 worksites of associated companies worldwide. I felt reassured after witnessing how thoroughly the parent com-pany’s principle of addressing the environ-mental conservation issue on three Reals — Real place, Real thing, Reality — is embraced by the management of the associated com-panies and how deeply environmental con-sciousness is instilled in individual employees.

A Reflection on On-site Inspections

Chief SpecialistEnvironmentalManagement DivisionTERM Corporation

Yoshihiko Kitada

Environmental Impact Assessment Flow

Examination by EMS representative

Report assessment scoresand countermeasures to

Global Environment Division

*Fill out the Environmental Aspect Identification Sheet and Impact Assessment Sheet in accord-ance with the procedures established (Environmental Aspects Identification and Environmental Impact Assessment Procedures) (requires prior consultation with the EMS representative of the applying division).

Deliberation(approval)

Large environmental impact (as-sessment scores of 70 and over): Consult with EMS representatives and prepare an approval request form detailing aspects of the business exerting serious impact, along with countermeasures.

Small environmental impact (as-sessment scores from 40 to 70): Prepare an approval request form detailing aspects of the business exerting greatest impact along with comments on the assessment results.

Reduction of Environmental Burden and Thorough Implementation of Environmental Risk Management

Assessing Environmental Impact of Existing Businesses

Environmental Considerations in Products and Services

Assessing Environmental Impact of New Investments

Environmental Impact Assessment

Environmental impact assessment by the division undertakingnew projects and the person in charge (Self-assessment)*

Entering in to force in 1992, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal was developed primarily by UNEP with the objective of pre-venting environmental pollution due to the export of hazardous waste from developed countries to developing countries. It stipulates the obligation of permission and prior notification when harmful waste is exported, and re-imported in cases of inappropriate exports or treatment. Japan became a party to the convention in 1993.

* Basel Convention

For existing businesses, we implement the Environmental Management Program for Associated Companies, which entails evaluating environ-mental burden and environmental pollution risks by means of a questionnaire sheet. Among approximately 2,000 associated compa-nies worldwide, excluding some industries such as investment, a total of 773 companies/offices were inspected in FY 2002. To increase assessment accuracy, we made improvements to the ques-tionnaire sheet by taking account of legal amendments and feedback from analyses of assessment results.

Each year, some 20 associated companies deemed to have high environmental risks are subject to an on-site inspection of their plants by Mitsui’s consultant with specific countermeasures to be implemented. Pressing ahead with introduction of environmental management systems such as ISO 14001 at associated companies, we provide assistance in setting up systems. We expanded on-site inspections to Southeast Asia in FY 2002.

We ensure that our products and services conform to relevant interna-tional treaties such as the Basel Convention* and to guidelines set by international organizations. Resource exploration and importation are undertaken with extreme caution in order to minimize their impacts. Since fiscal 2000, we have been conducting environmental impact assessment of products and services newly added to our repertoire.



In compliance with the Ordinance on Environ-mental Preservation to Secure the Health and Safety of Citizens of the Tokyo Metropolitan Area, we submitted a Global Warming Action Plan, with regard to Mitsui’s Head Office build-ing, to the Governor of Tokyo in June 2002.

Plan for Measures againstGlobal Warming

Reducing the Environmental Burden in the Office

To minimize environmental burdens at our offices, we strive to reduce electricity consumption and the amount of generated waste. In sup-port of the “Green Power Certification System*1” offered by the Japan Natural Energy Co., Ltd., we annually purchase a Certificate of Green Power of 1 million kWh. We have also introduced the district heating and cooling system*2 operated by Marunouchi Heat Supply Co., Ltd., thereby reducing the environmental burden from air conditioning. In order to reduce water consumption, about 90% of tap water con-sumed at the Head Office in Tokyo is reused as recycled water.

Efforts to Reduce Environmental Burdens

Environmental Conservation Costs

Compiled based on the Environmental Accounting Guidelines (FY 2000 version) established by the Ministry of the Environment of Japan. Offices covered: Head Office and all domestic offices Target Period: April 1, 2002 – March 31, 2003

Depreciation of investment in replacement of lighting equipment with inverter modelsCosts of separation/disposal of wastes (including infectious waste)Wastewater recycling costs (a system that uses wastewater to flush toilets)

Investment in the home delivery business of environmentally-friendly and wholesome mineral waterR&D costs of environmental businesses (promotion of the PCB recycling project; exploration of natural energy; new products utilizing construction sludge stabilizer)

Contents Investments Expenses

Unit: thousands of yen

Category

Subtotal

Increase in expenses resulting from the introduction of energy-efficient office automation (OA) equipmentIncrease in production costs of environmentally-friendly calendarsConsignment fees for recycling in compliance with the Container and Packaging Recycling LawOutsourcing of industrial waste disposal and recycling-related operations

Subtotal

Costs of implementing environmental management and environmental risk management systemsExpenses for production of environmental report for public disclosure of environmental information and environmental advertising expensesCosts of air and water quality testsEnvironmental education costs related to holding or participating in environmental seminarsExpenses to maintain greenery planted for greening and beautification of offices and their surroundingsSubtotal

Subtotal

Contributions to the Petroleum Industry Marine Association of Japan to support measures against marine oil pollution

Subtotal

Costs of managing company-owned forestsDonations and monetary aid to environmental conservation groupsExpenses for environmental activities in local communities

Subtotal

23,826

4,200

23,826

0

0

4,200

0

28,026

0

68,85088,514

972,000

30,244194,600

257,518

27,659

3,3331,1413,020

1,354,129

317,33811,1062,198

157,364

226,941

292,671

1,354,129

2,174

2,363,921

330,642

2,174

Electricity Consumption (All domestic offices) Total Waste (Head Office, Nagoya Office) CO2 Emissions (All domestic offices)

(MWh) Target Achieved Target Achieved Recycling rate

28,523

1998 1999 2000 2001 2002 2003

(tons) ElectricityCold waterGrade A Heavy oil

SteamGasolineCity gas

(t-CO2)(%)

1998 1999 2000 2001 2002 2003 2000 2001 2002

1,7671,547 1,537 1,668

1,503

5763 63 65

17,031 16,242 15,869

7327,830

25,80626,948 26,283

Paper Consumption(Head Office, Nagoya Office, Osaka Office)

Thousand sheets; A4-size sheet equivalent

2000 2001 2002

95,949 88,180 86,758

Water Consumption(Head Office, Nagoya Office, Osaka Office)

(m3)

0 0

000

2000 2001 2002

130,776118,312

93,251

R&D costs

Social activity costs

Environmental remediation costs

Total

Administration costs

Upstream/downstream costs

Business area costs

A system that enables any company to purchase environmental added values, such as energy conservation and reduction in CO2 emissions achieved by wind-power generation, in the form of the Certifi-cate of Green Power from Japan Natural Energy Co., Ltd. http://www.natural-e.co.jp/

*1 Green Power Certification System

A system under which a certain area has one or multiple centralized energy supplying plants that provide thermal energy in the form of cold water or hot water to buildings within that area. It not only offers higher energy efficiency than building-by-building cooling and heating, but also helps prevent pollution and disaster.

*2 District heating and cooling system

Target period: April 2002 – March 2005Greenhouse gas emissions of the base year (April 2001 - March 2002): 14,883 ton-CO2

Breakdown: 14,864 tons of CO2; 6 tons of methane; 13 tons of dinitrogen monoxideEmissions reduction target at the end of the plan period: 14,585 ton-Co2 (2% reduction)

Major reduction measures1. Stepping up energy conservation efforts at offices2. Replacing lighting equipment in parking garages

with inverter models3. Replacing sanitary pumps, air-conditioning sys-

tems, and lights in basement floors with inverter models

4. Replacing air-conditioners for elevators and exhaust fans in parking garages with inverter models

5. Promoting the reduction and recycling of waste at offices

6. Promoting separate disposal of office garbage by employees

Global Warming Action Plan


Regardless of the unclear outlook for the future of the Kyoto Protocol, establishing the reduction targets of greenhouse gas emissions for developed countries, EU and Canada have decided to implement their own emissions trading scheme*1 as the issue of global warming becomes a major concern worldwide. Japan is likely to follow. In conjunction with this, world-wide interest in greenhouse gas emis-sions reduction projects (CDM and JI*2) and emissions trading is increasing. These are new attempts at targeting the prevention of global warming with economic rationale using market principles.

As the issue of global warming is expected to exert significant influence on the future activities of Japanese corporations, Mitsui has taken the initiative to launch new businesses for the prevention of global warming, thus accumulating knowledge in this unexploited field. Now we offer comprehensive services, from the development and coordination of emissions reduction projects utilizing Mitsui’s global network, to trading and brokering carbon credits, providing solutions for risks and opportunities of this new environmental busi-nesses. Mitsui promotes our own emissions reduction projects that contribute to global warming prevention.

Investment in CO2e.com and Carbon MarketingIn October 2002, Mitsui made an investment in the US emissions brokering giant CO2e.com. Currently, we are working with CO2e.com to offer carbon marketing, brokering, and consulting in Japan. Further-more, plans call for establishing a jointly invested company in Japan to develop the market in the whole of Asia.

Investing in the World Bank’s Prototype Carbon FundWe have also invested in the World Bank’s Prototype Carbon Fund (PCF). A contract was concluded with the World Bank in December 2002 to make an additional 1 million dollar capital contribution, fol-lowing a 5 million dollar capital contribution made in 2000 (total investment in the fund rose to US$ 6 million, or 720 million yen). The fund was established in the World Bank with investments from governments and corporations from all over the world. The fund buys Carbon Credits generated from the implementation of the green-house gas emissions reduction projects based on the Kyoto Protocol, and proportionally distributes the share to investors.

Along with contributing to Japan’s fulfillment of the reduction

obligation through the reception of Carbon Credits from the fund, we provide Human Resources to the fund and are acquiring knowledge related to emissions reduction proj-ects. Using this knowledge and our overseas network and financial power, we will promote our own emissions reduction projects.

World Bank’s Prototype Carbon Fund Website: http://prototypecarbonfund.org/

CO2e.com Website: http://www.co2e.com/

Mitsui’s Role in the Climate Change Issue

Climate Experts (ClimeX)Naoki Matsuo

Project Schematic of the World Bank’s Prototype Carbon Fund

1. Contributing to emissions reduction in Japan

2. Gaining planning experience and creating original Japan-based projects

Projects

Mitsui

Distribution ofCarbon Credits

Contributions

Purchasing a portion ofCarbon Credits generated

from the projects

Payment of purchase price

for Carbon Credits

Financing

Interests/Returns

Othercontributors

World Bank’sPrototype

Carbon Fund

World Bank, International Finance Corporation, national export/import banks,

other financial institutions

Preventing Global Warming

Developing and Promoting Environmental Projects

CDM refers to the system that allows developed countries with quantitative goals for an established greenhouse gas emission volume to implement emissions reduction projects in developing countries and use the resulting emission reductions in its own quota. JI is a system that allows the emissions reduction units resulting from joint implementation of projects to reduce emissions of or to strengthen absorp-tion of greenhouse gases, to be transferred to (or acquired by) the nations that implemented the project.

*2 Clean Development Mechanism (CDM) and Joint Implementation (JI)

This system allows the selling of rights to emit greenhouse gases among nations or corporations. This system targets meeting reduction goals worldwide by allowing participants to transfer their emission reductions to others wishing to acquire the reductions.

*1 Greenhouse Gas Emissions Trading

General trading companies have a great role to play in mitigating climate change. Their principal contribution can be made through establ ishing a business model for a carbon-constrained society under the Kyoto Protocol by incorporating the value added of reducing greenhouse gas emissions into the framework of these socially influential, trading company businesses.

From this perspective, Mitsui is in a better position to use the information and knowledge developed from par-ticipating in the carbon funds and CO2e.com in their various proj-ects. In fact, Mitsui has started some projects since last year mobi-lizing these new resources. In newly emerging CDM businesses, in particular, I hope that they will crystallize many new projects. It would be ideal if they could secure about 1% of Japan’s emissions.

As the Kyoto Protocol is expected to enter into force, more stringent domestic regulatory framework is scheduled in 2005 in Japan. On the other hand, EU will establish its EU-wide emissions trading system in 2005. In these dynamic situations, I hope that Mitsui fully uses its advantage as a general trading company to lead Japanese corporations in keeping pace with European countries.


Particulate matter (PM) in diesel vehicle exhaust emissions is partic-ularly toxic to humans. The elimination of PM is an urgent issue in the measures against air pollution. In October 2003, eight cities and prefectures in the greater Tokyo Metropolitan area* enforced ordi-nances that regulate diesel exhaust particles, prohibiting the use of diesel vehicles that do not meet the emissions standards*3.

Mitsui developed a PM trap device “CRT-TSS,” a continuous regeneration type Diesel Particulate Filter (DPF) to be installed in diesel vehicles currently in use. The CRT-TSS has obtained designa-tion approval for its use by the eight prefectures and cities.

The CRT-TSS was designated as one of the DPFs to be used in commuter buses by the Tokyo Metropolitan Government in Septem-ber 2001. In september 2002, we began production of enhanced DPF at newly established PUREarth Incorporated — its dedicated fac-tory. In May 2003, the device obtained approval in all vehicle catego-ries, including trucks. Twenty thousand units have been sold as of December 2003. In addition, as new national short-term controls came into effect in 2003 with tightened PM emissions standards for new vehicles, the development of DPF for new vehicles is much anticipated. PUREarth Incorporated has taken over the development of DPF for new cars. We will continue to pursue better diesel vehicles with further research, development, and marketing.*(Tokyo, Kanagawa Prefecture, Chiba Prefecture, Saitama Prefecture, Yokohama City, Kawa-saki City, Chiba City, and Saitama City)

In February 2003, Mitsui initiated capital participation in “NS Wind Power Hibiki Ltd.” established by Nippon Steel Corporation and Japan Wind Development Co., Ltd. The Hibikinada Wind Power Proj-ect was the first wind power generation project in Japan located in a harbor area. With ten units, each with a rated power output of 1,500 kW, it is one of the largest wind power stations in western Japan. The station began commercial operations in March 2003 and is expected to supply 35 million kWh of electricity annually, equivalent to the annual power consumption of 10,000 households.

This project was planned in line with other environmental pro-

grams such as the City of Kitakyushu’s Eco-town Project. It is hoped that as a symbol of environmentally-considerate clean energy, this project can contribute to deepening the public understanding of the natural environment.

Dioxins are found in the incinerator ash produced by municipal waste processing facilities, and landfill sites are running out of space. Prob-lems of waste incineration are becoming increasingly serious. In December 1998, Mitsui and the Taiheiyo Cement Corporation jointly established the “Ichihara Ecocement Corporation” to produce and mar-ket “Ecocement” produced from waste materials such as incinerator ash. Ichihara Ecocement began operations in April 2001. Currently, the maximum amount of waste that can be processed annually is 62,000 tons of domestic waste (including municipal incinerator ash) and 28,000 tons of industrial waste (including combustion residue and sludge), reaching a total annual Ecocement production capacity of 110,000 tons. By recycling these wastes, the Ecocement business greatly contributes to the extension of the life-spans of final landfill sites, safe processing of dioxins and heavy metals, and the improvement of municipal infrastructure. In addition, the Ecocement plant serves as one of the core facilities for the Chiba Prefecture’s Eco-town Plan.

Prior to the enforcement of the Home Appliances Recycling Law*4, Mitsui co-established the JFE Urban Recycle Corporation (previously NKK Trienekens Corporation, whose name changed on April 1, 2003) with JFE Steel Corporation, Sanyo Electric, and other corpora-tions in December 1998 to service Keihin district in the Tokyo Metro-politan area. In the Chubu region (central Japan), we established the Green Cycle Corporation in July of the same year with six other home appliance companies including Sony Corporation. Both corporations began operations in April 2001 to collect and recycle end-of-life tele-visions, refrigerators, air conditioners, and washing machines. Their operation is a big step forward to the establishment of a sound material-cycle society.

Hibikinada Wind Power Project

Continuous Regeneration Type DPF [CRT-TSS]

Developing and Marketing Particulate Matter Trap Device for Diesel Vehicles

“Ecocement” — Making Industrial Materials from Waste(incinerator ash, sludge, etc.)

Home Appliance Recycling Business

Hibikinada Wind Power Project


Recently, there has been a growing concern about the increased risk of cancer, bronchial asthma, allergies, and other health effects of suspended particulate matter (SPM) emitted from diesel vehicles. Established in June 2001 and enforced since October 2002, the Automobile NOx/PM Law targets the improvement of air quality in urban areas by regulating the registration of vehicles that do no meet emission gas standards. In addition, Tokyo, Saitama, Chiba, and Kanagawa Prefectures all enforced an ordinance in October 2003, which detailed Diesel Vehicle Exhaust Gas Regulations in order to regu-late the operation of diesel vehicles.

*3 Emission Control for Diesel Exhaust Particles

*4 Home Appliances Recycling Law (see next page)


In conjunction with the implementation of the Container and Packag-ing Recycling Law, Mitsui, the City of Kitakyushu, Nippon Steel Cor-poration, and 4 other private companies jointly established the Nishi-Nippon PET-Bottle Recycle Co., Ltd. in the General Eco-Industrial Complex located in the City of Kitakyushu Eco-Town in April 1997.

Nishi-Nippon PET-Bottle Recycle Co., Ltd. uses several proc-esses to recycle used PET bottles collected by local governments to produce clear PET resin, which is then sold as raw material for tex-tiles or containers. The business has been the first project supported by the Eco-town Project capital funding sponsored by the Ministry of Economy, Trade and Industry and the Ministry of the Envi-ronment. Currently, the com-pany has an annual recycling capacity of about 20,000 tons.

Mitsui works with material manufacturers and clothing factories to plan apparel products using this recycled material and creates a variety of fashion products.

Mitsui Bussan Raw Materials Development Corporation, a leading company in the scrap metal industry, is actively engaged in disman-tling automobiles and producing and marketing of the parts made from recovered materials. Its Sakai Works operates automobile dis-mantling plants (processing about 20,000 automobiles per year). The company is also expanding investments in the end-of-life vehicle recycling and shredding business.

Furthermore, Mitsui established the West-Japan Auto Recycle Co., Ltd. in the General Eco-Industrial Complex located in the City of Kitakyushu Eco-Town in 1999 with Yoshikawa Kogyo Co., Ltd. and others. This company uses Japan’s first shredder-less method to reuse and recycle parts reclaimed by dismantling and disassembly. Operations began in January 2000, and currently 2000 cars can be processed monthly, with a recycling rate reaching 95%.

PET Bottle Recycling Plant

The West-Japan Auto Recycling Factory with a monthly processing capacity of 2000 cars

PET Bottle Recycling Business in the Kitakyushu Region

Expanding the Automobile Recycling*5 Business

Law that requires automobile manufacturers and importers to recover and recycle or appropriately process parts from end-of-life automobiles (discarded cars). The law targets “CFCs,” used as a refrigerant for car air conditioners and damaging to the environment when released into the atmosphere; “airbags,” difficult to process because they tend to explode; and “shredder dust,” left over in large quantities after usable resources have been removed from end-of-life automobiles. The expenses necessary for recycling are borne by the automobile user.

*5 Automobile Recycling LawThe Law for the Recycling of Specified Kinds of Home Appliances, which was enacted in 1998 and has been enforced since FY2001, requires the recycling of home appliances such as refrigerators and air conditioners.

*4 Home Appliances Recycling Law

Mitsui’s Company-owned Forests

Wild Bird Society of Japan

Seiji Hayama

We visited one of the Mitsui’s forests in Mukawacho town, Hokkaido, to place nesting boxes for Ural owls. We had visited this forest before in the spring to survey the summer birds. In Spring, the forest was brightened with flowers, such as dogtooth violet and Amur adonis, blooming on the forest floor, much like the Satoyama (community-based forests) on Honshu (the main island). The trees in June were full with foliage, showing us another facet. Dense woods had the feel of being a home to living creatures. The song of the nightjar echoed in the forest quickly approaching dusk. It was a voice that spoke of the strangeness of humans in the forest. Mitsui’s forests link the forests surrounding Lake Shikotsuko to the ones of the Hidaka Moun-tains. Mitsui’s forests act as a corridor for the inhabitants to pass through, helping preserve genetic diversity. In summer, Mitsui’s forests make one feel how important the place is for wild animals. Proper management of these forests is essential to maintain the diversity of life found there.

The Wild Bird Society of Japan proposed, based on past survey results, that the management goals for this forest should be creating a “Forest for Owls”. The owl is a superior predator and is at the top of the forest ecosystem. And because there are many varieties of owls, from insectivorous owls to ones that eat small animals, it is said that a forest that can support many species of owls is a forest rich in life. The forests

must be properly managed because the owls use tree cavi-ties. Larger owls need open space within the forest in order to fly, so tree thinning and prun-ing are also necessary. The goal is a proper indicator of the viabil-ity of the forests as a base for forestry and habitat for wildlife. The song of the Indian scops owl we heard during the survey was memorable. I wonder if we’ll find owls in the nesting boxes when visiting in next spring’s snow. I look forward to next spring.

Hanging nesting boxes for owls in Mitsui’s forests


EconomicPerformance

Building a sustainable soci-ety entails economic growth as well as environmental conservation and social development. Mitsui devel-ops businesses that benefit both present and future gen-erations. It also shares prof-its with society and contrib-utes to local and global eco-nomic growth as a responsi-ble corporate citizen.



The challenging economic environment notwithstanding, we increased gross trading profit by ¥23 billion from the previous year to ¥570 billion, and pretax earning power — the basic earning power of a company — to ¥138.8 billion, up 7.1% in FY 2002. A major contributor to this strong performance was the expansion of resource and energy busi-nesses, our core businesses. While continu-ing to devote efforts to the mainstay busi-nesses, we will also aim to become a “comprehensive business engineering com-pany.” We plan to do this by embarking on new strategic investments, such as nanotechnology, biotechnology, increasing the enterprise value of our group, realizing a global strategy that places primary focus on Asia, and promoting BPR(Business Process Re-engineering).

We are engaged in vigorous IR activities, with a view toward building a relationship of trust through a two-way dialogue with invest-ors, in order to secure a stable shareholder base and to form fair stock prices.

The only NASDAQ-listed company among Japanese trading companies, Mitsui has continued to submit an annual report (FORM 20-F) to the US Securities and Exchange Commission (SEC) for more than three decades and has remained at the fore-front of information disclosure to investors.

In a move to bolster the effort toward achieving the objectives mentioned above, we are currently focusing on the high-priority task of expanding the scope of the Presi-dent’s IR and information disclosure. In these expansion efforts, especially, we con-sider it important for the President himself to explain management policies and strategies. This will deepen investors’ understanding and strengthen their confidence and trust in Mitsui’s management. It is also vital for us to engage in two-way communication with investors, so that we can incorporate market trends and perspectives into management’s initiatives.

Overview of FY 2002 Performance

Significance, Objective and Focus Areas of IR Activities

Financial Results

Total Trading Transactions (consolidated)

(Billions of yen)

13,96113,181 13,028 12,635

13,237

1998 1999 2000 2001 20020

(%)

0

0.59

0.53

0.770.83

0.48

ROA: Return on Assets (consolidated) ROE: Return on Equity (consolidated)

1998 1999 2000 2001 2002

(Billions of yen)

Net Income (consolidated) Total Assets (consolidated)

40

35

5255

31

1998 1999 2000 2001 20020

(Billions of yen)

6,818 6,599 6,710 6,668 6,541

1998 1999 2000 2001 20020

(%)

0

5.19

4.37

6.186.05

3.61

1998 1999 2000 2001 2002

Total Trading Transactions by Operating Segment (consolidated, FY 2002) (Billions of yen)

Total Trading Transactions by Overseas Region (consolidated, FY 2002) (Billions of yen)

Metal products and minerals 1,612

Americas 787

Europe 355

Other overseas areas 577

Corporate and Eliminations 50

Machinery, electronics & information 2,294

Chemical 1,099

Consumer products & services 2,077

Domestic branches and offices 1,547

Energy 2,837

Oceania 58

Others 886

North America 1,429

Europe 1,129

Asia 2,229

(Note) Main countries or regions included in each regional segment are as follows:North America: United States, CanadaEurope: United Kingdom, GermanyAsia: China, Thailand Oceania: AustraliaOthers: Central and South America, Middle East

(Billions of yen) (%)

555528

561 547 570

1998 1999 2000 2001 20020

3.97 4.014.31 4.33 4.30

Ratio of gross trading profit to total trading transactions

Gross trading profit

Gross Trading Profit and Ratio of Gross Trading Profit to Total Trading Transactions (consolidated)


Shareholdings by Shareholder Type (consolidated, FY 2002)

Per Share Performance (consolidated; FY 2002)

(Persons)

7,354 7,1596,829

6,5356,264

1998 1999 2000 2001 20020

(thousands of shares)

Financial institutions*911,543

Business enterprises108,541

Foreigners311,042

Individuals and others237,090

* Financial institutions includes domestic financial investors, major com-mercial banks, country banks, trust and banking companies, life insur-ance companies, etc.

Current net income

Annual cash dividends paid(nonconsolidated)

Shareholders’ equity

¥19.68

¥8.00

¥545.19

(Persons)

Japan 5,071

North America 223

Europe213

Asia459

Other areas 254

Oceania 44


(Billions of yen) (%)

771 796 834915 862

1998 1999 2000 2001 20020

11.3012.06 12.44

13.7213.18

Shareholders’ Equity and Shareholders’ Equity Ratio (consolidated, as of term-end)

Shareholders’ equity ratioShareholders’ equity

Number of Employees (non-consolidated; as of term-end) Number of Employees by Geographic Area (nonconsolidated; FY 2002)

Remuneration of Directors (FY 2002)

Number of directors

Retirement allowance for directors

Bonuses

Salaries

47

1,160 million yen

105 million yen

1,208 million yen

Moody’s

S&P

R&I

P-2

A-2

a-1+

A3(STABLE)

BBB+

AA--

Short-term Long-termCredit-rating agency

Corporate Bond Ratings (as of October 1, 2003)

First quarter

Second quarter

Third quarter

Fourth quarter

¥927

828

650

682

¥749

600

525

547

$146.75

135.00

103.01

111.50

$113.50

100.42

89.40

91.40

Tokyo Stock Exchange

HighFY 2002 Low High Low

NASDAQ

Stock Price Trends

(Billions of yen)

87

73

100

130139

1998 1999 2000 2001 20020

* Pretax earning power = Gross trading profit + selling, general and administrative expenses + interest expenses, net of interest income + dividend income + equity in earning of associated companies-net

3.533.30 3.21

2.953.08

(Billions of yen)

1998 1999 2000 2001 2002

0

137

-246

-84

-191

-126

18

145

282

84

141

26

48

37 46

-13-108

96

134

52

39

Operating (Billions of yen) (times)

2,723 2,625 2,679 2,696 2,654

1998 1999 2000 2001 20020

Cash Flows (Consolidated) Pretax Earning Power* (consolidated) Net Interest-bearing Debts, NET DER (consolidated)

InvestingFinancing Free cash flows

(Operating & Investing)NET DERNet interest-bearing debts

Figures in the financial data have been rounded off to the nearest 100 million yen.


Mitsui has been a member of the World Business Council for Sustainable Development (WBCSD) since the Council was established in 1995. WBCSD has as its members some 160 companies from about 30 different countries. Mitsui engages in discussions on policies and future courses of corporate activities that will lead to sustainable development.

Participation in WBCSD

WBCSD http://www.wbcsd.ch/

Communications

Mitsui’s Web sitehttp://www.mitsui.co.jp/tkabz/english/

Annual report 2003 Environment Report 2002

Mitsui’s Corporate Activities: Joining Hands with People and Society (Japanese Only)http://www.mitsui.co.jp/activity/

Ad on the February 22, 2003 issue of Nihon Keizai Shimbun

Ad on the August 16, 2003 issue of Nihon Keizai Shimbun

Information Disclosure

For the purpose of informing the general public about business Mitsui conducts, we place advertisements in Nihon Keizai Shimbun and other newspapers and magazines. Environmentally-related busines-ses promoted by Mitsui are also topics covered by corporate adver-tising. Themes of recent advertising include the development of a diesel particulate filter (DPF), and PCB detoxification technology.

Environmental Advertising

Japan Foreign Trade Council, Inc./ Japan Business Federation/ Institute for Global Environmental Strategies (IGES)/ Committee for Energy Policy Promo-tion/ Japan Geothermal Energy Association/ The Institute of Energy Econom-ics, Japan/ The Children of Earth’s Club/ OISCA-International/ Green Purchas-ing Network/ World Business Council for Sustainable Development (WBCSD)/ Wild Bird Society of Japan/ISO Friendship Association (Japan Audit and Certif-ication Organization for Environment and Quality)/ Environmental Partnership Organizing CLUB/ Kyushu Recycle and Environmental Industry Plaza (K-RIP)

Nikkei BP Eco Management Forum/ Junior Eco-Club (Japan Environment Association)/ Ecolife Fair (Earth Water & Green Foundation)/ Chugoku Green Power Fund

Organizations we participate in:

Organizations we support:

Organizations participated in or supported by Mitsui

In recognition of the importance of increasing the transparency of business activities and securing accountability, Mitsui is promoting proper information disclosure and communication to stakeholders.

� Mitsui’s WebsiteMitsui’s Website contains corporate data including business activi-ties and financial results. Inquiries received are referred to and responded by the appropriate divisions in charge.

In August 2003 we created a new site, “Mitsui’s Corporate Activities: Joining Hands with People and Society” as a gateway to the sites of our social contribution activities, environmental ini-tiatives, and the Kids’ MBK page that provides children with an easy-to-understand account of the company’s activities.

� Annual ReportEvery year we publish an annual report in English to share our finan-cial performance and general aspects of activities.

� Environmental ReportOur first environmental report was published in 1997. Since 2000, the report has been published every year. Beginning with this FY 2003 report, we are publishing our environmental report as our sus-tainability report, whose scope has been expanded to include Mitsui’s social and economic activities.

� Other publicationsMITSUI & Co. in ACTION, an English newsletter to overseas read-ers, carries news related to Mitsui’s businesses. For Japanese shareholders we put out “Kabunushi Tsushin,” a biannual publica-tion reporting management policies and the status of various activities.


Information Disclosure Environmental Advertising

While the global environment continues to be threatened, environ-

mental problems are closely related to poverty and are synonymous

with the North-South issue. According to one study, Mitsui’s turn-

over ranked 37th among the world’s largest 100 economic entities,

almost equaling the 36th ranking GDP of Thailand. It is hoped that

Mitsui acts with corporate social responsibility as a global enter-

prise, not as a local enterprise, in efforts toward not just the conser-

vation of the environment, but the “restoration” of the environment.

With greater responsibility for the eradication of poverty, more so

than governments, it is also expected to play an important role in

human society.

This is Mitsui’s first sustainability report, replacing the conven-

tional environmental report. It demonstrates the company’s determi-

nation to strengthen trust and fulfill its corporate social responsibil-

ity. In near future, it is essential for the top management to express

strong and concrete commitments to this end. In particular, as a

general trading company, with an organizational structure not found

in other countries, Mitsui makes it possible to take on the above

responsibilities. As it also prides itself for doing so, it is hoped that

the company invests its huge power in attaining sustainability in

human society by solving global problems, including food issues.

It is evident that Mitsui exerted significant effort in gathering com-

prehensive data and information for its report. However, there are

many general statements and comments on past achievements and

systems already introduced. In the future, such comments should be

kept brief and efforts should be made to expand on future policies,

objectives and targets, and performance, including numerical data.

Furthermore, in view of today’s global trends, it is desirable that policy

and efforts in regard to corporate governance be stated more clearly.

Third Party Messages

Chair, Environmental Auditing Research GroupMember, Board of Directors, GRI

Toshihiko Goto

Amid increasing attention to corporate social responsibility (CSR),

Mitsui’s effort to take its environmental report a step further and

publish a sustainability report to extensively introduce its CSR activi-

ties can be highly regarded.

However, in the compliance section, my opinion is that more

could have been written on the incident in 2002 regarding the

bid rigging case for the diesel power plant in Kunashiri Island. To be

specific, it would have been better to explain the background and

course of events leading to the company’s decision to establish a

new compliance system and provide a venue for communication

between the President and employees. Also, I have heard that after

the incident, various voices were raised among the employees,

some of which expressed severe criticism. It would have been more

desirable to introduce the strong commitment of the employees to

change Mitsui, as well as the voices of stakeholders outside the

company.

The sustainability report is an important document, demonstrat-

ing Mitsui’s social responsibility. What is Mitsui’s CSR? How does

Mitsui comprehend CSR? Even if tentatively, Mitsui should have

indicated its concepts and how they relate to business activities,

environmental measures, and contribution to society, and then

report the achievements made as a result of such activities in con-

crete terms. In addition to such improvements, future reports could

be edited and presented with more of Mitsui’s corporate character.

When disclosing information, there is often a discrepancy between

what the company wants to present and what the stakeholders

want to know. In future sustainability reports, it is hoped that the

information disclosed be made with the standpoint of readers in

mind, and through more active communication.

Professor, Graduate School of Commerce, Hitotsubashi University

Kanji Tanimoto

In recent years, the importance of sustainable management based on a strong awareness of corporate social responsibility has become widely rec-ognized. Behind this movement is the recognition that not only economic performance, but also global, environmental, and social activities of busi-ness enterprises are closely associated with the lasting and sustainable growth of a company.

In publishing this first sustainability report, we have focused on what is required for the CSR of our company and of the type of information we should present, in order to contribute to the sustainable development of society. We set forth as one of our publishing objectives to communicate with as many stakeholders as possible through this report and make the best use of their comments received in response for further improvement of our efforts in CSR.

As a part of our attempt to incorporate opinions from outside the com-pany, we have asked for third party messages from Mr. Tanimoto and Mr. Goto, who are both experts in CSR, and have received valuable comments, including expectations for the future.

Efforts in CSR are our company’s long-term and continuing manage-ment objectives, and we recognize that there are many tasks to be under-taken. Accepting these comments with humbleness, we will actively pro-mote the disclosure of information to convey our company’s CSR in our effort to gain the proper understanding of all stakeholders. Until the next report, we will strive to clarify our policies for undertaking CSR and report concrete achievements by deepening two-way communication with wide ranging stakeholders through activities based on diverse perspectives.

We look forward to receiving your unreserved comments and opinions.

Toward Enhanced Corporate Social Responsibility

Mitsui & Co., Ltd.

Mit

sui &

Co.

, Lt

d.

J o i n i ng Hands w i t h Peop l e and Soc i e t y

This report is printed on 100% recycled paper (70% brightness) using highly biodegradable and deinkable soy ink, to facilitate recycling of this publication. Published in March 2004

Printed in Japan

Sust

ainab

ilit

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3

Corporate Communications DivisionE-mail: [email protected] Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004 JapanTel. +81-3-3285-1111 Fax. +81-3-3285-9819http://www.mitsui.co.jp/tkabz/english/

Every day, we strive to live up to the expectations of our customers in different regions of the world, who speak various languages, and have diverse customs and values. We make great efforts in bringing affluence to society while working toward the realization of our own dreams.

Mitsui’s biggest asset is its people, each and every employee.

Documents

Sustainability Report 2003 - Mitsui · The Pioneering Spirit ... and the United Nations Environment Programme ... Ltd. Sustainability Report 2003. Mitsui & Co., Ltd. Sustainability