ESG-Driven Management

Since our founding, our mission has been to contribute to the prosperity of society through our business activities. In the 1990s, we began initiatives such as the development of environmentally conscious packaging and containers and universal design to offer products that are easy for everyone to use, such as notched containers so that shampoos and conditioners can be distinguished by touch. In 2009, we announced our Environmental Statement, and we have been promoting environmentally conscious initiatives in collaboration with stakeholders throughout product lifecycles.
We cannot be bystanders when it comes to serious global issues such as climate change, aging societies, resource scarcity and plastic waste. In addition, with dramatic changes in global awareness and the spread of ethical consumption, in which consideration for the environment and human rights is a factor in purchasing decisions, we have a strong sense of crisis that people will no longer choose our products unless we step up our efforts.
Therefore, in 2019 we announced our environmental, social and governance (ESG) strategy, the Kirei^*1 Lifestyle Plan, and declared a major shift in course to ESG-driven management. The concept of ESG is not new to Kao, but we set forth a new strategy because of our desire to help resolve social issues globally at a higher level and to contribute through technology.
The foremost feature of the Kirei Lifestyle Plan is that consumers play the leading role. We defined the Kirei Lifestyle as a sustainable lifestyle that consumers seek, and formulated the plan to address the feelings and behaviors of consumers who want to live sustainable lifestyles that suit them as individuals. We believe that the role of a company is to provide options so that consumers can make choices that suit them, and we want to be closely involved in helping them realize their individual values.

Solving global environmental and social issues is difficult, and a single company cannot do it alone. It requires cooperation and collaboration with various partners including local communities, national and local governments, NGOs and NPOs, academia, industry associations, and other companies.
For example, to help realize plastic resource circulation, we are collaborating with Lion Corporation in the recycling of film packaging. In addition, to build a sustainable supply chain, we are working with Apical Group, which is engaged in palm oil production and sales, and Asian Agri, a plantation company, in a program to help Indonesian palm oil smallholders improve their yields and acquire sustainability certification for their palm oil. In both cases, the companies pool their knowledge and know-how to solve problems that cannot be accomplished by one company on its own.

The themes covered by this ESG governance system are basically ESG in general, but we promote strategic ESG by focusing mainly on KLP themes. The companywide goals and KPIs formulated for each KLP theme are incorporated into the activities of each division, and the progress of activities and KPIs are aggregated and monitored by the ESG Promotion Meeting.
We are building effective governance and integrating ESG into divisional policies, targets, and plans by having divisions engage in ESG-driven operations based on divisions taking responsibility for management and reporting in the organization. Divisions also conduct these operations for global Kao Group companies, with individual group companies conducting activities as appropriate according to the content.
In this way, we are interlinking the activities of the ESG Managing Committee, the ESG Promotion Meeting, and the ESG Steering Committees, connecting the activities of the responsible divisions for the 19 Kao Actions and other divisions, and incorporating ESG activities into divisions, including their global operations.
In order to promote the implementation of ESG initiatives by each employee and as an organization, ESG is incorporated into the human resource evaluation system. The human resource evaluation system is called Objectives and Key Results (OKR), and it began in 2021. All employees, including directors, audit & supervisory board members and executive officers, set a portion of their total targets as ESG targets, and they are evaluated based on the degree of challenge in the undertaken activities. Using this system, all employees will work together to tackle ESG issues and ramp up the level of activity.