Kao commits to purchase only sustainable palm oil that is traceable to the mill for use in Kao Group consumer products by the end of 2015.
【Completed traceability to palm oil mills (palm oil crushing plant), disclosure of the palm oil mills location map in 2017, and disclosure of the 2021 mill list.】

Kao commits to zero deforestation at the source of palm oil by the end of 2020, through cooperation with plantations, suppliers (mills and refineries) and third-party organizations. We will not purchase palm oil that contributes to development of any high conservation value (HCV^*1 ) forests, high carbon stock (HCS^*2 ) forests or peatlands, regardless of depth.
【Completed traceability to palm oil mills and the monitoring of deforestation in their surrounding areas. Continue investigation of high risk mills.】

Kao will purchase only sustainably sourced palm oil that is traceable to the plantation for use in Kao Group consumer products by end of 2020.
【Completed procurement of RSPO certified oil equivalent to the total amount of palm oil used for consumer products in 2020 and will also expand its use for industrial purposes. For traceability, completed tracking to the plantations managed by oil suppliers. Kao will continue to pursue traceability to small and medium-sized farms.】

Kao will work to obtain RSPO^*3 SCCS^*4 certification of Kao Group factories in order to build a traceable supply chain for the Kao Group by end of 2020.
【Achieved 100% RSPO SCCS Certification of all Kao Group factories (2018).】

By 2020, Kao aims to purchase only recycled paper or sustainably sourced paper for use in its products, including paper, pulp, packaging materials and office paper. When using pulp that is not recycled (i.e., virgin pulp), we aim by 2020 to purchase only pulp traceable to the source of wood fiber for raw materials.
Progress as of December 2020 is as follows.
Traceable paper and pulp: 100%^*1
Of this, ratio of certified products: 94%^*2

We have switched over to using sustainable paper (Green Purchasing items) for 99% of the copy paper used within Japan.

We use Sedex in confirming compliance with the Guidelines for Supplier's Assessment, which define initiatives in such areas as the environment, safety, conformance with laws and social norms, and human rights and labor problems, and in risk assessments. After joining in 2014, we began full-scale use in 2016, and we request that all direct materials suppliers worldwide join Sedex, respond to Sedex questionnaires and set up data access rights.
As of the end of 2020, suppliers accounting for 83% of global transactions (on a monetary value basis) were Sedex members (including Kao SAQ, an alternate program^*1 ). We will continue to raise the proportion of transactions with Sedex members in the future. We also perform risk assessments using Sedex risk assessment tools of those suppliers that have set access rights on Sedex^*2 . We provide feedback of the assessment results to suppliers and request revisions to items that require improvement so that the suppliers can receive an overall evaluation of A or better.

For suppliers that find it difficult to join Sedex, we also use an original survey form (Kao SAQ) as an evaluation tool to supplement Sedex. We have fully revised the items involving confirmation of corporate social responsibility such as compliance, human rights and business practices, as well as items involving confirmation of environmental protection such as environmental policies, environmental objectives and various categories of environmental management, including pollution prevention (air, water, etc.). In 2018, we began to apply this revised standard to some direct material suppliers to our group companies outside Japan, to domestic machinery suppliers, and to indirect material suppliers (gift item manufacturing and sales companies). In 2019, we expanded the standard to some domestic direct material suppliers.
We are also performing this assessment when onboarding new suppliers.

Kao joined CDP programs for climate change, water and forest. We were evaluated by list A for climate change, A for water and A for forest (Palm:A and Timber:A-) in 2020.

In 2020, we participated in the CDP supply chain programs for climate change, water security and forests, and expanded our participation in the climate change program to include overseas affiliates.
The supplier response rate in 2020 reached 73% for climate change (238 companies responding out of requests to 328 companies), 74% for water (73 companies responding out of requests to 98 companies), and 78% for forests (29 companies responding out of requests to 37 companies).
We will continue these three programs in 2021 as well.

In 2020, unfortunately, the meeting was postponed to prevent the spread of COVID-19.

In 2020, we hold quality improvement meetings with four packaging materials suppliers for the purpose of reduction of discrepant materials.
When a quality issue occurs, we take a corrective action and discuss a radical quality improvement with supplier in cooperation with our R&D division.

In 2020, we conducted a survey and received valuable feedback from 210 suppliers on topics including vendor selection, quality, ordering, customer service and communication.
We received high evaluations concerning fairness in price negotiations and vendor selection, customer service attitudes and corporate ethics. At the same time, we identified issues concerning changes after an order is placed, disclosure of the reasons for non-selection of vendors and mutual exchanges of information. We are working to improve the situation regarding changes after an order is placed by sharing information with the relevant divisions. With regard to disclosure of the reasons for non-selection of vendors and exchanges of information, we will provide thorough explanations that satisfy suppliers.

Procurement Division employees have taken the Certification Test for Environmental Specialists ("Eco Test") as the education to understand the relationship among our business, society and environment, and change their actions. The cumulative passing rate in 2020 for employees in the Procurement Division was 78% for the Eco Test.

We place high priority on purchasing environmentally conscious products, and achieved 92% of the levels set in the standards in 2020. We will promote our program with the aim of reaching 100% as soon as possible.