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2021 Progress Report

Initiatives to procure sustainable palm oil (high-risk supply chain initiatives)

To procure sustainable palm oil, Kao is working to ensure full compliance with the principles of the NDPE Policy*1 and HCSA*2 with palm oil suppliers as well as its Group companies. In addition, it is aiming to expand its use of RSPO*3 certified oil and complete traceability back to small farms by 2025 in cooperation with palm oil suppliers and NGOs.

Meanwhile, independent smallholders in Indonesia (there are an estimated 2 million such farms) face challenging economic circumstances, as their oil palm cultivation technology is underdeveloped and their harvest yields are also small. Kao positions this palm oil supply chain as a high-risk supply chain, and in 2021 began conducting a direct support activity (training program) for independent smallholders in Indonesia in cooperation with partners*4 aimed at fundamentally resolving the issues (SMILE project*5 ).

As part of this activity, a specialist education team is providing technical support to increase productivity (target of doubling yield) and education for obtaining RSPO certification (RSPO Principles and Criteria, safety education, yield management methods) for approximately 5,000 farms by 2030. If all independent smallholders in Indonesia were to double their oil palm productivity, it could have the potential effect of curbing new deforestation equivalent to the area of the existing oil palm farms on the island of Borneo (approximately 4 million ha).

In addition, Kao is preparing to begin introduction of a Grievance Mechanism*6 for independent smallholders from 2022, as a means to rapidly take action on human rights problems. Grievance Mechanism are a way to autonomously provide response and follow-up for investigating, confirming and resolving issues (complaints) at sites (farms) together with NGOs.
These are some of the ways Kao is reinforcing its activities to resolve fundamental issues in order to improve its sustainability, based on dialogue with sites (farms). Kao intends to communicate the details of these activities to stakeholders (NGOs and others) so as to connect its initiatives with further improvements through dialogue.

Priority activities to fundamentally resolve palm oil supply chain issues

  1. Establishing traceability to smallholder farms
    Complete 100% traceability back to smallholder farms by 2025.
  2. Procuring RSPO-certified oil
    Aim to procure 100% RSPO-certified oil for the palm oil used by the Kao Group by 2025.
  3. Providing direct on-site support (conduct a training program)
    Provide support for independent smallholders in Indonesia from 2021 to 2030.
  4. Introducing a Grievance Mechanism (operate a direct channel with sites)
    Plan to introduce a Grievance Mechanism for independent smallholders in Indonesia from 2022.

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Initiatives to procure sustainable palm oil

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Overall image of support measures for small oil palm farms 

Activity Policy for 2021

  • 1. With the aim of sustainable palm oil procurement, collaborate with NGOs and partner companies to support independent smallholders in Indonesia and engage in direct dialogue.
  • 2. Reinforce activities to establish traceability to smallholder farms.

2021 1st Half

2021 2nd Half

  • 3. Support zero deforestation at the source.
    ・Request supplier and their group companies to adopt and comply with NDPE policy thoroughly, and request and confirm improvement of status to non-compliant suppliers including the possibility of cancelation of transactions.
    ・Prioritize purchases from suppliers that comply with the above NDPE policy and HCSA
    ・Execute monitoring of palm oil mills and deforestation of their surrounding areas, and discuss the introduction of forest footprint evaluations
  • 4. Use certified oil (RSPO etc.) which satisfies the above item 2 and 3 in Kao products positively.
  • Coordinate with various stakeholders, including suppliers, plantations, non-governmental organizations, specialists and third-party organizations to carry out items 1, 2 and 3 above. Kao will not tolerate violence, criminalization or intimidation against human rights defenders in its supply chain.
  • Inform suppliers of Kao's procurement guidelines and conduct third-party audits (Sedex Members Ethical Trade Audit "SMETA")
  • 5. Disclose progress of the above goals through the Web and the annual sustainability data book.

Initiatives to reduce CO2 emissions

Aiming to accelerate decarbonization efforts and move up the target year for using 100% renewable energy for procured electricity within Japan and globally

Aligned with the 1.5°C target by SBTi*1 , Kao has been conducting activities to reduce its Scope 1+2 CO2 emissions (absolute value) by 22% (base year of 2017) by 2030, which is a medium-term decarbonization target set in Kao's ESG Strategy, the Kirei Lifestyle Plan, established in 2019. The Procurement Division is accelerating its decarbonization efforts, and as a result of installing solar photovoltaic power generation systems for captive consumption and switching to use of renewable energy sources, Kao was able to revise its 2030 reduction target for all global worksites significantly upward to a 55% reduction (compared with 2017).

Priority initiatives to achieve the 2030 RE100 and SBT 1.5°C targets

To switch to procuring 100% renewable energy at all worksites in Japan by 2023, and at all global worksites by 2025, Kao will move ahead with installing solar photovoltaic power generation systems for captive consumption and optimizing renewable energy use (including use of renewable energy certificates, power companies' renewable energy options and PPA*2 ).
In addition, Kao will reduce its CO2 emissions at its worksites in Asia by installing biomass boilers and optimizing cogeneration systems at its production sites.

  • * 1 SBTi: Science Based Targets initiative
  • * 2 PPA: Power Purchase Agreement, for procuring electricity from renewable sources through direct agreements concluded with renewable energy suppliers.
    May 19, 2021 News Release
    Kao Is Aiming to Reduce Its CO2 Emissions to Zero by 2040, and to Be Carbon Negative by 2050
    https://www.kao.com/global/en/news/sustainability/2021/20210519-001/
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