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2022 Activity Report

Our Policies and Initiatives for Sustainable Procurement

We recognize that our business is inextricably linked to the continued availability of natural capital and are taking action to source natural resources in more sustainable ways. In particular, we consider palm oil together with paper and pulp to be our most critical natural resources. Palm oil is a key ingredient in surfactants, and paper and pulp are used in packaging materials, disposable diapers and numerous other products.

We support zero deforestation at source for sustainable procurement, and require all of our third-party suppliers and their corporate groups*1 in all forest risk commodities to adopt the NDPE*2 policies covering their all forest-risk commodities' supply chains as an obligation, work to confirm thorough compliance, and request them to respect the human rights of all those involved in the supply chain, respect the rights of workers and indigenous and local communities, and confirm free, prior, and informed consent (FPIC) of the communities. We have a zero-tolerance policy in place for our supply chains regarding violence, criminalization or intimidation of Human Rights Defenders (HRDs). We also take appropriate action against non-compliant suppliers in accordance with our corporate protocols, including the option of terminating business contracts.

Policies and Initiatives for Sustainable Palm Oil Procurement

We support NDPE policies to sustainably source palm oil and require that all of our third-party suppliers and their corporate groups involved in supplying our palm oil have adopted the NDPE policies covering their all forest-risk commodities' supply chains as an obligation and we are working to confirm their compliance with the policies as well as HCSA*3 thoroughly. We prioritize purchasing from suppliers who comply with NDPE policies and HCSA, do not use fire for land development and adhere to Free, Prior and Informed Consent (FPIC) processes. We ask non-compliant suppliers to take corrective action, verify that action has been taken and retain the option to terminate our business contracts with them.

We will expand our use of RSPO*4 -certified palm oil as we move toward 2025 and are planning to achieve full traceability down to the plantation level by working with palm suppliers as well as NGOs and NPOs.

We also recognize that independent oil palm smallholders in Indonesia (estimated at 2 million smallholders) have limited palm cultivation technology and low yields, placing them in a difficult position economically. We consider palm oil supply chains like these to be high-risk supply chains and, in 2020, began working with local partners*5 to provide direct assistance (in the form of training programs) to independent oil palm smallholders in Indonesia to tackle this problem at its root (SMILE Project*6 ).

By 2030, the project will have a scope of close to 5,000 estates and will provide technological instruction to increase productivity (with a target of doubling yields) and also educate smallholders to help them obtain RSPO certification (including RSPO Principles and Criteria, safety education and yield management methods). If all of Indonesia's independent oil palm smallholders were able to double their palm productivity, this would potentially curb new deforestation for an area of land equivalent to the current expanse of all the palm farms in Borneo (approximately 4 million hectares).

In 2022, we are implementing a grievance mechanism*7 for independent oil palm smallholders to rapidly resolve human rights issues. Under the grievance mechanism, we work with NPOs to investigate issues (grievances) at sites (oil palm smallholders), take action to resolve grievances and follow up afterward. In addition, we will start to disclose the Forest Footprint of our supply chains by 2023 as part of our deforestation monitoring.

Beginning with our dialogues with local oil palm smallholders, we are strengthening our activities in these areas to address key challenges in improving sustainability. We will also update external stakeholders such as NGOs, to further encourage improvements.

Mid- to Long-Term Plan to Address Challenges in Palm Oil Supply Chains

  1. Achieve traceability down to the oil palm smallholder level
    Achieve 100% supply chain traceability, including oil palm smallholders by 2025.
  2. Transition to RSPO-Certified palm oil
    Aim to procure 100% RSPO-certified palm oil used by the Kao Group by 2025.
  3. Provide direct on-site assistance (through training programs)
    Provide assistance for independent oil palm smallholders (approximately 5,000 estates / 18,000 hectares) in Indonesia from 2021 to 2030.
  4. Grievance mechanism (a direct channel to local sites)
    Introduce a grievance mechanism for independent oil palm smallholders in Indonesia in 2022.
  5. Forest Footprint (implement deforestation monitoring)
    Introduce Forest Footprint disclosures for our palm oil supply chains (target date: 2023).

2022 Action Plan and Progress Report

  • 1. Create mill lists and mill maps and continue to research our supply chains to achieve full traceability to the smallholder level.

2022 1st Half

  • 2. Actively purchase RSPO-certified palm oil as a means to achieve sustainable traceability and zero deforestation.
  • 3. Work with our partners (Apical Group/Asian Agri*5 ) to assist independent oil palm smallholders in Indonesia in our supply chains to achieve higher productivity as well as assist 600 estates in obtaining RSPO certification in 2022.
  • 4. Complete surveys of 700 oil palm smallholders in Indonesia to better understand their actual situation and enter into direct dialogues with them.
  • 5. Introduce a grievance mechanism for oil palm smallholders in our supply chains in summer 2022.
  • 6. Finish selecting relevant areas and verifying research methods for Forest Footprint evaluation and disclosure in 2023.
  • 7. Educate suppliers about our procurement guidelines and arrange for third-party audits, including human rights (SMETA: Sedex Members Ethical Trade Audit).
  • 8. Partner and collaborate with stakeholders and external groups (JaSPON*8 , CGF*9 ), including suppliers, oil palm smallholders, NGOs, NPOs and third-party organizations.
  • 9. Publicly disclose progress reports on our action policies and action plans through our website and sustainability report.
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