14-10, Nihonbashi Kayabacho 1-chome, Chuo-ku,
Tokyo 103-8210, Japan
Corporate Strategy
For the year ended December 31, 2022
Sustainability as the only path
For the year ended
December 31,
2022
Kao
Integrated Report
2023
02
Kao Integrated Report 2023
01
Kao Integrated Report 2023
Introduction
02
Theme
A beginning of change
Contents ............................................................................................................ 1
“Children want a world where all life lives in harmony”..... 3
Our Purpose .................................................................................................... 5
Top Message .................................................................................................. 7
Our Business Overview ........................................................................ 13
A Legacy of Advancing Innovation
and Creating Unique Value ............................................................... 15
Sources of Our Innovation ................................................................. 19
Introduction
Company-wide endeavors
to protect future lives
Value Creation Model ............................................................................ 23
Commitment to the Future ................................................................ 25
Materiality ...................................................................................................... 31
Chapter 1
Our Value Creation:
External Evaluation/
Financial and ESG data .................................................................... 104
Corporate Information/Stock Information ........................... 108
Editorial Policy and
Information Disclosure Framework .................................... 109
Chapter 4
Data Section
The basis of our management
Messages from Outside Directors and
an Outside Audit & Supervisory Board Member ............... 85
Corporate Governance ........................................................................ 87
Risk and Crisis Management ........................................................... 99
Chapter 3
Corporate Governance:
Accelerating transformation
Achievements and Challenges
in the 2nd Year of K25 ............................................................................ 35
Key Strategies for Enhancing
Our Corporate Value .............................................................................. 36
· Deepen EVA-driven management ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 37
· Deliver on ESG ambitions ............................................................ 40
· Parallel business transformation ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 43
· Focused growth in 5 business fields ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 47
· Accelerate digital transformation ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 61
· Energize our people ......................................................................... 63
Value Chain Reform ................................................................................ 67
Our People: New Era, New Challenges ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 77
Chapter 2
Our Strategy:
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
03
04
Kao Group Official Website “Kao International Environment
Painting Contest for Children”
www.kao.com/global/en/sustainability/society/painting-contest/
W E B
Children want a world
where all life lives in harmony
Kao seeks to build the future
of our children’s dreams
In sync
with nature
Bozhidara Bogdanova
Dimitrova (9)
I have depicted two hands—one human and one belonging to nature.
In the human hand there are people and garbage, and in nature’s hand
there are plants and animals. The human hand holds the universe, and
nature’s hand holds the sea. I drew this to show people that they can
help make nature more sustainable by stopping to pollute it.
Help to plant mangroves
Woraphitcha Phuangprakhon (10)
Mangrove forests are inhabited by various animals, and they
are a line to prevent the washing of the sea as well. In my
painting, my friend and I are helping to plant mangroves to
provide the animals with homes, food and a good climate.
We have a great time, and we are proud of our efforts to
protect the mangrove forests. I promise I will be
environmentally friendly.
The case
for environment and land
Ahoora Bakhtiari (9)
We should be diligent in preserving the environment. My
painting was about giving a message to my friends to love
the earth. In my painting, someone is cleaning the earth and
every person is doing something to make the planet happy.
The future of the world that
we all support together
Shuka Matsumoto (10)
The Earth does not just belong to people. This planet is also
home to other animals, plants, fish and insects. In this
picture, many different living things are supporting the
shining Earth in harmony together. Environmental
destruction is an issue in the present day, so I expressed my
feelings in this picture that people need to think seriously
about coexisting with many different living things.
Kao International Environment Painting Contest for
Children started in 2010. This is a special contest where
children express everyday lives from an ecology
perspective and their future vision of the planet through
creative paintings. For this 13
th contest, we received
13,214 paintings and messages from all around the
world. These children’s genuine passion for the future
represents the origin of our purpose and our
Commitment to the Future. The expression of their
hopes and dreams through art inspires us and we are
confident it will also inspire others to take action across
the globe.
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
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06
Our Purpose
Protecting
future
lives
Sustainability
as the only path
To realize a Kirei World
in which all life lives
in harmony
Commitment to the Future
Precision Life Care
Every person is unique. Our solution will be too.
Leave No One Behind
Innovation can be for everyone. We won’t stop.
Regenerative Lifestyles
Plan for and enable regeneration.
Become an essential company in a sustainable world
Toward Carbon Negative
Move beyond CO2 reduction and unlock CO2 recycling
Transform to build robust business through investment
· Revitalize existing businesses (Reborn Kao)
· Create new businesses (Another Kao)
Zero Waste
Waste nothing. Period.
Strategic Approach
Life
Everyday
lives
Ecology
4
5
1
1
2
2
3
Maximize the power and potential of employees
3
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Kao Integrated Report 2023
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Introduction
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08
Top Message
The pandemic of 2020 brought unprecedented human
and health crises, leaving many people around the world
in extremely difficult circumstances. It highlighted how
interdependent we are in this finite space on earth.
The foundation of our daily lives hinges on our ability
to live without fear or worry. That is why I believe it is
To our
Stakeholders
In a world where human
demands outpace the world’s
limited resources, we strive
to create a “Kirei” lifestyle
for all.
more important than ever that we truly appreciate
the value of each day and cherish the moments that
bring us joy.
At Kao, our goal is to safeguard people’s daily
lives and delight them with our product experience.
We are simultaneously committed to protecting the
environment, preventing illness and stresses, and
creating a world where all life lives in harmony. This is
the “Kirei” world we aspire to achieve as we position
ourselves as a company that “protects future lives” and
proactively shape a sustainable society for all.
Representative Director
President and Chief Executive Officer
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
09
10
To enhance the value of our company, the management team has shared
our strategic areas of focus with all members of the Kao Group. Our top
priority is to revive our EVA (economic value added) management approach
to maximize profits, with targeted strategies for each business segment.
Additionally, we will prioritize ESG (environmental, social, and governance)
considerations to increase our future value as a company. We understand
that pursuing only short-term economic goals is not sustainable or supported
by society, so we will also concentrate on improving our current businesses
while creating new business opportunities. Our commitment to these twin
goals guides us as we move forward into the future.
As part of this, we are committed to keeping our stakeholders informed of
the progress of our initiatives across our five business segments.
Our Chemical Business is dedicated to creating sustainable industries. Our
Hygiene and Living Care Business offers products that support people’s daily
lives. Our Health and Beauty Care Business aims to support healthy lifestyles
and well-being, while our Cosmetics Business offers products that empower
individuals to express themselves and live vibrantly. Finally, our Lifecare
Business focuses on protecting future lives and we will ensure to pursue
this goal. All of these efforts are underpinned by two critical drivers: a
commitment to leveraging digital technology to connect people with the
right products and information, and our ability to unlock the strength
and potential of our diverse, global team.
At Kao, we have long embraced Diversity, Equity, and
Inclusion as key principles. Our corporate philosophy,
“The Kao Way,” embodies this spirit. The principles:
how we behave, state “We care for the people and the
planet”, and “We trust, respect and need each other”
recognizing individual differences and honoring the
wisdom that each unique perspective brings. “We act
with courage”, creating fair opportunities for those who
seek challenge and growth.
The Kao Way places great importance on open
dialogue and communication across all levels of
management. We don’t believe in addressing each
other by executive titles for example; instead, we
simply refer to one another by name and the honorific
-san, as is common in Japanese culture. This reflects
our belief that titles denote roles and responsibilities,
not authority. We communicate with each other
on a level playing field, conducting open and fair
dialogue. Our culture of inclusivity and collaboration
is deeply cherished and has served us well, fostering
diverse opinions and triggering “chemical reactions” and
innovations that propel us forward in new directions.
Indeed, the COVID-19 pandemic somewhat weakened
our culture of open discussion and dialogue. However,
we are steadfastly committed to regaining lost ground
and dramatically increasing the potential of our
employees.
Our Commitment to Integrity
The power
of open dialogue
Maximizing
our
corporate
value
Tomiro Nagase, the founder of Kao left us with the words “Good fortune
is given only to those who work diligently and behave with integrity.” This
timeless message from our predecessor holds immense significance for Kao
today. It inspires us to stay true to our values and uphold the principles of hard
work and honesty.
His message reminds us that our actions have consequences, and the
choices we make shape our future. At Kao, we work diligently in pursuit
of Yoki-Monozukuri and bringing joy to our customers. Customer
satisfaction is our reward and reflects the value of our work. As we continue
to grow as individuals and as a company, customer appreciation motivates
and drives us forward. The message from our founder is ever-present as we go
about our daily work – guiding us to take on challenges and make a positive
impact on the world.
The importance of remaining true to our roots while embracing new values
relevant in today’s rapidly changing world is well established at Kao. As our
business environment continues to change, we must be prepared to handle
unexpected challenges with strength and resilience. The recent sharp increase
in raw material prices is a case in point, where we learned that success favors
only those who are prepared. By staying agile and adapting to change, we will
continue to thrive in a dynamic and unpredictable business landscape.
To succeed in business, it is imperative that we remain tuned into the
shifting tides of the market and adapt our strategy. We are not alone in
the vast global economy; there are countless great companies vying for the
trust of customers. To rise above the competition, we must present compelling
reasons for customers to choose us perhaps by being the most trusted
company in a region or the “first and only choice” in moments of hardship.
Customers buy from trusted companies. We must continue to earn this trust
to in order to become an indispensable company in a sustainable society.
Our journey is ongoing as we pursue this goal with determination.
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
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12
To be an essential company in the world
The Mid-term Plan 2025 (K25) is designed to achieve
two strategic objectives: first, to focus on our current
business and implement structural reforms through
“Reborn Kao” initiatives, and second, to establish new
business fields and categories that align with our future
strategy, referred to as “Another Kao” initiatives. What
unites this parallel approach is a focus on unique, state-
of-the-art technology to drive global expansion. We are
committed to fostering growth in both approaches
to achieve our vision.
As we strive for continued global expansion, Kao’s
core value of compact innovation will continue to
take center stage. This means achieving maximum
impact with minimum resources, emphasizing efficient
resource management and timely product delivery. In
a rapidly changing world, global sustainability goals
demand reduced consumption. We remain pioneers
in this regard, leading by example by maximizing
manufacturing results and simultaneously minimizing
resource inputs. This is increasingly enabling Kao to
provide personalized products and services in full
harmony with nature.
We are also clear that we cannot achieve the world
we aspire to on our own. Our focus must be on
co-creation, not competition. Collaboration and
connection with other companies, each leveraging
our unique strengths, is crucial to success. Guided
by our founder’s evergreen wisdom, Kao’s journey
towards a “Kirei life for all” has no finish line. We
are committed in perpetuity to overcoming the most
challenging obstacles to push forward with unwavering
determination.
We pride ourselves at Kao on our unique approach
to matrix management – enabling us to acquire
knowledge and expertise from various businesses and
leverage collective wisdom across the organization.
This approach has allowed us to work collaboratively
and efficiently, historically resulting in the creation of
innovative new business models.
However, as the market landscape rapidly changes,
we have become acutely aware of the need to balance
speed with quality. With the growth of the company,
individual organizations have become more siloed
and focused on their responsibilities, leading to less
collaboration and cooperation across internal groups.
To address this challenge, we are implementing
Scrum-style team collaboration and management.
The more compact and agile, delivery approach enables
participation by key internal leaders and fast-tracking of
results.
The impact of this change has simplified management
styles and expedited business results at unprecedented
speed. Teams across the company are questioning the
status quo, exploring new approaches and propelling us
forward.
Looking back at Kao’s history, our most progressive
era was arguably the twenty years starting in 1987.
We introduced Attack, world’s first compact laundry
detergent and Quickle Wiper, which revolutionized floor
cleaning. Bioré Nose Pore Pack Sheet, was launched to
unclog skin pores. MegRhythm introduced a completely
new category of steam heating technology, and Blaune
Foam Hair Color transformed hair dyeing. We also
launched Curél, a product range and brand specially
formulated for delicate and sensitive skin. These
innovations showcase our ability to change norms
and elevate consumer expectations. Even today,
these products are in use, supporting the daily lives of
The best way
to predict
the future is
to create it
our valued customers.
To maintain our longstanding reputation for
innovation, we must continue to question norms and
conventions. While we will continue to improve on
existing products, our true and unique strength
lies in our ability to create entirely new categories.
Moving forward, our goal is to more deliberately tap
into that strength and pave the way for creating new
market opportunities. To achieve this, we will execute
structural and management reforms within our current
business, while also exploring new fields of business
that positively impact society.
Corporate Philosophy: The Kao Way
The Kao Way embodies our corporate philosophy. It
was established in 2004 to take the spirit and culture
cultivated by our predecessors and pass them down to
the next generation. We updated the Kao Way in 2021
with the aim to transform the company. We included the
phrase “people and the planet” in our Mission, adding
the phrase “beyond their expectation” in our Vision and
including “We act with courage” within our Principles.
This corporate philosophy is deeply ingrained in every
employee and brings consistency to all our activities.
The Kao Way is the driving force that integrates our
diverse assets and our employees’ strengths as we
tackle social and business challenges. It also serves as
a guide that links individual growth with the growth of
the company and our social contributions. In this way,
it makes our work more rewarding and instills us with a
sense of purpose.
Our Mission indicates our reason for being here
Our Vision expresses our future direction
Our Values represent our core tenets
Our Principles describe what we cherish
The foundations for shared dialogue between
all employees worldwide.
Mastering the art of quality and speed
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
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14
Our Business
Overview
(FY2022 results)
Health and
Beauty Care
46%
Skin Care
45%
Fabric Care
19%
Hair Care
33%
Home Care
10%
Cosmetics
36%
Life Care *Commercial-use only
24%
G11
49%
R8
11%
Personal Health Care
7%
Merries
56%
Products for Hair Salons
100%
Sanitary *except Merries
56%
Hygiene and
Living Care
28%
Ratio of net sales*
2 outside Japan
by business segment
Net sales ratio*
2
by region
57%
21%
12%
10%
Japan
the
Americas
EMEA
(Europe,
the Middle East
and Africa)
Asia
(except Japan)
*1 Share of net sales is calculated based on sales to customers
*2 Based on distributor location
Since 1887, Kao has pursued growth by expanding
its business domains and pioneering new markets
globally. In 2009, Kao made a significant commitment
to environmental sustainability through the Kao
Environmental Statement. Today, we continue to
prioritize environmental technology to develop
sustainable solutions and drive progress towards a
more sustainable society.
0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2020
2010
2000
1990
1980
1970
1964
Net sales:
1,551.1 billion yen
Operating income:
110.1 billion yen
Economic
Value Added (EVA®):
14.7 billion yen
Expansion of the market
based on environmental
technology
Expansion of beauty
care domain
Acceleration of
global expansion
Creation of new markets
through technological
innovations
Expansion of
business domains
1991
Japan’s economic
bubble collapsed
2000
The Dot-com
bubble burst
2020
The COVID-19 pandemic
1997
The Asian
financial crisis
2012
The European debt crisis
2008
The financial crisis
2021
The Russia-Ukrainian crisis
2022
results
Chemical
65%
Oleo Chemicals
87%
Performance Chemicals
54%
Information Materials
53%
Chemical
Cosmetics
Hygiene and
Living Care
Fabric Care
Home Care
Sanitary
Skin Care
Hair Care
Personal
Health Care
Products
for Hair Salons
Commercial-use
Hygiene Products
Counseling Cosmetics
Self-selection
Cosmetics
Oleo Chemicals
Performance
Chemicals
Information Materials
Life Care
Health and
Beauty Care
Health Drinks
23.8%
33.3%
23.1%
16.2%
Net sales ratio*
1
by business
segment
3.6%
Corporate History
and Net Sales Growth
(Trillions of yen)
(Fiscal year)
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
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16
Expand business
domains
Create new markets through
technological innovations
Accelerate global expansion
1890
1990
A Legacy of Advancing Innovation and Creating Unique Value
Launched Kao Sekken, an affordable, safe,
high-quality Japan-made soap born from a
desire to “help everyone enjoy clean and
hygienic lives.”
Hard holding power that
keeps hairstyles in place
against wind and rain
Neutral face wash that
is gentle on the skin to
replace soap
Carbon dioxide gas boosts
the effects of the warm
water and increases blood
flow to help relieve fatigue
A body wash with neutral
MAP as detergent base
that is mild to bare skin
Smooth texture
leaving fingers
glide, and kind to
hair and scalp
State-changing hair cuticle
Ultra-high-functional alcohol
synthesis catalyst
Finely crushing granules
for oral care
Environmentally responsive
polymer structure
Fine structure
of human keratin plug
A new type of sanitary
napkin with excellent
absorbency containing
super-absorbent polymers
Science-based basic
cosmetics focusing on
skin physiology
Utilizes a totally
breathable sheet that
is mild to baby skin
prone to diaper rash
Compact laundry
detergent to 1/4 by
power of
biotechnology
Granules scrape out
and remove plaque
between teeth
Makes ironing
smoother and easily
remove fine wrinkles
after washing
Enriches both
hair and mind
with minty
fragrance
Uses ceramide care technology
that supports the action of
ceramide, which plays a key
role in skin barrier function
Comfortable carbon
dioxide jets penetrate
active ingredients to the
hair roots
Developed a nonwoven fabric
sheet with strong dust
collection performance by
combining grid-like nets
Smooth silicon reduces
friction in fibers and
prevents shrinking
Sheet packs that instantly
unclog pores and remove
dinginess
Sheets allow people to
remove makeup even in
living rooms instead of the
washbasin
Technology for logically proving
complex phenomena to elucidate
the nature of unsolved problems
Essential analysis
Technology to efficiently and
precisely manufacture useful and
high functional materials
Precise conversion
of oils and fats
Advanced process technology for
reaction, compounding, processing
of all substances
Meta-processing
Technology for designing polymer
functions as the source of value in
products
Polymer function control
Technology for understanding the
nature of dirt and establishing
formulation to selectively remove it
Essential analysis
High-quality Japan-made
bath soap
Cuticle care
Prevents skin
from feeling tight
Cosmetics based on
Holistic Beauty Science
A spoonful will give
amazing brightness
Care for dry and
sensitive skin
Easily eliminate
wrinkles after washing
Mild to skin and
suitable for children
Keeps hairstyles firm
Secure and pleasant
on heavy days
Strong absorbance and
prevents skin rashes
Finely crushing granules
make teeth smooth
Fixing bed hair quickly
after waking up
Promotes blood circulation
and prevents hair loss
Easy cleaning
at home
Just a quick wipe
to remove makeup
Simple approach that
collects all dust and hair
Unclogs dirt of pores
of the nostrils
Carbonated
bath bombs
1890
1976
1980
1983
1984
1987
1994
1995
1996
1997
1976
1982
1983
1978
1987
1990
1994
1998
1999
Value creation and application expansion
for sheet products
Policy for value design
Kao’s history is one of innovation and value creation. We expanded our business domains into Cleanliness, Beauty,
Health, the Environment, and Life to meet the needs of consumers and society. By flexibly integrating these domains,
we have created new markets and value.
Beyond
Expectations
Game
change
Consumer
awareness/
needs
Progress in
Essential
Research
Evolution of
core
technologies
• Along with the enhancement in living standards due to economic growth,
growing need for more convenient life that incorporate new things
• Penetration and expansion of hygiene habits and lifestyles seeking comfort
• With women’s social advancement, awareness of beauty and caring for hair
and skin has improved
• Spread of the act of
washing the body and
clothing with
understanding of the
efficacy of cleansing
• Increase in needs for streamlining housework with the
rise in double-income households
• Further increase in awareness for cleanliness owing to
changes in the living environment
• Expansion from family use to personal use
• Increasing trend toward saving time in busy daily life owing to
women’s enhanced participation in society
• Increase in awareness of sensitive skin care owing to stress
and allergies
Fundamental technology
applied to all products
Surface
science
Skin
science
Hair
science
Water
science
Enzyme
science
Fiber
science
Safety
science
Precisely designed derivatives
(e.g., Bio IOS)
Technology for precise control over
different types of interfaces to achieve
mutually opposing properties.
Nano-interface control
1970–80
Kao Integrated Report 2023
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Introduction
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18
In an age of rapid change, we will change the game by building new technologies, while also creating values
beyond expectations through applications of core technologies and contribute to people’s lives and society.
Expand beauty care domain
Expand the market based
on environmental technology
2000
2010
2020
2023
A Legacy of Advancing Innovation and Creating Unique Value
Consumer
awareness/
needs
Progress in
Essential
Research
Evolution of
core
technologies
Beyond
Expectations
Making Asian women’s black hair
more elegant with a return to the
origin of Asian beauty. Oriental
Beauty Essence formula
Weak acidity that is
friendly to skin. Easy
to use for the whole
family
Foam reaches hard-
to-wash areas such
as internals, tight
spaces, and gaps
Contains 540 mg of highly
concentrated tea catechins to
promote the ability to utilize
fat as energy
UV care products
with smooth feel and
high SPF
A moisturizer that gradually
achieves a natural and
healthy-looking tan without
damaging the skin.
Easily clear away oil in
one go. Blended with
orange oil
Mixed with disinfecting
ingredients. Foam spreads in
mouth to leave teeth and
tongue clean
Comfortable steam of about
40°C gently wrap your
precious eyes for about 20
minutes
Reduces the number of
rinses by one to greatly
reduce the water used
for washing
The foam reaches the hair
roots and allows for
uniform coloring even at
home
Beauty serum with
rich carbonated*
foam
* Propellant
Functional spreaders for drones
making pesticides adhere to
crops more effectively, keeping
them wet
Activated brown fat cells
Technology for elucidating human
metabolism and realizing strong
homeostasis
Bio functional control
Substance penetration deep into
human wrinkles
Technology for advanced control of
penetration into, adherence to and
effects on target substances
Nano-interface control
Film of the bubbles for selective
absorption
Technology for creating new value
related to cleaning, penetration and
water-saving through foam control
Nano-interface control
Moraxella causes the smell in
half-dry clothes
Technology for creating health value
specialized for the properties of
microorganisms, pests, etc.
Bio functional control
Amphiphilic cellulose single
nanofibers
Technology for intricately
combining unstable substances
and creating special functionality
Meta-processing
RNA genes that help with
predicting the future
Technology for predicting change of
properties in the fields of Life,
Everyday lives and Ecology
Essential analysis
Simple application for
healthy bronze skin
Self-foaming toothpaste that
prevents mouth odor
More efficient
agriculture
For those concerned about body fat.
The first FOSHU tea
UV care, no white residue
nor sticky feeling
Long-lasting
“just-applied” tone
Asian beauty. Bouncy and
supple hair that leaves no mark when tied
Clean with just a spray;
no need to scrub
3D effects that change
hair color vividly
2003
2003
2007
2008
2016
2018
Progress in understanding
and controlling the body
Enhancement environmental
value and convenience
Hygiene value expansion
through microorganism control
Squeaky-clean feel
immediately after rinsing
Does not damage hair
even after repeated use
Changing care
from foundations
Refills in
10 seconds
Laundry detergent needing
only one rinse
Self-foaming hand soap
that is mild to skin
Achieves liquid type Attack’s strongest cleaning
power while also being kind to the planet
• Increased awareness of self-care as lifestyle-
related health problems surface
• Spread of habits for enjoying aromas in daily life,
and an increase in awareness for odor removal
• Increase in awareness of self-medication for eye strain,
etc. peculiar to the IT age
• Increase in eco-awareness owing to worsening global
environmental problems
• Demand in easier and more efficient housework with
sharing between family members and using robots
• Increase in awareness of health and beauty regardless
of gender or age
• Expansion in awareness and action regarding
environmental and social issues owing to SDGs education
• Increase in awareness for hygiene and health owing to the
spread of the COVID-19
Utilizes moisture
that evaporates
from lips to form
a sealing gel film
The main ingredient is Bio IOS
as a detergent base that was
created from a material that
was not suitable for a surfactant
Mixed with a precursor to the melanin
for black hair that is 100% naturally
derived. Helps compliment a natural
black color every time you use it
Raku-raku Eco
Pack Refills that
let anyone refill
easier
Newly developed next-
generation dye creates a
vivid, three-dimensional, and
radiant hair finish
New value creation
New innovations
2001
2004
2009
2015
2018
2019
2021
2005
2021
2021
2016
2004
Helps with deep release of
the tension and soothes the mind
Dyes hair evenly
with foam
Game
change
Only
1rinse
Metabo-
lism
science
Form
science
Environ-
mental
science
Photo
science
Microbial
science
Health
science
Kao Integrated Report 2023
Kao Integrated Report 2023
Introduction
19
20
Sources of
Our Innovation
Creativity
Yoki-Monozukuri is our commitment to excellence in
the product development creative process and has
been at the heart of our organization since its
inception. We believe in harnessing the collective
creativity and energy of our employees to create value
and enrich the lives of people and the planet.
Yoki-Monozukuri
Technology
Essential Research is identifying the truth behind various
phenomena - it is the foundation of our innovation.
Through this rigorous pursuit of knowledge, we aim to
solve social issues, leveraging a diverse range of
technology assets from both inside and outside of the
organization to make a positive impact on society.
Essential Research
and open innovation
Human
capital
Employees are our most valuable asset. We leverage
the collective wisdom of a highly skilled and diverse
workforce to tackle challenging problems and achieve
shared goals. Our culture enables our employees to
work together effectively, driving innovation and
creating value for our customers and society.
A diverse team that shares
expertise and takes on challenges
Brands
Our diverse portfolio of brands is united by a shared
commitment to maintaining close connections with
people and meaningful value throughout their lives,
whether in challenging or joyous moments, or during
their everyday experiences.
Brands that enrich lives
across generations
Corporate
culture
“The Kao Way” is a corporate philosophy deeply rooted
in all our employees and the foundation for all of our
activities. It is an indispensable guideline for aligning
company growth with employee development, job
satisfaction, and overall life fulfillment. Which in turn,
fosters a positive workplace culture, boosting
motivation, productivity, and overall success.
The Kao Way
(As of December 31, 2022)
Received the highest rating from CDP
in the fields of “Climate Change”,
“Forests” and “Water Security”
Consumer Products Business
Number of brands of categories share No.1
Number of employees
World’s Most Ethical Companies
®
selected in 2023
Chemical Business
Number of categories of No.1 share
Number of trademarks
Sales area
Number of patents
Subsidiaries
Female
employees
Female
managers
Source: INTAGE SRI+
® for Japan,
and Nielsen real channel data for the U.S.; both from FY2022
Source: Kao survey
23,938
100
35,411
Japan
3
consecutive
years
17
consecutive
years
Asia
EMEA
11
2
2
World top group
Japan top group
8
7
15,002
111
53%
31%
Number of our brands in the Consumer Products Business
71
Chapter 1
Our Value Creation
21
Kao Integrated Report 2023
221
Chapter 1
Our Value Creation
—Company-wide endeavors to protect future lives
Sustainability is the only path. We aim to be a company
that protects future lives.
We will protect people, society, the planet and every life on it.
Kao Integrated Report 2023
23
24
Our Value Creation
Chapter 1
Sustainability as the only path
Protecting future lives
Human
Capital
Relationship
Capital
Natural
Capital
Manufacturing
Capital
Intellectual
Capital
Financial
Capital
Environmental
Issues
Population
Aging
Pandemics
Challenges
Associated
with
Diversification
Social issues
of focus
The source
of our value creation
Business
areas
Commitment to the future
and our vision
Key strategies
p.36–66
Innovation can be
for everyone. We
won’t stop.
Leave No
One Behind
5
Plan for and enable
regeneration.
Regenerative
Lifestyles
1
Move beyond CO2
reduction and
unlock CO2 recycling.
Toward Carbon
Negative
2
Waste nothing.
Period.
Zero
Waste
3
Every person in
unique. Our
solutions will be too.
Precision
Life Care
4
Value Creation Model
Purpose
S
T
R
A
T
E
G
Y
To realize a Kirei World in
which all life lives in harmony
· Energy consumption: 18.1 PJ
· Water use: 16.5 million m
3
· Plastic packaging usage:
91.4 thousand tons
· CO2 emissions across the product
lifecycle: 11,251 thousand tons
· Number of employees: 35,411
· Management tool
for activating personal growth: OKRs
· Open recruitment program
for revolutionizing ideas: 0 ★1 Kao
· Sales area: over 100
· Subsidiaries: 111
· Customers, partners for business
and social contribution, academia
· Net sales: 1,551.1 billion yen
· Operating income: 110.1 billion yen
· EVA
® (Economic Value Added):
14.7 billion yen
· Number of brands: 71
· Number of patents held: 15,002
· Number of trademarks held: 23,938
· R&D expenses: 60.6 billion yen
· Production sites: 37 locations
· Capital investment: 94.3 billion yen
Kirei Lifestyle Plan
The Kao Way
Hygiene
and
Living
Care
Health
and
Beauty
Care
Life Care
Cosmetics
Chemical
Accelerate digital
transformation
S
T
R
A
T
E
G
Y
Focused growth
in 5 business fields
S
T
R
A
T
E
G
Y
S
T
R
A
T
E
G
Y
Deliver on ESG
ambitions
Parallel business
transformation
Energize
our people
S
T
R
A
T
E
G
Y
S
T
R
A
T
E
G
Y
Deepen EVA-driven
management
Kao Integrated Report 2023
25
26
Our Value Creation
Chapter 1
Commitment
to the Future
4
We offer tailored solutions to meet the unique needs of every individual,
achieved through a precise understanding of physical, environmental and
underlying causes.
Every person is unique.
Our solutions will be too.
Precision Life Care
1
As living environments undergo significant changes, we strive for a planet
where all people live more fulfilled and enriched lives with peace of mind by
promoting new practices of cleanliness, beauty, health and the environment
that are easy for anyone to do.
Plan for and enable regeneration.
Regenerative Lifestyles
3
We use precious resources without waste and revert products to raw materials
after use. Our absolute goal is zero waste from our business activities.
Waste nothing. Period.
Zero Waste
We will reduce CO2 emissions through our activities and the use of our
products and services as much as possible. Furthermore, we are aiming for
carbon negative by developing technologies in which CO2 in the air recycled
in raw materials.
2
Move beyond CO2 reduction
and unlock CO2 recycling.
Toward Carbon Negative
We leverage our assets to make meaningful progress in providing peace of
mind for all people grappling with serious challenges posed by aging and
illness, empowering them to live each day to the fullest.
5
Innovation can be for everyone.
We won’t stop.
Leave No One Behind
Life
Everyday
lives
Ecology
T
h
r
e
e
a
r
e
a
s
o
f
o
u
r
v
a
l
u
e
c
r
e
a
t
i
o
n
Plan for and
enable regeneration.
We will provide products, services and information
that flexibly address various environmental changes,
mainly through existing businesses.
1
R
e
g
e
n
e
r
a
t
i
v
e
L
i
f
e
s
t
y
l
e
s
things for the better not just individual lives, but for
the communities and societies that surround them and
of course our planet and natural environment. Much
is required to achieve this, but we believe the basis
for everything is the way individual people live their
everyday lives. We believe that as a company whose
core business is offering daily necessities, our role is
to enable Regenerative Lifestyles by being close to,
understanding and co-creating solutions with people.
Throughout its history, Kao has remained dedicated
to enhancing the satisfaction and well-being of
people across the globe. However, with mounting
environmental challenges, population aging the ongoing
threat of natural disasters and pandemics, we are
recommitting ourselves to our goal of enriching lives and
taking proactive steps to address these pressing issues.
Our concept of Regenerative Lifestyles aims not
only to maintain the status quo, but to make things
better, even if only gradually. It is about changing
We are dedicated to the physical, mental, and emotional well-being
of every individual and their daily life.
Hygiene and Living Care / Health and Beauty Care / Cosmetics
By promoting innovative practices in cleanliness, health, beauty, and the environment, we can help individuals
adapt more flexibly to rapid changes and uncertainties. In doing so, we aim to foster a hopeful society where
people live healthy lives with true peace of mind and freedom to express their unique individuality.
We are there for
people when they
have health
concerns.
Life Care
In addition to providing health
care through daily necessities, we
will monitor individuals’ physical
and mental condition and offer
highly precise solutions to
support health in a timely and
appropriate way.
We are connected to
people and their
everyday lives
through society and
industry.
Chemical
We will co-create our products
and solutions with our industrial
partners by providing innovative,
sustainable materials and eco-
solutions to support the
foundations for sustainable
lifestyles and world.
Kao Integrated Report 2023
27
28
Our Value Creation
Chapter 1
If we fail to change our lifestyles, the amount of waste
will compound unsustainably, leading to resource
scarcity and environmental destruction. At Kao, our
goal is to realize a zero waste society by reducing the
amount of resources used (Innovation for Reduction)
and effectively utilizing 100% of waste generated
(Innovation for Recycling). Specifically, we are working
to reduce the amount of waste we generate, and
also utilize it more effectively. We are also promoting
activities to eliminate overproduction in areas such as
products and promotional materials. In particular, we
are working in collaboration with other companies and
local communities to deliver innovation to reduce and
recycle plastic packaging.
Waste nothing.
Period.
We are focusing on resource circulation
for packaging and plastics, addressing the issue
through both existing and new business initiatives.
We are developing technologies to
capture, fix and recycle atmospheric
CO2 as a resource, with a target of
social implementation by 2030.
Carbon-negative
initiatives:
reduce atmospheric
CO2
We are working to reduce CO2
emissions from our worksites
by installing photovoltaic power
generation systems and enforcing
comprehensive energy-saving
measures. We will bolster our internal
carbon pricing system and accelerate
the installation of advanced energy-
saving and low-carbon equipment.
Scope 1 + 2 reduction:
reduce CO2 emissions
from our worksites
We are working to further roll out
products and services with lower CO2
emissions incurred when used, and
achieve CO2 reduction throughout the
product lifecycle.
Scope 3 reduction:
reduce LC-CO2
emissions associated
with use of our products
Social
implementation
Carbon Zero
Carbon
Negative
Targets
for 2050
Targets
for 2040
Targets
for 2030
20 %
-4 %
-6 %
26 %
-
-
-
-
55 %
22 %
Performance
in 2021
Performance
in 2021
Performance
in 2022
Performance
in 2022
Targets
for 2030
Targets
for 2030
(vs. 2017)
(vs. 2017)
(vs. 2017)
(vs. 2017)
(vs. 2017)
(vs. 2017)
While most of the world is working to achieve carbon
neutrality by 2050, our goal is carbon zero by 2040 and
carbon negative by 2050. To reduce CO2 emissions
from our own worksites (Scope 1 + 2), we will promote
the Internal Carbon Pricing System and accelerate
the introduction of the latest energy-saving and low-
carbon equipment to prevent facilities from becoming
stranded assets. With respect to reducing CO2 emitted
over the product lifecycle (LC-CO2), which accounts for
the majority of Scope 3, we are working with consumers
and various stakeholders to provide products that are
safe for consumers to use while emitting less LC-CO2.
In addition, we are expanding our products and services
that contribute to the reduction of CO2 and developing
technologies to recycle CO2 for reuse in raw materials.
Move beyond CO2 reduction
and unlock CO2 recycling.
We aim to achieve carbon zero by 2040
and be carbon negative by 2050.
“Positively-recycled” plastic
Plastic collected together with society
Recycled plastic used in packaging
Recycle innovation
Reduce innovation
2020
2030
2040
2050
2020
2030
2050
2040
Towards recycling 50%
●Peak out usage of fossil-based plastic
●Increase use of recycled plastic
●Expand “positive recycling“ (creating
new businesses through recycling)
●Products that Kao can collect together
with society, and can be used by society
Towards net zero waste
●Accelerate reduction of fossil-based
plastic usage
●Accelerate bio-based/recycled plastic
usage
●Accelerate expansion of products that
use “positively-recycled” plastic
●Increase plastic that Kao can collect
together with society, and can be used
by society
Towards negative zero waste
●Zero fossil-based plastic usage
●Accelerate bio-based/recycled plastic
usage
●Full penetration of products that use
“positively-recycled” plastic
Recycling 50%
Net zero waste
Negative waste
Recycle over 50% of plastic
used (by weight)
The quantity of plastic recycled
greater than the plastic
packaging produced by Kao
The quantity of plastic recycled
equivalent to the quantity of
plastic packaging produced by
Kao
Fossil-based plastic
Bio-based plastic
Recycled plastic
Quantity reduced (through refills,
replacements and compactification)
Total amount of plastic packaging
2
T
o
w
a
r
d
C
a
r
b
o
n
N
e
g
a
t
i
v
e
3
Z
e
r
o
W
a
s
t
e
Kao Integrated Report 2023
29
30
Our Value Creation
Chapter 1
To live a long life in one’s own favorite style, it is crucial
to maintain a healthy condition and also a good quality
of life. Kao believes it needs to understand each
person’s physical status, lifestyle, preferences and other
information in closer detail, and to take targeted action.
Precision Life Care consists of two core technologies:
Precision Monitoring, which accurately profiles an
individual’s condition, and our Virtual Human Body
Generative Model, which is able to estimate statistic
patterns in which different attributes appear. These
technologies can be used individually or in combination
to provide life care with unparalleled precision to
suit each and every individual’s unique qualities and
changes over time.
We are building a platform to evolve the systems in
Precision Life Care, and are collaborating with various
partners to create new businesses.
Every person is unique.
Our solutions will be too.
We use two core technologies
and work with a wide range of partners
to create businesses in various fields.
Innovation can be for everyone.
We won’t stop.
We are taking a two-pronged approach
with existing and new businesses
in the following four areas:
We aim to build new social
infrastructure that delivers helpful
information and products for
solving the serious issues faced by
people with disabilities and their
families.
Support for people
with disabilities
In addition to population aging and an increasing
number of people with weak resistance to diseases,
the risk of infectious diseases and natural disasters is
rising due to climate change. Everyone is impacted.
Amid these circumstances, we want to be there not
just for healthy people in their everyday lives, but for
people facing illness and impact from disasters. There
are many things we need to do to leave no one behind.
For now, we are focused on the following four initiatives
that leverage our strengths and current asset base. Our
ultimate ambition is to develop models for sustainable
contribution to the society and businesses, so that our
activities deliver concrete steps toward ensuring no one
is left behind.
We provide products and services
that prevent the spread of
infectious diseases more
effectively, and we are promoting
their penetration among low-
income population.
Stop
pandemics
We are promoting sustainable water
circulation systems that utilize
rainwater and distributing water-saving
products to individuals in Asia who
struggle with limited access to water
for basic needs such as washing.
Relief from
water stress
We support the lives and rapid
recovery of people affected by
disasters. We also develop
products and services that are
useful in both everyday life and in
the wake of disasters.
In everyday life and
in times of disaster
1
3
2
4
4
P
r
e
c
i
s
i
o
n
L
i
f
e
C
a
r
e
5
L
e
a
v
e
N
o
O
n
e
B
e
h
i
n
d
Main activities
in FY2022
regarding
Precision Life
Care
Precision Life Care
Precision Life Care to Propose Optimized Solutions
for Unsolved Issues
Kao and DOCOMO Agree to Collaborate in the Healthcare Field
www.kao.com/global/en/newsroom/news/release/2022/20220308-001/
Kao and istyle: Using Sebum RNA Monitoring Technology to Create Encounters with Cosmetics
that Suit Individual Skin Types: Joint Initiative Aimed at Customer Satisfaction and Reduction of
Product Waste to Launch from Spring 2022
www.kao.com/global/en/newsroom/news/release/2022/20220314-001/
Business Alliance Formed with Polar Star Space toward the Establishment of Ganoderma Disease
Monitoring Technology on Oil Palm Farms
www.kao.com/global/en/newsroom/news/release/2022/20221209-001/
IR Meeting: Precision Life Care (March 16, 2022)
www.kao.com/global/en/investor-relations/library/business-strategy-
presentations/
Precision Monitoring
Precision Solution
Precisely identifying causes
Appropriately solving causes
Organisms
Beauty and health products
Everyday lives
Daily products
Environment
Industry domains
Diagnosis
Products and services
Kao Integrated Report 2023
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32
Our Value Creation
Chapter 1
Improved qiuority of life
• The number of products which contribute to a comfortable, beautiful,
healthy life and touch people’s hearts
Habits for cleanliness, beauty and health
• Cumulative number of people reached by awareness-raising activities for
acquiring habits for cleanliness, beauty and health using Kao products and
services
Universal product design
• % of new or improved products that meet Kao’s Universal Design Guidelines
Sustainable lifestyle promotion
• Cumulative number of people reached by awareness-raising activities for
promoting environmentally friendly lifestyles and realizing a sustainable
world
Materiality
Process
for identifying materiality
Indicators corresponding
to our Commitment to the Future
In 2018, we identified the ESG materiality through the
process shown below to achieve our Vision for 2030 for
realizing a sustainable world and enhancing corporate
value. In 2019, we incorporated these elements as the
19 Kao Actions in the ESG Strategy: Kirei Lifestyle Plan
We will specify the indicators and KPIs for each theme in accordance
with progress in the formulation and execution of business plans.
Relationship between
our Commitment to the Future
and the KLP Kao Actions
The Mid-term Plan 2025 (K25), published in 2020,
indicated our focus on four social issues based on rapid
changes around the world: Environmental Issues,
Population Aging, Pandemics, and Challenges
Associated with Diversification. We also declared our
policy to upgrade existing businesses and accelerate
Commitment to the Future
Corresponding priority theme
and indicators of the KLP
Zero waste
• Quantity of fossil-based plastics used in packaging
• Quantity of innovative film-based packaging penetration for Kao and others
per annum
• % recycling rate of plastics involving Kao
• Practical use of innovative film-based packaging made from collected refill
packs
• % of recycled plastic used in PET containers (Japan)
• % of the waste generated from Kao sites, ratio of waste that cannot be
recycled * Beginning with production sites
• % reduction of discarded products and discarded promotional materials
Decarbonization
• % reduction in absolute full lifecycle CO2 emissions
• % reduction in absolute scope 1 + 2 CO2 emissions
• % of renewable energy in electricity consumption
Sustainability Report 2023
www.kao.com/global/en/sustainability/pdf/sustainability-report/
W E B
Waste nothing. Period.
3
Sustainability Report 2023
www.kao.com/global/en/sustainability/pdf/sustainability-report/
W E B
Move beyond CO2 reduction
and unlock CO2 recycling.
2
Improved quality of life
• The number of products which contribute to a comfortable, beautiful,
healthy life and touch people’s hearts
Innovation can be for everyone.
We won’t stop.
5
Improved quality of life
• The number of products which contribute to a comfortable, beautiful,
healthy life and touch people’s hearts
Every person in unique.
Our solutions will be too.
4
Plan for and enable
regeneration.
1
the creation of new businesses. Our Commitment to the
Future was established in 2021 by incorporating KLP
Kao Actions that were strongly related to business
activities. Going forward, we will clarify indicators for
each commitment according to the growth of our
business.
(KLP). To enhance the effectiveness of these elements,
we hold periodic reviews in line with changes in social
circumstances and challenges, as well as on Kao’s
policies and strategies.
We conduct periodic internal evaluations,
as well as reviews inside the ESG External Advisory Board
Review
The Board of Directors approved the actions following deliberation
within the ESG Committee (now the ESG Managing Committee)
Validation
A wide range of stakeholders, including employees, evaluated the themes’
importance in terms of our corporate value enhancement and business growth
Prioritization
Identification of candidate themes
We selected themes from two perspectives: society and stakeholders,
and impact on the company
Periodic
reviews
Our Strategy
Chapter 2
Kao Integrated Report 2023
33
342
Chapter 2
A nother
R eborn
Our Strategy
—Accelerating transformation
We will accelerate transformation through ambidextrous
management to revitalize a “Strong Kao.”
We will steadily and powerfully climb the steps toward transformation.
Kao Integrated Report 2023
35
36
Our Strategy
Chapter 2
· Fabric Care
· Home Care
· Personal Health Care
· Market share grew in the face of raw material
price hikes and increasingly severe competition,
but profitability decreased
· Positive factors were Laundry Detergents and
Home Care products
· Negative factor was Fabric Softeners
· Secured sales and profits as planned
· Positive factors were Cosmetics and UV Care in
Japan and the rest of Asia
· Negative factors were Cosmetics and Chemicals
in China and logistics issues in the Americas
· A positive factor was Sanitary Napkins in Japan
and the rest of Asia
· Negative factors were Hair Care products and
Baby Diapers
· Sanitary
· Hair Care
· Products for Hair
Salons
· Health Drinks
shows negative values.
FY2022 results
Our results for FY2022 featured 1,551.1 billion yen in
consolidated net sales (3.7% increase year-on-year on a
like-for-like basis) which marked a record high. However, our
operating income was 110.1 billion yen (33.4-billion-yen
decrease year-on-year) which was a significant deviation
from the plan. In Reborn Kao (RK) we have encountered
difficulties such as unprecedented in raw material prices,
economic slowdown in China and AEMEA, and shift toward
purchasing lower-priced products with a growing concern
about future living standards in Japan.
Growth Drivers was on track, with an 8.5% increase
year-on-year in net sales and a 1.0-billion-yen increase
year-on-year in operating income. Stable Earnings had a
small increase in net sales, but a 22.9-billion-yen decrease
year-on-year in operating income. Approximately 60% of the
increases in raw material costs affected this area. To counter
the impact, we implemented price increases and were able to
partially mitigate their effects. Business Transformation saw a
decrease in both net sales and operating income. We have
established a foundation for growth in the Sanitary Napkins,
and will now concentrate our efforts on regaining our position
in other businesses.
In Another Kao (AK), we are making steady progress in
social implementation and business development. We
launched repellents in Thailand and are working to achieve
global expansion with asphalt modifiers. In addition, we are
expanding our collaborations for application and social
implementation the Virtual Human Body Generative Model to
realize our Precision Life Care concept.
FY2022 results in each business portfolio category
Key Strategies
for Enhancing Our Corporate Value
To make swift improvements to profitability and realize mid- to long-term enhancements
in corporate value, we are executing on the following six key strategies:
Deepen EVA-driven management and revive a “Strong
Kao” with the introduction of ROIC by business and
strengthening business portfolio management.
Deepen EVA-driven
management
1
S
T
R
A
T
E
G
Y
Support the sustainable development of Kao through
ESG innovations, and create a significant impact on
people, society, and the planet.
Deliver
on ESG ambitions
2
S
T
R
A
T
E
G
Y
p. 43
p. 40
p. 37
p. 63
p. 61
p. 47
Design synergies between RK and AK to provide new
value that contributes to people’s enriched lives and the
realization of a sustainable world.
Parallel business
transformation
3
S
T
R
A
T
E
G
Y
Accelerate the development
of five business fields to continue protecting “Kirei”
for people and the planet.
Focused growth
in 5 business fields
4
S
T
R
A
T
E
G
Y
Pursue to further develop our DX talent
and transform into a UX creation company
that offers exceptional experience.
Accelerate digital
transformation
5
S
T
R
A
T
E
G
Y
Plan and execute various measures
to motivate every employee and encourage them
to take on challenges.
Energize
our people
6
S
T
R
A
T
E
G
Y
Business
area
Applicable
businesses
FY2022 net sales
(year-on-year
change)
FY2022 operating
income (year-on-
year difference)
Remarks
· Cosmetics
· Chemical
· Skin Care
· Commercial-use
Hygiene Products
+8.5 %
+1.0
Stable Earnings
Market share growth and
enhanced profitability
through appropriate
investments
Growth Drivers
Growth in sales and profit
through active investments
Business
Transformation
Swift improvements in
profitability with carefully
selected investments
+0.9 %
Mid-term Plan 2025 (K25)
Become an essential company in a sustainable world
Transform to build robust business through
investment
Maximize the power and potential of employees
Net sales
Operating income
EVA
®
Ratio of net sales
outside Japan
1,382.0 billion yen
175.6 billion yen
60.0 billion yen
38 %
1,551.1 billion yen
110.1 billion yen
14.7 billion yen
45 %
1,800 billion yen
250 billion yen
100 billion yen
50%
Objectives
FY2022
results
FY2020
results
FY2025
Target
Achievements and Challenges
in the Second Year of K25
22.9
billion yen
billion yen
2.9 %
11.5
billion yen
Kao Integrated Report 2023
37
38
Our Strategy
Chapter 2
1
STRATEGY
*1 Economic Value Added, EVA
® is a registered trademark of Stern Stewart & Co.
*2 Return on Invested Capital
Kao seeks to establish management that combines two
indicators—EVA and ROIC by business—to deepen its
EVA-driven management.
One characteristic of our five business segments is that
they each have their own individuality but also relate to each
other. It is vital to have a common target and management
indicator (EVA) across these businesses to realize the power
of our integrated approach. On the other hand, the
awareness of cost of capital is gradually weakening in each
business. As such, Kao will introduce ROIC by business and
reinforce EVA again.
Each business is competing with specialized
A key element of business transformation is to show all
employees a detailed strategy for bolstering business
portfolio management that drives our future forward. When
this is clear, each employee will have more awareness of
business reform. It is also crucial for them to understand the
concept of cost of capital, to break away from a profit and
loss mindset*
3 and to widely penetrate the “Maximum with
Minimum” approach that ties with EVA.
Any transformation includes a period of endurance, but
*3 A short-sighted mindset and attitude that aims to maximize indicators such as
immediate sales and income related to profits and losses.
manufacturers, so we could take an approach to define and
manage target ROIC values for each business based on its
market position. However, excessive focus on managing
businesses individually may bring the risk of opportunity loss
regarding large-scale investments. It is sometimes necessary
to make decisions with a perspective to improve company-
wide EVA. Through introducing ROIC by business, we will
realize a management that considers cost of capital.
Our company transformation will accelerate once
individual initiatives contribute to the desired growth of our
company. To this end, I will hold workshops and other events
to penetrate of this concept.
this only lasts briefly. The true nature of our transformation
involves investing with a long-term perspective in the face of
a certain degree of risk and realizing a virtuous cycle of
repeated transformation based on these investments. Human
capital investments are essential for organizational
transformation, as are DX investments for business
management transformation and ESG investments for social
reforms. I will strive to optimize the balance among these
investments.
Deepening EVA-driven management
by introducing ROIC by business
Sustainable transformation
in a virtuous cycle
Basic structure of ROIC tree by business
and initiatives for ROIC improvement
Deepen EVA-driven Management
Revitalizing a “Strong Kao”
by deepening EVA-driven
management
Masakazu Negoro
Senior Managing Executive Officer
Responsible for Management Finance
(Accounting and Finance, Business Structure Reforms,
Procurement, Human Capital Strategy)
My greatest responsibility among my four roles as
the person responsible for accounting and finance is
effectively utilizing all our assets and taking the lead in
sustainable corporate value enhancement. In 1999, Kao
became the first Japanese company to adopt EVA*
1 as a
management indicator that reflects the corporate value
and has pursued EVA-driven management since then.
In 2023, we introduced ROIC*
2 by business to bolster
business portfolio management and refined EVA-driven
management. We also seek to raise awareness among
all employees about capital efficiency by introducing
ROIC by business.
My other essential responsibility is to execute large-scale
investments including M&A to realize our vision. I will lead to
making the right decisions on investment in scrum-style
organizational management by ensuring to read ahead of
time rather than subsequent analysis of the facts.
One of my most important roles is to be accountable to
stakeholders while reinforcing communication and
engagement.
I cannot deny that decision-making and response have
been delayed in the past few years, due to rapid changes
and significant impacts in the business environment. We
have begun to focus our mindset on capital efficiency and t
execute growth strategies based on structural reform and our
business portfolio. Improving EVA as a company-wide effort
will eventually lead to revitalization toward a “Strong Kao”.
The business environment continues to be unclear, but we
will share the results of these efforts as soon as the results
prevail.
Progress and challenges
in the Mid-term Plan 2025 (K25)
Weighted Average
Cost of Capital
(WACC)
• Increase customer value across our brands,
products, and services
• Make advanced use of customer data and improve
prediction accuracy by DX
• Carry out fair cost-based price setting
• Explore raw materials and formulation development
• Improve employee engagement and productivity
with internal DX
• Strengthen the links between our research and
business strategies
• Promote open innovation
• Shift to loyalty marketing
• Strengthen digital marketing
• Optimize supply chain (strategic S&OP)
• Manage and maintain proper stock
• Measure capital investment and ESG investment
efficiency
• Develop acquired brands and strengthen the
synergy with existing business
• Strengthen IP portfolio management
• Promote immediate TCR action
ROIC
Operating margin
Effective tax rate
Invested capital
turnover rate
Net sales
Cost of sales ratio
Selling, general
and administrative
expenses ratio
Inventories
Fixed assets
Sales quantity differences
Sales price differences
Raw materials price differences
Other differences
Personnel costs
Amortization
Other expenses
Research costs
Promotion and advertising costs
Inventory turnover (days)
Property, plant and
equipment turnover ratio
Intangible fixed asset turnover ratio
Goodwill turnover ratio
Kao Integrated Report 2023
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40
Our Strategy
Chapter 2
All of our businesses are crucial as we have customers that
need those products and services. However, an analysis
based on growth and capital efficiency (ROIC) will clarify
businesses that need improvement. It is vital for management
to consider appropriate measures for these businesses and
execute the next measures swiftly through scrum-style
management.
Growth Driver businesses are an area for focused
investment. We have several options, such as expanding
their range to build a new field in Another Kao, creating
synergy with other business areas, or further reinforcing the
business through M&A investment. We will carry out
structural reform in Business Transformation businesses that
need improvement. If improving EVA is determined to be
difficult despite carrying out every possible action, it is
crucial to make timely decisions regarding the business,
including withdrawal or sale. We plan to clarify the direction
for the diapers business by the end of 2023.
Bolstering business
portfolio management
In 2019, Kao made a declaration for ESG-driven
management. In K25, we set “sustainability as the only path”
as our Vision and described our policy as only focusing on
business activities that contribute to ESG. We are carrying
out various initiatives to this end. For example, Kao is the
only Japanese company to attain an AAA score in CDP for
two consecutive years. We have also set our internal carbon
pricing (ICP) at 168 USD/t-CO2e, one of the highest values
across Japan, and we are actively working to reduce CO2.
Going forward, we will engage in value creation and
business operations with an even stronger awareness for
achieving both EVA (enhancing corporate value) and ESG
(solving social issues). In parallel with this, we will carry out
active public relations activities related to Kao’s ESG
initiatives and link these to customer loyalty enhancement.
Through investor relations (IR) activities, we will also reinforce
engagement with all investors with a strong interest in ESG.
Managing both
EVA and ESG
high
low
low
Capital efficiency (ROIC)
Growth potential
high
Sanitary Products
(baby diapers)
Fabric Care
Home Care
Personal Health
Life Care
(including Another Kao)
Cosmetics
Skin care
Chemical
Commercial-use Hygiene
Products
Concept for a business portfolio to realize K25
Sanitary Products
(sanitary napkins)
Products for Hair Salons
Hair Care
Deliver on ESG Ambitions
2
STRATEGY
David J. Muenz
Director, Managing Executive Officer
Senior Vice President, ESG, Global
Responsible for Strategic Public Relations
Kao’s vision of “protecting future lives” and
“sustainability as the only path” as outlined in our Mid-
term Plan 2025 (K25) has guided and accelerated our
commitment to ESG management. The rapid and
complex changes that are impacting our business are
only expected to intensify, and ESG strategies are
becoming more important than ever.
Kao’s ESG strategy, the Kirei Lifestyle Plan (KLP),
sets forth a unique direction and a set of ambitions for
our ESG activities, while putting the people we serve at
the center of our actions. Our ESG strategy focuses on
three commitments with 19 Kao actions to realize our
ESG Vision. It is aimed at providing care and enrichment
for all people and the planet. Our ability to seize
opportunities and mitigate risks through the lens of ESG
will lead to business growth and advance a virtuous
cycle of benefits to society and all of our stakeholders.
Growth Driver
Overseas ratio: >50%
ROIC: >12%
Stable Earnings
Japan market share: +5%
ROIC: >20%
Business Transformation
ROIC: >7%
Pursuing twin goals: resolution of social issues
and business development
Kao Integrated Report 2023
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Our Strategy
Chapter 2
Based on our foundational principles of benefiting society
while generating future financial value for Kao, it’s essential
that we accelerate the integration of ESG into our daily
business practices.
At Kao, innovation is the driving force behind serving our
customers, developing our business, and addressing the
pressing environmental and social issues we face in today’s
world.
Through innovations within the various aspects of the KLP,
we will drive true transformational change in the world with
holistic sustainability solutions in Resource Preservation and
Circularity, and Regeneration of Nature, to realize a Kirei
Lifestyle for all.
Creating maximum value from the limited and precious
resources of our planet is core to our product development.
Zero Waste within the KLP is driven by our efforts in
Resource Preservation and Circularity. Our chemical product
NEWTLAC 5000 can make pavements more durable using
recycled plastic and can play a role in building a sustainable
Another key to realizing a more sustainable society is to
enable people to enjoy sustainable lifestyles with ease and
comfort. This will also include encouraging people to make
sustainable choices more consciously. As part of this effort,
Kao launched a new communication strategy in 2022.
Designed to convey Kao’s commitment to the environment
and society in an approachable way, we created the slogan
“Mottainai” (“Wastefulness – Never today, nor tomorrow”).
The key objective of this communication is to engage
customers to consciously be a part of the solution simply by
choosing and using Kao’s products. This will increase Kao’s
corporate value through enhanced awareness of ESG
activities.
Kao will continue to evolve our ESG strategy to ensure we
have updated and relevant policies, actions, and
management in place. Biodiversity will be an area we will
step up activities in, as well as DE&I which will be promoted
across the value chain for creating a more inclusive world.
Innovation is needed to address the serious environmental
and social issues we face today. Through our essential
innovation at R&D and engaging and co-creating with various
stakeholders in novel ways, we will empower our Yoki-
Monozukuri from an ESG perspective. Our ESG-driven
management will support Kao’s sustainable growth and at
the same time create significant positive impacts on people,
society, and the planet.
Creating future value through business practices
that contribute to people and the planet
Sharing our
ESG vision
A Kirei Life
for all
circular society. Our efforts in Regeneration of Nature can be
seen in our surfactant base called Bio IOS, which utilizes an
under-used portion of palm oil, helping to reduce the
pressure on deforestation while ensuring supply of essential
hygiene products. We will continue to expand the use of this
material.
Moreover, in 2022, driven by our desire to ‘protect future
lives’, we succeeded in developing and launching a people-
friendly mosquito repelling skincare formula. Aiming to
eradicate infectious diseases caused by mosquitos, Kao
adopted a unique collaborative business approach. We
forged partnerships with stakeholders within the community,
such as governments, local authorities and distributors, to
address this common social issue and share the
responsibility to find sustainable solutions. While still in its
initial stages, we believe that this type of approach can
create positive transformation for society and the business,
and identify ways to develop new markets and customer
loyalty.
BY 2030
BY 2030
BY 2030
We will aim to empower all
people, at least 1 billion by
2030, to enjoy more beautiful
lives — greater cleanliness,
easier aging, better health and
confidence in self expression
100% of Kao brands will
make it easy for people to
make small but meaningful
choices that, together, will
shape a more resilient and
compassionate society
100% of our products
will leave a full life cycle
environmental footprint
that science says our natural
world can safely absorb
Making
my everyday
more
beautiful
Making
thoughtful
choices
for society
Making
the world
healthier
& cleaner
My
Kirei
Lifestyle
Kao’s ESG Innovations
Kao’s ESG Commitments
Positive Recycle
RecyCreation
Film to Film
Refill
Smart Holder
Compactification
of Products
Bio IOS
AC-HEC
Adjuvant
Catalysts
CNF
Bottleless
For People
Realization of Kirei Lifestyle
Resource Preservation
and Circularity
Regeneration
of Nature
Kao Integrated Report 2023
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Our Strategy
Chapter 2
Parallel Business Transformation
3
STRATEGY
Nishiguchi: At present, some challenges remain regarding
“Transform to build robust business through investment” in
the Mid-term Plan 2025 (K25). In FY2022, net sales grew but
bold measures are needed for achieving high profit and
Economic Value Added (EVA
®). Influence from external
factors includes the impact of the COVID-19 pandemic and
rising geopolitical risk leading to hikes in raw material prices.
In addition, there are challenges with some brands losing
momentum and having a lower impact to propose solutions
to people.
Tanaka: We must accelerate our transformation into a
high-profit structure in a method unique to Kao. Innovation is
a part of Kao’s DNA as stated in the Kao Way. We will use the
ROIC tree and other methods to increase the involvement of
each employee in capital efficiency, thereby accelerating our
transformation into a high-profit structure.
If we do not drive both Reborn Kao (RK) and Another Kao
(AK) at the same time, our growth is sure to reach a limit. With
AK, we are at the stage of nurturing the seeds of new
businesses that we created in the past two years and creating
a new stage. We will make maximal use of synergy with
existing businesses to pursue these activities at an early
stage.
Nishiguchi: I feel that Kao’s latent power allowed us to
steadily promote AK in the face of severe conditions. The
top-line growth in RK suggests an increase in Kao’s
customers. After shifting to living with-COVID and post-
COVID conditions, we will also exert every effort to take the
lead in bringing tangible results from AK and RK. For
example, in Asia, an area that I have worked with for a long
time, in the past few years there has been a dramatic
enhancement in online communication with other countries.
By developing a structure that enables local team members
understand communities up close, we are working to make
proposals that create new lifestyles while engaging in robust
collaboration between each area.
Tanaka: In the past two years, we have built the foundation
for globalization. We have appointed three Executive Officers
in AEMEA (the Americas, Europe, the Middle East and Africa)
and developed a structure for local business execution. We
are establishing knowledge for developing brands that joined
us through M&A and are steadily working to bolster the Oribe
and Guhl brands. We are ready for the expansion of our
business in Brazil.
2-year results and challenges
of the Mid-term Plan 2025
Nishiguchi: Kao has continually built new markets and
businesses. We will not change this style but rather
significantly change our method. Peoples’ interests have
shifted from products to lifestyles, and thus consumption-
based marketing is no longer effective. We must understand
people more deeply, shift to marketing that proposes new
lifestyles, and increase the number of our fans who feel that
Kao is essential for their future lifestyles. For this purpose,
the essence of RK and AK is the same.
That is why it is possible to develop AK in combination
with RK. We launched the repellents under the Bioré brand,
but with an AK approach. Because of our aspiration to
protect the lives of people in Thailand from Dengue fever, we
were able to gain strong support from governments and
retailers, and we built a structure for sales and collaboration
at an unprecedented speed. In addition, by utilizing the Bioré
brand in this initiative, we accelerated the spread of products
and information while also increasing the number of new
fans.
Tanaka: As you say, it is important to place people at the
center and draw a blueprint that maximizes value by utilizing
synergies between AK and RK. While RK aims to develop
existing markets, AK aims to change the game in new
markets—new fields—and create new businesses to serve as
the next growth engine. To this end, we will utilize all existing
and new technology assets, and we will also proactively
consider partnerships with other companies and M&A. We
will increase the number of fans through both RK and AK,
and enhance loyalty for brands, products and services to
help realize sustainable development at Kao.
Place people
at the center and draw a blueprint
that maximizes value
Nishiguchi: We will reinforce our proposals for creating
everyday lives. Specifically, we will move away from a method
that relies on sales power and develop strong brands that are
rooted in people’s everyday lives.
For RK in Asia, we are focusing efforts on Indonesia. There
are many lives that we can protect worldwide through soap,
repellents and other products. We will shift our perspective
from consumption to everyday lives and exert efforts to get
close to the local area to develop businesses to protect
future lives.
To change the way employees work, we will create a
diverse workplace where people from different background
work together. We will implement scrum-style in business
operations to prioritize the power of our integrated approach
and speed whereby relevant personnel gather together and
take quick action from the initial stage.
Tanaka: It is important for AK to take a global perspective
from the beginning of business design. We will delegate
authority to each country while taking a 3D perspective of the
world and establishing overarching strategies through
backcasting to accelerate global development. With Skin
Care, we will build footholds in the U.S. and expand into
Brazil and the UK.
The source of our development has been our employees’
unwavering stance in tackling challenges. Creating an
environment in which everyone can work with excitement is
my most important job. I will reinforce an environment in
which open-minded discussions and ideas can be achieved
while spreading a mindset for the idea “Don’t be afraid to
fail.” In addition to promoting AK, I will focus efforts on
supporting management.
Toward K25
achievement
Satoru
Tanaka
Managing Executive Officer
Senior Vice President,
Corporate Strategy, Global
Responsible for Product
Quality Management
Responsible for Legal
Toru
Nishiguchi
Senior Managing Executive
Officer
Responsible for Consumer
Products, Global
RK: Reborn Kao (Revitalize existing businesses) AK: Another Kao (Create new businesses)
We are working to make proposals
that create new lifestyles
while engaging in robust collaboration
between each area.
—Toru Nishiguchi
We are spreading
a mindset for the idea
“Don’t be afraid to fail.”
—Satoru Tanaka
Kao Integrated Report 2023
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Our Strategy
Chapter 2
With RK, we will achieve high profit in existing businesses
through dynamic investments to accelerate growth through
global expansion.
We will continue to concentrate investment in the four
businesses within the Growth Drivers area based on our
business portfolio. We will utilize ROIC by business and other
indicators, while placing even greater priority on capital
efficiency within each business strategy. We will also shift to
implement scrum-style organizational management to carry
out strategic investment decisions swiftly.
As we pursue globalization, we will offer one-of-a-kind
value propositions that cannot easily get caught up in price
wars or other rivalries with competitors. We will shift toward a
local production for local consumption model to get even
closer to local communities and optimize designs for
provided value and cost performance.
Reborn Kao
Another Kao
With AK, we are taking on challenges for completely new
businesses and business models through co-creation with
various partners and are creating engines for Kao’s next step
in growth as well as new fields that will help expand
businesses. Regarding the target areas in new markets, we
are focusing on Medical and Life Care, while also considering
Digital, Circular Economy and others.
From 2021 to April 2023, we have started a total of five
new businesses: Repellents, Durable Asphalt Modifiers made
using waste PET, Highly Functional Spreaders for drone
spraying pesticides, B2B Hygiene Solutions, and Mail-in
Testing Services for the skin barrier of babies and infants. We
will develop these businesses and expand them globally
while also working to create more new businesses.
Bolster our business foundation and
accelerate global growth in existing markets
Create growth engines for the future and
new fields in new markets
We will work in both Reborn Kao and Another Kao
to provide new value that helps realize comfortable lifestyles
for people throughout the world and helps achieve a sustainable society,
while also continuously developing our businesses.
Existing
technology
Existing
technology
New
technology
New
technology
Reimagine
Higher
Performance
New applications of existing
technologies that surprise
and delight consumers with
improved efficacy and
product performance.
New and better solutions
for old problems using
existing technologies in
unexpected ways.
Beyond
Expectations
Introduce new technologies
into existing markets and
categories to create new
value and change consumer
expectations.
Create new markets with new
technologies, introduce new
technologies that make existing
solutions obsolete, fundamentally
change possibilities.
Game Change
Strengthen foundation /
Global growth
Strengthen foundation /
Global growth
Create new engine /
Game change
Create new engine /
Game change
Reborn Kao
Another Kao
Reborn Kao
Another Kao
Game
Change
Beyond
Expectations
Higher
Performance
Reimagine
Roles of RK and AK
Business Concept for Realizing K25
and Making Further Developments
Existing market
New market
Existing market
New market
Kao Integrated Report 2023
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Our Strategy
Chapter 2
4
STRATEGY
Hygiene and
Living Care
Chemical
Health and
Beauty Care
Cosmetics
Hygiene and
Living Care
Health and
Beauty Care
Life Care
Cosmetics
Chemical
0
200.0
400.0
600.0
2022
2021
2020
2022
2021
2020
2022
2021
2020
2022
2021
2020
0
10
20
30
40
2022
2021
2020
(Billions of yen)
(%)
503.2
15.8
496.8
10.4
516.5
5.9
362.3
16.7
354.5
14.0
369.5
9.4
52.2
8.9
53.0
6.8
55.7
(0.0)
233.6
1.0
239.3
3.1
251.5
5.6
269.2
10.3
314.3
9.4
402.5
7.3
Net sales
Operating margin
(Fiscal
year)
Trends in net sales and operating margin by business segment
Outside: Net sales composition ratio (%)
Inside: Operating income composition ratio (%)
FY2022 Shares of net sales and operating income
by business segment
27.1
-0.0
31.8
28.2
23.1
16.2
3.6
23.8
33.3
Net sales
1,551.1
billion yen
Operating income
110.1
billion yen
Focused Growth in 5 Business Fields
Life Care
Share of net sales is calculated based on sales to customers.
Share of operating income is calculated before the elimination of intersegment
transactions.
Kao conducts business with a focus on the fundamental
value that people seek. We promote value creation
through five business segments: Hygiene and Living
Care that supports and brings greater comfort to
everyday lives; Health and Beauty Care that offers
healthy beauty for the entire body; Life Care that
develops new business to protect human lives;
Cosmetics that delivers hope and Kirei by staying close
to the beauty and individuality of each person; and
Chemical that contributes to the industry and a
sustainable world in the future—by providing innovative
solutions.
12.9
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Our Strategy
Chapter 2
Hygiene and Living Care Business
We aim to proactively engage in ESG activities and reinforce our contributions to society and connections with
customers through brands that have a large market share and are essential to everyday life.
* Excluding colorants, labels, pumps and caps
PET: Polyethylene terephthalate
* Japan: approximately 11,000 schools; six countries
and areas in Asia: approximately 1,200 schools
Kirei in our interactions and everything
our lives touch
ESG Activities
Business Strategies
Value Creation
By offering products and services that keep
clothing and home spaces clean and lessen
the burden of housework, we contribute to
creating living spaces where everyone can
live with peace of mind.
We offer sanitary products for each life stage
so that everyone can lead their lives how they
wish at any age and in comfort no matter
what the situation.
Source: Nielsen FY2022 real channel data
Reinforce our products proposal for clothing and home hygiene in response
to a growing hygiene awareness in the wake of the COVID-19 pandemic.
Proactively lead efforts to reduce the quantity of plastics and chemical
substances, and build essential brands for a sustainable world.
Develop strong brands which are loved globally by building trust with
people by products and services developed with the local needs.
Priority Activities
Increase customer value of the Attack and Humming brands
Solidify Home Care Business by proposing new value
Strengthen customer loyalty in Sanitary Business from the perspective of
lifetime value
Fabric Care and Home Care products with many
leading brands.
Sanitary products enjoy deep-rooted popularity in
Asia
Diverse range of technologies supporting cleanliness
and hygiene in everyday lives
Increased awareness about environmental issues
Growing hygiene needs for clothing and home
spaces globally
Advancement of women in society, declining
birthrate and population aging
Diversification in the allocation of housework
responsibilities (making it easier for anyone)
Strengths
Opportunities
Supporting first
menstrual education
We provide booklets that briefly cover
accurate knowledge on menstruation
along with sample products to
elementary schools in Japan and six
ountries and areas in Asia that made
applications to us. Since launching
Laurier in 1978, we have provided
them to approximately 12,000 schools
cumulatively*.
To reduce stress related to
menstruation as much as possible, we
are promoting initiatives to make
sanitary napkins a regular amenity in
workplace restrooms. In 2022, we
started introducing services to
companies that agree with this
initiative.
Laurier
in workplaces
Starting in 2021, we incorporated
bottles* using 100% recycled PET for
Attack ZERO and CuCute CLEAR
Foam Spray. By 2025, we will use
recycled PET in all PET bottles* for
Japanese household products.
Adopting 100% recycled
plastic bottles*
Natsumi Hotta
Senior Executive Officer
President, Consumer Products,
Hygiene & Living Care Business,
Global
Based on distributor location
Business Characteristics
Main Brands
Attack / heavy-duty detergent (33.9%)
EMAL / light-duty detergent (62.6%)
Wide Haiter / laundry bleach (79.1%)
CuCute / dishwashing detergent (47.5%)
Haiter / kitchen bleach (78.8%)
Magiclean / bath cleaner (56.7%)
Magiclean / toilet cleaner (40.0%)
Quickle / dust wiper (59.9%)
Quickle / toilet cleaning sheet (60.5%)
Source: INTAGE SRI+
®, figures in parentheses indicate FY2022 share by value
Develop numbers of
No. 1 brands in the
fabric and home
care market in
Japan
Strengthen our
presence in the Asian
market
Magiclean: No. 1 market share in the home care category within three countries and
areas in Asia we have business operation
Laurier: No. 1 market share in the sanitary napkin category within Guangzhou and
Pearl River Delta area, China
FY2022
results:
28 %
32 %
FY2025
target:
Ratio of net sales
outside Japan
Kao Integrated Report 2023
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Our Strategy
Chapter 2
In Thailand, we launched Bioré GUARD Mos Block Serum
that protects skin from mosquitoes in daily life with a safe and
comfortable feel after use. In addition, we started the
#GUARD OUR FUTURE project through a wide-ranging
collaboration alongside partners in government, academia
and the private sector with an aim to reduce harm from
dengue fever. We received delighted feedback from
customers in Thailand, and this also became a popular topic
New business protecting future
lives from mosquitoes
Business Strategies
Priority Activities
Continue to add new and compelling benefits to enhance
customer value across our core Brands, such as Bioré and Jergens
Expand tangible UV protection into more areas (Asia, U.S. EMEA and Brazil)
Strengthen functional skin care by communicating the value of Essential
Research
Expand e-commerce and direct-to-consumer (D2C) to deeply engage with
our customers
Strengthen oral care brands
Global business operation of Skin Care and Hair
Care products
Diverse range of technologies for hygiene and the
environment needs
Expertise in body skin care, skin protection and hair
coloring
Numbers of leading brands
Strengths
Hygiene and health needs expanded in the wake of
the COVID-19 pandemic
Global expansion of the hygiene market
Meeting the increasing concerns and needs around
environmental issues
Growing needs to improve the quality of life of elderly
people
Opportunities
Synergy with Another Kao
Kotaro Nuriya
Karen B. Frank
Senior Executive Officer
President, Consumer Products,
Health & Beauty Care Business,
Global
Executive Officer
President, Consumer Products,
Consumer Care, Americas and EMEA
President, Kao USA Inc.
Propose holistic solutions for needs in
various occasions of life.
Offer products and services to meet health
and wellness needs.
Focus on developing new products to solve
environmental and social issues.
Broaden our global footprint with a focus on
our leading brands of Bioré and Jergens
and John Frieda.
Accelerate Beyond Beauty, Beyond Bricks
and Beyond Borders.
Health and Beauty Care Business
Kirei that makes life shine
Value Creation
Through daily hygiene practices and selfcare
for physical and mental well-being that all
people can maintain without difficulty, we
contribute to realizing truly healthy lives,
where people can express their individuality.
Along with protection and prevention against
external factors such as infectious diseases
and UV rays, we also offer products and
information to boost the immune system for
caring environmental stresses and creating safety and
reassurance in everyday life.
Main Brands
Business Characteristics
Source: INTAGE SRI+
® for Japan, and Nielsen real channel data for the U.S.; both from FY2022
Bioré: 61 countries and areas
Liese: 11 countries and areas
MegRhythm: 16 countries and areas
Jergens: 39 countries and areas
John Frieda: 75 countries and areas
Global brands
Brands with No. 1
market share in their
category
Bioré / Japan: UV care products (unisex / for men)
Bioré / Japan: body washes (unisex / for men)
Bioré / U.S.: pore strips
Jergens / U.S.: skin tone enhancement
Ratio of net sales
outside Japan
FY2022
results:
46 %
50 %
FY2025
target:
in Japan. We will expand the product variations for more
diverse usage methods and occasions. We will also
collaborate with our partners and respond swiftly to the
different regulations in each country to expand our business
around areas beyond Thailand.
Based on distributor location
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Our Strategy
Chapter 2
Milbon × Kao: collaborative project for establishing beauty
and health care services in beauty salons
The hair stylist Oribe Canales created hairstyles for
many celebrities and was known as a legend in the
beauty industry. Oribe is a luxury brand that was born in
New York in 2008 with the aim to realize the beautiful
and glamorous feminine appearances that he
envisioned.
Goldwell originated in Germany in 1948. Ever since, the
brand has constantly innovated to provide industry-
leading and high-performance products for stylists.
Goldwell has been loved by hair stylists for 75 years,
and is widely recognized today as the best color system
in the world.
Health and Beauty Care Business
Salon Business
Making life beautiful for salons,
stylists and their clients
Business Characteristics
Main Brands
Beauty salons are a familiar place for many people, and a location that
they regularly visit. They have the potential to serve as new communities
that care not only for people’s beauty but also their health. Milbon Co.,
Ltd. and Kao are pursuing a collaborative project for a future in which
beauty salons can become new communities for people and cities
through beauty, and thereby serve as a beauty platform. We started
deliberations in 2022 about providing health care information at beauty
salons using sebum RNA monitoring. Going forward, we will promote
discussions on beauty and health care products to be exclusively sold in
beauty salons as well as health care products and various services that
utilize beauty salons as a hub.
Priority Activities
Reinforce Goldwell as a partner with leading hair color products and services
Continue to grow Oribe in all channels and expand globally
Enhance efficiency and profitability across the entire Salon Business
Collaborate with salons globally to reduce the environmental impact from products and their use
Collaborate with the salon industry to promote Diversity, Equity and Inclusion and inspire the next genera
tion of hair stylists.
Leading position for value creation, education and
sustainability in the salon industry
Hair color innovation that contributes to profitable
growth at salons
Oribe as a luxury omnichannel brand that achieved
double-figure growth on a global scale
Strengths
Expand from B2B business to omnichannel
Greater importance of experiences and storytelling
Increasing need for customization
Rise in interest for Environmental, Social and
Governance (ESG) among salons and consumers
Fusion between beauty and health (changing needs
in beauty salons)
Opportunities
Synergy with Another Kao
Kao provides products and services primarily for salons
to customers worldwide. This business operates on 6
continents and 63 countries through 22 subsidiaries.
Through five brands—Goldwell, Oribe, KMS, Kerasilk
and VARIS—we provide products in the four categories
of coloring, care, styling, and perms for salons and
stylists around the world, as well as various services
that support their business.
Value Creation
We believe in enriching the lives of hair
stylists, salon owners and their clients.
Together, we are making life more beautiful
with our salon brands, products and services.
Dominic M. Pratt Daniel Kaner
Executive Officer
President, Consumer Products,
Salon, Global
LLC Chairperson of the Board, Oribe
Hair Care
President, Kao Germany GmbH
President, Oribe Hair Care
Co-Founder, Oribe Brand
Business Strategies
Focus on the two key pillars of Hair Color
and Oribe, and maximizing the commercial
synergies
Develop and establish differentiated
innovations like Piston-Can, Automatic
color dispenser, @Pure Pigments and
Elumen.
Accelerate global expansion of Oribe in
EMEA (Europe, the Middle East and Africa)
and Asia to build on the omnichannel
success achieved in the US.
Strengthen relationships with salons and
stylists by supporting them to grow their
business via innovative products, services
and business models, with a focus on DX.
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Our Strategy
Chapter 2
We focused on the health functions of
polyphenols in plants, and developed
the Healthya brand as a series of Food
for Specified Health Use (FOSHU) and
Food with Function Claims that
harness the power of these
polyphenols.
With the online service Monitoring
Health that visualizes visceral fat
levels, blood pressure and steps
walked, we aim to help make healthy
behavior part of our customer’s daily
lives while enhancing loyalty.
Health and Wellness Business
Through Kao Professional Services Co., Ltd.
(KPS), we engage in the sales of commercial-use
detergents, also provide optimal hygiene
solutions with professional perspective for
restaurants, food
processing companies,
medical, care,
accommodations and
leisure facilities, and
other organizations.
Commercial-use Hygiene products
Business Characteristics
Main Brands
Priority Activities
Transform to Precision Life Care Business
Expand revenue in Commercial-use Hygiene Products
through synergy with B2B Hygiene Solutions
Strengths
Expansion in the self-health-care market
Advances in digital technologies
Expansion in hygiene-related markets
Developed technologies accumulated through
existing businesses (including hygiene, metabolic
syndrome care and skin care technologies)
Unique Precision Monitoring technology (including
sebum RNA testing technology) accumulated
through Essential Research
Data-driven marketing using advanced technologies
Opportunities
Synergy with Another Kao
Start to Precision Life Care Business
Healthcare Systems Co., Ltd. launched a mail-in testing service
called Baby Well Check that uses Kao’s sebum RNA monitoring
technology to understand the skin barrier status of babies and
infants.
The skin barrier function is known to be lower in babies and
infants who develop atopic dermatitis. We believe that this test can
help parents and guardians know the status of their children’s skin
and provide care that suits their skin.
We launched B2B Hygiene Solutions through Kao Professional
Services Co., Ltd. (KPS) to support measures against infectious
diseases at companies and organizations. We established the new
company Kiralia Hygiene Co., Ltd. as a 100% subsidiary of KPS to
provide solutions with even greater expertise that stay close to
customers’ individual needs.
RNA Testing Business
B2B Hygiene Solutions
Life Care Business
Supporting health so people can
lead happy and
fulfilling lives
Value Creation
In view of the nature of issues people face,
we take steps to realize self-cures and self-
care that fits their lifestyles and can be
continued without special effort.
By bringing together mental and physical
monitoring technologies and AI, we
provide solutions that accurately suit the
actual and potential needs of each person.
We offer solutions catering to professional hygiene needs for companies and
organizations, thereby contributing to people’s safety.
Akira
Shimotoyodome
Executive Officer
President, Consumer Products,
Life Care Business, Global
Masaaki Ozawa
Consumer Products,
Life Care Business, Global
President, Kao Professional Services
Co., Ltd.
Business Strategies
Transform from a Health Drink Business to a
Well-being Business that provides personalized
and optimized solutions based on biological
data.
Expand our business domain to environmental
hygiene to proactively prevent the spread of
infectious diseases, treatment for skin diseases
and the prevention of geriatric syndrome arising
with severe population aging.
Collaborate with companies, research
institutions, public-interest group and others,
we will engage in swift co-creation to produce
customer value.
Offer solutions that cover everything from
design to operations and maintenance in a
comprehensive package to resolve hygiene
issues holistically at professional use occasion.
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Our Strategy
Chapter 2
Curél is a brand for dry and sensitive skin in 10 countries
and areas with a focus on Asia. It has dominated the
No. 1 market share*
2 in sensitive skin care category in
Japan. We are pursuing global development further for
people with dry and sensitive skin worldwide.
SENSAI is a luxury brand rolled out to 48 countries with
a focus on EMEA (Europe, the Middle East and Africa). It
was launched in Europe in 1983, and is competing*
1 for
the leading market share in the skin care category in
Germany. We expanded into Tmall in China in 2021, and
aim for further development in Asia.
*1 In the alliance market with 400 perfumery stores, *2 INTAGE SRI+
®, FY2022 share by value of cosmetics for sensitive skin by series
In the Cosmetics Business, we
have selected eleven global
strategic brands (G11) and eight
regional strategic brands deployed
mainly in Japan (R8). We polish
each brand by fusing solid
evidence with beauty that appeals
to the five senses. Within the G11,
we will focus more on SENSAI and
Curél, which have already been
developed globally, to achieve
further growth at a faster pace.
Main Brands
Priority Activities
Accelerate growth in the G11 with a focus on SENSAI and Curél
Expand the sales composition ratio of e-commerce in China and EMEA
Improve profitability by reforming brand portfolio.
Cross-sectional asset utilization in the Kao Group
Integration of in-depth knowledge about skin based
on evidence (Science) and emotional value (Sense)
Highly distinctive brands that stay close to the
individuality of customers
Unique advanced technologies (Fine Fiber, sebum
RNA monitoring, etc.)
Strengths
Offering new value based on the SDGs perspective
Mid- to long-term global market expansion
Diversification of beauty needs and makeup behavior
due to new lifestyles and values
New purchasing experiences and customer
touchpoints with advances in digital technologies
Opportunities
Cosmetics Business
Celebration of Individuality
Value Creation
Through the outstandingly distinctive identity
of each of our brands, we are committed to
the “beauty” and “individuality” of each
person. We deliver hope and Kirei with solid
science and our abundant sense.
Through beauty, hope and Kirei, we
contribute to the realization of a “joyful”
lifestyle culture and a society in which fulfilling
lives are possible for all.
Yousuke
Maezawa
Mark Johnson
Senior Executive Officer
President, Consumer Products,
Cosmetics Business
Molton Brown Limited Chairperson of
the Board
President, Consumer Products,
Cosmetics Business
Molton Brown Limited President of
UK headquarters
Business Strategies
Focus investments on the G11 and R8, and
develop each brand to become No. 1 in its
segment.
Establish a new business division to expand
business in AEMEA, and expand market share
in China by executing a model with local
production for local consumption.
Promote ESG-driven manufacturing and
business operation to realize a sustainable
world and solve social issues.
Achieve engagement with customers and shift
toward a business model focused on retention.
Shift to a robust business framework through
initiatives such as restructuring Makeup
Business.
My Kao is an interactive digital platform with the following main four
functions: learning, experiencing, buying and creating. It helps us to
connect with customers and understand in depth using One-ID to
provide user experiences (UX) in many ways.
Cosmetics Business launched within it an interactive beauty-related
community site called Kao Beauty Brands Play Park, and is rolling out
many products in our e-commerce site My Kao Mall.
Reinforcing customer engagement
with My Kao
Synergy with Another Kao
G11
R8
Ratio of net sales
outside Japan
FY2022
results:
36 %
45 %
FY2025
target:
Based on distributor location
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Our Strategy
Chapter 2
Oleochemicals
Plastics and
Rubbers
Detergents and
Cosmetics
Agrochemicals
Surfactants
Food products
Fragrance
Casting
Digital printing
materials
Metals
Semiconductors and
Electronics
Asphalt,
Civil engineering and
Construction
In the leading group worldwide (8 products)
In the leading group within Japan (7 products)
(Source: Kao survey)
Silica dispersants for
fuel-efficient tires
Adjuvants for agrochemicals
Additives for tofu
Emulsifier for confectionery
Furan binder for casting
Metal cleaners
Hard disk polishing agents/cleaners
Cleaning agents for semiconductor
back-end processes
High-range water reducing
admixtures for concrete
products
Natural fatty alcohols
Tertiary amines
Surfactants for fabric softeners
Sulfate type anionic surfactants
Aroma chemicals
(HCA, MDJ, lactones, etc.)
Toners/Toner binders
W E B
Business Characteristics
Priority Activities
Bolster the No. 1 position of the Oleo Derivatives Business.
Steadily develop one-of-a-kind technologies.
Achieve global expansion of sustainable chemical products.
Product groups that demonstrate strengths through
unique technologies: Oleochemicals, Performance
Chemicals and Information Materials
Ability to deploy business solutions in a wide range
of industrial fields
Synergy with the Consumer Products Business
Business foundation that enables global growth
Strengths
Expanding needs for environmental response and
decarbonization
Expanding social expectations for hygiene
Increased concern about food-related issues
Aging infrastructure in developed countries and
economic development in emerging countries
Advanced digital technologies and expansions in
their use
Opportunities
Synergy with Another Kao
For details on the Chemical Business, please visit the Kao Chemicals website.
chemical.kao.com/global/
Chemical Business
Through the power of chemistry,
we create a future of Kirei for people,
society and
the planet
Value Creation
We strive to solve environmental and social
issues through co-creation by integrating
Kao’s various strengths with those of its
customers and partners. In this way, we help
create new value in the industry and realize
social impact.
We contribute to initiatives for customers, industries and society to make a
shift toward decarbonization and a circular economy by refining our
sustainable materials and proposing new ecological solutions.
Masahiro Katayose
Senior Executive Officer
President, Chemical Business, Global
Chairperson of the Board, Fatty Chemical (Malaysia) Sdn. Bhd.
Chairperson of the Board, Pilipinas Kao, Inc.
Chairperson of the Board, Kao Chemicals Europe, S.L.
Business Strategies
Strengthen our foundation for growth and accelerate
business expansion into new areas.
Proactively develop solutions and materials with high
environmental value and social value.
Strengthen and accelerate business development
through M&A and external collaboration and
cooperation.
Accelerate global growth by business expansion in
major markets including AEMEA (the Americas,
Europe, the Middle East and Africa) and China, and
creating a business foundation in emerging countries.
Innovate business and reinforce customer
touchpoints/communication by actively adopting
digital technologies.
NEWTLAC 5000 is an asphalt modifier made from waste PET and launched in 2020. It
enhances the durability of asphalt paved roads and reduces the frequency of repairs, thereby
decreasing environmental impact and maintenance costs. Adoption has increased in various
places and social implementation has steadily progressed.
To respond to the increase in the quantity used, we aim to establish a recycling system for
waste industrial PET film that is currently disposed of by incineration. We will pursue
collaborations with companies that dispose of waste PET as well as local governments while
also promoting collaborations with pavement companies to achieve widespread rollout for
expressways and regular roads.
We are developing NEWTLAC 6000SMA for cold environments, and will engage in sales
activities within cold regions in Japan starting in 2023. We are also pursuing deliberations on
expansion outside Japan, and seeking to make global contributions.
Asphalt modifier made from waste PET
Ratio of net sales
outside Japan
FY2022
results:
65 %
70 %
FY2025
target:
Based on distributor location
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Our Strategy
Chapter 2
Kao has streamlined operations and driven work style
reforms using AI and other advanced technologies from
FY2018. We made fully fledged efforts to promote digital
transformation (DX) in business starting in FY2021, and
in January 2023, we newly established a division called
DX Strategy by integrating DX functions.
Our current top-priority initiative for business DX is
to build an interactive platform “My Kao” for directly
connecting with customers to strengthen bonds with
them.
To this end, we are pursuing two approaches that are
unique to Kao. One approach is to provide a unique user
experience (UX) through our monitoring technologies.
The other approach is to harness our broad business
domains to stay close to each and every customer, and
thereby realize a Kirei Life.
This platform will also significantly contribute to the
digitalization of our Yoki-Monozukuri. The big data
collected on a daily basis through this platform will help
update our capabilities in consumer understanding,
product development and marketing.
Rolling out the Interactive Digital Platform Worldwide
We launched “My Kao” in December 2022 as our first
interactive digital platform in Japan. My Kao has four
functions: knowing, experiencing, buying and creating.
It helps us to connect with customers and get closer
using One-ID, allowing us to provide UX in many ways.
We have already launched direct-to-consumer (D2C)
business in China and AEMEA (the Americas, Europe,
the Middle East and Africa). We will share knowledge
from each area and work to develop the interactive
digital platform worldwide.
5
STRATEGY
We seek to go beyond manufacturing products
and become a company that provides unparalleled
experiences. In other words, Kao’s challenge for DX is
to transform from a manufacturing company to a UX
creation company.
Net sales composition ratio of digital channels
in Consumer Products
FY2025
challenge
FY2022
results
e-Commerce
In-house ratio
in e-commerce
11 % (5%)
4 % (8%)
25 % (15%)
15 % (20%)
Numbers in parentheses are those for Japan
Shifting from a Manufacturing Company
to a UX Creation Company
Accelerate Digital Transformation
Yoshihiro Murakami
Managing Executive Officer
Senior Vice President, DX Strategy
Categorize people into groups based on their skin RNA type. Analyze @cosme
evaluation comments from people in each group and give estimates on cosmetics that
suit each group.
Evolving our business in cosmetics through
collaboration with istyle Inc.
UX Creation and
Business Model Reform
We have two distinct perspectives for UX:
monitoring and solution matching.
For example, the monitoring can clearly
show customers changes in their physical
status, as well as makeup and hairstyles that
suit them, or the hygienic status in their living
spaces. On top of this, we will bring
customers the joy of coming across the ideal
solution that suits them, and deliver an
experience that has them want to continue
using it. This is what Kao seeks to achieve in
UX.
C Type
B Type
People
with
various
types
of skin
A Type
Skin RNA Type
Cosmetics
Our DX human capital require wide-reaching knowledge
and skills in both IT and business, including fields like IT
technologies, data science and digital marketing. We
are developing human capital by using digital skill study
services and providing data analyst training.
Developing DX human capital is also crucial for
improving work styles and business processes. To
respond to projects for individuals or specific teams that
have a lower company-wide priority, we have built a
system to train employees who understand the Genba
as “citizen developers”. In this way, by accumulating
many small-scale internal DX projects, we are steadily
improving streamlining operations.
DX Human Capital
Development and Internal
DX as the Foundation for
a UX Creation Company
· Routine work belonged to individuals
or teams, etc.
· Core system
· Customer and sales management system
· Production management system
Required resources
Few
Many
Business impact
Small
Large
We will respond to high-priority projects with active investments, and to
low-priority projects through employee reskilling.
As of February 2023, there are 673 citizen developers.
Two approaches for internal DX
Improving web accessibility
As part of our commitment to environmental and social
responsibility and our goal of promoting a fulfilling
lifestyle, we are working to improve the accessibility of
information and features on our website (web
accessibility). Through this effort, we aim to promote
user friendly digital communication, making it easy and
stress free for everyone to find and use Kao products.
Kao Web Accessibility Policy:
www.kao.com/global/en/web-accessibility/policy/
W E B
Japan “My Kao”: my.kao-kirei.com/
Americas (brand site): www.kao.com/americas/en/brands/
EMEA (brand site): www.kao.com/emea/en/brands/
China (e-commerce website): www.kao.com/cn/e-commerce/
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Our Strategy
Chapter 2
6
STRATEGY
We believe that empowered employees working with
passion for what they do strengthen the company.
We implemented OKR (Objectives and Key Results)
system as a way to revitalize our human capital. We
aim to create a corporate culture in which each and
every employee has aspirations and is willing to take on
challenges. We should make the most of individuality
and support individual growth. We will maximize our
organizational power by building a team in which each
individual can make biggest synergy.
Fostering a good working environment is also
important. It is our responsibility to create a place
where our employees can exercise their full
potential, achieve results and grow.
It motivates people more than anything when their
efforts lead to results. We manage the effectiveness of
work through ROIC for each business along with other
indicators, and we promote the provision of places
where people can demonstrate their abilities. It is also
essential to improve work efficiency to increase the
speed and standard of these efforts. We will integrate
our management strategy and human capital strategy,
leading to the growth of the company and employees.
We are promoting 0 ★1 Kao, which creates a challenge
for employees to make proposals that transcend their
responsibilities and roles. Nearly 100 proposals have
been submitted by the end of FY2022, and some of
them are in the process of being implemented.
In FY2022, we conducted personnel transfers and
placements inside and outside the company based on
their career orientation and aptitude of employees. We
have implemented 438 cross-departmental rotations
while prioritizing areas with importance in terms of
management, thereby working to develop of employees
with a long-term perspective.
To achieve OKRs as set by the employee, we provide
self-development programs that promote individual
learning opportunities. Personal development is
encouraged through a variety of programs, including
e-learning courses that provide more opportunities
without time restriction. We have also reorganized our
training programs for managers to enhance leadership
and management, as well as dialogue programs.
Further promotion of 0 ★1 Kao
New job assignments
for experience expansion and talent development
Expand learning opportunities
Various learning opportunities
Dialogue program
for managers
Providing continuous
learning
Cross-border programs,
cross-industrial programs,
etc.
Self-discipline
Learn by oneself
Persistence
Learn continuously
Co-creation
Learn from
each other
1 Individual growth
Proposers can freely exchange ideas with each other,
and supporters are given the opportunity to make their
own proposals by providing their ideas. This has led to
the expansion of our culture for taking on challenges and
the enhancement of our ability to promote innovation.
We are also expanding the number of employees
seconded to solve social problem together the
government and industry institutions. As of the end of
December 2022, 70 employees are actively working
outside the company. We believe that the experience of
these employees will help improve the skills of
individuals and organizations.
It is important to continuously enhance the abilities
of each and every employee to drive company
growth. Introducing OKRs to align the direction for
individual and company growth and to integrate
them for organizational strengths. As of FY2022,
90% of employees in Japan and 62% of global
employees have set their own goals using OKRs.
Employees are encouraged to set minimum KPIs
related to their basic role in addition to challenging
goals, and the system is designed to evaluate effort
that exceed the KPIs as an additional achievement.
In a sense, it is a more rigorous evaluation system
than KPIs, but depending on the degree of
achievement, the company will evaluate, reward
and recognize employees and provide opportunities
for the next stage of growth. According to the
results of an employee survey, about 25% of
employees have already set their own challenging
goals and are putting them into practice.
Opportunities
that assist growth
Providing
better workplaces
1 Individual
Growth
3 Opportunities
for growth
2 Maximization of
organizational power
4 Work
efficiency
Challenge-oriented human
capital: over 50%*
1
Investment in employee
education doubled
Strengthen development of
management and specialist
human capital
Expansion of autonomous
challenge system 0 ★1 Kao*
2
Evaluation and reward system
according to difficulty and
achievement
Expansion of duty-linked human
capital system
Workplace satisfaction rating:
over 80%*
1
Provision of a fair environment
(genderless mandatory childcare
leave, etc.)
Recruitment and promotion of diverse
human capital: Ratio of female
managers = Ratio of female employees
(FY2030)*
5
Mid-career hires: tripled*
3
Enhance the human capital portfolio and
strategically assign the right people
Ratio of highly motivated human capital:
over 80%*
1
DX human capital: tripled
(Utilization support and key human
capital assignment)
Work style satisfaction: over 70%*
1
Evolution of work styles
(expansion of work-style selectivity)*
4
Human Capital Development
and Engagement
Strong company is driven
by motivated and engaged
employees
Providing better workplaces and opportunities that assist growth
Unless specifically stated, target deadlines are FY2025, and target values for rate of change are comparisons with FY2020
*1 Employee Opinion Survey Index, *2 Kao’s original new proposal system,
*3 Targets for DX human capital and specialized human capital, *4 Workplace aptitude judgment, *5 FY2030 targets
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Our Strategy
Chapter 2
2 Maximization of
organizational power
Through OKRs and 0 ★1 Kao, employees’
challenge spirits are increasing. We are providing
opportunities for individuals that can take
challenges to maximize the power in each into the
power of the organization as a whole.
To develop and secure promising human capital over the
mid- to long-term, we manage human capital information
from multiple perspectives, based on their backgrounds,
achievements and potential. This information also serves as a
profile for the formation of new teams.
Priority tasks must be driven forward in a speedy and
advanced manner, so the best team formation is needed to
KCMK: Kao Group Customer Marketing Co., Ltd.; KPS: Kao Professional Services Co., Ltd.
For an organization to grow, it is essential that diverse human
capital can exercise its full potential in a good working
condition.
In FY2023, we introduced new measures in Japan to
promote the active participation of women, and we release
monthly informative contents on multiple themes such as
LGBTQ+, disabilities and nursing care to promote
understanding among our diverse employees and to
establish appropriate practices in the workplace. Ensuring a
time and environment in which all employees can play an
active role in the organization is a crucial factor for allowing
individuals to resonate with each other. In addition, we
appointed four non-Japanese and six female executive
officers out of 36 in FY2023 to incorporate diverse
perspectives into discussions and decision-making on
important management issues. We believe that maximizing
our organizational power means integrating the power of
distinctive individuals, and we are promoting a viewpoint that
recognizes diverse organizations as standard practice.
Practicing the optimal work style to suit the function and characteristics of the
organization and the role of the individual will increase the amount of work per
hour and the standard of results. In other words, this will lead to an
enhancement of organizational efficiency. In the wake of the COVID-19
pandemic, a hybrid work style that combines remote and in-office work is
currently taking root. To promote this style, Kao is evolving its IT facilities and
office environment by installing web conferencing areas and a webcasting
studio, as well as a Smart Work Support (SWS) that enables the monitoring of
employees working from home. In addition, Kao has introduced a remote work
system to create an environment in which employees
who work while nursing or caring for sick or elderly
family members or while receiving education can play
an even more active role.
Employee health and well-being are key to our business activities. This
does not only represent the foundation of the work environment, but it
also serves as an important element for individual growth and company
performance. Kao has utilized knowledge and solutions in the area of
health conditioning for employees and their families, and is promoting
practical health activities. We also collaborate with external
organizations to promote excellent initiatives among local residents,
thereby contributing to the realization of a healthy society.
Scrum-style management
In addition to the use of Robotic Process
Automation (RPA) and chatbots, which we have
been promoting for some time, we are also
actively improving our processes and efficiency
through new business applications.
The number of citizen developers who can build
their own solutions has also increased, and as of
February 2023, there were 673 creators and
2,862 projects. The extra capacity of individuals
and organizations freed through these efforts will
be allocated to such as more creative work and to
reallocate personnel, thereby accelerating
enhancements in efficiency.
Wider utilization of IT
Empowered by diversity
Work-style reform
Supporting employee health and expanding
into society: Promoting health
care management
meet the objectives. Human Capital Strategy has a mission
to propose the best team formation derived from talent
profiles. We are evolving a matrix structure and working to
implement scrum-style management in a way that is centered
on maximizing the speed of achieving results. We aim to
make decisions in Genba while avoiding silos and
uniformity that tend to occur in large organizations.
3 Opportunities for
growth
4 Work
efficiency
It is important for people to work in an organization
where they can improve themselves. However,
this can only be achieved with the foundation of
a workplace that enables employees to do so. A
workplace where employees can grow is created
by providing a mission in which their achievements
are properly evaluated and rewarded. OKRs play
“Efficiency” is the ratio of results obtained to the effort expended, and
“work efficiency” is the ratio of work obtained within a given time frame.
Kao’s emphasis is not on “efficiency,” but on “work efficiency,” which
is the ability to increase the amount of work that can be done in a
given amount of time. To this end, it is imperative to carry out a drastic
review of work styles and utilize IT on a daily basis.
a role in motivating employees by visualizing the
connection between their own goals and those of
the organization/company.
It is also essential to set rewarding work that
matches the aptitude of employees to improve
their activity. We will expand the job-linked
human resources system to maximize workplace
satisfaction. We aim for continuous growth and
maximization of the activities of human resources
by selecting jobs that should be prioritized, and by
allocating them appropriately.
(people)
Develop human
capital that can take
on leadership roles
Support employees
in balancing childcare
to promote
engagement
Provide management
education
for unbiased training
and promotion
opportunities
Strengthen development from
the perspective of equity
• Selective leadership training
program for women
• Motivative transformation for
women
Minimizing career gaps
caused by childcare
• Expand childcare support
system
• Raise career recognition among
employees in the childcare
period
Dispel the mindset
of gender-based roles
• Learn diversity management
skills
Contributions to society
Employee satisfaction
Individual growth and company performance
Work environment
Physical health
Well-being (seeking a better state for each person)
Mental health
Aim to bring diverse perspectives into decision-making process
Overview of measures
to promote women’s participation
Number of application creators
in each division (as of February 2023)
0
50
100
150
200
250
Others
KPS
KCMK
DX Strategy
Human Capital Strategy
Accounting & Finance
Consumer Products Business
Enterprise Information Solutions
R&D
Supply Chain Management
164
15
38
8
11
11
18
74
106
228
Total
673 people
Our Strategy
Chapter 2
67
Kao Integrated Report 2023
68
Value Chain Reform
We will implement scrum-style and integrate our diverse knowledge
to take on challenges swiftly with courage.
We will implement scrum-style and come together as we take on challenges.
Kao Integrated Report 2023
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Our Strategy
Chapter 2
Quadruple win: evolving our value co-creation
with customers and retailers
Our Sales Division serves to deliver products and
services with value from us to consumers. It has worked
to realize “Triple Win” for consumers, retailers and Kao
itself.
There have been rapid changes in recent years, such
as diversification in products, increasing channel
complexity, a shift to electronic payments, and the
acceleration of direct delivery. Through collaboration
with retailers, we are expected to contribute not only to
consumers’ lives, but also to sustainability in society
and economy. We must add a future-oriented
perspective to “Triple Win” and evolve our sales and
marketing activities for “Quadruple Win” that additionally
enables a win for our future society. Together with
retailers, we will eliminate unreasonableness, waste and
inconsistency in the value chain that delivers products
and services to consumers, and we will seek to achieve
a spiral up in profit for both sides.
We work with individual retailers and engage in reciprocal
customer transfer. In order to motivate Kao product purchase at
retailers and continue to improve customer satisfaction, we send
out our life hack information through retailers’ digital content as
well as POS, so that customers can experience the most value
from Kao products.
In 2022, we carried out SDGs campaigns together with
manufactures in other industries, retailers and consumers. Going
forward, we will expand our scope of collaboration to local
communities, environmental organizations and other groups to
promote ethical consumption.
The logistics crisis caused by a shortage of truck drivers is an
important issue we should address together with our partners. We
are promoting connected logistics to enhance logistics efficiency
with retailers and other partners.
Engaging in customer
transfers and sharing life
hack information
Promoting ethical
consumption
Realizing sustainable
logistics
R
E
F
O
R
M
1
Shift to loyalty
marketing
We work to be even closer to consumers and propose
new lifestyles (Life Value Solution) to make shift toward
loyalty marketing that strengthens our bonds with
consumers.
The key to loyalty marketing is to build an
environment that enables consumers to accurately
judge on their own whether a product suits them and
encounter products that can satisfy them.
We launched an interactive digital platform called My
Kao with direct-to-consumer (D2C) functions to serve as
a place for each and every person to choose products
that suit them. We also launched Toyohashi Connected
Flexible Factory, which enables efficient high-mix low-
volume manufacturing. Through these efforts, we are
promoting manufacturing that suits each and every
individual, and are accelerating our transformation to
loyalty marketing. At the same time, we will seek high-
profit businesses by streamlining marketing costs and
minimizing inventory and disposal.
High-mix and high-volume products,
large-volume mass-media advertising
Mass Trial Model
Highly personalized products,
precise and reliable information
Targeted Loyalty Model
Manufacturing for mass-market needs
Large volume inventory and disposal
Product A
Product B
Product C
Manufacturing for the individual to brighten personality
Less disposal
Product A
Product B
Product C
Marketing and
Sales Strategy
Deliver optimal value
to each and every
consumer through
loyalty marketing
Our product brands serve an important role as
touchpoints between consumers and us. We aim to not
just realize comfortable lives for consumers, but also
contribute to sustainability in society and across the
planet as we define each brand’s purpose. Based on
each brand’s purpose, we provide brands and services
while carrying out various activities as we gain empathy
from consumers and act together with them, thereby
further strengthening our bonds. In addition, we carry
out design activities so that our unique brand groups
create synergy, letting us utilize our strengths arising
from having developed many brands.
Purpose driven brand
design for all
Quadruple Win
C
o
n
s
u
m
e
r
s
F
u
t
u
r
e
s
o
c
i
e
t
y
R
e
t
a
i
l
e
r
s
Kao Integrated Report 2023
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72
Our Strategy
Chapter 2
2
R
E
F
O
R
M
Kao started to achieve centralized management of all information
ranging from raw material procurement to sales in 1966. We have
established and evolved an efficient approach to supply chain
management based on high prediction accuracy for each product.
However, in the face of diversifying lifestyles, structural changes in
the retail business and the logistics crisis, it is not enough for us to
simply strive for efficient mass production.
Starting in 2021, we are driving various initiatives to
fundamentally transform the supply chain end-to-end. More
specifically, we are introducing AI, robots and other advanced
technologies across all processes while reinforcing data linkage.
We are also working to improve demand forecast accuracy,
production stability and efficiency, and agility in the face of
changes in demand or disasters as well as to take efficient action
for personalization. These initiatives will bring a dramatic increase
in productivity across the supply chain and provide strong support
for boosting the profitability of our businesses and transforming
our business models. Increases in productivity within the supply
chain will directly contribute to waste-material reduction and
resources savings. We will also collaborate with partners in efforts
to respect the human rights and to preserve biodiversity in the
supply chain.
Genba DX: employees
at the Genba voluntarily driving DX
New supply chain base
with integrated production
and logistics functions
of these efforts, more and more employees are
participating, resulting in a greater acceleration for DX in
the Genba.
Alongside these activities, we are also working to
build a data lake for accumulating and utilizing the vast
amount of data in various granularities generated from
the supply chain. As a result, it is now possible to
harness the wisdom of veteran employees among the
next generation, to produce new ideas. Going forward,
we will link marketing and R&D with this data platform
and develop this into a data lake for Kao as a whole.
Starting in 2020, we have been advancing efforts for
going paperless and automating simple tasks by
introducing robotic process automation (RPA) and
low-code application development for daily work. To
realize digital transformation (DX) across a supply chain
composed of many processes, it is key to boost the IT
literacy of the employees who are familiar with their
work. We are training key users who will be responsible
for promoting DX in each plant, and have built a backup
framework for these users to train others. As a result,
we have achieved business process improvement in a
short period of time. By sharing information on the fruit
To address demand fluctuations and a shrinking
workforce, we are working to build a new integrated
production and logistics base.
Toyohashi Connected Flexible Factory started in 2023
includes a flexible production system using robots, AI
and other technologies, as well as a fully automated
warehouse with excellent environmental performance.
We also seek to engage in integrated operations with
our Logistics Center, to make contributions toward
boosting productivity and reducing environmental
impact and workload.
Developing systems for
efficient high-mix
low-volume production
In collaboration with B&R K.K. and Kyoto Seisakusho
Co., Ltd., we have developed decoration processing
technology to design individual products in a freeform
manner and dynamic cell production technology to
realize efficient high-mix low-volume production. We
plan to start running a new production system in
FY2023 using these new technologies.
This new production system will allow us to engage in
the simultaneous production of many types of products,
as the system allows for product types to be switched
flexibly and swiftly to suit the needs of individual
customers. By utilizing this production system, we will
accelerate our shift to a marketing approach that
reduces environmental impact while also achieving
personalization.
Dynamic cell production technology that enables efficient
high-mix low-volume production
Toyohashi Connected Flexible Factory
Proposing personalized products using new decoration
processing technology
Our goals for the new integrated
production and logistics base
· Less waste and less time required when
supplying products
· Lower logistics costs
· Traceability management
· Lower environmental impact by introducing
electric/fuel cell trucks and photovoltaic
power generation
· Better work environment through partial or
full automation of logistics operations
DX
Suppliers
Production
sites
Retailers
Customers
Predictions
Planning
Engineering
Operation
Logistics
sites
Productivity
improvement
· Demand forecast accuracy
· Production stability and efficiency
· Agility in the face of changes in
demand or disasters
· Action for personalization
Environmental
impact reduction
· Resource and energy saving
· Waste-material reduction
Operational burden
reduction
· Respect for human rights
· Improvement of job satisfaction
Supply Chain
Management
Strategy
Transform our business
models and boost
profitability by building
a resilient supply chain
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74
Our Strategy
Chapter 2
Our dedication to Essential Research
and our approach to value creation
Research strategy
for business
expansion
Structure and
human capital
for the power
of our integrated
approach
Essential Research is the driving force for Kao’s research activities.
“Essential” refers to the universal nature and functional
mechanisms identified by looking at human and physical
phenomena using the lens of science to contribute toward
technology assets.
Kao has developed precise interfacial control technology to
target skin, fiber, and many other objects. We combine this core
technology with many other technology assets, and link them with
the needs of customers, industry, and society to create unique
products and services.
We will enhance and evolve value creation in four areas
Cleanliness, Beauty, Health, and the Environment to respond to
four social issues such as Environmental issues, Population aging,
Pandemics, and Challenges associated with diversification. We will
create new businesses that transcend the boundaries of these
areas in a direction that matches future trends.
We are building a management system in
Research and Development to gather
knowledge in a cross-organizational and
cross-disciplinary way. Flexible collaboration
at research laboratories for fundamental
technology and product development helps
us quickly respond to change. By nurturing
highly specialized human capital with strong
expertise in specific fields alongside hub
human capital who excel in integrating skills
and networking, we can maximize the power
of our integrated approach.
We accelerate innovation by utilizing data
in a more advanced ways by promoting DX.
We also promote new discoveries and the
exchange of ideas at presentation sessions
where researchers can hold discussions and
opportunities for co-creation with universities
and other partners.
Research
Strategy
Challenge to create
new value through
integrating our strength
in a wide variety
of business domains
R
E
F
O
R
M
3
Approaches for revitalizing and bolstering existing
businesses and creating new businesses
Pursue high added value and reduce environmental impact for products and
services by carefully selecting raw materials and refining technologies for water
and energy conservation
Promote DX and the advanced use of technology assets and data to accelerate
product development
Utilize customer data from D2C platforms
Develop efficient high-mix low-volume process engineering to accommodate
the shift toward personalization
Accelerate innovations that meet local needs as well as global expansion
Explore and utilize safer, greener and cheaper raw materials
Hygiene: safe and secure measures against infectious diseases using bacteria/
virus control technologies that are easy to integrate into people’s daily routines
Holistic approaches: health and beauty solutions using RNA monitoring
technology
Upcycling: horizontal material recycling technology for used plastic film
packaging and asphalt modifiers using waste plastic
Food and infrastructure: adjuvants that boost food production with fewer
agricultural chemicals and solutions to strengthen infrastructure such as roads
and buildings durability
Sustainable chemicals: reclaiming plastic and recycling CO2
Healthy aging: health care services that prevent geriatric syndromes
Stop pandemic: everyday, effective technology to prevent the spread of
infection as infectious diseases become the norm
Diversity: precision life care technology to accurately measure or estimate
differences between individuals
Revitalize and bolster existing
businesses by refining existing
technologies and new technologies
Expand business domains
in boundary areas
Accelerate innovation and create
new businesses in neighboring areas
Provide new value in Cleanliness, Beauty,
Health, and the Environment to solve problems
in existing businesses
View technology assets from a new perspective
and provide new value to boundary areas
Use back-casting from the future to accelerate
innovation that will contribute to new
businesses in neighboring areas
Collaborating with our businesses to
take to market technologies, products,
and services that meet the needs of
customers and society
Identifying the universal nature,
mechanisms and root causes of
objects and phenomena
The power
of our integrated
approach
Product
development
research
Possessing experience in multiple
fields and businesses, as well as strong
capabilities in management, networking,
and knowledge application
Holding outstanding expertise in
specific fields
Hub human
capital
Highly specialized
human capital
Fundamental
technology
research
Core
technology
Precise
interfacial
control
Health
Cleanliness
Beauty
Diversity of beauty
Sustainable chemicals
Stop pandemic
Healthy aging
Environment
New business field
Existing
business field
Consumer Research
Industrial Research
Product Design
Service Design
Applied Technology
Research
Fiber
science
Foam
science
Water
science
Product Development
Research
Fundamental
Technology Research
Fundamental Core Technologies
Technological Design Elements
Raw Materials
Digital
Microbial
science
Metabolism
science
Environ
mental
science
Safety
science
Enzyme
science
Health
science
Surface
science
Hair
science
Essential Analysis
Essential Research
on Humans
Brain
science
Aroma
science
Skin
science
Essential Research
on Materials
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Our Strategy
Chapter 2
R
E
F
O
R
M
4
Building an IP portfolio
that protects our technologies, products and businesses
Solve social issues to realize our Purpose
Secure, maintain and reinforce competitive advantage
Achieve more efficient R&D, and enhance the profitability
of our businesses
Essential Research
and fundamental
core technologies
Establish core
technologies through
Essential Research
Develop technologies
for products and
services
Introduce new
business models
New distinctive
business models
Products and
services to achieve
appealing concepts
Kao engages in a wide range of initiatives for Essential Research, including nano-
interface control, precise conversion of oils and fats, biological control, meta-
processing, polymer control and essential analysis. We have created many
fundamental core technologies through these efforts. We are also creating many core
technologies for the monitoring systems that measure the effects of our products.
We are building an IP portfolio with collaboration between research and IP, and
utilizing it in various business domains while also working to achieve more efficient
research and development.
We are creating products and services to achieve appealing concepts based on our
business strategy for realizing our Purpose. Our fundamental technology and product
development research labs collaborate to combine multiple core technologies, while
also co-creating with partners, to adopt new technologies and swiftly promote
development. We are also working to build a strong IP portfolio with these
technologies, and to gain and maintain competitive advantage.
We are creating distinctive business models in which our businesses collaborate with
DX Strategy to realize an appealing user experience (UX). By taking the fruits of these
efforts and filing applications of business model patents and DX-related patents, we
work to attain competitive advantage.
Kao is working globally to build an IP portfolio
to protect its technologies, products, services
and businesses.
To address tough social issues and develop new business models, we will form collaborations
with industry, academia, government and other organizations for the co-creation of new
technologies, while also flexibly licensing and providing access to these technologies, thereby
promoting the development of new businesses with co-creation partners.
Our business divisions unite with our personnel in R&D and IPD in open innovation projects
where IPD personnel with refined knowledge train members about IP. Alongside this,
intellectual property coordinators give support in various ways for both internal and external
co-creation, such as by providing advice, collecting information and giving out analysis data,
while also managing information and contracts management to prevent technological
contamination.
To establish competitive advantage and achieve co-creation with suitable partners, we utilize IP
landscape analysis to explore new directions for research and development, to consider new
businesses using existing technologies and to select co-creation partners.
Utilize IP landscape
analysis
Utilize IP through
open innovation
It is extremely important to manage trademarks and design rights in order to develop strong
brands on a continued basis. We support schedule management all the way from preliminary
searches to applications and registration for trademarks so that names can be decided on in a
timely manner within the development process of products and services. We hold preliminary
clearance searches for design rights and trademarks to minimize reputation risks when dealing
with new names and designs.
We strive to secure rights in a broader scope to protect our brands in the face of increasingly
diverse products and services. We are also engaging in a mixed IP strategy that combines
multiple types of IP rights to protect our products organically and in a multifaceted way.
If we notice that another company has infringed on our rights, we will take stringent legal
action. In recent years, we have been focusing particular effort in measures against increasingly
complex and sophisticated counterfeit products in Asia and other regions. We reinforce our
market monitoring and collaborate with government authorities, e-commerce site operators
and other companies in the industry to work thoroughly on rapid detection and removal of
infringing products. Going forward, we will strengthen this framework and make steady efforts
to eliminate and expose counterfeit products.
Exercise our rights
resolutely against
counterfeit products
Assist brand
development
IP contributions to bolster and maintain product and brand loyalty
Efforts to build an IP portfolio to protect technologies, products and businesses:
Case study in sebum RNA monitoring
Sebum RNA
analysis
Information in RNA
Utilize IP in an advanced way to realize our Purpose
We discovered that it is possible to understand a person’s
current physical status by conducting high-precision analysis
on the RNA contained in sebum. We established this as a
core technology to develop many fundamental technologies.
We are developing technologies for such as gaining a highly
accurate understanding of the skin’s status, detecting signs
of atopic dermatitis and other diseases, and storing and
transporting sebum RNA at room temperature.
We are verifying business models using RNA monitoring in
various business domains. Among these models, we have
started a mail-in testing service called Baby Well Check to
understand the skin barrier status of babies and infants.
We regard intellectual property (IP) as an important management
resource and strengthen our global capabilities for creating, protecting
and utilize IP for mid- to long-term corporate value enhancement and for
helping to realize a sustainable world.
Protecting and utilize the fundamental core technologies created
through our Essential Research, the technologies for making products
and our unique business models, we are promoting efforts to build an IP
portfolio.
Our IP strategies and activities are closely linked with our business
strategies and research strategies for promoting Reborn Kao (Revitalize
existing businesses; RK) and Another Kao (Create new businesses; AK).
In addition, we will bolster collaboration not only internally but also with
other industries.
Intellectual
Property
Strategy
Collaborate with business, R&D and industry
to help enhance corporate value and realize a sustainable world
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New Era,
New Challenges
Our
People
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Our Strategy
Chapter 2
1
Sebum RNA Project, Biological Science Research,
Core Technology Research, R&D
Takayoshi Inoue
Aiming for ultimate personalization
through RNA monitoring
technology
Tomoko Uchiyama
Hair Care Business, Health & Beauty Care Business,
Consumer Products Business
Junichi Furukawa
Hair Care Products Research, Products Development
Research, R&D
Dengue fever is an infectious disease spread by
mosquitoes and is one of Thailand’s most severe social
issues. Bioré GUARD Mos Block Serum launched in
June 2022 as a skin care product that prevents
mosquitos from landing on the skin and is based on a
completely new idea from conventional repellents.
Alongside this launch, product information and
information on the #GUARD OUR FUTURE project were
widely communicated.
Consumers showed interest and desire to try the
products, and the ease of use and nice scent impressed
those who tried it. We received positive feedback from
more and more retailers as well. This project has been
gaining a lot of interest and is well-received among both
public and private sectors. Dengue fever is a serious
risk to the lives of children. We held educational events
at schools and children’s hospitals. Going forward, we
will build collaborative relationships with even more
institutions and accelerate initiatives for protecting
future lives.
RNA monitoring is a technology that can understand the
status of skin or inside the body by analyzing sebum
collected from a single oil-blotting film.
In studying the sebum secretion mechanism, I
discovered that sebum included RNA information for
over 10,000 genes. I was shocked by this discovery and
felt it had significant potential. It was surprising because
it is considered to be a disadvantage for such
information to exist on the skin surface. This would allow
for RNA information to be easily collected without
damaging the skin, unlike a skin biopsy. On the other
hand, Kao does not have experience in business with
testing for humans, and so there were concerns about
commercialization. However, like-minded people who
sensed the potential of this technology made progress
on a daily basis by exchanging opinions and knowledge,
thereby realizing social implementation. This project gave
me a newfound appreciation for the importance of
maintaining resolve as well as collaborating and sharing
knowledge with people from different positions.
There is an abundance of products and information
around us. RNA monitoring, which can reveal the
condition of one’s skin and inside the body, serves as a
bridge for consumers to find the products and services
that suit them best. We aim for a world in which we can
bring smiles to many people with this technology.
3
Bringing people smiles
by giving them the hair they want:
developing sustainable wigs
I am in charge of hair care product development and
constantly think about what value people seek for hair
and how to realize it. Hair comes in many different
types, styles and colors, and many people feel they
cannot get their hair styled in exactly the way they like.
Through a daily process of exploring how we could
approach this diversity, we arrived at the idea of
eliminating factors that prevent people from realizing
their ideal hair. We seek a world where everyone can
freely realize the hair they want without being
constrained by their own physical hair. As such, we
seek to make wigs and extensions more familiar as
means for people to realize their ideal length, style,
volume, color and so on. This idea is the starting point
of our sustainable wig concept.
I was involved in developing technology to
fundamentally improve the state of damaged hair. One
day, I learned that people with alopecia are deeply
concerned about how wigs can be easily damaged, and
I came up with an idea to solve for it with Kao’s
technology. Like-minded individuals came together in an
unprecedented initiative, as Kao had only ever worked
with living human hair until then, and we successfully
developed Sustainable Fiber. It looks natural and is
durable, so I imagine patients will be able to use it every
day without worrying about damage. We seek to help
bring a comfortable lifestyle to people who need it by
applying this technology to wigs and many other areas.
2
Pongchan Kongnim
Protecting future lives
from dengue fever:
the #GUARD OUR FUTURE
project
Senior Category Manager, Marketing,
GUARD OUR FUTURE Project Manager,
Kao Industrial (Thailand)
Kao Launches Bioré GUARD Mos Block Serum, a Newly-developed
Mosquito Repellent Product, in Thailand
www.kao.com/global/en/newsroom/news/release/2022/20220615-001/
Kao to Start a Health Testing Business Employing Skin Surface Lipids-
RNA Monitoring Technology
www.kao.com/global/en/newsroom/news/release/2023/20230308-001/
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Our Strategy
Chapter 2
Giving support to talking
hands with our Guhl hair
care brand
4
Armin Haery
Consumer Care Business,
DACH & Guhl Europe
5
Takato Kondo
0 ★1 Kao: changing Kao through
the passions of each and every
employee
0 ★1 Kao Office, Corporate Development,
Corporate Strategy
6
Hayuru Suzuki
Kao accelerates women’s empowerment and provides
support for balancing work and childcare to promote
engagement as one of its priority actions.
I recently gave birth and myself sometimes feel
difficulty in balancing work and childcare. I am
developing various measures with the goal to build an
environment in which many female employees in a
similar situation can engage more positively with work.
For women to be able to balance work with childcare,
it is crucial to build an environment so that they can
actively envision and realize their ideal career. It is also
vital to eradicate the mindset of gender-based divisions
of labor at home and in workplaces. To realize this, we
implemented seminars for our employees and their
partners to establish an environment for balancing work
and family life, realizing women’s ideal careers by
removing stereotypes. We also revised our systems to
encourage the continuation of women’s careers.
I will promote activities to achieve an environment
where employees can fully exert their willpower and
abilities to gain success.
Support for balancing work
and childcare to promote
engagement
Diversity & Inclusion,
Human Capital Strategy
0 ★1 Kao launched in July 2021
as an open system to easily
enable employees to propose
ideas for new business and
internal reforms. We have
received many proposals so far,
and some have brought a
significant impact on internal and
external affairs. I have worked for
almost two years in 0 ★1 Kao as
the Secretariat. In this position, I
have witnessed many people’s
dazzling passion when they
offered proposals—in some
cases when one proposer
started an initiative and formed
one team with those who resonated with the business
vision; and in other cases when a proposer came up a
clearer business concept by working steadily to look
closely at customers’ opinions. It has been a great
pleasure to see proposers grow on a daily basis and
become filled with energy through 0 ★1 Kao.
I will push forward so that even more people will gain
a strong aspiration to change Kao and the world, and
thereby work to create businesses for the new face of
Kao in the future.
1
4
2
5
3
6
1 Anti-Schppen
(Anti-Dandruff)
4 Intensiv Kräftigung
(Strength)
2 Feuchtigkeitsaufbau
(Moisture)
5 Frische & Leichtigkeit Anti-Fett
(Freshness)
3 Tiefenaufbau Reparatur
(Repair)
6 Langzeit Volumen
(Volume)
Kao supports the start-up talking hands with iconic hair care brand Guhl
www.kao.com/emea/en/news/2022/5/5_kao_supports_talking_hands_with_hair_care_brand_guhl/
These products are sold in Germany.
This initiative was sparked by the inspiring work of the
start-up talking hands that aims to overcome language
barriers and promote inclusive communication with the
help of colorful flipbooks that help children learn signs.
As the hair care brand Guhl, we “talk” to our consumers
every day, so we thought “why not use illustrations of
signs in our brand communication?” To give a platform
to talking hands’ mission, we created product labels
that depict the shampoo’s properties via colorful
illustrations of signs. It was an exciting experience for
us to see these Guhl bottles lined up in stores. We
wanted to support a purposeful cause as well as to offer
something relevant, unique and surprising to suit our
customers who love Guhl. These two interlinked desires
helped realize this wonderful collaboration.
Kao Accelerates Promotion of Women’s Empowerment by Establishing
and Expanding Its Child-care Support System
www.kao.com/global/en/newsroom/news/release/2023/20230117-001/
Chapter 3
Corporate Governance
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Corporate Governance
—The basis of our management
3
We will build diverse and robust governance to support
sustainable corporate value enhancement.
We will give firm support to what matters.
Chapter 3
Kao Integrated Report 2023
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Corporate Governance
Chapter 3
Messages from
Outside Directors
and an Outside
Audit & Supervisory
Board Member
Kao’s board was extremely busy in FY2022. In the face
of severe business environment conditions, we held
deliberations on progress in the Mid-term Plan 2025 (K25)
while tackling challenges for FY2022 performance. We
also held deliberations on viewpoints for mid- to long-
term corporate value enhancement, such as corporate
governance, human capital strategy and the ESG Strategy.
To enhance the effectiveness of the Board, it is vital
for all members to demonstrate their own knowledge,
experience and values to the maximum possible
extent. One of Kao’s strengths is the way open-minded
deliberations are carried out regardless of each member’s
position. As Chairperson, I focus efforts toward building an
environment to facilitate even franker opinion exchange.
I have implemented creative ideas such as increasing
opportunities for receiving reports on Kao’s businesses
and for casual talking.
Kao is currently at a crucial juncture. It is important
to deliberate the challenges on K25, quickly promote
structural reforms in existing businesses, and develop
competitive businesses that respond to environmental
changes. The Board of Directors understands the current
situation in a timely manner, identifies issues and makes
decisions more swiftly, and will strongly support these
executions.
I was appointed as an outside director of Kao in March
2022. The impression of Kao that I had upon assuming this
position was no different from my external perspective as
a consumer, which surprised me. Isn’t this consistency the
essential quality of a company that can be trusted?
I also feel a strong sense of engagement from members
in the Board of Directors. For Directors and Audit &
Supervisory Board Members to fulfil their duties entrusted
to them by shareholders, I believe it is important for each
member to have the passionate desire to contribute to
success of Kao, and to make best use of insight and skill.
Kao’s Board is a passionate one that puts this concept
into practice. The executives respond flexibly and rapidly
to proposals from the Board.
In the third year of K25, it is crucial to formulate and
execute realistic strategies that reflect environmental
and market changes based on this vision. I will hold
deliberations and monitor progress to make sure this is
being achieved.
Kao has incredible technologies and an innovative spirit
for creating truly unique products and services. To make
full use of these assets, it is crucial to incorporate various
values and opinions into decision-making. I will also focus
on whether management is carried out in a manner that
can compete with global competition.
Outside Director
Chairperson of the Board of Directors
Osamu Shinobe
Outside Director
Eriko Sakurai
Outside Audit & Supervisory Board Member
Chairperson of Compensation Advisory Committee
for Audit & Supervisory Board Members
Hideki Amano
* In Japanese, Genba means
the actual spot or on-site.
In Kao’s Audit & Supervisory Board, Outside Audit &
Supervisory Board Members also participate in division
interviews and on-site visits, meaning that members
work with a sense of unity. As many members as possible
participate in interviews and on-site visits, and audits are
conducted from on diverse viewpoints from individual
careers and insight. At the end of interviews and on-site
visits, we summarize matters based on three categories:
comments and requests, advice and excellent initiatives.
These details are shared with the audited divisions to
rapidly engage in the PDCA cycle. I believe that Kao
has an open corporate culture in which people from the
audited divisions consult with members about challenges
and issues.
The structures and systems for audits and supervision
have been continually improved in 2022. The support
system was strengthened, and the Group governance
system has been strengthened, such as with staff
members of the Office of the Audit & Supervisory Board
concurrently serving as auditors of subsidiaries. By
actively exchanging views, I encourage viewpoints from
Audit & Supervisory Board Members to be incorporated in
executive monitoring.
FY2023 is the halfway point for K25. I will closely watch
the process and results of structural reforms while helping
to achieve appropriate corporate governance from the
perspective of integrated risk management and internal
control.
Creating an open environment
and sparking active
deliberation
A passionate Board of
Directors with ambitious and
talented members
Aiming for corporate
governance that incorporates
opinions from the Genba*
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Corporate Governance
Chapter 3
Corporate Governance
In order to sustainably enhance corporate value over the
long-term, Kao positions corporate governance as a
top-priority management issue and continuously
strengthens governance in both systems and
operations. Kao’s corporate governance is a framework
for transparent, fair, prompt and decisive decision-
making. It takes into account the perspectives of all
stakeholders and responds in a timely and appropriate
manner to changes that are increasingly diverse,
complex, and difficult to predict so that we can
contribute to society and continuously enhance
corporate value. The foundations of our efforts to
achieve this are establishing and operating the
necessary management structures and internal control
systems, implementing the necessary measures in a
timely manner, and demonstrating accountability. In
addition, we work to understand social trends at all
times and actively engage in dialogue with stakeholders
to review the status of corporate governance from time
to time and implement appropriate and necessary
countermeasures and improvements.
President & CEO
Subsidiaries/Affiliates
Executive Officers
Business, Function, Corporate Function
System Improvement/
Monitoring
Management
Board
ESG Managing
Committee
Internal Audit
Report
Appointment/Dismissal
Appointment/Dismissal
Appointment/Dismissal
Auditors
Internal Control
Committee
Opinion
Opinion
Collaboration
Collaboration
Opinion
Board of Directors
Chairperson: Independent
Outside Director
Directors and Audit &
Supervisory Board Members
attend the meetings
5 Independent Outside Directors
and 5 Inside Directors
Supervision
Audit
Decision-making
Business Execution
Audit &
Supervisory Board
Office of
the Audit &
Supervisory
Board
Shareholders Meeting
Corporate Governance Structure
(As of March 24, 2023)
ESG Managing
Committee
ESG External
Advisory Board
ESG Promotion
Meeting
The ESG Managing Committee is chaired by the President and Chief Executive Officer, and its
members include Senior Managing Executives and Managing Executive Officers. These members
push forward the ESG strategy, the Kirei Lifestyle Plan (KLP) by developing policy and strategy
for our ESG activities, making final decisions on investments, identifying issues, risks and
opportunities and confirming the progress of activities.
By submitting reports and suggestions in response to queries from the ESG Managing Committee,
the ESG External Advisory Board ensures that an external perspective is reflected in our
management. To enable Kao to realize world-class plan formulation and implementation, the Board
provides information and opportunities for collaboration with external partners, and also offers
advice.
The ESG Promotion Meeting is attended by the heads of key divisions. These members promote
to realize ESG strategy based on policies, direction, and proposals decided by the ESG Managing
Committee.
Each division and group company
President & CEO
Board of Directors
ESG External
Advisory Board
Management Board
Decarbonization
Steering Committee
Plastic Packaging
Steering Committee
Human Rights & DEI
Steering Committee
Chemical Stewardship
Steering Committee
ESG
Task Force
ESG Managing Committee
ESG
Governance
Structure
ESG Task Force
The ESG Task Force established for individual focus themes when a inter-divisional structure
is needed, and propose activities based on the detailed plan developed by the ESG Promotion
Meeting.
ESG Steering
Committees
For the priority issues, decarbonization, plastic packaging, human rights and DE&I, the ESG
Steering Committees coordinate with the ESG Managing Committee and have the ability to make
suggestions to divisions and group companies.
Sustainability Report 2023
www.kao.com/global/en/sustainability/pdf/sustainability-report/
W E B
ESG Governance Structure
(As of February 2022)
Internal Control Committee
Committee for the
Examination of the
Nominees for Directors
and Audit & Supervisory
Board Members
Accounting Auditor
Compensation
Advisory Committee
for Audit &
Supervisory Board
Members
Compensation Advisory
Committee for Directors
and Executive Officers
Department
of Internal Audit
3 Independent Outside
and 2 Full-time Audit
& Supervisory Board
Members
ESG Promotion
Meeting
Audit
Supervision/Decision-making
Audit
Business
Execution
Decision-making
We have a flexible and robust ESG governance structure so that we
respond quickly to the major changes taking place globally, aiming to
ensure expansion of business opportunities and solve social issues. In our
ESG governance structure, under the Board of Directors, the President
and CEO and five subordinate organizations are responsible for business
execution. Characteristics of this structure include an organization
with outside committee member participation that functions to provide
oversight and advice, and the swift and targeted implementation of
management decisions broken down into innovation and initiatives.
Supervision
Kao Integrated Report 2023
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Corporate Governance
Chapter 3
Directors
Audit & Supervisory Board Members
Attending organization
Attendance
in FY2022
14
years and
9
months
7
years
5
years
1
year
1
year
4
years
4
years
6
years
5
years
3
years
Male
Male
Male
Male
Male
Male
Female
Male
Male
Female
Male
Male
Male
Japan
Japan
Japan
Japan
United
States
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Main reasons for marking “
”
Board of
Directors
Audit &
Supervisory
Board
Committee for the
Examination of the
Nominees for Directors
and Audit & Supervisory
Board Members
Compensation
Advisory Committee
for Audit
& Supervisory Board
Members
Directors
Audit &
Supervisory
Board Members
Compensation
Advisory
Committee
100 %
( 11 / 11 )
100 %
( 11 / 11 )
100 %
( 14 / 14 )
100 %
( 14 / 14 )
100 %
( 14 / 14 )
100 %
( 9 / 9 )
100 %
( 9 / 9 )
100 %
( 9 / 9 )
100 %
( 14 / 14 )
100 %
( 14 / 14 )
100 %
( 14 / 14 )
The areas of experience, knowledge, and expertise of each Director and Audit & Supervisory Board Member that are particularly expected of them are marked with a “
.”
Members attending each organization are marked with “
.”
•Experience in the Company’s Consumer Products Business
•Experience in management at the Company’s overseas subsidiaries
•Experience in research and business at the Company’s overseas
subsidiary •Experience in the Company’s ESG, Global
Chair
Chair
Chair
Chair
•Knowledge of space science research (medicine and life)
•Experience with NASA
•Experience as the top executive of a major international financial institution
•Mostly worked on international assignments, including more than 13 years
of work outside Japan
•Experience as the head of a global division and the regional head of a
major U.S. chemical company •Experience in overall human resources
strategy including compensation, development, and assignment in
global businesses •Knowledge of sustainability in the chemical field
•Experience as the top executive of a major food company •Experience in management
of overseas subsidiaries •Experience in the human resources department of such major
food company
•Certified Public Accountant •Served overseas and the head of the global
audit network for the Asia Pacific region •Experience in human capital
strategy, risk management, etc., as the COO of audit and consulting
operations
•Attorney-at Law
•Professor at Keio University Law School
•Certified Public Accountant
•Experience as the Company’s Representative Director, President and CEO •Experience
as the Company’s officer responsible for Human Capital Development •Experience in
the Company’s R&D (fundamental and applied technologies) •Chair of Japan Clean
Ocean Material Alliance (CLOMA)
100 %
( 14 / 14 )
100 %
( 14 / 14 )
•Experience in the Company’s R&D (including experience in global operations, and
knowledge of fundamental and applied technologies and matter cycle research)
•Experience at the Company’s overseas business promotion projects
•Experience as the Company’s Senior Vice President of Strategic Innovation Technology,
Global •Experience as the Company’s officer responsible for Human Capital Development
•Experience in the Company’s Chemical Business and management experience at
overseas subsidiaries (Chemical Business) •Experience at the Company’s Procurement,
Global (including promotion of sustainability activities in procurement) •Experience as
the Company’s officer responsible for Accounting & Finance
Michitaka Sawada
Yoshihiro Hasebe
Masakazu Negoro
Toru Nishiguchi
David J. Muenz
Osamu Shinobe
Chiaki Mukai
Nobuhide Hayashi
Eriko Sakurai
Takaaki Nishii
Yasushi Wada
Sadanao Kawashima
Hideki Amano
Nobuhiro Oka
Takahiro Nakazawa
Male
Japan
2
years
Male
Japan
Skill Matrix and Attending Organization
we believe it is important that Inside and Outside
Directors and Audit & Supervisory Board Members can
complement each other’s knowledge, experience and
skills and the Board of Directors can demonstrate high
effectiveness. We recognize that the Board of Directors
can make better contributions toward driving business
and appropriate supervision and auditing when it has
multifaceted perspectives informed by diversity in
addition to knowledge, experience and abilities. We
have a target for women to hold 30% of seats on the
Kao stated the Vision of “Protecting future lives—
Sustainability as the only path” in K25. In order to
achieve this, the management team carries out
operations in line with three policies; 1. Become an
essential company in a sustainable world; 2. Transform
to build robust business through investment (Revitalize
existing businesses and Create new businesses); 3.
Maximize the power and potential of employees.
To supervise that the management team is executing
business in accordance with the above policy,
Board of Directors by 2025.
We will reduce the size of the Board to achieve swift
decision making, while taking care to maintain a good
balance of diverse personnel. In addition, in order to
ensure diversity and independence, outside members
will occupy approximately half of the seats on the Board
of Directors and Audit & Supervisory Board Members.
Stance on balance among
knowledge, experience and
skills, and on diversity and
size of the Board of
Directors
Name
Experience/Knowledge/Expertise
Affiliation
Gender
Nationality Management
Global
Finance/
accounting
Term of
office
Consumer
goods
industry
Chemical
industry
Human
capital
strategy
Research Environment/
society
IT/
DX
Legal / risk
management
100 %
( 14 / 14 )
100 %
( 9 / 9 )
•Experience in the Company’s Finance Department
•Experience in the Company’s Department of Internal Audit
Chair
•Experience in the Company’s Product Quality Management •Experience at the
Company’s global production sites •Experience in the Company’s process engineering
development and plant management
•Experience as the top executive of a major international airline
(including experience as Chairman of CSR and Environmental
Management Committee)
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Corporate Governance
Chapter 3
Directors
Audit & Supervisory
Board Members
Michitaka Sawada
Director, Chair
Date of birth:
Dec. 20, 1955
Number of
Kao shares held:
44,300 shares
Other material position(s)
Outside Director, Panasonic Holdings Corporation
Outside Director, Nitto Denko Corporation
Outside Director, Komatsu Ltd.
Osamu Shinobe
Outside Director
Chairperson of Board of Directors
Date of birth:
Nov. 11, 1952
Number of
Kao shares held:
1,900 shares
Other material position(s)
Special Advisor, ANA HOLDINGS INC.
Yoshihiro Hasebe
Representative Director
President and Chief Executive Officer
Masakazu Negoro
Representative Director
Senior Managing Executive Officer
Toru Nishiguchi
Director
Senior Managing Executive Officer
Date of birth:
Jul. 30, 1960
Number of
Kao shares held:
15,300 shares
Date of birth:
Jan. 7, 1960
Number of
Kao shares held:
8,800 shares
Date of birth:
Nov. 18, 1961
Number of
Kao shares held:
16,800 shares
David J. Muenz
Director
Managing Executive Officer
Date of birth:
Nov. 15, 1960
Number of
Kao shares held:
500 shares
Yasushi Wada
Full-time Audit & Supervisory Board Member
Chairperson of Audit & Supervisory Board
Date of birth:
Jul. 30, 1959
Number of
Kao shares held:
14,100 shares
Sadanao Kawashima
Full-time Audit & Supervisory Board Member
Date of birth:
May 22, 1959
Number of
Kao shares held:
17,900 shares
Other material position(s)
Chairperson, The Kao Foundation for Arts and Sciences
Chiaki Mukai
Outside Director
Date of birth:
May 6, 1952
Number of
Kao shares held:
4,300 shares
Other material position(s)
Specially Appointed Vice President,
Tokyo University of Science
Outside Director, Fujitsu Limited
Nobuhide Hayashi
Outside Director
Date of birth:
Mar. 27, 1957
Number of
Kao shares held:
1,200 shares
Other material position(s)
Senior Advisor, Mizuho Financial Group, Inc.
Outside Director, Baroque Japan Limited
Outside Audit & Supervisory Board Member, JTB Corp.
Outside Audit & Supervisory Board Member, Tobu Railway
Co., Ltd.
Eriko Sakurai
Outside Director
Date of birth:
Nov. 16, 1960
Number of
Kao shares held:
100 shares
Other material position(s)
Outside Director, Sumitomo Mitsui Financial Group, Inc.
Outside Director, Astellas Pharma Inc.
Takaaki Nishii
Outside Director
Date of birth:
Dec. 27, 1959
Number of
Kao shares held:
1,000 shares
Other material position(s)
Senior Corporate Advisor, Ajinomoto Co., Inc.
Hideki Amano
Outside Audit & Supervisory Board Member
Date of birth:
Nov. 26, 1953
Number of
Kao shares held:
4,000 shares
Other material position(s)
Certified Public Accountant
Outside Corporate Auditor, Seiko Group Corporation
Outside Auditor, Mizuho Leasing Company, Limited
Nobuhiro Oka
Outside Audit & Supervisory Board Member
Date of birth:
Apr. 5, 1963
Number of
Kao shares held:
2,300 shares
Other material position(s)
Attorney-at-Law
Audit & Supervisory Board Member,
Kao Group Customer Marketing Co., Ltd.
Outside Director, Yamatane Corporation
Professor, Keio University Law School
Takahiro Nakazawa
Outside Audit & Supervisory Board Member
Date of birth:
May 30, 1958
Number of
Kao shares held:
500 shares
Other material position(s)
Certified Public Accountant
Outside Audit & Supervisory Board Member,
Tokyu Fudosan Holdings Corporation
Experience/knowledge/
expertise
Reasons for selection
Employees are our most important assets. In order to sustainably enhance corporate value, we have
formulated and executed a human capital strategy based on our corporate strategy. It is necessary to
supervise the adequacy and progress of this human capital strategy from expert knowledge and experience.
In order to effectively supervise business execution through discussions with a bird’s-eye view of our entire
business domain and insight into future prospects, it is important to have a deep understanding of the
business environment and market characteristics in the consumer goods and chemical industries.
As part of its global strategies, we aim to provide one-of-a-kind value and shift to a local production for
local consumption model. In order to properly offer advice and supervise the execution of these activities, it
is necessary to have experience and insight in management positions outside Japan and at non-Japanese
companies.
In order to effectively supervise the business execution by management and realize appropriate risk-taking
and aggressive governance that encourages prompt and bold decision-making, it is necessary to have
experience as top management.
Management
Global
Consumer goods
industry /
chemical industry
It is a natural responsibility to ensure the reliability of financial reporting. In order to sustainably enhance
corporate value by conducting management in consideration of the improvement of profitability and capital
efficiency, based on appropriate capital allocation from a company-wide perspective, it is necessary to have
experience, knowledge, and expertise in finance and accounting.
It is an important challenge in management to recognize various risks in corporate activities, manage them
appropriately, and respond strategically, proactively, and ex post facto to legal matters.
In order to realize K25, we believe that it is essential to have innovative initiatives that actively utilize IT and
digital transformation, such as new business creation, digital marketing and digital communications, which
are not an extension of existing initiatives. (Utilize executive officers and external human capital to compliment
supervision by the Board of Directors.)
In order to supervise the formulation and execution of ESG strategies that are integrated with our corporate
strategies, it is necessary to have an understanding of global trends in ESG and specialized knowledge of
environmental and social issues.
Our research is the driving force behind the creation of innovative, high-value-added products and services
and the enhancement of corporate value. It is necessary to supervise the maintenance and development of
our research system and the effective utilization of the created technology assets.
Research
Environment/
society
IT / digital
transformation (DX)
Legal /
risk management
Finance/
accounting
Human capital
strategy
Reasons for selection based on
experience/knowledge/expertise
Kao places its human capital strategy, including
measures for successors to the President and CEO,
as a top-priority issues in management. Continued
deliberations on this topic are held among the Board of
Directors and the Committee for the Examination of the
Nominees for Directors and Audit & Supervisory Board
Members. With regard to succession planning for the
President and CEO, we have indicated the requirements
for human capital with a view toward the management
environment in the next generation, and we are
updating our list of successor candidates. We are
also using a skill matrix for developing each candidate
and are deliberating on the insight and experience to
reinforce going forward.
In FY2022, the President and CEO indicated the
status of succession planning as described above.
After deliberation on this point, a response was given
regarding the need to suitably deliberate and execute
the plan for developing candidates, as well as to make
continual updates based on the business environment
and the status of candidate development. These
matters were reported to the Board of Directors. In
addition, with respect to evaluation of the effectiveness
of this Committee, it was noted that there is a need to
continue deliberations and provide opportunities for
Committee members to understand candidates better.
Succession Plan
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Corporate Governance
Chapter 3
Board of
Directors
Evaluation of
the effectiveness
of the Board of
Directors
The Board of Directors deliberates on major subjects regarding our management direction from
multiple perspectives, and supervises the appropriate execution of management strategy
based on diverse viewpoints. It also builds an environment to enable offensive management, by
establishing an internal control system and risk management system.
In FY2022, we held an open-minded exchange of opinions about multiple topics including
our vision for the Board of Directors and our human capital strategy. In addition, each month
the Board receives business execution reports on the major topics deliberated by the
Management Board.
Although ongoing initiatives and improvements are needed for continuing verification and discussion of internal control, the
FY2022 evaluation concluded that internal control was being properly supervised. Some participants felt that there was a need
for priority discussion of structural reforms under Reborn Kao and progress on Another Kao including M&A and other matters in
addition to the verification of K25 and human capital strategy.
Based on the idea that the roles and responsibilities of the Board of Directors must
be shared by the entire Board of Directors, we conduct an annual evaluation in
order to make improvements aimed at enhancing its effectiveness. We believe that it
is effective for all members who participate in meetings of the Board of Directors to
conduct an evaluation using a method that entails expressing their own opinions
and engaging in free and open discussion. Accordingly, we are currently conducting
self-assessment by participating members at a Board of Directors meeting.
However, recognizing the usefulness of evaluation from an objective perspective,
we continue to consider the introduction of third-party evaluations.
For the FY2022 evaluation, prior to the exchange of opinions for self-assessment
at the meeting of the Board of Directors held in January 2023, a survey of the nine
Directors and five Audit & Supervisory Board Members was conducted on the topics
below. Feedback on the results was then provided before the meeting, during which
the discussions and exchange of opinions were conducted.
Activities of the Board of Directors—Discussion and implementation of further strengthening
supervisory functions and delegation of authority to executive organizations
In FY2022, the Board of Directors deliberated with a focus on the following issues:
Theme
The Board of Directors discussed the ideal functions of its meetings and the following directions
were confirmed: Kao’s Board of Directors will conduct a substantial delegation of authority
to the executive organizations, and further strengthen its monitoring function to encourage
appropriate risk-taking by management and prompt and bold decision-making. In particular,
the Board of Directors will effectively supervise the appropriate allocation of management
resources, including human capital, and the adequate implementation of strategies by
management. It also recognizes that it is the responsibility of the Board of Directors to develop
internal controls and risk and crisis management systems, and will build and operate these
systems appropriately.
Based on the direction we are aiming for, the Board of Directors also discussed the following
issues.
· Revision of the criteria for submission of agenda items to the Board of Directors
· Monitoring the progress and issues of the Mid-term Plan
· Discussion of knowledge, experience, and skills required by the members of the Board of
Directors
How the Board of Directors
should function
Discussions were held on the portfolio of human resources and organizations to confirm
whether strategies and plans for maximizing the power and potential of employees and
maximizing the use of human resources are appropriately formulated and implemented. It
was pointed out that the Company should define roles and human resource requirements that
will be necessary for future growth, rather than as an extension of existing strategies, and
secure human resources strategically by systematically developing employees and appointing
them from outside organizations. We will continue to confirm that these measures are being
implemented, leading to fruitful results. We also discussed the progress and the results of the
Objectives and Key Results (OKR). We will confirm that members of the Group will increasingly
take on a variety of challenges and that further collaboration will be promoted through dialogue.
After indicating the direction of corporate strategy and business transformation based on
the business environment and competitive situation, we discussed the areas, factors, and
estimated scale that should be acquired through M&A to strengthen our business portfolio. We
will continue to review the effectiveness of the strategy and progress of the plan.
The Board of Directors received reports on the latest trends and Kao Group’s initiatives
on major ESG issues, such as climate change risks and opportunities (TCFD compliance),
sustainable palm oil procurement (including human rights), and biodiversity, and confirmed the
status of their promotion.
We also discussed the need for ESG to be included into growth strategies and profitability. We
will continue to review issues related to sustainability.
Human capital strategy
M&A strategies
Sustainability
(climate change risks/
human rights, etc.)
Details of deliberation
Results of the FY2022 Evaluation of Effectiveness of the Board of Directors
1. Structure, Status of Operation and Deliberations of the Board of Directors
FY2021 Issues
FY2022 Initiatives
Evaluation
Future Initiatives
Further improvements are expected
to ensure substantial discussion at
meetings of the Board of Directors.
· Sent materials before meetings
and received questions in
advance.
· Allocated half of the available
meeting time to presentations and
the other half to Q&As.
· The Board operated effectively in
general.
· There were times when the
information in reports was too
granular, resulting in unfocused
discussion.
· Participants engaged in free,
open, and constructive discussion,
but in some cases, there was
not enough time for substantial
discussion.
· Use a report format to clarify the
key points for discussion and
reports.
· Share Q&As with all participants in
advance so that more time can be
allocated to substantial discussion
based on those Q&As.
2. Agenda Item Selection and Discussion
FY2021 Issues
FY2022 Initiatives
Evaluation
Future Initiatives
Necessary measures will include
deepening discussions of issues
that impede the achievement
of K25, measures to resolve
those issues, and actions to be
prioritized, as well as conducting
regular verification with greater
awareness of PDCA
· Discussed M&A strategies and
global strategies for achieving
K25.
· Created and distributed a table
showing the status of progress of
K25.
· Had each of the businesses make
reports.
· Information on the progress of
K25 was shared.
· Issues to be addressed in
achieving K25 and interim
summaries needed to be
discussed in greater depth,
including quantitatively.
· There was a need for stakeholder
relations strategies.
· Further visualize management
indicators and deepen discussion
of issues to be addressed in
achieving K25 and interim
summaries.
· Present reports at the Board of
Directors meetings before and
after IR activities.
Human capital strategy is a
management issue for ongoing
consideration, and it is necessary
to deepen discussions of issues
including the allocation, promotion
and training of human capital
needed for realizing K25 and the
evaluation of executive staff.
Discussed human capital strategy
reflecting business environment
changes and business strategy
(three times).
· Human capital strategy was
thoroughly discussed in FY2022.
· There was a need for further
discussion regarding matters such
as relation to business strategy.
Have Executive Officers engage in
deeper discussion of human capital
strategy, present reports and
discussion at Board of Directors
meetings.
For the results of the evaluation of effectiveness Committee for the Examination of the Nominees for Directors and Audit & Supervisory Board Members
and Compensation Advisory Committee for Directors and Executive Officers, please refer to the Corporate Governance Report.
www.kao.com/global/en/corporate/policies/corporate-governance/
Please refer to the Corporate Governance Report for matters to be deliberated by each committee.
www.kao.com/global/en/corporate/policies/corporate-governance/
Kao Integrated Report 2023
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96
Corporate Governance
Chapter 3
The Audit & Supervisory Board
The Audit & Supervisory Board Members are entrusted
by shareholders to audit Directors’ execution of duties
from an independent standpoint, aiming to achieve
the sound and sustainable growth of the Kao Group
and establish governance that meets the trust of
stakeholders.
In FY2022, we conducted auditing activities with a
shared sense of urgency and the necessity of reforms
recognized by management with regard to the status
of implementation of corporate strategy and the status
of response to management environmental risks. We
adopted a policy which recognizes that stakeholders
are demanding a higher level of effective governance
and an active disclosure of information.
Key audit items, achievements and evaluation of effectiveness
Number of meetings held: 9
Attendance rate: 100%
Duration: Average of 2 hours and 14 minutes
17 resolutions
Audit annual plan, audit report, etc.
38 matters considered
Audit findings, the effectiveness of the group governance, etc.
Evaluation of the effectiveness of the Audit & Supervisory
Board: Discussions at the Audit & Supervisory Board based
on the results of the questionnaire led to the conclusion that
the system at the Board as a whole was functioning
effectively during FY2022.
Major contents of the evaluation
· The Audit & Supervisory Board conducts frank exchanges
of opinions.
· The agenda items are proactively selected matters to be
considered.
· Information sharing and support by the newly established
Office of the Audit & Supervisory Board have been also
strengthened.
Going forward, we hope to deepen discussions on the skill
matrix of the Audit & Supervisory Board, which aims for
greater diversity.
Deliberations by the Audit
& Supervisory Board
Key audit items
Audit method
Activity results and evaluation of effectiveness
All Audit & Supervisory Board Members attended all meetings. All of
them actively expressed their opinions.
Status of
execution
of duties by
Directors
Effectiveness
of the Group
governance
Development
and operation of
internal control
Proactive
disclosure
Attend important meetings such as the
Management Board to confirm decision-making
process and request explanations as necessary
Exchange opinions with management
Conduct on-site audits and interviews of
worksites, divisions, subsidiaries and affiliates
within and outside Japan (including confirmation
of priority audit items such as internal control.)
Attend the Committee for the Examination of the
Nominees for Directors and Audit & Supervisory
Board Members and Compensation Advisory
Committee for Directors and Executive Officers
· Exchange opinions between the Accounting
Auditor and Audit & Supervisory Board
Members and report accounting audit results
at Board of Directors meetings
· Conduct interviews with the divisions in charge
of the second line of internal control
· Attend or check minutes of the Internal Control
Committee and each affiliate committee
· Check the response status of the Compliance
Hotline
Exchange information with the Department of
Internal Audit which is the division responsible
for internal auditing
Conduct on-site audits and interviews of
worksites, divisions, subsidiaries and affiliates
within and outside Japan
Evaluate the construction and operation status
of the internal control system using a checklist
Evaluated the Company’s disclosure status by
investigating external requests and disclosure
status.
Attendance rate was 100%, reviewed decision-making process and
commented on matters to be considered.
Representative Directors of Kao (5 times); Outside Directors (2
times); Executive Officers with titles (6 times); Representative
Directors of important subsidiaries (3 times); Recognition of
management issues and future governance were shared through
frank exchanges of opinions.
114 times
· Emphasized dialogue (1,136 comments from Audit & Supervisory
Board members)
· Confirmed improvement status at a later date after completion of
action on audit findings. Shared details with Executive Officers
along with excellent Genba initiatives.
Attend meetings of the Board of Directors to
confirm the status of deliberations
11 times
· Commenced a system in which members of the Office of the Audit
& Supervisory Board concurrently serve as auditors of subsidiaries
· All Auditors of subsidiaries and affiliates regularly exchanged
opinions to identify and review risks (6 times)
· Introduced effectiveness evaluation of the Audit & Supervisory
Board at important subsidiaries, and provided training to improve
their skills
· Systematize and improve the effectiveness
of the Kao Group’s structure of Audit
& Supervisory Board Members. (Kao,
subsidiaries, affiliates)
· Improve the effectiveness of audit activities
under Group management
Exchanged opinions (21 times); Reported at meetings of the Board
of Directors (2 times)
· Audit plan, accounting audit results, key audit items, non-
assurance service management, audit quality, etc.
· Held global meetings to exchange opinions with auditors within
and outside Japan
Confirmed results of self-inspections and external audit, and also
the status of development and operation of internal control systems
Conducted quarterly or semi-annually
· Self-inspections and monitoring are taking hold, and responses to
issues to deal with have been handled appropriately in principle.
· Timely reports are also made to Audit & Supervisory Board
Members.
4 times
Generally effective
· Recommended the points that can be evaluated and points for
improvement when exchanging opinions with Management and to
related departments. Confirmed the development of the promotion
system and the information disclosure status.
· Proactively disclosed activities of the Audit & Supervisory Board
Members
The Audit & Supervisory Board consists of two Full-
time Audit & Supervisory Board Members with internal
execution experience and diverse knowledge and three
Outside Audit & Supervisory Board Members with
respective expertise and abundant experience.
In January 2022, the Office of the Audit &
Supervisory Board (with five members) was newly
established, to assist the Audit & Supervisory Board
Members with their duties and to allow the members to
serve concurrently as Auditors of subsidiaries.
Composition and execution of duties
of the Audit & Supervisory Board
Lively exchange of opinions
The Audit & Supervisory Board Members attend
important meetings and put emphasis on the
decision-making process for reaching resolutions,
and express their opinions as appropriate.
Dialogue with people at the actual sites (Genba)
In addition, the Audit & Supervisory Board
Members conduct on-site audits and interviews of
each division and subsidiary and affiliates. By
placing importance on dialogue with people at the
Genba, they confirm the degree of how well
corporate strategy is being shared and whether
proactive efforts are being made. They also identify
any issues that occur at the Genba. At least one
Outside Audit & Supervisory Board Member has
participated in approximately 70% of the
interviews.
Particularly important points
in Audit & Supervisory
Board Members’ activities
Kao Integrated Report 2023
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98
Corporate Governance
Chapter 3
Compensation System for Directors,
Audit & Supervisory Board Members and Executive Officers
Summary of Compensation System for Directors,
Audit & Supervisory Board Members and Executive Officers
The compensation system for Directors, Audit & Supervisory
Board Members and Executive Officers is aimed at: (1) securing
and retaining diverse, outstanding human capital to establish
and enhance our competitive advantage; (2) driving concerted
initiatives to promote sustainable enhancement of corporate value;
and (3) sharing interests in common with shareholders. We have
introduced a performance-based share remuneration plan with the
aim of boosting awareness of contributing to improvements in our
corporate value over the mid- to long-term.
With respect to long-term incentives, we conduct multifaceted
evaluations based on three perspectives: business growth
indicators and ESG activity indicators, alongside management
indicators measured through evaluations in employee engagement
surveys and other methods.
With respect to short-term incentives, we have adopted EVA
to spur long-term enhancement in corporate value, and the
consolidated net sales and profit indicators to promote our daily
business activities and foster a sense of unity with our employees.
From FY2023, the individual evaluation applied to all Directors
except Outside Directors will be more flexible. The Company has
also decided to introduce an evaluation confirmation process
by Outside Directors and Outside Audit & Supervisory Board
members to ensure objectivity and transparency.
Eligible for provision
· Directors
· Executive Officers
· Auditors
· Directors (Except for Outside
Directors)
· Executive Officers
· Directors (Except for Outside Directors)
· Executive Officers
Base salary
Short-term incentive compensation
(Performance-based bonus)
Long-term incentive compensation
(Performance-based share incentive)
—
Amount determined in
accordance with role and
rank, and provided as fixed
monthly compensation
No
No
—
—
—
Applicable period
Method of provision
Clawback
Performance evaluation period
Coefficient / Determination
of payout ratio
Compensation
structure
1 year
Amount of bonus determined in accordance
with degree of achievement of single fiscal-year
targets and provided
1 year
The payout ratio is determined within the range
of 0– 200% in accordance with the degree of
achievement of each indicator.
Bonus amount by position when the payout ratio
is 100%
· President and Chief Executive Officer: 50% of
base salary
· Executive Officers with titles: 40% of base salary
(except for the President and Chief Executive Officer)
· Other Executive Officers: 30–35% of base
salary
5 years (2021–2025)
Kao shares, etc., are delivered within a five-year target period
covered by the current mid-term plan.
*1 The weight of 3 indicators is determined by position.
*2 Gross profit less selling and general and administrative expenses
Evaluation Indicator and Criteria
for Short-term Incentive Compensation
Evaluation Indicator and Criteria
for Long-term Incentive Compensation
Method of Provision of Long-term Incentive
Compensation
Evaluation criteria
Method
Evaluation indicator
Type
Business growth
Fixed part
ESG activities
Variable part
Top management
activities
Weight
Composition
ratio indicator
40%
30%
40%
70%
20%
Business growth rate of net
sales, profit, etc.
Deliver a set number of
shares, etc. each year.
Evaluation by external indicators, and
extent of achievement of internal goals
(such as the Kirei Lifestyle Plan), etc.
Delivery of shares, etc. when
executive officers resign from
their post in accordance with
the results achieved in initiatives
and activities undertaken as part
of the mid-term plan.
Evaluation of management
activities by Kao employees, etc.
Evaluation criteria
Evaluation indicator
EVA
Consolidated Net
Sales and Income*
2
Individual
performance
Weight*
1
25–35 %
25–35 %
50–30 %
Degree of target achievement
Degree of target achievement /
Degree of year-on-year improvement
Degree of individual OKR
achievement
1. Base salary
2. Short-term incentive (25%*
1)
*1 In the case of the Representative Director, President and Chief Executive Officer.
*2 In the case where the variable component coefficient and the payout ratio are both 100%.
3. Long-term incentive (25%*
2)
Compensation Structure for Directors
Fixed compensation (50%)
Variable compensation (50%)
Compensation Paid to Directors in FY2022
The variable part (performance-based part) of the long-term incentive compensation (performance-based share incentives) will be
determined after the final year of our Mid-term Plan 2025, which covers the five fiscal years from 2021 to 2025, and therefore, the
variable part (performance-based portion) is the amount recorded as a provision for the most recent fiscal year.
Compensation Paid for Individual Directors in FY2022
Yoshihiro Hasebe
Audit & Supervisory Board Members (of
Outside Audit & Supervisory Board Members)
Total (of Outside Directors and Audit &
Supervisory Board Members)
147
5 (3)
15 (8)
Submitting company
110 (43)
710 (118)
87
110 (43)
516 (118)
19
- (-)
48 (-)
29
- (-)
110 (-)
12
- (-)
36 (-)
Michitaka Sawada
Directors (of Outside Directors)
130
10 (5)
Submitting company
600 (75)
104
406 (75)
0
48 (-)
18
110 (-)
8
36 (-)
Name / aggregate amount of remuneration /
corporate classification
Amount of remuneration by type (Millions of yen)
Classification / number of persons /
aggregate amount of remuneration
Amount of remuneration by type (Millions of yen)
Long-term incentive
compensation
Variable part
Long-term incentive
compensation
Variable part
Long-term incentive
compensation
Fixed part
Long-term incentive
compensation
Fixed part
Short-term incentive
compensation
Short-term incentive
compensation
Name
Classification
Aggregate
amount of
remuneration
(Millions of yen)
Number of
persons
(persons)
Short-term
incentive
compensation
Aggregate
amount of
remuneration
(Millions of yen)
Base salary
Base salary
Only Director remuneration amounts totaling over 100 million yen are listed.
In the case of a serious compliance violation by the individual
in question during the period from the start date of coverage by
the system to three years after the final delivery of shares and
so on, the Company claims that the delivered shares and so on
must be returned.
5 years (2021–2025)
The coefficient for the variable part is determined within
the range of 0–200% in accordance with the degree of
achievement of each indicator.
The yearly share remuneration amount when the variable
component coefficient is 100%
About 30–50% of the base salary of the position
Performance-based
share remuneration
Base salary
EVA-linked part
Consolidated net sales /
profit-linked part
Individual performance
evaluations
Variable
bonus
Short-term incentive compensation
In addition to “EVA” and “consolidated net sales/income,” reflect
“individual evaluation” in variable bonuses
Long-term incentive compensation
Evaluate in three perspectives: “business growth,” “ESG activities,”
and “top management activities”
Kao Integrated Report 2023
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100
Corporate Governance
Chapter 3
To sustainably enhance corporate value, we
need to respond to increasingly diverse and
complex risks in a timely and appropriate
manner.
We appropriately manage all potential risks
and crises with the response priorities* within
the Kao Risk and Crisis Management Policy.
* 1. Protection of human lives 2. Environmental conservation
3. Continuation of operations 4. Protection of assets
Risk and
Crisis Management
Chaired by
President and CEO
Responsible
Executive Officer
level
Examples of applicable events:
earthquake, disaster, infectious disease
Emergency
Countermeasure
Headquarters
Standards for establishing
response organizations
State of emergency
level 1
State of emergency
level 2
State of emergency
level 3
Executive
Office
Crisis Response
Team
Regional Response
Headquarters*
Local Response
Headquarters
* Regional Response Headquarters: an organization that gathers
local information, collaborates with and supports local offices,
decides on regional actions, and provides instructions for these
actions
Management framework during times of crisis
Risk and crisis management system
Corporate risks and
main measures
We define a risk as a potential negative impact on the
achievement of our management targets and business
activities, and define a crisis as the materialization of such a
risk. Our Risk and Crisis Management Committee has
established a system and activity guideline. Based on these
activity guidelines, our domestic divisions and affiliates
identify and assess risks, and formulate and implement
appropriate countermeasures. Affiliated companies outside
Japan are managed through business divisions.
In the event of a crisis, we launch an Emergency Response
Team according to the severity of the emergency to minimize
physical damage and financial loss. The Management Board
reviews these efforts, and the Board of Directors approves
them. The Internal Control Committee monitors the status
and confirms the effectiveness of risk and crisis management
activities.
State of emergency level
Level 1: Relevant divisions can respond on a
local basis
Level 3: Company-wide impact, and impact
on Kao’s business
Level 2: Impact on operations at multiple
divisions and locations
Organizations in place for each type of event,
including accident, disaster, disease outbreak, etc.
Clarifying corporate risks and strengthening responses
The Risk and Crisis Management Committee and the
Management Board have selected 15 main risks of special
importance as risks that could negatively impact our
sustainable and profitable development, and the
contributions we make to the sustainability of society through
our business activities. We use the term “corporate risks” to
refer to those among our main risks that have a particularly
strong impact on management and that require stronger
Theme
Main measures
· Revise guidelines and action plans for the next pandemic
based on response to the COVID-19
· Strengthen countermeasures at each site against natural
disasters such as large typhoons and floods
· Continuously strengthen disaster prevention education to
protect employees and their families
· Formulate BCP assuming long-term suspension of
operations and enhance BCP at sites outside Japan
· Strengthen company-wide response in the event of
critical damage arising due to product quality issues
· Strengthen internal awareness-raising to prevent serious
product quality issues from arising
· Strengthen security measures and clarify response
procedures in the event of an incident arising
· Strengthen activities to protect trade secrets, personal
information, and information security
· Strengthen the emergency response system in the event
of contingencies
· Strengthen the system for monitoring social media
· Establish a pre-check system in advertising and social
media messages and continuously strengthen internal
education
Pandemic response
Large-scale earthquakes
and other natural
disasters and BCP
response
Response to serious
product quality issues
Response to
cyberattacks and
personal information
protection
Response to reputation
risks
Details of risks
· Risk of health damage to employees and
temporary suspension of operations due
to COVID-19 variants or new viruses
· Risk of harm to employees and damage
to assets including facilities and
difficulties in supplying products
resulting from large-scale earthquakes
and other natural disasters such as large
typhoons and floods brought on by
climate change
· Risk of serious product quality issues
arising that would cause the loss of
social credibility
· Risk of leaks of confidential information
or personal information due to an error
or to intentional actions including
cyberattacks
· Risk of temporary suspension of
business activities such as supply chain
management activity
· Risk that causes brand value and social
credibility to decline due to the spread of
negative evaluations about Kao on
social media
· Strengthen response by preparing risk scenarios,
providing response systems, and monitoring political and
social situations
· Take countermeasures centered on ensuring the
employee safety, securing the supply chain network, and
managing reputation
Response to geopolitical
risks
· Risk to human casualties
· Risk of temporary suspension of
operations and changes in consumer
purchasing due to friction between
countries and regions
Please refer to Financial Report 2022 “Business Risks and Other Risks” for details of major risks and main measures.
www.kao.com/global/en/investor-relations/library/financial-report/
W E B
response. Once a year, the Management Board selects risk
topics and risk owners (Executive Officers) based on an
analysis of internal risk surveys and the external environment,
as well as interviews with executives. Each risk owner
assembles a response team and holds deliberations, and the
Risk and Crisis Management Committee meets four times a
year to manage their progress.
Supporting management
in an era of uncertainty
Kao Integrated Report 2023
101
102
Corporate Governance
Chapter 3
Information Disclosure
Based on the TCFD
Recommendations
Governance
Key Activities and Progress in FY2022
Main Business Risks and Opportunities
Strategy
Risk
management
Metrics
and targets
Kao’s ESG governance structure features an organization joined
by external members who supervise and advise management. Our
structure also has reinforced functions for converting management
decisions into innovation and initiatives that can be executed in a swift
and targeted way.
In 2021, we established and renewed our targets for 2030 based on our
policy of moving toward carbon zero by 2040 and carbon negative by
2050.
· % reduction in absolute scope 1 + 2 CO2 emissions ............... -55%
(base year: 2017)*
1
· % of renewable energy in electricity consumption ................. 100%*
2
· % reduction in absolute full lifecycle CO2 emissions ............ -22%
(base year: 2017)
· Contribution to greenhouse gas reduction*
3*
4
......................................................................................................10,000 thousand tons-CO2
*1 This has been approved by the Science Based Targets Initiative (established to
encourage companies to take ambitious activity in the field of climate change) as one
of the targets for the 1.5°C scenario.
*2 We have become a member of RE100.
*3 The seven types of greenhouse gases (GHG) agreed upon in the 17th session of the
Conference of the Parties (COP 17) to the United Nations Framework Convention on
Climate Change and the seventh session of the Conference of the Parties serving as
the meeting of the Parties (CMP 7) to the Kyoto Protocol.
*4 The amount of emission reductions in society as a whole as a result of products from
the Kao Group.
We have further strengthened our ESG
governance system by establishing four
ESG Steering Committees to deal with
decarbonization, plastic packaging,
human rights and DEI and chemical
stewardship.
—
—
The amount of emission reductions in
Kao’s business operations as a whole
was 4,565 thousand tons.
· % reduction in absolute scope 1 + 2
CO2 emissions -26% (base year:
2017)
· % of renewable energy in electricity
consumption: 48.6%
· % reduction in absolute full lifecycle
CO2 emissions -6% (base year: 2017)
Physical
Higher procurement costs
due to a rise in the unit price
of recycled plastic resulting
from greater demand for
recycled plastic
Higher procurement costs
due to a restriction on fossil-
based raw materials
Higher procurement
costs for palm oils and
pulp due to restrictions
on new agricultural land
development, regulations on
the procurement of certified
products, etc.
Demand for ethical products
expands worldwide
Longer period of demand for
summertime products
Increased risk of infection
Transitional
Higher costs incurred due to
the introduction of carbon
tax worldwide
Set targets for scope 1 + 2
CO2 emissions according to
the 1.5°C scenario
Continue and bolster
activities for plastics in a
circular society
Continue and bolster
activities for minimizing the
quantity of fossil-based raw
materials being used, and
revise sales prices based on
the change in costs
Continue and bolster
activities for minimizing the
quantity of biogenic raw
materials being used, and
revise sales prices based on
the change in costs
Develop and market ethical
products, and inform
consumers about them
Greater damage
No significant increase in
recycled plastic demand
Higher procurement costs
due to an increase in
demand for fossil-based raw
materials
Higher procurement costs
for palm oils and pulp due to
the need for purifying water
quality and contaminated
soil following excessive
agricultural activity and
chemical fertilizers
Demand for ethical products
expands among specific
generations
Even longer period of demand
for summertime products
More increased risk of
infection
Hardly any progress in
introducing carbon taxes
Immense damage
Conduct risk surveys at
each site and carry out
measures accordingly
Reinforce the development
of summertime products
Develop and launch of anti-
infectious disease products
Category
of risk
1.5°C / 2°C scenario (2030)
Kao’s response
4°C scenario (2030)
Area of evaluation
Introduction of
restrictions on
plastics
Raw material price
increase
Preservation of
biodiversity
Changes in
consumers’
behavior
Rise in
temperature
Introduction and/
or raising of carbon
tax
Natural disasters
See the “Toward Carbon Negative” section on page 27 for details.
The major risks related to climate change have been included in Kao’s
overall risk management process and are managed as part of our
corporate risks.
See the “ESG governance structure” section on page 88 for details.
See the table titled “Main business risks and opportunities” on the next
page for details.
See the “Risk and crisis management” section on page 99 for details.
An increase in the average temperature by 4°C poses an immense
impact on society. As such, we recognize the importance of making
significant contributions toward the aim to keep the global rise in
temperature at 1.5°C.
We have analyzed scenarios based on a rise in temperature of 1.5°C,
2°C and 4°C. The trends for risks and opportunities are the same for
1.5°C and 2°C, but the 1.5°C scenario is faster and has a greater level of
activity than the 2°C scenario.
Key activities
Progress in FY2022
Kao views dialogue with investors and all other
stakeholders to be a key activity for planetary
sustainability and corporate sustainable growth. This is
why we expressed our support for the TCFD in March
2019. Kao recognizes climate change as both a major
risk for continued management going forward and as
an opportunity for growth.
103
104
Kao Integrated Report 2023
Data Section
Chapter 4
Socially Responsible
Investment Indexes
(As of March, 2023)
Kao has been included in the following leading indexes
in recognition of having this credibility globally
External Evaluation
(As of March, 2023)
For 17 consecutive years, we have been announced
by the U.S. think-tank Ethisphere Institute as one of
the “World’s Most Ethical Companies
®.” For three
consecutive years, we have been selected as a triple A
company in the three fields of climate change, forest,
and water security by the international non-profit
organization CDP. Kao has been well-received every
year across the globe.
4
The FTSE4Good index series: www.ftse.com/products/indices/FTSE4Good
WEB MSCI: www.msci.com/
W E B
“World’s Most Ethical Companies” and “Ethisphere” names and marks are registered
trademarks of Ethisphere LLC.
3
17
consecutive
years
consecutive
years
Data Section
Evaluations from external organizations
Financial and ESG highlights
Chapter 4
105
106
Kao Integrated Report 2023
Data Section
Chapter 4
0
20
40
60
80
100
120
2022
2021
2020
2019
2018
0
50
100
150
200
0
25
50
75
22
21
20
19
18
17
16
15
14
2013
0
50
100
150
200
250
300
350
2022
2021
2020
2019
2018
0
10
20
30
0
20
40
60
80
100
2022
2021
2020
2019
2018
0
10
20
30
40
50
60
2022
2021
2020
2019
2018
0
1
2
3
4
5
0
30
60
90
120
150
22
21
20
19
18
17
16
15
14
2013
0
300
600
900
1,200
1,500
0
50
100
150
200
250
2022
2021
2020
2019
2018
0
20
40
60
80
100
120
140
160
2022
2021
2020
2019
2018
0
5
10
15
20
25
30
ESG Highlights
Financial Highlights
(Billions
of yen)
(Billions
of yen)
(Billions
of yen)
(yen)
(Billions
of yen)
(Billions
of yen)
(yen)
(Billions
of yen)
(Billions
of yen)
(Billions
of yen)
(Fiscal year)
(Fiscal year)
(Fiscal year)
(Fiscal year)
(Fiscal year)
(Fiscal year)
(Fiscal year)
(Fiscal year)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
NOPAT
*2 /
EVA
*3 /
ROIC
*4
Net Sales*
1 /
Operating Income
/
Operating Margin
*1 As of the fiscal year ended December 31, 2020, the Company has changed its
method of recognizing sales for some transactions from the gross amount to the
net amount
*2 Net operating income after tax (sum of EVA
® and cost of capital)
*3 EVA
® is a registered trademark of Stern Stewart & Co.
*4 Return on invested capital
*7 Excludes right-of-use assets from the fiscal year ended December 31, 2019.
Net sales (left)
Operating income (right)
Operating margin (%)
NOPAT (left)
EVA
® (left)
Cost of capital (left)
ROIC (right)
1,508.0
1,502.2
1,382.0
1,418.8
1,551.1
156.2
93.5
62.7
12.5
87.4
63.8
11.9
62.3
66.5
9.7
45.1
69.9
8.2
14.7
73.5
6.0
151.2
128.8
115.0
88.2
207.7
211.7
175.6
*5 Ratio of net income to equity attributable to owners of the parent
*6 Basic earnings per share
Trend in Capital Investments*
7
ROE
*5 /
EPS
*6
EPS (left)
ROE (right)
314.25
89.1
90.2
69.7
66.6
74.5
306.70
262.29
230.59
183.28
18.9
17.6
14.2
11.6
8.9
Performance of Cash Dividends per Share
R&D Expenses
/
R&D Expenses Ratio
R&D Expenses (left)
R&D Expenses Ratio (right)
57.7
3.8
59.1
3.9
58.5
4.2
59.0
4.2
60.6
64
70
80
94
110
120
130
140 144 148
3.9
Status of Share Repurchases*
8
Net Income Attributable to Owners of the Parent
/
Shareholder Returns*
8
*8 Excludes repurchase of shares of less than one trading unit and shares acquired
through the Board Incentive Plan Trust (“BIP Trust”).
Share repurchases (left)
Total dividend amount (left)
Net income attributable to owners of the parent (right)
50.0153.7
58.5
62.6
148.2
50.0
67.4
126.1
68.4
109.6
50.0
69.3
86.0
50.0
30.0
50.0
50.0
50.0 50.0
50.0 50.0
*2 Employees seconded from the Group to outside are excluded, but employees
seconded from outside to the Group are included. From this fiscal year, full-time,
indefinite-term and non-permanent employees are included.
*3 Employees seconded from the Group to outside are excluded.
Number of Patents (Japan
/
Outside Japan*
1)
(number)
(people)
Employee Numbers by Gender*
2 /
Percentage of Female Managers*
3
GHG Emissions (all worksites) *
6
*6 Boundary: All Kao Group sites including company cars in Japan. Gases included:
The seven GHGs specified by the Kyoto Protocol (only CO2 for sites outside
Japan.)
Plastic Packaging Usage
/
Recycle Material Usage Ratio
Number of patents held outside Japan
Number of patents held in Japan
Female employee (left)
Male employee (left)
Percentage of female managers (right)
GHG emissions (left)
Absolute emissions reduction rate (right)
Plastic packaging usage (left)
Recycle material usage ratio (right)
0
2,000
4,000
6,000
8,000
10,000
12,000
2022
2021
2020
2019
2018
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2022
2021
2020
2019
2018
2017
-60
-50
-40
-30
-20
-10
0
10
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2022
2021
2020
2019
2018
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2022
2021
2020
2019
2018
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
*1 In FY2022 overseas patents that have completed their roles have been
abandoned to maintain an appropriate portfolio.
(Thousands of tons)
(Thousands of tons)
(Millions m
3)
Water Use across the Product Lifecycle*
4
*5 “CO2 emissions across the product lifecycle” is defined as the combined total for
the amount of lifecycle emissions of individual products, excluding emissions
during manufacturing and distribution, multiplied by their annual sales quantity
and the amount of emissions from the group’s manufacturing and distribution
processes. However, this amount does not include emissions related to the use
and disposal of Chemical products.
CO2 Emissions across the Product Lifecycle*
5
Water use (left)
Per unit (of sales) reduction rate (right)
CO2 emissions (left)
Absolute emissions reduction rate (right)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2022
2021
2020
2019
2018
2017
-60
-50
-40
-30
-20
-10
0
10
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2022
2021
2020
2019
2018
2017
-60
-50
-40
-30
-20
-10
0
10
*4 “Water use across the product lifecycle” is calculated by multiplying lifecycle
water use of individual products, excluding use during manufacturing and
distribution, by their annual sales quantity and the amount from the group’s
manufacturing and distribution processes. This amount includes water used for
procurement in regard to Chemical products but does not include water used in
the use and disposal of such products.
2,961
1,057
0
1,037
-2
963
-9
899
-15
845
-20
778
62.5
0.07
65.6
0.07
116.6
0.37
106.0
1.26
-26
0
2,924
-2
2,819
-6
2,876
5
2,968
11,910
0
11,743
-1
11,455
-4
11,445
-4
11,398
-4
5
(Thousands of tons CO2 e)
(Fiscal
year)
(Fiscal
year)
(Fiscal
year)
(Fiscal
year)
(Fiscal
year)
(Fiscal
year)
13.8
14.1
12.7
10.1
7.1
143.5
110.1
7,233
7,537
7,785
7,910
5,831
9,660
9,455
9,555
9,446
9,171
16,748
16,916
27.3
16,657
16,946
29.4
16,775
16,634
28.8
16,918
16,589
30.2
18,734
16,677
30.5
-3
2,992
11,251
-6
3.00
91.4
107
108
Kao Integrated Report 2023
Data Section
Chapter 4
1. EVA
® is a registered trademark of Stern Stewart & Co.
2. As of the fiscal year ended December 31, 2020, the company has changed its
method of recognizing sales for some transactions from the gross amount to the
net amount.
3. Free cash flow = Net cash flows from operating activities + Net cash flows from
investing activities.
4. Capital expenditures include investments in property, plant and equipment,
intangible assets, and other non-current assets. Starting from the fiscal year
ended December 31, 2019, capital expenditures include investments in right-of-
use assets.
5. From the fiscal year ended December 31, 2022, full-time, indefinite-term,
non-permanent employees are included to standardize information disclosure
globally. The number of employees based on the standards used up to last fiscal
year is 32,895.
6. Numbers in parentheses are negative.
Historical Financial Data
For the year:
Economic Value Added (EVA
®)
Net sales
Operating income
(% of sales)
Income before income taxes
Net income
Net income attributable to owners of the parent
Net cash flows from operating activities
Net cash flows from investing activities
Free cash flow
Net cash flows from financing activities
Capital expenditures
Depreciation and amortization
Research and development expenses
(% of sales)
Advertising
(% of sales)
At year end:
Total assets
Equity attributable to owners of the parent
Number of employees (people)
Per share:
Annual cash dividends per share (yen)
Share price at the end of the year (yen)
Key financial ratios:
73,357
1,457,610
185,571
12.7
183,430
127,889
126,551
184,307
(88,639)
95,668
(95,043)
89,900
51,116
54,567
3.7
97,437
6.7
1,338,309
679,842
50.8
33,195
253.43
94.00
504,000
5,541
18.6
13.8
90,394
1,489,421
204,791
13.7
204,290
148,607
147,010
185,845
(96,146)
89,699
(53,244)
79,355
54,508
56,703
3.8
89,935
6.0
1,427,375
806,381
56.5
33,560
298.30
110.00
495,000
7,619
19.8
14.8
Dec. 2016
Dec. 2017
Dec. 2018
Dec. 2019
Dec. 2020
Dec. 2021
Dec. 2022
93,530
1,508,007
207,703
13.8
207,251
155,331
153,698
195,610
(157,895)
37,715
(108,579)
89,097
60,662
57,673
3.8
80,274
5.3
1,460,986
822,360
56.3
33,664
314.25
120.00
488,700
8,154
18.9
14.4
87,403
1,502,241
211,723
14.1
210,645
150,349
148,213
244,523
(94,266)
150,257
(126,166)
113,387
83,369
59,143
3.9
77,545
5.2
1,653,919
857,695
51.9
33,603
306.70
130.00
482,000
9,025
17.6
13.5
62,265
1,381,997
175,563
12.7
173,971
128,067
126,142
214,718
(61,941)
152,777
(87,065)
86,149
86,080
58,509
4.2
71,984
5.2
1,665,616
923,687
55.5
33,409
262.29
140.00
482,000
7,970
14.2
10.5
45,127
1,418,768
143,510
10.1
150,002
111,415
109,636
175,524
(67,232)
108,292
(141,573)
87,766
87,341
58,993
4.2
74,847
5.3
1,704,007
965,137
56.6
33,507
230.59
144.00
475,000
6,019
11.6
8.9
14,669
1,551,059
110,071
7.1
115,848
87,742
86,038
130,905
(74,911)
55,994
(139,311)
94,567
89,738
60,601
3.9
74,664
4.8
1,726,350
972,061
56.3
35,411
183.28
148.00
465,900
5,255
8.9
6.8
1. The number of shares may include the number of shares related to the trust
business or the stock custody business.
Status of Top 10 Shareholders
Corporate Overview
Stock Listing
Ticker Symbol Number
Total Number of
Authorized Shares
Total Number of
Issued Shares
Number of Shareholders
Administrator of
Shareholder Register
Tokyo Stock Exchange
1,000,000,000 shares
465,900,000 shares
170,563
Sumitomo Mitsui Trust Bank,
Limited 4-1, Marunouchi
1-chome, Chiyoda-ku, Tokyo
100-0005, Japan
4452
Stock Information
Company
Head Office
Founded
Incorporated
Share Capital
Employees
Subsidiaries
Associates
Kao Corporation
14-10, Nihonbashi Kayabacho
1-chome, Chuo-ku, Tokyo
103-8210, Japan
June 19, 1887
May 21, 1940
85.4 billion yen
8,403 (Number of employees
in Kao Group consolidated
companies: 35,411)
111 (of which 93 are subsidiaries
outside Japan)
5 (of which 2 are associates
outside Japan)
Composition of Shareholders
IFRS (Millions of yen)
Individuals
and Others
15.33 %
Treasury
Shares
0.02 %
Financial Institutions
36.59 %
Companies
and Individuals
in Foreign
Countries
34.78 %
Other Japanese Companies
4.83 %
Securities
Companies
8.45 %
The Master Trust Bank of Japan, Ltd. (Trust Account)
Custody Bank of Japan, Ltd. (Trust Account)
SMBC Nikko Securities Inc.
STATE STREET BANK WEST CLIENT – TREATY 505234
THE BANK OF NEW YORK 134104
Japan Securities Finance Co., Ltd.
JPMorgan Chase & Co.
Nippon Life Insurance Company
National Mutual Insurance Federation of Agricultural Cooperatives
STATE STREET BANK AND TRUST COMPANY 505223
Name of Shareholder
88,817
31,656
16,845
8,581
7,322
7,033
6,802
6,691
6,334
5,976
Number of Shares
(thousand shares)
Shareholding
(percentage)
19.07
6.80
3.62
1.84
1.57
1.51
1.46
1.44
1.36
1.28
2. The shareholding ratio is calculated based on the total number of issued shares
minus the number of treasury stock.
Ratio of equity attributable to owners of the parent to total
assets (%)
Basic earnings per share (EPS) (yen)
Ratio of net income to equity attributable to owners of the
parent (ROE) (%)
Number of issued shares, including treasury shares, at the end
of the year (in thousands of shares)
Ratio of income before income taxes to total assets (ROA) (%)
109
110
Kao Integrated Report 2023
Data Section
Chapter 4
Kao Integrated Report 2023 Editorial Policy
Information Disclosure Framework
The Kao Integrated Report tells our value creation story to all stakeholders.
It sets out our aims for the future, the value we will provide to society, the
strategies and management base we will leverage to achieve these goals,
and other information about our financials and ESG activities. This fiscal
year, we have explained our endeavors and progress in our transformation to
achieve K25 and enhance our sustainable corporate value, giving the title of
“A beginning of change” to this report.
In the process of compiling this report, we have referred to the Guidance
for Collaborative Value Creation 2.0 from the Ministry of Economy, Trade
and Industry, as well as the recommendations in the International Integrated
Reporting Framework from the IFRS Foundation. We have also revised the
content based on advice from readers.
Going forward, we will continue to improve and augment the Kao
Integrated Report through dialogue with our stakeholders. The feedback
we receive will be incorporated into our management, and we will strive to
contribute more to society while creating corporate value.
The tree motif featured in this report expresses our commitment to live up
to the next generation’s dreams for the future, as expressed through the
works submitted to the Kao International Environment Painting Contest for
Children.
The 13th Kao International Environment Painting Contest for Children
took place in 2022, 13,214 beautiful paintings and messages were sent from
children around the world.
Forward-looking statements such as earnings forecasts and other projections
contained in this report are based on information available at the time of publication,
and on assumptions that management believes to be reasonable. These statements
are not guarantees that Kao will achieve its targets. Actual results may differ
materially from Kao’s expectations due to various factors.
Disclaimer on
Forward-looking
Statements
Digital media
This site describes Kao’s Purpose, our initiatives for sustainability and
innovation and our businesses and brands, while also providing
information for investors, details on careers and much more.
Reporting Period
FY2022 (January 1–December 31, 2022)
* Some portions contain activities before FY2021 and
from FY2023 (results and planned)
Referenced Guidelines
Guidance for Collaborative Value Creation
International Integrated Reporting (IR)
Framework
GRI Standards
Organizations Covered
Kao Group (Kao Corporation and its
subsidiaries and affiliates)
* Some data regarding the environment and society
refer to Kao Corporation and subsidiaries (noted in
text)
* “Kao” refers to the Kao Group
Date published
May 26, 2023
Accounting Standards
Japanese GAAP applied up to FY2015,
and International Financial Reporting
Standards (IFRS) applied from FY2016
Value creation story/ Mid- to long-term perspective
Results / Timeliness
Integrated Report
• Investor Relations website
www.kao.com/global/en/investor-relations/
• Kao Group Mid-term Plan
• Management and Business Strategy
Conference
• Financial Report
• Financial Results
• Earnings Conference
Financial
ESG
• Sustainability Report
www.kao.com/global/en/sustainability/pdf/
sustainability-report/
• Corporate Governance Report
www.kao.com/global/en/corporate/policies/
corporate-governance/
• Sustainability website
www.kao.com/global/en/sustainability/
ESG Information
Investor Relations
Kao Group official website
www.kao.com/global/en/