Sustainability as the only path
For the year ended December 31, 2023
OUR
PURPOSE
We aim to create a Kirei life for people,
society, and the planet through creation
and innovation building a future
where all life enjoys more fulfilling
and enriched lives.
To Realize
a Kirei World
in Which All Life
Lives in Harmony
We will contribute to Kirei that makes life shine for each
and every person, Kirei that makes everyone smile in their
everyday lives, and Kirei that realizes a sustainable ecology.
Life
Everyday Lives
Ecology
Three areas
of our value
creation
Kirei-Making Life Beautiful
“Three areas”video
2
0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2020
2010
2000
1990
1980
1970
1964
OUR
DNA
Continuing to Expand
through Yoki-Monozukuri
Yoki-Monozukuri represents our approach of staying close to people, society, and the planet
while creating products and services that respond to their needs and enrich their lives. This
is a deeply rooted value within Kao, and it serves as the driving force for our corporate
growth. Going forward, we aim to maximize the power and potential of employees, evolve
Yoki-Monozukuri, enhance corporate value through transformation to build robust business
through investment, and become an essential company in a sustainable world.
Products that support
cleanliness in daily life
Founded
in 1887
Concentrated
detergents
De-inking agents, water-
reducing agents for concrete,
etc.
Increasing
availability of refill
products
Water-saving
products
Products made
using sustainable
raw materials
More efficient agriculture /
More durable roads
Strengthen health
and beauty
Expand business fields
into the health and
beauty domains
Respond to needs for
streamlining housework and
personal care
Accelerate global
expansion
Begin expansion
to Asia
FY2023 results
Net sales: 1,532.6 billion yen
Operating income: 114.7 billion yen
EVA®:14.9 billion yen
（Economic Value Added）
（
Trillions of yen
）
Corporate History and Net Sales Growth
Become an Essential Company
in a Sustainable World
Create truly unique value for
customers
Decisive investment in
human capital
Withdrawal from matrix
management
Global shift to essential,
highly profitable businesses
Yoki-Monozukuri
Maximize the Power and
Potential of Employees
Business
Transformation
Corporate value
enhancement
〈
〉
Contributions to
the Environment
Expand beauty
care domain
3
OUR
CHALLENGE
We will become the number-one essential, solutions-led
company for individuals across the world. This is our
Global Sharp Top Strategy. We view the entire world as our
market, garnering consumer loyalty by refining the
characteristics of our products and services, and aiming for
top market share within specific segments. We will form
scrum teams with internal and external members who
share our philosophy and combine our wisdom to
accelerate transformation to build robust businesses
through investment.
Global Sharp Top
Strategy to Accelerate
Transformation
4
To Realize a Kirei World in
Which All Life Lives in Harmony
OUR PURPOSE
02
Global Sharp Top Strategy to
Accelerate Transformation
OUR CHALLENGE
04
Continue to Expand Through
Yoki-Monozukuri
OUR DNA
Corporate value
enhancement
Yoki-Monozukuri
Maximize the power and
potential of employees
Business
transformation
03
Strive to Be the One and Only
Company Through Creation
and Innovation
06
TOP MESSAGE
Net sales
1,532.6
billion yen
Core operating
income
114.7
billion yen
Kao’s Value Creation
Transformation for K27
Value Creation Model ・・・・・・・・・・・・・・・・・・・・・・・・10
Materiality ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・11
ESG Strategy / Balancing ESG and EVA ・・・・12
Introduction
CONTENTS
Decisively implement structural
reforms and create
a Global Sharp Top business
Transform to build robust business
through investment by adhering to the
Global Sharp Top Strategy
Rebuild a “Strong Kao”
through a scrum-type approach
Establish diverse and robust
governance to support the sustainable
enhancement of Kao’s corporate value
Aim to realize a world
where all life lives in harmony
Four Strategies
for Achieving K27 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・15
Business Overview ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・23
Hygiene and Living
Care Business
24
DATA SECTION
Evaluations from external organizations /
ESG and Financial highlights ・・・・・・・・・・・・・・・・・・・・53
Corporate Overview and
Stock Information ・・・・・・・・・・・・57
Editorial Policy and Kao Information
Disclosure Framework ・・・・・・・・・・・・・・・・・・・・・・・58
MK_ Purpose-Driven and Value Co-Creation for
Strong Consumer Connections ・・・・・・・・・・・・・・・・・・・・・・・・・・・・31
Sales_A Sales Model for Continued Profitable Growth ・・・・・・32
DX _ Using Digital Technologies to Transform Yoki-Monozukuri ・・33
SCM_Aiming for a Sustainable and Resilient Supply Chain ・・34
Research_Creation of Cutting-edge Solutions ・・・・・・・・・・・・35
Intellectual Property_Maximize Utilization of
Technology Assets ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・36
P R_ Contributing to Corporate Value and Profit
by Creating Kao Fans̶a loyal consumer base ・・・・・・・・・・37
【 OUR PEOPLE 】
A New Challenge to Create One and Only Values ・・・38
Messages from Outside Directors
and an Outside Audit & Supervisory
Board Member ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・43
Corporate Governance ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・44
Risk and Crisis Management ・・・・・・・・・・・・・・・・・50
Health and Beauty
Care Business
25
Chemical
Business
29
Life Care
Business
27
Cosmetics
Business
28
Build Global Sharp Top
Businesses ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・16
Global Sharp Top Human Capital /
Organizational Management ・・・・・・・・・・17
Improve Capital Efficiency /
Profitability ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・19
Build Businesses Through
Co-creation with Partners ・・・・・・・・・・・・・・・・21
01.
02.
Business Strategy
03.
04. Value Chain Reform
Corporate Governance
05.
Chemical
Cosmetics
Hygiene and
Living Care
Health and
Beauty Care
Life Care
5
A Global Sharp Top Strategy That
Propels Us Toward K27
Four Frameworks for
Transformation
A Company That Protects
Future Lives
The global COVID-19 pandemic, the multipolarity and
fragmentation of the international society with growing
geopolitical risks, price hikes due to soaring raw material
prices, and the issue of releasing treated water have
profoundly impacted Japan’s economy. Meanwhile,
the global movement towards decarbonization and
environmental conservation to create a sustainable society
is becoming even more critical.
The Kao Group aims to realize a world in which all
life lives in harmony. We are moving to become an
indispensable part of a sustainable society as a company
that protects future lives and cherishes the connection
between people and society as well as the vibrant
connections between people.
In August 2023, we updated parts of the Mid-term Plan
to accelerate global development and improve capital
efficiency. Here, we announced K27, which has 2027 as
the last year of the plan. Although our core plan has not
changed, the Global Sharp Top strategy has been added
to clarify our axes of growth.
Kao’s strengths lie in our unique technologies,
developed through pursuing Essential Research. These
technologies have resolved customer concerns on a
superior level by creating indispensable products or,
in other words, creating value. We aim to be the one
and only company in the world to provide sharp value
proposals that customers wholeheartedly support.
This is the essence of the Global Sharp Top mindset.
We have specified four frameworks as strategies that
guide us toward achieving K27.
The first framework is to strengthen and expand
businesses that have high customer demand and
profitability on a global scale.
The second framework is to develop talented individuals
with exceptional skills and creativity to address important
needs. These individuals will play central roles in
promoting effective organizational management.
The third framework is to continually improve capital
efficiency and profitability. We will strive to maximize the
value of our management capital by investing in various
categories and monitoring business efficiency based on
business portfolios.
The fourth framework is focused on business development
through co-creation with partners. This strategy will enable us
to quickly and significantly utilize our technology assets.
Global Sharp Top
Striving to Be the One and
Only Company Through
Creation and Innovation
TOP MESSAGE
Representative Director
President and Chief Executive Officer
6
TOP MESSAGE
Build Global Sharp Top Business
Global Sharp Top Human Capital and Organization Management
Shift from quantity and volume to quality and
connections
Fostering skilled human capital through
well-balanced investments
Speedy decision-making and implementation
with task-based management
Gaining loyalty through building on a global
perspective
Kao’s Yoki-Monozukuri approach focuses on identifying
the essence from various facets, starting with the
consumer, to create highly unique approaches.
R&D’s strengths in supporting this lie in continuously
incorporating and refining technology used in different
fields to develop products that provide new value.
As diversity has become more prevalent, it is rare
for people to seek the same product value. Instead,
people now seek products that align with their personal
values and have meaning to them. We are evolving
manufacturing from value creation that provides a certain
level of satisfaction to anyone who uses our products, to
value creation with a strong focus on certain customers,
thereby striving for an elevated level of satisfaction. To
achieve this, we are making efforts to transform from an
economy of quantity and volume toward an economy of
quality and connections.
We will steer towards an increasingly well-balanced
investment in human capital. Based on Kao’s Diversity,
Equity, and Inclusion values, which respect diversity of
people, we will establish policies that provide maximum
respect for the individual characteristics and strengths of
each member in our workforce.
To achieve this, we will start by focusing on developing
distinct personnel that can exert leadership and those
highly skilled in specific fields.
Although we provide numerous training opportunities
within our human capital investments, we especially
focus on innovation technology education. Currently, Kao
has launched the DX Adventure Program, which allows
participants to acquire top-class skills starting from a
basic understanding of IT. We have also started an AI
Academy to reskill advanced engineers.
For those with strong leadership qualities, we promote the
delegation of authority and create an environment where
swift decision-making is done in small teams.
While we respect the conventional matrix structure
between business management divisions and functional
divisions, we are now transitioning to a task-based
management model with business management divisions
at its core to make clearer and faster decisions.
We believe in promoting dialogue and leveraging the
collective wisdom of our employees to prioritize speed in
decision-making and task implementation.
We re-established a strong awareness of globalization
to clarify the contrast between that and conventional
international expansion. Instead of promoting Japanese
technology and products overseas as we did in the past,
we will now focus on generating value from a global
perspective from the start.
We are committed to creating products and developing
businesses that are indispensable to our customers, as
measured by the repeat ratio (loyalty). Equally important,
we are determined to maintain our top position within the
important sectors for these businesses.
7
TOP MESSAGE
Improve Capital Efficiency/Profitability
Build Businesses Through Co-creation
with Partners
Aiming to Increase Corporate Value
Under the Kao Way
Breaking free from self-sufficiency to
create synergy
Business portfolio review with ROIC* as an indicator
Since 2023, Kao has been managing business portfolios
with ROIC as its foundation. The company’s businesses
have been quantitatively analyzed and categorized into
the three sectors: Stable Earnings, Growth Drivers, and
Business Transformation, with the ROIC for each sector
been made clear.
The ultimate goal of K27 is to achieve an ROIC of 11%.
To reach this goal, we will prioritize investments for global
growth and increase sales of global businesses in the
growth driver business area, which includes skin care,
cosmetics, chemicals, and business products.
＊Return on Invested Capital
The final framework requires building businesses through
co-creation with partners. To maximize Kao’s technology
assets and contribute to business and society as much
and fast as possible, collaboration with partners with
distinctive strengths becomes essential. Our collaboration
guidelines are based on whether we have the same
values and ambition toward the same direction to
resolve social issues. We believe that leading the industry
and each having areas of strength is important when
creating synergies.
From now on, Kao will strive to break free from a self-
sufficient mindset and build businesses with a higher level
of products and profit with the support of many partners.
The Kao Way is our corporate philosophy deeply
rooted in each employee. Due to this foundation, all
activities become consistent and become the driving
force that brings together our diverse assets and
employee capabilities.
As we propel towards K27, the power of our people
will drive our aspiration to become an essential global
company under our Global Sharp Top strategy. We will
focus on maximizing the energy of our employees to
further evolve Yoki-Monozukuri from an ESG perspective
fueled by creativity and innovation.
We aim to become an essential company in a
sustainable world, walking the right path by showing
the world how to transition from an economy of quantity
to an economy of quality.
[ Guidelines to Attain K27 ]
Pursuing the transition
from quantity to quality
Global Sharp Top
Yoki-Monozukuri
Maximizing the power and
potential of employees
Conducting structural reforms to pave the way
for improved capital efficiency
We initiated a significant structural reform in 2023
reviewing our business portfolio, which relied heavily
on China, and reorganized it to foster well-balanced
global growth. Through these human capital structural
reforms, we have maximized our human capital and paved
the way to improved efficiency.
In Japan where there is a strong business custom of
maintaining low prices for everyday products, Kao has
led the industry in implementing strategic price increases
to pass on the rising costs of raw materials. In this
dynamic environment, Kao has harnessed digital technology
to manage profit ratios from product design to sales,
and are consistently challenging ourselves to deliver
high-added value.
Looking ahead to 2024, we are proactively addressing
logistics issues by implementing effective inventory control
measures, eliminating product shortages, and enhancing
shipping efficiency.
8
Children want a world
where all life lives in harmony.
Kao aims to be a company that
protects future lives based on our Vision,
“Sustainability as the only path”.
Chapter
01
Kao’s
Value Creation
We listen to children’s thoughts on the future through
the Kao International Environment Painting Contest for Children.
※Winning entries for 2023
9
Yoki-Monozukuri
Maximize the Power and
Potential of Employees
Business
Transformation
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 is unique.
Our solutions will be
too.
Precision
Life Care
4
Protecting future lives
Sustainability as the only path
Our Value Creation
Ki
rei
Lif
est
yle
Pl
an
C
o
rp
or
at
e
Phi
los
oph
y :
Th
e
Ka
o
W
a
y
To Realize a Kirei World in Which All Life Lives in Harmony
Value Creation Model
Purpose
Hygiene and
Living Care
Health and
Beauty Care
Cosmetics
Life Care
Chemical
Environmental
Issues
Aging
Population
Pandemics
Diversification
of Society
Social Issues
of Focus
Sources of Our
Value Creation
Human
Capital
Relationship
Capital
Manufactur
ing Capital
Intellectual
Capital
Financial
Capital
Natural
Capital
Corporate value
enhancement
Become an Essential Company in a Sustainable World
・ Number of employees ……34,257
・ Management tool for activating
personal growth : OKRs
・ Open recruitment program for
revolutionizing ideas : 0★1 Kao
・ Sales area ……………………………… over 100
・ Subsidiaries ………………………… 113
・ Customers, partners for business
and social contribution, academia
・ Net sales …………………………………
1,532.6
billion yen
・ Core operating
income＊ …………………………………… 114.7
billion yen
・ EVA
(Economic Value Added) ………… 14.9 billion yen
・ Production sites ………………… 36 locations
・ Capital investment ………… 93 billion yen
・ Number of brands …………… 81
・ Number of
patents held ………………………… 15,000
・ Number of
trademarks held ………………… 22,000
・ R&D expenses …………………… 62.6 billion yen
・ Energy consumption……… 16.7PJ
・ Water use ……………………………… 16.2 million m3
・ Plastic packaging ……………
usage
85.0
thousand tons
・ CO2 emissions across ……
the product lifecycle
10,094
thousand tons
Commitment
to the Future
Our Vision
＊FY2023 figures are calculated based on core income. The Kao group presents income excluding one-time gains and losses due to non-recurring factors as "core income."
10
In 2018, we identified the ESG materiality through
the process shown below to achieve our 2030 Vision
for realizing a sustainable world and enhancing
corporate value.
In 2019, we incorporated these elements as the KLP
Kao Actions in our ESG Strategy: Kirei Lifestyle Plan
(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.
Updating our materiality analysis
We are currently working to update our materiality
analysis considering various environmental changes, such as
shifts in consumer awareness following the COVID-19
pandemic and heightened geopolitical risks. We will respond
to external requirements such as the ESRS
(European Sustainability Reporting Standards) and follow
the principle of double materiality as we identify areas
for action.
In 2020, we indicated our focus on four social issues
based on rapid changes around the world: Environmental
issues, Aging Population, Pandemics, and Challenges
associated with diversification. We also declared our
policy to enhance existing businesses and accelerate the
creation of new businesses.
In 2021, we established Our Commitment to the Future
based on KLP Kao Actions that were strongly related to
business activities. We will promote these activities to
achieve our commitment, with the goal of becoming an
essential company in a sustainable society through our
company-wide endeavors to protect future lives.
Materiality
Link: Sustainability Report
Link: Kao Stories
Process for Identifying Materiality
Commitment to the Future
Periodic
reviews
Company
Environment
/ Society
Impact of the environment /
society on the company
(financial materiality)
Impact of the company on the
environment / society
(environmental / social materiality)
Regenerative
Lifestyles
Plan for and enable
regeneration.
We strive for a planet
where all people live more
fulfilling and enriched lives
with peace of mind by
promoting new practices in
cleanliness, beauty, health,
and the environment that
are easy for anyone to do.
1
Zero Waste
Waste nothing.
Period.
We use precious resources
without waste and return
products to raw materials
after use. Our absolute goal
is zero waste from our
business activities.
3
Toward Carbon
Negative
Move beyond CO2
reduction and unlock
CO2 recycling.
We will reduce CO2 through
our activities and the use of
our products and services
as much as possible.
Furthermore, we are aiming
to be carbon negative by
developing technologies in
which CO2 in the air is
recycled in raw materials.
2
Precision Life
Care
Every person is
unique. Our solutions
will be too.
We offer tailored solutions
to meet the unique needs
of every individual,
achieved through a precise
understanding of physical,
environmental, and
underlying circumstances.
4
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.
Leave No One
Behind
Innovation can be for
everyone. We won’t
stop.
5
Identification of candidate themes
We selected themes that have an impact on the
company from two perspectives: society and
stakeholders
Prioritization
A wide range of stakeholders, including employees,
evaluated the themes’ importance in terms of our
corporate value enhancement and business growth
Validation
The Board of Directors approved the actions following
deliberation within the ESG Committee (now the ESG
Managing Committee)
Review
We conduct periodic internal evaluations, as well as
reviews inside the ESG External Advisory Board
Our Materiality
11
With our commitment to
Yoki-Monozukuri with an
ESG perspective, Kao will
continue to pursue value
creation for our consumers
through solutions for social
issues, as well as
optimization of our
business operations across
the value chain. This will
bring positive impact to
ROIC and EVA and
contribute toward our
financial framework.
David J. Muenz
Director, Managing Executive
Officer Senior Vice President, ESG,
Responsible for Strategic
Public Relations
With rapid changes in our business environment, meeting various
social challenges from an ESG perspective will boost stakeholders’
confidence and therefore Kao’s presence in the marketplace. Kao
has formulated an ESG strategy, the Kirei Lifestyle Plan (KLP), which
describes ambitious goals for the future and a detailed direction
of ESG activities with a focus on consumers. The KLP works on
resolving key social issues, which include Decarbonization, Zero
Waste, and Human Rights, while striving for business growth.
Our Global Sharp Top approach is about creating unique brands
with high-performing products that have strong loyalty and high
repeat purchase levels. As we transition to a more sustainable
world, the KLP will be put into action with sustainability embedded
in our operations and in the unique propositions we offer to our
customers. This will further increase customer satisfaction and
loyalty, thus further enhancing the Global Sharp Top approach.
Kao’s ESG Strategy Strengthens Our Global Sharp Top Approach
ESG Strategy
Integrating Sustainability into Our Business and Balancing ESG and EVA
Kao’s ESG Strategy – Kirei Lifestyle Plan
12
Our corporate philosophy, the Kao Way, defines our
mission as realizing a Kirei World in which all life lives in
harmony. It is about creating a Kirei Life for all̶providing
cleanliness, beauty, and health for the life of all people and
the planet. Making a difference to sustainable lifestyles
through our business has been a central tenet for Kao
since the founding of the company.
As we pursue K27 and beyond with the vision of
“Sustainability as the only path” by embedding ESG
strategically into our business, Kao will lead the way in
realizing a sustainable world. We will deliver high value
proposals from an ESG perspective to consumers around
the world and fulfill our purpose of creating a Kirei life for
all and increase our corporate value along the way.
Creating a Kirei Life for All
The bottle refill for CuCute dishwashing detergent
with about 40%* less plastic usage is easily crushable
for disposal and has been well received for its
environmentally-friendly features.
Products like this, which address ESG issues, have
contributed to the development of new markets and
increased customer loyalty. We will continue to promote
value-added proposals from an ESG perspective to
consumers globally.
Realizing a Sustainable World Together
Engaging with users of our products and raising societal
awareness of ESG is key to realizing
a sustainable world. Starting in 2022, Kao began
promoting the message “Wastefulness̶Mottainai. Never
today, nor tomorrow.” to communicate Kao’s actions for
the environment and society in an approachable way.
The objective is to engage people to consciously address
environmental issues simply by choosing Kao products.
Through this message, we are seeing that raising
awareness of the benefits of using our environmentally-
friendly and socially-conscious products strongly
encourages people to choose our products. We will
continue to enhance Kao’s corporate value through ESG
activities and contribute towards supporting consumers in
leading sustainable lives.
Multi-faceted ESG Activities Make Our
Business Sustainable
ESG will be critical in ensuring our businesses are
sustainable. We reduced CO2 emissions (Scopes 1+ 2)
from all Kao Group sites by 35% in 2023 compared to
2017 (base year), a steady progress toward achieving
the target of 55% reduction by 2030. In our efforts to
create a more circular society, we are promoting the use
of recycled plastic for PET packaging, achieving an 81%
usage rate in Japan, our biggest market.
Sourcing responsibly is another key focus for Kao.
We closely cooperate with partners for the procurement
of one of Kao’s key materials, palm oil, towards the
establishment of a sustainable supply chain free of
deforestation and human rights violations. This includes
securing traceability to oil palm smallholders, providing
support to oil palm smallholders in Indonesia, and purchasing
RSPO-certified sustainable palm oil. We share the latest
progress on our
Palm Oil Dashboard, which is a page that
introduces activities related to palm oil procurement.
Through these actions and the wholehearted
implementation of our efforts based on the KLP, we believe
that Kao will continue to be a leader in sustainability, improve
our financial performance as measured by EVA and ROIC,
and grow our business globally.
Linking ESG Value Proposals to Business Growth
We are already seeing our ESG proposals bear fruit in
creating new value for our consumers. Bioré UV Aqua
Rich Protect Mist enables consumers to easily reapply
UV during the day thus protecting their future well-being,
while Laurier has been building empathy and loyalty with
its purpose-driven branding.
Our interactive digital platform My Kao offers product
proposals for consumers based on results of a skin
analysis service equipped with a
proprietary AI algorithm. This approach
allows our consumers to enjoy a higher
quality of life and results in more repeat
purchases.
ESG Strategy
Plastics
about 40%
reduction
＊Please see
the Executive Summary of the Kao Sustainability Report 2024 for further
details.
Example of a skin analysis on My Kao
＊Conventional weight ratio for product packages
Indicator
Target
Value
Target
Year
Results
in 2023
% reduction in absolute full lifecycle CO2
emissions (Base year: 2017)
22%
2030
15%
% reduction in absolute scope 1 + 2 CO2
emissions (Base year: 2017)
55%
2030
35%
% of recycled plastic used in PET containers
(Japan)
100%
2025
81%
13
K27 Vision
Protecting Future Lives
Introduce ROIC company-wide, decisively implement
structural reforms, and aim to be a company that sustains
Global Sharp Top businesses
for K27
Kao Group Mid-term Plan
Transformation
Basic Policy
1. Become an essential company in a sustainable world
2. Transform to build robust business through investment
3. Maximize the power and potential of employees
K27 Target
＊1 FY2023 results indicate core operating income
＊2 Net sales outside Japan represents net sales based on distributor location
FY2024 plan
8.6%
24.0 billion yen
130.0 billion yen
697.0 billion yen
FY2027 target
Over 11%
Over 70.0 billion yen
Record-high
for operating income
（211.7 billion yen in FY2019）
Over 800.0 billion yen
（CAGR + 4.3% in net sales）
FY2023 results
4.1%
14.9 billion yen
114.7 billion yen
655.8 billion yen
ROIC
EVA
Operating income
＊1
Net sales outside Japan
＊2
Chapter
02
14
Transformation for K27
the Fabric and Home Care Business, we have launched
new products with strong potential for global expansion
and we have strengthened the rollout of the ORIBE
brand and other products for hair salons in the Americas
and Europe. We have also rolled out products from
all categories on the DtoC site “My Kao Mall.” Going
forward, we will further accelerate the rollout of UV care
products outside Japan, introduce high-value-added
sheet-type products and new products in the Hair Care
Business and continue to ramp up the global rollout of
one-of-a-kind eco-chemical technologies.
We are nurturing and acquiring human capital to support
Global Sharp Top businesses while driving reforms in
organizational management. With a priority on aggressive
investments in human capital centered on dialogue, we
will provide a setting for self-improvement and jointly
learning with others, delegation of authority, fair and
transparent evaluation, compensation and benefits, as
well as optimal job assignment. In addition, we will utilize
As announced in August 2023, we revised our Mid-term
Plan 2027 (K27) with a focus on structural reforms and
growth strategies. We will carry out structural reforms in
businesses and human capital, and enhance profitability
through strategic price increases and earning power
reforms. We also seek to introduce ROIC by business
based on EVA to improve investment efficiency. With the
aim of becoming a company that sustains Global Sharp
Top businesses, we will carry out appropriate portfolio
management actions and swiftly execute strategic
investments, M&A, and reorganization.
task-based team formation independent of departments
to shift toward structures that take swift action as we
withdraw from matrix management.
We have maximized the value of our management capital
by expanding our highly profitable businesses including
Attack and Bioré, improving profit through strategic
price increases and structural reforms, and revising our
business portfolio. These initiatives have a sustainable
and long-term impact on our business results and
financial performance. Going forward, we will continue to
execute disciplined portfolio management, promote
high value-added products with a focus on profit and
further reform our earning power.
We are co-creating with external partners to build
businesses thereby accelerating the maximization of
technology assets in the Kao Group.
We are promoting a global shift toward essential and
highly profitable businesses. In 2023, we paved the
way towards global expansion for our skin protection
business by selling Bioré UV care products in Europe
and Brazil, and acquiring Bondi Sands Australia Pty
Ltd, a leader in the self-tanning and sun care fields. In
Accelerating Transformation for the Mid-term Plan 2027 （K27）
Build Global Sharp Top
Businesses
Global Sharp Top Human Capital/
Organizational Management
Build Businesses Through
Co-creation with Partners
Improve Capital Efficiency/Profitability
Four Strategies for Achieving the Mid-term Plan 2027 (K27)
Build Global Sharp Top
Businesses
Global shift to essential,
highly profitable businesses
Global Sharp Top Human Capital /
Organizational Management
Decisive investment in human capital
Withdrawal from matrix management
Improve Capital Efficiency /
Profitability
Maximize the value of
management capital
Faster maximization of
technology assets
Build Businesses Through
Co-creation with Partners
15
FROM: International Marketing
Prioritize Japan while expanding businesses
and products outside of Japan
Change in
perspective
View the entire world as a market, define priority
customers and put the local area first in activities.
TO: Global Marketing
Building Global Sharp Top businesses
Making a Rapid Global Shift to Essential, Highly Profitable Businesses
Creating Sharp Values with a Global Perspective
Kao has always moved forward by creating new markets and
businesses. The company will continue to utilize this style in the
future, but it will significantly change its approach. This is a global
mindset shift meaning everyone at Kao needs to change their view
in which we view the entire world as a market, rather than focusing
on Japan and then other countries. From the start, we will expand
across areas with a global perspective while creating value for
consumers, thereby building Global Sharp Top businesses.
To this end, it is essential to have an organization in which a
diverse range of people can seamlessly work together. We will
implement scrum-style business operations to prioritize the power
and speed of our integrated approach, whereby relevant personnel
will gather together and take quick action from the initial stage.
Our Skin Protection Business, which guards the skin from UV rays,
is our first runner for our Global Sharp Top businesses. To roll out
our proprietary technologies to Europe and the Americas with this
business, we created a global scrum-style structure and overcame
strict regulations in each country so that we could successfully
launch products. We plan to continue expanding our area of
operations in 2024, and aim to become the global leader in this field.
People tend to understand the concept of global expansion as
simply moving across the world. However, we implement many
different formations based on the strengths of each brand and
business, such as executing one-of-a-kind activities for a specific
area or expanding a European brand while targeting a specific
demographic in Asia.
In any case, it is essential to have a deep understanding of
diversified lifestyles, engage in manufacturing that brings specific
consumers a high level of satisfaction, and create essential value.
I believe that it is also vital to have an ESG perspective that helps
tackle increasingly severe environmental changes and a wide range
of social issues. Going forward, we will accelerate our transformation
to essential, highly profitable businesses on a global scale.
Kao’s Chemical Business is also expanding with a stronger global
perspective than before, and it is currently seeking to build a strong
business with a focus on eco-chemicals. The Chemical Business
brings significant strength to the Consumer Products Business
through shared technology assets, that it has developed for a wide
range of industrial uses which are being applied to create value for
consumers, creating a synergistic effect in production facilities and
raw material purchases.
We will provide leading-edge
products and services based
on our brand purpose and
create strong bonds with
each and every consumer
to build Global Sharp Top
businesses.
We will contribute to
business development by
boosting the quality of sales
with highly essential brands
and products to nurture
highly profitable businesses.
Toru Nishiguchi
Representative Director
Senior Managing Executive Officer
16
Global Sharp Top human capital / organizational management
Maximize the Power and Potential of Employees with Decisive Investment in Human Capital
Sharpen the Skills and Unlock the Potential of Highly
Motivated Employees and Create a Scrum Organization
Since Kao’s greatest asset is its employees, continuing to maximize
their vitality is a key issue in our strategy. Through personnel with
global perspectives, high level of expertise, and the power for
transformation, we will evolve Yoki-Monozukuri, and build robust
businesses through investment. The social and financial impact from
these investments will be reinvested to human capital. We are aiming
to drive further development as a company through this positive cycle.
Kao’s Guidelines for Human Capital Development state the following
three policies: “from equality to equity,” “from the relative to the absolute,”
and “from the uniform and formal to the diverse and having initiative.”
Under this, we will promote Global Sharp Top human capital/organizational
management, which expands on decisive investments in highly motivated
employees and enables prompt decision-making and implementation.
After implementing “Create equitable opportunities for all employees,”
in order to “Sharpen the skills and unlock the potential of highly
motivated employees,” we optimally assign each employee according
to their career plans and company policies, while also expanding
opportunities for reskilling and improving skills with DX learning.
We are also making efforts to “Withdrawal from matrix management
in organizations” by reinforcing a scrum-type approach in which
personnel capable of prompt decision-making are gathered for the key
tasks. Key employees are identified at the preliminary stages of their
careers to undergo systematic and active training and assignment.
At the same time, we strive to “Create an environment that focuses
on challenges and results” through activities, such as providing more
transparency in the evaluation for each employee’s challenges, and
rewarding employees who have tackled difficult challenges with success.
Kao has always recognized
the strengths of employees
as its greatest asset and has
worked to maximize their
vitality.
Now, to achieve K27 and
evolve our Yoki-Monozukuri,
there is a need for our human
capital/organization to
become Global Sharp Top.
We have begun swiftly
implementing decisive
human capital measures and
activities around the pillar of
transitioning “from equality to
equity”.
Hideki Mamiya
Senior Executive Officer Senior Vice
President, Human Capital Strategy,
President,
Kao Group Corporate Pension Fund
Chairperson of the Board,
Kao America Inc.
A value creation cycle toward enhancing corporate value
17
The basis for all activities is ongoing dialogue in all
directions. As diverse work styles tailored to one’s role
become prevalent, we are taking even more thorough
initiatives and approaches to expand this dialogue.
Regular employee engagement surveys, which include
group companies in Asia/Americas/EMEA, are conducted
to confirm the status of employees and the organization
while checking the effects of each measure on every
occasion. Based on these activities, we are striving
to further expand the number of highly motivated
employees through developing efficient measures.
Revitalizing Employees and
the Organization Through Dialogue
Create equitable opportunities for all employees:
Well-being, DE&I and OKR
To maximize the power and potential of employees, health
insurance associations and the Company work together
to conduct Health and Productivity Management® that
promotes health development. At the same time, we
promote the participation of all employees, including those
who identify as female, members of the LGBTQ+ community,
have disabilities, are from different cultures, or are raising
children or providing care to family members.
Introduced in 2021, Objectives and Key Results (OKR) is
an initiative in which each employee sets challenging goals
and makes efforts toward those goals based on three axes:
Business Contribution, ESG, and One Team & My Dream.
Currently, 72% of global employees and 90% of employees
in Japan have set goals and activities based on OKR. All Kao
employees are able to view each other’s OKR on a system.
The dialogue and collaboration
of employees transcends
countries, regions, and positions
while also resulting in innovation
and speedier business.
We also provide opportunities
to learn about psychological
safety and unconscious bias in
order to build an organizational
culture that focuses on dialogue.
Create an environment that focuses on challenges and
results: More transparency in evaluation
We will expand the 360-degree feedback, which has been
introduced in some areas, to all Kao Group companies in
Japan starting in FY2024 in order to support the growth of
management and improve the transparency of organizational
management. This tool provides feedback not only from
senior positions but also from various directions, thereby
enabling management employees to assess their capabilities
and the level of leadership they demonstrate. This results in
capacity building and enhances transparency and reliability
of management assessments.
Sharpen the skills and unlock the potential of
highly motivated employees: Kao Techno School
Kao Techno School, which trains employees to be the next
Genba leaders in Supply Chain Management, is a program
that polishes management capabilities that combine “spirit”
for excellent character and insight with “skill” for a wide
range of special expertise and skills. Young employees
selected globally participate in this program, and 1,047 have
completed the program to this point. In leader positions at
worksites that handle high-pressure gasses, which especially
call for safety management, 80% are graduates of this
program.
In the last three years, 45% of participants were selected
from group companies in Asia/Americas/EMEA, making
this a global learning program. Graduates who have
developed new knowledge, skills, and the spirit of taking
on challenges have
become the one and only
personnel who contribute
to the revitalization of the
workplace.
Withdrawal from matrix management in organizations:
Business Steering Board
We are evolving matrix-type organizational management that
leverages the freedom of business and functional divisions,
and promoting "scrum-type management" that aims to
achieve targets for priority tasks at maximum speed.
In 2023, Kao launched a Business Steering Board in
Kao’s key businesses, which include Fabric Care, Sanitary,
and Hair Care categories, with key employees from each
business and function as members. Active discussions
for priority issues based on the overall strategy and quick
decision-making are being conducted, leading to speedier
initiatives for business expansion.
Global Sharp Top human capital / organizational management
Employee engagement
Results for FY2023
63
Target for FY2027
75
＊ The total score in the employee engagement survey (perfect score is 100)
＊ In 2023, 27,460 Kao employees responded to the survey
Human capital strategy toward K27
Selected as a Health &
Productivity Stock Selection
brands for the ninth time
18
Improving capital efficiency and profitability
Increasing Capital Efficiency Globally by Bolstering Business Portfolio Management
Mid-term Plan Review and Structural Reform Implementation
In August 2023, we revised our medium-term management plan
as K27. We aim to improve capital efficiency and strengthen global
expansion based on Global Sharp Top strategy. By adding “Business
ROIC” as a new indicator, we will continuously increase EVA®
(Economic Value Added) and strive to improve corporate value. In
order to achieve K27 and increase corporate value, we will transform
ESG Yoki-Monozukuri by striving to maximize the power and
potential of employees, grow our business as an output, and
achieve financial impact as an outcome. It is important to continue
this value improvement cycle.
Especially for business growth, Kao must enhance the competitive
advantage of its core brands and develop globally high-value-added
products. To achieve this, the key to success is to increase capital
efficiency by making appropriate investments in human capital,
research/technology assets, and marketing globally.
Based on this mindset, in August 2023 we introduced the Mid-
term Plan K27, and we started to proceed with structural reforms
focusing on the following three measures to establish fundamental
competitive strengths.
1. Conduct a drastic strategic review and reorganization of
inefficient businesses
2. Promote structural reform of human capital
3. Carry out earnings power reform
We have allocated 54.7 billion yen as structural reform expenses
related to conducting a strategic review and reorganization of
inefficient businesses and promoting structural reform of human
capital. The combined effect of improving profit and reforming
earning power is expected to yield approximately 18 billion yen
in 2024 and 30 billion yen in 2025 and beyond.
Operating income in 2023 was 60 billion yen due to the temporary
increase of these structural reform expenses. However, the core
operating income excluding structural reform expenses was 114.7
billion yen and better than the previous year. EVA also increased.
This was mainly due to improved profitability in Fabric and Home
Care business resulting from strategic price increases and
contributions in Health and Beauty Care Business led by high value-
added products, especially UV products.
We have revised our
Mid-term plan as K27.
We will make efforts to
increase corporate value
while maintaining steady
shareholder returns through
appropriate investments that
are mindful of capital costs.
We aim to realize a
V-shaped recovery from
FY2024, achieve a
company-wide ROIC of 11%
or more by FY2027 (FY2023
was 4.1%), and attain record-
high operating income.
Masakazu Negoro
Senior Managing Executive Officer
Responsible for Management Finance
(Accounting and Finance, Business
Structure Reforms, Procurement,
Human Capital Strategy)
ROIC (estimate)
Operating income (estimate)
FY22
FY24
FY26
FY23
FY25
FY27
100
150
200
Operating income
(Billions yen)
Record-high
operating income
FY22
FY24
FY26
FY23
FY25
FY27
11%
70
0
0%
ROIC
(%)
EVA
(Billions yen)
11% or more
70.0 billion
yen or more
Forecast
8.6%
Growth strategy
+60.0
Billion yen+α
Structural
reform +30.0
Billion yen+α
110.1
60.0
Operating income
114.7
ROIC
7.8%
EVA
Core operating income
14.7
14.9
4.1%
+90.0
Billion yen
+α
（vs FY23）
Forecast
130.0
19
Bolstering business portfolio management
We will continue in-depth discussions on what our portfolio
should be from the two perspectives of ROIC and growth
potential, and bolster our business portfolio management.
As for reviewing inefficient businesses, we have established
internal guidelines as standards for decision-making and
have also started monitoring situation by business.
We will analyze the focus businesses and brands and
the status of each area from various perspectives, and we
will aggressively invest in marketing and R&D globally. We
plan to leverage our business ROIC and portfolios toward
successfully achieving our K27 goals.
These reviews led to the decision to reorganize the
production of baby diapers and the transfer of the Healthya
the tea catechin drink business in FY2023.
Improving earning power with scrum management
TCR action, which pursues cost reductions and at the
same time fosters creativity by reviewing work methods
with innovative ideas, has firmly taken root globally among
employees.
Furthermore, we were able to obtain the understanding
of our distributors to implement strategic price increases as
planned in 2023. With these two elements as our starting
point, we will continue taking on the challenge of further
improving our earning power toward K27.
With scrum management focused on each business unit,
and involving R&D, purchasing/production/distribution, sales,
and indirect divisions, we will review product designs from
various perspectives to reduce costs and increase added
value, as well as realize appropriate pricing according to
the added value. Kao believes that improving profitability
by realizing higher gross margins in areas beyond the
existing TCR is vital to increasing corporate value. We are
growing our business with appropriate brands and SKUs
and establishing efficient supply chains to achieve the shift
from quantity to quality. Through reducing inventory and
optimizing fixed assets, we will work toward enhancing asset
turnover and ROIC.
Furthermore, from 2024, we plan to expand the previously
limited EVA-linked performance compensation to all
employees. With this, each employee’s daily activity will
directly connect to improving corporate value
Creating cash flow and identifying investment priorities
Operating cash flow (CF) for FY2023 was dramatically
improved by more than 70 billion yen from the previous year
due to actions including inventory reduction. Additionally,
the acquisition of Bondi Sands, which owns an Australian
premium skincare brand, resulted in an approximately 37.2
billion yen increase in free cash flow. We will continue to
increase operational cash flow by improving the profitability
of our businesses while also striving to increase cash flow by
shortening cash conversion cycles (CCC＊).
For cash flow use, we will clarify the priorities for
investment to achieve K27 goals and focus on the following
areas.
1) Fields that will boost the competitive advantage of core
brands
2) Fields that will globally develop high-value-added
products
3) Fields that will increase ROIC in growth driver areas.
After investment in businesses, strategic capital allocations
will be implemented in order to maintain stable dividends and
repurchase of own shares according to our status.
Furthermore, we will utilize leverage to the extent that we
maintain financial health and respond to temporary cash
outflows such as mergers and acquisitions (M&A).
＊CCC: Cash Conversion Cycle
Improving capital efficiency and profitability
Envisioned ROIC Improvement by Business (FY2023 Results ⇒ FY2024 Forecast)
Mid-term capital policy
̶implemented from an EVA perspective
Operating
Cash Flow
1.1
trillion yen
Debt+α
Five year
Cumulative
(FY2023–FY2027)
Regularly review inefficient businesses to accelerate business reorganization.
High
Five year
Cumulative
(FY2023–FY2027)
Sales
growth
rate
Low
High
Capital efficiency (ROIC)
Low
Growth Driver
Life Care
Transfer of tea-catechin
beverage Healthya
Baby Diaper
Termination of production in China
Optimize production system in Japan
Fabric Care
Home Care
Personal Health
Skin Care
Acquisition of Bondi Sands
Cosmetics
Focus on core brands
Chemical
Stable Earnings
Business Transformation
＊Including products for hair salons
Sanitary
Transfer of Nyan Tomo Clean Toilet
Hair Care
＊
M&A+α
Strategic
Investment
Capital
Expenditure
ROIC
Management enhancement
Stable dividends
Investments focusing on 1) to 3) above
M&A
New businesses
Loan utilization
Shareholder
returns
20
Global rollout of Kao’s technologies: Mosquito eradication spray
based on a new technology
Dengue fever is a viral disease spread by mosquitoes. Many of those
infected are children, and serious cases can result in death. Kao,
working alongside Earth Corporation who has extensive expertise
in insect and mosquito control, implemented a new technology that
prevents mosquitoes from flying by wetting their wings and body
surfaces. We developed a spray that can eradicate mosquitoes safely
and securely without using insecticides that will launch in Thailand in
July 2024. This will contribute toward “protecting future lives” through
new value creation.
Creating new value through technological synergy: Proposing a
new idea for “Wearable Stratum Corneum Care”
Curél has introduced a new skincare method that utilizes Fine Fiber
Technology to diffuse ultra-fine fibers onto the skin as a laminated,
ultra-thin veil, thereby assisting people with concerns about severe skin
dryness. We have collaborated with Panasonic Corporation to develop
a diffuser that can apply an ultra-thin veil on a targeted area instantly.
The ultra-thin veil stays in place snugly as the moisturizing ingredients
seep deeply into the stratum corneum, resulting in firm, supple, and
smooth skin.
Co-create Value with Like-minded Partners
Kao aims to maximize and accelerate the use of its technology
assets through Yoki-Monozukuri, supported by Essential Research.
The goal is to reinforce existing businesses and develop new ones
through co-creation with partners. As Kao continues to advance,
we expect to encounter more social issues, such as environmental
challenges and infectious diseases, which cannot be solved by a
single company.To become an essential company in a sustainable
world, we must address the deepest concerns and needs of the
consumers.
We will build synergies with top-class partners that share the same
aspirations, with leading-edge strengths in their fields to implement
our technology assets in society as rapidly as possible and thereby
creating new consumer value as we tackle these challenges.
We aim to co-create businesses in new fields that bring new value,
while still increasing the value of existing businesses and brands. We
are also driving efforts for the global rollout of Kao’s technologies
and generating high profits from minimal investment, thereby building
Global Sharp Top businesses.
Build Businesses through Co-creation with Partners
Achieve Faster Maximization of Technology Assets and Co-create Global Sharp Top Businesses
Kao is driving efforts to build
businesses in co-creation with
partners to make maximum
use of its technology assets
in a swift way.
We will break away from
self-sufficient mindset, and
instead will seek tojoin forces
with many like-minded
partners to build even better
products and profitable
operations as we co-create
Global Sharp Top businesses.
Satoru Tanaka
Managing Executive Officer
Senior Vice President,
Corporate Strategy,
Responsible for Product
Quality Management Responsible
for Legal
Global rollout of Kao’s technologies
― Joint businesses
Insect repellent and eradication
technology that does not use
insecticides
New value creation through
synergies among technologies
― Open innovation
Moisture-permeable membrane as
an artificial skin surface
Next-generation cleaning system
technology
Global rollout through customer
products
― Global BtoB business
Recycled materials for road
development business, adjuvant for
drone-assisted agriculture business
for advanced semiconductors
High profits from minimum
investments
― Improve ROIC in process industries
New product development
in the sanitary business
ARS Mos Shooter
co-created with Earth Corporation
to help tackle infectious diseases
with Curél Outfit-for-Skin Potion
and Curél Veil Creator
through co-creation
with Panasonic Corporation
Kao and Earth Collaborate in the Field of “Insect (Mosquito) Control” in Thailand
Kao launches Curél Outfit-for-Skin Potion and Curél Veil Creator
Maximize technology assets for K27 (2024 plan)
21
Chapter
03
Business
Strategy
We will create a Global Sharp Top business
by applying the strengths of each of our five
segments, to transform and build robust
business through investment.
22
Consumer Products Business
Chemical Business
The net sales composition ratio by region are classified based on the location of the sales recognized.
The net sales composition ratio by region for the Chemical Business includes intersegment transactions, and the net sales composition by
business segment is calculated based on sales to customers.
Share of net sales is calculated based on sales to customers. Share of operating income includes intersegment transactions.
The Kao group presents income excluding one-time gains and losses due to non-recurring factors as "core income."
Chemical
Cosmetics
Hygiene and
Living Care
Japan
Japan
Japan
Asia
（excluding Japan）
Asia（excluding
Japan）
the Americas
the Americas
the
Americas
EMEA (Europe, the
Middle East and Africa)
EMEA （Europe, the
Middle East and Africa）
EMEA （Europe, the Middle East
and Africa）
Health and
Beauty Care
Net sales
1,532.6
billion yen
Core operating income
114.7
billion yen
Net sales
outside Japan
655.8
billion yen
Net sales
composition ratio
79.0％
Net sales
composition
ratio
21.0％
FY2023 net sales ratio by region / composition ratio （%）
FY2023 Shares of net sales and operating income by business segments
Outside: Net sales composition ratio (%) Inside: Core operating income composition ratio (%)
Life Care
Asia
（excluding Japan）
37.7%
36.9%
34.1%
57.2%
64.6%
18.4%
10.4%
6.6%
23.0%
16.7%
36.6%
23.7%
20.0%
12.2%
10.6%
25.6%
3.7%
15.6%
4.7%
-1.1%
21.8%
21.0%
Business Strategy
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.
FY2023 net sales composition by business segments
Business Overview
23
Key Initiatives for K27
・ Ensuring steady growth of Sanitary Business with globally
integrated operations
・ Proposing new value and creating new markets for Japan’s Fabric and
Home Care market
・ Accelerating growth of Fabric and Home Care in Asia
Refining Powerful Brands
with New Value Proposals
Our Main Brands
Fabric Care Business
Home Care Business
Sanitary Business
Global Sharp Top Strategy
Hygiene and Living Care Business
Business Strategy
Focusing on the essentials of daily life, Hygiene and Living
Care is the foundation of Kao’s business. This is why we
need to be a reliable brand with reliable benefits and efficacy
that can be experienced by anyone who uses our products.
Developing Laurier brand within Asia is a priority initiative
for K27. Within this rapidly changing environment with
soaring raw material costs and intense competition, the
Japanese market is getting smaller, and acceleration of
sales outside Japan is an important priority. With integrated
operations in Asia and through reviewing business models
that include brand management, product development, and
production, we will foster a brand that becomes the driving
force for Global Sharp Top strategy.
In the Fabric and Home Care category, we are aiming
for growth by providing new value. This field promotes
proposals of new value that are one step ahead of
increasingly diverse lifestyle needs. We will propose high-
value-added products in Japan and Asia that will make
housework easier and living more comfortably, to enhance
brand value.
Accelerated growth in Asia with a focus on
strong brands
With speed desired in all elements of housework, this
product was released in July 2023 with a new value proposition
that alleviates the stress before washing. The product does not
require any measuring or refilling, and it cleanly
removes collar and cuff stains without prewashing. This added
value was well received and highly regarded among
busy consumers.
Furthermore, a speedy scrum-type
operation was applied for
simultaneous product launches in
Japan, Taiwan, and Hong Kong. We
also plan to expand to Singapore
and Australia in the future.
Reducing the burden of laundry for consumers:
Attack ZERO Perfect Stick
Natsumi Hotta
Senior Executive Officer
President, Consumer Products,
Hygiene & Living Care Business
Value Creation of Hygiene and Living Care Business
We create living spaces that offer peace of mind for
everyone by keeping clothing and homes clean while
reducing the load of housework.
By proposing sanitary products for each life stage, we
contribute to a world where everyone can live comfortably in
their own way.
Laurier conducts empathetic
marketing with the goal of
“creating a society where women
can feel safe and comfortable as
themselves by improving the
environment surrounding women’s
physiological phenomena throughout their lives.”
Laurier in Workplaces is a 2022 BtoB project, born from the
opinions of workers, that makes sanitary napkins a regular
amenity in the workplace. It has received approval from many
companies, and the number of those incorporating this system
has grown to over approximately 50*.
With this purpose-driven branding, the favorability rating of
the brand has increased 1.2 times, and the ratio of loyal users
has also increased.
Enhancing loyalty with purpose branding: Laurier
24
Protecting the skin from UV
rays is a universal need, but
many people are still not
satisfied with their UV care
products. Bioré UV features
proprietary technology that
realizes powerful sunscreen
effects while also maintaining a
light feel. This even, long-
lasting UV-protection coating technology is created through
in-house manufacturing from Kao’s Chemical Business. We
have secured a patent for it, giving us a major advantage
when differentiating our products from others in the market.
In 2023, Bioré Aqua Rich Aqua Protect Mist was a hit in
Japan, contributing to significant growth for UV care in terms
of sales and market share.
We overcame regulatory hurdles in multiple countries and
regions, and started rolling out products in Europe and North
America. In 2024 and beyond, we will go further and include
China and Brazil in our focus regions, and aim to become a
company that helps people worldwide genuinely feel grateful
that our products exist.
＊2 INTAGE SRI+ sunscreen market for January to December 2023; market share
in terms of monetary amounts
Bringing the powerful proprietary technology of Bioré UV to the world
Key Initiatives for K27
In the Skin Protection Business
＊1
・ Steadily launch products incorporating new technologies, with a focus on UV care
・ Expand range of countries and brands
・ Focus regions: China, U.S., Brazil
・ Promote synergy across all businesses and accelerate growth
One-of-a-kind
UV Solutions for
Skin Around the World
Global Sharp Top Strategy
Health and Beauty Care Business
Business Strategy
The first runner for a Global Sharp Top business is skin
protection, a field in which skin is shielded from the external
environment, which grows harsher every year. In 2023,
the business expanded its sales and market share within
Japan’s sunscreen market, and it has started rolling out
to the Americas and EMEA (Europe, the Middle East and
Africa). By acquiring Bondi Sands Australia Pty Ltd, which is
strong in this field, we have built a structure for expanding
global development.
The challenge for this business is to roll out products
from Japan to the world as rapidly as possible. The crucial
aspect of UV care products is overcoming legal regulations
and managing production and marketing systems, which
are different in each country. The Global Steering Board
plays a significant role in this regard with a scrum. We will use
a cross-functional process that bridges research,
production and other divisions as well as representatives in
each country so that all personnel can share information in
real time and solve challenges to utilize assets and increase
our speed.
In 2024, we will expand our range of brands and
areas while promoting synergy across all businesses to
accelerate growth.
Aiming for the global top with the
Skin Protection*1 Business
Value Creation of Health and Beauty Care Business
We contribute to healthy lives where people can express
their individuality through daily self-care and hygiene
practices. We promote efforts to provide care with regard to
environmental stresses and offer safety and reassurance in
everyday life by protecting and preventing against external
factors such as infectious diseases and UV rays.
Skin Protection Business Growth Strategy Briefing (September 26, 2023)
Kotaro Nuriya
Senior Executive Officer
President, Consumer Products, Health &
Beauty Care Business
Karen B. Frank
Executive Officer
President, Consumer Products, Consumer Care,
Americas and EMEA
Kao USA Inc. Chairperson of the Board & President
As we seek to expand our range of countries in the “safe color”
field, which creates a tanned look on skin, Bondi Sands, which
is strong in Australia and Europe, will now join Jergens, a brand
that has achieved the No. 1 market share in the U.S.
We aim to realize a society in which everyone can smile and
be relieved from skin-related concerns through the three
brands of Bioré, Jergens and Bondi Sands.
＊1 Skin protection: The collective term for “UV care” that protects skin from UV
rays, “safe color” that creates a tanned look without UV exposure, and
“protection from environment-related risks” including mosquito repellents.
Rolling out three brands including Jergens and Bondi Sands
6.7 million units
shipped annually
Bioré UV total market share: 23.2％
＊2
Our Main Brands
25
In the UK market, Goldwell’s share grew during 2023 while its
major competitors fell. As a result, it maintained its No. 3
position and narrowed the gap with its top competitors.
This was achieved by acquiring the RUSH Group, which
shares Goldwell’s
values regarding
business principles and
creativity, and has over
50 salons in the UK.
Increase hair color’s share in the UK
Goldwell
Leading the way to profitable growth, Oribe continues to
make remarkable progress as a result of its focus on growing
channels and building trusting relationships with its
customers.By exceeding customer expectations in all
aspects of the experience (products, communication, and
sales), Oribe has turned customers into Oribe-obsessed fans.
Continue profitable growth by providing experiential
value that exceeds customer expectations Oribe
Key Initiatives for K27
・ Execute business transformation and improve ROIC
・ Bolster relationships with salons and grow Goldwell
・ Expand Oribe’s position as No.1 in luxury hair care
・ Strengthen omnichannel capabilities
Making Life Beautiful
for Salon Clients
Global Sharp Top Strategy
Health and Beauty Care Business
Salon Business
Business Strategy
Driven by digitalization, the COVID-19 pandemic and
economic challenges, the professional hair market has
become truly omnichannel; now covering both traditional
BtoB salon channels as well as new BtoC consumer
channels (including e-commerce).
Consumers have shifted retail purchasing habits to
e-commerce, and so stylists must shift their focus to
increasing in-salon value.
We will transform our organization and business model to
maximize profitable growth opportunities. Kao Salon has a
Global Sharp Top focus on growing in customer segments
and channels with higher sales potential and profitability,
utilizing the following brands:
We will continue to leverage Kao Salon’s strengths in
community building to attract new customers faster and
nurture win-win industry relationships.
●Goldwell: Win and grow market share in the top 10% of the
salon segment with unique and superior value centered on
in-salon color services
●Oribe: Grow in omnichannel with the luxury haircare segment
and accelerate EMEA expansion
Positioning Goldwell color and Oribe luxury haircare
as the driving forces to transform Salon Business
Value Creation of Salon Business
We enrich the lives of hair stylists, salon owners and their
clients around the globe. Together with salons, we are making
life more beautiful with our brands, products, and services.
Dominic M. Pratt
Executive Officer
President, Consumer Products, Salon
LLC Chairperson of the Board, Oribe Hair Care
President, Kao Germany GmbH
Daniel Kaner
President, Oribe Hair Care
Co-Founder, Oribe Brand
Our Main Brands
26
Key Initiatives for K27
・ Expanding the testing business that provides precision solutions
・ Expanding income and accelerating channel expansion by proposing
hygiene solutions that utilize Kao’s integrated capabilities
Supporting Health and
Safety in the Future with
Proprietary Solutions
Our Main Brands
Global Sharp Top Strategy
Life Care Business
Business Strategy
The Life Care Business puts people’s lifestyles at the center
and stays close to consumers to provide solutions that
encapsulate personalized value.
The Health & Wellness Business focuses on proposing
solutions based on
the Precision Life Care concept
and with the testing business at the core. Kao has a
unique evidence-based approach to swiftly realize future
lifestyles within society through co-creation and DX with
external partners.
In the BtoB Hygiene Business, we provide optimal hygiene
solutions with a professional perspective for restaurants,
medical and nursing care, accommodation and leisure
facilities, and other organizations through the hygiene
consulting and the sales of detergents. We propose one
and only BtoB hygiene solutions that consider infection
control in addition to food hygiene management. We will
view opportunities in social issues and signs of lifestyle
changes as we expand our sales channels in new areas and
contribute to people’s safety.
Providing proprietary solutions that stay close
to consumers
In 2023, Healthcare Systems Co., Ltd. launched a mail-in
testing service called Baby Well Check, which uses Kao’s
sebum RNA monitoring technology to understand the skin
barrier status of babies and infants. Now, in 2024, we will
secure more partners and expand the business by moving
into many areas, such as beauty and health care.
Value Creation of Life Care Business
In view of the nature of the issues people face, we provide
proprietary solutions that stay close to consumers, precisely
match each person’s explicit and implicit needs, and suit
hygiene needs among professionals. These solutions
contribute to people’s health and safety now, and in the future.
Toru Nishiguchi
Senior Managing Executive Officer
President, Consumer Products,
Life Care Business
Responsible for
Kao Professional Services Co., Ltd.
Masaaki Ozawa
Consumer Products, Life Care Business
President, Kao Professional Services Co., Ltd.
Expanding the testing solutions business through co-creation:
RNA Testing Business
Restrictions on people’s actions were lifted following the
reclassification of COVID-19 as a Class 5 disease in Japan,
resulting in more opportunities for going outside as well as an
increase in international tourists coming to Japan. Meanwhile,
lodging facilities face issues regarding a lack of employees and
an aging workforce. In light of this, KPS developed the Raku-
Navi series that helps reduce the burden of cleaning large
baths and bathrooms̶a particularly intensive task when
cleaning facilities. This helped provide high-quality service
with fewer workers while also mitigating the cleaning burden
at the Genba through a new operational approach.
Continuing the reinforcement of the BtoB Hygiene Products Business
Raku-Navi series of detergents for baths and bathrooms
Raku-Navi Large
Bath Cleaner
Foam Spreader for
Raku-Navi Large Bath
Cleaner
Raku-Navi Unit
Bath Cleaner
27
Accelerating Globalization
Through Purpose-Driven
Brand Strategies
Key Initiatives for K27
・ Creating excellent brands with purpose branding
・ Providing solutions catered to each customer by applying internal and
external technologies
・ Establishing operational systems on a global scale
Global Sharp Top Strategy
Cosmetics Business
Business Strategy
As geopolitical risks, lifestyles, and other external
circumstances dramatically change, we create functions
and worldviews that focus on the satisfaction of each
customer through our detailed customer perspectives. We
will construct deep ties with customers that will evolve the
purpose-driven activities of our brands so that such brands
are the first to come to consumers’ minds in each segment.
As first-runners in the Global Sharp Top strategy, we have
selected SENSAI, MOLTON BROWN, and Curél. We will
aim for profitable growth with ROIC as an indicator and
accelerate the globalization of organizations, human capital,
and business promotion methods while expanding each
brand in the countries where we engage with business.
Furthermore, we will concentrate investments on purpose-
driven marketing and brands such as KATE and KANEBO,
which had double-digit growth last year for their products, in
our efforts to improve brand loyalty. Furthermore, to achieve
a resilient and agile value chain, we will reinforce our scrum-
type management and construct an operational system on a
global scale.
Deepening purpose branding and accelerating
globalization
Value Creation of Cosmetics Business
Through our brands' distinctive identity, we are committed to
each person's beauty and individuality. We deliver hope and
Kirei with solid science and our abundant sense.
Through beauty, hope and Kirei, we contribute to realizing a
joyful lifestyle culture and a society in which fulfilling lives are
possible for all.
Yousuke Maezawa
Senior Executive Officer
President, Cosmetics Business, Consumer
Products Business
President and Representative Director, Kanebo
Cosmetics Inc.
Mark Johnson
Executive Officer
President, Consumer Products -
Cosmetics Business, Americas and EMEA;
President, Molton Brown Limited
Curél has been expanding its categories, leveraging evidence
based on skin ceramide research, and it has performed well,
mainly in Japan and China.
Going forward, we will expand solutions developed in Japan
to resolve global skin problems that differ with climates and
skin types, and strive
to be the world’s top
brand for dry and
sensitive skin.
Relieve concerns about skin sensitivity caused by dryness on a global scale
Curél
Our Main Brands
Cosmetics Business Growth Strategy Briefing (Sep. 26, 2023)
In 2023, the supreme line that
embodies SENSAI luxury, known
as the ULTIMATE line, was renewed
with sustainability enhancements.
This was the driving force behind
the increase in sales of high-end skincare products
throughout EMEA (Europe, the Middle East and Africa).
Grow further in the EMEA market
SENSAI
MOLTON BROWN has accelerated
its growth by promoting a strategy
that prioritizes the fragrance
category. Its new collection range
of Wild Mint & Lavandin is enjoying
strong sales. The brand also
actively utilizes recycled material in
its efforts to achieve both luxury and sustainability.
Balancing both luxury and sustainability
MOLTON BROWN
28
Chemical Business
Business Strategy
Masahiro Katayose
Senior Executive Officer
President, Chemical Business
Chairperson of the Board, Fatty Chemical
(Malaysia) Sdn. Bhd.
Chemical Business Growth Strategy Briefing (Jun. 22, 2023)
＊For details on the Chemical Business, please visit
the Kao Chemicals website
Solving Social Issues and
Growing the Business
with Eco-innovation
Key Initiatives for K27
・ Achieve social impact and grow the business by solving social issues
・ Create and secure value through eco-innovation
・ Bolster partnerships and collaborations with external parties and
accelerate business development
Value Creation of Chemical Business
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.
Global Sharp Top Strategy
We are working to shift toward a business structure with
high added value to minimize the effects of the economic
landscape and fluctuations in raw materials within this time
of rapid change. The business landscape was challenging
in 2023, including a decline in demand due to a delay in
economic recovery. However, we made progress in rolling
out highly profitable products such as inkjet printing systems
and semiconductor chemicals. In addition, we have started
running facilities in Europe for tertiary amines and aroma
chemicals, and we are planning to expand the business.
Kao’s Chemical Business proposes innovative products
and solutions to solve social issues while leveraging its
strengths in unique eco-innovation technology that creates
added value, applications in a broad range of industrial
fields, and robust capabilities for rolling out products on
a global scale. We will accelerate our progress together
with our customers and partners to secure value and grow
the business by always investing in initiatives to solve the
next social issue in a cyclic process. Through these efforts,
we will help shape the industry’s future and build a more
sustainable society.
In 2024, we will maximize the use of our facilities that
have recently started operations while strengthening our
foundation for growth and further expanding our business
in durable asphalt modifiers, adjuvants for agrochemicals,
and other high-value-added products to accelerate our
transformation into a stronger business structure.
Accelerating a shift toward a high value-added
business structure
Our asphalt modifier made from waste PET boosts road
durability and reduces the frequency of repairs, thereby
decreasing environmental impact and maintenance costs.
In 2023, we held a new field test with partners for a
pavement material using upcycled waste fishing nets in
Miyagi Prefecture. We have also begun expanding outside
Japan, and we seek to contribute globally by continuing to grow
our area of operations.
Helping to realize a circular society by effectively using
waste PET
We contribute to functional innovation in various use cases by
using proprietary hydrophobic modification technology on
cellulose nanofiber material made with natural timber and
then carrying out customizations to suit user objectives. In
2023, this technology was utilized in electronic materials in a
world first. This new material of the future can provide many
different solutions, such as improving heat resistance and
hardness, and it is expected to expand across a wide range
of industrial fields.
Contributing to many industrial fields with proprietary
hydrophobic modification technology
29
Value Chain
Reform
Chapter
04
We will rebuild a “Strong Kao”
through speedy and bold challenges
by combining diverse knowledge
through a scrum-type system.
30
Toru Nishiguchi
Senior Managing Executive Officer
Responsible for Consumer Products; President,
Consumer Products - Life Care Business;
Responsible for
Kao Professional Services Co., Ltd.
Co-creation of Value with Consumers
Based on Brand Purpose
The mass-trial model for marketing is no longer applicable
due to the widespread digitalization and increasingly diverse
consumer lives. Kao aims to contribute to a sustainable
society and people’s lives with an elevated level of satisfaction
by providing value that addresses issues for each consumer
under the slogan of Life Value Solution Marketing. What
we value is purpose, which is the essence of a brand, and
co-creating value with consumers based on that purpose.
We watch over all of the hours of consumers’ lives with a
global perspective to deepen connections and create a
robust brands.
Bioré UV̶Value co-creation with consumers focused on
impressed experiences
Bioré UV is promoting value co-creation with consumers
based on their impressed experiences. The brand’s purpose
is to create a society where people can spend more time in
the sun with smiles on their faces, and we focus most on real
feelings when creating products.
The UV care product market is one in which 90% of users
are unsatisfied with their products' effects. It is a category in
which users are unsure what to select, so they tend to refer
to social media to make purchases. Bioré UV, creates certain
Wow! (impressed) experiences (Scene), which leads to word
of mouth (Social media & user-generated content)
and in-store visits (Store). We aim to expand the user base
and enhance brand’s loyalty by repeating this self-driven cycle
of three S’s.
We are making efforts to create strong connections with
consumers while taking agile action, such as applying social
media feedback at stores and within product appeal.
KANEBO
In 2020, KANEBO redefined itself under the slogan “I Hope”
as a brand that speaks of hope beyond beauty. The brand’s
communication also transitioned from relaying product
functions to communication that appeals to emotions,
such as loving your skin and parts of your body, which
is a sentiment shared by many.
Sales for products that embody the brand’s purpose,
such as foundation that poses as bare skin and vernix-
inspired cream, are
going strong. Sales
for the KANEBO
brand in 2023 have
exceeded previous
performances, at
180% globally and
170% within Japan
compared to 2020.
Enhancing brand presence by deepening purpose
branding
KATE TOKYO
KATE’s purpose-driven marketing of “no more rules”
continued, thereby accelerating the brand’s value. In addition
to lipsticks such as Lip Monster, the brand has established a
strong position in the Japanese
makeup market with constant
releases of new products and
marketing.
Moreover, the brand is
also increasing its presence in
the greater China markets, as
the highly rated brand spreads
out globally.
Value Chain Reform
Marketing Strategy
Purpose-driven and Value Co-creation for Strong Consumer Connections
Marketing Strategy to Pursue Global Sharp Top
Creating value that supports consumers 24 hours a day
Deepening purpose-driven branding
Promoting a global scrum system
Social trends and strong desires of consumer
Store
Store
（Customers can find
Wow! here）
Scene
Use scenes
（Wow! is born here）
A self-driven cycle
of Wow!
The three S’s
connect
(Three “S” cycle model)
Social media & user-generated content strategies
Word of mouth
（Widespread
feeling of Wow!）
Bioré UV: Self-driven marketing with Wow! Impression
31
Value Chain Reform
Sales Strategy
A Sales Model for Continual Profitable Growth in Anticipation of Future Development
Yoshio Nakao
Senior Executive Officer;
Representative Director, President,
Kao Group Customer Marketing Co., Ltd.
Building a sustainable value chain
Sales Strategy to Pursue Global Sharp Top
Transform the sales structure to have three strong
pillars in net sales, profit, and market share
Boost loyalty through co-creation with retailers
Work with retailers to advance together globally
Contributing to Our Future Society and
Economic Growth
Alongside our business partners, Kao will engage in the
co-creation of life value through brands and products with
consumers to contribute toward enriched lives on an
everyday basis. We have worked to realize a “triple win”
for consumers, retailers, and Kao while emphasizing
sustainability in society and the economy. Additionally, we
will enable a win for our future society for a “quadruple win.”
Our strengths are in our people with capabilities in
information, quick action, and adaptability. We will work with
our partners to stay close to consumers, propose life value,
and boost the quality of sales while dedicating ourselves to the
sustainable development of our future society and economy.
Boosting our capability to generate profit through strategic
price increases
In the face of a growing concern among consumers about
future living standards, as well as severe changes in the
business landscape, including increases in raw material and
energy prices, we transformed our sales activities in FY2023
to carry out strong management of three targets: net sales,
profit, and market share. As a result, we attained our sales
budget, grew our market share in consumer products, and
contributed to profit.
Strategic price increases served as a powerful force
toward this end. However, price increases can bear
considerable risks and are more challenging than they may sound.
For each product, we analyzed the market environment,
the status of competition, and Kao’s positioning. Then
we linked this information with marketing strategies to
visualize the added value of these products to consumers and
gain understanding among retailers through a careful process
at each step. In these activities, we emphasized attaining
a win for consumers, retailers, and Kao itself, on top of our
future society.
Boosting efficiency swiftly in the value chain
Predictions for 2024 continue to include labor shortages and
increasing logistic costs. In the face of this, we will enhance
the quality of sales and address unreasonableness, waste,
and inconsistency in the value chain as we transform our
sales model to achieve ongoing profitable growth.
For example, we have already started to see effects in
reduced costs and personnel through eliminating opportunity
loss by expanding the shelf space of best-sellers, boosting
efficiency of in-store operations by cutting down sales
promotions that require displays at the end of aisles and by
shifting toward promotion on regular shelves, and revising
orders and delivery frequency to match the scale of each
store. Going forward, we will continue these ESG-focused
initiatives as actions to be carried out across the entire value
chain, including our partners.
Working with retailers to build more Kao fans
Stores are vital locations, as this is where consumers
encounter products. We will revise our conventional sales
promotion activities and aim to build a sales model that
creates sustainable profit by proposing promotions that
Consumers
Retailers
Kao
Future society
Quadruple Win
suit the characteristics of each retailer while seeking to
nurture consumers into Kao fans. For example, by rewarding
consumers with loyalty points, we can create opportunities
for purchasing additional products and trying new products
while growing loyal customers. In addition, we have driven
one-to-one marketing in a timely way that stays close to
consumers’ desire to purchase with Kao Group’s official LINE
account (4.5 million people: as of March 2024), as we work
to build more Kao fans.
Plants /
Logistics centers
Orders
Deliveries
Centers / Stores
K a o
R e t a i l e r s
32
Yoshihiro Murakami
Managing Executive Officer
Senior Vice President, DX Strategy
Connecting with consumers worldwide with an interactive
platform
We are driving efforts to build My Kao, an interactive digital
platform for directly connecting with each and every one of
our customers. This is a form of owned media that delivers
reliable information and our product development philosophy
from us as a manufacturer to our consumers, while
simultaneously serving as a new marketing platform.
It is possible to carry out agile manufacturing and
marketing by building a system with community features
for direct dialogue between the various divisions across the
company and consumers. By providing a personalized user
experience (UX), this can contribute toward a Kirei Lifestyle
for each and every consumer.
We are promoting this interactive platform concept on
a global scale. We launched My Kao in December 2022
in Japan and have already launched My Kao Shop in the
U.S. and Kao Life+ in China. In addition, we are continually
expanding the functionality of the platform.
Accelerating efforts to change the game with co-creation
beyond corporate borders
In March 2024, Kao and istyle Inc. together established
the
RNA Co-creation Consortium with Kao’s proprietary
sebum
RNA monitoring technology at the core. This
consortium welcomes partner companies that play a leading
role in their own industries and seeks to achieve a fusion
of each company’s data and research insight. Creating
systems for realizing a selection of sustainable products
and services that provide even greater consumer satisfaction
will take industry-wide initiatives, thereby accelerating efforts
to change the game.
Digital skill enhancement program for all employees
In addition to our proactive efforts to nurture “citizen
developers*,” we have begun introducing the DX Adventure
Program in November 2023 to promote the enhancement of
digital skills for all employees. We will bolster our activities
to discover and nurture "DX employees" and accelerate the
creation of new value and business process transformation
in all companies and divisions. We are visualizing skills
by implementing Open Badge digital certificates, thereby
boosting employee motivation. This program has started in
Japan and will expand worldwide in 2024 and beyond.
Value Chain Reform
DX Strategy
Using Digital Technologies and Data to Transform Yoki-Monozukuri
Naohiko Uramoto
Senior Executive Officer
Vice President DX Strategy
Data Intelligence Strategy
Kao is aware of the need to develop a direct connection with
consumers and invest in "DX employees" in order to adapt to
changes in purchasing habits and consumer lifestyles driven
by digital technologies. Kao is evolving Yoki-Monozukuri to
stay closely connected with each and every consumer using
digital technologies.
The company aims to refine its business model by utilizing
digital technologies and big data to enhance corporate
activities and shift from a mass-market focus to an ESG
perspective that aligns with diverse values. These efforts
will accelerate our transformation into a Global Sharp
Top company.
Stay Close to Consumers with the Power
of Digital
DX Strategy to Pursue Global Sharp Top
Development of our interactive digital platform
Exploration of future growth engines through co-creation
Nurture "DX employees" as an engine for the above goals
※ In Japan
Creating Kao fans by building
an interactive platform
Results in FY2023
Targets for FY2027
My Kao visitors
10 million
30 million
My Kao members
0.25 million
3.0 million
Nurturing "DX employees"
Results in FY2023
Targets for FY2027
Citizen developers
1,000
3,000
Companywide DX Leaders
30
150
Division DX Promoters
30
300
＊Activities with a Genba-oriented perspective to promote regular employees without IT
expertise to improve operations by using low-code or no-code tools
Targets
Companywide
DX Leaders
Division DX
Promoters
All employees
Level 4
Level 3
Level 2
Level 1
Level 5
Programs
Project-based OJT using both
internal and external resources
Programs customized for each
division
Programs personalized for all
employees
Japan
My Kao
United States
My Kao Shop
China
Kao Life＋
33
One mission of the SCM Division is to fulfill its responsibilities
of supplying products to customers. However, there have
been times when there was too much focus on preventing
shortages that resulted in excess production or, conversely,
occurrences of product manufacturing failing to keep up with
sudden demand.
We aim to build a resilient supply chain to pursue Yoki-
Monozukuri with minimal environmental impact. At
manufacturing sites and during supply and demand
planning, we incorporate digital technologies and other
advanced innovations, including AI and robots, to promote
smarter operations.
Connected flexible factory
Amid social issues such as labor shortages and long working
hours due to the declining birthrate, aging population,
and diversity of consumers,
the new warehouse at
the Toyohashi factory, a symbol of smart SCM, began
operations in March 2023. Through integrated operation
with neighboring factories, we are able to streamline every
process of product supply, shorten lead times, reduce
logistics costs, and reduce CO2 emissions. In addition, it
has a highly flexible design that can respond to low-volume,
high-mix production, achieving complete automation from
warehousing of products to sorting them to destinations and
shipping them.
This full automation has eliminated heavy labor and
streamlined the workforce by approximately 30 people.
Furthermore, trucks waiting for cargo on-site used to take
one to two hours, but we are now able to shorten waiting
times to approximately 30 minutes.
Dynamic cell production system
In December 2023, we introduced
a new production
system at the Odawara Plant, which is a global supply base
for cosmetics. This system is a combination of floating linear
transport technology and robotization, and products with
different processes and processing times can be fed into one
manufacturing line since each product is transported and
processed individually. This advanced automation technology
makes it possible to operate with the minimum number of
employees, and the system is quickly able to switch between
diverse types of products.
With this system, we are now able to produce products
that cater to the various needs of consumers, providing the
necessary amount at the necessary timing without waste.
We have achieved efficient production for varied low-volume
products, which had conventionally been seen as impossible.
Value Chain Reform
Supply Chain Management Strategy
Aiming for a Sustainable and Resilient Supply Chain
SCM Strategy to Pursue Global Sharp Top
Shifting to smart factories leveraging advanced
technologies
Sophisticated AI forecasting of demand and evolving the
S&OP process
Innovation by DX at the Genba and in engineering
operations
Osamu Tabata
Managing Executive Officer
Senior Vice President, Supply Chain Management
Please click
here for information on next-generation warehouse
Please click
here for information on dynamic cell production system
Smart SCM Innovation
34
As global competition intensifies and social issues and
lifestyles become increasingly more diverse, the R&D mission is
to identify the major needs of consumers and customers
globally and to contribute with cutting-edge and unique
solutions through technology innovations. To achieve this, we
are maximizing our technology assets and dramatically
improving the level of our core technology development.
Furthermore, collaborating with business divisions from the
initial steps of development enables us to convert unique
technology to global cost-competitive value. With the aim of
attaining K27, we will further accelerate the speed of our value
creation through active co-creation with partners outside of our
company, in addition to reinforcing collaborations within the
company that make the most of our strengths of diverse
country and business activities.
Converting Technology into Cost-competitive Value
Expanding value creation through technology innovation
based on Essential Research and their synergies
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.
Since its foundation, 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. By creating synergies across a wide range of
business sectors, we provide our competitive strength and
also heighten our efficiency in R&D investments.
Development of globally competitive and sustainable raw
materials
The surfactant BIO IOS® utilizes Kao’s core technologies
of precision interface control and precise conversion of oils
and fats. It is created from sustainable raw materials, and
it is able to exert powerful cleaning capabilities in a wide
range of water hardness around the world. We are currently
incorporating this product into laundry detergents such as
Attack ZERO, but through Essential Research, we have
discovered unique functions in beauty care products as well.
We will develop this unique detergent base on a global level
and contribute to cleaning for a sustainable future.
Value Chain Reform
Research Strategy
Creation of Cutting-edge Solutions with Technology Innovations
Research Strategy to Pursue Global Sharp Top
Developing competitive core technologies and products
in global
Achieving both customer and sustainable value
creation
Reinforcing development with speed as our competitive axis
BIO IOS
® molecular structure
model
Hydrophilic group: Part with high affinity
to water
Lipophilic group (hydrophobic chain): Part
with high affinity to oil
A special structure in which the
hydrophilic group is located at the middle
of a long lipophilic group
Hydrophilic group
Lipophilic group
(hydrophobic chain)
Kao’s R&D activities
Hideaki Kubo
Managing Executive Officer
Senior Vice President, Research and Development
35
New business field
We regard intellectual property (IP) as an important
management resource. We are strengthening our global
capabilities, including the creation, protection, and utilization of IP.
We have built a strong IP portfolio with core technologies
derived from Essential Research, commercialization
technologies providing high value, trademarks, and designs for
nurturing strong brands, and distinctive business models to
gain and maintain competitive advantage. We are also working
on an IP MIX strategy that offers multi-faceted and organic
protection of Kao rights through combining multiple IPs, such
as patents and trademarks.
In order not only to strengthen and maintain loyalty for
products and brands but to protect consumers from health
hazards, we are globally strengthening measures against
counterfeit products, speedily disclosing information, and
alerting consumers.
Recently, we have been collaborating with external partners and
working toward achieving a competitive advantage by focusing
on obtaining patents for business models and DX-related
patents with an appealing UX (User Experience) utilizing DX.
We will contribute toward boosting R&D effectiveness and
Kao’s profitability through collaborations between IP strategy
and business, research, even outside the company, by enabling
the applications of IP across diverse business domains.
External and Internal Collaborations to Transform
Technology Assets into Earnings Power
Global development of UV care products with speed as
the competitive axis
In cooperation with our business divisions, we developed
unique products and usage methods of long-lasting coating
that is utilized by Kao’s core technologies “precision
interface control” within the UV care category, where product
differentiation is difficult. To pursue global developments,
we have been demonstrating our overall strengths by
swiftly complying with diverse laws and regulations in each
country, ensuring safety with measurement and assessment
technologies, and quickly starting production by streamlining
registration processes using DX. We will accelerate our
global development going forward by implementing this
mechanism for other products as well.
Striving for the creation of new businesses that transcend
fields
To address environmental issues, population aging,
pandemics, and challenges associated with diversification,
we will deepen and advance value creation in the four fields
of cleanliness, beauty, health, and the environment. At the
same time, we will create new businesses through innovation
that have a social impact with Stop Pandemics, Diversity
of Beauty, Healthy Aging, and Sustainable Chemicals that
transcend business field borders. To achieve these, there is
a need to promote the creation, protection, and strategic use
of intellectual property.
Core technology application across diverse business
domains̶BIO IOS ®
Kao has been applying core technologies created from
Essential Research of fundamental technologies across
diverse business domains. For instance, BIO IOS ®, which
was developed as a sustainable surfactant, is establishing
and utilizing IP portfolios with the collaboration of business
divisions, R&D, and IP divisions for diverse applications
within and outside of the company, including detergents,
beauty-related products, and the chemical field.
Creating a mechanism that increases profits with external
partners
Kao has implemented a so-called “Open & Close Strategy,”
in which it seeks to expand its market by opening up its
technologies while leveraging its technological first-mover
advantage, and at the same time restricting the opening up
of technologies that would lead to its own competitiveness.
By controlling the timing in which technology is released
to external partners, Kao is able to ensure its competitive
advantage while becoming the driving force for market
expansion.
In November 2023, Kao signed a Comprehensive Joint
Research Agreement with NANO MRNA for mRNA medical
drug discovery. This initiative forms a model that maintains
the advantage of Kao’s proprietary technologies while
creating markets and profits with external partners.
Value Chain Reform
Value Chain Reform
Research Strategy
Intellectual Property Strategy
Intellectual Property Strategy to Pursue Global
Sharp Top
Enhancing the IP portfolio through collaborations with
business divisions and R&D
Implementing the Open & Close Strategy utilizing IP
rights
Reinforcing global anti-counterfeit measures
Maximize utilization of Technology Assets
in Conjunction with the Management Strategy
Developing Core Technologies Globally in Diverse Fields
BIO IOS ®
Trademarks: 16 countries
※
Patents: 422 patents in 22 countries
※
※As of April 2024
Fundamental
Technology IP
Product-
Related IP
-Essential
Research-
Material Science
Production
Technology
Safety in
Chemistry
Analytical
Chemistry
Fabric and
Home Care
Skin Care
Hair Care
Oral Care
Chemicals
Existing business field
Beauty
Environment
Health
Cleanliness
Core
technology
Precise
interfacial
control
Diversity of
beauty
Healthy aging
Sustainable
chemicals
Stop
pandemic
36
Mami Murata
Executive Officer
Senior Vice President,
Strategic Public Relations
Tsuki-sai : An opportunity for passionate employees to
communicate with consumers
Tsuki-sai (moon festival) is an activity in which employees
visit places where consumers have gathered to introduce
information regarding daily life along with Kao products
through face-to-face dialogue. The name of the event reflects
the Kao Moon, the symbol of the company, and
the hope that consumers would enjoy themselves.
Employees act as a hospitality team to passionately
communicate Kao’s innovative products and evidence
to contribute toward expanding the Kao fan base. We
were overjoyed to receive comments such as, “Hearing
employees explain about Kao products made us love the
products even more,” and “What a bright and fun company!”
Those words spread throughout social media to over 2.6
million consumers.
Participating employees also felt a renewed sense of
attachment and pride toward Kao, and this activity also
worked to maximize their vitality and potential. We will
continue to spread globally and expand the Kao fan base.
“Kao Do it!” to deliver employees’ passion for taking on
challenges
Kao employees plan and appear in
videos that communicate Kao’s thoughts
and feelings. The total number of views
has exceeded 9.5 million, and we are
reinforcing engagement with consumers
through this channel
Kao Do it!
Corporate ESG communication from a consumer
perspective to lead behavior change
Since 2022, Kao has been proactively communicating to
consumers about how we are a company dedicated to what
is good for society and the
planet, with the desire to
trigger ethical changes in
consumer behavior and
contribute toward realizing
the Kirei Lifestyle.
Communicating typical
daily life situations that
are unique to Kao creates
awareness, empathy, and favorable impressions. It also
contributes toward deepening understanding about Kao’s
corporate stance, efforts being made for the environment,
and also encourages consumers to choose our products.
Transforming even customer feedback into Kao fans
We do not stop with only reflecting consumer feedback
into our Yoki-Monozukuri, but also provide communication
that exceeds expectations for customers offering feedback,
thereby resulting in more Kao fans and improving corporate
value. At the same time, our activities to deliver consumer
opinions expressing gratitude to all employees have
doubled employee motivations and is contributing towards
“maximizing the power and potential of employees.”
Value Chain Reform
PR Strategy
Contributing to Corporate Value Improvement and Business Profit by Creating Kao Fans
The mission of public relations (PR) is not one-way
dissemination of general corporate information, but to create
connections with stakeholders through dialogue and expand
Kao’s fan base. Having more fans who deeply comprehend
Kao, have strong empathy, and have good impressions will
create a sharper corporate image, and purchases by fans
should contribute to business profits.
Strategic PR has diverse contact points that connect to
consumers, news media, and society. At those points, we lively
communicate to consumers and society the image of our
employees doing their best in corporate activities within the
K27 vision, “Protecting Future Lives,” and toward the Global
Sharp Top business and its attainment. Accordingly, we aim to
achieve the goal of the K27 PR strategy, doubling the number
of Kao fans globally.
Doubling the Number of Kao Fans with
Connections through Dialogue
PR Strategy to Pursue Global Sharp Top
Doubling the number of Kao fans globally
Contributing to business profits by creating fans
Transforming customer inquiries into inspiring experiences
to create more Kao fans
ダミー
※TOP 2 BOX comparative assessment of subjects recognizing advertisements
including commercial videos, websites, and newspaper advertisements, and
subjects who do not recognize advertisements n: 2,400
0
20
40
60
80
100
（%）
An environmentally
friendly image
+48points
Consumers
recognizing
publicity
Agree
Consumers not
recognizing
publicity
Want to select Kao
products
0
20
40
60
80
100
（%）
+31points
Agree
Wastefulness–Mottainai.
Never today, nor tomorrow
37
OUR PEOPLE
A New Challenge
to Create
One and Only
Values
New value is born
by launching innovation.
We will continue to
challenge ourselves
to be an essential company
for someone in the world.
38
02
01
By working with a unique perspective, we
can develop a makeup that focuses on
the finer details and becomes someone’s
first and only choice. This perspective
is constantly on my mind as I work in
product development.
For example, we created DESIGNING
EYEBROW 3D (dual color), taking a hint
from people who use reddish eyeshadow
on their eyebrows. This innovative
product features KATE ’s popular
eyeshadow powder mixed with a healthy
red tone.
KATE SUPER SHARP LINER EX4.0
launched this spring, with creative
ideas used for the container, brush, and
formulation to allow stable lines to be
drawn regardless of technique. This is
designed for people who have difficulty
drawing neatly with liquid eyeliner in
one stroke.
I create touchpoints with consumers
on social media and video streaming
sites. I send out information swiftly about
the products’ appeal and techniques,
while iterating on ways to demonstrate
the appeal of the products in the best
possible way.
Going forward, I hope that I can
continue to help people feel creative, be
confident in themselves, and see a new
side to themselves through makeup.
Ren Oota
Masstige Business, Cosmetics Business
KATE Product Development
Developing Makeup
That Is Someone’s
First and Only Choice
In 2023, we simultaneously launched a
revolutionary new detergent, Attack
Zero Perfect Stick, in Japan, Hong Kong,
and Taiwan.
Young and busy generations expect
both ease of use and high detergency,
and our new generation of detergent is
changing the face of laundry. No pre-
washing or soaking is required*, just pop
the stick in and use for true cleanliness
and convenience. It is also eco-friendly.
For the new release, great teamwork
was demonstrated across areas and
departments. We shared market research
results, discussed big opportunities, and
started initiatives to generate trials. There
was especially strong support from all
Kao (Taiwan) employees, who played an
important role as Stick Ambassadors to
expose the product widely.
Marketing efforts focused on
highlighting the unique design and special
features of the product. We promoted
understanding among consumers with
in-store demonstrations, websites,
and YouTube videos linked via QR
codes. We are also implementing many
new initiatives, such as conducting
trial campaigns and recommendation
activities on social media before the
product’s release, to generate a great
response and word of mouth by the time
of release.
We sincerely believe that this product
will create a new
era of washing and
will further support
a Kirei Lifestyle for
consumers.
＊ For dirt stains, spilled food
stains, and sock stains
Fabric Care Business
Kao （Taiwan） Corporation
Huang Yu Ting
Demonstrate Teamwork
and Deliver New Value
to Consumers
39
03
04
Research & Development
Kao Chemicals Europe, S.L.
Agusti Bueno
Taking on the Challenge
of Eco-innovation
with a Global Scrum
Team Formation
Our commitment to sustainability is
one of the driving forces behind Kao’s
growth. Developing new solutions
reduces environmental impact and
advances society.
In 2014, I focused on the
byproducts generated during the toner
manufacturing process. They were
made up of a polyester mixture, had little
biodegradability, and were meant to be
thrown away. We posed the question "Is
there any way we can take advantage
of this?" to the R&D department at
Kao Chemicals Europe, S.L. What I
discovered was the knowledge we
had accumulated through asphalt
research. We found that by adding this
reprocessed byproduct to asphalt, it was
possible to give the pavement additional
performance (higher load resistance and
fuel resistance).
Our first joint patent was signed in
2016, and R&D continued until Kao
launched Newtlac 5000, an asphalt
modifier made from waste PET. This
is an excellent innovation that can
reduce environmental impact and frequency
of repairs.
A moment of inspiration and a small
team’s big challenge moved many
people. This effort was made possible
through open dialogue and scrum team
collaboration with many departments
and affiliates in Japan, the United States,
and Mexico. I am proud to have been
able to contribute to Kirei in life together
with them. We will continue to evolve
our technology to meet the needs of our
customers and fulfill the goals of society.
Mosquitoes pose a threat to children’s
lives worldwide. We want to protect lives
by stopping mosquitoes from biting.
Based on this desire, we developed
Bioré GUARD Mos Block Serum, which
prevents mosquitoes landing on the skin,
and as our second effort, a spray to get
rid of mosquitoes.
Surfactant experts offered their insights
on the spray’s formulation, machinery
experts gave input on the containers, and
biology experts described the behavior
of mosquitoes. By bringing together the
expertise of different members to look
at the same phenomenon from different
angles, we successfully created a spray
that can get rid of mosquitoes anytime,
anywhere, without using pesticides.
These products are in a new field, so
launching them was not so easy. However,
we made steady efforts to consider the
spray’s formulation and write an academic
paper to describe the technology, which
helped us start collaborating with Earth
Corporation, a leading company for insect
care in Japan. We utilized our collective
iinsights and conducted home use tests
and multiple experiments before launching
ARS Mos Shooter in Thailand in July 2024.
We will continue to dedicate ourselves
to developing anti-mosquito products for
people’s daily lives so that we can protect
future lives and help everyone around
the world spend precious time with
their families.
Human Health Care Products Research
Products Development Research, R&D
Aya Namba
Protecting Future Lives
from Mosquitoes
by Integrating Diverse
Expertise
40
05
06
Transforming
Consultations into
Impressive Experiences
to Win Kao Fans
Each day Kao's Consumer
Communication Center receives a wide
variety of consumer consultations such
as inquiries, delights, concerns and
expectations. Our mission is to transform
even simple consultations into impressive
experiences so that all of our consumers
can feel satisfied with having called us
and are reassured by Kao, with lasting
memories coming back to them every
time they use our products.
Some consumers call Kao as their final
hope because they are not able to solve
their issues through consultations with
other organizations. I am sometimes
surprised to hear customers' anxious
words when they ask me do something
about their situation. Each consumer
has different circumstances, so all
consultations are not the same. We
also believe that consumers are more
empowered to speak about some topics
on the phone rather than face-to-face.
We listen to consumers carefully and try
to understand their individual situation so
that we can deeply empathize with them
and search for suitable proposals.
The feedback from customers in this
process is incorporated into the next
step of Yoki-Monozukuri, and these
impressive experiences help build loyal
Kao fans. In this way, our crucial
activities here also help support Kao’s
corporate development.
We always want to exceed consumer
expectations so that Kao can contribute more
to consumer happiness than ever before.
Consumer Relations
Consumer Communication Center
Ai Maezawa
Consumers
Kao
Consumer
Communication
Impressive
experiences
Returns and
developments
Maximize loyal Kao fans
Project Management Processing Manager
Americas, Kao USA
Todd Warnock
Production of Bioré UV
under Strict
U.S. Regulations
In February 2020 Kao began the
journey to launch Bioré UV Aqua Rich
in the Americas, which contains a Kao-
developed unique ingredient to protect
the skin from UV rays. As this product
is classified as a pharmaceutical locally,
there were strict regulations regarding
the design and construction of the
manufacturing facilities. To overcome
this high hurdle, we worked with an
external company specializing in
pharmaceutical manufacturing to evaluate
construction materials, processing
equipment, utilities, and environmental
controls to ensure a design that fully
complied with regulations.
Although progress was delayed due
to the pandemic, the construction
of the facility was completed in June
2021, upon which commissioning and
verification began. This was an important
process to keep the factory running
smoothly. Visual inspection and dynamic
testing of all systems ensured that the
facility and systems were functioning
safely and compliant with regulations.
Production began in January 2023
connecting all our efforts to launch
this product. Although the path was a
demanding one, this was a rewarding
project that has brought Kao USA’s
supply chain team together. We will
continue to take on the challenge
of expanding and developing our
production capabilities.
41
We will establish diverse and robust
governance with a focus on dialogue to
support the sustainable enhancement of
corporate value.
Corporate
Governance
Chapter
05
42
Outside Audit &
Supervisory Board
Member
Nobuhiro Oka
Outside Director
Takaaki Nishii
Holding active deliberations and taking
actions to achieve K27
Business performance continues to be under pressure due
to the impact of the COVID-19 pandemic, increases in raw
material prices, and the slowdown in the Chinese market. To
break through this situation, the Board of Directors deliberated
over FY2023 focusing on structural reform and redefining the
mid-term plan.
The participants in these deliberations spoke openly, regardless
of whether they were from inside or outside the company. As
such, I believe that these Board of Directors meetings were quite
intense and productive. The result was that Kao announced its
new Mid-term Plan （K27） and has made bold structural reforms.
I feel that the decline in operating income has bottomed out, and
the company has built a foundation for increased profits.
In FY2024, Kao will continue to invest decisively and manage
its portfolio in a disciplined manner while also evolving its
deliberations on growth strategies and execution monitoring
to secure a firm path for achieving K27. To this end, we will
fully share details on K27 with the newly appointed Outside
Director and Outside Audit & Supervisory Board Member, will
always keep track of the challenges and points of deliberation
in the Board of Directors, and will assign them different levels
of priority when holding deliberations. A characteristic of our
Board of Directors is an open-minded culture in which each
member, regardless of their position, can express opinions
frankly and I will continue to preserve this going forward as
Chairperson.
Monitoring operations that pursue capital
efficiency and value creation cycle
One year has passed since I was appointed as Outside
Director. Careful deliberations have been carried out on
important issues such as structural reforms and redefining
the mid-term plan. In this way, the Board of Directors has
demonstrated its effectiveness.
Kao has a widespread excellent corporate culture in
which employees make earnest efforts to put the corporate
philosophy into practice based on the company’s Purpose.
During this year, the company has redefined K27 to reflect the
substantial expectations of stakeholders and has accelerated
its pursuit of returning to a growth trajectory and achieving
capital efficiency. Kao is making further progress in promoting
world-class sustainability, as stated in its Commitment to the
Future.
Currently, stakeholders who have high expectations for Kao
are expecting engagement that clarifies the value creation
story that leads to the K27 targets. I will carry out monitoring
so that the company will not just achieve profit growth led
by priority businesses but also pursue capital efficiency that
is optimal for the whole company, including corporate and
supply chain divisions, and that the company will return the
results of these efforts to shareholders while contributing
to greater job satisfaction for employees, thereby creating
a highly sustainable value creation cycle that starts from
employees.
Holding free and open-minded deliberations
with interviews and external perspectives
The Audit & Supervisory Board conducts fruitful deliberations
in a free and open-minded atmosphere. I value maintaining
an appropriate relationship with the executive side, and when
attending Board of Directors meetings or exchanging opinions
with the Representative Directors, I try to actively express
my opinions from my perspective as an Outside Audit &
Supervisory Board Member, which is different from that of an
Outside Director.
One characteristic of Kao’s Audit & Supervisory Board is
how the Audit & Supervisory Board Members actively go to
the Genba meaning actual site or spot and hold interviews
with each division. These interviews are attended by Full-time
Audit & Supervisory Board Members and at least one Outside
Audit & Supervisory Board Member who listens directly to
the opinions of the Genba from an outside perspective and
gather information. Another characteristic of the Board is its
group governance structure, which focuses on supporting the
auditors of its subsidiaries, such as the staff of the Office of
the Audit & Supervisory Board also serving as auditors of the
subsidiaries. Amid demand for revisions to management plans
and business strategies, I will regularly conduct monitoring
to ensure that the internal control system is being built and is
operating fairly. The Audit & Supervisory Board Members over
the years have continually brought about innovation in all audit
activities, and I feel that the Kao Way has been instilled within
these efforts.
Outside Director
Chairperson of the Board
of Directors
Osamu Shinobe
Messages from Outside Directors and an Outside Audit & Supervisory Board Member
43
Corporate Governance Strengthened in Both Systems and Operations as a Top-Priority Management Issue
In order to sustainably enhance corporate value over the
long term while working to realize a Kirei World in which
all life lives in harmony, which is our Purpose of our
corporate philosophy “The Kao Way,” and to become an
essential company in a sustainable world, 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 required 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.
To further enhance discussions on corporate governance
and make disclosures to stakeholders easier to understand,
Kao compiled in July 2023 a Corporate Governance Policy
that had been disclosed in the Corporate Governance Report
and other materials. The Kao Corporate Governance Policy
is available on
Kao’s website.
Corporate Governance Structure
（As of March 22, 2024）
Subsidiaries/Affiliate
3
Independent
Outside
Board Members
4
Independent
Outside
Directors
2
Full-time Audit
& Supervisory
Board Members
4
Inside
Directors
Chairperson :
Independent Outside Director
Directors and Audit &
Supervisory Board Members
attend the meetings
Appointment/
Dismissal
Appointment/
Dismissal
Appointment/
Dismissal
President & CEO
Management Board
ESG Managing Committee
Internal Control Committee
Executive Officers
Business, Function, Corporate Function
Auditors
System
Improvement/
Monitoring
Internal Audit
Collabo
ration
Report
Supervision/
Decision-Making
Audit
Audit
Accounting
Auditor
Collabo
ration
Opinion
Opinion
Opinion
Board of Directors
Audit & Supervisory Board
Audit
Supervision/
Decision-Making
Business Execution
Committee for the
Examination of Nominees
for Directors and
Audit & Supervisory
Board Members
Compensation
Advisory Committee
for Directors and
Executive Officers
Office of
the Audit & Supervisory
Board
Shareholders Meeting
Compensation Advisory
Committee for
Audit & Supervisory
Board Members
Department of
Internal Audit
44
Stance on Balance among Knowledge, Experience, and Skills, and on Diversity and Size of the Board of Directors
At Board of Directors meetings （attended by Directors and Audit & Supervisory Board
Members）, Directors provide broad direction regarding business strategies and Directors and
Audit & Supervisory Board Members deliberate on their appropriateness and the risks related
to their realization and other matters in an objective and multidimensional fashion.
The Kao Group Mid-term Plan K27 includes the vision of “Protecting future lives.”
To accomplish this, the Company’s management is executing business in line with the
Company’s strategies of （1） becoming an essential company in a sustainable world, （2）
transforming to build robust business through investment, and (3) maximizing the power and
potential of employees.
The Board of Directors considers it important for Inside and Outside Directors and Audit
& Supervisory Board Members to complement each other with each of their knowledge,
experience, and abilities, and to be able to demonstrate high effectiveness as a whole, in
order to supervise that management is implementing business execution in a framework for
transparent, fair, prompt and decisive decision-making accordance with the above strategies.
Directors and Audit & Supervisory Board Members Skill Matrix（As of March 22, 2024）
Attributes
Experience/Knowledge/Expertise
Main reasons for marking “
”
Term of
office
Gender
Nationality
Management
Global
Consumer
goods
industry
Chemical
industry
Human
capital
strategy
Research
Environment/
society
IT/DX
Legal/risk
management
Finance/
accounting
Directors
Yoshihiro
Hasebe
8
years
Male
Japan
●Experience in the Company’s Research and Development (including experience in global operations, and
knowledge of fundamental and applied technologies and matter cycle research) (Doctor of Engineering)
●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
Masakazu
Negoro
1
year
Male
Japan
●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 and Finance
Toru
Nishiguchi
1
year
Male
Japan
●Experience in the Company’s Consumer Products Business
●Experience in management and global marketing at the Company’s overseas subsidiaries ●MBA
David J.
Muenz
2
years
Male
United
States
●Experience in research and business at the Company’s overseas subsidiary
●Experience in the Company’s ESG Division
Osamu
Shinobe
6
years
Male
Japan
●Experience as the top executive of a major international airline (including experience as Chairman of CSR and
Environmental Management Committee)
Eriko
Sakurai
2
years Female 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
Takaaki
Nishii
1
year
Male
Japan
●Experience as the top executive of a major food company ●Experience in the management of overseas
subsidiaries ●Experience in the human resources department
Makoto
Takashima
－
Male
Japan
●Experience as the top executive of a major financial institution
●Experience in international and corporate planning departments
Audit & Supervisory Board Members
Yasushi
Wada
1
year
Male
Japan
●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
Sadanao
Kawashima
3
years
Male
Japan
●Experience in the Company’s Accounting and Finance ●Experience in the Company’s Internal Audit
Hideki
Amano
7
years
Male
Japan
●Certified Public Accountant ●Served overseas and as 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
Nobuhiro
Oka
6
years
Male
Japan
●Attorney-at-Law ●Ph.D. in Law (Chuo University) ●Professor at Keio University Law School
Saeko Arai
－
Female Japan
●Certified Public Accountant ●Experience as a representative of a U.S. corporation
●Experience as a partner of an IT venture company
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 “
”
＊For more information, please refer to pages 21 to 23 in
the Notice of the 118th Annual General Meeting of Shareholders.
45
List of Directors and Audit & Supervisory Board Members
（As of March 22, 2024）
Full-time Audit &
Supervisory Board Member
Yasushi Wada
Date of birth: Jul. 30, 1959
Number of Kao shares held: 14,600
shares
Representative Director
President and Chief
Executive Officer
Yoshihiro Hasebe
Date of birth: Jul. 30, 1960
Number of Kao shares held: 16,700
shares
[Other material position(s)]
Chairperson, The Kao Foundation for
Arts and Sciences
Representative Director
Senior Managing Executive
Officer
Toru Nishiguchi
Date of birth: Nov. 18, 1961
Number of Kao shares held: 17,200
shares
Outside Director
Eriko Sakurai
Date of birth: Nov. 16, 1960
Number of Kao shares held: 300
shares
[Other material position(s)]
Outside Director, Sumitomo Mitsui
Financial Group, Inc.
Outside Director, Astellas Pharma Inc.
External Director, Nippon Sheet Glass
Company, Limited
Outside Director
Chairperson of Board of
Directors
Osamu Shinobe
Date of birth: Nov. 11, 1952
Number of Kao shares held: 2,600
shares
[Other material position(s)]
Special Advisor, ANA HOLDINGS INC.
Outside Director
Takaaki Nishii
Date of birth: Dec. 27, 1959
Number of Kao shares held: 4,000
shares
[Other material position(s)]
Senior Corporate Advisor, Ajinomoto
Co., Inc.
Outside Director, Daiichi Sankyo, Inc.
Director
Managing Executive Officer
David J. Muenz
Date of birth: Nov. 15, 1960
Number of Kao shares held: 500
shares
Representative Director
Senior Managing Executive
Officer
Masakazu Negoro
Date of birth: Jan. 7, 1960
Number of Kao shares held: 10,500
shares
Outside Audit &
Supervisory Board Member
Saeko Arai
Date of birth: Feb. 6, 1964
Number of Kao shares held: 0 shares
[Other material position(s)]
Certified Public Accountant
President, Acuray, Inc.
Professor, Hakuoh University
Outside Director, Sumitomo Pharma
Co., Ltd.
Outside Director, Tokyu Fudosan
Holdings Corporation
Outside Audit & Supervisory Board
Member, YKK CORPORATION
Full-time Audit &
Supervisory Board Member
Sadanao Kawashima
Date of birth: May 22, 1959
Number of Kao shares held: 17,900
shares
Outside Audit &
Supervisory Board Member
Hideki Amano
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
Outside Audit &
Supervisory Board Member
Nobuhiro Oka
Date of birth: Apr. 5, 1963
Number of Kao shares held: 3,200
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
Outside Director
Makoto Takashima
Date of birth: Mar. 31, 1958
Number of Kao shares held: 0 shares
[Other material position(s)]
Chairman of the Board, Sumitomo
Mitsui Banking Corporation
Audit & Supervisory Board Members
Directors
46
How the Board of Directors Should Function and Evaluation or Its Effectiveness
FY2022 Issues
FY2023 Initiatives
FY2023 Evaluation and Issues
Future Initiatives
●The issues to be
addressed in order to
achieve the Mid-term
Plan K25 and the interim
summary needed to be
discussed in greater
depth, including in
quantitative terms.
●A K25 interim summary was
provided, and structural reforms
and growth strategies were
discussed.
●Focus topics for each business
segment were reported.
●Business status indicators and
the progress status of K25 were
monitored through monthly
meetings of the Board of
Directors.
●Based on the results of the K25 interim
summary, the Mid-term Plan K27 was
reformulated, and progress was made in
both discussing and implementing
structural reforms.
●Further discussion is needed regarding
growth strategies and business
segments that are experiencing issues.
●Further improvements should be made
to the monitoring of management
indicators under ROIC management.
●Allocate time for ongoing
discussions at meetings of the
Board of Directors, while also
being aware of the integration of
growth strategies and issued
businesses with ESG strategies.
●Evolve management indicators
to be monitored and report
regularly on the performance
against such management
indicators.
●Stakeholder relations
strategies needed to be
discussed.
●Reports were presented at
meetings of the Board of
Directors before and after IR
activities.
●Deliberations are being conducted with
greater attention paid to key
stakeholders, including investors.
●Growth strategies need to be
demonstrated more clearly.
●Continue to engage in
deliberations while paying
attention to key stakeholders
and how to demonstrate growth
strategies.
●Further discussions were
needed regarding how
human capital strategies
relate to business
strategies.
●Discussed human capital
strategies and human capital
structural reforms.
●Discussions and decisions on the structural
reforms in relation to human capital have
been given a positive evaluation.
●It is necessary to deepen discussions
regarding what is required of the human
capital responsible for growth
strategies, and how to develop and
acquire said human capital.
●Further discuss concrete human
capital strategies linked to the
growth strategies at meetings of
the Board of Directors.
FY2022 Issues
FY2023 Initiatives
FY2023 Evaluation and Issues
Future Initiatives
●There were times when
the level of reporting was
too granular, resulting in
unfocused discussions.
●Defined the indicators that are
needed in order to achieve K25
(and K27).
●A presentation format was used at
meetings of the Board of Directors.
●The Board of Directors is appropriately
fulfilling its supervisory functions.
●Presenters should make discussion
points clear.
●Use the presentation format at
all meetings of the Board of
Directors, and clearly indicate
the discussion points.
●Ongoing deliberations were
needed regarding the
necessary elements for
realizing the vision of the
Board of Directors, as well
as the Board’s composition.
●Corporate governance was
discussed, and official policy
was formulated and disclosed.
●The disclosure of the corporate
governance policy is commendable.
The composition of the Board of
Directors was in line with the corporate
governance policy.
●The composition of the Board of
Directors, including diversity of
Directors (skills, women and
global human capital), will be
discussed on an ongoing basis.
Results of the FY2023 evaluation of the effectiveness of the Board of Directors
How the Board of Directors should function
Kao’s Board of Directors will delegate authority to a
substantial degree to the executive organizations, and further
strengthen its monitoring function to encourage appropriate
risk-taking and prompt and bold decision-making by
management. In particular, the Board 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 to develop
internal controls and risk and crisis management systems,
and will build and operate these systems appropriately.
Overall, it was found that the Board of Directors has adequately exercised its supervisory functions, and that its effectiveness
has been maintained. However, the evaluation also identified issues to be addressed in order to further improve the Board’s
effectiveness, and opinions were shared regarding future initiatives.
Evaluation of the effectiveness of the Board of Directors
On an annual basis, an evaluation is conducted at a
meeting of the Board of Directors in order to make
improvements aimed at enhancing the effectiveness of the
Board of Directors. Based on the idea that the roles and
responsibilities of the Board of Directors must be shared by
the entire Board, the Company believes that it is effective
for all members who participate in meetings of the Board of
Directors, including Audit & Supervisory Board Members,
to conduct evaluations using a method that entails the
expression of opinions and free and open discussion.
Furthermore, the Company also recognizes the usefulness
of an objective evaluation by a third party, with an eye to
introducing activities that further enhance the effectiveness of
the Board of Directors. At the 2023 evaluation, the Company
received advice from a third party.
Please refer to
the Corporate Governance Report for
information on the activities of the Board of Directors and
details on the evaluation of the effectiveness of the Board
of Directors, as well as the evaluation of the Committee
for Examination of Nominees for Directors and Audit &
Supervisory Board Members and the Compensation Advisory
Committee for Directors and Executive Officers.
Agenda item selection and discussions
Structure, status of operation and deliberations of the Board of Directors
47
The Audit & Supervisory Board Initiatives
Particularly important points in Audit &
Supervisory Board Members’ activities
The Audit & Supervisory Board Members are entrusted by
shareholders to audit the Directors’ execution of duties
from an independent standpoint and, thus, are engaged in
auditing activities to achieve sound and sustainable growth
of the Kao Group and establish governance that meets the
trust of stakeholders. Regarding our work, the specifics of its
activities in 2023 will increase the transparency of the audit
and the effectiveness of the dialogue with stakeholders.
Audit Policy
In FY2023, as the business environment remained uncertain
in the face of rising geopolitical risks and other factors,
we were required to make a major transformation toward
achieving profitable growth. Under these circumstances,
with a shared sense of urgency and the necessity of reforms
recognized by management, the Company adopted a policy
to audit the progress of implementation of management
strategies and response to management environmental risks
while conducting auditing activities, including ESG-related
activities, in view of the requests and views of society and
stakeholders.
Deliberations
Number of meetings held : 11
Attendance rate : All members marked 100%
Duration : Average of 1 hour and 51 minutes
26 resolutions : Audit plans, audit reports, etc.
9 matters considered : Audit findings, revision of Audit &
Supervisory Board rules, etc.
Composition and Execution of Duties
The Audit & Supervisory Board consists of five Members (two
Full-time Members and three Outside Members). The Full-
time Members with extensive internal execution experience
and diverse knowledge, and the Outside Members with their
respective expertise (certified public accountant, attorney-at-
law) and abundant knowledge from experience as officers of
other companies share audit-related information in a timely
manner and deliberate from various perspectives.
The Office of the Audit & Supervisory Board was
established directly under the Audit & Supervisory Board to
assist them with their duties and to allow the office members
to serve concurrently as Auditors of subsidiaries.
Lively exchange of opinions
Dialogue with people at Genba (the actual sites)
We attend meetings of the Board of Directors, the
Management Board, and other important meetings
with regard to auditing the duties of Directors. They
put emphasis on confirming the decision-making
process for reaching resolutions and expressing their
opinions as appropriate.
In addition, we conduct on-site audits and interviews
with each division, subsidiary, and affiliate. By
placing importance on dialogues with people at
Genba (the actual sites), they confirm the degree to
which the corporate strategy is being shared and
whether proactive efforts are being made. They also
identify any issues that occur at Genba. At least one
Outside Member has participated in approximately
60% of the interviews.
Evaluation of the effectiveness
Each year, the Board sets evaluation items, with a focus on
critical auditing items, and evaluates the effectiveness of
the Board from a multifaceted and objective perspective. In
FY2023, through comprehensive and unfettered discussions
at the Board meetings based on the self-evaluation by each
Member, the exchange of opinions with Representative
Directors, and feedback from Outside Directors and other
related parties, it was concluded that the system of the
Board as a whole was functioning effectively.
For Genba, the Board observed and assessed the
degree of utilization of ROIC in each business segment
and the progress of structural reforms, which are part of
management strategies. To that end, they compiled the
results of such observation and assessment into a proposal
and shared the proposal with the Directors. The Board will
continue to observe the ROIC in each business segment.
As for the three types of Audits (Audit & Supervisory Board,
Accounting Auditor and Department of Internal Audit),
to further strengthen the collaboration among them, we
understand that we need to share auditing plans and issues
with other Audits.
The issues identified through the effectiveness evaluation
will be reflected in auditing activities and critical auditing
items for FY2024 so that the effectiveness of the Board will
be further improved.
Please click
here for information on key audit items, results of activities, and
evaluations of effectiveness.
On-site audits and interviews at Kao Vietnam Plant
48
Compensation System for Directors, Audit & Supervisory Board Members and Executive Officers
Base salary
Percentage
Short-term
incentive
compensa
tion
100%*
EVA-linked part
35%
Consolidated net sales/profit-linked part
35%
Individual performance evaluations
30%
100%
Long-term
incentive
compensa
tion
Vari
able
part
Business growth evaluation EVA, business growth rate of net sales, profit, etc.
28%
ESG activities evaluation External evaluation and achievement of the Kirei Lifestyle Plan, etc.
28%
Top management activities evaluation TSR, Employee Engagement Survey results, etc.
14%
Fixed part
30%
See
the Securities Report for the monetary amounts and other details regarding the compensation system for
Directors, Audit & Supervisory Board Members and Executive Officers.
●We have not changed the base salary amount.
●We have revised the percentages of the base
salary and short-term and long-term incentive
compensation for the Representative Director,
President, and Chief Executive Officer to be in
the ratio 1:1:1.
●We have revised the percentages of the
short-term and long-term incentive
compensation for other Directors and
Executive Officers to be 30% to 70% of the
base salary in accordance with rank.
To encourage further enhancement of
corporate value, we have partially revised
the long-term incentive compensation to be
implemented in FY2024 onward.
●Introduced new evaluation indicators such as
EVA and TSR(Total Shareholder Return)
●Expanded the scope for delivering the
company’s shares (foreign-national Directors,
etc.)
Before revision
After revision
Base salary
1
Base salary
1
Short-term incentive
compensation
0.5
Short-term incentive
compensation
1
Long-term incentive
compensation
0.5
Long-term
incentive
compensation
1
Variable
compensation
Variable
compensation
Fixed
compensation
Fixed
compensation
Aims of compensation for Directors, Audit & Supervisory Board Members and
Executive Officers
Standards, systems and other details for the compensation and other incentives for
Directors, Audit & Supervisory Board Members and Executive Officers are established on
the basis of the following aims:
●Securing and retaining diverse, outstanding personnel to establish and enhance our
competitive advantage
●Driving concerted initiatives to promote sustainable enhancement of corporate value
●Sharing interests in common with shareholders
Compensation Structure for Directors, Audit & Supervisory Board Members and
Executive Officers （In the case that short-term and long-term incentive payout ratio are
both 100%）
Compensation for Directors (other than Outside Directors) and Executive Officers consists
of a base salary, short-term incentive compensation and long-term incentive compensation.
Outside Directors and Audit & Supervisory Board Members are paid a base salary only.
To achieve the ambitious targets for supporting Global Sharp Top businesses in K27,
we have boosted the function of incentives to encourage bolder risk taking, and we have
revised the variable compensation structure to be implemented in FY2024 onward.
Compensation Structure for the Representative Director, President, and Chief Executive Officer
Summary of Compensation System for Directors, Audit & Supervisory Board Members and
Executive Officers
The short-term incentive compensation is paid as bonuses in accordance with the degree of
target achievement in a single fiscal year. The evaluation indicators consist of EVA, consolidated
net sales and profit, and individual performance, and the bonus payment rate varies from 0%
to 200%. The long-term incentive compensation (performance-based share incentives) is a
system for delivering shares and other incentives with the aim to further enhance corporate
value. This system consists of a variable part that is delivered at a rate from 0% to 200% in
accordance with the relevant period and targets of the mid-term plan, and a fixed part whereby
a defined number of shares and other incentives are delivered annually.
The adequacy of these incentives is examined by the Compensation Advisory Committee for
Directors and Executive Officers.
＊In the case of the Representative Director, President and Chief Executive Officer. The weight of indicators is determined by position.
Points of
revision
49
Kao appropriately manages the various risks and crises that
may occur across the management and business activities
in line with the response priorities*1 within the Kao Risk and
Crisis Management Policy.
Risk and crisis management system
We define risk as the effect of uncertainty on the achievement
of our management targets and the execution of business
activities. The Risk and Crisis Management Committee has
established a system and activity guideline for risks that result
in threats and the state of crisis, which is the materialization
of risks. Each division and affiliate conducts risk management
based on these activity guidelines. 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 losses. The Management Board reviews risk and
crisis management activities, and the Board of Directors
approves them. The Internal Control Committee confirms the
effectiveness of risk and crisis management activities.
Management framework during time of crisis
Clarifying corporate risks and strengthening responses
The Risk and Crisis Management Committee and the
Management Board have selected 15 particularly significant
risks as the “main risks” that could have a negative impact
on its sustained profitable growth and contribution to the
sustainability of the world. Among these main risks, the Kao
Group determines themes for and addresses risks that would
have a major impact on management and require an enhanced
response as “corporate risks”. The Management Board decides
upon risk themes and risk owners (Executive Officers) based
on its analyses of an internal risk survey and the external
environment as well as interviews with management, and the
Risk and Crisis Management Committee manages progress.
Corporate risks, main themes, and measures
Risk and Crisis Management Supporting Management in an Era of Uncertainty
Theme
Details of risks
Actions
Response to social
issues
Risk of initiatives to resolve social issues being
perceived as inadequate. Risk that failure to
adequately show progress toward the KPIs committed
to in the KLP being perceived as “greenwashing”
●Understanding the evaluations of our initiatives for social issues
from stakeholders and other parties on a global scale and
reducing reputation risks
Response to
geopolitics
Risk of deterioration of business environments in
countries and regions where we develop business and
procure raw materials. Risk of human casualities,
temporary suspension of operations, or changes in
consumer purchasing
●Developing risk scenarios and response systems, and
monitoring political and social situations
●Establishment of guidelines for ensuring employee safety
●Strengthening the supply chain networks for raw material
procurement, etc
Large-scale
earthquakes and
other natural
disasters and BCP
response
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
●Enhancing hardware and software measures based on flood
risk studies at each site, and providing disaster prevention
education to protect employees and their families
●Formulating BCP for long-term suspension of operations in
Japan and strengthening BCPs at sites outside Japan
Response to serious
product quality
issues
Risk of serious product quality issues arising that
would cause the loss of social credibility
●Strengthen company-wide responses in the event of serious
damage arising due to product quality issues
●Strengthen internal awareness-raising to prevent serious
product quality issues from arising
Response to
cyberattacks and
personal information
protection
Risk of leaks of confidential information or personal
information due to errors or intentional actions,
including cyberattacks. Risk of temporary suspension
of business activities, such as supply chain activity
●Reinforcement of security measures and response system in
case of incidents
●Strengthen global protection of trade secrets, personal
information, and information security
Response to
reputation risks
Risk that causes brand value and social credibility to
decline due to the spread of negative evaluations
about Kao on social media
●Strengthen the emergency response system in the event of
contingencies
●Strengthen the social media monitoring system
●Establishment of a pre-check system and in-house training for
using advertising and social media
Pandemic response
Risk of temporary suspension of operations due to
pandemic outbreak. Risk of shrinking cosmetics
market, etc., due to changes in purchasing behavior
●Reviewing the guidelines, action plans, etc., in preparation for
the next pandemic, based on past responses to the COVID-19
pandemic
Examples of applicable events: earthquake, disaster, infectious disease
＊1. 1. Protection of human lives 2. Environmental conservation 3. Continuation of operations 4. Protection of assets
＊2. 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
State of
emergency
level
Level 1
Relevant divisions
can respond on a
local basis
Level 2
Impact on operations
at multiple divisions
and locations
Level 3
Company-wide impact,
and impact on Kao’s
business
Chaired by
President and
CEO
Responsible
Executive
Officer level
Emergency Countermeasure
Headquarters
State of
emergency level 3
Standards for establishing
response organizations
State of
emergency level 2
State of
emergency level 1
Executive
Office
Crisis
Response Team
Regional Response
Headquarters*2
Local Response
Headquarters
Organizations in place for each type of event,
including accident, disaster, disease outbreak, etc.
50
Kao expressed its support for the TCFD* in March 2019, and has disclosed information based on its
recommendations. Kao recognizes climate change as both a major risk for continued management
going forward and an opportunity for growth.
Information Disclosure Based on the TCFD Recommendations
Key Activities and Progress in FY2023
Main Business Risks and Opportunities
Key activities
Progress in FY2023
Governance
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.
The ESG Steering
Committee for
decarbonization has held
deliberations on carbon
zero.
Strategy
4°C increase in the average temperature will have a
significant impact on society. As such, it is important to
make meaningful contributions toward aiming to keep the
global rise in temperature at 1.5°C.
See “Main Business Risks
and Opportunities” at the
right for details.
Risk
Management
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 “Risk and crisis management” section on page 50 for
details.
Metrics and
Targets
We have established our targets for 2030 and are taking action based on our policy of
moving toward carbon zero by 2040 and carbon negative by 2050.
Category
of risk
Area of
evaluation
1.5°C / 2°C
scenario (2030)
4°C
scenario (2030)
Kao’s response
Transition
Introduction of
carbon tax
Higher costs incurred
due to the introduction
of carbon tax worldwide
Hardly any progress in
introducing carbon
taxes
Promote the use of
renewable energy
according to the 1.5°C
scenario
Introduction of
restrictions on
plastics
Higher procurement costs
due to greater demand for
recycled plastic
No significant increase
in recycled plastic
demand
Bolster activities for
plastics in a circular
society
Raw material
price increase
Higher procurement
costs due to a restriction
on fossil-based raw
materials
Higher procurement costs
due to an increase in
demand for fossil-based
raw materials
Bolster activities for
minimizing the quantity
of fossil-based raw
materials being used
Preservation
of biodiversity
Higher procurement
costs for palm oils and
pulp due to regulations
on the procurement of
certified products, etc.
Higher procurement
costs for palm oils and
pulp due to the need for
purifying water quality
and contaminated soil,
etc., following the
excessive use of
chemical fertilizers
Continue and bolster
activities for minimizing
the quantity of biogenic
raw materials being
used
Changes in
consumer
behavior
Demand for ethical
products expands
worldwide
Demand for ethical
products expands among
specific generations
Develop and market
ethical products
Physical
Natural
disasters
Greater damage
Immense damage
Conduct risk surveys at
each site and carry out
measures accordingly
Rise in
temperature
Increase sales due to
significantly increasing
demand for UV-care
products, anti-
perspirants and
infection control
products
Strong increase sales
due to significantly
increasing demand for
UV-care products,
anti-perspirants and
infection control
products
Strengthen
development of
products with growing
demand
＊ Task Force on Climate-related Financial Disclosures
＊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.
Results in 2023
-35%
57%
-15%
4,485 thousand tons
- CO2
-55%
（base year : 2017）
＊1
100% ＊2
22%
（base year : 2017）
10,000 thousand tons
- CO2
% reduction in absolute scope 1 + 2
CO2 emissions
% of renewable energy in electricity
consumption
% reduction in absolute full lifecycle
CO2 emissions
Contribution to greenhouse gas reduction
51
Evaluations from external organizations
Financial and ESG highlights
Data Section
52
External Evaluation
Socially Responsible Investment Indexes
The first Japanese
company to be rated
Triple-A for four
consecutive years
Kao has been selected as an A-List
company with the highest rating across
all categories within the survey for
worldwide companies conducted by a
leading international nonprofit
organization, CDP, regarding climate
change, forests, and water security. Only
ten companies were selected as A-List
companies from more than 21,000,
assessed on responses to the CDP
questionnaire survey. This marks the
fourth consecutive year that Kao has
achieved Triple-A status.
＊"World's Most Ethical Companies" and "Ethisphere"
names and marks are registered trademarks of
Ethisphere LLC.
The only Asian company
to be selected as one of
the World’s Most Ethical
Companies® for 18
consecutive years
We have been selected as one of the
World’s Most Ethical Companies 2024,
announced by the Ethisphere Institute, a
leading US think tank.
Kao is the only company in Asia to be
selected for this award for 18
consecutive years, ever since the award
was established in 2007.
4
consecutive
years
18
consecutive
years
External Evaluation
53
ESG Highlights
Number of Patents (Japan / Outside Japan)
Number of Employees by Gender*2 /
Percentage of Female Managers*3
CO2 Emissions across the Product Lifecycle *4
GHG Emissions （all worksites）*5
Water Use across the Product Lifecycle*1
Plastic Packaging Usage / Recycled Plastic Usage Ratio
（Thousands
of tons）
2019
2020
2021
2022
2023（Fiscal year）
2023（Fiscal year）
-4
0
11,455
11,445
-4
11,398
-4
11,251
-6
10,094
-15
2,000
6,000
10,000
14,000
18,000
-60
-50
-40
-30
-20
-10
0
10（%）
（Millions m3）
-6
0
2019
2,819
2020
2,876
5
2021
2,968
5
2022
2,992
-3
2023（Fiscal year）
2,866
-6
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
-60
-50
-40
-30
-20
-10
0
10（%）
0
0
2020
65.6
2021
116.6
0.07
0.37
106.0
1.26
2022
6.10
3.00
91.4
85.0
2023（Fiscal year）
20.0
40.0
1.0
60.0
80.0
100.0
2.0
120.0
3.0
140.0
4.0
5.0
6.0
7.0
（Thousands
of tons）
（%）
2019
2019
2020
2021
2022
2023（Fiscal year）
0
500
1,000
1,500
2,000
-60
-9
-15
-20
-26
-35
-50
-40
-30
-20
-10
0
10
（Thousands of
tons CO2 e）
（%）
963
899
845
778
688
0
0
2019
16,055
18,202
31.1
16,677
18,734
30.5
16,589
16,918
30.2
16,634
16,775
28.8
16,946
16,657
29.4
5.0
10,000
10.0
15.0
20,000
20.0
30.0
30,000
25.0
40,000
35.0
（people）
（％）
2020
2021
2022
0
2019
6,069
5,831
7,910
7,785
7,537
9,455
9,555
9,446
9,171
8,766
2020
2021
2022
2023（Fiscal year）
2,000
4,000
6,000
8,000
10,000
12,000
（number）
*1 “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.
*4 “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.
*5 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.)
*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 held outside Japan ■ Number of patents held in Japan
■ Water use （left）
Per unit（of sales） reduction rate （right）
■ Plastic packaging usage （left）
Recycled material usage ratio （right）
■ Female employees （left） ■ Male employees （left）
Percentage of female managers （right）
■ GHG emissions （left）
Absolute emissions reduction rate （right）
■ CO2 emissions （left）
Absolute emissions reduction rate （right）
54
Financial Highlights
Net Sales*1 / Operating Income*2 /
Operating Margin*2
R&D Expenses / R&D Expenses Ratio
NOPAT*2,3 / EVA*2,4 / ROIC*5
Cash Dividends per Share
ROE*6 / EPS*2,7
Net Income Attributable to Owners of the
Parent*2 / Shareholder Returns*8
Trend in Capital Investments
Status of Share Repurchases*8
■ Net sales （left） ■ Operating income （right）
Operating margin （%）
■ R&D Expenses （left）
R&D Expenses Ratio （right）
■ Share repurchases （left） ■ Total dividend amount （left）
Net income attributable to owners of the parent （right）
NOPAT （left） ■ EVA®（left） ■Cost of capital （left）
ROIC （right）
■ EPS （left）
ROE（right）
0
2019
14.1
1,502.2
211.7
175.6
143.5
110.1
114.7
2020
12.7
1,382.0
2021
10.1
1,418.8
2022
7.1
1,551.1
2023
7.5
1,532.6
300
600
900
1,200
1,500
1,800
300
250
200
150
100
50
0
（Billions of yen）
（Billions of yen）
（Fiscal year）
0
2019
15.2
151.2
87.4
63.8
2020
12.3
128.8
62.3
66.5
2021
10.1
115.0
45.1
66.9
2022
7.8
88.2
14.7
73.5
2023
4.1
89.0
14.9
74.1
20
40
60
80
100
120
140
160
30
（%）
25
20
15
10
5
0
（Billions of yen）
（Fiscal year）
0
2019
306.70
17.6
2020
262.29
14.2
2021
230.59
11.6
2022
183.28
8.9
2023
184.95
4.5
50
100
150
200
250
300
350
30
20
10
（%）
0
(yen)
（Fiscal year）
0
2019
113.4
2020
86.1
2021
87.8
2022
94.6
2023
93.2
20
40
60
80
100
120
（Billions of yen）
（Fiscal year）
0
0
2019
62.6
50
148.2
2020
67.4
126.1
2021
68.4
109.6
50
2022
69.3
86.0
50
2023
69.9
86.0
50
20
100
150
40
60
80
100
120
200
（Billions of yen）
（Fiscal year）
（Billions of yen）
0
70
2014
80
15
94
16
110
17
120
18
130
19
140
20
144
21
148
22
150
23
30
60
90
120
150
（Fiscal year）
（yen）
0
0
2019
59.1
3.9
2020
58.5
4.2
2021
59.0
4.2
2022
60.6
3.9
2023
62.6
4.1
10
1
20
2
30
3
40
60
5
50
4
70
6
（%）
（Fiscal year）
（Billions of yen）
0
2014 15
16
17
18
19
20
21
22
23
25
50
75
50.0
50.0
50.0 50.0
50.0 50.0
（Fiscal year）
（Billions of yen）
*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 FY2023 figures are calculated based on core income. The
Kao group presents income excluding one-time gains and
losses due to non-recurring factors as "core income."
*3 Net operating income after tax (sum of EVA® and cost of
capital)
*4 EVA® is a registered trademark of Stern Stewart & Co.
*5 Return on invested capital.
*6 Ratio of net income to equity attributable to owners of the
parent
*7 Basic earnings per share
*8 Excludes repurchase of shares of less than one trading unit
and shares acquired through the Board Incentive Plan Trust
（“BIP Trust”）.
55
Historical Financial Data
Dec. 2019
Dec. 2020
Dec. 2021
Dec. 2022
Dec. 2023
For the year:
Economic Value Added (EVA®)
87,403
62,265
45,127
14,669
14,920
Net sales
1,502,241
1,381,997
1,418,768
1,551,059
1,532,579
Operating income
211,723
175,563
143,510
110,071
60,035
(% of sales)
14.1
12.7
10.1
7.1
3.9
Income before income taxes
210,645
173,971
150,002
115,848
63,842
Net income
150,349
128,067
111,415
87,742
46,157
Net income attributable to owners of the parent
148,213
126,142
109,636
86,038
43,870
Net cash flows from operating activities
244,523
214,718
175,524
130,905
202,481
Net cash flows from investing activities
（94,266）
（61,941）
（67,232）
（74,911）
（109,302）
Free cash flow
150,257
152,777
108,292
55,994
93,179
Net cash flows from financing activities
（126,166）
（87,065）
（141,573）
（139,311）
（79,983）
Capital expenditures
113,387
86,149
87,766
94,567
93,178
Depreciation and amortization
83,369
86,080
87,341
89,738
89,595
Research and development expenses
59,143
58,509
58,993
60,601
62,575
(% of sales)
3.9
4.2
4.2
3.9
4.1
Advertising
77,545
71,984
74,847
74,664
75,841
(% of sales)
5.2
5.2
5.3
4.8
4.9
At year end:
Total assets
1,653,919
1,665,616
1,704,007
1,726,350
1,769,746
Equity attributable to owners of the parent
857,695
923,687
965,137
972,061
983,658
Ratio of equity attributable to owners of the parent to total assets (%)
51.9
55.5
56.6
56.3
55.6
Number of employees
33,603
33,409
33,507
35,411
34,257
Per share:
Basic earnings per share (EPS) (yen)
306.70
262.29
230.59
183.28
94.37
Annual cash dividends per share (yen)
130.00
140.00
144.00
148.00
150.00
Number of issued shares, including treasury shares, at the end of the year (in thousands of shares)
482,000
482,000
475,000
465,900
465,900
Share price at the end of the year (yen)
9,025
7,970
6,019
5,255
5,800
Key financial ratios:
Ratio of net income to equity attributable to owners of the parent (ROE) (%)
17.6
14.2
11.6
8.9
4.5
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.
5. To standardize information disclosure globally, we
have included full-time, indefinite-term, non-regular
employees, etc. in the number of employees since
the FY2022. The number of employees in the
FY2022 based on the criteria applied until the
FY2021 totals 32,895.
6. Core operating income (loss) excludes impacts of
structural reform. Reconciliation of operating
income (loss) to core operating
income (loss) is as follows.
Core Operating income: 114,706 millions of yen
IFRS (Millions of yen)
56
Composition of Shareholders
Stock Information
Stock Listing
Tokyo Stock Exchange
Ticker Symbol Number
4452
Total Number of Authorized Shares 1,000,000,000 shares
Total Number of Issued Shares 465,900,000 shares
Number of Shareholders
144,398
Administrator of Shareholder Register
Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo
100-0005, Japan
Status of Top 10 Shareholders
Corporate Overview and Stock Information
Corporate Overview
Company
Kao Corporation
Head Office
14-10, Nihonbashi Kayabacho 1-chome, Chuo-ku, Tokyo
103-8210, Japan
Founded
June 19, 1887
Incorporated May 21, 1940
Share Capital 85.4 billion yen
Employees
8,199 (Number of employees in Kao Group consolidated
companies: 34,257)
Subsidiaries
113 (of which 95 are subsidiaries outside Japan)
Associates
5 (of which 2 are associates outside Japan)
Shareholders
Number of Shares
（thousand shares）
Shareholding
（percentage）
The Master Trust Bank of Japan, Ltd. (Trust Account)
87,856
18.86
Custody Bank of Japan, Ltd. (Trust Account)
33,377
7.17
SMBC Nikko Securities Inc.
11,450
2.46
STATE STREET BANK WEST CLIENT – TREATY
505234
8,854
1.90
JP MORGAN CHASE BANK 385632
7,702
1.65
Japan Securities Finance Co., Ltd.
6,869
1.47
Nippon Life Insurance Company
6,691
1.44
THE BANK OF NEW YORK 134104
6,603
1.42
JPMorgan Securities Japan Co., Ltd.
6,541
1.40
STATE STREET BANK AND TRUST COMPANY
505223
6,440
1.38
1. The number of shares may include the number of shares related to the trust business or the stock custody
business.
2. The shareholding ratio is calculated based on the total number of issued shares minus the number of treasury
stock.
Total
465,900
thousand shares
Treasury Shares
0.02％
Financial
Institutions
36.13％
Companies and
Individuals in
Foreign Countries
35.55％
Securities
Companies
7.76％
Individuals
and Others
15.61％
Other Japanese Companies
4.93％
57
Value creation strategies
Quantitative information
Integrated Report
Sustainability Report
Corporate Governance Report
Annual Securities Report/
Financial Report
Financial Results
Editorial Policy and Kao Information Disclosure Framework
The Kao Integrated Report aims to provide a comprehensive understanding
of our value creation story to all our stakeholders. It covers a wide range
of information related to finance and ESG, including our Vision, the value
we provide to society, and the strategies and management foundations we
employ to achieve our goals. This year, we have outlined various innovative
initiatives and reforms that we are implementing to achieve our Mid-term
Plan K27 and ensure sustainable improvement of corporate value, driven by
the theme of Global Sharp Top Strategy to accelerate transformation.
As we compiled this report, we 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 also incorporated feedback and
advice from our readers to revise and improve the content.
Moving forward, we will continue to engage in dialogue with our
stakeholders to enhance and augment the Kao Integrated Report. The
feedback we receive will be incorporated into our management practices as
we strive to contribute more to society while increasing corporate value.
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 do not
guarantee that Kao will achieve its targets. Actual results may differ materially from Kao’s
expectations due to various factors.
Kao publishes an Integrated Report, a Sustainability Report, and a Financial Report, each with
its own disclosure content. The Integrated Report and the Sustainability Report are published on
the same day. They can be read together to confirm progress and data on ESG initiatives and
management strategies. Other supplementary information can be viewed on Kao’s various websites.
Editorial Policy
Disclaimer on Forward-looking Statements
Kao’s Information Disclosure Framework
Results
Mid- to long-term
perspective
Integrated Report
Sustainability Report
Annual Securities Report/
Financial Report
Reporting Period
FY2023 (January 1–December 31, 2023)
＊ Some portions contain activities before FY2023 and from FY2024 (results and planned)
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
Accounting
Standards
International Financial Reporting Standards (IFRS)
applied from FY2016 onwards
Date published
May 24, 2024
Investor Relations website Link
Corporate Governance Link
Multi-stakeholder Policy Link
58
14-10, Nihonbashi Kayabacho 1-chome, Chuo-ku,
Tokyo 103-8210, Japan
Corporate Strategy
Published in May 2024