INTEGRATED REPORT 2023
Our people are the ultimate
drivers of value creation
LIXIL collaborates with stakeholders worldwide
to take on the challenge of making better
homes a reality for everyone, everywhere.
Value creation always starts with the
passion of our people.
LIXIL BEHAVIORS
LIXIL’s
LIXIL’s Purpose is the north star that guides
LIXIL’s employees in making decisions and
inspires us to become a more agile,
entrepreneurial company for sustainable
growth. Our people are the ultimate drivers
of value creation, and they realize LIXIL’s
Purpose by putting the LIXIL Behaviors into
practice in their work every day.
1 LIXIL’S PURPOSE
Make better homes a reality
for everyone, everywhere
2 THE RESOURCES WE RELY ON
We cultivate financial and
non-financial capital, which are the
sources of value creation
4 LIXIL’S VALUE AND IMPACT
We aim to generate sustainable
growth and positive impact for
society through our businesses
that bring people comfort and
better living
3 THE WAY WE CREATE VALUE
Our people are the ultimate
drivers as we take on the
challenge of creating value as
set out in the LIXIL Playbook
LIXIL’s Value Creation Process
LIXIL’s Value Creation Process
1 LIXIL’S PURPOSE
Make better homes a reality
for everyone, everywhere
LIXIL’s Value Creation Process
2 THE RESOURCES WE RELY ON
We cultivate financial and
non-financial capital, which are the
sources of value creation
3 THE WAY WE CREATE VALUE
Our people are the ultimate
drivers as we take on the
challenge of creating value as
set out in the LIXIL Playbook
LIXIL’s Value Creation Process
LIXIL’s Value Creation Process
4 LIXIL’S VALUE AND IMPACT
We aim to generate sustainable
growth and positive impact for
society through our businesses
that bring people comfort and
better living
4 THE VALUE WE CREATE
3 THE WAY WE CREATE VALUE
Outputs
Stakeholders
Outcomes
Diverse and Purpose-led People
Approx. 51,500 * employees worldwide
“Monozukuri”
Manufacturing Platform
80 factories worldwide
Sustainable Resource Management
29.9% reduction in CO2 emissions
from FYE2019
Financial Foundation
Long-term goal of 10% core
earnings margin
Global Sales Infrastructure
Present in over 150 countries
Unrivalled Portfolio of Brands
Over 70% consumer recognition rate
in key markets in each region
Meaningfully Designed Products
6 major global in-house design studios
LIXIL’s value creation comes from our people, who are empowered
to act and create value for stakeholders via six enablers.
* For new detached houses
Contributing to the resolution
of social and environmental
issues
1 LIXIL’S PURPOSE
Make better homes a reality for everyone, everywhere
Megatrends and the Current Environment
p.26
2 THE RESOURCES WE RELY ON
Corporate Governance
p.63
Enhancing corporate
value through
business activities
Shareholders
Employees
Partners
Consumers
Societies
LIXIL’s Impact
p.28
Clear
Strategic
Goals
Universal
“LIXIL
Behaviors”
An Efficient
Operating
Structure
A Modern Work
Environment
A Clear
Corporate
Purpose
A Strong
Governance
Foundation
Employees
The LIXIL Playbook
p.31
Strategic Initiatives
Our Foundation
LIXIL’s Core Businesses
p.41
p.47
Impact Strategy
How We Create Value in a Sustainable and Meaningful Way for Our Stakeholders and Society
LIXIL’S VALUE CREATION PROCESS
LIXIL’S VALUE
CREATION PROCESS
1.
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4.
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Medium-term targets
for sustainable growth
Core earnings margin
7.5%
Net interest-bearing debt-to-EBITDA ratio
3.5 times or less
Ratio of equity attributable to owners of the parent to total assets 35% or more
D&I targets
50% female directors and executive officers by FYE2030
30% or more female managers by FYE2030
Social impact targets
Carbon neutrality by FYE2051
100% ratio of high-performance windows sold by FYE2026*
100% waste recycling ratio by FYE2026
Contribute to reducing water use by 2 billion m3 annually by FYE2025
Improve access to sanitation for 100 million people by 2025
* Number of persons employed
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4
3
Outputs
Outcomes
FYE2022
Updated high-performance product
lineup for new housing
For new detached houses
Annual avoided emissions of CO2
For existing homes
LHT renovation sales ratio
FYE2024 sales target for windows
in the renovation market
Assuming
achievement of
sales target at left
In-Plus inner
window
-34 kg/window*
Replus
-33 kg/window*
Contribution to increasing the
renovation sales ratio of LHT
Approx. 3 times sales compared to FYE2023
Approx. 200,000 detached houses
100%
26,000-ton
reduction*
80%
FYE2022 32%
FYE2023 34%
By FYE2026
CO2 emissions reduction contribution/year
1
2
Changing the future with high-performance
windows for new and existing housing
High-performance
windows
Promotion of high-
performance houses for
a decarbonized society
Our
Foundation
Empower our people to deliver on strategy and create value
Strategic
Initiatives
LIXIL’S VALUE
CREATION PROCESS
LIXIL’S PURPOSE
Make better homes a reality for everyone, everywhere
THE RESOURCES WE RELY ON
Diverse and Purpose-led People
Product development that leverages
diverse human resources
“Monozukuri”
Manufacturing Platform
A “monozukuri” platform
that utilizes accrued production
technologies
Sustainable Resource Management
Technologies that make effective
use of limited resources
Financial Foundation
A financial foundation that supports
product development
Global Sales Infrastructure
A sales base that captures
needs worldwide
Unrivalled Portfolio of Brands
Brand power that serves diverse
customer segments
Meaningfully Designed Products
Product design capabilities that
resolve social issues
VALUE CREATION CASE STUDY: CHANGING THE FUTURE WITH HIGH-PERFORMANCE WINDOWS
Exemplifying our approach to achieving our purpose, LIXIL’s high-performance window business delivers value in ways such as contributing to the mitigation of climate change. We use
high-performance window technologies and expertise as well as other forms of capital that we have accumulated over many years to implement strategies as set out in the LIXIL Playbook.
Our employees drive this process of creating value that realizes sustainable growth and positive social impact for a broad range of stakeholders.
Our people are the ultimate drivers of
value creation. They draw on the LIXIL
Playbook for clear strategic direction in
implementing initiatives to create value.
Clear
Strategic
Goals
Universal
“LIXIL
Behaviors”
An Efficient
Operating
Structure
A Modern Work
Environment
A Clear
Corporate
Purpose
A Strong
Governance
Foundation
Employees
THE VALUE WE CREATE
THE WAY WE
CREATE VALUE
Transform
Innovate
Focus
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
Impact Strategy
Global Sanitation & Hygiene
Diversity & Inclusion
Water Conservation &
Environmental Sustainability
* Estimated by LIXIL
1.
LI
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4.
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W
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3.
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2.
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Grow
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CONTENTS
01 OVERVIEW
Our corporate purpose, our value creation
process, an overview of LIXIL, and
management messages
7
LIXIL’S VALUE CREATION PROCESS
10
OVERVIEW
12
LIXIL’S HISTORY
13
CEO MESSAGE
18
CFO MESSAGE
21
CPO MESSAGE
24
EXECUTIVE OFFICERS
GOVERNANCE
03
Our approach to corporate governance and
the steps we are taking in this area
65
MESSAGE FROM THE CHAIRPERSON OF THE
BOARD OF DIRECTORS
66
THE BOARD OF DIRECTORS’ EFFECTIVENESS
EVALUATION
67
ELECTION OF DIRECTOR CANDIDATES
68
LIXIL BOARD OF DIRECTORS
69
CORPORATE GOVERNANCE AT LIXIL
72
MESSAGE FROM THE CHAIRPERSON OF THE
NOMINATION COMMITTEE
73
MESSAGE FROM THE CHAIRPERSON OF THE
AUDIT COMMITTEE
74
MESSAGE FROM THE CHAIRPERSON OF THE
COMPENSATION COMMITTEE
75
EXECUTIVE COMPENSATION
77
MESSAGE FROM THE CHAIRPERSON OF THE
GOVERNANCE COMMITTEE
78
INTERNAL CONTROL SYSTEMS AND
COMPLIANCE
DATA
04
A summary of the data that defines our
company and performance
82
CONSOLIDATED 11-YEAR SUMMARY
83
FINANCIAL HIGHLIGHTS
85
NON-FINANCIAL HIGHLIGHTS
87
REVIEW AND ANALYSIS OF OPERATING
RESULTS AND FINANCIAL POSITION
93
PRINCIPAL GROUP COMPANIES/
GLOBAL MANUFACTURING AND SALES SITES
95
STAKEHOLDER ENGAGEMENT
96
BASIC POLICY FOR INVESTOR RELATIONS
97
SHAREHOLDER INFORMATION
98
CORPORATE DATA
STRATEGY
02
Our management strategies to create long-term value for
stakeholders and society, our initiatives for sustainable
growth, and their progress
26
MEGATRENDS AND THE CURRENT ENVIRONMENT
27
PRINCIPAL RISKS AND COUNTERMEASURES
28
LIXIL’S IMPACT
29
MEDIUM-TERM TARGETS
30
MANAGEMENT DIRECTION
31
THE LIXIL PLAYBOOK
31 TACKLE INFLATION AND SUPPLY CHAIN CHALLENGES
32 OPTIMIZE JAPAN AND DRIVE NEW GROWTH
33 GROW GLOBAL WATER BUSINESS
34 EMBED ROBUST ENVIRONMENT STRATEGY
35 DEVELOP NEW CORE
36
OUR FOUNDATION
36 DIGITAL TRANSFORMATION
38 GLOBAL PEOPLE STRATEGY
40 INTELLECTUAL PROPERTY STRATEGY
41
LIXIL’S CORE BUSINESSES
41 WATER TECHNOLOGY BUSINESS (LWT)
45 HOUSING TECHNOLOGY BUSINESS (LHT)
47
IMPACT STRATEGY
48
LIXIL’S MATERIAL ISSUES
50
GLOBAL SANITATION & HYGIENE
51
WATER CONSERVATION & ENVIRONMENTAL SUSTAINABILITY
52 ENVIRONMENTAL STRATEGY UPDATE
53 CLIMATE CHANGE MITIGATION AND ADAPTATION
54 WATER SUSTAINABILITY
55 CIRCULAR ECONOMY
56 RESPONSE TO TCFD RECOMMENDATIONS
58
DIVERSITY & INCLUSION
60
HUMAN RIGHTS
62
RESPONSIBLE SUPPLY CHAIN MANAGEMENT
Editorial policy
This integrated report aims to enhance communication with LIXIL’s stakeholders,
especially investors, by presenting our initiatives to achieve long-term, sustainable
growth. In editing, we focused on key content and aimed for an easy-to-understand
structure. Please refer to our corporate website for information not included in this
integrated report, such as detailed non-financial and financial information, and our
latest news.
Organizations covered
LIXIL Corporation (“the Company”) and its consolidated
subsidiaries (collectively, “the LIXIL group”)
Period covered
April 1, 2022 through March 31, 2023
Note: Some activities from before or after the reporting
period are included.
International initiatives
LIXIL has joined
Frameworks
referenced
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LIXIL AT A GLANCE
1 Construction methods
2 Tiles
3 Solar energy systems
4 Windows
5 Bathrooms and toilets
7
Housing exteriors
8
Entrance doors
9
Housing interiors
10 IoT systems
11 Kitchens
12 Smart water products
1
2
3
4
7
8
6 Garden rooms
5
10
11
12
9
6
As an industry leader, we fully leverage the various forms of capital we have
developed over our history to expand our business globally.
(As of March 31, 2023)
Touching the lives of over
1 billion people every day
Present in over 150
countries
Approx. 51,500
employees around
the world
Over 100 years of
brand history
¥1,496.0 billion
consolidated revenue
¥25.7 billion
core earnings
80 factories
116 showrooms
16 household
product brands
6 major design studios
¥23.5 billion
invested in R&D
13,000+ patents
and design applications
worldwide
OVERVIEW
Make better homes a reality for everyone, everywhere. LIXIL provides a wide range of high-quality products that
resolve issues in everyday life globally by employing world-leading technologies and innovation.
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WATER TECHNOLOGY BUSINESS (LWT)
HOUSING TECHNOLOGY BUSINESS (LHT)
Principal Products and Services
Principal Products and Services
Direct Customers
Direct Customers
Competitors
Competitors
Plumbing fixtures
Sanitaryware, shower toilets, water faucets, washstands, bathtubs, prefabricated
bathrooms, smart products, showerheads, washstand fixtures, washstand
cabinet units, kitchen systems, etc.
Metal building materials
Window sashes for houses, buildings, and stores, entrance doors, shutters, gates, carports,
banisters, high railings, curtain walls, etc.
• Dealers
• Sales agencies
• Construction companies
• Dealers
• Sales agencies
• Construction companies
• Kohler
• Roca
• Hansgrohe
• Masco (Delta)
• YKK AP
• Sankyo Tateyama
• SHIKOKU CHEMICALS
• Takasho
• Panasonic
• DAIKEN
• Eidai
• NODA
• NICHIHA
• KMEW
• Architectural firms
• Developers
• Wholesalers
• Architectural firms
• Developers
• Building materials wholesalers
• Fortune Brands (Moen)
• Geberit
• TOTO
• Takara Standard
• Cleanup
• Panasonic
• Building material trading companies
• Volume retailers
• General consumers
• Homebuilders
• House manufacturers
• General consumers
Tile building materials
Tiles for houses and buildings, interior decorative tiles, etc.
Wooden interior furnishing materials
Window frames, wooden furnishing materials, interior decorative materials, etc.
Housing and services
Development of homebuilding franchise chains and construction on order, real estate
management services, support for development of real estate franchises, housing loans, etc.
Other building materials
Siding, roofing materials, etc.
Other
Solar power systems, etc.
Product Brands
Note: In order to strengthen the foundation of the Japan business, the kitchen, vanity, and interior businesses were
consolidated to launch the Living Division in April 2023.
Product Brands
(FYE2023 results)
Revenue
60.5%
¥915.3
billion
Core earnings*1 ¥47.3 billion
Employees*2
30,913 people
R&D
¥16.7 billion
*1 Equivalent to operating profit in JGAAP
*2 Excluding non-regular employees
Revenue
39.5%
¥598.2
billion
Core earnings*1 ¥19.4 billion
Employees*2
19,299 people
R&D
¥6.9 billion
*1 Equivalent to operating profit in JGAAP
*2 Excluding non-regular employees
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LIXIL’S HISTORY
Establishing the foundation for
global business expansion and growth
2012
2013
2018
2017
2016
2015
2014
2019
2020
2021
2022
2023
1,291.4
1,436.4
1,628.7
IFRS
JGAAP
1,705.4
1,890.5
1,633.2
1,829.3
1,692.4
1,514.4
1,378.3 1,428.6
1.4%
1.4%
3.5%
3.5%
4.2%
4.2%
3.0%
3.0%
3.7%
3.7%
5.5%
5.5%
4.2%
4.2%
3.2%
3.2%
3.5%
3.5%
4.2%
4.2%
4.5%
4.5%
1.7%
1.7%
1,496.0
LIXIL divests its international building
business and Japanese retail business
Creating LIXIL through mergers of
Japanese companies
Improving the balance sheet, simplifying organizational structure,
and increasing profitability
2001
• INAX Corporation and
TOSTEM Corporation
merge
2010
• High-performance hybrid
window SAMOS launches
2013
• Manufacturing and
sales of SATO toilet
pans begin
2014
• SPAGE, a prefabricated
bathroom, launches
2020
• Environmental Vision 2050
announced
2021
• GROHE’s Cradle to Cradle Certified®
products unveiled
• High-performance resin window
EW launches
2022
• Development of revia, a
sustainable material
• Launched PremiAL, a series
of low-carbon aluminum
extrusion products
2023
• GROHE Everstream concept
announced
2016
• Corporate Responsibility
Strategy* formulated
• AQUA CERAMIC, an
industry leading new
material that prevents
stains, launches
* Became Impact Strategy
following update in 2023
2011
• Five companies merge and
establish LIXIL Corporation
• Permasteelisa becomes a
subsidiary
2013
• American Standard’s North
American business becomes
a subsidiary
2014
• GROHE becomes an
equity-method
affiliated company
2015
• GROHE becomes a
subsidiary
2020
• LIXIL focuses on core businesses
• LIXIL divests its international building
business and Japanese retail business
1967
• First made-in-Japan
shower toilet launches
Net Sales (JGAAP) / Revenue (IFRS) (Years ended March 31)
(¥ billion)
■ Japan
■ International
● Operating income margin (JGAAP) /
Core earnings margin (IFRS)
Corporate Developments
History of Value Creation
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CEO MESSAGE
In FYE2023, we faced considerable headwinds stemming from a
difficult global economic environment. Our challenges included
global inflation surpassing expectations and widespread supply
chain disruptions. Furthermore, the yen depreciated significantly,
material costs increased, and consumer sentiment declined as a
result of rising interest rates and persistent uncertainty over
the future.
In response to these changes, we promptly executed a number
of measures, from optimizing our pricing to addressing supply chain
issues. While we succeeded in growing revenue, however,
profitability declined significantly over the full year as a result of the
prevailing headwinds, in addition to factors such as the time lag
between cost increases and our price optimization measures.
We acknowledge that our full-year results for FYE2023 were
behind our targets set at the beginning of the fiscal year, and we
take this matter seriously as it represents a shortfall in meeting the
expectations of our stakeholders.
Although we have made significant progress in addressing these
global shifts, due to the ongoing economic downturn in Europe and
the United States, as well as a greater than expected decline in new
housing starts in Japan, we expect our full recovery to be from the
latter half of FYE2024. We firmly believe, however, that such challenges
Director, Representative Executive Officer,
President, and CEO
Kinya Seto
have provided us with invaluable lessons. From enhancing our lineup
with environmentally friendly products and reinforcing our supply chain
to improving our overall productivity, the measures we are taking are
building a more resilient LIXIL in the long term.
Turning External Challenges into Opportunities
Among these measures, we are addressing supply chain challenges
by building more resilient product supply systems as well as
enabling supply chain redundancy. In addition to promptly optimizing
CAPITALIZING ON GLOBAL SHIFTS TO STRENGTHEN
OUR FOUNDATION FOR SUSTAINABLE GROWTH
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our prices ahead of our peers, we are also taking measures to
reduce fixed cost burdens resulting from decreased sales volume
and recognizing the need for further structural reforms.
Furthermore, with growing environmental awareness and
increasing demand for home renovation, we have been swiftly
adapting to changes in the market and consumer behavior. We will
continue to introduce new, innovative, and differentiated products,
especially environmentally friendly products. Our focus on
differentiated products, together with our pursuit of digital
transformation and new business models, will drive growth and
higher margins in the future.
While we anticipate global economic uncertainty will remain high
in FYE2024, we see strong growth prospects in markets such as
Southeast Asia, driven by population growth, as well as the Middle
East, which we regard as a robust growth market with significant
untapped potential. By strengthening our initiatives in these markets
and reallocating resources, we aim to provide support that makes
better homes a reality for everyone living in these regions.
Updating the LIXIL Playbook
The LIXIL Playbook, first introduced in FYE2021, is an evolving
document that outlines the strategic initiatives that everyone at LIXIL
should prioritize, and the role each person must play to make them
a reality. I am pleased to report that many of the original initiatives
have either been almost completed or are well under way.
The first strategic initiative, which was “Divest Non-core
Businesses and Simplify Organization,” is the first to be completed.
This included divesting non-core assets and simplifying our overly
complex corporate structure, which we inherited when LIXIL was
formed from five separate Japanese companies. It is the first step in
our ongoing work to establish our global organizational framework.
We have since updated the LIXIL Playbook to adapt to our
rapidly changing business environment and are now focused on five
priority initiatives:
Tackle Inflation and Supply Chain Challenges
We will further strengthen our logistics and procurement
processes, leverage the platform production model to increase
efficiency, and use alternative materials to reduce cost
Optimize Japan and Drive New Growth
As new housing starts decline, we will accelerate our growth in
the renovation market, expanding our focus to include
energy-saving products such as high-performance windows
Grow Global Water Business
We will capture profitable growth in different regions leveraging
our global network and extensive brand portfolio, focusing on
high-value-added, high-margin products
Grow
Innovate
Transform
Tackle Inflation
and Supply Chain
Challenges
LIXIL’s
Corporate
Purpose
Make better homes a reality for everyone, everywhere
Strategic
Initiatives
Focus
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
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Embed Robust Environment Strategy
We are expanding our lineup of environmentally friendly products,
aiming to differentiate ourselves and seize new growth
opportunities, while making a positive impact on the environment
Develop New Core
We are focusing on establishing new game-changing
technologies, products, and business models
While our strategic initiatives have evolved, we are maintaining
our financial targets of 10% core earnings margin and 10% Return
on Invested Capital (ROIC) in the long term. As a milestone, our
medium-term goal is to achieve a stable core earnings margin of
7.5%, and when excluding the impact of sudden changes to our
external operating environment this past year, we believe we are
making progress toward this goal. I am confident that if we can get
our five key initiatives right, we can meet the expectations of our
shareholders and other stakeholders.
Strengthening Our Environmental Response
In the updated version of the Playbook mentioned earlier, we added
“Embed Robust Environment Strategy” as a strategic initiative.
When it comes to Environmental, Social, and Governance (ESG)
initiatives, our focus extends beyond showcasing our commitment
to environmental considerations. Instead, we aim to explicitly
incorporate and drive these initiatives as an integral part of our
business strategy.
While many companies around the world seek to reduce their
carbon footprint, our goal at LIXIL is much more ambitious: we
believe LIXIL has the unique ability to help the world reduce its
carbon footprint. Building-related operations account for an
estimated 28% of the world’s energy-related CO2 emissions, with
residential building operations accounting for an estimated 17%.*
The products we offer at LIXIL have high insulation properties,
enable efficient water resource utilization, and contribute to
improved hygiene and people’s health, thereby helping people
everywhere to live more comfortably while reducing their burden on
the planet. At the same time, we are improving energy efficiency and
* 2022 Global Status Report for Buildings and Construction, Global Alliance for
Buildings and Construction
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optimizing resource utilization across our business processes and
the entire value chain. We are also actively promoting the circular
use of resources and working toward establishing a business model
that is both sustainable and competitive in order to maximize our
impact on the environment and society.
Transitioning to an Impact Strategy
The ESG landscape is rapidly evolving and stakeholder expectations
are higher than ever. In order to further accelerate our initiatives that
go beyond the boundaries of corporate responsibility and
obligations, we transitioned from our existing corporate responsibility
strategy to an “Impact Strategy” in April 2023, placing it at the
center of our business strategy. With a stronger emphasis on
accountability and transparency, we aim to create a positive impact
on both the environment and society through a more holistic
approach – all while simultaneously pursuing financial results that
lead to the creation of long-term value.
There is no change to the three core pillars of the Impact
Strategy: Global Sanitation & Hygiene, Water Conservation &
Environmental Sustainability, and Diversity & Inclusion. Through the
SATO brand, we have scaled up efforts to provide innovative and
affordable toilets and handwashing solutions to underserved
communities around the world. We will enhance collaboration
across the public and private sectors, focusing on solutions to
improve sanitation and hygiene, and create a positive social impact
that can help people everywhere live better lives.
In response to the escalating environmental challenges
worldwide, we have updated our environmental strategy. We have
established medium-term key performance indicators (KPIs) and
defined clear responsibilities for focus areas, including reducing CO2
emissions through climate change mitigation, ensuring water
sustainability, and promoting the circular use of limited resources.
We aspire to expand our impact beyond our value chain and extend
our reach beyond the boundaries of our existing business to make a
positive impact on society and the environment.
For Diversity & Inclusion, our focus has expanded from gender
equity. Driving inclusion allows us to integrate more diverse
knowledge and perspectives, better catering to the needs of our
diverse customer base and creating new business opportunities.
Pursuing Purpose-led Innovation
We have been actively transforming our organization, aiming to
foster a dynamic and entrepreneurial mindset throughout in pursuit
of our purpose, to “make better homes a reality for everyone,
everywhere.” As we accelerate innovation across the entire
organization, I would like to highlight two examples.
Our circular material revia launched this year, marks a
breakthrough in helping to recycle the growing global stockpile of
plastic waste. Currently, only 9% of global plastic waste is recycled,
with the rest either incinerated, put in landfills, or ending up in the
ocean. We have now successfully developed technologies to recycle
almost all types of waste plastics, including composite and marine
plastics, which were previously challenging to recycle. The
commercialization of revia, a product made from plastic waste and
waste wood, as a pavement material marks a significant
advancement in accelerating the transition toward a circular
economy. We are actively developing an ecosystem for waste
plastics that spans from procurement, production, sales, and
installation, to collection.
Under our GROHE brand, we have developed the GROHE
Everstream shower system, which reuses water. In many developed
countries, showers and baths account for a significant portion of
household water consumption. However, water scarcity has
emerged as a pressing global social issue due to factors like climate
change and population growth. GROHE Everstream enables hot
water to be reused, reducing the amount of water consumed and
the energy required to heat the water. It is scheduled for
commercialization in spring 2024.
Encouraging consumers to change their behaviors and lifestyles
is not an easy task. To address the increasing environmental
challenges worldwide and the need to support sustainable living for
future generations, we must take on the role of corporate citizens.
By offering innovative technologies and products such as revia and
GROHE Everstream, we are confident that we can foster an
environment where individuals can embrace new possibilities and
adapt to changes in their lives without compromising on comfort.
Promoting innovation is not only a fundamental aspect of
fulfilling our corporate responsibility, but it is also crucial to achieving
sustainable growth as well as delivering value to diverse
stakeholders. But such innovation does not come by chance. We
are strategically focused on fostering innovation by incorporating it
into the LIXIL Playbook.
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Strengthening Our Foundation
To ensure the successful implementation of our strategies and the
achievement of our goals, we have integrated our Global People
Strategy into our foundation. At the core of this strategy is Diversity &
Inclusion (D&I), which serves to empower and enable our people.
With aging societies in many of the countries where we do business,
the competition for talent is intensifying. Driving D&I is vital to enhance
LIXIL’s long-term competitiveness, secure the talent we need to fuel
our growth, and foster a corporate culture that nurtures innovation.
We are also proud to count ourselves as a leader in advancing
D&I in the housing and plumbing industries, which are traditionally
seen as male-oriented. In an inclusive corporate culture, diversity
flourishes, and within a diverse and inclusive work environment that
embraces differences, exceptional talent can unleash its full
potential. Furthermore, actively creating an inclusive environment is
also critical to developing new ideas to drive future growth. We
believe that the more diverse the viewpoints that we can bring to a
problem, the more certain we can be of making new discoveries
and driving innovation.
Continuously Evolving to Enhance Corporate Value
Despite the uncertain business environment we face, we see new
challenges as opportunities to strengthen our resilience to external
changes. In the medium to long term, we must continue to drive
innovation and expand our portfolio of differentiated products in
order to establish a more solid revenue base. Furthermore, we must
pursue not only profits in the short term but also sustainable growth,
all while collaborating with our stakeholders to create a positive
impact on society and the environment. We are confident that this is
the direction we must take to achieve long-term value creation and
meet the expectations of our stakeholders.
With LIXIL’s Purpose serving as our north star, we are
committed to overcoming the challenges we face to transform LIXIL
into a great company – one we can all be proud of.
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FYE2023 in Review and Financial Priorities for FYE2024
In FYE2023, we faced the most challenging business environment
that we had encountered for quite some time due to the sharp
depreciation of the Japanese yen, rising material and component
prices, and supply chain constraints in Europe that continued into
the third quarter.
While revenue increased ¥67.4 billion year on year to ¥1,496.0
billion due to factors including the depreciation of the yen and price
optimization, core earnings decreased ¥39.1 billion year on year to
¥25.7 billion due to the lag between the time of cost increases and
the time we were able to effect price optimization, which meant that
we were unable to fully offset cost increases in the full-year results.
The main factors behind these results were that we were not
able to fully reflect higher raw material and component costs in
prices during the fiscal year, especially in Japan, where the yen
depreciated rapidly, and the impact on sales and production caused
by weakening demand amid rising prices in many parts of the world.
We believe that each of these challenges to restoring profitability
must be addressed separately with respect to firstly the increase in
variable costs, and secondly the increase in fixed costs.
First, it is essential to reflect higher variable costs, such as raw
material and component costs, in selling prices. In that respect, we
have tried to be as agile as possible and in the fourth quarter we
began to see signs that those efforts are finally starting to produce
results. If we foresee further increases in variable costs, we will work
to restore and enhance profitability through flexible pricing in line
with those increases.
On the other hand, these responses have led to a softening of
demand in many parts of the world due to the effects of inflation.
Declining sales volumes slow the rate at which cost increases can
be reflected in prices and, from the perspective of production, raise
fixed costs ratio per product. Unlike with variable costs, it is not
always appropriate to pass on higher fixed costs through prices, so
companies need to make greater efforts to reduce fixed costs and
expand sales of high-value-added products.
Therefore, especially in FYE2024, our top financial priorities are
to further reduce fixed costs (i.e., an asset-light approach) through
our ongoing activities to improve capital efficiency using return on
invested capital (ROIC) management and control, as well as
measures to increase free cash flow* by optimizing inventory levels,
for the purposes of development, production, and sales of
high-value-added products.
* Free cash flow = Net cash flows from operating activities
+ Net cash flows from investing activities
CFO MESSAGE
WE ARE STRIVING TO IMPROVE CAPITAL EFFICIENCY AND INCREASE FREE CASH FLOW TO BUILD
A SOLID FINANCIAL POSITION, WHICH WILL BE ESSENTIAL
FOR BUSINESS GROWTH
Sachio Matsumoto
Director, Representative Executive Officer,
Executive Vice President, Finance, Treasury, M&A, and IR, and CFO
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Improving Capital Efficiency through ROIC Management
We seek to improve capital efficiency by strengthening our financial
position and enhancing profitability. To that end, we introduced
ROIC management globally in 2019, and have been increasing the
incentive to achieve results by incorporating ROIC into performance
metrics, setting targets by organization using ROIC tree diagrams,
and managing and reporting progress on a monthly basis.
Improvement of gross profit margin: We are working to improve
our gross profit margin through initiatives to overcome changes in
the business environment from the perspectives of selling prices and
reduction of production costs.
To overcome issues related to selling prices, we are shifting to
high-value-added and differentiated products, including the
expansion of our lineup of environmentally friendly products, and
building and operating the frameworks that will enable us to flexibly
establish pricing. For production costs, we are adopting an
asset-light approach to promote the reduction of fixed expenses.
Reduction of SG&A expenses: In addition to enhancing
productivity through the use of digital technology, consolidating and
optimizing showrooms and sales offices, and optimizing personnel
allocation, we relocated our headquarters to a smaller location while
further promoting working from home and autonomous work styles
suited to each employee’s way of life. We will continue reducing
fixed costs and improve capital efficiency by further promoting the
use of digital tools to increase productivity and utilizing shared
services for back-office operations.
ROIC* Tree
* ROIC = Operating profit × (1 – Effective tax rate) / (Working capital + Fixed assets)
Actions
Optimization of business portfolio
Improvement
of gross profit
margin
Improvement
of CCC
Improvement
of working
capital turnover
Optimization of
capital
investment;
improvement
of fixed asset
turnover ratio
Improvement
of core
earnings
margin
Reduction of
SG&A
expenses
Expansion of international business sales
Price optimization
Improvement of production efficiency at LHT
Improvement of payback ratio and
payment processing site
Retention control; inventory optimization
Optimization of payment terms
Improvement of production efficiency
Improvement of business efficiency
Management of investment hurdle rates and
enhancement of post-investment monitoring
Optimization of investment amounts
Implementation of structural reforms
Review of real estate holdings; sale of idle real estate
Strengthening of project management
Reduction of cash on hand and interest-bearing debt
Review of unprofitable businesses
Tax management
Improvement
of ROIC
Improvement
of core
earnings after
tax
Improvement
of invested
capital
efficiency
ROI
management
Maintenance
and optimization
of fixed assets
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Tax management: We will promote fair and appropriate tax
payment and tax management.
Improvement of CCC: As a consequence of our response to
supply chain disruptions, the cash conversion cycle (CCC) increased
by 17.7 days year on year to 99.2 days, mainly due to a longer
inventory turnover period as part of strategic buildup of inventory to
stabilize product supply. In FYE2024, however, in light of the recent
resolution of supply chain issues, we will focus on improving
inventory turnover by reducing inventory levels to March 31, 2022
levels.
ROI and ROIC management: We have been introducing
investment evaluation guidelines that target improved investment
efficiency. We apply hurdle rates for investment decision-making,
which are calculated for each project and depend on the investment
goal, taking into account differences in country risk and the inflation
rate of the relevant market (e.g., for companies in Japan, the hurdle
rate is set at 10%).
Maintenance and optimization of fixed assets: In line with our
policy of adopting an asset-light approach to improve capital
efficiency, in FYE2023 we closed the Maebashi and Yokohama
plants, and relocated our headquarters to a smaller location. In
FYE2024, we will continue to pursue an asset-light approach with
measures to restructure the supply chain and resolve current supply
chain issues.
Reduction of cash on hand and interest-bearing debt: In
FYE2023, net interest-bearing debt increased by ¥87.4 billion year
on year to ¥511.7 billion. The primary factors were the acceleration
of payments to suppliers in accordance with our Declaration for
Building Partnerships and the issuance of corporate bonds to raise
funds in relation to securing working capital at an earlier stage in
anticipation of future interest rate increases. In FYE2024, we aim to
reduce interest-bearing debt and improve our financial position by
enhancing free cash flow from the second half of the fiscal year.
Ensuring Financial Stability
We are currently in the phase of laying the foundations for future
growth through innovation, and as such we are not considering any
large M&As or capital investments. Consequently, we do not have
any plan for large borrowings or a capital increase for the time being.
However, we do plan to increase operating cash flow through
growth investments in intangible assets such as IT, talent, design,
and branding that will lead to LIXIL’s long-term sustainable growth.
We will also generate the necessary funds for growth investments by
optimizing our asset holdings.
In FYE2024, the amount of capital expenditures will increase
due to factors including the yen’s depreciation and increased IT
investment for further productivity improvement. Taking these factors
into account, we aim to make investments totaling approximately
¥65 billion as we continue our policy of allocating more capital for
investment purposes and to projects that are highly capital efficient
and contribute to future growth.
A stable financial base is essential for achieving sustainable
medium- to long-term growth.
While both enhancing profitability and strengthening our financial
position, we will pursue a net interest-bearing debt-to-EBITDA ratio
of 3.5 times or less and an improved ratio of equity attributable to
owners of the parent to total assets* of 35% or more as
medium-term targets, and work to improve capital efficiency and
reduce interest-bearing debt based on an asset-light approach.
Policy on Capital Allocation and Shareholder Returns
Our basic policy on shareholder returns is to maintain a consolidated
dividend payout ratio of 30% or more, and to return profits to
shareholders in a stable manner, taking into consideration financial
condition and profit level. Based on this policy, in FYE2023 we
issued an annual dividend of ¥90 per share and conducted share
buybacks to the value of ¥10 billion. Our forecast for FYE2024 is an
annual dividend of ¥90 per share, based on the assumption of
continued improvement in profitability.
As our business environment is changing rapidly, it is necessary
for us to respond quickly and appropriately. By steadily implementing
the measures outlined above, we will strive to secure financial
stability and achieve sustainable growth.
* Equity ratio under JGAAP
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AN INCLUSIVE CULTURE THAT EMBRACES DIVERSITY IS
THE DRIVING FORCE FOR SUSTAINABLE AND LASTING IMPACT
CPO MESSAGE
Jin Song Montesano
Director, Representative Executive Officer, Executive Vice President,
Human Resources, Communications, External Affairs, and
Impact Strategy, and Chief People Officer
LIXIL’s corporate purpose is to make better homes a reality for
everyone, everywhere. This purpose is the starting point that guides
everything we do. A better home can be a more sustainable home
that maximizes recycled materials. It can be a more comfortable
home fitted with high-performance, heat-insulating windows. It can
be a healthier home equipped with products that enhance home
sanitation and hygiene. And it can be a safer and more secure home
with improved accessibility for all generations living under one roof,
as well as those with mobility issues. Through the products we
make and the sustainable ways in which we make them, we aim to
deliver on our corporate purpose and create positive impact for all of
our stakeholders.
Shift to Impact Strategy
Being a purpose-driven company, LIXIL is passionate about making
a positive impact on society and the environment. Since the launch
of our Corporate Responsibility Strategy (CR Strategy) in 2016, we
have focused on fulfilling our role as a responsible corporate citizen.
While we are proud of what we have achieved thus far, LIXIL’s
initiatives under this strategy have evolved beyond just meeting our
responsibilities or obligations. To more accurately articulate our
approach and continue to strengthen our commitment, we have
shifted our CR Strategy to become LIXIL’s Impact Strategy from
April 2023.
Why Impact? LIXIL’s proactive efforts and strong commitment to
build a more sustainable world over these past years is today better
represented by Impact rather than Responsibility. The shift to Impact
Strategy will further drive us to be a proactive, solutions-oriented
organization. It will allow us to take a more holistic approach to make
a positive environmental and social impact as part of our pursuit to
improve financial outcomes for LIXIL. It will also place a stronger
emphasis on accountability and transparency, which we believe will
further build trust with our stakeholders. There are no changes to the
three strategic pillars we set forth in 2016. I am pleased to report
that we have made solid progress across the pillars during FYE2023,
some of the highlights of which I will outline below.
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Global Sanitation & Hygiene
Our social business SATO, which contributes to Goal 6 of the United
Nations’ Sustainable Development Goals (SDGs) – Ensure availability
and sustainable management of water and sanitation for all – by
enabling access to adequate and equitable sanitation and hygiene for
all, continues to extend its reach. This year marks the tenth anniversary
of the launch of SATO, and we are celebrating the progress by
extending the lineup with two new products. The SATO Slab will
facilitate the swift installation of toilet facilities. The product is suitable for
various needs, including humanitarian purposes, because many toilets
can be installed at once. SATO launched operations in Bangladesh with
a single product offering in 2013. Today in Bangladesh, we are helping
expand the local sanitation industry in what has become our largest
SATO market not only by extending our product portfolio, but also by
building a solid supply chain that spans production and distribution.
To accelerate change at scale, in FYE2023, we continued to
focus on creating sustainable markets through collaboration with
public and private organizations. We joined with FINISH Mondial, a
partnership for financial inclusion that aims to create sustainable
change and increase access to safe sanitation through economic
empowerment. This new partnership is expected to help reduce the
affordability gap by positively impacting the entire value chain of the
sanitation economy. Our “MAKE A SPLASH!” global partnership with
UNICEF continues to build momentum, working across six focus
countries in Africa and Asia. In Japan, we raised awareness among
consumers through the “Cleanliness for All” campaign held during
the months of October through December in 2022, which also
further supported the partnership activities.
Furthermore, we are excited to report that we established our
first dedicated public sector engagement platform, LIXIL Public
Partners (LPP), to explore synergies and expanded collaboration
with the public sector for the delivery of innovative household
solutions in water, sanitation, and hygiene. These efforts will build on
our existing initiatives, including SATO, and we are working with the
government, NGOs, and academic institutions to tackle America’s
sanitation challenges.
I am pleased to report that SATO has shipped over 1 million
products for four consecutive years, and LIXIL’s sanitation initiatives
have positively impacted 45 million people in 45 countries to date.*1
We are proud of this progress and are committed to delivering on
our ambitious goal of improving the lives of 100 million people
through safe sanitation and hygiene by 2025.
Water Conservation & Environmental Sustainability
As a maker of pioneering water and housing products, addressing
environmental issues is critical in pursuing our corporate purpose
and ensuring the sustainability and viability of our business. To this
end, in FYE2020, we established our Environmental Vision 2050 for
Zero Carbon and Circular Living and determined the three focus
areas to achieve this vision: Climate Change Mitigation and
Adaptation, Water Sustainability, and Circular Economy.
In FYE2023, we updated our Environmental Strategy, setting
out new medium-term targets across our operations, value chain,
and beyond, to expand the positive impact LIXIL can make on
environmental issues of the world. In doing so, we have integrated
the Environmental Strategy into our business strategy more clearly
than ever before and clarified our commitment to creating a positive
impact in addressing social and environmental issues through
product innovations and new solutions.
In the field of Climate Change Mitigation and Adaptation, LIXIL is
working to achieve net-zero carbon emissions in operations, housing,
and lifestyle solutions. We have renewed our certification from the
Science Based Targets initiative (SBTi) in line with its targets to cap
global temperature increase at 1.5ºC compared to pre-industrial
temperatures. We are furthering our innovations in manufacturing
technology to reduce production emissions and successfully verified
the use of hydrogen combustion for aging treatment to fortify finished
aluminum parts at a production plant in Japan last year. We are also
increasingly switching to the use of renewable energy and installed
solar power generation systems based on on-site Power Purchase
Agreements (PPA) in Japan and overseas. We will continue to actively
pursue such “additive” renewable energy procurement methods in our
operations. We are pleased that such initiatives have contributed to a
significant increase in our ratio of renewable energy usage from 16% in
FYE2022 to 25% in FYE2023.
To facilitate Water Sustainability, we are actively developing water
technology products that enable the reduction of water usage, in
addition to reducing usage in our operations. A key part of the solution
in protecting the planet’s limited water resources is to make homes,
and particularly bathrooms, more water efficient. One recent example
of our innovation in this field is GROHE Everstream, which is designed
to create the shower experience that people expect while consuming
only a quarter of the water and a third of the energy by recycling
water. This new technology is scheduled for launch in spring 2024.
We are also accelerating our efforts to contribute to the
realization of a Circular Economy through product innovation. In
FYE2023, we launched revia, a new material that combines waste
plastic with waste wood, which previously had to be disposed of by
landfill or incineration. With the urgent need to deal with the
*1 As of April 2023
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challenge of recycling waste plastics, revia opens up opportunities
to cut CO2 generated from conventional waste processing. Revia is
currently marketed as a paving material and can be applied to other
products, such as decks and fences. Last year, we also launched
the PremiAL series of window sashes in Japan, which uses recycled
aluminum as raw material. The initial product PremiAL R70 uses
70% recycled aluminum. We have already succeeded in developing
the technology to make products from 100% recycled aluminum
and plan to launch PremiAL R100 in fall 2023.
Diversity & Inclusion (D&I)
The true, meaningful impact LIXIL can make on society is only
possible when every employee can fully demonstrate their individual
potential and ability. Through our employees, we will respond to the
diversifying needs of society with innovative products and services
made possible by their knowledge and perspectives.
LIXIL is fostering an inclusive culture that embraces employee
diversity to maximize the full impact of our diverse and capable
workforce. We are on track to meet our 2030 D&I goal to embed a
culture of inclusion across LIXIL and achieve key gender equity
goals. Our Human Resources focus for FYE2023 was to deepen
managers’ and employees’ understanding and engagement of D&I.
We published the LIXIL Leaders’ Guide to Advancing D&I to support
our leaders in becoming more effective in activating D&I with tailored
solutions for their teams. We also built the D&I Dashboard to enable
leaders to monitor progress toward D&I goals and assess current
status regularly. With these tools in place, we have shifted the
accountability of driving D&I to each business from FYE2024 and will
review the progress at the D&I Committee.
As a part of our initiatives in promoting D&I externally, in
FYE2023, LIXIL launched a new product line, Art Brut Ecocarat, in
collaboration with Heralbony Co., Ltd., an experimental welfare unit
with the mission of “Unleashing the Exceptionality.” This social
business project uses art drawn by neurodivergent artists contracted
to Heralbony Co., Ltd., as Ecocarat tile designs and pays license
royalties out of the product sales revenue to the artist. We also
started using AmiVoice ScribeAssist,*2 a transcription app that
utilizes AI voice recognition, to better serve customers with hearing
disabilities when providing consultation via our online showroom.
Talent Strategy and Employee Engagement
LIXIL continues its ambitious journey of transformation, the core part
of which is our talent strategy. Our employees are the force behind
creating long-term corporate value, and we are investing in the
learning and development of our employees to ensure sustainable
growth. In collaboration with the Tuck School of Business at
Dartmouth College (of the U.S.), we are offering the Tuck Innovation
Program to our senior and high-potential leaders, specifically
designed to build a shared common language around strategy and
transformation, enable more efficient decision-making, and inspire
collaboration. We are also now providing access to LinkedIn Learning
to more employees, not just managers, to build a strong foundation of
management skills and capability.
Our drive to embed D&I, together with our talent strategy, has
already made a significant impact on our employees’ engagement.
The five global Employee Resource Groups we launched in 2022 to
build global community around shared interests and topics among
employees all remain highly active and engaged, and we are seeing
new groups being formed by employees. Through the D&I Strategy,
we ignited the emergence and activities of communities of employees
with affinities on topics they care about to advocate improvements.
We are excited to see the grassroots energy and innovation emerging
from our employees to make LIXIL a great place to work.
As we continue our efforts to make a positive and lasting impact
on society and the environment, our ongoing work on ESG
(Environment, Social, and Governance) has received top-level
evaluations. LIXIL has been selected for the first time for the MSCI
Japan ESG Select Leaders Index. As of June 2023, we have been
selected for all six ESG indices adopted by Japan’s Government
Pension Investment Fund (GPIF). We also received the highest AAA
“Leader” rating in the MSCI ESG Ratings assessment for the first
time in recognition of our ESG initiatives and highly transparent
disclosure. LIXIL also earned a place in CDP’s Water Security A List
for the second consecutive year and has been named to Dow Jones
Sustainability World Index for the fourth consecutive year.
Furthermore, for the seventh time, we were selected as one of the
Nadeshiko Brands for our excellence in advocating the
empowerment of women in the workplace.
At LIXIL, we have a diverse workforce that is incredibly passionate
about our purpose and the products we produce. Our shift to Impact
Strategy will further ignite the internal energy we have in seeking ways
to make better homes a reality for everyone, everywhere.
*2 Product of Advanced Media, Inc.
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Yugo Kanazawa
Executive Officer, Executive Vice President,
Marketing and Digital, and Chief Digital Officer
Number of Company shares owned: 20,913
Number of Phantom Stocks held: 22,608
(From the left)
Jin Song Montesano
Director, Representative Executive Officer,
Executive Vice President, Human Resources,
Communications, External Affairs, and Impact
Strategy, and Chief People Officer
Number of Company shares owned: 67,983
Number of Phantom Stocks held: 33,304
Shoko Kimijima
Executive Officer, Executive Vice President,
Legal, Compliance, and Corporate Audit, and
Chief Legal and Compliance Officer
Number of Company shares owned: 2,886
Number of Phantom Stocks held: 8,483
Hiroyuki Oonishi
Executive Officer, Executive Vice President,
LIXIL Water Technology (LWT) Japan
Number of Company shares owned: 22,696
Number of Phantom Stocks held: 16,007
Satoshi Yoshida
Executive Officer, Executive Vice President,
LIXIL Housing Technology (LHT)
Number of Company shares owned: 19,047
Number of Phantom Stocks held: 18,021
Sachio Matsumoto
Director, Representative Executive Officer,
Executive Vice President, Finance, Treasury,
M&A, and IR, and CFO
Number of Company shares owned: 105,131
Number of Phantom Stocks held: 41,368
Kinya Seto
Director, Representative Executive Officer,
President, and CEO
Number of Company shares owned: 560,024
Number of Phantom Stocks held: 242,315
Bijoy Mohan
Executive Officer, Executive Vice President,
LIXIL International
Number of Company shares owned: 0
Number of Phantom Stocks held: 145,653
EXECUTIVE OFFICERS (As of June 21, 2023)*
* The number of Company shares and the number of Phantom Stocks held are as of June 1, 2023.
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STRATEGY
02
26
MEGATRENDS AND THE CURRENT
ENVIRONMENT
27
PRINCIPAL RISKS AND COUNTERMEASURES
28
LIXIL’S IMPACT
29
MEDIUM-TERM TARGETS
30
MANAGEMENT DIRECTION
31
THE LIXIL PLAYBOOK
36
OUR FOUNDATION
41
LIXIL’S CORE BUSINESSES
47
IMPACT STRATEGY
48
LIXIL’S MATERIAL ISSUES
50
GLOBAL SANITATION & HYGIENE
51
WATER CONSERVATION & ENVIRONMENTAL
SUSTAINABILITY
58
DIVERSITY & INCLUSION
60
HUMAN RIGHTS
62
RESPONSIBLE SUPPLY CHAIN MANAGEMENT
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Megatrends
• Climate change
• Water and resource shortages
• Heightened geopolitical risk
• Supply chain disruptions
• Growing global middle class
• Maturing Japanese market
• Accelerating digitalization
• The changing world of work
Opportunities
Risks
• Demonstrate design and technology leadership
• Growing worldwide consumer demand for
water purification technology and innovative
water-saving products and services
• Development of platform-based production
• Restructure organization to enhance
responsiveness
• Increased demand for improved sanitation
and comfortable housing as disposable
income increases
• Growth opportunities in the renovation
business in Japan
• Create business opportunities for transformation
• Develop into an innovative organization
that attracts a diverse range of highly
motivated people
• Environment
(climate change, water, resources)
• Disasters, accidents, and infectious diseases
• Procurement of raw materials
• New product development
• Competition and product pricing
• Information and cybersecurity
• Acquisition and development of human
resources and promotion of diversity
Risks and Opportunities
Principal Risks and Countermeasures
Medium-term
Targets
p.29
p.27
MEGATRENDS AND THE CURRENT ENVIRONMENT
The world is faced with numerous social issues, ranging from climate change to water and resource shortages. These issues transcend national boundaries and are increasing in complexity.
Furthermore, LIXIL’s business environment is changing, and our corporate activities are exposed to various actual and potential risks, including heightened geopolitical risk. We are working to
minimize the impact of these risks on our corporate activities, while accurately anticipating long-term megatrends, effectively identifying opportunities for future value creation, and implementing
strategies as set out in the LIXIL Playbook.
1.
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4.
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3.
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2.
T
H
E
RE
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UR
CE
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WE
R
ELY
ON
LIXIL’S VALUE
CREATION PROCESS
LIXIL’s Purpose
LIXIL’s Purpose
Make better homes a
Make better homes a
reality for everyone,
reality for everyone,
everywhere
everywhere
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OVERVIEW
STRATEGY
01
02
Business risks Risks relevant to FYE2023
Risks
Countermeasures
Strategic risks
1
Changes in the
economic environment,
fluctuations in
exchange rates and
interest rates
• Impact of fluctuations in global demand and prices
• Rising raw material prices, logistics costs, and
energy costs
• Significant fluctuations in new housing starts
• Fluctuations in foreign exchange rates, rising
market interest rates
• Timely price optimization
• Increase sales in mid- and high-end product markets, enhance renovation
market strategy
• Structure a stable supply system
• Monitor foreign exchange rates
• Efficient and stable financing
2
Geopolitics
• Rapidly rising prices for raw materials, energy and
transportation costs, and procurement risks
• Logistical supply disruptions and delays
• Increased impact from global inflation and policy
interest rates
• Changes in national policies, laws and regulations
• Diversify suppliers
• Restructure regional supply chains
• Establish backup production systems
• Monitor political situations, policy changes, and other trends
5
Environment
(climate change,
water, resources)
• Transition risks resulting from changes in policies,
regulations, and markets due to climate change
• Response to global water problems
• Rapidly rising prices for raw materials and
components
• More stringent regulations on petroleum-based
plastics and wood
• Identify and assess the risks and opportunities of climate change issues, and
reflect them in environmental strategies
• Efficiently use energy in production activities
• Use renewable energy
• Reduce environmental impact throughout the supply chain
• Research decarbonized manufacturing technologies and product materials
• Increase sales of environmentally friendly products
11
Competition and
product pricing
• Loss of competitive advantage due to competitor
pricing
• Falling market prices due to intensifying price
competition
• Differentiate LIXIL with high-value-added products that meet market needs
• Improve investment capital efficiency by developing platform-based production
• Use platforms to more rapidly launch new products
• Offer new value and emphasize value rather than price
Operational risks
12
Disasters, accidents,
and infectious diseases
• Suspension of production activities in Japan and/
or international markets
• Suspension of production and sales among
business partners
• Workforce contraction due to deteriorating
employee health
• Formulate and regularly review business continuity plans
• Diversify suppliers and structure rapid recovery systems
• Respond to emergency situations
• Secure appropriate insurance
13
Information and
cybersecurity
• Business disruptions due to communication
network failures
• Loss of social trust and significant costs due to
personal information leaks
• With the Information Security Committee in place, develop internal regulations
and train employees
• Update aging core systems
• Establish a dedicated team to deal with cyberattacks, constantly monitor
unauthorized access, and prepare emergency responses
• Enhance cybersecurity
• Promote compliance with the EU’s General Data Protection Regulation (GDPR)
Risk Map and Comments
Impact
High
Low
Medium
High
Risks that have increased in materiality or emerged since
the previous fiscal year
Risks with the same degree of materiality as in the
previous fiscal year
Risks that have decreased in materiality since the
previous fiscal year
Strategic risks (risks relevant to all businesses)
Strategic risks (risks specific to particular businesses)
Operational risks
Medium
Low
Likelihood
10
12
1
16
7
14
15
6
9
11
3
8
4
5
13
2
Please visit our website for more information on LIXIL’s strategic and operational risks and countermeasures.
www.lixil.com/en/investor/strategy/risks.html
Business risks
Risks relevant to FYE2023
Strategic
risks
1
Changes in the economic environment, fluctuations in exchange rates and interest rates
2
Geopolitics
3
New product development
4
Procurement, including raw materials
5
Environment (climate change, water, resources)
6
Business restructuring
7
Collaboration with other companies, corporate acquisitions, and others
8
Acquisition and development of human resources and promotion of diversity
9
Sales channels
10
Brands
11
Competition and product pricing
Operational
risks
12
Disasters, accidents, and infectious diseases
13
Information and cybersecurity
14
Intellectual property
15
Likelihood of deferred asset recovery
16
More stringent regulations
PRINCIPAL RISKS AND COUNTERMEASURES
At LIXIL, in pursuing our purpose, we regularly identify, assess, and respond to risks that may have an impact on business activities based on company-wide criteria and prioritize risks to be
addressed. We classify risks into strategic risks and operational risks, formulate and implement countermeasures for addressing each risk, monitor their progress, and make ongoing improvements.
In doing so we realize sustainable value creation for our stakeholders. In addition to the guidance and supervision provided by the Board of Directors, members of the Audit Committee, which is
comprised of outside directors, conduct hearings and request reports at committee meetings, as well as participate in meetings of the Board of Directors, the Board of Executive Officers, and other
committees as observers, in order to exercise supervision and control over the execution of business operations.
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02
*1 Compared to FYE2019
*2 By FYE2026
*3 By FYE2025
(All targets are for FYE2031, unless otherwise noted)
Impact Strategy
Global Sanitation &
Hygiene
Sanitation &
Hygiene for All
Water Conservation &
Environmental Sustainability
Zero Carbon & Circular Living
Diversity &
Inclusion
Inclusive for All
LIXIL’S IMPACT
Committed to achieving our purpose, generating sustainable growth, and creating
value, we aim to improve corporate value by pursuing business activities and
growth and by contributing to the resolution of social and environmental issues.
Impact Strategy
p.47
Diversity & Inclusion
p.58
LIXIL Playbook
Transform
Grow
Innovate
Focus
Resolution of social issues
Increased corporate value
Impact on society
Impact on LIXIL
100%
Scope 1+2
CO2 emissions
-50.4%
*1
Total water savings from water-saving
products 2 billion m3 per year*3
Scope 3
CO2 emissions
-30%
*1
(Japan)
(Japan)
100%
Ratio of high-performance
windows sold for new
detached houses
100%
*2
Provide safer and
better tasting water
Reduce
difficult-to-recycle
waste plastics
Use of
recycled
aluminum
Ratio of
energy- and
water-saving
faucets and
toilets sold
Net interest-bearing
debt-to-EBITDA ratio
3.5 times or less
Ratio of equity attributable to
owners of the parent to total assets 35% or more
Medium-
term target: 7.5%
Long-
term target: 10.0%
Core earnings
margin
Diversity & Inclusion
By FYE2030
• Ratio of female directors and
executive officers
50%
• Ratio of female managers
worldwide
30%
• Gender equality
in recruiting new
graduates in Japan
By 2025
improve access
to sanitation for
100
million
people
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
ROIC 10%
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Core earnings margin: 1.7%
ROIC: 1.5%
Core earnings
margin
(Years ending March 31)
Core earnings margin: 2.6%
ROIC: 1.6%
2023
7.5%
10.0%
2024
(Forecast)
Medium-term
target
Long-term
target
MEDIUM-TERM TARGETS
LIXIL has formulated the LIXIL Playbook as a
roadmap (management direction) for achieving
medium- to long-term targets. LIXIL is steadily
implementing the strategies in the Playbook to
enhance its competitive advantages and
transform into a highly profitable company.
These initiatives require us to respond flexibly
to changes in the rapidly evolving business
environment of recent years by allocating
resources appropriately and at the right time.
LIXIL therefore announces the execution of
strategies in accordance with the Playbook as a
discrete plan for every fiscal year, and conducts
reviews to measure progress and confirm validity.
ROIC: 10%
Net interest-bearing
debt-to-EBITDA ratio: 3.5 times or less
Ratio of equity attributable
to owners of the parent
to total assets:
35% or more
Core earnings
margin:
7.5%
Core earnings
margin:
10.0%
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Grow
Innovate
Transform
Tackle Inflation
and Supply Chain
Challenges
LIXIL’s
Corporate
Purpose
Our
Foundation
Make better homes a reality for everyone, everywhere
Empower our people to deliver on strategy and create value
Strategic
Initiatives
Focus
Divest Non-core
Businesses
and Simplify
Organization
Impact Strategy
Global Sanitation & Hygiene
Water Conservation &
Environmental Sustainability
Diversity & Inclusion
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
MANAGEMENT DIRECTION
Any successful team requires a shared vision, achievable goals and a clear strategy. The LIXIL Playbook ensures that everyone in the Company knows what we want to achieve and how to get there.
It provides the roadmap for how we will achieve sustainable growth and value creation, and our corporate purpose of making better homes a reality for everyone, everywhere.
Updating the LIXIL Playbook
The Playbook is an evolving document. As our operating environment continues to rapidly change, we
have updated our LIXIL Playbook to ensure we stay on course to becoming a sustainable company.
Today, we are focused on five key strategic initiatives, including “Embed Robust Environment Strategy”
and “Tackle Inflation and Supply Chain Challenges,” which were newly added.
The Foundation of the LIXIL Playbook
Our Impact Strategy, which forms part of the foundation supporting all five strategic initiatives of the
Playbook, clarifies LIXIL’s programs to help address some of the most pressing global issues where we
can drive positive change. Integrating our Impact Strategy into our business strategy enables us to focus
our efforts on securing growth and enhancing corporate value. The strategy, based on three core pillars,
represents not just our commitments as a global corporation but is fundamental to how we will improve
profitability, enhance brand equity, and create long-term value.
In addition to the Impact Strategy, the foundation of the LIXIL Playbook also covers other fundamental
aspects of business including our Global People Strategy, as well as digital transformation, intellectual property
strategy, focus on design, governance, risk control and compliance as important constituents of ESG.
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We have taken steps to develop more nimble procurement models,
ensuring suitable levels of inventory. Furthermore, we have optimized
supply chain operations so manufacturing and logistics bases are
closer to their consumer markets, thereby localizing production
processes. We have also aligned decision-making processes
throughout our sales and operating planning platforms. All these
measures aim to ensure a steadier supply at a more predictable
level of cost.
Creating a More Resilient and Optimized Supply Chain
While we want to continue an inventory-light business model, having
the proper supply of key items in stock can help avoid the need for
purchasing at a time of increasingly volatile price spikes. In the
Americas, we have shifted from reliance on components from Asia
to local procurement within the region. We are also shifting from
transporting products from Europe to Asia to producing them within
each region. In this way LIXIL is building a more reliable supply chain
that reduces the risks of cost volatility.
An additional element is to reduce the number of parts required
through greater standardization and to move to more environmentally
friendly materials that are today increasingly cost competitive.
In the face of rising costs we have also moved quickly to
optimize prices. This requires solid market knowledge in each of the
150 countries where we operate since price sensitivity differs from
one market to another. In Japan we have broken from the traditional
model of annual price reviews to a more dynamic pricing model. In
every market we want to be ready to meet the challenge of higher
costs, but not to be ahead of other brands with price changes that
could reduce our competitiveness.
Accelerate Product Differentiation
We also believe that the best solution to the issue of rising costs is
to focus on more differentiated, high-value-added products.
Because commoditized goods are exposed to fierce price
competition, they are more heavily impacted by higher input costs.
At the same time, such products are vulnerable to price
undercutting by our competitors. With higher-value products, we
enjoy greater pricing power and higher profitability since the value to
the consumer comes from our innovative design and higher
functionality rather than raw material inputs.
TACKLE INFLATION AND SUPPLY CHAIN CHALLENGES
KEY INITIATIVES OF THE LIXIL PLAYBOOK
Supply constraints and the resulting inflationary pressures have proven to be among the most challenging external factors facing LIXIL and our industry. As we saw over the past year, rising cost and
supply volatility affect every stage of LIXIL’s business, from procurement, manufacturing, and delivery, to retail pricing and the level of consumer demand. The Company’s response has therefore been
equally multifaceted.
Restructuring of the transportation network to counter supply chain fragmentation
Localizing procurement and production
Innovate
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
Grow
Transform
Focus
Strategic
Initiatives
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Penetration of Dynamic Pricing
In 2021, we set “improve profitability of Japanese business” as a
strategic initiative in the LIXIL Playbook. As inflation began to appear
in many of our markets, we transitioned from the more conventional
annual product price revision to dynamic pricing, enabling us to
implement price revisions promptly. Through the implementation of
this dynamic pricing, we have improved profitability in the fourth
quarter of FYE2023 relative to the same period in the previous year.
However, the risks of a weak yen and geopolitical uncertainties
persist, and the business environment remains uncertain. Therefore,
we have set out “Optimize Japan and Drive New Growth” as a
strategic initiative in our updated Playbook. Capturing the growing
demand in the renovation sector will be a key focus in our efforts.
Expanding Renovations beyond Water-related
Products to Insulation Improvements
Traditionally, renovation projects have focused mainly on water-related
products. However, with an increasing focus on comfort and the
need to save energy, other areas of renovation have also shown high
potential in the Japanese market. Through high-insulation windows,
doors, and walls, we can enhance comfort inside the home both
during hot summers and cold winters.
In the field of renovation, we are enhancing our capability to
provide a range of insulation improvement plans tailored to the
needs of individual rooms or entire houses, moving beyond single
window solutions. In the water-related category, we continue to
introduce popular product lines, such as dual-cleansing nozzle
shower toilets, which greatly enhance cleanliness and hygiene, and
the Navish Hands-Free faucet.
Our subsidiary LIXIL Total Service (LTS) has developed a
business model where they directly undertake renovation work from
end users. In addition to physical stores, LTS has established virtual
bases in multiple locations to expand its presence.
Launch of the Living Division
To strengthen the foundation of our domestic operations, we launched
the “Living Division” in April 2023, integrating LWT Japan’s kitchen and
bathroom businesses with LHT’s interior business. For LIXIL it also
means that we can drive improvements in efficiency. By unifying
specifications and standards that previously varied across different
businesses, we can present simplified, better coordinated proposals
while reducing SKUs. We will also transition our business structure to
ensure sustainable growth, even in a changing external environment.
This includes a full review of our supply chain to reduce costs and
enhance transportation and warehousing efficiency. This enables the two
businesses to work together more closely by creating a comprehensive
program to improve the living environment across the home.
OPTIMIZE JAPAN AND DRIVE NEW GROWTH
We have worked to improve the profitability of the Japan business by bringing down fixed costs while implementing price optimization. To achieve sustainable growth and increase profitability, we will
focus on capturing the growing demand for home renovations and further strengthening our organizational structure.
Innovate
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
Grow
Transform
Focus
Strategic
Initiatives
Growing demand for high-insulation windows, doors, and walls
Integrated kitchen, vanity, and interior businesses under the Living Division
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GROW GLOBAL WATER BUSINESS
The international water business represents one of our most promising growth opportunities. We have been focusing on enhancing operational efficiency and accelerating the rollout of differentiated
products and services through our global brand portfolio. With many of the industry’s best-known and most-respected names, coupled with our global reach, we are uniquely placed to provide
products to meet various lifestyle needs and preferences, and to tackle the growing problem of ensuring access to clean drinking water and proper sanitation for everyone.
At the core of our strategy is to more fully synergize the distinct
capabilities and features of GROHE, American Standard and INAX
beyond their home regions. These three industry-leading brands are
key growth drivers for international markets.
To capitalize on these opportunities, we have created a set of
Key Performance Outcomes (KPOs) for our international business.
These include moving beyond the selling of a product into creating
an overall bathroom experience, with a focus on effectively
managing the end-to-end consumer journey. By doing so, we can
embed LIXIL’s brands in the minds of consumers and become their
brands of first choice. By providing services and more frequent
solution touch points through the active life of the product, we can
increase our consumer lifetime value.
Under our GROHE brand, we continue to drive innovation such
as the revolutionary water-recycling shower GROHE Everstream. We
are also strengthening our ability to cater to key market segments
through the GROHE SPA sub brand, and the GROHE QuickFix and
the GROHE Professional portfolios, each of which powers a
differentiated product assortment, tailored to the specific needs of a
customer group.
With American Standard, one of the most iconic brands in the
industry, we have relaunched and unified the brand across the
Americas and Asia to better express empathy and closeness to
consumers, together with a new brand claim of “LIFE. LOVE. HOME.”
This will help strengthen connection to the consumer globally,
revitalize consumer experiences, and further build on brand equity.
INAX is also playing an increasingly important role outside its
home market of Japan, with its award-winning technology offering
potential for greater cross-brand synergy. With the current trends
and an enhanced focus on wellness and hygiene products, the
shower toilet that is now the standard in Japan is offering new
opportunities for this highly popular product in international markets.
In all our markets, higher profitability also relies on how efficient
we can be in purchasing and creating simplified production models
with a greater use of common components to help achieve lower
costs, combined with an agile supply chain that effectively leverages
our global footprint. This must be matched with demand creation in
untapped segments such as faucets and showers in the U.S.
market and GROHE SPA in Europe. Leveraging our global
multi-brand portfolio, we are expanding into and filling existing
product gaps in higher-margin segments, and thereby enhancing
our profit margins.
We have also set targets for sustainability. Our products can play
a meaningful role in helping people around the world reduce water and
energy consumption. This allows us to offer true differentiated value to
end users. Reducing our own carbon footprint is also a critical
element, requiring a more agile supply base that can reduce
production costs, time to market, and our usage of raw materials.
Exhibition of GROHE SPA at Milan Design Week
American Standard relaunched its brand identity
Innovate
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
Grow
Transform
Focus
Strategic
Initiatives
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Toward Sustainable Growth and Value Creation
LIXIL established “Zero Carbon and Circular Living” as its
Environmental Vision in 2019 and identified three focus areas to
achieve this vision. These represent our commitment to providing
innovative products and services and reducing the environmental
impact of our operations.
We have updated our environmental strategy and added
“Embed Robust Environment Strategy” to the LIXIL Playbook in
March 2023 as a strategic initiative. In addition to reducing the
negative impact on the environment of our business activities and
product usage, we are accelerating initiatives to generate a positive
social and environmental impact. As part of this, we aim to reduce
CO2 emissions in society, provide safe drinking water, and contribute
to reducing global plastic waste.
Environmental Vision 2050
We have set both qualitative and quantitative medium-term
goals to clearly outline the actions we will take toward achieving our
“Environmental Vision 2050.”
Environmental Strategy Update p.52
Strengthening Organizational Foundation
to Support Environmental Strategies
To enhance the implementation of our environmental strategies on
an organizational level, we have established the “Environmental
Strategy Committee.” Led by the Chief Environmental Impact Officer
(CEIO), the committee oversees the development and execution of
the environmental strategies of all business units, corporate
departments, and consolidated subsidiaries. With business unit
leaders also playing an active role, we have created a structure to
more effectively integrate our environmental strategy into our global
business strategy.
Providing High-Value-Added Products and Solutions
We are committed to providing products, services, and solutions
that generate a significant positive social and environmental impact.
One notable example is our circular material revia, which was
launched in 2022. This innovative material, made by combining
waste plastic and wood, has already been commercialized as a
pavement material. By utilizing materials that were previously
discarded or incinerated, we contribute to reducing CO2 emissions
and promoting resource circulation.
The need for improved sanitary conditions and access to clean
water is not limited to developing countries. Even in the United
States, communities still face sanitation challenges in areas where
toilets are not connected to public sewage systems. LIXIL
collaborates with governments, municipalities, private companies,
and local communities to develop scalable solutions to address the
environmental challenges of untreated wastewater.
Three Focus Areas to Achieve Our Vision
CLIMATE CHANGE MITIGATION AND ADAPTATION
Achieve Net-Zero GHG Emissions through Our Business Operations, Products, and Services
WATER SUSTAINABILITY
Enhance the Environmental Value of Water Resources by Saving, Circulating, and Purifying Water
CIRCULAR ECONOMY
Help Transition to a Circular Economy and Preserve Natural Resources for Future Generations
EMBED ROBUST ENVIRONMENT STRATEGY
In response to the increased urgency around environmental issues including climate change, LIXIL is addressing these issues not only as part of its responsibility as a global company but also an integral
part of its business strategy. We actively strive to tackle these challenges, aiming to achieve sustainable growth and create value.
By 2050, LIXIL aims to reduce CO2 emissions
from its business processes, products, and
services to net zero and to be a leader in the
field of preserving water and limited resources
for future generations.
Innovate
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
Grow
Transform
Focus
Strategic
Initiatives
Waste plastics
Waste wood
revia
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To help spur this innovation, we have been investing in our people in
recent years to help create a new cycle of innovation. We introduced
the Three Box framework as a common language and have worked
with the prestigious Tuck School of Business at Dartmouth College
(of the U.S.) to create a training program specifically tailored to our
needs. The common language for innovation enables cross-regional
collaborations and helps employees with diverse backgrounds work
in sync toward the same goal.
Our approach focuses on the needs of consumers and the
broader issues facing society as the world faces increasing resource
and environmental challenges. From these efforts, we have already
seen numerous successful innovations:
●revia
In response to the severe issue of global
plastic waste, we created a new material
consisting of a wide range of plastic waste
combined with waste wood. Today, our
revia line of sustainable building products
is already being sold as a pavement
material used to create sidewalks. As a
result of its lower environmental burden and contribution to resource
circulation, we aim to expand our product lineup and promote its use
for various purposes.
●KINUAMI
A showering system where the hot water coming out of the shower
head becomes a dense silk foam at the touch of a switch. Not only
does it make showering more enjoyable, it helps those who find it
difficult to wash properly during a shower, an important
advancement in care for the elderly.
●Clean water
In too many parts of the world, water cannot be consumed from the
tap, part of the reason for an explosion in wasteful single-use plastic
bottles. Through our proprietary systems, tap water can instead be
filtered to become safe to consume.
●GROHE Everstream
A water-saving approach to the perfect
shower. Through a high-tech recycling
system, the amount of water can be
reduced by up to 75% while the energy
to keep it warm can be lowered by 66%.
While LIXIL’s individual brands have strong core products that
support growth as part of a portfolio strategy, we have an opportunity
to develop a new core for LIXIL that will enable long-term sustainable
growth.
DEVELOP NEW CORE
Strong short-term performance is not enough to ensure long-term success. Establishing and growing innovative new businesses is therefore an important part of the LIXIL Playbook. This approach is built
on the concept that we must have the entrepreneurial mindset today to see what kind of businesses we can create in 10 years. We must also balance the funding needed for these new businesses of the
future with our current capital requirements.
Innovate
Tackle Inflation
and Supply Chain
Challenges
Divest Non-core
Businesses
and Simplify
Organization
Optimize Japan and
Drive New Growth
Grow Global
Water Business
Embed Robust
Environment
Strategy
Develop
New Core
Grow
Transform
Focus
Strategic
Initiatives
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Transforming Existing Businesses
LIXIL continues to define how the industry engages its customers by
integrating powerful digital tools into sales and business processes.
The LIXIL Online Showroom, which first opened in the spring of
2020 during the COVID-19 pandemic, newly introduced AmiVoice
ScribeAssist,* a transcription app utilizing AI voice recognition for
hearing-impaired customers and non-Japanese speakers. In
addition, the LIXIL Product Plan Recommendation System utilizes AI
technology to create a personalized project plan and estimate,
including 3D images, thereby simplifying and accelerating the
decision-making process for the customer.
Developing New Businesses
At Mirai Erabo, an experimental IoT house that opened in October
2022, we are advancing our smart home system, Life Assist2,
through open innovation and the integration of products from
outside suppliers. Homebuilders who saw the “smart” products in
operation were keen to adopt high-value-added items, such as
automated electric shutters.
Outside of the housing sector, we have combined sanitation
equipment with new advanced features into the LIXIL Toilet Cloud,
an IoT service that utilizes AI technology to enhance the efficiency of
public toilet cleaning. This innovative system, capable of detecting
toilet clogs and centrally controlling toilets, has been installed at the
recently opened Umekita (Osaka) underground station of West
Japan Railway in March 2023. We expect such systems to continue
to be adopted more broadly.
* Product of Advanced Media, Inc.
DIGITAL TRANSFORMATION
LIXIL is committed to embracing digital transformation in order to add value through enhancing the customer experience. In pursuit of this goal, we are actively integrating digital technology into the way
we work to produce unique products and services, and improve productivity and engagement.
Enterprise-level Infrastructure
Enterprise-level Organization
Regional & Business-level
Organization
Information Security Committee
LIXIL-CSIRT
Foundation
IT Infrastructure
IT Organization
Cybersecurity
IoT Products
IoT Business Models
Employee Engagement
Communications
Education
Improve Productivity
Digital Services
Consumer Marketing
Consumer Insight
Growth Drivers
Transform Existing Businesses
Develop New Businesses
DX Mission
Go beyond the norms of a traditional manufacturer through digital means
that bring us closer to the consumer and empower our people
Outcome
Consumer-centric and Agile Organization
Key Beneficiaries
Consumers
Business Partners
Employees
OUR FOUNDATION
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LIXIL Digital Transformation Roadmap
Focus: Divest Non-core Businesses and Simplify Organization
Transform: Tackle Inflation and Supply Chain Challenges
Grow: Optimize Japan and Drive New Growth/Grow Global Water Business
Innovate: Embed Robust Environment Strategy/Develop New Core
* ERP: Enterprise resource planning
Customer
Experience
Transform
Existing Businesses
Evolution of digital showrooms
Citizen developer training (No-code development, etc.)
Development of digital platform
AI / IoT research and utilization
Expansion of IoT service business and smart homes
Promote agile work styles (Adoption of Scrum methodology)
Shift to a meritocracy-based system
FYE2021
FYE2025
FYE2022
FYE2023
FYE2024
Develop
New Businesses
IT Organization
Improve Productivity
Strengthen Digital /
IT Infrastructure
CX
Employee
Experience
EX
IT Infrastructure
ERP* system advancement in Japan and international businesses
Cloud-based IT environment transformation
Cybersecurity
Strengthening security governance (Information Security Committee, etc.)
Improving Productivity
Through the promotion of digital democratization, LIXIL strives to foster
a corporate culture where employees can independently create value
using digital tools.
Since the introduction of a no-code development tool in 2021,
employees without specialized knowledge have been able to develop
their own business tools, with 1,600 apps already in operation. We
also have created the LIXIL Data Platform (LDP), a cloud-based data
integration platform that enables more data-driven and faster
decision-making.
In addition, our digital division has adopted the Scrum
methodology to speed up development. Through this, it aims to
become an agile organization that aligns with management
priorities while offering high levels of autonomy for each team.
Reinforcing IT Infrastructure
To accelerate international business growth, we are optimizing our
global production system and supply chain through the
implementation of a globally standardized and centralized system of
master data governance that encompasses products and materials
data. As part of business continuity planning and to enhance
cybersecurity, we are migrating to the cloud on a global basis. Shifting
employees’ work environment to the cloud will help promote a more
collaborative digital workplace, transforming how employees work.
Strengthening Information Security
LIXIL offers flexible work styles that include telecommuting for its
employees. This requires additional information security measures to
protect personal and confidential information throughout the
Company. This work is being carried out by the Information Security
Committee under the supervision of the Chief Digital Officer. To ensure
that information security is strengthened throughout the Company
and that governance related to data protection meets all global
standards, we have established two special subcommittees to closely
examine the measures needed in each of these important areas.
37
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01
02
It has been several years since the Global People Organization
(GPO) reorganized into a centralized global function and created the
GPO mission to “transform LIXIL into an innovative and inclusive
community that empowers everyone, everywhere.” This mission is
realized by the delivery of five KPOs, or Key Performance
Outcomes, outlined below. The mission and the KPOs form the
building blocks of the GPO Strategy for FYE2022–FYE2025.
I. Embed inclusion into our DNA
We implement holistic, strategic, and leader-led efforts across LIXIL.
Our belief is that inclusion is the goal and that diversity will be the
result that follows. Everyone from senior executives to managers
and employees must understand why Diversity & Inclusion (D&I)
matters to LIXIL’s future competitiveness and recognize the close
relationship between an active D&I culture and an innovation culture.
II. Elevate talent across the enterprise
We will more effectively enable LIXIL’s transformation and establish
the innovation culture we need to build for our future. Our efforts to
build foundational infrastructure for our talent programs will enable
us to leverage our global scale through the harmonization of human
resource systems and processes.
III. Enhance employee experience
We put people at the heart of our work to enhance the employee
experience. This process starts with our effective employee listening
program, LIXIL Voice. Direct access to timely data, analytics, and
reporting will empower people managers to leverage insights to
support the Career Journey of their teams and to proactively discuss
their development.
IV. Strengthen HR corporate governance
We are building a stronger model and framework for people data
and governance at LIXIL. Key to this is establishing global systems
and processes that will enable consistent and transparent reporting
and decision-making.
V. Transform HR to transform the business
We redefine the evolving role of HR at LIXIL as the Company’s
needs evolve and prioritize specific HR competencies that will
deliver a world-class employee experience.
GLOBAL PEOPLE STRATEGY
At LIXIL, we believe that our employees are the driving force behind value creation, and have positioned talent development as one of our long-term priorities. Through our development processes,
we focus on training next-generation leaders and employees with the right capabilities to meet our future business needs.
Make better homes a reality for
everyone, everywhere
LIXIL Playbook
Transform LIXIL into an innovative and inclusive community
that empowers everyone, everywhere.
Embed
inclusion
into our DNA
Elevate
talent across
the enterprise
Strengthen HR
corporate
governance
Enhance
employee
experience
Transform HR
to transform
the business
•
•
Our
purpose
Company
strategy
GPO
mission
Global
KPOs
Three
behaviors
38
GOVERNANCE
DATA
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04
INTEGRATED REPORT 2023
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STRATEGY
01
02
Manager Effectiveness
Effective managers are the linchpin that galvanizes higher
performance across large, complex organizations. Managers create
the culture in the workplace, define the work, and determine the
experience at work. Managers have the greatest influence on an
employee’s sense of engagement with the company. The old adage
remains true: people join companies, but leave bad bosses. To create
a working environment in which all employees can work with full
flexibility and high engagement, we support career development from
two angles: strategic company-driven career development, and
self-motivated career development managed by individual employees.
From FYE2022, we launched initiatives that support the ability of
management-level talent to bring out the best in their team members,
with a particular focus on manager effectiveness. We have been
gradually introducing various programs centered around building an
inclusive environment, fostering human resources, and empowering
teams. As part of the Manager Effectiveness program, we have
launched a guidebook for leaders with more practical examples on
how best to embed inclusion into our culture. To further enable this,
more than 5,000 managers will be invited to attend workshops to
practice these workplace inclusive behaviors. In the future, we expect
everyone to have a clear understanding of the expertise and skills
they need to develop as a manager to support the engagement and
development of their team.
Diversity and Inclusion
As one of the key pillars of LIXIL’s D&I Strategy, we are committed to
achieving gender equity at LIXIL by raising the percentage of female
directors and executive officers to 50% and the percentage of
female managers to 30%, both by 2030. We have introduced a D&I
Dashboard to support each part of the business to monitor their
progress toward this goal, tracking the five key KPIs that support
gender equity – hiring, promotion, exits, manager ratio, and inclusion
score on the LIXIL Voice survey.
Talent Management
To identify critical talent at the enterprise level, LIXIL conducts
People & Organizational Development (POD) reviews for our
business leaders and executive officers to discuss the succession
pipeline, high-potential talent, and female talent nominations. In
FYE2023, 732 successors and 156 high-potential talents were
identified in LIXIL globally. Furthermore, we are expanding the scope
of the list in some business divisions in Japan to search for strong
individuals in order to promote the active appointment of young talent.
Through this POD process, we are seeking to create an
inclusive working environment, and promote talent development that
considers diversity of all types including gender, nationality, race,
and career.
This enables us to ensure business continuity even in times of
emergency and to build a future-fit system for strategically selecting
successors. We devise and implement training plans for each of the
listed successors that are designed to build their individual strengths
and address development areas by providing business assignments
and job transfer opportunities and offering leadership training.
NEXT Program: Developing Next Generation Leaders
We want to create a work environment in which diverse talent can
assume important positions, regardless of age. To that aim, we operate
our NEXT program, which is designed to identify and develop talented
employees with the potential to become the next generation of leaders
based on merit-based credentials.
Program Overview
NEXT Tier 1
NEXT Tier 2
Target
Those recommended by each
department as future executive
candidates
Those recommended by each
department as future managerial
candidates
Development
goal
Aim to become a general
manager, director, or senior
manager within three years
Aim to be promoted to a
managerial position such as group
leader within three years
Based on recommendations from individual departments and
assessment results, we design tailored development plans co-created
by the selected individual and the manager in charge of their
development and accelerate their growth through interesting and
challenging stretch assignments tailored to their development plans.
We also offer innovation training to develop the qualities and skills
expected of leaders and the mindset needed to achieve innovation.
In addition to conducting regular one-on-one meetings between the
participant and the manager in charge of their development, we also
provide a mentoring program that encourages their growth through
greater awareness and learning from other people’s advice, feedback,
and support.
Separately, with strong commitment from senior management,
including roundtable discussions with the CEO and executive officers,
we drive initiatives that accelerate the promotion of program participants.
Developing Our Talent for the Future
39
GOVERNANCE
DATA
03
04
INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
Three Core Pillars of the IP Division’s Mission
MAKE BETTER
HOMES A REALITY FOR
EVERYONE, EVERYWHERE
LIXIL Playbook
Support the acquisition, utilization, and risk management of intellectual
property rights to enhance the execution of management strategies, and
contribute to sustainable competitiveness
Appropriate Risk
Management Structure
Leveraging IP
Intelligence
Intellectual Property
Management that Protects
Differentiated Values
LIXIL’s
Purpose
LIXIL’s
strategy
IP sector
mission
Foundation
Prevention and
elimination of significant
business risks
Improve internal CS with
strategy support
Prevent other companies
from free riding
KPOs
Maintain competitiveness to achieve long-term business
advantage and high profit margins
Goal
LIXIL Playbook
• Divest Non-core Businesses and
Simplify Organization
• Tackle Inflation and Supply Chain
Challenges
• Optimize Japan and Drive New Growth
• Grow Global Water Business
• Embed Robust Environment Strategy
• Develop New Core
Prioritized Issues for
Realizing Sustainable Growth
Fusion of IP strategy and business strategy based on LIXIL’s strategy
Investment Strategy
R&D Marketing Activities
Products
Services
Know-how
Technology
Design
Brand
Sales and
profit
Management
as trade secret
Acquisition of
intellectual
property rights
Data Analysis
INTELLECTUAL PROPERTY STRATEGY
We support our business units by acquiring intellectual property assets and managing their intellectual property portfolios. In doing so, we enhance the execution of management strategies, and contribute
to the sustainable competitiveness of the company, which are key components of the IP Division’s mission.
Risk Management Structure
To ensure that everyone at LIXIL respects the intellectual property of third
parties, the IP Division has implemented a risk management structure
that includes conducting prior searches of third-party intellectual property,
thereby preventing and eliminating significant risks to the business. For
example, the IP Division and business units have incorporated intellectual
property risk assessments within the product development process,
enabling the IP Division to search, and analyze third-party intellectual
property rights during the early stage of product development.
Intellectual Property Management That Protects
Differentiated Value
At LIXIL, we develop differentiated products and services to create
value for consumers around the world. This requires continuous
investment in our technology, design, brand, and other intellectual
property, which are important management resources alongside our
human capital. To maintain our competitiveness and achieve high
profitability over the long term, the IP Division manages the
Company’s portfolio of IP to protect our intellectual property rights
and prevent our differentiated factors which are our source of
competitiveness from being imitated by other companies.
Intellectual Property Intelligence
Intellectual property is an important management resource for LIXIL.
We utilize an IP landscaping*1 method in our IP analysis and
incorporate the results into our management and business strategies.
Our strategic initiatives are based on various data analyses,
including IP information from IP analysis, so as to avoid risks and
ensure competitive advantage in our business.
*1 IP landscaping: Supporting the formulation of management and business strategies by
1) performing an analysis integrating IP information with management and business
information and 2) sharing the results of the analysis, including the current overall
situation and the future outlook, with top management and the heads of business units
Intellectual Property and Standardization
While LIXIL protects its unique differentiated factors by guarding its intellectual property rights, it also works to achieve
industry-wide standardization of advanced technologies that are important for society.*2 These include areas such as
antibacterial technology.
*2 To build an environment that helps various businesses enter new markets through the openness of technology and know-how by
standardization. One of the measures to maximize Total Addressable Market (TAM: the entire market size that a business may
acquire). Reference: Ministry of Economy, Trade and Industry, “Market Formation Guidance,” published in March 2022.
40
GOVERNANCE
DATA
03
04
INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
413.7
8.0%
6.0%
5.9%
0
100
200
300
400
500
FYE2022
FYE2023
FYE2024 (Forecast)
Revenue
Core earnings
Core earnings margin
(¥ billion)
418.4
429.5
33.2
25.0
25.5
0
2
4
6
8
10
(%)
WATER TECHNOLOGY BUSINESS (LWT) Japan Business
LIXIL’S CORE BUSINESSES
LWT makes attractive and purposefully designed products for bathrooms
and kitchens through powerful global brands such as INAX and GROHE,
as well as product brands in Japan such as RICHELLE and SPAGE.
Hiroyuki Oonishi
Executive Officer, Executive Vice President, LIXIL Water Technology (LWT) Japan
Market Environment
• Demand for new housing in Japan forecast to decrease over the
medium to long term due to population decline
• Increased renovation needs and more transactions carried out online
as a result of the uptake in new working styles
Key Strengths
• Combined global capabilities managed by core global team
• Highly regarded and clearly differentiated house of brands
• Comprehensive product portfolio covering luxury to mass-market
segments
• Extensive nationwide sales and distribution network in Japan
• Strong cooperative structure with suppliers
Growth Opportunities
• Increasing need for environmentally friendly materials, reflecting
growing awareness of ethical consumption
• Worldwide interest in health and hygiene spurred by the COVID-19
pandemic remains high
• Ongoing demand for greater comfort at home and increasing
renovation demand in the post-COVID-19 era
• Evolving needs and lifestyle practices relating to bathing and
water purification
Risks
• Decrease in new housing construction in Japan
• Further increases in human resources costs and logistics, material,
and energy prices
• Deterioration of the component procurement environment
• Supply chain disruptions
• Shortage of skilled labor
Countermeasures
• Create new demand by strengthening renovation and new
business strategies
• Achieve both resilience and efficiency in the supply chain through
redundancy and end-to-end optimization
• Develop easy-to-install and prefabricated products, and expand
installer network
• Continue targeted investment in innovation, brands, and design
• Price products in line with market conditions
• Provide clearly differentiated value
• Strengthen relationships with suppliers based on the Declaration
for Building Partnerships
Strategy
• Expand sales and accelerate development of health and
hygiene-related products
• Respond to lifestyle changes by expanding sales of renovation
products and growing new businesses
• Leverage digital platforms to expand reach of sales channels
• Enter profitable market segments and gain market share by
leveraging brand, product, and service strengths
• Create more sustainable products and materials
• Further collaboration between LHT and LWT Japan
41
GOVERNANCE
DATA
03
04
INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
Progress on Major Initiatives
Before 1922, ceramic wall and floor coverings and other similar products
were known by many different names in Japan, but that year they came
to share the name “tile” (an English loanword), making 2022 the 100th
anniversary. April 12 has been dubbed “Tile Day,” and in commemoration
of the anniversary the entire domestic tile industry worked to communicate
the appeal of tiles through a variety of projects. LIXIL held a roadshow
exhibition titled Japanese “Tile”—A Century of Beauty and Utility at INAX
MUSEUMS, and embarked on a project to collect and recycle titles as art.
We have also launched Art Brut Ecocarat tiles featuring artworks by
neurodivergent artists contracted to Heralbony Co., Ltd. By paying license
royalties out of the product sales revenue to the artists, we aim to create
new revenue streams for them and create an inclusive society in which
everyone can play an active role, in collaboration with Heralbony Co., Ltd.
How people choose to bathe is diversifying, and LWT Japan has
strengthened its lineup so that users can choose the bathroom and
shower that best suits them. In May 2022, we began general sales of the
KINUAMI U foam shower, which dispenses warm and silky foam. In June
2022, we launched the Body Hug Shower, which is designed for user
comfort. In addition, in April 2023 NITTO CERA Corporation (a wholly
owned subsidiary of LIXIL Corporation) began general sales of our
U-shaped showerhead SHIN-ON, which wraps the body in hot water
from all angles. SHIN-ON features improved design and enhanced
usability and cleanability based on user feedback from crowdfunding
supporters of KINUAMI U. As a result, it was highly acclaimed in Good
Design Award 2022, where it placed among the Good Design Best 100.
Decorative and Functional Tiles for a More Colorful Lifestyle
Addressing Diverse Bathing Needs
42
GOVERNANCE
DATA
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INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
448.4
9.7%
4.5%
5.3%
0
100
200
300
400
600
500
496.9
515.5
43.4
22.3
27.5
0
2
4
6
8
12
10
(%)
Revenue
Core earnings
Core earnings margin
(¥ billion)
FYE2022
FYE2023
FYE2024 (Forecast)
An unparalleled portfolio of brands, agile manufacturing capability, and
innovation continue to drive LIXIL’s global growth. With a clear strategy in
place, we are well-positioned to grow sustainably in international markets.
Bijoy Mohan
Executive Officer, Executive Vice President, LIXIL International
Market Overview
• Targeted water technology market comprises bathroom equipment
products such as faucets, showers, bathing and toilets, as well as
kitchen faucets and drinking water systems
• Water technology market worth approx. ¥8 trillion and forecast to
grow at an attractive CAGR of +4%
• Growth fueled by secular demographic, individualization, and
sustainability trends
• Go-to-market characterized by strong distribution partnerships
across multitude of professional and retail channels
Key Strengths
• Truly international market coverage with significant sales in more than
150 countries across the Americas, EMEA, APAC, and Greater China
• Highly regarded and clearly differentiated house of brands that can
fill product gaps in each region
• Comprehensive product portfolio covering luxury to entry segments
• A global supply chain and production footprint
• Strong innovation pipeline with focus on enhancing consumer
experience and sustainability
• Award-winning in-house design team
Growth Opportunities
• Increased demand for sustainable products due to heightened
environmental awareness, cost of energy, and water scarcity
• Design, colors, and finishes to leverage the individualization and
personal home spa themes
• Growing demand for solutions that improve health, hygiene, and
well-being and allow for aging in place
• Increasing need for easy-to-install sanitary products or inclusion of
installation services
Risks & Countermeasures
1. Further increase in material and labor costs
• Timely price adjustment and mix optimization
• Focus on mid- to high-end products
• Switch to alternative materials
2. Supply chain challenges
• Strengthen nearshoring and redundancy in supply chain
• De-risk external supply securing multi-sourcing
• Complexity reduction, e.g., component standardization
• Back up production plan and cost variabilization
3. Commoditization of products
• Develop innovative, differentiated, and high-value-added products
and services
• Enhance consumer journey and customer experience to cultivate
brand affinity and loyalty
• Build and expand repeat sales businesses
4. Skilled labor shortages
• Develop easy-to-install and prefabricated products
• Nurture the next generation of talent among installers
Strategy
• Expand profitable product categories and fill product gaps in each
region by leveraging the multi-brand portfolio
• Lift the average sales price by providing innovative, high-value, and
differentiated products and services
• Enhance channel strategy according to each region’s unique needs
• Attract consumers early in their purchase journey and enhance
consumer experience
• Strengthen market segmentation, delivering on specific needs and
wants of each segment
• Reduce the environmental footprint of products and services, as well
as business operations
• Strengthen global innovation platforms utilizing technologies within LIXIL
LIXIL INTERNATIONAL WATER TECHNOLOGY BUSINESS
LIXIL’S CORE BUSINESSES
43
GOVERNANCE
DATA
03
04
INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
We have committed to delivering consumer-centric solutions that simplify
the purchasing experience. In December 2022, we acquired Basco, a
U.S.-based shower door company, and have made significant progress
in integrating the company into the LIXIL family. These efforts have
created new synergy opportunities for strengthening and expanding our
U.S. sales and distribution channels. The move, in line with our LIXIL
Playbook strategy to look for market segments with unmet demand,
helps to supercharge our U.S. efforts, making us the fourth-largest player
in this product segment.
Just as importantly, the strategic acquisition enables us to expand
our comprehensive kitchen and bath portfolio in the Americas and take
consumers on a new purchase journey with full showering and bathroom
solutions. This represents another step forward in our drive to move
beyond commoditized individual sales of goods into conceptualized
suites of products. It also enables us to attract consumers early in their
purchase journey and enhance the consumer experience. We are
confident that these initiatives are perfectly timed to catch the wave of
increased home renovation demand for 2023.
American Standard is a household name in North America, with a rich
history of nearly 150 years. With a consumer-first mindset fueled by the
desire to create a unified global brand experience and connect with
Millennial homeowners, American Standard has embarked on a total
brand refresh across all consumer and customer touchpoints.
Foundational to the rejuvenated brand expression are the American
Standard brand values – Dependable, Inviting and Pioneering – brought
to life via the brand claim of “LIFE. LOVE. HOME.” and expressed through
signature design elements that differentiate it from GROHE and INAX.
The new brand identity has already begun its rollout in both the U.S. and
Asia. In November 2022, the modernized and more consumer-friendly U.S.
website and social media handles were launched. This was followed by an
unveiling of the visual identity in APAC at the American Standard Trade Event
in Bangkok, Thailand in February 2023. The brand’s visuals and colors signify
love, warmth, and approachability, driving a closer emotional connection with
our consumers. Under this new identity, American Standard introduced the
Loven Collection in Asia, designed with a cohesive aesthetic and ensuring a
polished and stylish look for any bathroom. It features a compact footprint,
making it a perfect match for urban residential projects. Later in 2023, the
new Aspirations bath collection will be introduced in the U.S., providing
beautiful, functional, and convenient features which maximize space and
convenience. From products,
packaging, communications, and
customer engagement, the new
American Standard brand will
enhance the entire consumer
journey and customer experience
to cultivate brand affinity and
inspire people to create a home
they will love every day.
Acquisition of Basco:
Expanding Offerings for Full Showering Solutions
New American Standard Brand Identity:
Strengthening Connection to Consumers
Progress on Major Initiatives
Established a new brand identity for American
Standard with signature design elements
Acquired Basco, a major shower door company
44
GOVERNANCE
DATA
03
04
INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
LHT will create new value through innovation, and make better
homes a reality while reducing the environmental burden through
the products it provides to customers in Japan and the rest of Asia.
584.2
700
600
500
400
300
200
100
0
(%)
7
6
5
4
3
2
1
0
598.2
606.5
31.7
19.4
33.0
5.4%
3.2%
5.4%
Revenue
Core earnings
Core earnings margin
(¥ billion)
FYE2022
FYE2023
FYE2024 (Forecast)
HOUSING TECHNOLOGY BUSINESS (LHT)
LIXIL’S CORE BUSINESSES
Satoshi Yoshida
Executive Officer, Executive Vice President, LIXIL Housing Technology (LHT) Japan
Market Overview
• Demand for new housing in Japan forecast to decrease over the
medium to long term and building material manufacturers expected to
shift focus to the home renovation sector, due to population decline
• Increased demand for energy conservation and renewable energy due
to the global energy crisis
• Growing interest in decarbonization in light of efforts to achieve
carbon neutrality by 2050
• Growing interest in safe, secure housing and new ways of living in
response to recently increasing natural disasters
• Building materials markets, particularly in Asia, continue to expand as a
result of medium- to long-term economic, population, and income growth
Key Strengths
• Leading market share in residential sash and door, and exterior
product market sectors in Japan
• Leadership in low-carbon, sustainable materials for housing and buildings
• Extensive nationwide sales and distribution network in Japan
• Wide range of products and product categories, enabling
complementary design for the entire home
• Innovative product development made possible through advanced
technologies and global design capabilities
• Simple organizational structure that facilitates the rapid
development, manufacture, and sale of products
• Implementation of platform-based production in each business division
• Rapid creation of new businesses by applying the lean startup method
• Strong cooperative structure with suppliers
Growth Opportunities
• Growing demand for environmentally responsible products,
reflecting growing awareness of ethical consumption
• Increasing interest in high-performance housing, driven by government
subsidy projects and more stringent energy-saving standards
• Growing demand for new products and services suitable for Japan’s
aging population
• Growing market for highly affluent consumers
• Increasing need for differentiated products due to population growth
and rising income levels in Asian markets
Risks
• Decrease in new housing construction in Japan
• Further increases in human resources costs and logistics, material,
and energy prices
• Deterioration of the material procurement environment
• Supply chain disruptions
• Increase in operating costs in conjunction with environmental
measures
• Shortage of skilled labor
Countermeasures
• Create new demand by strengthening renovation and new business
strategies
• Bring environmentally friendly products and services to market faster
• Review and improve procurement policy
• Price products in line with market conditions
• Provide differentiated high added value
• Strengthen supply chain management
• Raise energy efficiency at production and distribution bases
• Strengthen relationships with suppliers based on the Declaration for
Building Partnerships
Strategy
• Develop differentiated high-value-added products and business models
• Expand market share in net zero energy houses and buildings (ZEH/ZEB)
• Provide products and services that meet the needs of niche markets
including the senior and pet markets
• Respond to lifestyle changes by expanding range of products and
materials as well as sales in home renovation market
• Develop products to meet each market’s needs, utilizing
technologies and resources from Japan
• Increase number of production facilities in the Asia region and
strengthen sales structure
• Further collaboration between LHT and LWT Japan
45
GOVERNANCE
DATA
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04
INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
Progress on Major Initiatives
Rising electricity bills have become a social issue and there is increasing
concern about reducing energy consumption at home. The Japanese
government has incentivized decarbonization by launching a ¥100 billion
subsidy project, one of its largest ever, to promote energy conservation
in housing renovation. LHT has been responding to such trends by
continuously enhancing its window and door lineup. We launched
Replus High-Insulation General-Purpose Frame, which can be used to
replace an existing window with a high-performance triple-glazed
window in one day. In products for new-build detached houses, we have
added the industry’s first triple-glazed hybrid fire door to the TW hybrid
window product line. By continuing these and other initiatives, we will
work toward our target of high-performance specifications accounting
for a 100% ratio of high-performance windows sold for new detached
houses by FYE2026.
Asia is home to roughly 3.4 billion people, and its economies and
markets are only expected to continue growing. Demand in Asian
markets for Japan-made quality is increasing with the expansion of the
high-income and middle-income consumer segments. LHT has
production sites in China, Vietnam, and Thailand, thereby establishing the
foundations for growth in the region in terms of supply. In November
2022, we began local manufacture of window sashes for the Indian
market and have since been constructing a system for rapid product
supply. We are expanding our local dealer network, which currently
numbers 95 dealers with 58 showrooms throughout India. In January
2023, we added 4.5-meter-tall large-aperture windows and 3.5-meter-tall
corner sliding doors to the lineup for our GRANTS high-end window
series. Meanwhile, in Indonesia we are ramping up activities targeting
business growth and are strengthening our supply framework, including
through an alliance agreement with a local aluminum materials company.
Moving forward, we
plan to continue
steadily expanding
our business in the
Asia region.
Further Enhancing Housing Window
and Door Insulation Performance
Business Growth in the Asia Region
46
GOVERNANCE
DATA
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INTEGRATED REPORT 2023
OVERVIEW
STRATEGY
01
02
IMPACT STRATEGY
• Diversity & Inclusion
• Global Sanitation & Hygiene
• Climate Change Mitigation and Adaptation
• Water Sustainability
• Circular Economy
• Environmental Impact of Product Lifecycle
• Environmental Management
• Conservation of Biodiversity
• Talent & Development
• Product Safety
• Customer Satisfaction
• Employee Safety & Wellbeing
• Ethics & Integrity
• Human Rights
• Responsible Marketing & Advertising
• Supply Chain Management
• Corporate Governance
• Stakeholder Engagement
• Information Security
• Tax Transparency
We innovate viable products, solutions, and business
models to elevate standards of living through
improved sanitation and hygiene.
• Global Sanitation & Hygiene
Improve sanitation and hygiene for
100 million people around the
world by 2025
• Climate Change Mitigation and Adaptation
• Scope 1+2 CO2 emissions -50.4%*1
• Scope 3 CO2 emissions -30%*1
• Ratio of energy- and water-saving faucets
and toilets sold (Japan) 100%
• Ratio of high-performance windows sold for
new detached houses (Japan) 100%*2
• Water Sustainability
• Water use efficiency +20%*1
• Total water savings from
water-saving products
2 billion m3/year *3
• Circular Economy
• Improved waste recycling rates
90%*2
• Use of recycled aluminum
100%
• Diversity & Inclusion
By FYE2030
• 50:50 for Board & Executive Officers
• 30% female managers across LIXIL
• Maintaining gender parity in new
graduate recruitment (Japan)
Commitment
LIXIL’s purpose is to make better homes a reality for everyone, everywhere.
We do this through actions and innovations designed to create positive impact in the world, today and tomorrow.
GLOBAL SANITATION & HYGIENE
Sanitation and Hygiene for All
We promote the responsible use of energy, water, and
natural resources. From our operations and throughout our
product lifecycle, we minimize our ecological footprint and
scale innovation to help our partners and consumers protect
the environment today and for generations to come.
WATER CONSERVATION &
ENVIRONMENTAL SUSTAINABILITY
Zero Carbon and Circular Living
We promote diversity and inclusion, starting with building an
equitable workplace. By leveraging the knowledge and
perspectives of our diverse employee base and together with
stakeholders, we stimulate innovation and collaboration that
enables everyone to live more comfortably and healthily and
reach their full potential.
DIVERSITY & INCLUSION
Inclusive for All
Three
Strategic
Pillars
Metrics and
Targets
Material
Issues
Priority
*1 Benchmark: FYE2019 *2 By FYE2026 *3 By FYE2025 (All targets are for FYE2031, unless otherwise noted)
LIXIL’s purpose is to make better homes a reality for everyone, everywhere: this is the positive impact we have and how we can be a force for good in a rapidly changing world, from the products we
make, to the way we work for today and tomorrow. LIXIL’s Impact Strategy outlines three strategic pillars that can have a greater impact in resolving global issues: Global Sanitation & Hygiene, Water
Conservation & Environmental Sustainability, and Diversity & Inclusion.
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Positioning of the Material Issues and Our Approach
At LIXIL, we pursue our corporate purpose to “make better homes a
reality for everyone, everywhere.” To that end, we have determined
material issues that we, our stakeholders, and society in general
consider to be of the highest importance for achieving our
company’s sustainable growth and improving corporate value for
driving progress on sustainable development. We are working to
resolve these issues through our business activities while monitoring
the progress against our goals.
LIXIL’s material issues are determined by selecting and
evaluating issues from both a risk and opportunity perspective using
the following process, taking into consideration LIXIL’s Purpose,
Value Creation Process (VCP), management direction, Impact
Strategy, stakeholder needs and expectations as well as current
social circumstances and issues, via the process described on page
49. We review these material issues to accommodate any changes
in LIXIL’s immediate environment or society at large.
Material Issues
Other Material Issues
• Conservation of Biodiversity • Talent & Development
• Product Safety
• Customer Satisfaction • Employee Safety & Wellbeing
• Ethics & Integrity
• Human Rights
• Supply Chain Management • Corporate Governance
• Risk Management
• Stakeholder Engagement • Information Security
• Tax Transparency
• Responsible Marketing & Advertising
*1 As of June 2023. Figures not yet finalized. *2 Benchmark: FYE2019 *3 Excluding products not intended for energy- and water-saving faucets, such as those for exclusive use of hot water
filling or full-body bathing *4 Excluding apartment buildings *5 A6063
In August 2023, we plan to publish a data book on our website with a third-party assurance of these figures.
www.lixil.com/en/impact/data/performance.html
Priority
Three Pillars of Our Impact Strategy
LIXIL’S MATERIAL ISSUES
LIXIL has identified material issues that we and our stakeholders consider to be of the highest importance, and we are working to resolve these issues.
Global Sanitation & Hygiene
Water Conservation &
Environmental Sustainability
Diversity & Inclusion
Material issues
Target year
Goals and targets (quantitative targets only)
FYE2023 results
Global Sanitation &
Hygiene
By 2025
Improve sanitation and hygiene for 100 million people around the world by 2025
Approx. 45 million people
Climate Change
Mitigation
and Adaptation
By FYE2031
*6 By FYE2026
*7 By FYE2025
• Scope 1+2 CO2 emissions: -50.4%*2
• Scope 3 CO2 emissions: -30%*2
• Ratio of energy- and water-saving faucets and toilets sold (Japan): 100%
• Ratio of high-performance windows sold for new detached houses (Japan): 100%*6
• -29.9%*1
• -11.9% (FYE2022)
• Faucets: 92.2%*3
Toilets: 99.2%*4
• 90%
Water Sustainability
• Water use efficiency: +20%*2
• Total water savings from water-saving products: 2 billion m3/year*7
• +16.0%*1
• 1.3 billion m3 (FYE2022)
Circular Economy
• Improved waste recycling rates: 90%*6
• Use of recycled aluminum: 100%
• 88.1%*1
• 74%*5
Environmental Impact
of Product Lifecycle
Included in the above
̶
Environmental
Management
̶
̶
Diversity & Inclusion
By FYE2030
• 50:50 for Board & Executive Officers
• 30% female managers across LIXIL
• Maintaining gender parity in new graduate recruitment (Japan)
• 31.3%
• 17.5%*1
• 34.1%
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Material Issues Selection
In FYE2021, we reviewed the material issues selected in FYE2016
and newly set 20 material issues based on the process below. From
FYE2023, we expanded our material issues to include “Conservation
of Biodiversity.” We consider biodiversity to serve as the common
foundation for our three focus areas in the environment domain and
believe that it is vital to address the issue of biodiversity in order to
ensure the sustainable growth of LIXIL. Company-wide efforts that
include sustainable raw material procurement and the effective use
of resources will contribute to biodiversity.
We determined the priority of our material issues in terms of
degree of risk as weighted by the criteria of ESG-rating
organizations and their impact on LIXIL, our stakeholders, and
society at large.
LIXIL prioritizes areas that significantly impact its stakeholders
and society at large and where it can make a considerable
contribution to resolving relevant issues by leveraging its strengths
and taking proactive measures. We also prioritize areas where we
need to strengthen our initiatives based on stakeholder needs.
“Priority” material issues are deeply related to the three pillars of
our Impact Strategy, and we will continue to advance various
initiatives with a focus on these material issues. In FYE2023, we
also changed the priority levels of our material issues from
“priority,” “high,” and “medium” to only “priority” in order to clarify
the display of priority items.
• Selection of candidate issues based on the evaluation criteria by ESG-rating organizations (DJSI and MSCI),
as well as essence from global standards such as SASB, GRI, and SDGs
• Definition of the impact of each issue based on the weighting of evaluation criteria
Selection of
the issues
IDENTIFY
• Discussion by Corporate Responsibility Committee,* focusing on candidate issues
• Interviews with business units and corporate functions
Discussion of
the issues
DISCUSS
• Detailed evaluation of the selected issues with executive officers
• Selection of key issues and prioritization based on the above feedback and the impact on society and LIXIL
• Approval at Board of Executive Officers
Detailed evaluation of
the issues
REFINE
Following the above process, we will continuously review the material issues.
* From April 2023, the Corporate Responsibility Committee has been replaced by the Impact Strategy Committee.
Material Issues Selection Process
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GLOBAL SANITATION & HYGIENE
Promote and enable access to safe and hygienic sanitation practices, especially for women and girls, while protecting children from harmful infectious diseases.
Our Strategy
An estimated 3.6 billion people lack access to safely managed
sanitation services, and approximately 494 million people regularly
defecate in the open. Roughly 2.3 billion people lack basic
handwashing facilities at home. The current rate of progress would
need to be quadrupled in order to achieve the SDG 6 (Clean water
and sanitation) by 2030.*
We have set out to improve sanitation and hygiene for 100 million
people around the world by 2025 through the introduction of innovative
and affordable toilet and hand hygiene solutions. SATO’s affordable
solutions are complemented by value-added products that create
market demand for products higher in the pyramid. The SATO Advisory
Board oversees the strategies and initiatives designed to help resolve
global hygiene issues.
SATO’s Diverse Product Portfolio
The SATO business, which celebrates its tenth anniversary in 2023,
has recrafted its brand concept into “A BETTER LIFE. EVERY DAY.”
and expanded its product portfolio to more than 40 items. In
addition to developing the SATO simple toilet for emerging markets
and the low-cost SATO Tap handwashing solution, we also started
selling the SATO Slab toilet and the Universal I-Trap toilet, which are
compatible with a variety of plumbing conditions, in FYE2023. SATO
products are currently manufactured and sold in six countries in Asia
and Africa, and the number of units distributed reached 1 million for
four consecutive years. An estimated 7.5 million units have been
distributed to 45 countries, contributing to better sanitation for an
estimated 45 million people. (As of April 2023)
Establishing Sanitation Markets by Multiple Approaches
For our SATO business, we strive to nurture regional business and
employment through our Make-Sell-Use business model that seeks
to build local production and marketing systems and develop local
human resources. We also conduct various hygiene-related
educational activities in different locations, including our School
Toilet Enhancement Program (STEP) in Africa. We aim to use these
initiatives to consistently improve sanitation environments and
establish a sustainable sanitation market.
Strengthening Partnerships to Maximize Impact
LIXIL is working to strengthen our collaborations with various
partners to maximize impact. In addition to our existing MAKE A
SPLASH! global partnership with UNICEF and our five-year
Partnership for Better Living (PBL) program with the United States
Agency for International Development (USAID), we launched a new
partnership with FINISH Mondial to provide sanitation solutions that
involve financial services in FYE2023. We also established LIXIL
Public Partners (LPP), a new organization, to strengthen and
accelerate the development of public-private partnership models in
the field of global water and sanitation, starting with trial projects in
the U.S.
* Progress on household drinking water, sanitation and hygiene, 2000-2020, WHO/UNICEF Joint
Monitoring Programme
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Our Strategy
Buildings account for about 28% of the world’s energy-related CO2
emissions, with the residential sector alone accounting for 17%.*1
Due to the increase in global population, total household use of
water has increased six-fold since the 1960s.*2 More than 40% of
the world’s population is expected to experience water stress by
2050 due to the depletion of global water resources.*3 Indeed, in
2020, 2 billion people did not have access to safely managed
drinking water.*4 Furthermore, global resource consumption is
expected to more than double by 2050.*1
Against this backdrop, we have designated Water Conservation
& Environmental Sustainability as one of the strategic pillars of our
Impact Strategy and positioned the six areas detailed below as
material issues. We added conservation of biodiversity to the list of
material issues in FYE2023 because this is an issue that needs to be
addressed in order to ensure sustainable growth for LIXIL.
The LIXIL Environmental Vision 2050 declared a commitment to
Zero Carbon and Circular Living. By 2050, we aim to achieve
net-zero carbon emissions and preserve water and natural
resources in operations, housing, and lifestyle solutions for future
generations to become a leading company in environmental
sustainability. Among the material issues listed above, we set
Climate Change Mitigation and Adaptation, Water Sustainability, and
Circular Economy as focus areas for realizing the vision. As a
springboard for promoting these focus areas, we have been striving
to reduce environmental burden across the product lifecycle and to
strengthen our company-wide environmental management. We are
also working to conserve biodiversity, which is the common
foundation for the three focus areas.
Environmental Governance
We are strengthening company-wide management to reduce
environmental risks that we seek to address in the LIXIL
Environmental Vision 2050 and expand the environmental benefits
that we offer to society. LIXIL has established a governance system
in which the Board of Directors oversees the entire sustainability
process. We have also established an Environmental Strategy
Committee (ESC), chaired by the Chief Environmental Impact Officer
(CEIO) who is appointed by the Board of Executive Officers. At
regular meetings held at least once a quarter, the ESC formulates
and implements environmental strategies, including determining
rules and policies relating to environmental governance, deliberating
and deciding measures to address risks and opportunities due to
climate change and other environmental issues, and managing and
monitoring company-wide environmental targets. The details of the
debate and any resolutions are reported to the Impact Strategy
Committee. Decisions on matters of significance or special
importance are elevated to the Board of Executive Officers for
discussion and approval, and then elevated to the Board of
Directors for discussion and oversight.
Furthermore, in addition to establishing the LIXIL Environmental
Sustainability Principles as a guideline for all employees and senior
managers, including directors and executive officers, we are also
working to strengthen our environmental governance through
internal environmental audits, employee education, and internal
evaluation systems.
WATER CONSERVATION & ENVIRONMENTAL SUSTAINABILITY
Conserve energy, water, and other natural resources utilized in and by LIXIL products and services across the value chain
from procurement through production, distribution, end use, and product disposal.
• Climate Change Mitigation and Adaptation
• Water Sustainability
• Circular Economy
• Environmental Impact of Product Lifecycle
• Environmental Management
• Conservation of Biodiversity
*1 UNEP
*2 World Resource Institute
*3 Indiatimes
*4 UNICEF
CLIMATE CHANGE MITIGATION AND ADAPTATION
Achieve Net-Zero GHG Emissions through Our Business Operations,
Products, and Services
WATER SUSTAINABILITY
Enhance the Environmental Value of Water Resources by Saving,
Circulating, and Purifying Water
CIRCULAR ECONOMY
Help Transition to a Circular Economy and Preserve Natural Resources for
Future Generations
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OUR OPERATIONS
OUR VALUE CHAIN
EXPANDING OUR IMPACT
Climate Change
Mitigation and
Adaptation
Scope 1+2
CO2 emissions
Scope 3
CO2 emissions
Ratio of energy- and
water-saving faucets
and toilets sold
100%
(Japan)
Ratio of high-performance
windows sold for new
detached houses
100%*2
(Japan)
Water Sustainability
Water use
efficiency
+20%*1
Reduce water use
at water-scarce
sites
Total water savings from
water-saving products
2 billion m3
per year*3
Provide safer and
better tasting water
Circular Economy
Improved waste
recycling rates
90%*2
Promote use of recycled and renewable materials
Use of recycled aluminum 100%
Reduce single-use plastics in packaging
Enhance resource efficient products and solutions
Build take-back systems for ‘product to product’ use
Reduce
difficult-to-recycle
waste plastics
*1 Benchmark: FYE2019 *2 By FYE2026 *3 By FYE2025 (All targets are for FYE2031, unless otherwise noted)
Medium-Term Targets
ENVIRONMENTAL STRATEGY UPDATE
We updated our strategy and formulated medium-term targets in FYE2023 to help further accelerate initiatives designed
to achieve our Environmental Vision 2050.
Three Phase Approach
Through the updated strategy, LIXIL aims not only to fulfill its
corporate responsibilities, but also to create new value, and
maximize the impact of its business. With that in mind, we have
divided our three focus areas into three phases: Our Operations,
Our Value Chain, and Expanding Our Impact, and have formulated a
comprehensive strategic approach and medium-term targets for
each of these phases. Through our Environmental Vision 2050, we
aim to make a difference in the lives of people around the world and
contribute to a better and brighter future.
1. Our Operations:
Business processes that include activities at our production sites,
offices, and sales bases, and involve our employees and residents in
the surrounding areas.
2. Our Value Chain:
Our value chain refers to a series of processes including activities
related to products and services that we procure, such as mining
and processing of raw materials, as well as activities related to
products and services that we sell, such as packaging for
transportation, logistics, and end use of our products. This involves
interaction with external stakeholders, such as our business partners
and end users.
3. Expanding Our Impact:
This goes beyond the production and use phase of our products in the
value chain, and extends to providing solutions that address the
environmental challenges of the world. It also means contributing to the
future of the planet by going beyond the framework of our business.
In each phase of the three focus areas, we set the following
medium-term targets to promote initiatives.
Creating solutions addressing
the environmental challenges of the world,
beyond the framework of our business
For sustainable living
and the environment,
today and tomorrow
Procurement,
packaging during transportation,
logistics, and end user use of
our products
Business partners
and end users
Our production sites,
offices, and sales
With and for
our employees
and communities
Our Operations
Expanding Our Impact
Our Value Chain
-50.4%*
1
-30%*
1
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CLIMATE CHANGE MITIGATION AND ADAPTATION
We are promoting company-wide initiatives to achieve net-zero CO2 emissions from business processes, products, and
services across our organization and providing solutions to support climate change adaptation.
Our Approach
Approximately 28% of energy-related CO2 emissions are from
buildings, of which 17% is residential.*1 We aim to reduce CO2
emissions to net zero by 2050 by reducing the environmental
burden of our operations, and providing environmentally sound
products and services. Our commitment to the reduction of CO2
emissions is not limited to direct reduction of CO2 emissions from
LIXIL’s business. We also promote initiatives to contribute to the
transition to a low-carbon society. Furthermore, we intend to
support climate change adaptation by providing solutions, such as
for dealing with natural disasters or for preventing indoor heatstroke.
Our Operations
By FYE2031, we aim to reduce CO2 emissions from our business
sites (Scope 1 and 2) by 50.4% (SBT 1.5°C level) compared to
FYE2019. In addition to implementing thorough energy-saving
measures at our plants and offices, we are also promoting energy
efficiency and fuel conversion by encouraging electrification,
switching to electricity derived from 100% renewable energy, and
switching from petroleum-based fuels to natural gas at some of our
production sites.
Also, in FYE2023, we successfully completed hydrogen
combustion tests at our Maebashi Plant. Aiming for practical
application from 2030 onward, we are seeking to apply new
technologies, such as carbon capture and utilization (CCU) and
methanation, that separate, collect, and effectively use CO2.
Furthermore, as part of our efforts to transition to 100%
renewable energy at our bases inside and outside Japan, we are
promoting the use of renewable energy that has been generated
in-house and introducing facilities to generate solar power through
the on-site Power Purchase Agreements (PPA)
model that considers the additionality of
encouraging investment in new renewable
energy facilities. At the end of FYE2023, our
renewable energy ratio reached 25%.
Our Value Chain
By FYE2031, we aim to reduce CO2 emissions from supply chains
(Scope 3) by 30% (SBT WB-2°C level*) compared to FYE2019 To
that aim, we are seeking to reduce CO2 emissions during product
use by creating energy-saving products, including energy-saving
toilets and kitchen facilities. We are also striving to reduce CO2
emissions in the procurement and distribution stages together with
our suppliers and other companies. In FYE2023, we conducted
supplier surveys to assess their CO2 emissions. We are also working
to encourage the use of low-carbon raw materials and components
as well as recycled materials and to create resource-saving products.
Expanding Our Impact
We have set targets to increase the sales ratio of energy- and
water-saving faucets and toilets to 100% by FYE2031, and the sales
ratio of high-performance windows for new detached houses to
100% by FYE2026. We are seeking to expand our impact to
mitigate climate change by providing highly insulated windows and
front doors; introducing high-performance construction methods for
reinsulating entire homes including walls, ceilings, and floors;
providing water-saving products; offering products with
energy-creating functions and associated services; and producing
IoT-driven delivery boxes.
*1 United Nations Environment Programme
(https://globalabc.org/our-work/tracking-progress-global-status-report)
* The well below 2°C target of the Science Based Targets initiative (SBTi) to cap global temperature increase
well below 2°C compared to pre-industrial temperatures
*1 Benchmark: FYE2019
*2 By FYE2026
(All targets are for FYE2031, unless otherwise noted)
-50.4%
*1
-30%
*1
100%
(Japan)
100%
*2
(Japan)
Our Operations
Expanding Our Impact
Our Value Chain
Scope 1+2 CO2 emissions
Scope 3 CO2 emissions
Ratio of energy- and water-saving
faucets and toilets sold
Ratio of high-performance
windows sold for
new detached houses
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WATER SUSTAINABILITY
As a leading company in water-related products, we create environmental value for water through water conservation,
water circulation, and water purification technologies.
Our Approach
An estimated 2 billion people lack access to safe drinking water at
home*1 and by 2050, 40% of the global population is likely to
experience water stress.*2 Due to the growing population among
other factors, total household use of water has increased six-fold
since the 1960s.*3
LIXIL seeks to promote water sustainability by encouraging the
responsible use of water in business processes and providing safe,
delicious water that enables everyone, now and in generations to
come, to enjoy the benefits of water to the full.
Our Operations
LIXIL aims to improve water use efficiency at its business sites by
20% by FYE2031 compared to FYE2019. At water-scarce sites, we
take appropriate steps to improve water efficiency, recycle water, and
manage wastewater. In FYE023, we used approximately 660,000 m3
of recycled water. We also started conducting surveys in FYE2017 to
identify water risks at 77 production sites that use water in their
manufacturing processes to take measures based on the survey
results at each site. We also participate in the Corporate Engagement
Program run by the Science Based Targets Network (SBTN) and help
formulate guidelines for water risk assessments.
Our Value Chain
LIXIL aims to contribute to a global reduction of 2 billion m3 per year in
water consumption by FYE2025. We help reduce the water
consumption by end users through various products and services
such as energy- and water-saving faucets and toilets, and IoT-enabled
water leakage prevention solutions such as smart controllers.
Expanding Our Impact
LIXIL is working to reduce the risk of groundwater contamination by
increasing access to safe sanitation facilities and safer water. Our
new LIXIL Public Partners (LPP) is an organization that seeks to
strengthen cooperation between the public and private sectors. LPP
is currently conducting trials to introduce wastewater-treatment
facilities and water-efficient fixtures and fittings in rural areas of the
U.S. without access to public sewage systems. In addition, LPP is
introducing water purification faucets and cartridges in areas that do
have access to tap water to provide safer and better-tasting water.
We are pressing ahead with our efforts to develop standout
water-purifying products for global deployment by developing
technologies that are tailored to individual markets at our X-Water
Fab Tokoname (Tokoname, Aichi) and X-Water Lab Tokyo (Tokyo)
water-purification research and development sites in Japan and at
other bases around the world.
Provide safer and
better tasting water
Total water savings from
water-saving products
Reduce water use
at water-scarce sites
Water use
efficiency
Our Operations
Expanding Our Impact
Our Value Chain
+20%
*1
2 billion m3
per year *2
*1 The WHO/UNICEF Joint Monitoring Programme (JMP)
Progress on household drinking water, sanitation and hygiene 2000-2020: Five years into the SDGs
(https://washdata.org/reports/jmp-2021-wash-households)
*2 OECD Environmental Outlook to 2050: The Consequences of Inaction - Key Facts and Figures
(https://www.oecd.org/env/indicators-modelling-outlooks/oecdenvironmentaloutlookto2050theconsequ
encesofinaction-keyfactsandfigures.htm)
*3 WorId Resources Institute. Domestic Water Use Grew 600% Over the Past 50 Years
(https://www.wri.org/insights/domestic-water-use-grew-600-over-past-50-years)
*1 Benchmark: FYE2019
*2 By FYE2025
Water-recycling shower GROHE Everstream
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CIRCULAR ECONOMY
We promote the company-wide sustainable use of raw materials across the entire lifecycle of our products, from raw materials procurement through production, end use, and product disposal.
Our Approach
It is estimated that the world’s consumption of resources will double
by 2050.* We are promoting circular production across the entire
product lifecycle, from procurement of raw materials, including
metals, timber, resin, and ceramics, through to manufacturing,
product use, disposal, and recycling, by promoting sustainable use
of raw materials and easy-to-recycle design. While the amount of
plastic waste has more than doubled worldwide over the past 20
years, the recycling rate remains at a stubbornly low 9%. Fueled by
the LIXIL Plastics Action Statement announced in FYE2021, we are
also working to reduce the amount of plastic we use, to recycle
plastic, and to develop alternative materials.
Our Operations
We have set a target of increasing the recycling rate of waste
generated from our business sites to 90% globally by FYE2026.
We promote the effective use of resources at our plants by
improving manufacturing processes to help reduce the amount of
raw materials used and waste generated, recycling waste, and
converting wood chips into biomass fuel.
Our Value Chain
LIXIL is promoting the use of recycled materials such as recycled
aluminum, recycled resin, and recycled wood in order to increase
the ratio of recycled and renewable materials used for our products
to minimize the use of new resources. We have set a target to
increase the ratio of recycled aluminum used in our housing
business to 100% by FYE2031. In FYE2023, we developed PremiAL
R70, which uses 70% recycled aluminum as a raw material, and, in
FYE2024, we plan to start selling PremiAL R100 made from 100%
recycled aluminum.
We are also working to reduce single-use plastic
packaging, expand our supply of resource-efficient
products designed for durability and reuse, and
create a circular system that encourages
product-to-product recycling.
Expanding Our Impact
LIXIL is working to develop circular materials that promote the
effective use of waste plastic to reduce the amount of waste plastic
that is difficult to recycle. In FYE2023, we developed a circular
material called revia, that combines most types of waste plastics,
including composite plastics and marine plastics, and waste wood
from the demolition and repair of buildings. We aim to build an
eco-system from procurement to production, sales, construction,
and recovery, and contribute to the realization of a circular economy
through collaboration with stakeholders such as governments,
municipalities, industry associations, and business partners.
Reduce difficult-to-recycle
waste plastics
Use of
recycled
aluminum
Reduce
single-use plastics
in packaging
Build take-back systems
for ‘product to product’ use
Enhance resource
efficient products
and solutions
Promote use of
recycled and
renewable materials
Improved
waste recycling rates
Our Operations
Expanding Our Impact
Our Value Chain
100%
*2
90%
*1
* With resource use expected to double by 2050, better natural resource use essential for a
pollution-free planet, UN Environment Programme
(https://www.unep.org/news-and-stories/press-release/resource-use-expected-double-2050-
better-natural-resource-use)
*1 By FYE2026
*2 By FYE2031
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Overview
Progress of FYE2023
Relevant page
Governance
LIXIL established the Environmental Strategy Committee (ESC) in order to create a governance system whereby the Board of
Directors oversees overall sustainability. At regular meetings held at least once a quarter, the ESC formulates and implements
environmental strategies, including determining policies and rules relating to environmental governance, deliberating and
deciding measures to address risks and opportunities due to climate change and other environmental issues, and managing and
monitoring company-wide environmental targets. The results of ESC discussions and deliberations are reported to the Impact
Strategy Committee. The Board of Executive Officers discusses and approves targets and action plans, and the progress is
elevated to the Board of Directors twice a year for discussion and oversight.
The ESC formulated medium-term targets for water sustainability and circular
economy, and it also formulated a comprehensive approach for realizing the
Environmental Vision 2050. The results were elevated to the Board of
Executive Officers and the Board of Directors for discussion and approval of the
revised environmental strategies.
p.69
Corporate Governance at LIXIL
Strategy
Looking ahead to 2030 as a milestone year toward achieving the LIXIL Environmental Vision 2050, we conduct scenario analyses
to identify risks and opportunities that are expected to have a particularly large impact on our business from among items
relating to climate change that might impact our value chain, including transition risks caused by changes in the market, policies
and regulations, and physical risks such as abnormal weather patterns. Having referred to several existing scenarios published
by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), we have assumed two
scenarios: the 1.5°C scenario, and the 4°C scenario. Based on these two scenarios, we are working to identify the transition
risks posed by climate change due to changes in policies, regulations, and the market, as well as physical risks such as extreme
weather events, to understand their financial impact, and to reflect them in the group’s environmental strategies.
• We updated the LIXIL Playbook to strategically prioritize the incorporation of
environmental strategies into our business strategies. By doing this, we aim
to improve our corporate value while expanding our positive impact on
society and the environment.
• We expanded our material issues to include conservation of biodiversity as
the common foundation for our three focus areas. We believe it is vital to
address the issue in order to ensure the sustainable growth of LIXIL.
p.47
Impact Strategy
p.51
Water Conservation &
Environmental Sustainability
Risk Management
For climate-related risks and opportunities, LIXIL identifies significant climate-related risks and opportunities and assesses their
impact by conducting scenario analyses based on the TCFD recommendations under the direction of the ESC. After judging the
importance of each business risk, we develop activities designed to generate continuous improvements that involve the planning
and implementing of countermeasures and the monitoring of progress at all levels of the organization.
p.27
Principal Risks and
Countermeasures
Metrics and Targets
We manage Scope 1, 2, and 3 CO2 emissions and the ratio of environmentally friendly products sold that help reduce CO2
emissions in order to manage identified business risks and the climate change risks and opportunities that we have identified
through scenario analyses based on the TCFD recommendations. We obtain third-party assurance regarding Scope 1, Scope 2,
and particularly significant categories of Scope 3 emissions, water consumption, and waste generation, etc., and we disclose our
targets and results for each indicator.
• We revised up our CO2 reduction targets from the 2°C level to the 1.5°C
level indicated by the Science Based Targets initiative (SBTi), and renewed
our target validation.
• We added medium-term 2030 targets for water and resources.
p.52
Environmental Strategy Update
ESG Data >
RESPONSE TO TCFD RECOMMENDATIONS
With regard to the material issue of Climate Change Mitigation and Adaptation, LIXIL announced its endorsement of the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) in
March 2019. Based on the TCFD recommendations, we have identified and assessed the risks and opportunities that climate change and other environmental issues pose to LIXIL. We are reflecting the results
of the assessment in our environmental strategy after reporting to and approval by the Board of Executive Officers and the Board of Directors. In FYE2023, we updated the LIXIL Playbook and positioned
“Embed Robust Environment Strategy” as one of our five strategic initiatives. As part of our response to the TCFD recommendations, we are working to establish integrated management of water and
resources, recognizing their high correlation with climate change.
For more details on “Disclosure of Environmental Issues (In response to the TCFD recommendations),” please visit here.
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02
Risk and opportunity category
Estimated financial impact
Strategic response
Metrics and targets
1.5ºC scenario
4ºC scenario
Risk
Transition
(1) Increased operating costs due to
introduction of carbon taxes
¥10 billion*1
No additional tax
burden
• Improve energy use efficiency
• Expand the use of renewable energy
• Strategic capital investment
• Verify implementation of decarbonization
technologies
Carbon emission reduction by FYE2031
(vs. FYE2019)
• Scope 1 and 2: Reduce by 50.4%
• Scope 3*4: Reduce by 30%
• Carbon emission reduction by FYE2051
• Scope 1, 2, and 3: Net zero by FYE2051
(2) Increased raw material and component
procurement costs due to market
changes
Financial impact not calculated due to lack
of parameters necessary for quantification
• Procurement of low-carbon materials and
components
• Promote resource-conscious design
• Supplier engagement
• Effective and circular use of resources at
production sites
Recycling rate of waste to 100% globally
by FYE2026
Physical
(acute)
(3) Loss of revenue opportunities due to
damage to the Company’s plants
caused by typhoons, floods, etc.
¥1.5 billion*2
• Promote business continuity planning (BCP)
• Systematic facility investments and upgrades
―
Physical
(chronic)
(4) Loss of revenue opportunities due to the
suspension of operations at the
Company’s plants caused by drought, etc.
Financial impact not calculated due to lack
of parameters necessary for quantification
• Improve efficiency of water usage and introduce
water circulation systems
• Promote water risk management at production sites
• Improve water use efficiency at our business sites by 20% by FYE2031 (vs. FYE2019)
Opportunities
(5) Increased demand for energy-saving
products and services for new ZEH
construction and energy-efficiency
remodeling
¥20 billion*3
Maintain current
trends
• Develop and promote eco-friendly products
(high-performance windows, solar photovoltaic
systems, high-efficiency housing, energy- and
water-saving faucets and showers, etc.)
• Ratio of high-performance windows sold for new detached houses (Japan)
100% by FYE2026
• Ratio of energy- and water-saving faucets and toilets sold (Japan)
100% by FYE2031
(6) Increased demand for products that use
low-carbon, eco-conscious materials or
resources
Financial impact not calculated due to lack
of parameters necessary for quantification
• Develop and promote low emission products using
recycled materials (resin window frames, artificial
wood decks, etc.)
Ratio of recycled aluminum used to 100% by FYE2031
(7) Increased demand for products related
to disaster preparation, response, and
recovery
• Develop and promote disaster prevention and
mitigation products (storm shutters, sun blinds,
storage of electricity, Resilience Toilet, etc.)
―
(8) Increased demand for products and
services that help conserve water or
improve water quality
• Develop and expand sales of water-saving and
water-purifying products
• Help provide safe water and reduce the risk of
water pollution
Through water-saving products, global reduction of 2 billion m3 per year in water
consumption by FYE2025
*1 Financial impact calculation is based on the assumption that a carbon tax (using IEA’s estimates of carbon prices considered necessary to achieve the 1.5ºC target) is imposed on Scope 1 and 2 carbon emissions.
*2 Average loss is calculated based on the following steps: (1) identified any production sites with flood risks (based solely on production site location; risk mitigation measures set forth in our business continuity plans (BCP) are not incorporated), using the World Resources Institute’s (WRI) Aqueduct Floods tool and hazard
maps provided by Japanese municipalities; and (2) multiplied two factors: the number of days of stalled operations for sites in each inundation height zone indicated in Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) Manual for Economic Evaluation of Flood Control Investment; and the daily
production volume of each site.
*3 Profit calculated based on the share, price, and profit margin of key products. This calculation assumes an increased ZEH percentage of new and existing housing in 2030 to achieve the Japanese government’s 66% CO2 reduction target for the residential sector by 2030.
*4 Excluding use-phase emissions from products that indirectly consume energy such as hot water supply during use.
Strategies for Addressing Climate Change and Other Environmental Issues
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02
Our Strategy and Management
The share of global population at ages 65 and above is projected to
rise from 10% in 2022 to 16% in 2050.*1 While there have been
global advances regarding women’s roles in society, the global labor
force participation rate for women is still just under 47% (compared
to 72% for men). According to a 2022 report*2 from the International
Labour Organization (ILO), women’s pay around the world is on
average 20% lower than men’s.
Furthermore, approximately 15% of the world’s population
today also live with some degree of disability,*3 and this rate is
increasing every year.
LIXIL is committed to providing innovative products and
services that meet the diverse needs of customers in order to realize
its goal of making better homes a reality for everyone, everywhere.
To achieve sustainable growth by ensuring a truly customer-centric
approach and realizing innovation that meets diverse needs, we
believe it is important to build inclusive environments that enable a
diverse range of employees to demonstrate their true potential. To
that aim, we actively promote Diversity & Inclusion (D&I).
In March 2020, we established a global department responsible
for developing company-wide measures for promoting D&I. In
FYE2021, we set up the D&I Committee consisting of our CEO as
chairperson and other executive officers and leaders, and updated our
D&I Strategy and promotion measures. The D&I Committee
implements various measures based on the D&I Strategy. Results of
the committee discussions and deliberations are periodically reviewed
by the Impact Strategy Committee (the former Corporate Responsibility
Committee) to accelerate D&I initiatives across our organization.
2030 D&I Road Map
Our D&I Strategy seeks to embed a culture of inclusion across LIXIL
and to achieve gender equity by FYE2030. Recognizing the
challenges our company faces, such as the gender pay gap and low
proportion of female managers, we formulated an action plan to
achieve our targets, and we are gradually implementing measures
that incorporate D&I perspectives into our HR policies, talent
development, and improvement of workplaces.
In FYE2023, we launched a dashboard for leaders with
visualizations of KPIs such as inclusion score and percentage of
female managers, to enable each department to monitor the impact
of their D&I initiatives themselves. We also published the Leaders’
Guide to Advancing D&I at LIXIL to share more practical case studies.
Additionally, as a key pillar of D&I promotion, we are also
focusing on creating workplaces that make it easier for employees
with disabilities to play an active role.
LIXIL aims to meet diversifying customer needs through
innovations that leverage the knowledge and perspectives of our
diverse workforce, and through numerous internal and external
collaborations, so that everyone can live a healthy and comfortable
life regardless of age, gender, and level of disability.
Aiming to create a universally accessible society that enables
diverse groups of people to live invigorating lives while respecting
those around them, we promote universal design (UD) that is easy
for everyone to use, and conduct awareness-building activities that
foster understanding of diversity.
*1 World Population Prospects 2022: Summary of Results, United Nations
*2 Pay transparency legislation: Implications for employers’ and workers’ organizations, International
Labour Organization
*3 International Labour Organization
DIVERSITY & INCLUSION
LIXIL aims to meet diversifying customer needs and support a healthy and comfortable life for all people, irrespective of their age, gender, and level of disability, through innovations that leverage the
knowledge and perspectives of our diverse workforce, in order to create a society where everyone can live actively and positively.
Enhanced gender equity across
leadership roles by 2030
• 50:50 for Board & Executive
Officers by FYE2030
• 30% female managers across
LIXIL by FYE2030
• Maintaining gender parity in new
graduate recruitment (Japan)*
* Excluding our group companies.
By 2030, embed a culture of inclusion
across LIXIL and achieve key gender
equity goals.
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02
Fostering an Inclusive Culture
We added inclusion as one of the KPIs in our LIXIL Voice employee
opinion surveys, and are implementing measures based on the
results in order to embed the inclusive culture that we declared as a
goal of our D&I Strategy. In FYE2022, we have launched five
Employee Resource Groups (ERGs) on a global scale focusing on
Better Together, Multicultural, Ability, Working Parents & Caregivers,
and LGBTQ+. We assign an executive officer to each group to
support the group’s activities as an executive sponsor.
We also conduct workshops and e-learning on a global scale
designed to promote understanding of D&I elements such as
unconscious bias and psychological safety, and workshops on
utilizing the Leaders’ Guide to Advancing D&I.
Empowering Women and Ensuring
Meritocracy in the Workplace
We are transitioning to a new human resources system that adopts
a job-based grade system in Japan, aiming to create equity and
meritocracy, so that all of our employees can perform at their best
and LIXIL can help them grow.
The new job-based grade system was adopted for manager
level positions in April 2022. Having switched to a grade system
based on job duties and responsibilities, the system applies a
mechanism to reflect individual contributions and performance to
compensation decisions. In addition, we have abolished the work
location-specific employment system (regional wages), which had
typically been utilized by more female employees than male
employees, in April 2022. This reduces wage differences caused by
likelihood of future work location transfer. With these changes, the
Company aims for a merit-based compensation system that
corresponds to individual job duties and responsibilities.
For general employees, the Company revised certain
allowances in April 2023 to eliminate personal factors and realize
compensation based on job content and performance contributions.
Moreover, the Company plans to switch its grade system from an
ability-based one to a job-based one as well as abolish the work
location-specific employment system in April 2024, aiming for a
merit-based human resources system regardless of gender or age.
The Company continues to proactively evaluate HR policies and
processes to accelerate equity.
Supporting a Healthy Work-Life Balance
We are committed to creating the necessary systems and cultivating
the right atmosphere to support a good work-life balance, enabling
employees to maintain a high level of performance throughout
different life stages. We have been creating frameworks to further
expand mechanisms for supporting flexible workstyles, childbirth,
childcare, and nursing care. In FYE2023, we introduced initiatives to
extend systems for supporting shorter working hours, and
designated the 19th of every month as a promotional day to share
information that increases awareness and understanding of male
parental leave. We are aiming to achieve a 100% acquisition rate for
paternity and male parental leave by FYE2025.*
Promoting Universal Design
LIXIL defines our UD concept as “Good for One, Good for All, Good
for a Lifetime,” and provides housing and water-related products
that suit diverse ways of living, as well as conducts research and
proposals for public toilet systems that everyone can use
comfortably and with peace of mind.
In FYE2023, we launched the Body Hug Shower to suit all
lifestyles, and developed plans and proposals for public toilets
designed with consideration for people who have dementia.
Promoting Broader Understanding of Diversity
In addition to providing training on UD for our employees, we also
offer outreach classes at elementary schools and workshops where
students can try using sports prosthetic limbs. We also share
information on our UD website and LIXIL Public Toilet Lab website
as part of our efforts to help create a universally accessible society.
* Including LIXIL’s own paid childcare leave system for male employees
Easy to
understand
Intuitive
Clear purpose
Easy to love
Can be used for a
long time
Encourages
smiles
Safe & secure
Considerate of all
people
Child-friendly
Easy to use
Easy to execute
and operate
Flexible
LIXIL UD Concepts and Policies
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02
HUMAN RIGHTS
Based on the LIXIL Human Rights Principles, we strive to uphold the human rights of all stakeholders, including customers, business partners including suppliers, residents living near our factories
and offices, and our employees.
Human Rights Principles
LIXIL’s business activities are built on a fundamental respect for
human rights. The LIXIL Human Rights Principles are founded in
accordance with international standards, including the International
Bill of Human Rights, the International Labour Organization (ILO)
Declaration on Fundamental Principles and Rights at Work, and the
United Nations (UN) Guiding Principles on Business and Human
Rights. We also promote efforts to respect the rights of all humans,
including those of children based on the approach of the Children’s
Rights and Business Principles developed by UNICEF. If there are
any discrepancies between the internationally recognized standards
and local laws and regulations, we adhere to the higher
commitment. If any contradictions exist, we seek a way of
respecting international standards while complying with local laws
and regulations.
Our Human Rights Principles stipulate key human rights issues,
including to prohibit discrimination, prohibit forced and child labor,
respect freedom of association and collective bargaining, and ensure
decent wages and working hours, all in alignment with international
standards. The principles also clearly state that we comply with laws
and regulations regarding human trafficking, equal pay for equal
work, immigrant labor, etc. In addition, the principles state that we
also expect our business partners including suppliers to support the
content of the principles and to adopt similar principles.
LIXIL periodically reviews and evolves the principles to continue to
become a better protector of human rights. In FYE2022, we reviewed
the principles we had formulated in FYE2016 and subsequently
submitted revised principles that were approved by the Board of
Executive Officers and signed by the CEO. Particularly, we specified in
more detail our governance structure led by the executive officer in
charge of legal, compliance, and corporate audit, our key human rights
issues determined in FYE2021, and our human rights due diligence
process as well as our concern-raising system and overall commitment
to reducing human rights risks based on those frameworks.
LIXIL Human Rights Principles >
LIXIL’s Key Human Rights Issues
In addition to formulating its Human Rights Principles, LIXIL has
identified key human rights issues as focus areas for mitigating
potential human rights risks as below. By addressing these issues,
we aim to strengthen our human rights due diligence. We regularly
conduct human rights risk assessment and will review these issues
based on the assessment result.
• Provide equal opportunity and prohibit discrimination
• Prohibit forced and child labor
• Respect freedom of association and collective bargaining
• Ensure decent wages and working hours
• Ensure occupational health and safety
• Prohibit harassment
• Legal, fair, and transparent acquisition and use of personal data
Our System
LIXIL established the Human Rights Due Diligence Task Force,
comprising members from a broad range of departments, as well as
a governance structure led by the executive officer in charge of
legal, compliance, and corporate audit who oversees human rights
issues. We are using these systems to strengthen our company-
wide human rights due diligence and promote transparent reporting.
Any important policies and measures relating to human rights due
diligence are reported to the Impact Strategy Committee when
required and, in turn, the Impact Strategy Committee reports to the
Board of Executive Officers and the Board of Directors. We are also
planning to review our governance structure, including the Human
Rights Due Diligence Task Force, to further strengthen our business
and human rights efforts globally.
Key Activities Designed to Strengthen Our Commitment
FYE2016
Formulated the LIXIL Human Rights Principles
FYE2018
Established Human Rights Due Diligence Task Force
FYE2021
Identified LIXIL’s seven key issues as focus areas for
mitigating potential human rights risks
FYE2022
• Appointed the executive officer in charge of legal, compliance,
and corporate audit to oversee human rights issues
• Revised the Human Rights Principles, which were approved
by the Board of Executive Officers and signed by the CEO
• Conducted a human rights survey of all global employees
(including indirect employees)
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Our Human Rights Due Diligence Process
We seek to mitigate human rights risks by analyzing and assessing
potential risks using the following human rights due diligence process.
In FYE2022, we conducted a human rights survey of all global
employees, including indirect employees. We planned three
measures to mitigate risks that have been identified through the
survey. In FYE2023, we implemented the following measures as part
of our risk mitigation plans with a particular focus on conducting and
strengthening training and workshops designed to improve
understanding of human rights.
• Members from the Human Rights Due Diligence Task Force who
are responsible for promoting business and human rights at LIXIL
took part in UNDP Business and Human Rights Academy training
and an individual guidance session with human rights experts (in
October 2022 and January 2023).
• Conducted business and human rights training with an external
expert for directors and executive officers, from which videos and
materials (in Japanese and English) were made available to all
employees via internal social media (in March 2023)
• Published a video montage of messages about human rights from
our global leaders, including the CEO (in November 2022)
• Strengthened communication via internal social media where all
employees can access by sharing information and knowledge
about human rights more frequently (now done once per month
on average throughout the year)
• Continually conducted awareness-building and/or training
programs for all employees on topics such as compliance,
information security, and D&I (throughout the year)
In addition to surveys on human rights, we also conduct
occupational safety audits, employee opinion surveys and
responsible procurement surveys as part of our efforts to identify
and mitigate potential human rights risks in our own business and
our wider supply chain.
Concern-Raising System
LIXIL has established a concern-raising system that is operated in
accordance with its policies on confidentiality, prohibition of
retaliation, and procedures for reporting concerns.
We receive concerns through the LIXIL Compliance Hotline –
Speak Up!, which is available online in 18 languages and accessible
to all group employees, including those at subsidiaries outside
Japan, and external stakeholders such as suppliers and other
business partners. In Japan, we also provide a reporting channel
with external lawyers serving as contacts. We accept anonymous
reporting through either channel.
Concern-Raising System >
Concern-raising system
Engagement with stakeholders
Conducting consistent human rights training
Maintain a clear grasp of
human rights issues we
face by communicating
with stakeholders, and
determine our human
rights principles and key
issues. Reflect human
rights elements in other
corporate principles and
policies.
Conduct human rights
risk assessment
across our operations
and supply chain, the
results of which will
be analyzed and
evaluated by the
Human Rights Due
Diligence Task Force.
Pinpoint any human
rights issues within
LIXIL based on the
results of our human
rights risk assessment,
and implement
measures to reduce
human rights-related
risks.
Regularly disclose
relevant information
through our website.
Reporting & disclosure
Remediation
Assessment
Commitment
Human Rights Due Diligence Process
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02
Scope: Suppliers to LIXIL Corporation and its subsidiaries. Figures in parentheses represent the number of applicable companies.
Japan: Procurement by operating sites in Japan
Overseas: Procurement by operating sites outside Japan
*1 Survey coverage for the Asia region began in stages from FYE2021. Excluding the Asia region, the coverage ratio is 92% (336 companies).
*2 No target has been set as the scope is currently under reconsideration.
RESPONSIBLE SUPPLY CHAIN MANAGEMENT
We are committed to promoting responsible procurement that upholds the environment and human rights, and strengthening partnerships with suppliers.
Our Approach
We base our procurement on the Ten Principles of the United Nations
Global Compact (UNGC) in the four areas of human rights, labor,
environment, and anti-corruption. In accordance with the UNGC
principles as well as our Procurement Principles and our Global
Policy on Third Party Compliance for Suppliers, we seek to build
sound partnerships with global suppliers to carry out procurement
activities. Based on the LIXIL Human Rights Principles, we strive to
uphold the human rights of our business partners including suppliers.
Our Supplier Code of Conduct compiled in FYE2018 has been
translated into multiple languages and distributed to suppliers,
requiring them to respect human rights, observe international labor
standards, conserve the global environment, and ensure fair
business conduct. In FYE2023, we revised the Code to add
stipulations related to factors such as human rights, labor, and the
environment, and strengthened our risk management system by
specifying the reporting hotline for violations and other concerns.
The Code now also states that we expect compliance not only from
direct suppliers, but also their own suppliers.
Additionally, we created Green Procurement Guidelines outlining
our policy and standards for procuring parts and materials that exert
the least impact on the environment. In Japan, we endorsed the
objectives of the “Conference on Promoting Partnership Building for
the Future” promoted by the Cabinet Office and the Small and
Medium Enterprise Agency and announced the “Declaration for
Building Partnerships.”
Promoting Responsible Procurement That
Upholds the Environment and Human Rights
LIXIL conducts risk assessments of new suppliers by checking
written responses to surveys on compliance. Depending on the
results of an initial risk screening, which are based on risks arising
from the relationship with suppliers (e.g., products and services,
characteristics, industry, and geographic locations), we also ask
about their measures for anti-corruption, labor management,
occupational health and safety, and human rights.
We also regularly check ongoing initiatives at existing suppliers
through responsible procurement surveys, site visits, online
interviews, and other means, and follow progress on any
improvements.
Conducting and Following Up
on Responsible Procurement Survey
LIXIL identifies supply chain risks by conducting a responsible
procurement survey and checking subsequent progress. Survey
results form part of the basis for selecting suppliers or determining
whether to continue business with an existing partner. For suppliers
that are classified as high risk because their conformity rates are
substandard, we provide site visits, education, and other forms of
individual guidance that help promote sustainable partnerships and
strengthen our supplier base, the primary goals of our supply chain
management strategy.
Activities
KPI
FYE2021
FYE2022
FYE2023
Targets
Results
Targets
Results
Targets
Results
Distribute
Procurement
Principles, follow up
on survey results and
related activities
Coverage ratio (based
on purchased amount)
Japan
90%
94% (1,293)
90%
90% (1,357)
90%
90% (1,185)
Overseas
90%
85% (378)*1
90%
90% (415)
90%
90% (421)
Total conformity rate
Japan
90%
91%
90%
91%
90%
92%
Overseas
—
89%
—
89%
—*2
92%
Improvement rate
Japan
100%
100%
100%
100%
100%
100%
Please click on the links below for related policies and guidelines:
LIXIL Procurement Principles >
Supplier Code of Conduct >
Green Procurement Guidelines >
Declaration for Building Partnerships (Japanese only) >
Responsible Procurement Survey Results
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OVERVIEW
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03
02
04
63
INTEGRATED REPORT 2023
GOVERNANCE
03
65
MESSAGE FROM THE CHAIRPERSON OF
THE BOARD OF DIRECTORS
66
THE BOARD OF DIRECTORS’
EFFECTIVENESS EVALUATION
67
ELECTION OF DIRECTOR CANDIDATES
68
LIXIL BOARD OF DIRECTORS
69
CORPORATE GOVERNANCE AT LIXIL
72
MESSAGE FROM THE CHAIRPERSON OF
THE NOMINATION COMMITTEE
73
MESSAGE FROM THE CHAIRPERSON OF
THE AUDIT COMMITTEE
74
MESSAGE FROM THE CHAIRPERSON OF
THE COMPENSATION COMMITTEE
75
EXECUTIVE COMPENSATION
77
MESSAGE FROM THE CHAIRPERSON OF
THE GOVERNANCE COMMITTEE
78
INTERNAL CONTROL SYSTEMS
AND COMPLIANCE
LIXIL’s Corporate Governance
Supports Sustainable Growth
OVERVIEW
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DATA
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03
02
04
65
INTEGRATED REPORT 2023
The FYE2022 evaluation of effectiveness confirmed that
LIXIL has made steady progress in restructuring governance.
During FYE2023, the Board of Directors focused on (1)
overseeing internal understanding and implementation of the
updated LIXIL Playbook, the Company’s guide for executing
its growth strategy; (2) overseeing initiatives to address
sustainability issues, as highlighted in Japan’s revised
Corporate Governance Code; and (3) holding strategic
discussions for sustainable growth.
Regarding (1), the updates to the LIXIL Playbook include
provisions for (i) implementing measures to achieve medium-
term financial targets in the rapidly changing business
environment; (ii) going beyond the medium-term financial
targets to also make LIXIL an excellent company; and (iii)
consolidating revisions to measures conducted by corporate
functions to support (i) and (ii). We confirmed that execution
status reports from the CEO and other executive officers
referenced the updated LIXIL Playbook.
Regarding (2), we have been focusing on execution
initiatives from the perspective of both risks and growth
opportunities. In terms of risks, we confirmed that LIXIL’s
initiatives for the environment and human rights were keeping
pace with the requirements of the international community.
In terms of growth opportunities, we confirmed that LIXIL
is doing more than just responding passively to the needs
of society – it is also drawing on Board opinions regarding
the positioning of environmental strategies as part of the
Company’s growth strategy and strengthening its human
resource strategy as a source of competitiveness.
With regard to (3), through the Governance Committee,
outside directors exchanged opinions concerning issues
the Board of Directors should discuss for the sustainable
growth of LIXIL. The issues identified were shared with
internal directors and then discussed at Board of Directors’
meetings. We were thus able to follow up on issues and
discussion points that were not sufficiently covered in
Executive Officers’ reports.
The Board of Directors continues to stand behind the
executive team’s approach of not compromising on
medium-term strategic measures even as challenges arise in
near-term business performance. Nonetheless, it is important
that the implementation of those strategic measures results
in a business structure that generates strong gross profit. As
such, I would like to focus on the status of their execution.
We also recognize the issue of continuously enhancing
the collective capabilities of the outside directors in order
to contribute to the Board of Directors’ ability to provide
effective direction for LIXIL’s sustainable growth.
We are committed to providing effective direction, and will support
sustainable growth by closely focusing on the status of strategy execution.
MESSAGE FROM THE CHAIRPERSON OF THE BOARD OF DIRECTORS
Chairperson of the Board of Directors
Masatoshi Matsuzaki
Themes
Main agenda items
The LIXIL
Playbook
・ Improvement of the global supply chain
・ Medium- to long-term growth strategies
Governance
・ Reports and discussions from three statutory
committees and the Governance Committee (CEO
succession plan, outside director succession plan,
response to the Board of Directors’ effectiveness
evaluation, etc.)
Sustainability
・ Identification of key themes for sustainable growth
・ Status review of initiatives pertaining to sustainability
・ Impact Strategy
Other
・ Capital policy (completion of share buybacks and
cancellation of treasury shares)
・ Status of Intellectual Property Strategy and its
governance structure
・ Status of activities and systems pertaining to
other key themes (information security, quality
management, safety and health, etc.)
Main Agenda Items for FYE2023
Note: Excludes agenda items related to financial results
OVERVIEW
GOVERNANCE
STRATEGY
DATA
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INTEGRATED REPORT 2023
THE BOARD OF DIRECTORS’ EFFECTIVENESS EVALUATION
The evaluation is performed to confirm the effectiveness of the Board of Directors and the committees, and to identify
medium- to long-term issues with regard to improving their effectiveness.
Progress on Priority Issues from FYE2022
Priority
issues
(1) Reconfirm the role of
the Board of Directors
and strengthen strategy
discussions to suit the
new phase
(2) Re-examine the ideal committee
activities required of a company
with a nomination committee,
etc.
(3) Implement an outside
director succession plan
to continuously support
the newly restructured
governance system
(4) Implement a CEO
succession plan to achieve
continued corporate value
improvement
Implemented
improvements
Formed consensus on 11
important themes for the
Company’s sustainable
growth and set them as
agenda for the Board of
Directors' meetings
Deliberate on each committee’s
issues across the organization
at meetings of the Governance
Committee (e.g., how organizational
audits should be conducted at
a company with a nomination
committee, etc.)
Re-examined the
appropriateness of the
succession plan at the
Nomination Committee in
FYE2023, then implemented
as per the plan
Confirm and update the list of
possible successors; promote
understanding of the next
generation of leaders, including
executive officer successor
candidates
Results of
implementation
As a result of the effectiveness evaluation for FYE2023, it has been confirmed that the Board of Directors and the committees
are performing their role to “further contribute to the growth strategy” through implementation of high-priority measures for
each issue.
Priority
issues
(1) Establishment of an “ideal way of oversight” by
the Board of Directors
(2) Plan for smooth succession of outside directors
and assistance for their integration
(3) Promotion of measures for a stronger
organizational auditing system
Initiatives and Priority Issues for FYE2024
As a result of deliberations by the Governance Committee,
etc., the following priority issues were set for further
improving the effectiveness of the Board of Directors and its
committees. The Company will appoint an owner for each
issue and move forward with measures to resolve the issues.
Evaluation Process and Results for FYE2023
Implemented an evaluation by the external specialized
organization Board Advisors Japan, Inc. (questionnaire
for directors and executive officers as well as individual
interviews with directors).
Main
focuses
during
evaluation
(1) Whether progress on the four priority issues of
the previous fiscal year has been smooth
(2) Whether the transition from the “restructuring
of corporate governance” to the stage aiming
at “further enhancement of corporate value”
is under way
(3) Whether sufficient deliberations are held on
important management issues, etc.
Results
summary
(evaluation
by outside
specialist)
It was confirmed that the effectiveness of LIXIL’s
Board of Directors is ensured, and that the
main challenge of the Company’s corporate
governance has shifted from “restructuring
corporate governance” to the stage of “realizing
further enhancement of corporate value.”
Board of Directors’ Members in FYE2024
(As of June 21, 2023)
Directors with and
without concurrent
position as executive
officers
3 : 8
Directors concurrently
serving as executive
officers
Outside directors
ratio
3 : 8
Internal
directors
Male to female
ratio
7 : 4
Male
Nationality
10 : 1
Japanese
Directors not
concurrently
serving as executive officers
Outside
directors
Foreign
nationals
Female
Member
Independent
directors
Meetings
convened
Attendance
Kinya Seto
15
15
Sachio Matsumoto
15
15
Jin Song Montesano
15
15
Masatoshi Matsuzaki
○
15
15
Tamio Uchibori
○
15
14
Shiho Konno
○
15
15
Teruo Suzuki
○
15
15
Mayumi Tamura*
○
12
12
Yuji Nishiura
○
15
15
Daisuke Hamaguchi
○
15
15
Mariko Watahiki
○
15
15
Board of Directors’ Members, Meetings Convened,
and Attendance in FYE2023
* Appointed June 21, 2022
OVERVIEW
GOVERNANCE
STRATEGY
DATA
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INTEGRATED REPORT 2023
ELECTION OF DIRECTOR CANDIDATES
Assessment System for Outside Directors
We conduct periodic individual assessments of outside directors
for the purpose of assessing their contribution to the Company.
The second assessment was conducted in FYE2023, as follows.
(Summary of assessment method)
Subjects of assessment: Three outside directors (two appointed in
2021, and one appointed in 2022; simple evaluation for outside
director appointed in 2022)
Assessment method: Individual interviews with all directors, executive
officers, and others, by a specialized external organization
Main perspectives in the assessment:
● Whether the individual took actions that contributed to the
restructuring of the Company’s corporate governance
● Whether the individual asked appropriate questions in line with
the objectives of the agenda
● Contributions the individual made to any committees of which he
or she was a member
The results of the assessment were reported to the respective
outside director for the purpose of future improvement, and were
used in consideration by the Nomination Committee on the
succession plan for outside directors.
Skills Required of Directors
In order to appropriately supervise the Company’s execution of
business, the Board of Directors should be comprised of personnel
who have abundant experience and specialized knowledge. The
above table “Experience, Knowledge, and Expertise required of
Directors” (hereinafter, “skills”) sets forth areas of experience and
Composition of
the Board of Directors
and Committees
in FYE2024*
Experience, Knowledge,
and Expertise required
of Directors
Practical experience in corporate management
●
●
●
●
●
●
●
●
Experience in global business and
management
●
●
●
●
●
●
●
●
Experience in negotiating with
government agencies
●
●
●
●
●
●
●
●
Knowledge of accounting, finance, and M&A
●
●
●
●
●
Knowledge of legal and compliance
●
●
●
●
●
●
Knowledge of risk management
●
●
●
●
●
●
●
●
●
●
●
Knowledge of human resources training,
development, and labor
●
●
●
●
●
●
●
●
Knowledge of sales and marketing
●
●
●
●
Knowledge of manufacturing, technology,
and R&D
●
●
●
●
Knowledge of IT and digital
●
●
●
●
●
●
Chairperson of the Board and Committee Membership
Chairperson of the Board of Directors
◎
Nomination Committee
●
◎
●
●
Audit Committee
●
●
●
◎
Compensation Committee
●
●
◎
Governance Committee
●
●
●
●
●
●
◎
●
* Since June 21, 2023 ★ Independent officer ◎ Chairperson ● Committee member
Kinya Seto
Jin Song Montesano
★
Shiho Konno
★
Mayumi Tamura
★
Daisuke Hamaguchi
Sachio Matsumoto
★
Jun Aoki
★
Shigeki Ishizuka
★
Yuji Nishiura
★
Masatoshi Matsuzaki
★
Mariko Watahiki
knowledge that the Nomination Committee has determined to be
particularly important to LIXIL. The committee believes that it is
important that the Board of Directors should encompass these
skills as a whole. Under its corporate purpose of making better
homes a reality for everyone, everywhere, the Company is working
to achieve sustainable growth together with society through the
strategic initiatives and Impact Strategy of the LIXIL Playbook,
which lays out medium- to long-term management direction.
Toward that end, the Company believes that for the Board of
Directors to effectively fulfill its supervisory function with respect to
the execution of business, what is required from the perspective of
sustainability is the attitude or perspective of each individual
director, rather than simply skills. We expect the supervisory
function to be demonstrated through the expert skills of each
director, such as practical experience in corporate management,
knowledge of accounting, finance, and M&A, knowledge of risk
management, and knowledge of human resources training,
development, and labor.
Month
Internal director candidates
(reappointment/ new appointment)
Outside director candidates
(reappointment)
Outside director candidates
(new appointment)
Jul. 2022
Beginning of considerations by the Nomination Committee on the composition of the Board of Directors for the next term
Aug.
Decision on policy regarding the
succession plan for outside directors
Decision on the specialized external
organization for outsourced assessment
Formulation of outside director
search plan
Sep.
Discussion of method for implementing
individual outside director assessments
Oct.
Nov.
(Main assessment criteria)
● Ratio of internal directors to outside directors
● Experience, knowledge, and expertise
required of directors
● Ensuring diversity
Implementation of individual assessment
of outside directors by a specialized
external organization
Dec.
Interview of candidates for new appointment
by the Nomination Committee
Jan. 2023
Examination of the framework for the
next term based on the results of
discussions, etc. with the Chairperson of
the Nomination Committee and the CEO
Feedback of individual assessment results
Deliberation on policy regarding the
succession plan for outside directors for the
next term
Implementation of the Company’s
prescribed process for nomination
of director candidates (confirming
independence, etc.)
Feb.
Deliberation on the Board of Directors
composition/ committee composition, etc.
for the next term
Mar.
Determination of proposed director candidates/ proposed committee composition, etc. for the next term
Apr.
Finalization of skills matrix used from the end of the Shareholders’ Meeting held in June 2023
May
Disclosure of skills matrix
Jun.
Election of directors
Submission of proposal to the Shareholders’ Meeting for election of director candidates; election of directors for a one-year term based
on votes on the proposal
Implementation of effectiveness assessment of the composition of the Board of Directors
by a specialized external organization
Preparation of director candidate list
Creation of a candidate list based
on external search firm results and
recommendations from directors
(updated on an ongoing
basis thereafter)
Director, Representative Executive Officer,
Executive Vice President, Finance, Treasury,
M&A, and IR, and CFO
Number of Company shares owned: 105,131
Number of Phantom Stocks held: 41,368
SACHIO MATSUMOTO
Outside Director, Chairperson of Nomination
Committee, Member of Compensation
Committee, and Member of Governance
Committee
Number of Company shares owned: 0
Number of Phantom Stocks held: 2,000
YUJI NISHIURA
Outside Director, Chairperson of
Audit Committee and Member of
Governance Committee
Number of Company shares owned: 0
Number of Phantom Stocks held: 2,000
DAISUKE HAMAGUCHI
Outside Director, Chairperson of the Board
of Directors,
Chairperson of Governance Committee, and
Member of Nomination Committee
Number of Company shares owned: 0
Number of Phantom Stocks held: 2,000
MASATOSHI MATSUZAKI
Outside Director, Chairperson of
Compensation Committee, Member of
Nomination Committee, and Member of
Governance Committee
Lawyer
Number of Company shares owned: 5,000
Number of Phantom Stocks held: 2,000
MARIKO WATAHIKI
Director, Representative Executive Officer,
President, and CEO
Number of Company shares owned: 560,624
Number of Phantom Stocks held: 242,315
KINYA SETO
Director, Representative Executive Officer,
Executive Vice President, Human Resources,
Communications, External Affairs, and
Impact Strategy, and Chief People Officer
Number of Company shares owned: 67,983
Number of Phantom Stocks held: 33,304
JIN SONG MONTESANO
Outside Director, Member of Nomination
Committee, Member of Compensation
Committee, and Member of Governance
Committee
First-class architect
Number of Company shares owned: 0
Number of Phantom Stocks held: 0
JUN AOKI
Outside Director, Member of Audit Committee
and Member of Governance Committee
Lawyer
Number of Company shares owned: 0
Number of Phantom Stocks held: 2,000
SHIHO KONNO
Outside Director, Member of Audit Committee
and Member of Governance Committee
Number of Company shares owned: 0
Number of Phantom Stocks held: 0
SHIGEKI ISHIZUKA
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
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68
INTEGRATED REPORT 2023
LIXIL BOARD OF DIRECTORS (As of June 21, 2023)*
Outside Director, Member of Audit
Committee and Member of Governance
Committee
Number of Company shares owned: 0
Number of Phantom Stocks held: 2,000
MAYUMI TAMURA
Profiles and reasons for nomination of directors
are available on our corporate website.
www.lixil.com/en/about/board/
* The number of Company shares and Phantom Stocks held are as of June 1, 2023.
OVERVIEW
GOVERNANCE
STRATEGY
DATA
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69
INTEGRATED REPORT 2023
CORPORATE GOVERNANCE AT LIXIL
LIXIL Corporation has adopted the corporate governance
structure of a “Company with Nomination Committee, etc.” as
outlined in Japan’s Companies Act. Under this structure,
corporate governance is founded on management execution by
executive officers and other management personnel, and
management supervision by the Board of Directors. However,
the Board of Directors’ role goes beyond simply supervising
management execution. By establishing an environment that
supports an appropriate risk appetite on the part of
management, the Board facilitates the construction of a
framework that ensures decision-making is well-reasoned, quick,
and decisive.
In order to continuously enhance corporate governance, the
Company has voluntarily established the Governance Committee
and convenes various voluntary committees as appropriate,
comprising members of the executive team. These committees
discuss management strategies, Impact Strategy, medium- and
long-term policies, and investment-related matters, thereby
accelerating decision-making while enhancing the effectiveness
of governance.
The Board of Directors is responsible for reviewing the Impact
Strategy formulated by the executive team and approving it as a
policy, and continuously verifies that this policy is aligned with
LIXIL’s management strategies (in terms of allocation of
management resources to priority areas such as investments in
human capital or intellectual property; business portfolio
composition; and other aspects).
For further details regarding the Company’s corporate
governance, internal control systems, and other related
matters, please visit our corporate website.
www.lixil.com/en/about/governance/
Impact Strategy Promotion and Risk Management Structure
These bodies work with the relevant committees to make adjustments to Impact
Strategy-related and ESG-related items, and manage and track commitments in the
field of priority Impact Strategy initiatives.
Report
Report
Formulation and approval
of strategy and policy
Report, information sharing, adjustment
• Human Rights Due Diligence
Task Force, etc.
• Progress reports to Impact
Strategy Committee
Board of Directors
Board of Executive Officers
SATO
Advisory Board
Environmental
Strategy Committee
Diversity & Inclusion
Committee
Sustainability-related task forces
Impact Strategy Committee
Approval and supervision
of strategy and policy
Management Control/Supervision
LIXIL Corporation
Nomination Committee
Compensation Committee
Directors
Board of Directors
Chairperson of the Board
(Each division)
Corporate functions
Business divisions
(such as Technology division)
Board of Executive Officers
Alignment
Appointment/Removal
Appointment/Removal
Report
Audit
Decision on compensation
Decision on proposal for election
dismissal of directors
Election/Dismissal
Report/Advice
Appointment/Removal
Election/Dismissal
Decision on compensation
Election/
Dismissal
Report
Report
Report
Audit
Audit
Alignment
Alignment
Alignment
Audit
Audit
Audit
Audit
Report/
Alignment
Governance Committee
(Monitoring and supervision of corporate governance)
Supervision
Execution
Shareholders’ Meeting
Group companies (Japan/international)
Dedicated Auditors (Company Auditors) (major subsidiaries in Japan)
Voluntary committees
Investment Review Committee
M&A Committee
Diversity & Inclusion Committee
Risk Management Committee
Impact Strategy Committee
Environmental Strategy Committee
SATO Advisory Board
Information Security Committee
Compensation and Benefits Committee
Compliance Committee
Group Credit Committee
Stock Sale and Purchase Review Committee
Internal audit divisions
Financial Auditors
Representative Executive Officers and Executive Officers
Audit Committee
Governance Structure (As of June 21, 2023)
•Introduced and disclosed skills matrix for the Board of Directors
• Established the Governance Committee
• Changed the composition of three statutory committees and the Governance
Committee to solely independent outside directors
•Established CEO succession plan
• Conducted mutual nomination ballot of outside directors (overseen by an external
organization)
• Approved annual budget for Board of Directors and committees’ activities*1
• Implemented training for directors and executive officers (training sessions, site visits,
and others) and systematized orientation for directors and executive officers at the
time of their appointment*1
• Implemented assessment of executive officers by an outside professional organization
• Approved Corporate Responsibility Strategy policy*3
• Approved transition to Impact Strategy
Strengthening the perspective of “effectiveness and transparency”
Construction
of governance
structure
Initiatives to
strengthen
effectiveness
Promoting sustainability
• Outsourced evaluation of the
effectiveness of the Board
of Directors to a specialized
external organization*2
• Increased the number
of outside directors to
seven (ratio of outside
directors: 70%)
2021
• Increased the number
of outside directors to
eight (ratio of outside
directors: 73%)
2022
2023
*1 Conducted annually since then *2 Outsourced at least once every three years thereafter *3 Transitioned from Corporate Responsibility Strategy to Impact Strategy in 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
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INTEGRATED REPORT 2023
System for Providing Information to Outside Directors
We hold training sessions given by outside lecturers for all
officers, including outside directors, on important management
matters such as risk management at least once a year. In
addition, pursuant to requests from outside directors we are
implementing the following measures to deepen understanding
of LIXIL’s businesses and promote substantive Board discussion.
(1) Preliminary briefings on important themes
(2) Visits to manufacturing sites and other business locations
(3) Provision of basic information about the LIXIL group,
including production systems and personnel composition
System for Providing Information to Newly Appointed
Outside Directors
Shortly after assuming office, outside directors receive
guidance about their responsibilities from executive officers.
In addition, outside directors participate in inspections of key
facilities such as the primary factories of LWT Japan and LHT
in Japan and flagship showrooms.
Initiatives in FYE2023
Outside directors participated in on-site inspections of the
Otani Factory and an exhibition on the new technology of
LWT Japan. We also held training sessions for officers with
the theme of “business
and human rights” as
part of risk management
training.
SUPPORT SYSTEM FOR OUTSIDE DIRECTORS
Outside directors regularly have the opportunity to visit manufacturing sites, etc., and participate in training sessions, through which they are able to deepen their understanding of LIXIL’s various businesses
and important management issues.
Site visit at Otani Factory
GOVERNANCE REFORM IN RECENT YEARS
(Years ended March 31)
OVERVIEW
GOVERNANCE
STRATEGY
DATA
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INTEGRATED REPORT 2023
■ Board of Directors
15
Made decisions on matters specified by law, basic management policies, and
important management matters, while monitoring the conduct of duties of directors
and executive officers.
■ Nomination Committee
13
Made decisions on the content of proposals to be submitted to the Shareholders’
Meeting regarding the election and removal of directors. Reported its opinion to the
Board of Directors when requested, such as on the election, appointment, removal,
and dismissal of candidates for executive officer and Representative Executive
Officer (CEO), and on the appointment and dismissal of the Chairperson of the
Board, members, and chairpersons of each committee, etc.
■ Audit Committee
14
In addition to auditing the conduct of duties by directors and executive officers,
discussed and made decisions on auditing policy, auditing plans, and the content of
proposals to be submitted to the Shareholders’ Meeting regarding the election and
removal of financial auditors.
■ Compensation Committee
11
Made decisions regarding the compensation of directors and executive officers
and their individual compensation received from the Company as consideration
for duties.
■ Governance Committee
7
Continually enhances the Company’s corporate governance, discusses or advises
the Board of Directors on matters such as reviewing and amending the LIXIL
Corporate Governance General Policy, and manages the implementation of the
evaluation of the effectiveness of the Board of Directors.
■ Investment Review Committee
21
Deliberated and made decisions on material investments (excluding those relating
to M&A), financing, and matters relating to the establishment, reorganization, and
restructuring of subsidiaries (conducted by the Company and its subsidiaries) within
the authority delegated by the Board of Executive Officers.
■M&A Committee
31
Deliberated and made decisions on matters relating to M&A (including divestment
of business) conducted by the Company and its subsidiaries, within the authority
delegated by the Board of Executive Officers.
■ Compliance Committee
4
Resolved the important compliance strategy and plans as well as reported on
training and promotional activities of the LIXIL group of companies.
■ Risk Management Committee*
0
Endeavors to improve the ability to deal with future risks by predicting extraordinary
risks of the Company and the LIXIL group of companies and establishing systems
to address them in advance.
■ Corporate Responsibility Committee (Now Impact Strategy Committee)
4
Selected and reviewed material issues for the overall LIXIL group of companies,
formulated the targets as well as the initiatives of the CR Strategy, and provided
oversight and guidance for the implementation of priority themes and activities.
■ SATO Advisory Board
3
Reviewed and provided guidance on SATO’s overall business strategy and key
operational issues such as annual targets and strategic plans, internal and external
partnerships, and risk management.
■ Environmental Strategy Committee
8
Established and implemented environmental strategies, including the formulation
of regulations and policies related to environmental governance, deliberation
and decision-making on measures to address environment-related issues, and
management and monitoring of group-wide environmental targets.
■ Compensation and Benefits Committee
4
Made decisions regarding compensation and benefits structures for officers as
well as employees of the Company and the LIXIL group of companies and officers’
individual compensation, except for the matters to be exclusively resolved by the
Compensation Committee, while monitoring HR policies in terms of compensation
and benefits.
■ Information Security Committee
4
As the committee responsible for decision-making on fundamental matters related
to group-wide information security and data privacy, decided on and approved
relevant policies, resolved issues, approved implementation of countermeasures,
and conducted measures to ensure awareness.
■ Group Credit Committee
4
Resolved and deliberated on credit management related to business transactions
with third parties conducted by the Company and its subsidiaries in order to
accelerate decision-making and enhance effectiveness of governance.
■ Stock Sale and Purchase Review Committee
8
Conducted reviews and examined insider trading regulations in order to prevent rule
violations as well as to fulfill the Company’s social responsibilities as a business in
the event that officers or employees give prior notification they will be engaging in
the sale or purchase of the Company’s shares and others.
■ Diversity & Inclusion Committee
1
Supervised formulation and implementation of basic diversity and inclusion policies
and roadmaps throughout the LIXIL group of companies.
■ Board of Executive Officers
14
As the decision-making body responsible for the execution of business activities in
accordance with the basic policies approved by the Board of Directors, this Board
decided on important matters relating to the execution of business in the Company
and the LIXIL group of companies as a whole.
Status of Cross Shareholdings
LIXIL and its group companies maintain cross shareholdings in
cases where it is deemed necessary in terms of facilitating sales
activities or as part of external alliances required for the
Company’s business activities. Every year, we conduct a
comprehensive evaluation of each cross-held stock in terms of
the status of business dealings between the issuer and the
Company, the total amount invested, and whether the cost of
capital matches the benefits and risks of the holding. The Board
of Directors subsequently verifies the content of these
evaluations. Due to changes in the LIXIL group’s operating
environment, we are working to reduce cross shareholdings in
cases where reevaluation indicates that the rationale for the
cross shareholding is no longer valid. As a result, as of March
31, 2023, the total number of (listed) cross-held stocks was 47.
* There was no meeting in FYE2023 because we operated flexible risk management systems, such as activating task forces as necessary at headquarters and in regions, in preparation for increasing
levels of risk.
Balance sheet amounts (¥ million)
Proportion of total equity (%)
* Total cross shareholdings held by the Company or the former LIXIL Corporation
Category
FYE2020
FYE2021
FYE2022
FYE2023
Number of
cross-held
stocks
Listed
58
53
49
47
Unlisted
105
102
98
88
Total
163
155
147
135
Balance
sheet amounts
(¥ million)
Listed
36,185
50,317
38,733
27,236
Unlisted
1,343
1,330
1,313
1,570
Total
37,528
51,647
40,046
28,806
Cross Shareholdings and Balance Sheet Amounts*
Cross Shareholdings
FYE
2020
FYE
2021
FYE
2022
FYE
2023
28,806
40,046
7.0
9.3
6.5
4.6
37,528
51,647
Number of Meetings Held during FYE2023
OVERVIEW
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STRATEGY
DATA
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INTEGRATED REPORT 2023
MESSAGE FROM THE CHAIRPERSON OF THE NOMINATION COMMITTEE
* Since June 21, 2023
* Appointed June 21, 2022
Yuji Nishiura
Chairperson of the Nomination Committee
Outlook on Long-term Issues and Direction of Initiatives
The Nomination Committee transitioned from a phase of
restructuring corporate governance to a phase of ensuring
LIXIL’s sustainable growth, which entails focusing on building
the foundation for transforming the management team for the
next generation. As such, we are taking the following actions:
(1) Clarifying and improving transparency of the
reappointment process for the CEO and appointment and
election process for directors and executive officers
(2) Gaining a greater understanding of the next generation of
human resources and monitoring training plans
(3) Succession planning for outside directors and
implementing individual assessments of outside directors
(4) Reviewing the composition of committees
Specific Initiatives and Progress in FYE2023
Initiatives to build the foundation for transforming the
management team for the next generation proceeded as
planned. During FYE2023, we focused on gaining an
understanding of the next generation of human resources
and monitoring training plans, as well as succession planning
for outside directors. One specific example was to identify
future executive officer candidates through group interviews.
Another example is the ongoing implementation of individual
assessments of outside directors via an initiative unique to
LIXIL. Based on the insights gained from these assessments
we have been identifying outside director candidates and
considering how to plan for their succession. These activities
helped us lay the groundwork for transforming the
management team for the next generation and achieve
further increased effectiveness of the Board of Directors and
the various committees. In FYE2023, the above initiatives
resulted in the appointment of one new representative
executive officer, the election of two new outside directors,
and the retirement of two outside directors.
Key Initiatives and Future Direction
The Nomination Committee remains committed to the goals of
ongoing qualitative improvement of corporate governance and
transformation for the next generation.
Specific initiatives include the following:
(1) Monitor human resource development based on the CEO
succession plan
(2) Identify management personnel who will lead the next
generation and expand the list of executive officer
successor candidates
(3) Formulate a succession plan for outside directors to
achieve further qualitative improvement of the Board
of Directors
Member
Meetings convened
Attendance
Yuji Nishiura (Chairperson)
13
13
Shiho Konno*
10
10
Daisuke Hamaguchi
13
13
Masatoshi Matsuzaki
13
13
Mariko Watahiki
13
13
Nomination Committee Members, Meetings Convened, and Attendance in FYE2023
Member
Yuji Nishiura (Chairperson)
Jun Aoki
Masatoshi Matsuzaki
Mariko Watahiki
Nomination Committee Members*
in FYE2024
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
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73
INTEGRATED REPORT 2023
MESSAGE FROM THE CHAIRPERSON OF THE AUDIT COMMITTEE
Outlook on Long-term Issues and Direction of Initiatives
While aiming to enhance efficiency and effectiveness, the
Company’s Audit Committee conducts audits in close
collaboration with the internal audit divisions of the Company and
its subsidiaries. The Audit Committee Office was established to
assist the Audit Committee, and it encompasses the Audit
Committee Secretariat and company auditors. Company auditors
are assigned to major subsidiaries in order to enhance the
internal control of the group companies of LIXIL and to
strengthen corporate governance. The Audit Committee is
responsible for deciding on personnel changes and
performance evaluations for Audit Committee Secretariat
members and company auditors to ensure independence from
executive officers.
Specific Initiatives and Progress in FYE2023
The Audit Committee convenes in the month before Board of
Directors’ meetings, as well as whenever necessary. In
FYE2023 the committee met 14 times. Under the annual
auditing plan, there were four opportunities for exchanging
opinions with the representative executive officer and CEO
and three interviews were held with executive officers.
Members of the committee also attended important internal
meetings such as those of the Board of Executive Officers,
and gathered information. At the monthly Audit Committee
meetings, the Corporate Audit Division and directly appointed
company auditors presented audit reports and the committee
members gave directions as appropriate. Also, three
meetings of company auditors assigned to group companies
were held to confirm the status of internal control
implementation by each subsidiary and to share group-wide
auditing policies. Site inspections of four subsidiaries and two
factories in Japan were also conducted. For bases outside
Japan, the Audit Committee received reports on the results
of audits from Corporate Audit, and one member of the Audit
Committee was dispatched to Thailand and Vietnam to
conduct a site audit. The committee also conferred and
exchanged information with local financial auditors from
North America and Europe.
Twelve information-exchange sessions and other
meetings were held with financial auditors, and discussions
took place regarding the financial auditors’ management
letter, reports on the status of audits, consideration of key
audit matters (KAM), and revisions to materials published by
the International Ethical Standards Board for Accountants
(IESBA).
Key Initiatives and Future Direction
The composition of the FYE2024 Audit Committee was
decided at the Board of Directors’ meeting that took place
after the Annual Shareholders’ Meeting held on June 21,
2023. In addition to developing a new structure, the
committee will build on its FYE2023 initiatives to establish
and further develop group-wide audit frameworks within and
outside Japan, as well as to conduct effective, efficient, and
transparent audits.
Member
Meetings convened
Attendance
Teruo Suzuki*1 (Chairperson)
14
14
Tamio Uchibori*1
14
14
Shiho Konno
14
14
Mayumi Tamura*2
9
9
Audit Committee Members, Meetings Convened, and Attendance in FYE2023
Member
Daisuke Hamaguchi (Chairperson)
Shigeki Ishizuka
Shiho Konno
Mayumi Tamura
Audit Committee Members*
in FYE2024
* Since June 21, 2023
*1 Resigned June 21, 2023 *2 Appointed June 21, 2022
Daisuke Hamaguchi
Chairperson of the Audit Committee
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
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INTEGRATED REPORT 2023
MESSAGE FROM THE CHAIRPERSON OF THE COMPENSATION COMMITTEE
Outlook on Long-term Issues and Direction of Initiatives
In the Compensation Committee, we fully understand the importance
of securing superior officers. After repeated discussions with the CEO
and specialized external agencies on the subject of a compensation
system for executive officers that is competitive by global standards,
we have confirmed the following policy going forward.
• To secure essential executive officers with global roles and
responsibilities who have proven skills and experience on
the international stage, we will work to further align
compensation levels with global standards rather than
Japanese industry standards.
• Nevertheless, given the wide divergence between global
and Japanese industry compensation standards, we will
carefully restructure compensation with due consideration
of equitability within the Company based on the degree of
contribution to operating performance.
• In further stepping up our efforts to address ESG issues,
we intend to increase the weighting of Stock-linked
Compensation for officers in roles that make significant
contributions to ESG, with the purpose of enhancing
incentives to improve corporate value over the medium to
long term.
Specific Initiatives and Progress in FYE2023
We have been applying the Phantom Stock Plan, which is a
stock-linked monetary compensation plan for directors and
executive officers, since FYE2020. In addition to this plan, we
resolved to introduce the Restricted Stock Compensation Plan
for executive officers from April 2023 in order to encourage
them to deepen their shared interests with shareholders over
their term of office and work to create value over the medium
to long term. Furthermore, we introduced Stock Ownership
Guidelines, which provide recommendations for the number of
Company shares to be held by executive officers during their
term of office.
We decided against revising the compensation of directors
and executive officers for FYE2024 upward in light of the
Company’s performance in FYE2023.
Key Initiatives and Future Direction
We will continue our activities while constantly monitoring
whether the executive compensation system is functioning
appropriately as a strong motivator for the management team
to work together toward achieving management goals and
responding appropriately to drastically changing economic
and social conditions and the evolution of the Company’s
management strategy.
Member
Meetings convened
Attendance
Daisuke Hamaguchi (Chairperson)
11
11
Tamio Uchibori*1
11
11
Yuji Nishiura
11
11
Mariko Watahiki*2
9
9
Compensation Committee Members, Meetings Convened, and Attendance in FYE2023
Member
Mariko Watahiki (Chairperson)
Jun Aoki
Yuji Nishiura
Compensation Committee Members*
in FYE2024
*1 Resigned June 21, 2023 *2 Appointed June 21, 2022
* Since June 21, 2023
Mariko Watahiki
Chairperson of the Compensation Committee
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GOVERNANCE
STRATEGY
DATA
01
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INTEGRATED REPORT 2023
EXECUTIVE COMPENSATION
Compensation Basic Policies for
Directors and Executive Officers
The compensation for directors and executive officers shall be
determined in accordance with the following basic policies.
• Foster improvement of short-, medium-, and long-term
business results and sustainable corporate value.
• Attract and retain the best talent who are necessary to
foster business growth globally.
• Ensure a fair and reasonable decision process with regard
to compensation that will provide accountability to
shareholders, employees, and all stakeholders.
• Consider and discuss based on the economic and social
circumstances, our business condition, and objective
indexes and advice of external specialized agencies at the
Compensation Committee.
• Individual compensation shall be managed in consideration
of role and responsibility, business performance, experience,
and difficulty of securing personnel, etc.
Compensation System
The compensation structures for directors who monitor and
supervise the Company’s management, and for executive
officers who are responsible for the performance of business,
shall be separate. When a director concurrently serves as an
executive officer, the compensation system for executive
officers shall be applied.
Compensation Mix
The Compensation Committee determines compensation mix
for each officer based on role and responsibility, business
performance, experience, and difficulty of securing personnel,
etc. for each individual, as well as ESG action targets, etc. for
each individual in line with the purpose of the compensation
basic policies. The committee sets a higher ratio of
Stock-linked Compensation to total compensation for officers
who are expected to contribute significantly to improving
corporate value from a medium- to long-term perspective,
especially through structural reform or initiatives related to
ESG issues.
The chart below shows the base amount for Performance-
linked Compensation and Stock-linked Compensation, which are
different from the actual amount paid.
Annual Base Salary
Annual Base Salary shall be determined individually, based on
role and responsibility, business performance, experience, and
difficulty of securing personnel, etc. of each officer, while using the
external specialized agencies’ data for executive compensation
and comparing the Company’s compensation levels with
those of similarly sized companies inside and outside Japan,
in line with the purpose of the compensation basic policies.
Performance-linked Compensation
To encourage executive officers to work together to achieve
single-year management goals and to ensure that they are
fairly and equitably rewarded in accordance with the results of
their performance, Performance-linked Compensation is
calculated based on only company-wide performance.
The base amount of Performance-linked Compensation
shall be calculated by multiplying the Annual Base Salary by
the coefficient that is set based on the role and responsibility,
etc. of each executive officer, in line with the purpose of the
compensation basic policies. Business targets in FYE2023
included ROIC, core earnings, and profit for the year
attributable to owners of the parent (net profit), just as they did
in FYE2022. In accordance with the table below, the payout
rate for FYE2023 was 0%.
There is no Performance-linked Compensation in the
compensation system for outside directors, as they are in the
position of monitoring and supervising management.
Business target
achievement rate
Payout rate
Less than 50%
0%
50% or more but
less than 100%
Same as business target
achievement rate
100% or more but
less than 150%
([Business target achievement rate
– 100] × 2 + 100)%
150% or more
200%
Payout Rate According to Business Target
Achievement Rate
Business Target Achievement Rate for FYE2023
Performance-linked
Compensation
Base amount of
Performance-linked
Compensation
＝
×
Payout rate according
to business target
achievement rate
Business
target items
Ratio versus
all business
targets
Target
Result
Business target
achievement rate
([Result ÷ Target] × 100)
ROIC
40%
5.0%
1.5%
30.0%
Core earnings
30%
¥81,000 million
¥25,745 million
31.8%
Net profit
30%
¥51,000 million
¥15,991 million
31.4%
Business target achievement rate for all items
Total of each business target achievement rate
( multiplied by ratio versus all business targets )
30.9%
Stock-linked
Compensation
50%
Performance-
linked
Compensation
25%
Annual
Base Salary
25%
Chairperson
Allowance
4%
Stock-linked
Compensation
22%
Performance-
linked
Compensation
26%
Stock-linked
Compensation
22%
Stock-linked
Compensation
30%
Performance-
linked
Compensation
30%
Annual
Base Salary
40%
Annual
Base Salary
74%
Annual
Base Salary
52%
President
Vice
President
Outside
Directors
Executive
Vice
Presidents
Note:
The compensation of executive vice presidents and outside directors are the median values.
OVERVIEW
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DATA
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INTEGRATED REPORT 2023
Stock-linked Compensation
The Company has been applying the Phantom Stock Plan,
which is a stock-linked monetary compensation plan for
directors and executive officers, since FYE2020. The
Company introduced the Restricted Stock Compensation
Plan for executive officers from April 2023 in order to
encourage them to deepen their shared interests with
shareholders over their term of office and work to create
value over the medium to long term. In principle, the
Phantom Stock Plan and Restricted Stock Compensation
Plan shall each account for 50% of Stock-linked
Compensation for executive officers.
Stock-linked Compensation I: Phantom Stock Plan
The Company introduced the Phantom Stock Plan for three
reasons: to encourage directors and executive officers to
monitor, supervise, and make management decisions and
thereby sustainably enhance the corporate value of the
Company over the medium to long term; to further promote
shared corporate value with shareholders of the Company;
and to attract and retain superior personnel from around the
globe by standardizing the global officer compensation
system. In this compensation plan, the Company grants
Phantom Stock to directors on the day of the Annual
Shareholders’ Meeting, and to executive officers on the first
day of the fiscal year. The number of Phantom Stock granted
shall be determined by dividing the base amount (which is
calculated by multiplying the Annual Base Salary by the
coefficient set based on the role and responsibility of each
officer) by the stock price* at the time of grant in line with the
purpose of the compensation basic policies. The holding
period of Phantom Stock is one year for directors and three
years for executive officers, and the vesting amount shall be
determined by multiplying the stock price* at the time of
vesting by the number of Phantom Stock held. In summary,
the amount of compensation increases or decreases in
accordance with changes in the stock price during the
holding period.
Stock-linked Compensation II:
Restricted Stock Compensation Plan
In principle, the Company allots shares within two months of
the first day of the fiscal year. The number of shares allotted
shall be determined by dividing the base amount (which is
calculated by multiplying the Annual Base Salary by the
coefficient set based on the role and responsibility of each
officer) by the stock price* at the time of allotment in line with
the purpose of the compensation basic policies. The transfer
restriction shall be lifted when the executive officer leaves
office. However, if the executive officer remains an officer
under the Companies Act, the transfer restriction shall be lifted
when the executive officer retires from that position.
Stock Ownership Guidelines
The Company has introduced Stock Ownership Guidelines
from FYE2024, which provide recommendations for the
number of the Company’s shares to be held by executive
officers during their term of office.
Malus and Clawback Provisions
With regard to Performance-linked Compensation and
Stock-linked Compensation, if there has been any material
accounting error by the Company or the Board of Directors
determines that there has been a material violation, etc. by
the officer concerned, the Compensation Committee may
decide to reduce or cancel pre-vested compensation and/or
demand the return of post-vested compensation based on
such reasons.
* The average closing price of the Company’s stock for the 30 business days prior to
each of the grant date and the vesting date shall be used.
* The average closing price of the Company’s stock for the 30 business days prior to
April 1, the first day of the fiscal year, shall be used.
Officer title
Total amount of
compensation
(¥ million)
Total amount of compensation by type (¥ million)
Number of
officers
receiving
Annual Base
Salary
Performance-linked
Compensation
Stock-linked
Compensation
Various
Allowances
Outside directors
175
140
ー
35
ー
8
Executive officers
1,222
575
ー
423
224
8
Total
1,397
715
ー
458
224
16
Total Amount of Compensation by Officer Title, by Compensation Type, and Number of Officers Receiving (FYE2023)
Notes:
1. The total amount of compensation shown above is the amount based on Japanese standards and includes compensation paid by the Company’s subsidiaries,
in addition to compensation paid by the Company.
2. The amount of Annual Base Salary for outside directors includes chairperson allowance.
3. Performance-linked Compensation and Stock-linked Compensation are the amounts that should be recorded as expenses for FYE2023.
4. Cost-of-living allowances and income tax allowances, etc. were paid as Various Allowances.
* Representative executive officers: Three times the amount of Annual Base Salary
Other executive officers: One time the amount of Annual Base Salary
*1 Resigned June 21, 2023 *2 Appointed June 21, 2022
Outlook on Long-term Issues and Direction of Initiatives
The Governance Committee’s objective is to complement the
functions of and collaborate with the Board of Directors and
the three statutory committees in continuously strengthening
LIXIL’s corporate governance.
In FYE2023, the Governance Committee primarily
focused on (1) following up on the results of the effectiveness
evaluation in FYE2022; (2) planning and executing the
effectiveness evaluation in FYE2023; (3) ensuring the Board
of Directors’ compliance with Japan’s revised Corporate
Governance Code; and (4) reviewing disclosure materials and
advising on improvements.
Specific Initiatives and Progress in FYE2023
(1) In following up on the results of the effectiveness
evaluation in FYE2022, outside directors discussed which
topics the Board should table for consideration in order to
sustainably enhance corporate value. The conclusions of
those discussions were shared with executives and
reflected in the Board agenda.
(2) In planning and executing the effectiveness evaluation in
FYE2023, the committee formulated questions to confirm
progress toward the next phase of the restructuring of
governance, and implemented the evaluation. Based on
the results of the evaluation, the committee was able to
confirm progress, including the qualitative improvement of
discussions at Board meetings, and share issues to
address, which are presented below.
(3) In ensuring the Board of Directors’ compliance with
Japan’s revised Corporate Governance Code, the
committee reviewed matters requiring a response from
the Board under the revised code, such as the Board’s
involvement in addressing sustainability issues.
(4) In reviewing disclosure materials and advising on
improvements, outside directors discussed improvements
with the personnel in charge regarding the content of the
notice of convocation of the Annual Shareholders’
Meeting, the integrated report, and the annual securities
report. Suggestions for the integrated report included
those regarding the method of presentation for financial
targets and LIXIL’s value creation process, and
consistency when discussing business strategy.
Key Initiatives and Future Direction
The effectiveness evaluation in FYE2023 identified several
issues to follow up on: (1) establishment of an ideal way (i.e.,
best practices) of oversight; (2) the establishment of a plan
for the smooth succession of outside directors; and (3) the
functions required of the Company’s Audit Committee. During
FYE2024, the Governance Committee will devote a significant
amount of time to deepening discussions on each issue
between committee members and the persons with
responsibility for those issues.
Member
Meetings convened
Attendance
Masatoshi Matsuzaki (Chairperson)
7
7
Tamio Uchibori*1
7
6
Shiho Konno
7
7
Teruo Suzuki*1
7
7
Mayumi Tamura*2
5
5
Yuji Nishiura
7
7
Daisuke Hamaguchi
7
7
Mariko Watahiki
7
7
Governance Committee Members, Meetings Convened, and Attendance in FYE2023
Member
Masatoshi Matsuzaki (Chairperson)
Jun Aoki
Shigeki Ishizuka
Shiho Konno
Mayumi Tamura
Yuji Nishiura
Daisuke Hamaguchi
Mariko Watahiki
Governance Committee Members*
in FYE2024
* Since June 21, 2023
OVERVIEW
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STRATEGY
DATA
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INTEGRATED REPORT 2023
MESSAGE FROM THE CHAIRPERSON OF THE GOVERNANCE COMMITTEE
Masatoshi Matsuzaki
Chairperson of the Governance Committee
INTERNAL CONTROL SYSTEMS AND COMPLIANCE
Risk Management
Internal Control Systems
LIXIL and its group companies build, operate, and evaluate
internal control systems to ensure the appropriateness
and efficiency of operations, as well as the reliability of
financial reporting in order to enhance corporate value. In
addition, we are strengthening our group-wide operational
management system through risk awareness and, as a
corporate group that emphasizes compliance management
we are building various systems that comply with laws
and regulations. As part of the system, the Chief Legal
and Compliance Officer, who is responsible for legal,
compliance, risk management, and corporate audit, is
structurally independent of our business lines in order to
promote robust risk management.
Enterprise Risk Management (ERM)
The LIXIL group strives to stably and continuously develop
its business through the implementation and operation of
ERM for the entire group. Risks related to crises that require
immediate response when they occur are also controlled
through crisis management as part of ERM.
Risk Management (RM)
The LIXIL group promotes a system of managing risks
whereby leaders identify risks that may influence the
achievement of management targets and take on the role of
risk owner responsible for addressing and managing them.
Risks are categorized into strategic risks and operational
risks. For strategic risks, efforts are made to collaborate
with relevant departments to ensure the framework
encompasses a wide range of perspectives. This includes
medium- to long-term perspectives such as management
policies, business strategies, and Impact Strategy, as well
as the perspectives of stakeholders. By identifying and
assessing risks that may hinder the achievement of our
goals for material issues, risks are prioritized as the basis
for taking risk measures. The risk management system
established for operational risks is autonomous, whereby
each organization and region holds meetings or sets
agendas regularly, or as necessary, to discuss and respond
to risks, which they then report to headquarters.
Crisis Management (CM)
A crisis management framework has been established at each
group company. We develop crisis management policies that
enable a swift initial response and escalation when a crisis
occurs. We have also put in place frameworks for the
establishment of crisis task forces whenever necessary at
various levels, such as at headquarters, departments, or local
business premises.
Understanding the importance of cybersecurity, the LIXIL
group has established and operates the LIXIL Computer
Security Incident Response Team (LIXIL-CSIRT) to minimize
the impact of cyberattacks, which are becoming increasingly
sophisticated. To ensure a quick response, we constantly
monitor computers and networks to detect problems at an
early stage and analyze the impact and cause of the problems.
We have also established a Business Continuity Plan (BCP) for
possible cyberattacks, as well as a crisis management system
that includes emergency reporting criteria and reporting flows,
which enables a coordinated response among departments.
Risk Management Initiatives (Years ended March 31)
2018
2020
2019
2021
2022
2023
• Developed and rolled
out crisis management
handbook
• Worked to
optimize
Business
Continuity Plan
in Japan
• Identified material risks for FYE2020 at the
Board of Executive Officers’ meeting
• Established a Workplace group to
share and discuss risks on political,
geopolitical and social trends
• Identified risks that
may impede the
achievement of goals
for material issues
• Transitioned to
an online crisis
management
task force at
headquarters
• Implemented COVID-19
countermeasures
• Established task force
in Europe to respond to
recent geopolitical risks
• Established
a BCP for
cyberattacks
RM
CM
Intellectual Property Strategy
www.lixil.com/en/investor/strategy/ip_index.html
Material Issues
www.lixil.com/en/impact/structure/issues.html
Business Risks
www.lixil.com/en/investor/strategy/risks.html
The following are available on our corporate website.
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INTEGRATED REPORT 2023
Compliance
LIXIL Code of Conduct
The LIXIL Code of Conduct (the “Code of Conduct”) is a set of
rules to be adhered to by all officers and employees worldwide
in order to undertake business activities appropriately and with
shared values and ethics. The Code of Conduct is available in
19 languages and is regularly updated. Every year, the
Company conducts training and requires all company officers
and employees to pledge to comply with the terms of the Code
of Conduct. Furthermore, global policies and detailed rules
aligned with the Code of Conduct have been put in place for
specific fields posing a high risk.
For further details regarding the Code of Conduct, please visit our corporate website.
www.lixil.com/en/about/governance/pdf/LIXIL_CoC_en.pdf
LIXIL Human Rights Principles
The LIXIL group reviewed the LIXIL Human Rights Principles
in June 2021, and made revisions to strengthen governance
and efforts to respect human rights, and to improve the
transparency of processes for addressing human rights issues
and fulfilling accountability responsibilities.
For further details regarding the Human Rights Principles, please visit our corporate website.
www.lixil.com/en/impact/society/h_rights.html
Compliance System
In addition to the Compliance Committees of the LIXIL
group and affiliates in Japan, Compliance Committees
have been established in each region. These committees
provide a platform for reviewing initiatives and discussing
countermeasures. Following the transition to a new system in
January 2022, LIXIL has worked to enhance risk management
and further solidify the compliance culture and system of LIXIL
and its group companies. The new system promotes efficiency
and standardization of programs at the global level.
Corporate Culture
LIXIL group management is working to raise compliance
awareness and embed a culture of compliance through
measures such as video messages about compliance from
management. We also conduct educational events such
as contests in Japan and globally so that employees can
increase their compliance awareness in an engaging setting
on their own accord.
Education and Training Programs
The LIXIL group provides training on compliance and on
laws and regulations for new employees, new managers,
and executives. Programs are also conducted for all
officers and employees on global policies. The LIXIL group
has developed effective education and training programs
suited to the risks of each area. In addition, the LIXIL group
publishes newsletters and distributes information via the
Workplace platform, and strives to continue cultivating
employees’ knowledge and awareness of compliance.
Review Process
Compliance Reviews are conducted regularly by management to
check the compliance systems of their own organizations.
Compliance Surveys are also completed by all officers and
employees to gain an understanding of the extent to which
compliance culture has been embraced within the LIXIL group.
The results are reported to the compliance committees and
reflected in policies to promote consistent initiatives.
Concern-raising System “Speak Up!”
We operate the 24-hour concern-raising system Speak Up! with
the aim of gathering information on compliance breaches, taking
measures to prevent fraudulent and unlawful behavior, and
responding quickly where action is required. Since 2017, the
number of compliance concerns received has totaled more than
300 per year for Japan and international operations combined.
To facilitate greater understanding of how to use it and how the
process works after a report is made, we produced animated
videos in 2021 and 2022. We also periodically conduct programs
to publicize the system. When a concern is reported, depending
on the nature of the concern, the relevant department conducts
an investigation, analyzes trends, and takes proactive measures
such as organizational improvements and employee education to
prevent wrongdoing and violations.
2018
2017
2020
2019
2022
2023
2021
•Initiated compliance review
• Held group-wide compliance events for the
first time
•Unified Concern-Raising System globally
• Introduced risk countermeasures in subsidiaries
in Japan
• Strengthened compliance education and
implemented e-learning
•Revised LIXIL Code of Conduct
• Strengthened cooperation
with audit divisions
• Global rollout
of short training
videos
• Distributed
video on
how to use
Speak Up!
correctly
• Revised
Supplier Code
of Conduct
• Reorganized
the Compliance
division globally
• Held compliance questionnaire on
globally unified platform
• Held compliance review
• Revised the LIXIL Human Rights
Principles
• Conducted global
research skills
training
Human Rights: See p.60
Responsible Supply Chain Management: See p.62
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Compliance Initiatives (Years ended March 31)
Internal Audit
How LIXIL and Its Group Companies See Internal Audit
Corporate Audit, a corporate function, is responsible
for managing the internal audit organizations of all LIXIL
group companies in Japan and international markets, and
ensures all of those audits are conducted in a unified and
comprehensive manner by integrating the internal audit
chain of command. (At the end of May 2023, the number of
people involved in the internal audit organizations of all LIXIL
group companies totaled 57.) Corporate Audit is responsible
for carrying out traditional internal audit processes such
as accounting audits, operational audits, and assessment
of internal controls. Additionally, it continuously reviews
internal audit systems and processes in order to help achieve
sustainable group-wide growth, strengthen governance as
well as internal control, and contribute to the development of
human resources.
Corporate Audit’s overall mission is to continuously and
quantitatively provide value that contributes to strengthening
the management foundation and quickly addresses changes
in the internal and external environment through internal
audit operations.
Initiatives to Ensure the Effectiveness of Internal Audits
All audit organizations of LIXIL group companies, including
our global teams, report to the leader of Corporate Audit,
who, in turn, ensures detailed information is shared in a
timely manner. Furthermore, Corporate Audit reports audit
results each quarter to the Board of Executive Officers
(management meeting comprised of executive officers) and
attends regular meetings of the Audit Committee (comprised
of outside directors), reporting on audit results, specific risk
information, awareness of issues relating to group
governance, and other matters directly to the Audit
Committee. In terms of organization, Corporate Audit
operates under the executive officer in charge of internal
audit, acts in close cooperation with the Audit Committee
while taking into account the committee’s instructions and
advice, and makes regular reports directly to the external
auditors. This structure ensures the independence and objectivity
of audit functions. We plan to further improve group governance
by increasing opportunities for internal audits to evaluate
effectiveness at the request of the Audit Committee.
Initiatives Launched to Audit Compliance
and Non-financial Information
Corporate Audit has been emphasizing internal audit
programs related to compliance in recent years. This has
involved enhanced cooperation with the Compliance
Department to confirm that group companies are properly
managed to preclude violations of laws and regulations,
reduce corporate risks and increase reliability. In addition,
Corporate Audit in Europe has been piloting an Environment,
Health and Safety (EHS) program. To supplement design-
oriented third-party external certification, local members are
conducting trials of sample-based audits. Initiatives in these
areas require a medium- to long-term outlook, and will help
prevent fraudulent acts and corruption, improve the integrity
of operations, and enhance compliance awareness among
management and employees.
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
80
INTEGRATED REPORT 2023
• Strengthened unification
of internal audit chain
of command within the
global headquarters
• Enhanced functions
for improving group
governance
• Increased sophistication
of internal audit through
digital technologies
• Aligned the assessment standards of internal audit
• Transferred Global Corporate Audit Staff (GCAS)
Inappropriate
activities by domestic
subsidiaries
2018
2017
2020
2019
2022
2021
2023
• Reorganized Corporate
Audit into a network-based
organization
• Expanded
the scope of
internal audit
for domestic
subsidiaries
• Enhanced internal
audit functions
• Began internal audits of
corporate responsibility in
the SATO business and
other businesses
Internal Audit Initiatives (Years ended March 31)
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
81
INTEGRATED REPORT 2023
DATA
04
82
CONSOLIDATED 11-YEAR SUMMARY
83
FINANCIAL HIGHLIGHTS
85
NON-FINANCIAL HIGHLIGHTS
87
REVIEW AND ANALYSIS OF OPERATING
RESULTS AND FINANCIAL POSITION
93
PRINCIPAL GROUP COMPANIES/
GLOBAL MANUFACTURING AND SALES SITES
95
STAKEHOLDER ENGAGEMENT
96
BASIC POLICY FOR INVESTOR RELATIONS
97
SHAREHOLDER INFORMATION
98
CORPORATE DATA
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
CONSOLIDATED 11-YEAR SUMMARY
LIXIL Corporation and Consolidated Subsidiaries
Years ended March 31
2013
2014
2015
2016
2017
2018
2019
2020*6
2021*6
2022
2023
Results of Operations
Net sales (JGAAP) / Revenue (IFRS)
¥1,436,395
¥1,628,658
¥1,705,427
¥1,890,450
¥1,633,229
¥1,829,344
¥1,692,432
¥1,514,449
¥1,378,255
¥1,428,578
¥1,495,987
Operating income (JGAAP) / Core earnings (IFRS)
50,485
69,080
51,722
70,069
89,781
76,046
54,485
52,290
57,288
64,875
25,745
Operating income margin (JGAAP) / Core earnings margin (IFRS) (%)
3.5
4.2
3.0
3.7
5.5
4.2
3.2
3.5
4.2
4.5
1.7
Operating profit (IFRS)
48,041
39,011
69,251
59,107
49,011
32,010
35,842
69,471
24,903
Net income (loss) (JGAAP) / Profit (loss) for the year attributable to owners of the parent (IFRS)*1
21,347
20,952
30,864
(25,605)
42,503
54,581
(52,193)
12,518
33,048
48,603
15,991
Research and development expenses
14,025
17,380
18,211
25,523
26,089
27,875
28,188
27,508
23,975
22,864
23,536
Capital expenditures
73,795
64,321
61,454
72,083
68,215
69,953
67,639
68,635
68,498
48,634
55,349
Depreciation and amortization
44,736
49,168
50,404
62,205
60,701
64,661
68,502
105,557
84,786
80,722
81,900
EBITDA*2
100,627
124,822
102,126
132,274
146,441
140,707
120,053
134,832
137,895
145,597
107,645
Cash Flows
Cash flows from operating activities
28,432
83,533
98,563
121,085
132,531
116,362
69,351
157,701
151,043
118,296
15,005
Cash flows from investing activities
(12,397)
(218,333)
(119,041)
19,122
(58,052)
(52,606)
(72,328)
(41,314)
(54,151)
(24,805)
(29,319)
Cash flows from financing activities
(31,753)
153,144
46,618
(154,403)
(79,899)
(43,843)
1,579
(153,285)
(93,425)
(108,094)
19,839
Cash and cash equivalents, end of year
114,662
139,039
147,708
129,646
121,563
138,751
141,421
95,862
111,061
100,404
106,677
Financial Position
Total assets
1,465,689
1,786,294
1,915,427
2,130,120
2,042,165
2,107,131
2,059,544
2,091,529
1,741,814
1,782,882
1,853,534
Net assets (Net of non-controlling interests) (JGAAP) / Equity attributable to owners of the parent (IFRS)*3
561,161
593,487
583,747
524,806
547,244
616,897
533,656
502,165
552,271
612,385
625,433
Net assets (JGAAP) / Total equity (IFRS)
566,312
601,795
590,855
537,308
559,431
649,573
567,167
535,137
554,767
614,968
627,720
Net interest-bearing debt
307,089
463,479
559,971
697,413
638,345
549,159
584,537
736,689
484,444
424,299
511,723
Per Share Data
Net income (loss) per share (JGAAP) / Earnings (loss) per share (IFRS)*1 (EPS) (¥)
¥73.42
¥72.06
¥105.80
¥(89.33)
¥148.01
¥189.13
¥(179.98)
¥43.15
¥113.92
¥167.21
¥55.54
Net assets per share (JGAAP) / Equity attributable to owners of the parent per share (IFRS) (BPS) (¥)
1,930.02
2,041.34
2,038.56
1,828.84
1,902.18
2,128.77
1,839.59
1,730.99
1,902.89
2,106.30
2,178.77
Dividends per share (¥)
40
55
60
60
60
65
70
70
75
85
90
Key Ratios
EBITDA to sales ratio*2 (%)
7.0
7.7
6.0
7.0
9.0
7.7
7.1
8.9
10.0
10.2
7.2
ROE (%)
3.9
3.6
5.3
(4.6)
7.9
9.4
(9.1)
2.4
6.3
8.3
2.6
ROA (%)
1.4
1.3
1.7
(1.3)
2.0
2.6
(2.5)
0.6
1.7
2.8
0.9
Total assets turnover (times)
1.0
0.9
0.9
0.9
0.8
0.9
0.8
0.7
0.7
0.8
0.8
Equity ratio (JGAAP) / Ratio of equity attributable to owners of the parent to total assets (IFRS) (%)
38.3
33.2
30.5
24.6
26.8
29.3
25.9
24.0
31.7
34.3
33.7
Dividend payout ratio (%)
54.5
76.3
56.7
̶
40.5
34.4
̶
162.2
65.8
50.8
162.0
Net debt-to-equity ratio*4 (%)
54.7
78.1
95.9
132.9
116.6
89.0
109.5
146.7
87.7
69.3
81.8
Number of employees*5
45,602
51,419
̶
60,677
59,248
61,140
62,940
61,634
51,879
51,640
51,501
Stock Indicators
Stock price (closing), end of year (¥)
¥1,858
¥2,846
¥2,847
¥2,295
¥2,825
¥2,376
¥1,478
¥1,345
¥3,075
¥2,290
¥2,177
Market capitalization
581,655
890,952
891,265
718,459
884,378
743,817
463,086
421,414
963,456
717,501
625,038
Price earnings ratio (times)
25.3
39.5
26.9
̶
19.1
12.6
̶
31.2
27.0
13.7
39.2
Price book-value ratio (times)
0.96
1.39
1.40
1.25
1.49
1.12
0.80
0.78
1.62
1.09
1.00
*1 Figures are after amortization of goodwill (JGAAP).
*2 EBITDA is calculated under JGAAP as operating income + depreciation and amortization + goodwill amortization, and under IFRS as
core earnings + depreciation and amortization.
*3 Equity attributable to owners of the parent is calculated under JGAAP as total net assets – stock acquisition rights – non-controlling
interests.
*4 The net debt-to-equity ratio is calculated as net interest-bearing debt ÷ total equity based on the fiscal year-end.
*5 The number of employees from FYE2016 is on an IFRS basis, the definition of which differs from the number under JGAAP.
*6 In line with the Company’s decision to sell the shares of Permasteelisa S.p.A. and LIXIL VIVA Corporation, the operations of Permasteelisa and its
subsidiaries and the businesses of LIXIL VIVA have been classified as discontinued operations. For the purposes of comparison, figures for FYE2020
reflect the reclassification.
Note: Under JGAAP, figures of less than ¥1 million are truncated, while under IFRS, figures of less than ¥1 million are rounded.
IFRS
JGAAP
(¥ million)
82
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
Revenue
Earnings (loss) per share (EPS) /
Dividends per share / Dividend payout ratio
■■ Japan ■■ International
■■ Earnings (loss) per share (EPS) (left) ■■ Dividends per share (left)
●● Dividend payout ratio (right)
(¥ billion)
2,000
1,500
1,000
500
0
2019
2020
2021
2022
2023
1,496.0
969.2
526.8
(¥)
200
100
0
-100
-200
2019
2020
2021
2022
200
(%)
100
0
-100
-200
2023
90
55.54
162.0
Revenue increased by 4.7% year on year to ¥1,496.0 billion. Factors
included the effect of foreign currency translation resulting from the
weaker Japanese yen, as well as the effect of price optimizations in
Japan and sales growth of products for the renovation market.
Earnings per share decreased year on year by ¥111.67 to ¥55.54,
while annual dividends increased by ¥5 to ¥90 per share.
(¥ billion)
(%)
80
60
40
20
0
2019
2020
2021
2022
2023
8
6
4
2
0
25.7
1.7
(¥ billion)
60
30
0
-30
-60
2019
2020
2021
2022
20
10
(%)
0
-10
-20
2023
16.0
2.6
Core earnings decreased by 60.3% year on year to ¥25.7 billion.
Factors included rising component costs, logistics system constraints
in Europe, and inventory adjustments in the United States.
Profit for the year attributable to owners of the parent decreased by
¥32.6 billion year on year to ¥16.0 billion, primarily because of lower
core earnings.
■■ Core earnings (left) ●● Core earnings margin (right)
■■ Profit (loss) for the year attributable to owners of the parent (left)
●● ROE (right)
Core earnings / Core earnings margin
Profit (loss) for the year attributable
to owners of the parent / ROE
(¥ billion)
600
400
200
0
2019
2020
2021
2022
2023
40
(%)
30
20
10
0
442.9
29.6
(¥ billion)
2,400
1,200
0
-1,200
-2,400
2019
2020
2021
2022
2023
4
2
0
-2
-4
(%)
0.9
1,853.5
SG&A expenses increased by 4.9% year on year to ¥442.9 billion,
and the SG&A ratio was essentially unchanged. Despite productivity
improvements and other cost reduction initiatives, factors included
increases in sales expenses associated with the resumption of sales
activities and additional increases in logistics costs.
Total assets increased by ¥70.7 billion year on year to ¥1,853.5
billion. Factors included the effect of foreign currency translation
resulting from the weaker yen, and an increase in inventories based
on the need to avoid supply chain disruptions.
■■ SG&A expenses (left) ●● SG&A ratio (right)
■■ Total assets (left) ●● ROA (right)
SG&A expenses / SG&A ratio
Total assets / ROA
FINANCIAL HIGHLIGHTS
LIXIL Corporation and Consolidated Subsidiaries (Years ended March 31)
83
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
EBITDA / EBITDA to sales ratio
Equity attributable to owners of the parent / Ratio of
equity attributable to owners of the parent to total assets
■■ EBITDA (left) ●● EBITDA to sales ratio (right)
■■ Equity attributable to owners of the parent (left)
●● Ratio of equity attributable to owners of the parent to total assets (right)
(¥ billion)
200
150
100
50
0
2019
2020
2021
2022
(%)
16
12
8
4
0
7.2
107.6
2023
(%)
(¥ billion)
800
600
400
200
0
2019
2020
2021
2022
2023
60
40
20
0
33.7
625.4
(¥ billion)
(%)
800
600
400
200
0
2019
2020
2021
2022
200
150
100
50
0
511.7
81.8
2023
(¥ billion)
40
30
20
10
0
2019
2020
2021
2022
34.3
20.4
2023
(Times)
6
4
2
0
2019
2020
2021
2022
4.8
2023
(¥ billion)
40
30
20
10
0
2019
2020
2021
2022
34.4
26.3
2023
EBITDA to sales ratio decreased by 3.0 percentage points year on
year to 7.2%, primarily because of lower core earnings amid the
challenging external environment.
Ratio of equity attributable to owners of the parent to total assets
decreased by 0.6 percentage points to 33.7%. Factors included
the decrease in business profitability and a ¥93.7 billion increase in
interest-bearing debt following new bond issues.
Capital expenditures increased primarily because of investment in
new product development in core businesses, the establishment
of new distribution facilities in international markets, increased IT
investment, and headquarters relocation expenses.
Notes: 1. Excluding the impact of IFRS 16 Leases applied from FYE2020
2. LWT: LIXIL Water Technology, LHT: LIXIL Housing Technology, LBT: LIXIL
Building Technology, H&S: Housing & Services Business
3. Changed reporting segments from FYE2023
Net interest-bearing debt increased by ¥87.4 billion year on year
to ¥511.7 billion due to factors including fund-raising to accelerate
payments to suppliers.
Net interest-bearing debt-to-EBITDA ratio increased from 2.9 times
to 4.8 times. Factors were the increase in net interest-bearing debt
and the decrease in profitability.
Depreciation was mainly associated with developing LIXIL’s group-
wide IT systems and maintaining and upgrading facilities. Depreciation
at LWT increased due to the ongoing development of products for the
Japanese and international markets, and decreased at LHT because
it completed the accelerated depreciation associated with the
streamlining of plant assets during the fiscal year.
Notes: 1. Excluding the impact of IFRS 16 Leases applied from FYE2020
2. Changed reporting segments from FYE2023
■■ Net interest-bearing debt (left) ●● Net debt-to-equity ratio (right)
●● LWT ●● LHT ● LBT ● H&S
●● LWT ●● LHT ● LBT ● H&S
Net interest-bearing debt /
Net debt-to-equity ratio
Capital expenditures by business segment
Net interest-bearing debt-to-EBITDA ratio
Depreciation by business segment
Former segments
Former segments
New segments
New segments
84
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
NON-FINANCIAL HIGHLIGHTS
(Years ended March 31)
CO2 emissions from operational activities
(Scope 1 and 2)*1
Environment (As of June 2023. Figures not yet finalized.)
Waste recycling ratio*1
●● Japan ●● Asia (excluding Japan)
●● Europe ●● North America
(Thousand t-CO2)
(%)
1,200
400
0
0
-40
2019
(Base year)
2021
2022
2023
800
-28.4
793
341
452
(%)
100
80
60
20
0
2020
2021
2022
2023
40
69.0
97.3
96.8
99.0
2019
(Base year)
2021
2022
2023
(%)
10
0
20
30
25.0
(%)
20
15
10
5
0
2019
(Base year)
2020
2021
2022
16.0
(People)
2021
2022
2023
20
60
40
80
(%)
60
40
20
0
34.1
44
0
(%)
20
15
10
5
0
2021
2022
2023
17.5
7.1
By seeking to increase energy efficiency and utilize renewable energy
to further reduce CO2 emissions, we achieved a 29.9% reduction in
CO2 emissions and a 28.4% reduction in emission intensity per unit of
output. (Benchmark: FYE2019)
By minimizing the use of newly introduced resources and by promoting
reuse and recycling, we achieved a company-wide recycling rate of 88.1%,
with the recycling rate in North America more than doubling from FYE2019.
By switching to renewable energy for electricity used at our business
sites, we achieved a ratio of 25.0% at the end of FYE2023.
By promoting efficient water use and recycling, we continued to
reduce water intake and discharge, resulting in a 16% improvement in
water use efficiency. (Benchmark: FYE2019)
We continue to focus on attracting high-potential female candidates
and aim to achieve gender parity in new graduate recruitment in Japan.
We have set a target of 30% female managers across the
organization by FYE2030.
■■ Scope 1 (left) ■■ Scope 2 (left)
●● Carbon intensity per unit of output (right)
■■ Number of female new graduates recruited (left)
●● Ratio of female recruitment (right)
●● LIXIL and its group companies*4
●● LIXIL Corporation (excluding group companies in Japan)
Ratio of electricity usage from
renewable energy sources*1
Water use efficiency in our operations*1
Ratio of female new graduate recruitment*2
Social (As of June 2023. Figures not yet finalized.)
Ratio of female managers*3
LIXIL’s sustainability policies and initiatives are on p.47.
In August 2023, we plan to publish a data book on our website with a third-party assurance of these figures.
www.lixil.com/en/impact/data/performance.html
85
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
*1 Scope of coverage: LIXIL Corporation and its group companies (production and
non-production bases in Japan, and production bases outside Japan)
*2 Scope of coverage: LIXIL Corporation (excluding group companies in Japan)
Ratio of female candidates with college or graduate degrees hired.
*3 Directly hired employees only.
*4 Excludes companies sold during FYE2023 and consolidated subsidiaries with
less than 100 employees in Japan. (Calculated based on the job grade system
of each operating company.)
Gender pay gap*3
Note: Pay includes base salary, overtime, other allowances and bonus. Regular
employees include managers, non-managers, senior employees, and
employees assigned from LIXIL to other companies. Employees assigned
from other companies to LIXIL are excluded. Contract workers include
part-time and temporary employees. Temporary staff hired through
agencies are excluded.
Ratio of male employees who took childcare leave*3
Internal directors
3
Outside directors
8
The Board of Directors consists of eleven members including eight outside
directors and three internal directors (including four women). The ratio of
independent outside directors was over 70%.
We are replacing the existing system with our new personnel system
in a phased manner from April 2022 and aiming to bring about a
compensation scheme that reflects job value.
Number and ratio of outside directors (FYE2023)
Governance
(Number)
400
300
100
0
200
(Ratio per hundred employees)
1.0
0.8
0.4
0
0.2
0.6
2021
2022
2023
303
0.52
We collect information on any compliance violations, ensure early
action on any wrongdoings and violations, and implement preventive
measures. No compliance violations that have a significant impact
on the Company, including serious violations of laws and regulations
occurred.
Reports of possible compliance issues
We are aiming to achieve a 100% acquisition rate for paternity and
male parental leave by FYE2025.
Note: Including LIXIL's own paid childcare leave system for male employees
LIXIL Corporation
77%
All workers
Regular
employees
Contract
workers
LIXIL
Corporation
57.4%
63.6%
95.9%
99.4%
The Board of Directors met 15 times in FYE2023. LIXIL's Corporate
Governance General Policy requires a minimum attendance rate of 75%
at Board meetings.
Attendance rate at Board of Directors’ meetings
(FYE2023)
86
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
In the fiscal year ended March 31, 2023 (FYE2023), the
Japanese economy faced downward pressure from global
monetary tightening policies, the ongoing depreciation of the
Japanese yen caused by factors such as the widening
interest rate gap between Japan and the United States, in
addition to the rise in components and energy prices. This in
turn had an impact on consumer confidence as consumers
became concerned about longer-term inflation. The outlook
for the housing sector remains uncertain, with the number of
new housing starts remaining sluggish. Although rental
properties and detached houses for sale displayed steady
performance, owner-occupied housing starts continued to
decline due to concerns about rising mortgage interest rates
and the impact of high construction material prices. On the
other hand, demand is expected to be stimulated by housing
energy-saving assistance measures that are among the
largest ever seen. One of these measures is the creation of a
government-led subsidy program for advanced window
renovation projects.
The global economy continues to be impacted by the rise
in component and energy prices that are a consequence of
the protracted conflict between Russia and Ukraine. In
addition, there are still concerns about a possible downturn
in economic recovery due to geopolitical risks such as the
rapid monetary tightening to control inflation in the United
States and Europe, as well as the slowdown in economic
growth due to the reaction to zero-COVID policies and
stagnation of the real estate market in China. The situation
must be closely monitored.
Nevertheless, although COVID-19 continues to have an
impact in Japan and in international markets, economies
around the world are expected to gain steam as society
adapts to a post-COVID reality and the resumption in normal
economic activities accelerates with the significant relaxation
of behavioral restrictions.
Operating Results
Overall Business Results in FYE2023
In FYE2023, we faced the most challenging business
environment that we had encountered for quite some time
due to the sharp depreciation of the Japanese yen, increases
in component costs, and supply chain constraints in Europe
that continued into the third quarter. While revenue increased
¥67.4 billion year on year to ¥1,496.0 billion due to factors
including the depreciation of the yen and price optimization,
core earnings decreased ¥39.1 billion year on year to ¥25.7
billion due to the lag between the time of cost increases and
the time we were able to effect price optimization, which
meant that we were unable to fully offset cost increases in
the full-year results. The main factors behind these results
were our inability to fully reflect higher raw material and
component costs in product prices during the fiscal year,
especially in Japan, where the yen depreciated rapidly, and
the impact on sales and production caused by weakening
demand amid rising prices in many parts of the world.
We believe that each of these challenges to restoring
profitability must be addressed separately with respect to
firstly the increase in variable costs, and secondly the
increase in fixed costs. First, it is essential to reflect higher
variable costs, such as raw material and component costs,
in selling prices. In that respect, we have tried to be as agile
as possible and in the fourth quarter we began to see signs
that those efforts are finally starting to produce results. If we
foresee further increases in variable costs, we will work to
restore and enhance profitability through flexible pricing in
line with those increases.
On the other hand, these responses have led to a
softening of demand in many parts of the world due to the
effects of inflation. Declining sales volumes slow the rate at
which cost increases can be reflected in prices and, from the
perspective of production, raise fixed costs per product.
Unlike with variable costs, it is not always appropriate to
pass on higher fixed costs through prices, so companies
need to make greater efforts to reduce fixed costs and
expand sales of high-value-added products.
REVIEW AND ANALYSIS OF OPERATING RESULTS AND FINANCIAL POSITION
FYE2022
FYE2023
Increase/Decrease
Rate of change
Revenue
1,428.6
1,496.0
+67.4
+4.7%
Gross profit
(%)
486.9
34.1%
468.6
31.3%
-18.2
-2.8pp
-3.7%
̶
Selling, general and administrative expenses
422.0
442.9
+20.9
+4.9%
Core earnings*1
(%)
64.9
4.5%
25.7
1.7%
-39.1
-2.8pp
-60.3%
̶
Overview of Financial Results for FYE2023
(¥ billion)
*1 Equivalent to operating profit in JGAAP
87
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
Operating Results in FYE2023
The financial results for LIXIL Corporation and its
consolidated subsidiaries (together, “the LIXIL group”) for
FYE2023 are as follows. Revenue was ¥1,496.0 billion (up
4.7% year on year), as we were able to offset the negative
impact of factors such as supply chain disruptions in our
international business and declining demand in the United
States and China. The positive factors include the effect of
foreign currency translation resulting from the weaker yen
and increased revenue as price optimization measures in
the Japan business took effect and sales of products for
renovation purposes expanded. In terms of profit, continued
efforts to implement structural reforms, price optimization,
and measures to improve profitability both in the Japan
business and in the international business were not enough
to offset challenging factors such as increases in component
costs and energy prices, increased costs associated with
supply chain constraints in Europe, softening demand in the
United States amid sharply rising interest rates, and sluggish
market conditions in China. Consequently, core earnings
were ¥25.7 billion (down 60.3% year on year), operating profit
was ¥24.9 billion (down 64.2% year on year), and profit before
tax from continuing operations was ¥19.8 billion (down 70.6%
year on year), each of which represents a significant decrease.
As a result, profit for the year attributable to owners of
the parent after deducting non-controlling interests totaled
¥16.0 billion (down 67.1% year on year).
FYE2022
FYE2023
Increase/Decrease
Rate of change
Water Technology Business (LWT)
Revenue
862.2
915.3
+53.1
+6.2%
Core earnings
76.6
47.3
‐29.4
-38.3%
(%)
8.9%
5.2%
‐3.7pp
̶
Housing Technology Business (LHT)*1
Revenue
584.2
598.2
+14.0
+2.4%
Core earnings
31.7
19.4
-12.3
-38.9%
(%)
5.4%
3.2%
-2.2pp
̶
Consolidation adjustments, etc.*2
Revenue
-17.8
-17.5
+0.3
̶
Core earnings
-43.4
-40.9
+2.5
̶
Total
Revenue
1,428.6
1,496.0
+67.4
+4.7%
Core earnings
64.9
25.7
-39.1
-60.3%
(%)
4.5%
1.7%
-2.8pp
̶
Overview of Financial Results by Segment
(¥ billion)
*1 In the figures for LHT, the classification criteria for Japan and international financial results for companies that operate multiple global businesses were changed
from the first quarter of FYE2023. Financial results for FYE2022 have also been restated to reflect this change.
*2 “Consolidation adjustments, etc.” correspond to the difference between the total of Japan and international revenue/core earnings, and the figure shown in the “Total” row.
Therefore, especially in FYE2024, our top financial
priorities are to further reduce fixed costs (i.e., adopt an
asset-light approach) through our ongoing activities to
improve capital efficiency using return on invested capital
(ROIC) management and control, as well as measures to
increase free cash flow by optimizing inventory levels, for the
purposes of development, production, and sales of
high-value-added products.
88
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
Water Technology Business (LWT)
Despite a continued low number of new housing starts,
Water Technology Business (LWT) in Japan secured revenue
slightly above that in FYE2022 as a result of the emerging
effects of price optimization and strong sales of renovation-
related products. Furthermore, revenue in the international
business grew year on year due to factors including the
recovery in economic activity in Asia Pacific, which had
previously been sluggish due to the COVID-19 pandemic,
as well as the effect of foreign currency translation resulting
from the weak yen, despite negative factors in the external
environment such as softening demand against the backdrop
of interest rate hikes in the United States and the effect of
the delayed recovery in the Chinese economy due to the
zero-COVID policies. As a result, LWT saw revenue increase
to ¥915.3 billion (up 6.2% year on year).
At the same time, despite positive results such as an
increase in gross profit due to the effects of price optimization
in Japan and the international business and an increase in
the proportion of renovation products and mid- to high-end
priced products among total sales in Japan, core earnings
decreased to ¥47.3 billion (down 38.3% year on year) due
to negative factors such as increased costs for components
and energy prices (continuing on from FYE2022), as well as
supply chain disruptions in Europe and inventory adjustments
by customers in the Americas.
Housing Technology Business (LHT)
Housing Technology Business (LHT) saw revenue increase
to ¥598.2 billion (up 2.4% year on year). This was due to
not only the implementation of price optimizations, but also
steady demand for renovations aimed at making homes more
efficient and enhancing peoples’ lifestyles.
On the other hand, despite securing an optimal level
of gross profit through price optimization, as well as
steady improvement in profitability with the growth of high-
performance window product sales, and being able to proceed
on course with the adoption of an asset-light approach, core
earnings declined to ¥19.4 billion (down 38.9% year on year).
This is attributable to the negative impact of decreased sales
volume associated with the sluggish demand for new housing,
as well as higher-than-expected component prices, and a
significant increase in costs due to a further rise in the prices
of components procured from international business partners.
Financial Position (As of March 31, 2023)
A stable financial base is essential for achieving sustainable
medium- to long-term growth. While both enhancing
profitability and strengthening our financial position, we will
pursue a net interest-bearing debt-to-EBITDA ratio of 3.5
times or less and an improved ratio of equity attributable to
owners of the parent to total assets of 35% or more as medium-
term targets, and work to improve capital efficiency and reduce
interest-bearing debt based on an asset-light approach.
Assets, Liabilities, and Equity as of March 31, 2023
Total assets as of March 31, 2023 amounted to ¥1,853.5
billion (up ¥70.7 billion from the previous fiscal year end).
Current assets were ¥744.5 billion (up ¥29.9 billion from
the previous fiscal year end), mainly due to the fact that
an increase in inventory levels in response to supply chain
March 31,
2022
March 31,
2023
March 31,
2022
March 31,
2023
Current
assets
714.6
Non-current
assets
1,068.3
Current
assets
744.5
Non-current
assets
1,109.0
Assets
1,782.9
+70.7
Assets
1,853.5
Current
liabilities
603.0
Non-current
liabilities
564.9
Non-current
liabilities
573.6
Equity
615.0
Equity
627.7
Current
liabilities
652.2
Liabilities
and equity
1,782.9
+70.7
Liabilities
and equity
1,853.5
(of which, impact of
foreign currency
translation: +52.7)
(of which, impact of
foreign currency
translation: +52.7)
Consolidated Financial Position
(¥ billion)
89
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
FYE2022*1
FYE2023*1
100.4
15.0
-29.3
19.8
0.7
106.7
FCF*2
-14.3
Working capital
Depreciation
-52.9
81.9
CAPEX*3
-55.3
Note: Profit before tax: 18.5*1
111.1
118.3
-24.8
-108.1
3.9
100.4
Cash and cash equivalents
at the beginning of the year
Other*4
Net cash flows from
operating activities
Net cash flows from
investing activities
Net cash flows from
financing activities
Cash and cash equivalents
at the end of the year
Cash and cash equivalents
at the beginning of the year
Other*4
Net cash flows from
operating activities
Net cash flows from
investing activities
Net cash flows from
financing activities
Cash and cash equivalents
at the end of the year
FCF*2
93.5
Working capital
Depreciation
-13.9
80.7
CAPEX*3
-48.6
Note: Profit before tax: 64.7*1
Cash Flow Status and Cash Balance (¥ billion)
*1 Includes discontinued operations *2 Free cash flow = Net cash flows from operating activities + Net cash flows from investing activities
*3 CAPEX = Purchase of property, plant and equipment + Purchase of intangible assets (Excluding the purchase of assets classified as right of use assets under IFRS 16 Leases)
*4 Other = Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies + Net increase (decrease) in cash and cash
equivalents included in assets classified held for sale
disruptions more than offset a decrease in assets held for sale
recorded in the previous fiscal year following the completion
of the sale of the former head office building (WING Building).
Non-current assets were ¥1,109.0 billion
(up ¥40.7 billion from the previous fiscal year end), mainly due
to factors such as the effect of foreign currency translation
(resulting from the depreciation of the yen) on goodwill and
other intangible assets, and the acquisition of subsidiaries,
which more than offset a decrease in other financial assets
from the sale of listed shares.
Total equity was ¥627.7 billion, and the ratio of equity
attributable to owners of the parent to total assets was 33.7%
(down 0.6 percentage points year on year).
Cash Flows (FYE2023)
Cash and cash equivalents as of March 31, 2023, totaled
¥106.7 billion (up ¥6.3 billion from the previous fiscal year
end), after accounting for the effects of exchange rate changes
on the balance of cash and cash equivalents held in foreign
currencies and other factors.
Net Cash Flows from Operating Activities
Net cash provided by operating activities was ¥15.0 billion
(down ¥103.3 billion year on year), a significant decrease. Main
factors included a decrease in profit before tax from continuing
operations, as well as a decrease brought about by changes
in working capital, including trade and other receivables, trade
and other payables, and inventories.
Net Cash Flows from Investing Activities
Net cash used in investing activities was ¥29.3 billion (down
¥4.5 billion year on year). Main factors included purchase of
property, plant and equipment and purchase of intangible
assets as well as payments for acquisition of subsidiaries,
which exceeded proceeds from disposal of property, plant and
equipment and proceeds from the sale of listed shares.
Net Cash Flows from Financing Activities
Net cash provided by financing activities was ¥19.8 billion
(compared with net cash used in financing activities of ¥108.1
billion the previous year). Main factors in this large change included
flexibly taking on and repayment of interest-bearing debt, including
new bond issues, which more than offset dividends paid, lease
liabilities paid, and payments for acquisition of treasury shares to
improve capital efficiency and enhance shareholder returns.
100.4
106.7
-524.7
-618.4
March 31,
2022
March 31,
2023
Net
interest-bearing
debt
-424.3
-511.7
Cash and cash equivalents
(¥ billion)
Interest-bearing debt
90
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
Outlook for FYE2024
A gradual recovery of the economic environment is expected
to continue as the effects of the COVID-19 pandemic subside
both in Japan and in international markets. Nevertheless, the
outlook is expected to remain uncertain, with concerns about
ongoing global geopolitical risks such as the Russia–Ukraine
conflict, and the possibility of further increases in prices
and interest rates, as well as persistently high component
and energy prices, among other factors that could have a
negative effect on business performance.
Under this business environment, the LIXIL group will
continue to optimize selling prices and reduce costs, such as
by switching to more cost-efficient materials, and transitioning
to a regional procurement and production system centered
on the localization of manufacturing processes. In the Japan
business, we are working to further strengthen our efforts to
capture renovation-related demand and optimize our business
models. We will also expand sales of high-value-added
products to capture demand in water-related products in
international markets, where growth is anticipated.
Thus far, the LIXIL group’s response to increased
consumer and public concern regarding climate change
has included expanding the lineup of environmentally
friendly products. However, as a means for achieving further
sustainable growth and creating corporate value, we are
also planning to integrate environmental strategies into the
LIXIL group’s overall business strategies while developing
and marketing products that are more appealing and provide
greater added value.
The results of our efforts to strengthen our business
foundation are beginning to emerge, and the path we have
laid out for long-term growth remains unchanged. We will
continue to move forward by further enhancing the value we
provide to our stakeholders and, in turn, realize our purpose
of making better homes a reality for everyone, everywhere.
FYE2024 Forecast
•Revenue: ¥1,530.0 billion (up 2% year on year)
• Core earnings: ¥40.0 billion (up 55% year on year; core
earnings margin 2.6%)
• Operating profit: ¥28.0 billion (up 12% year on year)
• Profit before tax: ¥21.0 billion (up 6% year on year)
• Profit for the year attributable to owners of the parent:
¥11.0 billion (up 31% year on year)
• Cash dividends: Planned payment of ¥90 per share for the
full year, with interim and year-end dividends of ¥45 per
share each.
The above forecasts are based on the information
available to LIXIL as of the date of publication, and include
risks and uncertainties. Actual results may differ materially
from the forecasts above due to various factors.
91
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
ROE*1
ROIC*2
Revenue
Net interest-bearing debt-to-EBITDA ratio
Ratio of equity attributable to
owners of the parent to total assets*3
Core earnings margin
(%)
FYE2021
FYE2022
FYE2023
(¥ trillion)
1.2
1.3
1.4
1.5
1.6
1.38
1.50
1.53
(%)
15
20
25
30
35
34.3
33.7
33.9
(%)
-10
-5
0
5
10
6.3
8.3
1.8
(%)
FYE2024
0
2
4
6
8
2.3
1.5
1.6
4.5
(Times)
2.6
1.43
FYE2021
FYE2022
FYE2023
FYE2024
FYE2021
FYE2022
FYE2023
FYE2024
FYE2021
FYE2022
FYE2023
FYE2024
FYE2021
FYE2022
FYE2023
FYE2024
FYE2021
FYE2022
FYE2023
FYE2024
(Forecast)
(Forecast)
(Forecast)
(Forecast)
(Forecast)
0
1
2
3
4
5
6
4.2
1.7
2.6
4.5
2
3
4
5
6
3.5
2.9
4.7
(Forecast)
4.8
31.7
*1 Figure before the effect of share buybacks announced on April 28, 2023 *2 Calculation: Operating profit × (1 – Effective tax rate) / (Working capital + Fixed assets) *3 Equivalent to “equity ratio” under JGAAP
92
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
PRINCIPAL GROUP COMPANIES
(As of March 31, 2023)
Consolidated Subsidiaries
Name
Location
Paid-in capital
(¥ million)
Business
segment
LIXIL Total Service Corporation
Sumida-ku, Tokyo
100
100 LWT, LHT
TM.S Corporation
Shinagawa-ku, Tokyo
60
100
LWT
Dinaone Corporation
Chuo-ku, Tokyo
90
100
LWT
LIXIL Europe S.à r.l.*1
Luxembourg
€ thousand
57,143
100
LWT
Grohe AG*1
Düsseldorf, Germany
€ thousand
60,885
100
LWT
Other 49 affiliate companies of LIXIL Europe S.à r.l.
̶
̶
̶
LWT
ASD Holding Corp.*1
New Jersey, USA
US$ thousand
412,961
100
LWT
15 affiliate companies of ASD Holding Corp.
̶
̶
̶
LWT
A-S (China) Co., Ltd.
Shanghai, China
US$ thousand
30,000
100
LWT
LIXIL Vietnam Corporation
Hanoi, Vietnam
VND million
743,386
100
LWT
LIXIL (Thailand) Public Co., Ltd.
Pathumthani, Thailand
THB million
277
99
LWT
LIXIL AFRICA HOLDINGS (Pty) Ltd.*1
Krugersdorp, South Africa
ZAR million
2,726
100
LWT
LIXIL (China) Investment Co., Ltd.*1
Shanghai, China
CNY thousand
450,605
100
LWT
Taiwan LIXIL Water Technology Corporation*2
Taipei, Taiwan
NT$ thousand
282,677
100
LWT
LIXIL Living Technology (Suzhou) Corporation*3
Suzhou, Jiangsu, China CNY thousand
395,464
100
LWT
LIXIL Sanitary Fitting Manufacturing (Suzhou) Corporation Suzhou, Jiangsu, China
1,730
100
LWT
LIXIL India Sanitaryware Private Limited
Andhra Pradesh, India
INR thousand
69,823
100
LWT
LIXIL Total Hanbai Corporation
Shinagawa-ku, Tokyo
75
100
LHT
G TERIOR Corporation
Shinagawa-ku, Tokyo
316
100
LHT
LIXIL Housing Research Institute, Ltd.
Shinagawa-ku, Tokyo
100
100
LHT
Name
Location
Paid-in capital
(¥ million)
Business
segment
Asahi Tostem Exterior Building Materials Co., Ltd. Shinagawa-ku, Tokyo
100
80
LHT
LIXIL Renewal Corporation
Sumida-ku, Tokyo
100
100
LHT
LIXIL TEPCO Smart Partners Inc.
Sumida-ku, Tokyo
450
60
LHT
Sonitech Corporation
Sumida-ku, Tokyo
66
100
LHT
LIXIL Toyo Sash Shoji Co., Ltd.
Sumida-ku, Tokyo
100
100
LHT
Kuwata Co., Ltd.
Suma-ku, Kobe, Hyogo
30
100
LHT
LIXIL REALTY, Corp.
Taito-ku, Tokyo
160
100
LHT
Oita Tostem Co., Ltd.
Oita, Oita
50
100
LHT
Nishi Kyushu Tostem Co., Ltd.
Saga, Saga
30
100
LHT
GHS Corporation
Shinagawa-ku, Tokyo
100
100
LHT
LIXIL Living Solution Corporation
Shinagawa-ku, Tokyo
100
100
LHT
LIXIL Home Finance Corporation
Chiyoda-ku, Tokyo
500
100
LHT
LIXIL INTERNATIONAL Pte. Ltd.*1
Singapore
30,565
100
LHT
TOSTEM THAI Co., Ltd.*1
Pathumthani, Thailand
THB million
2,767
100
LHT
LIXIL GLOBAL MANUFACTURING VIETNAM Co., Ltd.
Dong Nai, Vietnam
4,310
100 LHT, LWT
LIXIL Manufacturing (Dalian) Corporation
Dalian, Liaoning, China
US$ thousand
43,500
100
LHT
LIXIL WINDOW SYSTEMS PRIVATE LIMITED
Haryana, India
INR thousand
858,318
100
LHT
PT. LIXIL ALUMINIUM INDONESIA
Cileungsi, Indonesia
IDR million
173,617
75
LHT
41 other companies *4,5,6
*1 Specified subsidiary
*2 Taiwan Inax Corporation changed its name to Taiwan LIXIL Water Technology Corporation.
*3 LIXIL Building Materials Manufacturing (Suzhou) Corporation changed its name to LIXIL Living Technology (Suzhou)
Corporation.
*4 Among other companies, LIXIL India Private Limited is a specified subsidiary.
*5 LIXIL Africa (Pty) Ltd. is an insolvent company with liabilities of ZAR 1,399 millions in excess of assets as of
March 31, 2023.
*6 The Company decided to merge with LIXIL Group Finance Corporation on May 12, 2022, and concluded a merger
agreement on the same date.
Equity
owned
by the
holding
company
(%)
Equity
owned
by the
holding
company
(%)
93
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
Equity-Method Affiliates
Name
Location
Paid-in capital
(¥ million)
Business
segment
Sanyo Homes Corporation*1
Nishi-ku, Osaka, Osaka
5,945
27*2
̶
42 other companies
*1 The company submits securities reports.
*2 “Equity owned by the holding company” shows the ratio of the number of shares owned by the Company to the
total number of issued shares (excluding treasury stock) of Sanyo Homes Corporation as of March 31, 2023.
GLOBAL MANUFACTURING AND SALES SITES
(As of March 31, 2023)
Number of factories
Number of showrooms
Japan
Europe
China/
Asia Pacific
84
10
22
Home reform shops and
reform network members in Japan
11,768 stores
Homebuilding franchise members
in Japan
195 stores
116
sites
* Seven of the LHT factories also manufacture commodities for buildings.
Japan
Americas
Europe
China/
Asia Pacific
LWT
20
13
4
21
LHT
17*
̶
̶
5
80
sites
Equity
owned
by the
holding
company
(%)
Japan
37
International
43
Japan
84
International
32
94
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
STAKEHOLDER ENGAGEMENT
95
INTEGRATED REPORT 2023
Stakeholder Cooperation
in Our Three Strategic Pillars
MAKE A SPLASH! Partnership with UNICEF
Through our MAKE A SPLASH! global partnership with UNICEF, LIXIL helps to
establish markets for hygiene-related goods such as toilets and handwashing
products and to improve the overall sanitation environment in low- and
middle-income countries.
MAKE A SPLASH! >
THINK Heat: Let’s Think about Eco- and
People-Friendly Temperatures
We launched THINK Heat initiatives to build awareness and understanding of climate
change mitigation and adaptation. Those initiatives include outreach classes called
“Healthy Living and Good for the Environment” for people primarily at elementary
schools, as well as donation of Style Shade external sunshades to childcare centers
and nurseries in partnership with local customers, governments, and business
partners. The donation was funded by a portion of the revenue earned from sales of
thermal windows and other energy-saving products that help reduce CO2 emissions.
THINK Heat: Let’s Think about Eco- and People-Friendly Temperatures (Japanese only) >
Art Brut Ecocarat : Tiles featuring designs
by neurodivergent artists
LIXIL has launched a new product line that incorporates art brut artworks, drawn by
neurodivergent artists contracted to Heralbony Co., Ltd., into our Ecocarat tiles. By
paying license royalties out of the product sales revenue to the artists, we aim to
create new revenue streams for them and help create an inclusive society in which
everyone can play an active role, in collaboration with Heralbony Co., Ltd.
Art Brut Ecocarat (Japanese only) >
We strive to resolve social issues by collaborating with the stakeholders who support our business activities.
Stakeholders
Type of engagement
Customers
・ Provide timely and appropriate disclosure on products and services
・ Incorporate customer feedback into products and services
・ Offer customer support via telephone, email, and showrooms
Customer Satisfaction >
Suppliers
・ Build and maintain strong relationships by facilitating two-way communication
・ Share our Procurement Principles and recognize current circumstances through responsible
procurement surveys
・ Follow through on promised improvements based on the results of above surveys
・ Hold regular meetings
・ Share information on regulatory trends and new procurement strategies
Supply Chain Management >
Shareholders
and investors
・ Hold discussions with investors (368 times in FYE2023)
・ Hold an annual ESG briefing for investors
・ Disclose information through our Integrated Report and investor relations web pages
・ Disclose timely information in English and Japanese on the Tokyo Stock Exchange website
Investor Relations > FYE2023 ESG briefing for investors >
Employees
・ Conduct global employee opinion surveys
・ Hold regular discussions between the union and the Company
・ Create an inclusive and inspiring working environment that incorporates feedback gained
through above activities
Our People >
Local
communities
・ Respect local cultures and customs
・ Contribute to community development
・ Communicate with local residents through community briefings and factory visits
・ Hold outreach classes on social issues such as sanitation, the environment, and diversity at
local schools
・ Implement LIXIL x SDGs NEXT STAGE to convey information about LIXIL’s SDGs activities
Community > LIXIL×SDGs NEXT STAGE （Japanese only） >
NPOs, NGOs, and
educational and
research institutions
・ Build partnerships (Research studies, solution development, and seminars)
Government
authorities
and industrial
associations
・ Participate in several industrial and business associations whose missions include engaging
with public authorities (Window sash, plumbing, metal, and other industrial associations and
economic organizations)
・ Collect up-to-date information on relevant laws and international agreements related to our
business
Global Sanitation
& Hygiene
Water Conservation
& Environmental Sustainability
Diversity
& Inclusion
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
BASIC POLICY FOR INVESTOR RELATIONS
The Company’s investor relations (IR) activities facilitate
communication with the Japanese and international capital
markets, thereby helping to enhance corporate value. These
IR activities convey messages from senior management to
markets while providing senior management with feedback
from markets in an unflagging effort to boost corporate value.
Based on the timely disclosure rules of the Tokyo Stock
Exchange, the Company discloses important information,
including decisions, events, or information regarding
accounts settlement, that might affect investment judgments.
It is also the Company’s policy to disclose information that
does not fall under the timely disclosure rules as proactively
and fairly as possible, in order to better meet investors’ needs.
Dow Jones Sustainability Indices
Selected as a component of the S&P Global
DJSI World Index for the fourth consecutive
year and the DJSI Asia/Pacific Index for the
sixth consecutive year (December 2022)
MSCI ESG Leaders Indexes
Selected as a constituent of the
MSCI Japan ESG Select Leaders Index
(December 2022)
(Please refer to our website* for disclaimers.)
CDP Water Security
A List
As a result of our multifaceted
initiatives to address water
risk, we were selected for the
A List (the highest ranked list)
for the second consecutive
year (December 2022)
CDP Supplier
Engagement
Leaderboard
Received the highest rating
for the third consecutive year
(March 2023)
FTSE Russell Indexes
Selected as a constituent of the FTSE Blossom
Japan Sector Relative Index (March 2022);
selected as a constituent of the FTSE4Good
Index Series and FTSE Blossom Japan Index
for the sixth consecutive year (June 2022)
MSCI ESG Ratings AAA
MSCI ESG Rating improved to AAA (from AA;
February 2023)
(Please refer to our website* for disclaimers.)
* www.lixil.com/en/about/evaluation.html
“Most Liked!” IR Award
Received the “Most Liked!” IR
award in the 2022 IR Awards
held by the Japan Investor
Relations Association
(November 2022)
MSCI Japan Empowering
Women Index
Selected as a constituent of the MSCI Japan
Empowering Women Index (WIN) for the sixth
consecutive year (June 2022)
(Please refer to our website* for disclaimers.)
Activities for FYE2023
• Communicated management messages to the markets
(for institutional investors and analysts)
Earnings briefing sessions: 4 (quarterly)
One-on-one meetings: 368
Briefing sessions regarding management strategy and
business strategy: 5
Small meetings: 3
Investor conferences participated in: 5
Social gathering with shareholders: 1
• Feedback from markets to the Company
Reported on IR activities at Board of Directors: Regularly,
as well as 4 times/year after earnings briefing sessions
Exchanged opinions with business divisions on business
condition and market outlook: Regularly
Shared information with management via email: Regularly
External Recognition (From April 2022 to June 2023)
Investor Relations
www.lixil.com/en/investor/
Digital Transformation
Stock 2023
Selected as a Digital
Transformation Stock
2023, a joint initiative of the
Ministry of Economy, Trade
and Industry, the Tokyo
Stock Exchange, and the
Information-technology
Promotion Agency, Japan,
for the second consecutive
year (May 2023)
Nadeshiko Brand
Selected under the
Nadeshiko Brand initiative, a
joint initiative of the Ministry
of Economy, Trade and
Industry and the Tokyo Stock Exchange (seventh
time, March 2023)
Health & Productivity
Management Outstanding
Organization (White 500)
Certified as a Health &
Productivity Management
Outstanding Organization
under the Certified
Health & Productivity Management Outstanding
Organizations Recognition Program, a joint initiative
of the Ministry of Economy, Trade and Industry and
the Nippon Kenko Kaigi, Japan; selected as a White
500 enterprise, recognized among the top 500
under the large enterprise category (March 2023)
Environmentally
Sustainable Company
Selected as an
Environmentally Sustainable
Company at the ESG
Finance Awards Japan held by the Ministry of the
Environment (February 2023)
Gomez IR Site Ranking 2022
Awarded silver prize in the overall IR site ranking
and second place in the “Metal Products” industry
category (December 2022)
96
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
SHAREHOLDER INFORMATION
(As of March 31, 2023)
Major Shareholders (Thousand shares)
Name of shareholder
Number of
shares held
Ratio of
shareholdings
The Master Trust Bank of Japan, Ltd. (Trust Account)
47,895* 16.69%
JP MORGAN CHASE BANK 385632
(Standing Proxy: Settlement & Clearing Services Division, Mizuho Bank, Ltd.)
29,837
10.39%
Custody Bank of Japan, Ltd. (Trust Account)
14,075*
4.90%
SSBTC CLIENT OMNIBUS ACCOUNT
(Standing Proxy: The Hongkong and Shanghai Banking Corporation Limited Tokyo Branch)
13,820
4.81%
LIXIL Employee Stock Ownership
6,834
2.38%
BNYM AS AGT/CLTS 10 PERCENT
(Standing Proxy: MUFG Bank, Ltd.)
6,596
2.30%
NORTHERN TRUST CO. (AVFC) SUB A/C AMERICAN CLIENTS
(Standing Proxy: The Hongkong and Shanghai Banking Corporation Limited Tokyo Branch)
5,562
1.94%
STATE STREET BANK CLIENT OMNIBUS OM04
(Standing Proxy: The Hongkong and Shanghai Banking Corporation Limited Tokyo Branch)
5,420
1.89%
STATE STREET BANK WEST CLIENT – TREATY 505234
(Standing Proxy: Settlement & Clearing Services Division, Mizuho Bank, Ltd.)
4,740
1.65%
JPMORGAN SECURITIES JAPAN CO., LTD.
4,496
1.57%
Number of Shares and Shareholders
Number of shares authorized
1,300,000,000
Number of shares outstanding
(Excluding treasury stock of 51,992 shares)
287,057,667
Number of shareholders
53,606
Stock Trading Volume (Thousand shares)
10,000
20,000
30,000
40,000
50,000
June
2019
October
2019
April
2020
October
2020
April
2021
October
2021
October
2022
April
2022
April
2023
0
A Financial institutions
84,603
B Japanese companies
23,111
C International investors 127,917
D Individuals and others
51,425
E Treasury stock
51
Total
287,109
Distribution of Ownership among Shareholders (Thousand shares)
A
B
C
D
E
Total
287,109
thousand
shares
Notes:
In addition to the above, LIXIL
Corporation holds 51 thousand
shares of treasury stock.
Shareholding calculations exclude
treasury stock.
* indicates a trust service arrangement
Share Price Movement*
* Relative stock price trend based on the closing stock price as of June 30, 2019.
LIXIL stock price Nikkei 225
-40%
-20%
0%
20%
40%
60%
80%
100%
June
2019
October
2019
April
2020
October
2020
April
2021
October
2021
October
2022
April
2022
April
2023
97
INTEGRATED REPORT 2023
OVERVIEW
GOVERNANCE
STRATEGY
DATA
01
03
02
04
Company Name
LIXIL Corporation
Established
September 19, 1949
Registered Office
Osaki Garden Tower, 1-1 Nishi-Shinagawa 1-chome,
Shinagawa-ku, Tokyo 141-0033, Japan
Paid-In Capital
¥68,418 million
Fiscal Year End
March 31
Employees
Consolidated employees: 51,501
Financial Auditors
Deloitte Touche Tohmatsu LLC
Overview of Major Businesses
The Company manufactures and sells building materials
and housing equipment for housing and buildings, and
operates housing-related businesses as well as related
services
Common Stock Listings
Tokyo Stock Exchange Prime Market
Nagoya Stock Exchange Premier Market
Transfer Agent and Special Management of Accounts
Mitsubishi UFJ Trust and Banking Corporation
Annual Shareholders’ Meeting
Normally held in June
LIXIL Online Information
In addition to the Company profile,
sustainability initiatives, and the
latest news, our corporate website
also contains sections covering
the Company’s recent business
initiatives and insights from the CEO.
Corporate Website
www.lixil.com
Our IR website offers comprehensive
content for shareholders and other
investors, including information
regarding financial results, streaming
video of results briefings, and
performance data.
Financial Information
www.lixil.com/en/investor/
Our corporate website introduces
LIXIL’s Impact Strategy and
initiatives around the world in order
to contribute to achieving the SDGs,
under our corporate purpose: “make
better homes a reality for everyone,
everywhere.”
Non-Financial Information
www.lixil.com/en/impact/
Overview of Information Disclosure
Please visit our website for more information on these subjects.
Cautionary Statement
with Respect to Forward-
Looking Statements
Statements made in this
integrated report with respect
to plans, strategies, and future
performances that are not
historical facts are forward-
looking statements. LIXIL
Corporation cautions that a
number of factors could cause
actual results to differ materially
from those discussed in the
forward-looking statements.
Reports
Website
• Integrated Report
• ESG Databook
• TCFD Report
• Corporate Governance
Report
A report that integrates key
financial and non-financial
information
Financial Information
Non-Financial Information
• Annual Securities Report
• Information for
shareholders and
other investors
• Impact Strategy
(Sustainability) Website
• Corporate Governance Information
CORPORATE DATA
(As of March 31, 2023)
98
INTEGRATED REPORT 2023
www.lixil.com
2023.06.26
TSE Securities Code: 5938