KAO CORPORATION Sustainability as the only path
For the year ended December 31, 2023
OUR
PURPOSE
To Realize
a Kirei World
in Which All Life Lives in Harmony
We aim to create a Kirei life for people, society, and the planet through creation and innovation building a future where all life enjoys more fulfilling
and enriched lives.
Three areas of our value creation
Life
Everyday Lives |
Ecology
"Three areas"video
Kirei-Making Life Beautiful
We will contribute to Kire i that makes life shine for each and every person, Kire i that makes everyone smile in their everyday lives, and Kirei that realizes a sustainable ecology.
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 2 |
OUR
DNA
Continuing to Expand
through Yoki-Monozukuri
Corporate History and Net Sales Growth
Yoki-Monozukuri represents our approach of staying close to people, society, and the planet while creating products and services that respond to their needs and enrich their lives. This is a deeply rooted value within Kao, and it serves as the driving force for our corporate growth. Going forward, we aim to maximize the power and potential of employees, evolve Yoki-Monozukuri, enhance corporate value through transformation to build robust business through investment, and become an essential company in a sustainable world.
Become an Essential Company
in a Sustainable World
FY2023 results
Net sales: 1,532.6 billion yen
Operating income: 114.7 billion yen EVA®:14.9 billion yen
（Economic Value Added）
Expand business fields into the health and beauty domains
Accelerate global expansion
Respond to needs for streamlining housework and personal care
Expand beauty care domain
Strengthen health and beauty
Corporate value
enhancement
- （
- Trillions
of
1.2 yen
）
1.0
Begin expansion to Asia
Products that support cleanliness in daily life
Founded | 1964 | 1970 | 1980 | 1990 | 2000 | 2010 | 2020 |
in 1887 |
Contributions to |
0.8
0.6
0.4
0.2 | Business | Maximize the Power and |
0 | Transformation | Potential of Employees |
Global shift to essential, | Decisive investment in | |
highly profitable businesses | human capital | |
Withdrawal from matrix |
〈the Environment〉 |
Yoki-Monozukuri
management
De-inking agents, water- | Concentrated | Increasing | Water-saving | Products made | More efficient agriculture / |
reducing agents for concrete, | detergents | availability of refill | products | using sustainable | More durable roads |
etc. | products | raw materials |
Create truly unique value for
customers
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 3 |
OUR
CHALLENGE
Global Sharp Top
Strategy to Accelerate
Transformation
We will become the number-one essential, solutions-led company for individuals across the world. This is our Global Sharp Top Strategy. We view the entire world as our market, garnering consumer loyalty by refining the characteristics of our products and services, and aiming for top market share within specific segments. We will form scrum teams with internal and external members who share our philosophy and combine our wisdom to accelerate transformation to build robust businesses through investment.
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 4 |
CONTENTS | |
Introduction | |
OUR PURPOSE | 02 |
To Realize a Kirei World in Which All Life Lives in Harmony
01. Kao's Value Creation
Aim to realize a world
where all life lives in harmony
Value Creation Model ・・・・・・・・・・・・・・・・・・・・・・・・ 10
Materiality ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 11
03. Business Strategy
Transform to build robust business through investment by adhering to the Global Sharp Top Strategy
Business Overview・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 23
04. Value Chain Reform
Rebuild a "Strong Kao" through a scrum-type approach
MK_ Purpose-Driven and Value Co-Creation for
Strong Consumer Connections・・・・・・・・・・・・・・・・・・・・・・・・・・・・31
Sales_ A Sales Model for Continued Profitable Growth
Corporate value
enhancement
Business | Maximize the power and |
transformation | potential of employees |
Yoki-Monozukuri |
OUR CHALLENGE | 04 | |
Global Sharp Top Strategy to |
ESG Strategy / Balancing ESG and EVA ・・・・ 12
02. Transformation for K27
Chemical | |
Net sales | |
Cosmetics | 1,532.6 |
billion yen | |
Core operating | |
income | |
114.7 | |
billion yen | |
Life Care |
Hygiene and Living Care
Health and Beauty Care
DX _ Using Digital Technologies to TransformYoki-Monozukuri
SCM_ Aiming for a Sustainable and Resilient Supply Chain・・34 Research_ Creation of Cutting-edge Solutions Intellectual Property_ Maximize Utilization of
Technology Assets ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・36
P R_ Contributing to Corporate Value and Profit
by Creating Kao Fans̶ a loyal consumer base ・・・・・・・・・・37
- OUR PEOPLE 】
A New Challenge to Create One and Only Values・・・38
Accelerate Transformation | |
TOP MESSAGE | 06 |
Strive to Be the One and Only Company Through Creation and Innovation
Decisively implement structural reforms and create
a Global Sharp Top business
Four Strategies
for Achieving K27 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 15
Build Global Sharp Top
Businesses ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 16
Global Sharp Top Human Capital /
Organizational Management ・・・・・・・・・・ 17
Improve Capital Efficiency /
Profitability・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 19
Build Businesses Through Co-creation with Partners ・・・・・・・・・・・・・・・・ 21
Hygiene and Living | 24 | Health and Beauty | 25 | ||||
Care Business | Care Business | ||||||
Life Care | 27 | Cosmetics | 28 | |||
Business | Business | |||||
Chemical
Business 29
05. Corporate Governance
Establish diverse and robust governance to support the sustainable enhancement of Kao's corporate value
Messages from Outside Directors and an Outside Audit & Supervisory
Board Member ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・43
Corporate Governance ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・44
Risk and Crisis Management ・・・・・・・・・・・・・・・・・50
Introduction
Contents
DATA SECTION | Evaluations from external organizations / | Corporate Overview and | Editorial Policy and Kao Information | |||||||||||
ESG and Financial highlights ・・・・・・・・・・・・・・・・・・・・53 | Stock Information・・・・・・・・・・・・ 57 | Disclosure Framework・・・・・・・・・・・・・・・・・・・・・・・58 | ||||||||||||
Top Message | Value Creation | K27 Strategy | Business Strategies | Value Chain | Governance | Data Section | 5 | |||||||
TOP MESSAGE
Global Sharp Top
Striving to Be the One and Only Company Through Creation and Innovation
Representative Director
President and Chief Executive Officer
A Company That Protects
Future Lives
The global COVID-19 pandemic, the multipolarity and fragmentation of the international society with growing geopolitical risks, price hikes due to soaring raw material prices, and the issue of releasing treated water have profoundly impacted Japan's economy. Meanwhile, the global movement towards decarbonization and environmental conservation to create a sustainable society is becoming even more critical.
The Kao Group aims to realize a world in which all life lives in harmony. We are moving to become an indispensable part of a sustainable society as a company that protects future lives and cherishes the connection between people and society as well as the vibrant connections between people.
A Global Sharp Top Strategy That
Propels Us Toward K27
In August 2023, we updated parts of the Mid-term Plan to accelerate global development and improve capital efficiency. Here, we announced K27, which has 2027 as the last year of the plan. Although our core plan has not changed, the Global Sharp Top strategy has been added to clarify our axes of growth.
Kao's strengths lie in our unique technologies, developed through pursuing Essential Research. These technologies have resolved customer concerns on a superior level by creating indispensable products or, in other words, creating value. We aim to be the one and only company in the world to provide sharp value proposals that customers wholeheartedly support. This is the essence of the Global Sharp Top mindset.
Four Frameworks for
Transformation
We have specified four frameworks as strategies that guide us toward achieving K27.
The first framework is to strengthen and expand businesses that have high customer demand and profitability on a global scale.
The second framework is to develop talented individuals with exceptional skills and creativity to address important needs. These individuals will play central roles in promoting effective organizational management.
The third framework is to continually improve capital efficiency and profitability. We will strive to maximize the value of our management capital by investing in various categories and monitoring business efficiency based on business portfolios.
The fourth framework is focused on business development through co-creation with partners. This strategy will enable us to quickly and significantly utilize our technology assets.
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 6 |
TOP MESSAGE
Build Global Sharp Top Business
Global Sharp Top Human Capital and Organization Management
Shift from quantity and volume to quality and connections
Kao's Yoki-Monozukuri approach focuses on identifying the essence from various facets, starting with the consumer, to create highly unique approaches.
R&D's strengths in supporting this lie in continuously incorporating and refining technology used in different fields to develop products that provide new value.
As diversity has become more prevalent, it is rare for people to seek the same product value. Instead, people now seek products that align with their personal values and have meaning to them. We are evolving manufacturing from value creation that provides a certain level of satisfaction to anyone who uses our products, to value creation with a strong focus on certain customers, thereby striving for an elevated level of satisfaction. To achieve this, we are making efforts to transform from an economy of quantity and volume toward an economy of quality and connections.
Gaining loyalty through building on a global perspective
We re-established a strong awareness of globalization to clarify the contrast between that and conventional international expansion. Instead of promoting Japanese technology and products overseas as we did in the past, we will now focus on generating value from a global perspective from the start.
We are committed to creating products and developing businesses that are indispensable to our customers, as measured by the repeat ratio (loyalty). Equally important, we are determined to maintain our top position within the important sectors for these businesses.
Fostering skilled human capital through well-balanced investments
We will steer towards an increasingly well-balanced investment in human capital. Based on Kao's Diversity, Equity, and Inclusion values, which respect diversity of people, we will establish policies that provide maximum respect for the individual characteristics and strengths of each member in our workforce.
To achieve this, we will start by focusing on developing distinct personnel that can exert leadership and those highly skilled in specific fields.
Although we provide numerous training opportunities within our human capital investments, we especially focus on innovation technology education. Currently, Kao has launched the DX Adventure Program, which allows participants to acquire top-class skills starting from a basic understanding of IT. We have also started an AI Academy to reskill advanced engineers.
Speedy decision-making and implementation with task-based management
For those with strong leadership qualities, we promote the delegation of authority and create an environment where swift decision-making is done in small teams.
While we respect the conventional matrix structure between business management divisions and functional divisions, we are now transitioning to a task-based management model with business management divisions at its core to make clearer and faster decisions.
We believe in promoting dialogue and leveraging the collective wisdom of our employees to prioritize speed in decision-making and task implementation.
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 7 |
TOP MESSAGE
Improve Capital Efficiency/Profitability
Business portfolio review with ROIC* as an indicator
Since 2023, Kao has been managing business portfolios with ROIC as its foundation. The company's businesses have been quantitatively analyzed and categorized into the three sectors: Stable Earnings, Growth Drivers, and Business Transformation, with the ROIC for each sector been made clear.
The ultimate goal of K27 is to achieve an ROIC of 11%. To reach this goal, we will prioritize investments for global growth and increase sales of global businesses in the growth driver business area, which includes skin care, cosmetics, chemicals, and business products.
＊ Return on Invested Capital
Conducting structural reforms to pave the way for improved capital efficiency
We initiated a significant structural reform in 2023 reviewing our business portfolio, which relied heavily on China, and reorganized it to foster well-balanced global growth. Through these human capital structural reforms, we have maximized our human capital and paved the way to improved efficiency.
In Japan where there is a strong business custom of maintaining low prices for everyday products, Kao has led the industry in implementing strategic price increases to pass on the rising costs of raw materials. In this dynamic environment, Kao has harnessed digital technology to manage profit ratios from product design to sales, and are consistently challenging ourselves to deliver high-added value.
Looking ahead to 2024, we are proactively addressing logistics issues by implementing effective inventory control measures, eliminating product shortages, and enhancing shipping efficiency.
Build Businesses Through Co-creation with Partners
Breaking free from self-sufficiency to create synergy
The final framework requires building businesses through co-creation with partners. To maximize Kao's technology assets and contribute to business and society as much and fast as possible, collaboration with partners with distinctive strengths becomes essential. Our collaboration guidelines are based on whether we have the same values and ambition toward the same direction to resolve social issues. We believe that leading the industry and each having areas of strength is important when creating synergies.
From now on, Kao will strive to break free from a self- sufficient mindset and build businesses with a higher level of products and profit with the support of many partners.
Aiming to Increase Corporate Value Under the Kao Way
The Kao Way is our corporate philosophy deeply rooted in each employee. Due to this foundation, all activities become consistent and become the driving force
that brings together our diverse assets and employee capabilities.
As we propel towards K27, the power of our people will drive our aspiration to become an essential global company under our Global Sharp Top strategy. We will focus on maximizing the energy of our employees to further evolve Yoki-Monozukuri from an ESG perspective fueled by creativity and innovation.
We aim to become an essential company in a sustainable world, walking the right path by showing the world how to transition from an economy of quantity to an economy of quality.
[ Guidelines to Attain K27 ]
Pursuing the transition from quantity to quality
Global Sharp Top
Yoki-Monozukuri
Maximizing the power and potential of employees
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 8 |
01Chapter
Kao's
ValueCreation
Children want a world
where all life lives in harmony. Kao aims to be a company that protects future lives based on our Vision,
- Sustainability as the only path".
We listen to children's thoughts on the future through
the Kao International Environment Painting Contest for Children.
- Winning entries for 2023
Introduction | Contents | Top Message | Value Creation | K27 Strategy | Business Strategies | Value Chain |
Governance
Data Section | 9 |
Our Value Creation
Value Creation Model
Purpose To Realize a Kirei World in Which All Life Lives in Harmony
Social Issues
of Focus
Human
Capital
Environmental
Issues
Relationship
Capital
Sources of Our
Value Creation
・Number of employees …… 34,257
・Management tool for activating personal growth : OKRs
・Open recruitment program for revolutionizing ideas : 0 ★ 1 Kao
・Sales area ……………………………… over 100
・Subsidiaries ………………………… 113
・Customers, partners for business and social contribution, academia
Become an Essential Company in a Sustainable World
Corporate value
enhancement
Commitment | Our Vision |
to the Future | |
1 RegenerativeLifestyles
Plan for and enable regeneration.
2 | Toward Carbon |
Negative | |
Move beyond CO2 |
Aging
Population
Financial
Capital
・Net sales ………………………………… 1,532.6
billion yen
・Core operating 114.7 income＊…………………………………… billion yen
・(EVA) 14.9 billion yen Economic Value Added …………・Number of brands …………… 81
Hygiene and | Health and | Life Care | Cosmetics | Chemical |
Living Care | Beauty Care | |||
reduction and unlock | Sustainability as the Protectingfuture |
CO2 recycling. | |
3 WasteZero | |
Waste nothing. | |
Period. | |
Intellectual
Capital
Pandemics
Manufactur-
ing Capital
Diversification
of Society
Natural
Capital
・Number of15,000 patents held …………………………
・Number of22,000 trademarks held…………………
・R&D expenses …………………… 62.6 billion yen
・Production sites………………… 36 locations
・Capital investment ………… 93 billion yen
・Energy consumption……… 16.7PJ
・Water use ……………………………… 16.2 million m3 | |
・Plastic packaging …………… 85.0 | |
usage | thousand tons |
・CO2 emissions across …… 10,094 | |
the product lifecycle | thousand tons |
Business | Maximize the Power and |
Transformation | Potential of Employees |
Yoki-Monozukuri | ||||||||||||
C | Ki | n | y | |||||||||
o | rei Li festyle Pla | |||||||||||
a | ||||||||||||
r | ||||||||||||
p | o | r | W | |||||||||
at | a | |||||||||||
e | he | K | ||||||||||
P | ||||||||||||
hilosophy : T |
4 | Precision | lives | onlypath |
Life Care | |||
Every person is unique. | |||
Our solutions will be | |||
too. | |||
5 | Leave No | ||
One Behind |
Innovation can be for everyone.
We won't stop.
＊ FY2023 figures are calculated based on core income. The Kao group presents income excluding one-time gains and losses due to non-recurring factors as "core income."
Introduction
Contents
Top Message
Value Creation
K27 Strategy
Business Strategies
Value Chain
Governance
Data Section | 10 |
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Disclaimer
Kao Corporation published this content on 24 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 May 2024 02:09:06 UTC.
