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Integrity [41,57,58,DMA,HR2,HR12,SO4]

Kao strives to implement and establish compliance on a global basis in order to behave lawfully and ethically and conduct fair and honest business activities, while responding to changes in society.

2015 activities
While continuing to implement existing compliance-related measures and activities, in order to develop a more objective picture of the effectiveness of compliance measures and activities so as to provide a basis for further improvement, Kao launched the Listening to Employees’ Opinions Activity in 2015, through which we have been able to collect the views of a large number of Kao employees and verify their understanding of compliance issues. Building on this Listening to Employees’ Opinions Activity, October 2015 was designated Compliance Awareness Month. During Compliance Awareness Month, a message from the Compliance Committee chairman was disseminated using posters, and compliance messages were also sent from the Executive Officers to individual divisions. In addition, voting was conducted to decide on a compliance logo, and tests were conducted to check understanding of the Kao Business Conduct Guidelines (BCG). Also in 2015, external experts conducted third-party auditing of Kao’s compliance operations, focusing in particular on corruption prevention. Proposals for future improvements have been made in regard to the issues identified in this audit.



Kao upholds the principle of Integrity, passed down from our founder, as one of the core values of its corporate philosophy, the Kao Way. Integrity means to behave lawfully and ethically and conduct fair and honest business activities. Kao regards Integrity as the starting point of compliance and promotes it as a foundation for earning the respect and trust of all stakeholders.

Compliance promotion structure

Kao has established the Compliance Committee, chaired by the Representative Director and Senior Managing Executive Officer, and comprised of representatives of relevant divisions and affiliates.
The Compliance Committee:
1) reviews the establishment and revision of the Kao Business Conduct Guidelines (BCG) and other compliance-related internal guidelines;
2) implements educational activities to promote wider permeation and establishment of corporate ethics both in and outside of Japan; and
3) monitors the operation of and responses to the compliance hotlines once every six months, reports on important matters, provides an overview of activities and makes proposals to the Board of Directors as appropriate.
The Compliance Committee has installed a secretariat and holds a secretariat meeting each month. At the secretariat meetings, members of the secretariat review and discuss the responses to inquiries made to hotlines both in and outside of Japan, consider new approaches to promote compliance and make plans to provide compliance education.
In addition to conducting these activities, Kao monitors and evaluates the activities and continues to improve them using the PDCA cycle.

Auditing and monitoring structure

Kao conducts audits for compliance through the Department of Internal Audit, Global and monitoring of activities in a variety of formats.

  • ・Auditing through the Department of Internal Audit, Global

    The Department of Internal Audit, Global conducts regular internal audits for all companies and divisions of the Kao Group, which include verifying conduct on compliance-related issues based on guidelines related to entertaining and gift-giving.

  • ・Self-appraisal of individual divisions

    Once a year, the Compliance Committee members of individual divisions conduct self-appraisals concerning whether there are violations of the BCG and the progress of activities to promote compliance in their own divisions.

  • ・Employee opinion survey

    The Kao Group monitors the status of compliance awareness among employees through the company-wide opinion survey Find conducted every other year.

  • ・Supplier satisfaction survey
    Kao conducts a supplier satisfaction survey on a regular basis, targeting outside vendors (suppliers) and other business partners to create an opportunity to review its own conduct.
  • ・Self-check exercises at seminars
    Compliance seminar participants do self-check exercises on their compliance awareness.


Identifying mid- to long-term issues and studying corresponding initiatives

Kao conducts compliance promotion activities based on mid- to long-term and annual activity plans. These include regularly revising the BCG, improving and operating compliance hotlines, and holding Integrity Workshops.
From 2014, Kao introduced a process to verify the validity and appropriateness of existing activities when formulating the activity plan for the following year and thereafter. To facilitate more effective compliance activities, this verification process includes gathering the opinions of staff involved in compliance in company divisions as well as other employees. Kao also used an evaluation of the compliance structure by an external consulting firm as a reference when formulating the compliance promotion action plan for the following year and thereafter.

In 2015, Kao implemented the Listening to Employees’ Opinions Activity and Compliance Roundtable to provide an opportunity for dialog with the staff members of 19 departments and organizations including Kao Group companies, to find out employees’ views on existing measures and their expectations for new measures they will adopt. Kao has also been listening to voices from outside the company, commissioning an accounting firm to evaluate Kao’s compliance system and compliance activities.

PDCA Cycle for Compliance Activities

PDCA Cycle for Compliance Activities


Implementation of Compliance Awareness Month

Recognizing that compliance is each employee’s responsibility, and responding to the many requests from employees to make compliance activities more relevant to them personally, within Japan Kao has designated October as Compliance Awareness Month, timing this to coincide with the Nippon Keidanren’s Corporate Ethics Promotion Month, and seeking to use this activity to spread compliance awareness more widely within the Kao Group.
During Compliance Awareness Month, a message from the Compliance Committee chairman is disseminated via the Kao company Intranet and by using posters, and compliance messages are also sent from the Executive Officers to individual divisions. In addition, case studies are disseminated, and refresher tests are administrated to check knowledge of the Kao Business Conduct Guidelines (BCG) and, in 2015, voting was conducted to decide on a compliance logo.
Comments from Kao employees included: “Having employees of Kao Group companies vote on a campaign logo helped strengthen group cohesion” and “Providing a once per year opportunity to reflect on compliance issues is an innovative and exciting idea.”
In 2016, the scope of Compliance Awareness Month implementation will be expanded to cover all of the Kao Group, including Kao Group companies outside Japan.

Compliance Awareness Month poster


Utilization of compliance-related rules

The Kao Business Conduct Guidelines (BCG), which serve as Kao’s corporate code of conduct, have been adopted by all Kao Group companies throughout the world.
In addition, the Kao Business Conduct Guidelines Casebook, which covers possible scenarios relating to the BCG in Q&A format, has been compiled in both Japanese-language and English-language versions.
Reflecting the approach embodied by the BCG, Kao prohibits the giving and receiving of bribes regardless of the identity of the other party and bans facilitation payments in the Kao Anti-Bribery Guidelines, and prohibits the making of political donations in its Donation Guidelines. Kao Anti-bribery Guidelines are being drawn up and adopted for each region and company including Kao Group outside Japan.
Besides the measures noted above, Kao is also proceeding with the adoption at Kao Group companies outside of Japan of the Kao Guidelines for Avoiding Conflicts of Interest which requires particular forms of approval or notifications corresponding to specific situations in which there is a risk of a real, apparent or potential conflict of interest through competition, transactions, loans, personal investments etc. with the Kao Group.

The following measures were implemented in 2015:

  1. The Kao Anti-bribery Guidelines and Kao Guidelines for Avoiding Conflicts of Interest were adopted in those regions where they had not been adopted in 2014 (including the U.S.A., Europe, the Middle East, Africa, Indonesia, and Singapore).
  2. Kao Business Conduct Guidelines Casebook (Thai language version)

    A total of 17 local-language versions of the Kao Business Conduct Guidelines Casebook were compiled, so that the Casebook could be shared with Kao employees in all countries and regions.

  3. The content of the BCG was revised to reflect the measures implemented by the Kao Group since 2013 and the approach adopted by the Kao Group in relation to the global environment in which it operates; the revised version of the BCG took effect in April 2016.
  4. It was confirmed that Kao had made no political donations in 2015.


Activities to communicate and instill the BCG

To deepen employee understanding of the BCG and other compliance-related Guidelines, Kao holds classroom-based training for new employees, newly appointed managers, executives working in Japan, and Group company employees outside Japan. In addition, an annual BCG refresher test is held to check knowledge of BCG content.

For 2015, specific targets were set for the following three items; the result achieved are outlined below:

  1. BCG refresher test:
    Target: 95.0% completion rate
    Result: 96.4% completion rate (34,229 out of 35,483 eligible personnel)
  2. Compliance training for Kao executives working in Japan:

    Target: 70.0% completion rate
    Result: 73.6% completion rate (1,369 out of 1,859 eligible personnel)

  3. Integrity Workshops held overseas:
    Target: 85.0% completion rate
    Result: 85.0% completion rate (9,360 out of 11,000 eligible personnel)
    Utilizing mainly the 16 instructors selected in late 2014, these training programs were extended to Kao Group companies in Europe in 2015.

Integrity Workshop (Finland)

Integrity Workshop (Norway)


Establishment and operation of compliance hotlines

Kao Group operational policy

In accordance with the needs of each country and region, Kao Group companies have established and operate both internal and external compliance hotlines or only external hotlines.
In operating the hotlines, after properly confirming the report and caller’s needs, companies take steps to respect the individual’s privacy, strive to ensure that callers suffer no disadvantage as a result of their good-faith consultation, and receive the caller’s consent when a third party needs to be involved.
In 2015, there were 196 calls to the hotlines of the Kao Group including companies outside Japan, none of which presented a serious risk. About 70% of the calls concerned consultations about communications in the workplace.

Kao Group in Japan

Kao Group companies in Japan have established internal compliance hotlines operated by members of the Compliance Committee secretariat and external hotlines operated by outside specialists including lawyers and clinical psychologists. Some of the internal and external hotlines accept reports and inquiries not only from Kao employees but also from related parties including business partners.

Kao Group outside Japan

All Kao Group companies outside Japan have established and operate external compliance hotlines operated by an outside service provider, and the majority have also established internal compliance hotlines in which the company’s HR manager or other representative handles inquiries.
The Integrity Lines, which are external compliance hotlines, have been successively set up at Group companies in countries outside of Japan and are available in the caller’s own language 24 hours a day, 365 days a year. Anonymous inquiries are accepted, but callers are encouraged to use their real names due to the limited nature of investigations based on anonymous reports.
In 2015, new hotlines were set up for Kao Group companies in Brazil and Norway.

Poster for the Integrity Line in Brazil and Integrity Cards for Brazil and Norway


Response to compliance violations and serious violations in 2015

Kao upholds a principle of disclosing serious violations of laws and regulations in the Kao Group’s business operations.
*However, in cases where there are legal or contractual confidentiality obligations, the risk of affecting public interest, the need to take privacy into consideration or other similar limiting factors, the violation may not be made public.

There were no serious compliance violations relating to the Kao Group’s operations in 2015.
While there were cases involving fraudulent behavior for personal gain, criminal behavior (such as theft) for which formal criminal charges were not brought, and instances of sexual harassment, etc., none of these were serious enough to cause any significant harm to the company’s reputation, and internal measures to remedy the situations have already been taken.


Ten consecutive years on the World’s Most Ethical Companies list

In March 2016, Kao was named to the list of the World’s Most Ethical Companies 2016 by the U.S. think tank Ethisphere Institute. We have been on this list for 10 straight years, since the award’s inception in 2007. Kao is the only Japanese company, and the only manufacturer of fast-moving consumer goods as well as chemicals, to be honored in all 10 years.
Selection of companies is based on the evaluation of five factors: (1) Ethics and Compliance Program; (2) Leadership, Innovation and Reputation; (3) Corporate Citizenship and Responsibility; (4) Governance; and (5) Culture of Ethics. In this year of the award, 131 companies around the world made the list. This recognition reflects the fact that the spirit of Integrity as passed on by our Kao predecessors continues to be implemented by all Kao Group members through practice of the Kao Way and the BCG.

Awards ceremony


Measures ensuring full compliance in daily work

Kao assigns employees trained as “laws and regulations experts” to monitor trends in enforcement and amendments to laws and regulations related to its business, and to communicate information and educate as needed through various means such as in-house workshops.
In addition, various internal rules that are useful in putting the BCG into practice are available on the Intranet system at Kao Group in Japan.

Laws and regulations revised in 2015 for which laws and regulations experts conducted relevant activities
  • Laws and regulations relating to the rationalization of energy use, etc.
  • Laws and regulations relating to the rationalization and appropriate management of fluorocarbon use
  • Laws and regulations relating to the promotion of measures to safeguard the environment through environmental education etc.
  • Basic Act on the Water Cycle (Japan)
Number of laws for which laws and regulations experts have been appointed and the number of internal regulations registered as of the end of December 2015
Number of laws for which laws and regulations experts* have been appointed: 340 laws in total from 92 laws and regulations experts
Number of internal regulations registered: 605
  • * Laws and regulations experts
    The managing division independently appoints laws and regulations experts for specified laws and regulations


Management and use of intellectual property

Kao conducts its business activities while protecting its industrial property rights, such as patent, design and trademark rights for intellectual property including new technology and product concepts, package designs and brand names.
R&D–Intellectual Property focuses on patent rights, which indicate key company values such as capacity for technological development, as it promotes strategic applications in a broad range of fields. Brand Legal Management collaborates closely with the business divisions, considering cost-effectiveness while submitting and managing applications for design and trademark rights (some design rights are handled by the R&D–Intellectual Property department). Kao also actively pursues the acquisition of rights outside of Japan, while vigorously protecting the company against any infringements of its legal rights, both in and outside Japan. Most recently, Kao has been pursuing measures against counterfeit products in Asia and other regions.
At the same time, we strive to respect the industrial rights of other companies in Japan and overseas, to avoid infringing upon them from the initial stages of our R&D activities, re-confirming existing patents before new product launches and taking action as necessary, and examining product packages in advance to avoid any rights-related issues.

In 2015, Kao announced the licensing of Kao’s patented technology for identifying causative microorganisms in food and beverage product incidents. It is anticipated that bringing this technology into more widespread use will help to enhance food safety and make a positive contribution to society.

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