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Third-party opinion

The Japan Research Institute, Limited Counselor Eiichiro Adachi

The Japan Research Institute, Limited
Counselor
Eiichiro Adachi

After graduating from Hitotsubashi University in Japan in 1986 with a Bachelor’s degree in Economics, Mr. Adachi joined The Japan Research Institute, Limited (JRI) in 1990. Currently Counselor at JRI, he previously served in the Management Consulting Department and Technology Research Department. He is mainly engaged in conducting industrial surveys and corporate evaluations from the perspective of corporate social responsibility. He was one of the experts in the Japanese delegation to the ISO/Social Responsibility Standards (ISO 26000) Working Group (March 2005–May 2009).
He has co-authored numerous books including CSR Management and SRI (Kinzai, 2004), Businesses That Grow with Global Warming (Toyo Keizai Inc., 2007), Introduction to Environmental Management (Nikkei Publishing Inc., 2009), Ten New Things to Know about Environmental Management: From Carbon Risk to Natural Capital (Nikkei Publishing Inc., 2015), and Introduction to Natural Capital: The Challenge of the Nation, Local Governments, and Companies (NTT Publishing, 2015).

The Kao Group completed the Kao Group Mid-term Plan 2015 (K15), which started in fiscal 2013, by setting new high records for sales and profit. It achieved each of its fiscal 2015 management targets of consolidated sales of 1.4 trillion yen, consolidated profit of 150 billion yen, and an overseas sales ratio of more than 30%. The annual dividend per share for fiscal 2015 increased by 10 yen, marking 26 consecutive terms of increased dividends.
While continuing to increase returns to shareholders, the Kao Group aims for both sustained “profitable growth” by increasing the added value of its products and “contributions to the sustainability of the world” by making proposals to resolve social issues through its business activities and conducting social contribution activities. As such, it is only natural that more expectations than ever are also placed on the Kao Group’s returns to society.
The expectations on the Kao Group’s returns to society do not stop at paying taxes, employing people, and social contributions. At the core of returns to society is nothing less than mitigating the negative social and environmental impacts of doing business as much as possible, and exerting positive impacts as much as possible.
I read the Kao Sustainability Report 2016 from this perspective. I had the impression that the Kao Group described the results of its efforts to give returns to society from a focus on integrating the returns with its main business. I also felt that several issues remained upon detailed examination.
The highlights included in this year’s report cover “Kao’s recognition of social issues” and “Kao’s approach.” This style of reporting is more persuasive for the reader, but deeper exploration of the content is still possible based on its correlation with and importance to the Kao Group’s business.
For example, the problem of plastic debris in the oceans, which was mentioned in the third-party opinion last year, has attracted global attention including at the G7 summit. One of the sources of plastic debris, plastic microbeads are used in personal care products. The Kao Group has discontinued use of plastic microbeads as a scrubbing agent in toothpaste and other products and announced its plan to complete the replacement of plastic microbeads with other materials by the end of 2016. It would be beneficial to disclose the progress of this initiative, which is closely aligned with the Kao Group’s main business. The Kao Group is working to reduce the amount of plastic used in its packaging and containers through efforts including promotion of refill and replacement products, but it still produces 56,000 tons of plastic waste in Japan from packaging and containers. As the consumer products business in Asia is expected to see accelerated growth, countermeasures for plastic waste in countries that do not have developed recycling programs will become even more important.
In the same vein, the 2016 report states in regards to the United Nations’ adoption of the Sustainable Development Goals (SDGs), “We are supporting people to live healthy lives through products and services that incorporate technologies we have cultivated.” Yet the report does not share information such as analysis of the 17 goals’ and 169 targets’ correlation with the Kao Group’s business and their order of priority. The company’s future business strategy states that it is preparing to enter businesses related to food and health and to create businesses in peripheral areas such as hygiene, meaning there is plenty of opportunity to design a story of giving returns to society based on the SDGs from both angles of its main business and contributions to society.
This is my third time to contribute the third-party opinion to the Kao Group’s sustainability report. In terms of the content covered and level of detail, I judge the report as fully meeting the objective of providing comprehensive information for targeting professionals that enables accurate evaluation of its initiatives. As a corporate group leading Japan in business performance, however, the Kao Group should recognize that stakeholders are placing greater expectations on it than ever.

  • I have provided a third-party opinion on the Kao Group’s activities contributing to the sustainability of the world described in this report and on the way in which the Group disclosed relevant information from the perspective of a provider of corporate information to financial institutions to serve their decision-making regarding socially responsible investments. This opinion does not express a view on whether this report presents, in all material respects, matters measured, calculated, and prepared in accordance with environmental reporting guidelines generally accepted.
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