Kao’s new ESG strategy is centered on kirei (meaning “clean, beautiful and orderly”) — a Japanese word that is not yet well known worldwide but one that the company aims to make aspirational throughout the world.
The Japanese concept of kirei (“clean, beautiful and orderly”), is central to Kao Corporation’s ESG (environmental, social, and governance) strategy: the Kirei Lifestyle Plan. This strategy incorporates the spirit of the company maintained since its founding, pursuing 21st-century Yoki-Monozukuri (“excellent manufacturing”) while delivering a sustainable world and a better daily life for everyone, globally. Kao has become a unique global brand by offering lifestyle products based on kirei— a Japanese word that is not yet well known worldwide but one that Kao aims to make much more widely known and understood throughout the world.
In the past 10 years, Kao has carried out various organizational reforms — including establishing a new ESG Division. Sustainable Brands Japan’s Yoshihiko Yamabuki recently sat down with Dave Muenz, Kao’s executive officer and ESG Division SVP, to talk about some of these reforms and Kao’s overall ESG strategy.
Focusing on cleaning and hygiene products during COVID-19
Yamabuki: What have you prioritized during this pandemic?
Dave Muenz: Employee safety has been our top priority. We responded to the situation very quickly by starting remote working initiatives and sharing directions from the CEO, right from the early stages of the pandemic. We also stepped up manufacturing of cleaning and hygiene products. For example, in Japan, we rapidly increased the production capacity of hand sanitizer products by 20 times; and placed priority on supplying these products to medical institutions and facilities. Our German manufacturing facility changed production and produced its first disinfectant product. To help encourage cleaner and more hygienic lifestyles, we are promoting a video called, “Awa Awa Tearai no Uta” ( “A Song for Handwashing with Foamy Soap”), which is available in seven languages — including Japanese, English, Chinese and Spanish.
At the root of these actions is the “Kao Way” — our corporate philosophy that aims to bring heartfelt satisfaction and enrichment to the lifestyles of people. To demonstrate our integrity, we believe that sharing factual and evidence-based perspectives and solutions will lead to more effective and thoughtful actions throughout these difficult times.
The 'Kirei Lifestyle Plan' ESG strategy
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Yamabuki: Last year, Kao announced its Kirei Lifestyle Plan ESG strategy for 2030. Could you comment on that a bit?
Muenz: As we face global issues such as environmental crises and social change, it is time to reconsider what we should aim for from the perspective of ESG. Specifically, we will reconstruct our ESG commitment in a more visible manner; and in a way that is authentic to Kao's DNA. as we convey our message to the world. In this way, we hope to increase employee motivation; and, more than ever, I want to implement new strategies that will help us achieve even higher levels of ESG.
In developing our strategies, we first conducted materiality analysis to discover the most important issues that Kao should focus on, globally. We asked stakeholders around the world using questionnaires. Out of the nearly 90 issues that we had, we thought about what was most important to Kao and what changes would be needed within the company. This work provided the basis for our ESG strategies.
In pursuit of something that could be seen as unique to Kao, we chose the word, kirei — which represents a spirit that has been rooted in the Kao ethos since the company’s inception. Of particular importance is the value of the word kirei; it conveys a sense of cleanliness, order, and well-being — not only on the surface, but also on the inside.
Kirei can be seen as a holistic view of life — not only for individuals but also for families, communities, and our planet. Kirei is a concept that we are trying to convey to people all over the world, and I want it to form an identity and lifestyle that is synonymous with the Kao brand. Considering the needs of society is, of course, important; but faithfully questioning “who and what we are” at a company level is also especially important.
Yamabuki: Do you think that the kirei concept will be welcomed by people all over the world?
Muenz: When I talk about kirei, I feel that there are many people outside Japan that understand the idea immediately and are very attracted to it. For consumers in Europe, the United States and other parts of the world, I think we have a wonderful opportunity to bring the concept of kirei to consumers on a global scale.
Personally, I have spent most of my life in the US; and in the last decade or so, I’ve noticed a growing interest and fascination in Eastern philosophy. In terms of Japanese culture, many people are interested in its simplicity, closeness to nature, and the spiritual elements involved. These cultural aspects are incredibly attractive ideals for Westerners and also provide a sense of differentiation for them.
Yamabuki: As a Japanese company, Kao attaches great importance to the following three points when implementing its ESG strategies: (1) placing consumers at the center of everything, (2) integrating ESG strategies into the company’s businesses, and (3) working to collaborate with other companies, governments, and NGOs/NPOs, as well as consumers.
Muenz: By incorporating our ESG strategies into the company’s business, Kao is trying to see everything through the lens of the “Kirei Lifestyle” and our ESG framework. The basis of our strategies starts with the consumer. ESG strategies often focus on what companies can actually do, such as how much water can be saved and how much CO2 can be reduced in manufacturing processes. Kao takes this further by attaching great importance to implementing strategies that put consumers in leading roles, such as: “How can consumers contribute to a more sustainable, Kirei Lifestyle?” Against that backdrop, I think it is particularly important to focus on consumers in all aspects.
Although companies can work at making changes in the world under their own accord; if we really want to make a difference, companies and consumers must work together. We can do this by working toward helping consumers lead more sustainable, kirei lives by simply encouraging the use of Kao's products and services. In order to realize an ideal based around Kirei Lifestyles, the concepts of consumer-focused direction, positioning and orientation are therefore all essential elements.
The road toward comfortable and sustainable lifestyles
Yamabuki: In terms of strategies starting with the consumer, do you think that companies can change their practices in order to help consumers purchase more ethical products and sustainable-oriented products? According to a survey conducted by Sustainable Brands, 65 percent of consumers said that it was important to purchase both environmentally and socially friendly products; however, only 28 percent actually do so, mainly due to pricing issues.
Muenz: As I have been involved in product development and other R&D areas, I think that the difference between ideology and reality exists everywhere. As an example, if you look at healthy lifestyles and diets — even though there are many fantastic ideals and concepts, there are just as many cases where the action never materializes. There are, of course, various reasons why change does not come about; but one of these is that behavioral change is being forced on people.
It's actually quite difficult to change people’s lifestyles by constantly telling them to “exercise more” or to “stop doing this or that.” What’s important is finding solutions that easily fit with current habits in order to help create more “comfortable” changes, so that the changes do not overwhelm people. So, changes need to be based on fun, attractive and easy methodology. Rather than trying to force consumers to change and/or spend lots of money, Kao believes that companies need to provide better knowledge-based leadership.
One way to help find solutions is by asking company employees questions such as, “How can we come up with ideas that enable products with greater ease of use, that are affordable and that fit with our lifestyles?” By making products attractive and hassle-free, we can work at improving differences between ideology and reality.
Yamabuki: So, based on the Kirei Lifestyle Plan — rather than trying to force people into making changes, you are effectively offering more attractive options that they can take up voluntarily.
Muenz: Absolutely. One example is our refill packs. Japanese refill packs have undergone an amazing evolution. People all over the world are really surprised to hear that around 80 percent of our laundry and residential detergents, as well as our personal care products, are based on refill packs. It has taken nearly 30 years to get to this point. The first refill pack was released in the early ‘90s but wasn't easy to use, as it had to be cut open with scissors. However, we continued to make improvements, and now the packaging is much easier to use. The important thing is making continuous efforts to make things easier and affordable, as well as increasing added value as we move forward into the future.
We are also working to reduce the number of plastic packaging containers. We have made even further improvements so that the actual refill packs can be used as containers without having to refill. For example, look at the “Smart Holder,” which can be used repeatedly simply by inserting the refill bag. However, as evolution is an ongoing progression, we have now developed the “Air-in Film Bottle.”
This development involves a bottle that can be used like a main container by inflating the outside of the film container with air to make it self-supporting. Through this method, we are able to reduce the weight of the plastic used by about 50 percent. It comes with an easy-to-use pump and an inner bag that shrinks when used, so there is no residue left in the container. The pump can be reused, but due to the film being multi-layered, it is more difficult to recycle. Therefore, we are working hard to make the design completely recyclable through further technological innovation.
Kao's fundamental value: 'Walking the right path'
Yamabuki: We hear that “when you take a marketing approach with consumers, you must always take care to follow the right path — which includes issues involved in supply chains, and with a particular focus on human rights.” How are you doing this, specifically?
Muenz: At the root of the Kirei Lifestyle Plan is the company’s fundamental ethos of "walking the right path.” A founding principle of Kao is to always “act in good faith;” we hold this ideal as an absolute.
Many of today's consumers want to know more about the companies that make their products — like the types of values that are adhered to by the company, how the company treats people, how the company works with its suppliers, how those suppliers treat people; and finally, how the company takes the environment into consideration. Consumers want to see companies that are in line with their own values; and in turn, demand higher levels of transparency. It is therefore important to carry out all of these factors in order to become a partner that matches with consumers.
Yamabuki: One area that attracts particular attention from NGOs and stakeholders is palm oil, which is used in Kao's products. What is the most important thing when communicating with NGOs and local suppliers?
Muenz: We are trying to obtain a deeper understanding of what's happening in the field — to get a better understanding of the situation right down to the smaller factories — and to work toward helping make the system more sustainable. We use a range of mechanisms in order to aid this. The important thing is to have a good understanding of RSPO certification and to go back deeper into the supply chain, down to the smaller farms. We are committed to working throughout the entire supply chain to find out exactly what we need and to help improve situations.
Kao has also helped improve situations through its own technological development. Although we haven't released too much detail to date; our laundry detergent, Attack ZERO, uses a new detergent base — known as Bio IOS. When removing surfactants from palm trees, there are always leftovers that cannot be used. So, in this area, Kao has developed a new method to make a highly functional detergent base from the surplus substance. In this way, we believe that we are able to help stall the practice of land use conversion, such as deforestation, etc., due to increased demand for cleaning agents.
And this is not exclusive to palm oil but is relevant to other issues, such as marine plastics and climate variability; and we need to work at finding solutions to these global issues — solutions that must be implemented in collaboration with other businesses, as well as with governments and communities. Although we have to continue to work hard, I think that we can all make a difference. We also actively participate in industry groups as we work on issues together.
Creating a positive impact through business
Yamabuki: One of the difficulties faced by global companies is that there are separate and varying regulations and guidelines around the world. Finding an overall solution that will satisfy the different stakeholders across the world can be a daunting task.
Muenz: Yes, it's extremely difficult to try to make major changes in the world. When thinking about a true solution, it's especially important to have a holistic view, and this is an area that we want to advance in.
It is also pertinent to look at the entire LCA (Life Cycle Assessment) from a holistic perspective. Marketing is included in this as one of the solutions. I think it is great to have a recycling economy and to use recycled materials that we collect, but that's not the only solution. There is also the aspect of high-energy consumption. That is why we have put a lot of focus on reducing consumption, wherever possible. For example, reducing the amount of plastic used in packaging makes a lot of sense. I think a more holistic perspective is important.
Yamabuki: Besides having a holistic perspective, how else are you looking to contribute to society and our future?
Muenz: Many of our sustainability initiatives to date have focused on reducing negative impacts. Though this is important, it does not make all the necessary changes. We also want to focus on making positive impacts through our work.
When establishing our new ESG strategy, I wanted to shift from a concept that focuses on simply reducing negative impacts to a mindset that focuses on the consumer and helps to produce positive impacts. Sustainability is often thought of as tackling environmental issues; but ESG clearly involves the environment, society and governance, along with how people interact with these concepts. I think that the ESG concept is a more holistic approach.
Yamabuki: COVID-19 is still a threat. Are there any changes in the Kirei Lifestyle Plan positioning with the pandemic as it is now and after it is under control? And are there any areas among these that are important to focus on in your work going forward?
Muenz: I think that the Kirei Lifestyle Plan will play a role that’s even more important as we look to the future. Our efforts to address environmental issues will continue to be important, and we don’t believe that this pandemic will lead to any setbacks in those efforts. Looking at the changes in the world over these past few months, our strategies of decarbonization, zero waste and respect for human rights will carry even more importance. We tend to think that we are all separate from each other, but the pandemic actually shows how much we are truly connected and that our individual actions affect everyone. I think this acts as a strong reminder to everyone.