Kao Sets 15% and 45% CO2 Targets: Shifting Toward Qualitative ESG Transformation

Key Metrics at a Glance

:::visual-block{"type": "fact-card-grid", "title": "Key Metrics at a Glance", "facts": [{"factKey": "group_employee_count", "factKeyJp": "Kao Group Employee Count", "category": "human_capital", "timeseries": [{"year": 2025, "value": "32566", "unit": "people", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "71"}], "latestValue": "32566", "latestUnit": "people", "yoyChange": null, "context": ""}, {"factKey": "product_lifecycle_co2_emissions", "factKeyJp": "Product Lifecycle CO₂ Emissions", "category": "esg_metric", "timeseries": [{"year": 2024, "value": "10094", "unit": "thousand tons", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/reports-fy2024j.pdf", "pdfTitle": "KAO INTEGRATED REPORT 2024", "pageNumber": "10"}, {"year": 2025, "value": "10121", "unit": "thousand tons", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "23"}], "latestValue": "10121", "latestUnit": "thousand tons", "yoyChange": 0.3, "context": ""}, {"factKey": "plastic_packaging_usage", "factKeyJp": "Plastic Packaging Usage", "category": "esg_metric", "timeseries": [{"year": 2025, "value": "86", "unit": "thousand tons", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "23"}], "latestValue": "86", "latestUnit": "thousand tons", "yoyChange": null, "context": ""}, {"factKey": "co2_emissions_reduction_rate", "factKeyJp": "CO2 Emissions Reduction", "category": "esg_metric", "timeseries": [{"year": 2024, "value": "15", "unit": "%", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "5"}, {"year": 2025, "value": "45", "unit": "%", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "17"}], "latestValue": "45", "latestUnit": "%", "yoyChange": 200.0, "context": ""}, {"factKey": "palm_plantation_traceability_target", "factKeyJp": "Traceability Target to Palm Oil Plantations", "category": "esg_metric", "timeseries": [{"year": 2025, "value": "100", "unit": "%", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "5"}], "latestValue": "100", "latestUnit": "%", "yoyChange": null, "context": ""}, {"factKey": "renewable_energy_ratio", "factKeyJp": "Renewable Electricity Ratio (Actual)", "category": "esg_metric", "timeseries": [{"year": 2023, "value": "57", "unit": "%", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/reports-fy2024j.pdf", "pdfTitle": "KAO INTEGRATED REPORT 2024", "pageNumber": "51"}, {"year": 2024, "value": "69", "unit": "%", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "64"}], "latestValue": "69", "latestUnit": "%", "yoyChange": 21.1, "context": ""}, {"factKey": "energy_consumption", "factKeyJp": "Energy Consumption", "category": "esg_metric", "timeseries": [{"year": 2024, "value": "16.7", "unit": "PJ", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/reports-fy2024j.pdf", "pdfTitle": "KAO INTEGRATED REPORT 2024", "pageNumber": "10"}, {"year": 2025, "value": "16.5", "unit": "PJ", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "23"}], "latestValue": "16.5", "latestUnit": "PJ", "yoyChange": -1.2, "context": ""}, {"factKey": "ghg_reduction_contribution", "factKeyJp": "GHG Reduction Contribution (Actual)", "category": "esg_metric", "timeseries": [{"year": 2024, "value": "4434", "unit": "thousand tons-CO2", "pdfUrl": "https://www.kao.com/content/dam/sites/kao/www-kao-com/jp/ja/corporate/investor-relations/pdf/kao-reports-fy2025-jp.pdf", "pdfTitle": "Kao Integrated Report 2025", "pageNumber": "64"}], "latestValue": "4434", "latestUnit": "thousand tons-CO2", "yoyChange": null, "context": ""}]}:::

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Three Numbers Defining Kao’s Current Standing: ESG Achievements and Challenges

1. Will "Bio IOS®" Technology Become the Key to Balancing ESG with Business Growth?

Kao’s ESG strategy is positioned not merely as a cost, but as a source of business competitiveness. A prime example is the technology related to its internally developed surfactant, "Bio IOS®." This technology dramatically expands the potential use of solid oils (press cake)¹ and liquid oils² from the non-edible parts of oil palm fruit, which were previously difficult to utilize, offering the potential to triple the overall utilization of the oil palm plant.³ This not only addresses social demands for sustainable palm oil procurement—given challenges such as deforestation—but also directly links to securing stable raw materials and strengthening cost competitiveness. To achieve the "Global Sharp Top"⁴ status that Kao envisions, innovations that simultaneously solve environmental issues and drive business profit are essential. This case represents a modern embodiment of the company’s "Yoki-Monozukuri"⁵ spirit.

2. A Decrease of 2,845 Employees: Shifting "Employee Vitality" from Quantity to Quality

From a human capital perspective, changes in the workforce size are noteworthy. The number of Kao Group employees decreased by approximately 8% over two years, from 35,411 in 2023⁶ to 32,566 in 2025.⁷ This figure suggests a strong commitment to business portfolio transformation and productivity improvement rather than simple downsizing. The policies of "transforming into businesses that grow through investment"⁸ and "maximizing employee vitality,"⁹ as outlined in the mid-term management plan, can be interpreted as a shift away from pursuing organizational scale toward a lean organization of top-tier talent that maximizes individual potential to create high value. However, given that specific metrics for D&I and engagement have not been fully disclosed, it is difficult for external observers to evaluate the success of this qualitative shift. Further disclosure regarding the talent strategy aimed at becoming a "peerless company"⁹ is highly anticipated.

3. A 15% CO2 Reduction vs. a 45% Target: The Steepness of "Sustainability as the Only Path"

The greatest challenge in Kao's ESG management lies in climate change mitigation. As of 2024, the reduction rate for lifecycle CO2 emissions reached 15% compared to 2017 levels.¹⁰ While this represents steady progress, there is a massive 30-percentage-point gap relative to the 2025 reduction target of 45%.¹¹ In absolute terms, lifecycle CO2 emissions increased slightly from 10,094 thousand tons in 2024¹² to 10,121 thousand tons in 2025,¹³ highlighting the extreme difficulty of achieving reductions. Although internal efforts are advancing—such as raising the renewable electricity ratio from 57% in 2023¹⁴ to 69% in 2024¹⁵—further breakthroughs are required to reduce emissions across the entire supply chain. For Kao, which has declared "Sustainability as the only path,"¹⁶ the ability to bridge this gap will serve as a touchstone for its true commitment.

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Toward "Realizing a Kirei World": The ESG DNA Woven from the Founder’s Legacy

At the root of Kao’s management lies "The Kao Way,"¹⁷ a corporate philosophy passed down for over 130 years. Its core is the value of "walking the right path,"⁵ symbolized by founder Tomiro Nagase’s words: "Good fortune is given only to those who work diligently and behave with integrity."¹⁸ This integrity-based philosophy has evolved with the times.

Today, that philosophy has been redefined as a Purpose: "To realize a Kirei world in which all life lives in harmony."¹⁹ This represents a broad and profound commitment to more than just making people's lives clean and beautiful; it aims for a future where "all life lives in harmony,"²⁰ including the global environment and society.

The vision to materialize this Purpose is "Protecting future lives,"²¹ and the sole roadmap to achieve it is "Sustainability as the only path."¹⁶ In other words, for Kao, sustainability and ESG are not temporary initiatives to follow trends or social demands, but the very core of management, inseparable from its corporate philosophy. This robust ideological framework fosters a culture that "courageously takes on challenges,"²² serving as the engine for long-term value creation.

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"Yoki-Monozukuri" for the Planet: Implementation Starting from the "Genba" with 88% Palm Oil Traceability

A prime example of how Kao’s philosophy connects to business activities is its approach to human rights and environmental issues in the supply chain. The company’s core value, "Yoki-Monozukuri,"⁵ encompasses more than just making high-quality products; it involves fulfilling social and environmental responsibilities throughout the entire process, from raw material procurement to disposal.

A specific instance is its response to the palm oil issue. Palm oil is an essential raw material for many of Kao's products, yet its production is associated with serious issues such as rainforest destruction and child labor. In response, Kao has set an ambitious goal of "100% traceability to palm oil plantations" by 2025.²³ As of 2024, the achievement rate reached 88%,²⁴ bringing the target within reach.

This initiative embodies the principle of "Genba-focused" (on-site) action.²² Kao’s commitment to solving problems directly by ensuring supply chain transparency through collaboration with suppliers and field surveys demonstrates its sincerity in putting philosophy into action. Furthermore, its stance on tackling social issues through business²⁵—such as developing fire-extinguishing agents free of PFAS (per- and polyfluoroalkyl substances)²⁶—remains consistent even in its chemical business. These activities clearly show that "Yoki-Monozukuri" is now synonymous with fulfilling responsibilities toward the global environment and society as a whole, far beyond what is visible to the consumer.

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What a Workforce of 32,566 Says About the "Next Move" in Human Capital Management

Kao has placed "maximizing employee vitality"⁸ as a pillar of its mid-term management plan and cites "respect for the individual and the gathering of strengths"²⁷ as an action principle. However, current specific human capital data for measuring progress is largely limited to employee counts.

The decrease from 35,411 employees in 2023⁶ to 32,566 in 2024 and 2025⁷ can be viewed as a strategic optimization of the workforce structure in tandem with business model transformation. This is likely an essential process for achieving sustainable growth²⁸ in a rapidly changing market environment.

Nevertheless, employee count alone is insufficient to measure the achievement of "maximizing employee vitality." Multidimensional data is required, such as diversity metrics (e.g., the ratio of women in management and employment rates for people with disabilities) to show if diverse talent is thriving, engagement scores to reflect employee job satisfaction, and succession plans to indicate the development of next-generation leaders.

Precisely because Kao has earned high praise for disclosing detailed ESG targets and results, similar transparency and specificity are expected in its human capital management. How the company draws out the vitality of each of its 32,566 employees and links that to improved corporate value²⁹ will be the "next move" to watch in Kao’s human capital strategy.

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Can "My Kirei Lifestyle" Make Consumers the Protagonists of ESG?

The uniqueness of Kao’s ESG strategy lies in its aim to move beyond internal corporate activities to involve consumers and transform the lifestyles of society as a whole. At the heart of this is the ESG commitment "My Kirei Lifestyle."³⁰ This is an attempt to build a system where consumers can practice a sustainable life ("Kirei Lifestyle") simply by choosing Kao products, even without conscious effort.

This vision is materialized as the "Five Promises for the Future."³¹ Promises such as "Regenerative Lifestyles"³² and "Zero Waste"³³ directly link corporate initiatives—like the promotion of refillable/replaceable products and improved recycling technologies—with environmentally conscious consumer behavior. For example, the goal of reducing plastic packaging usage³⁴ will only be accelerated when consumers choose refillable products.

This approach is both a fulfillment of corporate social responsibility and a marketing strategy³⁵ that provides consumers with the added value of "participating in social contribution." Under the slogan "Kirei—Making Life Beautiful,"³⁶ Kao’s success in weaving sustainability into daily life and turning consumers from ESG observers into protagonists will be a critical challenge that determines its brand value.

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Deciphering Changes Over Time: The Trajectory from 2023 to 2025

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ESG Leader Kao Faces a New Frontier: "Human Capital"

Strength: A Consistent ESG Strategy Centered on Philosophy

Kao’s greatest strength lies in the fact that its ESG strategy is deeply permeated throughout every corner of its business activities, grounded in the unwavering philosophy of "The Kao Way."¹⁷ For critical issues such as climate change,¹¹ plastic waste,³⁴ and supply chain management,²³ the company has set high targets and is making steady progress through technological development and on-site activities. Its stance on converting environmental technology into business competitiveness serves as an advanced model that views sustainability as a growth opportunity rather than a cost.

Challenge: Lack of Specificity and Transparency in Human Capital Management

Conversely, a clear challenge exists: the limited disclosure of information regarding human capital management. While setting the important goal of "maximizing employee vitality,"⁹ Kao lacks sufficient data on diversity and engagement to objectively evaluate progress. Amidst the major shift of a decreasing workforce, the company has yet to demonstrate to stakeholders whether this is leading to a positive qualitative transformation. Visualizing initiatives related to the "S" (Social) in ESG—specifically regarding employees—is an unavoidable path for future corporate value enhancement.

Key Points to Watch Moving Forward

When evaluating Kao in the future, three points warrant attention. First, how will the company leap from its current 15% reduction¹⁰ to the 45% CO2 reduction target set for 2025?¹¹ This will require innovative technologies and business model shifts. Second, how will it maximize "vitality" and continue to create innovation within a smaller workforce? Disclosures of specific talent strategies and performance metrics are awaited. Finally, how will these ESG activities translate into "profitable growth"³⁸ within a harsh market environment? The true value of sustainability management—the compatibility of philosophy and profit—will be put to the test.

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Footnotes

出典

Footnotes

1. Kao Integrated Report 2025, p.15, "Science Based Solutions," (FY2025) ↩

2. Kao Integrated Report 2025, p.15, "Science Based Solutions," (FY2025) ↩

3. Kao Integrated Report 2025, p.15, "Science Based Solutions," (FY2025) ↩

4. Kao Integrated Report 2025, p.9, "The Future to Aim For: 'Global Sharp Top'," (FY2025) ↩

5. Kao Integrated Report 2025, p.11, "The Kao Way - Kao’s Corporate Philosophy," (FY2025) ↩ ↩² ↩³

6. Kao Integrated Report 2023, p.55, "Company Information," (FY2023) ↩ ↩² ↩³

7. Kao Integrated Report 2025, p.71, "Company Information," (FY2025) ↩ ↩² ↩³

8. Kao Integrated Report 2023, p.19, "Mid-term Management Plan 'K25'," (FY2025) ↩ ↩²

9. Kao Integrated Report 2025, p.11, "CEO Message," (FY2025) ↩ ↩² ↩³

10. Kao Integrated Report 2025, p.5, "Planet," (FY2024) ↩ ↩²

11. Kao Integrated Report 2025, p.17, "Science Based Solutions," (FY2025) ↩ ↩² ↩³

12. KAO INTEGRATED REPORT 2024, p.10, "Inputs - Natural Capital," (FY2024) ↩

13. Kao Integrated Report 2025, p.23, "Sources of Value Creation - Natural Capital," (FY2025) ↩ ↩²

14. KAO INTEGRATED REPORT 2024, p.51, "Main Initiatives and FY2023 Progress - Indicators and Targets," (FY2023) ↩ ↩²

15. Kao Integrated Report 2025, p.64, "Indicators and Targets," (FY2024) ↩ ↩²

16. Kao Integrated Report 2025, p.1, "Integrated Report 2025," (FY2025) ↩ ↩²

17. Kao Integrated Report 2025, p.25, "Kao’s ESG Commitments and Actions," (FY2025) ↩ ↩²

18. Kao Integrated Report 2023, p.6, "Good fortune is given only to those who work diligently and behave with integrity," (FY2023) ↩

19. Kao Integrated Report 2025, p.3, "OUR PURPOSE," (FY2025) ↩

20. Kao Integrated Report 2023, p.4, "Our Purpose," (FY2023) ↩

21. Kao Integrated Report 2025, p.30, "Outcomes," (FY2025) ↩

22. Kao Integrated Report 2025, p.11, "The Kao Way - Kao’s Corporate Philosophy," (FY2025) ↩ ↩²

23. Kao Integrated Report 2025, p.5, "Planet," (FY2025) ↩ ↩²

24. Kao Integrated Report 2025, p.5, "Planet," (FY2024) ↩

25. Kao Integrated Report 2025, p.11, "The Kao Way - Kao’s Corporate Philosophy," (FY2025) ↩

26. Kao Integrated Report 2025, p.21, "Science Based Solutions," (FY2025) ↩

27. Kao Integrated Report 2023, p.6, "Now is the time for serious casual talk," (FY2023) ↩

28. Kao Integrated Report 2025, p.22, "Our Value Creation," (FY2025) ↩

29. Kao Integrated Report 2025, p.22, "Our Value Creation," (FY2025) ↩

30. Kao Integrated Report 2025, p.25, "Kao’s ESG Commitments and Actions," (FY2025) ↩

31. Kao Integrated Report 2023, p.3, "Kao International Environment Painting Contest for Children," (FY2023) ↩

32. Kao Integrated Report 2023, p.13, "Outcome & Vision," (FY2023) ↩

33. Kao Integrated Report 2023, p.13, "Outcome & Vision," (FY2023) ↩

34. Kao Integrated Report 2025, p.17, "Science Based Solutions," (FY2025) ↩ ↩²

35. KAO INTEGRATED REPORT 2024, p.31, "Co-creating value with consumers based on purpose," (FY2024) ↩

36. Kao Integrated Report 2025, p.73, "Corporate Slogan," (FY2025) ↩

37. KAO INTEGRATED REPORT 2024, p.54, "ESG Highlights," (FY2023) ↩

38. Kao Integrated Report 2025, p.23, "Value Created," (FY2025) ↩