Aiming for Sustainable GrowthSustainability Strategy

Realizing a Sustainable Society through Social Value Creation Jun Aoki Director, Executive Corporate Officer Realizing a Sustainable Society through Social Value Creation Jun Aoki Director, Executive Corporate Officer

The Key to Sustainability is Creating Social Value

In 2017, the Shiseido Group realized its target for net sales under the medium-to-long-term strategy VISION 2020, which was adopted in 2015, three years ahead of schedule. In addition, the Group realized its target for operating profit in 2018, two years ahead of schedule. The Group views consumer value as the starting point for all of its activities and has been proactively investing in marketing and innovation activities, as well as in the human resources that support these activities. By doing so, the Group has realized a recovery in its performance that far exceeded expectations.

Through these efforts, we have greatly improved our economic value in terms of market share, net sales, and operating profit. We believe that the steady creation of social value, including the resolution of consumers’ skin concerns through the products and services we provide, is precisely what has allowed us to improve our economic value.

Our management policy is “To Be the Most Trusted Beauty Company in the World.” As we celebrate our 147-year anniversary as a company, we aim to carry on the values and traditions that we have received from our predecessors for the next 100 years. To do so, the economic value that we create must be supported by social value to a greater extent than ever before. In consideration of our stakeholders, who we value above all else, this need for creating social value becomes even more apparent.

Our stakeholders include consumers, business partners and other affiliated parties, employees, and younger generations who will oversee the future. These stakeholders need Shiseido to be an organization that creates meaningful value for society and that has the power to change the world.

Our shareholders and investors, who have great expectations of us to realize growth as a company, also want us to be a corporation that values its stakeholders and creates social value from a long-term perspective.

Furthermore, the society and global environment in which we exist are the stakeholders that we should value the most.

BEAUTY INNOVATIONS FOR A BETTER WORLD
Creating an Even Better Society

In 2019, we established our new corporate mission, “BEAUTY INNOVATIONS FOR A BETTER WORLD.” Guided by this mission, we are committed to realizing an even better society on a Groupwide basis.

Shiseido’s mission throughout its development as a company has been to create social value. The name Shiseido comes from a passage in the ancient Chinese divination text I Ching, which is highly regarded as a textbook for leadership. The passage reads, “Praise the virtues of the earth, that is where anything and everything is born from.” In this way, the name Shiseido conveys love and respect for the earth, the global environment, and society.

Arinobu Fukuhara, the founder of Shiseido, was 23 years old in 1872, when Japan was evolving as a nation during its period of westernization. At that time, Arinobu Fukuhara was passionate about adopting new values originating from the West (business models, products, and services) and using them to transform Japan into a modern society and enrich the lives of its citizens.

In the early 1900s, the first president of Shiseido, Shinzo Fukuhara, traveled the world in search of true beauty. Through his travels, he studied the advanced value being created in Western Europe and used this experience to launch the cosmetics business from a distinctly Japanese point of view, thereby laying the foundation for what the Company is today. This represents the results of Shinzo Fukuhara’s determination to create an enriched society by being curious and open to new things and studying them insatiably from every angle.

Relevant SDGs and ESG Management as a Beauty Company

After establishing our new corporate mission, we gave consideration to a framework for creating social value as a beauty company that relates closely to this new mission. We believe that actions which are deeply rooted in the characteristics and strengths of our businesses will naturally become our core operations as a company.

Based on interviews and discussions with all of our stakeholders, we categorized issues from two perspectives: impact on society and impact on the Company’s businesses. We then established an order of priority and selected 18 materiality issues. In addition, with our core focus on beauty, we redefined our definition of social value from the perspectives of the environment, society, and culture (ESC).

The Shiseido Group’s Materiality Map (Revised in 2019)

The Shiseido Group’s Materiality Map (Revised in 2019)

Social issues and SDGs addressed by Shiseido

Protect Beauty Empower Beauty Inspire Beauty Protect Beauty Empower Beauty Inspire Beauty

At the moment, efforts to create social value are being strongly encouraged. This is reflected by efforts to realize the 17 Sustainable Development Goals (SDGs) and the promotion of ESG (Environmental, Social, and Governance) management. Guided by an approach unique to a beauty company, we aim to create an even better society through ESG+C (Culture) management.

Protect Beauty Empower Beauty Inspire Beauty Protect Beauty Empower Beauty Inspire Beauty

Eight Key Domains for Our Activities

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Reducing environmental burden

From the perspective of craftsmanship, including the procurement of raw materials, we are promoting activities to reduce our environmental burden. In this way, we are working to fulfill our responsibilities as a global corporate citizen and contribute to society. We are stepping up efforts to reduce CO₂ emissions, a primary cause of climate change. We are also making progress on a global scale with regard to ethical procurement (palm oil, paper), which puts a halt to deforestation. At the same time, we are proceeding with water usage reduction and working to reduce and recycle waste in order to lessen the burden placed on the environment.

Reducing environmental burden

Protecting skin from UV rays and photoaging*

Due to the impact of climate change and other factors on the global environment, regions with lively economies and dense populations (mainly in the middle latitudes) are expected to see an increase in excessive UV ray exposure over the next 100 years. Based on the results of our dermatological science research and development activities, which span over 100 years, we are moving forward with new research from the perspective of the relationship between environment and skin (including UV rays). Through this research, we are developing and providing innovative products and services (UV care, skin brightening, anti-aging care) that protect beautiful skin.

  • Signs of aging caused by UV rays
Protecting skin from UV rays and photoaging
Protecting skin from UV rays and photoaging

Developing sustainable packaging

Since the launch of our first refill products in 1926, we have developed various kinds of environmentally friendly packaging (e.g. biomass containers, recyclable PET bottles, low-temperature combustible materials), based on the philosophy that the earth creates all value. We are the first Japanese company to join SPICE*. We have also been actively developing biodegradable packaging in addition to promoting the 3Rs (reduce, reuse, recycle) in order to utilize limited resources and resolve the issue of ocean pollution.

  • Sustainable Packaging Initiative for CosmEtics: A collaborative initiative by global cosmetic companies to create a future with sustainable packaging
Developing sustainable packaging

Empower Beauty Empower Beauty

Realizing gender equality and fairness

In Japan, over 80% of our employees are women, and we have maintained over a 90% rate of women returning to work after taking childcare leave. In 2017, we achieved a 30% ratio of women in management positions, and we aim to raise that to 40% by the end of 2020. In March 2019, the ratio of women on the Board of Directors reached 45%, making discussions at Board meetings extremely dynamic from a multifaceted perspective.

On the other hand, while Japan has the third largest economy in the world, the reality is that it ranks 110th in the global gender gap index. Following the launch of “30% Club Japan,” which aims to realize a 30% ratio for women serving as corporate officers in Japan, Shiseido has expressed its participation. This is one example of how we view the elimination of the gender gap, not just in Japan but also around the world, as our corporate mission. Accordingly, we are focusing our efforts to support women’s education in regions outside Japan in an effort to maximize the potential of all women. In these ways, we aim to realize an even better society.

Realizing gender equality and fairness

Supporting empowerment through the strengths of cosmetics

In 1956, we launched Shiseido Spots Cover, with the hope of lessening the suffering of people with burn damage resulting from war. With the launch of this product, we began the provision of “Life Quality Makeup” that works to resolve serious skin concerns. At the moment, we are working to leverage the strengths of our cosmetics and hospitality to engender confidence and courage among people dealing with skin concerns, including not only concerns over bruises and injuries but also those regarding changes in appearance as a result of cancer treatment. By doing so, we are helping to realize an inclusive society. While striving to create innovative technologies in terms of formulas and software, we are actively pursuing overseas development so that we can provide support to an even greater number of people.

Supporting empowerment through the strengths of cosmetics

Business and human rights

In accordance with the United Nations Guiding Principles on Business and Human Rights, we have established the Shiseido Group Policy on Human Rights and are promoting Groupwide efforts to support human rights. In addition, we are working to share information on and resolve human rights issues together with our various stakeholders, including international human rights experts and workers in regions that produce raw materials. At the same time, we are participating in initiatives aimed at addressing the problem of child labor in India in an earnest effort to tackle human rights issues. In 2018, we joined Sedex*, thereby working to further improve social and environmental issues within the supply chain.

  • Supplier Ethical Data EXchange
Promoting an ethical supply chain

Inspire Beauty Inspire Beauty

Embracing our heritage as a social asset and source of value creation

We established an archive that can be accessed by all of our employees around the world to help them create new value. At the same time, we are thoroughly implementing new Shiseido heritage education activities in which all employees of the Group can participate. In addition, we will promote activities aimed at sharing our management philosophies and cultivated experience with society.

Embracing our heritage as a social asset and source of value creation

Communicating aesthetics rooted in Japanese beauty

We will communicate aesthetics unique to a Japanese company. This effort will include disseminating information through Shiseido Gallery and Hanatsubaki Magazine* (paperback and digital versions), holding corporate exhibitions around the world, and collaborating with other companies and social media influencers. In these ways, we will work to realize a better world by spreading the comprehensive value inherent in the concept of Japanese beauty around the globe. In May 2019, we established the Japanese Beauty Institute with the aim of communicating and arousing interest in Japanese aesthetics as well as Shiseido's knowledge and stories related to Japanese beauty.

  • Hanatsubaki magazine is Shiseido’s own media publication. First published in 1937, Hanatsubaki offers all kinds of information that helps contemporary women lead even more enriched lives. This includes information on beauty, fashion, culture, and Shiseido’s unique expertise.
>Communicating aesthetics rooted in Japanese beauty

Social Value Creation Division Leads Activities Company-Wide

As made clear by the key domains of our activities, social value creation is not simply giving back a share of profits to society when profit increases. Social value creation is something all functions and divisions of the Company are constantly aware of and work to achieve through their activities. It is also something that is implemented across all divisions, from our brand and local sales divisions to our corporate divisions.

In 2019, we created the Social Value Creation Division to act as a conductor for all of the Company’s activities. The Social Value Creation Division’s role consists of five parts: (1) determining areas in which we should particularly focus our efforts; (2) establishing targets and KPIs that should be achieved Companywide; (3) committing to the realization of these targets and KPIs both inside and outside the Company; (4) providing the necessary support while monitoring progress toward reaching targets and KPIs; and (5) raising awareness among our stakeholders, especially our employees.

The division has clear authority and responsibility regarding the constant creation of social value. Accordingly, we are able to lead activities across all divisions of the Company and raise awareness. The Social Value Creation Division will work together with all Group employees on a daily basis to realize “BEAUTY INNOVATIONS FOR A BETTER WORLD.”

Jun Aoki Director, Executive Corporate Officer Jun Aoki Director,
Executive Corporate Officer