TOTO GROUP

Integrated Report

2 019

Philosophy System for TOTO Group Management

The Spirit of TOTO Unchanging for
Words of Our FounderPhilosophy System for TOTO Group Management

Kindness must always come first.
Bring the concept of service to your work.

Comp
Mo anyttos

Your goal should be to provide good products andsatisfy the customer.
Accomplish that, and profit andcompensation will follow.

TO
TO
Co Grorpo
upPhilos rateophy

Many in this world chase after the shadow of profit.
But, in the end, they never capture the real thing.

A letter written by TOTO’s first president, Kazuchika Okura,
to his successor, Saburo Momoki, contains words that have beentreasured as the Words of Our Founder.
In 1962, we formulated the Company Mottos based on our
corporate activities in the future while respecting the traditionCh
TO arterT
rpo O Gr oforate B up
eha
vio
r

Co

of TOTO’s founding.
These ideas, which have been passed down since our founding,have been incorporated into the Philosophy System for TOTO
Group Management so that they are appropriate for the times
and can be shared within the TOTO Group.

Common Group Philosophy
The Common Group Philosophy
represents the inherited values of TOTO
that are shared among employees andwill be carried forward into the future.

VisionToward a Dynamic, Vibrant and Excellent TOTO

MissionMid- or Long-Term
Management Plan

1

TOTO GROUP Integrated Report 2 019

TOTO WILL2022 Mid-Term Management Plan

100 Years
Company Mottos
4Company Mottos
The Company Mottos represent the thoughts of the founder to bepassed down through the generations.

TOTO Group Corporate Philosophy
Our Corporate Philosophy, based on the thoughts of the founder to bepassed down through the generations, communicates to all of our
stakeholders the purpose for which our company exists, our business domains,
and the type of company we aim to be.

3

2

1

1

Take pride in your work,and strive to do your best

2

Quality and Uniformity

3

Service and Trust

4

Cooperation and
Prosperity

TOTO Group Corporate Philosophy

Charter of TOTO Group Corporate Behavior

The TOTO Group strives to be a great company trusted by people all
around the world, and contributing to the betterment of society. To
achieve our Corporate Philosophy, TOTO will:

The Charter of TOTO Group Corporate Behavior stipulates the basic stance of behavior
of all people working for the TOTO Group to realize all stakeholders’ satisfaction.
Details are published on our website

Create an enriched and more comfortable lifestyle and culture built on
our plumbing products.
Pursue customer satisfaction by exceeding expectations with our
products and services.
Provide high-quality products and services through ongoing researchand development.
Protect the global environment by conserving finite natural resourcesand energy.
Create an employee friendly work environment that respects theindividuality of each employee.

https://jp.toto.com/en/company/profile/philosophy/group

Heart
Body

Vision for Business Activities
Our vision and mission are positioned as
the course of our business activities thatchange in accordance with the demandsof the times.

A statement that refers to the future image that the management of the
TOTO Group seeks to achieve based on the Common Group Philosophy.

Vis
ion

A statement of the most important plan to implement in the Mid- or
Long-term for sustainable growth.

Mi

ssi

Lays out the ideal state of the TOTO Group and the system
for implementing the plan. We will promote
TOTO WILL2022 through the year 2022.

onMi
dMa or Lonagn
em g-Ter
ent
m
Pla
n

TOTO GROUP Integrated Report 2 019

2For the Next 100 Years

Message from the President

Special FeatureThis section describes the present stateof the TOTO Group, a company with ahistory cultivated over the past 100
years, and introduces the future visionof the Group as well as its values as it
looks toward the next 100 years.

President, Representative Director
Madoka Kitamura explains the future
vision of the TOTO Group and the efforts
that will go into making it a reality.

This section describes the fivestrengths of the TOTO Group that
contribute to value creation.

P. 5 —

P. 13 —

P. 1 7 —TOTO WILL2022

TOTO Global

Corporate Governance

Mid-Term Management Plan

Environmental VisionThis section explains the details, aims,
and major efforts related to our
mid-term management plan.

This section details the TOTO Global
Environmental Vision, and describes
how our specific corporate activities
work toward realizing this greater vision.

P. 21 —

P. 35 —

3

TOTO GROUP Integrated Report 2 019

This section illustrates the TOTO Group’ssystem of governance, which forms thebasis for the sustainable enhancementof our corporate value, and features
messages from Outside Directors.

P. 51 —

Contents

Philosophy System for TOTO Group Management1

For the Next 100 Years

TOTO Global Environmental Vision

TOTO Global Environmental Vision

35

Cleanliness and Comfort

37

TOTO Group History

5

Environment

39

TOTO Group Business Performance

7

Relationships

41

TOTO Group in Present Day

9

TOTO Group Value Creation Model

11

Message from the President

13

Offering Satisfaction That Goes Above and Beyond
Customer Expectations

43

Together with Our Employees

44

Together with Our Suppliers

45

For Society

46

Dialogue with Shareholders and Other Investors

47

Stakeholder Engagement

48

CSR Management

49

Special Feature

The Globally Unified NEOREST NX
A Compilation of TOTO Group Strengths

17

TOTO WILL2022 Mid-Term Management Plan

Awareness of Opportunities and Risks

21

TOTO WILL2022 Mid-Term Management Plan

23

Global Housing Equipment Business(Japan Housing Equipment Business)

25

Global Housing Equipment Business(China & Asia Housing Equipment Business)

27

Global Housing Equipment Business(Americas & Europe Housing Equipment Business)

29

Corporate GovernanceCorporate Governance

51

Messages from Outside Directors

53

Board of Directors

55

Corporate Information

57

New Business Domains (Advanced Ceramics Business) 3 1
New Business Domains(Green Building Materials Business)

32

Cross-organizational Innovation Activities

33

Editorial Policy
The TOTO GROUP Integrated Report 2019 has been published
as an integrated communication tool for all our stakeholders.
This report introduces information such as the origins of the
TOTO Group and business activity topics in addition tofinancial/ESG (Environmental, Social, and Governance) data.
In addition, it communicates TOTO’s corporate stance to becommitted to linking its past and present performance as wellas our initiatives designed to further enhance corporate value
for the future.
Period of reporting
FY2018 (April 1, 2018 to March 31, 2019)* This report includes some information pertaining to before or after the period.

Guidelines
International Integrated Reporting Framework, International
Integrated Reporting Council (IIRC)
Guidance for Collaborative Value Creation, Ministry of
Economy, Trade and Industry
Sustainability Reporting Standards, Global Reporting
Initiative (GRI)
Reference guidelines are available on the TOTO Group website.

https://jp.toto.com/en/company/csr/gri

Financial and Non-Financial Data
Financial and non-financial data can be found on our website.
Financial and Non-Financial Data

https://jp.toto.com/en/company/profile/library

Scope of reporting
TOTO LTD. and Group companies

TOTO GROUP Integrated Report 2 019

4TOTO Group

History

Company History
1917
Established Toyo Toki Company,
Limited1970
Changed corporate name to TOTOKIKI LTD.

1962
Formulated Company Mottos

1977
Established TOTO’s first overseas
joint venture company for ceramic
sanitary ware production, inIndonesia

1993
Remodeling Declaration

Products and Technology
1914
Successfully developed Japan’s firstseated flush toilet

1976
Launched CS Series water-saving,noise-reducing toilet

1993
Launched NEOREST EX integrated
toilet1980
Launched WASHLETTM
1981
Launched modular kitchen design

1946
Began faucet production

1985
Launched the Shampoo Dresser(bathroom vanity suited for washing
hair)

1963
Developed Japan’s first prefabricated bathroom module (based on
JIS provisions)1988
Started mass production ofelectrostatic chucks in the ceramics
business

1968
Launched bathroom vanity units

Business Promotion Resources

CulturalSupportand Other
Activities

1985
Opened GALLERY · MA

1999
Developed CEFIONTECT technology

1989Founded TOTO Publishing
Diversity

Timeline in Providing Cleanliness
and Comfortable Living Spaces
1970s

1995
Discovered photocatalytic superhydrophilicity (TOTO and the
University of Tokyo)

1980s

1993
Established SUNAQUA TOTO LTD. toprovide a comfortable work environment
for people with disabilities

1990s

Value Creation History
1914
Successfully developed
Japan’s first seated flush toilet

First inJapan

In an age when public sewage systems were notyet common in the country, TOTO’s first president,
Kazuchika Okura, set his sights on spreading
healthy sanitary toilets across Japan. With this goalin mind, he successfully developed Japan’s firstseated flush toilet.

1963
Developed Japan’s firstprefabricated bathroom module(based on JIS provisions)First inJapan

In anticipation of the 1964 Tokyo Olympic Games,
the Hotel New Otani, Japan’s first high-rise hotel,
required the installation of a large number ofbathrooms within a short amount of time. In order
to meet this demand, TOTO developed the firstprefabricated bathroom module in Japan.

1980
Launched WASHLETTM
WASHLET was born out of an age where thestandard type of toilet had shifted from theJapanese-style to the seated type. This new style of
toilet led to a new lifestyle of “washing” instead of“wiping” and became a part of Japanese daily life.

WASHLET is a trademarkor registered trademark
of TOTO LTD.

5

TOTO GROUP Integrated Report 2 019

Since its founding, the TOTO Group has been imbued with the spirit of providing a healthy and civilized way of life.
No matter the era, we will continue to pursue challenges and innovations in the name of creating new lifestyles.

2003
New Remodeling Declaration

2006
Established TOTO Universal Design
Research Center2010
Announced TOTO Environmental
Vision 2017

2007
Changed corporate name to
TOTO LTD.

2014
Announced TOTO Global
Environmental Vision

2017
Established new company mission
Announced TOTO WILL2022 Mid-Term
Management Plan
Updated TOTO Global Environmental Vision
2018
Remodeling “Anshin” Declaration

2004
Established the Philosophy System
for TOTO Group Management

2009
Announced TOTO V-Plan 20172001
Launched Furopia system bathroom
with quick-drying KARARI floor

2008
Launched Restroom Item 01(Universal Design of public toilets)

2010
Launched AIR-IN SHOWER
showerhead

2013
Launched Bedside Flushable Toilet

2009
Launched NEOREST Series/SE in
Europe2011
Launched WASHLET apricot with
EWATER+ antibacterial electrolyzed
water

2017
Launched NEOREST NX globally

2002
Launched NEOREST EX Series withbuilt-in TORNADO FLUSH
2004
Launched Furopia insulated thermal
pot MAHOBIN bathtub Series2012
Launched Drake II 1G water-saving
toilet in the US

Launched the Faucet 10 series of water
faucets, distinguished by their sophisticateddesigns, to the global market

2015
2019
Established GALLERY TOTO at Narita International Airport Established experience TOTO at
Opened TOTO Museum
Narita International Airport
2018
Obtained Platinum Kurumin accreditation from the Ministry of Health,Labour and Welfare as a company that supports child-rearing

2005
Established the Kirameki Promotion Office to further
women’s careers
CSR
Activities

2004
Established the CSR Committee

SocialContribution

2005
Established the TOTO
Water Environment Fund2006
Embarked on the TOTO Acorn
Reforestation Project

2019
Announced endorsement of the Task Forceon Climate-related Financial Disclosures

2011
Participated in the UN Global Compact
2008
Established the TOTO Water
Environment Fund in China

2000s

2010s

2002

2008

2017

Launched NEOREST EX Series withbuilt-in TORNADO FLUSH

Launched Restroom Item 01 (Universal
Design series of public toilets)

Launched NEOREST NX globally

NEOREST, a series of next-generation toilets of thehighest standard, made “simple and clean” a reality
thanks to its built-in TORNADO FLUSH system with
RIMLESS design. The whirlpool-like flow of water
allows for both the efficient use of water and effective
cleaning of germs and dirt.

TOTO launched the Restroom Item 01 with the aim ofcreating a harmonized space that delivers ease of use
for an even greater number of people. With its unity of
toilet components and sophisticated design, this new
approach led to great strides in revolutionizing the
public toilet.

TOTO launched NEOREST NX as a globally unified
model, highly recognized worldwide for having thefunctionality of WASHLET and wrapped in an
elegant and ergonomic design.

TOTO GROUP Integrated Report 2 019

6

For the Next 100 Years

2002
Entered into operational agreement
between TOTO, DAIKEN, andYKK APTOTO Group

Business Performance

Net sales, operating profit, and number of new housing under construction
Consolidated net sales (left)

Consolidated operating profit (right)

Number of new housing under construction (10,000 houses)* Based on the period in which products are delivered(Billion yen)
600

156

150

500

134

163
148

141
134
1 17

400

122

121

1 17

1 17

114

1 19

300

200

100

0
1991

1992

1993

1994

1995

1996

1997

1999

2000

2001

1998

Remodeling Declaration

2002

2003

New Remodeling Declaration

Reliance on New Housing Demand

Japan Housing Equipment Business
When the bubble economy collapsed in 1993, we announced
the Remodeling Declaration in order to establish the remodeling business as a business pillar with the aim of transitioning
to a management structure that does not rely on new housing
demand. In the nearly 30 years since, we have been actively
promoting the remodeling business. As a result, the remodeling business now accounts for roughly 70% of all sales in theJapan Housing Equipment Business, proving that we haveindeed established a business structure that is not dependenton new housing demand. Since April 2018, we have been
moving forward with the Anshin Remodeling Strategy in orderto further strengthen the remodeling business.

Ratio of Sales from New Construction/Remodeling to Total Sales
in the Japan Housing Equipment BusinessNewhousingNewhousing

Remodeling46%

Remodeling68%

FY2001FY2018China & Asia Housing Equipment Business /Americas & Europe Housing Equipment BusinessIn 1977, with the desire to deliver enriched and comfortable
lifestyles to customers all over the world centered on bathroom and kitchen plumbing products, we established our firstoverseas joint venture company for ceramic sanitary ware
production in Indonesia. Since then, we have been actively
promoting overseas business expansion. Now, sales from the
China & Asia Housing Equipment Business and the Americas& Europe Housing Equipment Business account for 22% of
our consolidated net sales.

7

Ratio of Overseas Sales to Consolidated Net Sales
Overseas8%
Overseas22%

FY2001
TOTO GROUP Integrated Report 2 019

2004

FY2018

To position the remodeling business in Japan as a business pillar, the TOTO Group announced the Remodeling
Declaration in 1993. Since then, the Group has established a business structure that does not rely on new housing
demand. In addition, the Group has actively expanded overseas guided by the desire to deliver enriched and comfortable lifestyles to customers around the world.

For the Next 100 Years(Billion yen)
60

50

124

128
40

103

103
84

81

77

89

98

97

92

88

96

93
30

20

10

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 (FY)

Remodeling “Anshin ” Declaration

Shift toward Remodeling Business

Developing Products That Create Shared Value with Our Stakeholders
To continue to be a company that contributes to the global environment, we are developing products with high levels of water-saving functionality on a global basis and working to reduce the amount of water consumed by our products when they are used. Particularly in terms of toilet
bowls, since the launch of the water-saving CS Series toilet in 1976, we have been working to reduce the amount of water needed to flush toilets
and to remove bacteria, germs, and dirt, while ensuring toilets remain pleasant to use. We also strictly adhere to the toilet water volume
regulations in each country and region of operation. Today, we are continuing to fine-tune our water-saving technology in such ways as
launching products that only require 3.8 L of water per flush.

Water-Saving Performance of Toilets
C150E
20L

Japan
CS Series
CS Series

13L

3.8L

Reduced the volume of water
per full flush by approx. 70%

NEW CS Series
10L

13L

RESTICA Series
8L

NEOREST A
6L

Overseas
U.S.
6L

1 976

1 988

U.S.
One-piece toilets
6L
1 994

1 997

1 999

NEOREST AH
5.5L

NEOREST
AH/RH
4.8L

GREEN MAX
4.8L

NEOREST AH/RH/DH(Floor drainage)

3.8L U.S. / China

U.S. / China
4.8L

2006

NEOREST
AH/RH/DH(Floor drainage)

NEOREST GH/XH/750H

2007

2009

2010

201 2

(FY)

* Water consumed per full flush

TOTO GROUP Integrated Report 2 019

8

TOTO Group in

Present Day

Keep Gaining TOTO Fansaround the World

RussiaU.K.
Germany
France
Korea
China

UAE

India

Japan
TaiwanMyanmarThailandPhilippines

Vietnam
Malaysia
Singapore
Indonesia

New Business Domains
5%
Americas & Europe Housing
Equipment Business
6%
China & Asia
Housing
Equipment
Business
16%

Sales
Breakdown

Japan Housing
Equipment Business73%

Net Sales¥

9586.0 billion

TOTO GROUP Integrated Report 2 019

Operating Profit¥

40.1 billion

Operating Margin

6.9 %TOTO is utilizing its strengths to expand its business across the globe.
Moving forward, TOTO will continue to create innovative and appealing products and services,
and in doing so will keep gaining fans around the world.

18 countries and regions
32 sites(Excluding Japan)

Number of Showrooms

100
Overseas: 1 4Japan:U.S.A.

Mexico(Directly managed showrooms)

Number of Employees

33,431
Ratio of Female Managers

14.7%(Total for Japan and overseas)

Reduction of Water Consumption
during Product Use

860 million m

3(Reduction effect when compared with the case where
products of 2005 continue to be used)

Profit Attributable to
Owners of Parent¥

32.3 billion

ROA (Return on Assets)

ROE (Return on Equity)

7.1 %

9.6%

(Based on operating profit)(Based on net profit)* Actual results for FY2018 and as of March 31, 2019 for the entire TOTO Group

TOTO GROUP Integrated Report 2 019

10

For the Next 100 Years

TOTO’s Global Network

TOTO Group

Value Creation Model“Marketing
Innovation”

Three Crossorganizational
Innovation Activities

Capital Input“Management
Resource
Innovation”

Financial capital

Optimal management
resources
Intellectual capital

R&D toward TOTO
“Only One” technologies“Demand
Chain
Innovation”

Global Housing
Equipment Business
New Business Domains

Strength1

Advanced fusion of design and functionality

Mid-Term Management Plan
TOTO WILL2022
Details on page 23

Manufactured capital

Global expansion of
production sites

Integrating CSR into
Management

Human capital

Diverse human resources
sharing our corporate
philosophy

Value Chain
R&D
Strength

TOTO Global
Environmental Vision

Social/relationship capital

Relationships of trust withstakeholders cultivatedthrough our rich history

2

Creating new value through unique technologies

Details on page 35
EWATER+

Natural capital

Resources with care
for a sustainable
society

Procurement–Production“Cleanliness
and Comfort”

RIMLESSTORNADO FLUSH
Strength

3

CEFIONTECT

Advanced production technolo
and global supply system

The three material
issues derived from “Environment”
our mission“Relationships”

Corporate Governa

Directing created va
11

TOTO GROUP Integrated Report 2 019

The TOTO Group conducts corporate activities with the aim of continuing to provide greater contributions to society and the environment.
To achieve this goal, we are taking steps toward integrating our management and CSR activities. We are also working tocreate value for our stakeholders while leveraging our strengths and, as we continue to create value through our value chain,
we will spread this value throughout society as a whole by way of our social contribution activities.

For the Next 100 Years

Strength

4

Providing high-quality
products and services

Business partners
Providingdiverseinformation

Employees
Work lively and utilize
individuality

Coexist and grow together
while contributing to society
and the environment
Details on page 45

Details on page 44
Showroom
proposals

CustomersnLogistics–Sales

Products

Offer lifestyles that
go beyond expectations
Details on page 43

Qualityin assemblySociety

HYDROTECT

Realize asustainable society

ogy

ance

After-sales
services

Details on page 46

Shareholders
Earn trust and provide
returns over the long term
Details on page 47

Createdvalue

Strength

5

Relationships with stakeholders

TOTO Water Environment
Fund

Volunteer activities

TOTO GALLERY• MA

TOTO Museum

Details on page 51

alue toward capital
TOTO GROUP Integrated Report 2 019

12

Message from the President

Keep Gaining
TOTO Fansaround the World

President, Representative Director

Madoka Kitamura

13

TOTO GROUP Integrated Report 2 019

outstanding technologies alone. Product design is anotherimportant element of product value as a good design brings
joy to people and helps brighten their lives. By pursuing

TOTO’s first president, Kazuchika Okura, wrote a letter to his

challenges and innovations in order to fuse design andsuccessor, Saburo Momoki. The words contained in thatfunctionality, we have improved our production technologies

letter have been treasured by the TOTO Group as the Words

and realized mass production on a global scale. In this way,of Our Founder. Beginning with “Kindness must always

the important elements of product value are mutually con-come first,” the Words of Our Founder state that our goal

nected to each other and have become Group strengths.

should be to provide good products and satisfy the cus-

We have also benefited greatly from the fact that we

tomer and, by accomplishing that, profit and compensation

ourselves are actually consumers. This allows us to con-will follow. Accordingly, the Words of Our Founder represent

sider things from the standpoint of our customers, making

a vision that I as president must place at the center of theit easier to ascertain what they find inconvenient. This

Group’s management. In addition, this vision acts as areality also underscores the importance of “Kindness must

touchstone that has been passed on for over a century,

always come first.” I believe the word for kindness inmaking it an extremely valuable asset to the TOTO Group.
Amid the changing times, we must never lose sight of ourJapanese, shinsetsu (親切), explains our employees very
well. The shin (親) in shinsetsu conveys a sense of familiar-

vision to constantly pursue new technologies and even better

ity, and the setsu (切) conveys a sense of closeness andcraftsmanship and strive for levels of satisfaction that exceed

empathy. I therefore believe that the word shinsetsu lays

the expectations of our customers. As many of our products

out ideas based on which we should move forward. Having

are used by customers over long periods of time, we place

the ability to relate closely to our customers and under-

importance on providing after-sales services that cater closely

stand their feelings has allowed us to realize the strength ofto their needs in the event there is an issue with our products.

“providing high-quality products and services.” To that end,

The entire process from manufacturing to after-sales andfollow-up services contributes to building the TOTO brand, andour pursuit of challenges and innovations for further
enhancing these Group strengths is endless.

all Group employees understand that this process must be
rigorously upheld. I believe that my mission as president is toensure that this understanding is passed on to future generations so that we can create enriched and comfortable lifestyles
centered on bathroom and kitchen plumbing products.

Aiming to Be a Company That
Enriches People’s Lives
Society is undergoing dramatic changes, and thesechanges have extended into the business environment inDrawing on the Strengths of
the TOTO Group

which the Group operates. In particular, technologicalinnovation such as AI and the Internet of Things (IoT) has
been advancing rapidly, and it has now become crucial to

The TOTO Group began manufacturing seated flush toilets at

utilize such tools in various business operations, including

a time when the concept of public sewage systems was notproduct development and frontline production, in an effort

yet widespread. Since then, the TOTO Group has opened theto enhance efficiency. Meanwhile, we are placing impor-door to new lifestyles by creating a variety of bathroom andtance on becoming a company that enriches people’s lives.

kitchen plumbing products such as WASHLET, which is now

In terms of products and services, we will naturally pursue

commonly used by numerous households across Japan.

efficiency through the use of technologies such as AI and

Through the challenges and innovations it has pursued

IoT. However, we do not want to emphasize efficiency at theover its 100-year history, the TOTO Group has cultivatedexpense of providing products that do not have a humanthe strengths of “advanced fusion of design and functional-

nature. There is a sense of awareness and certain emotions

ity,” “creating new value through unique technologies,”that only people have, such as the bond between parent“advanced production technology and global supply system,”and child and husband and wife as well as relaxation andand “providing high-quality products and services.”

comfort. We therefore want our toilets to provide a clean

The Group has created various unique technologies suchand comfortable space, our kitchens to be a space where

as EWATER+, TORNADO FLUSH, and CEFIONTECT. However,people can enjoy cooking and communication, and oura product’s value is not necessarily realized throughbaths to be a space where people can relax and refresh.
TOTO GROUP Integrated Report 2 019

14

For the Next 100 Years

Leveraging the Vision of Our Founder
as a TouchstoneMessage from the President

prices of raw materials. These results were also due to ourproactive investment toward the start of operations at newplants, the strengthening of sales, and the improvement ofwages and employee treatment. While we got off to a roughstart in the first year of the plan, we have been able to gaina thorough understanding of our areas of improvement. We
therefore position fiscal 2019 as a year in which we will
restart efforts to earnestly address the issues we face.

Gaining TOTO Fans around the WorldIn the Japan Housing Equipment Business, we are promoting
the Anshin (peace of mind) Remodeling Strategy as the nextstage of the remodeling business. Our Remodeling “Anshin”
Declaration, announced in April 2018, is a declaration of intent
In this way, we value people’s emotions, and we therefore

to add Anshin to remodeling as we make Companywide

wish to be a company that creates products and services

efforts to revitalize the renovation market. The starting pointthat have a human nature. And, in a greater sense, we wishof Anshin Remodeling is establishing an environment in

to be a company that enriches people’s lives.

which we offer peace of mind to customers by addressing

Our desire to provide people with enriched lifestyles istheir concerns over remodeling, be it due to cost or lack of

the same regardless of age, gender, nationality, or region.

knowledge regarding the construction process. Rather than

Even with the aging population, people will continue tochasing profit and share increases over the short term, we

desire enriched lifestyles. We believe that our products can

aim to qualitatively improve and invigorate the renovation

provide that sense of enrichment.

market under the Anshin Remodeling Strategy by taking thetime to build and accumulate trust with our customers. This

Promoting the TOTO WILL2022
Mid-Term Management Plan with a
New Sense of Determination

strategy involves straightforward activities, and we believe itis the perfect strategy for the TOTO Group to execute, as it
has helped drive the renovation market for over the past 30
years. I always remind the members of the Support Desk forIn fiscal 2018, we commenced the TOTO WILL2022 Mid-

Remodeling, a consultation desk related to remodeling, that

Term Management Plan, which embodies our strong “WILL”

the role they play is not on behalf of TOTO but rather on

as “We Innovate Leading Lifestyles.” Accordingly, the TOTO

behalf of the customer. The desk has received various queriesGroup must continue to be an organization that provides

from customers, and many of these customers have statedcustomers with levels of satisfaction that go above andthat the desk members helped resolve their concerns andbeyond their expectations. We will therefore strengthen ouroffered them peace of mind. I therefore believe that thewill on a Groupwide basis as we aim to become such anactivities of the Support Desk for Remodeling have become aorganization by leveraging our long-cultivated strengths

true embodiment of the TOTO spirit, and we will further

and overcoming the various changes we face in the busi-

advance these activities in fiscal 2019.

ness environment.

In the overall Global Housing Equipment Business, we

Our performance during the first year of the mid-term

are stepping up our WASHLET Global Strategy. According tomanagement plan was sluggish, with net sales and operat-

a global market survey conducted in March 2018, WASHLET

ing profit both declining year on year, to ¥586.0 billion andtoilet seats were the number one brand by sales volume in¥40.1 billion, respectively. In addition, ROA and ROE, which

six countries and regions (Japan, China, South Korea,

we have adopted as important management indicators,

Taiwan, the U.S., and Germany), which comprised 87% ofstood at 7.1% and 9.6%, respectively.

the global market for toilets with spray seats. Also, cumula-

The main reasons for these results include our delayed

tive WASHLET shipments exceeded 50 million units globally

response to changes and issues concerning the supply of

as of March 2019. By effectively promoting these strengths,

ceramic sanitary in the Chinese market as well as the soaring

we have firmly established the TOTO WASHLET brand.

15

TOTO GROUP Integrated Report 2 019

Comfort,” “the Environment,” and “Relationships” as our
three material issues. We position this vision as the driving

needs and are strengthening a purchase channel-specificengine of the TOTO WILL2022 Mid-Term Management Plan.

strategy, which involves products, prices, logistics, and sales

Going forward, we will strive to further integrate CSR into

promotions, in order to become the brand of choice among

our management and contribute to the SDGs.

customers. While gaining an accurate and earnest understanding of market conditions, we will strive to provide customers with value that differentiates us from the competition.
Also, in March 2019, we held an exhibition at International

Moving toward a Dynamic, Vibrant,
and Excellent TOTO

Sanitary and Heating 2019 (ISH 2019), held in Frankfurt,

The majority of TOTO’s products are used by customers forGermany. At ISH 2019, we promoted the TOTO CLEANOVATION

10 to 20 years. Ensuring that our products are chosen again

message, which comes from the combination of the words

in 10 to 20 years’ time is what will guide the next 100 and“clean” and “innovation.” This message emphasizes the

200 years of the Company. It is for this reason that wesynergistic effects of the cleaning functions realized throughbelieve our main role as a manufacturer is to cherish our

TOTO’s toilets and WASHLET. Thanks to this message, ourcustomers and the excellent products that bring joy to theirexhibition garnered a high level of praise. The TOTO

lives. In addition, customer satisfaction helps enhance

CLEANOVATION message also conveys our desire to enrichemployee motivation. To pass these ideas on to the next

lives through cleanliness as well as to realize cleanlinessgeneration, it is important that we develop our employees.

through technologies and innovations. Going forward, we

To that extent, the Group’s approach to workstyle reform iswill actively communicate our stance of being a company

to focus on establishing an environment in which allthat continues to pursue technological innovation, thereby

employees can work in a lively manner. Also, our businessenhancing the level of recognition of the TOTO brand.

activities are supported not only by our customers andIn Japan, we are moving forward with renovating andemployees but also by our various other stakeholders,installing toilets at hotels and public facilities in line withincluding our shareholders, business partners, and local

the government’s policy of reaching a target of 60 million

community members. We must therefore strive for collabo-

overseas visitors by 2030. With the aspiration of turning

ration and co-creation with these stakeholders. To be a

Japan into a showroom for the rest of the world, we are

dynamic and proud company, we must work to strictly

accelerating the installation of WASHLET so that a large

discipline ourselves, and strengthening our governance is

number of overseas visitors can gain a firsthand experi-

an essential element for maintaining our soundness as aence of this technology for the first time. Through thiscompany. With the aim of enhancing both internal andexperience and enjoyment of the comfort offered byexternal communication, we have our outside directors and

WASHLET, we will communicate Japanese toilet culture tooutside Audit & Supervisory Board members visit our

the rest of the world.

locations in Japan and overseas, thereby making our entire
business operations as open as possible. While these

Further Integrating CSR into Management

outside officers offer us their frank opinions at the Board of

The expectations and demands of stakeholders around thegovernance is to receive strict guidance and establish an

world continue to change, and the UN Sustainable

environment where such guidance can be offered.

Directors’ meetings and other venues, the whole point ofDevelopment Goals (SDGs) are emblematic of that change.

We would like to express our gratitude for the contin-

We have provided a wide array of products and services inued support of all of our stakeholders, and we ask that you

pursuit of enriched, comfortable lifestyles. These efforts,

look forward in anticipation to the future of the TOTO

which we have promoted earnestly on a continuous basis,

Group going forward.

relate closely with the SDGs. In light of this, we reevaluatedour mission in October 2017 with the aim of highlighting themost important matters to tackle in the medium to long

President, Representative Director

term in order to realize sustainable growth. Based on thismission, we have been promoting the TOTO Global
Environmental Vision, which establishes “Cleanliness and
TOTO GROUP Integrated Report 2 019

16

For the Next 100 Years

For the China Housing Equipment Business, we havelaunched a new project that focuses on visualizing customer

The Globally Unified

NEOREST NX
A Compilation of
TOTO Group Strengths
In 2017, TOTO launched the NEOREST NX as a globallyunified model. NEOREST NX is one of our most prestigious
toilets and is brimming with the strengths that the Grouphas cultivated over its 100-year history. Drawing on the
feel of ceramic, the graceful curves of NEOREST NX offer
the highest levels of comfort. At the same time, NEOREST
NX creates new value through the use of TOTO’s uniqueclean technologies.

Spe c ial

F eatureAwards Received for NEOREST NXiF DESIGN AWARDRed Dot Design Award
Gold Selection Award,
JIDA Design Museum Selection

17

TOTO GROUP Integrated Report 2 019(February 2018)(April 2018)(January 2019)

Strength1

Advanced Fusion of Design
and Functionality

while also working to provide high levels of quality and functionality.
Our aim with NEOREST NX was not simply to have it be a part ofa space, but rather to offer a toilet of the future that realizes attractiveness through its pure existence. We conducted countless roundsof examination regarding the design of the functional compartment,
which houses our latest technologies. We also made painstaking
efforts to eliminate unnecessary surface elements and spaces, which
can cause noise. Furthermore, we adopted a curvy design that accen-

Yuji Yoshioka

tuates the beauty of ceramic sanitary ware. In this way, we believe weDesign Department

have realized a truly integrated toilet. By making the lid appear as if it
is a part of the ceramic sanitary ware, we were able to realize abeautiful appearance for when the toilet is both open and closed,
thereby achieving the ultimate design without compromising beauty
or functionality. Accordingly, NEOREST NX is our premier toilet—now
used across the world—that was created through the analysis data,
sophisticated technological capabilities, and abundance of knowhow we have accumulated over the past 100 years.

Strength 1

Strength 2Strength2Creating New Value through
Unique Technologies

Within the beautiful design of NEOREST NX are various built-infunctions that maintain the cleanliness of the product and ensure

Sachiko Niwano
WASHLET Development Departmentthat it can always be used comfortably. The EWATER+ technology of
NEOREST NX keeps water clean after every use by automaticallyremoving bacteria, which can cause darkening of the toilet bowl,
thereby controlling dirt buildup and odor. In addition, NEOREST NX
is equipped with CEFIONTECT, a unique technology that starts withbaking a layer of specialized glass onto the NEOREST NX’s ceramic
surface and smoothing out surface unevenness to a level of onemillionth of a millimeter. By doing so, CEFIONTECT helps control andsimplifies the removal of dirt buildup. Additionally, NEOREST NX
features RIMLESS design, which further prevents stains throughelimination of the toilet bowl rim, as well as the TORNADO FLUSH
system, which creates a whirlpool-like flow of water that enables
both the efficient use of water and the effective cleaning of germs
and dirt. In these ways, not only is NEOREST NX strong against
stains and easy to clean, but it also offers new value by reaching newheights of cleanliness by effectively cleaning itself.

18

Special Feature

In our product development, we have pursued exquisite designs

Strength3

Advanced Production Technology
and Global Supply System
TOTO’s manufacturing of ceramic sanitary ware exudes originality in all
aspects, from the clay used as well as its design and shape, features, andmanufacturing process. One challenging aspect in manufacturing ceramic
sanitary ware is controlling the shape when baking clay-like materials onto theceramic surface. We control the deformities that occur between the molding
stage and the firing stage to the degree of one millimeter. This allows us toachieve “Quality and Uniformity.” This original production technology
standardizes the handcrafting techniques we have inherited for over the
past 100 years while fully utilizing IT technologies. Additionally, NEOREST NX
is the fruit of our latest production technologies as it integrates ceramic and

TOTO SANITECHNO LTD.

resin materials, for which manufacturing techniques differ completely, and(Kokura Factory)

realizes an extremely natural, curvy form that completely conceals its functional compartment. This approach to manufacturing has been standardized,with TOTO SANITECHNO LTD. (Kokura Factory) acting as the mother factory.
Based on this approach, we manufacture products with the same specifications and inspection standards at all of our factories around the world. In
addition, we hold ceramic skills competitions where our personnel demonstrate their handcrafting techniques, which are indispensable to the manufacturing process. These competitions help enhance the technological prowess
and motivation of our employees. The TOTO Group’s production technologies
serve as a vital element for realizing “Quality and Uniformity” on a global scale.
Strength 3

Strength 4

Strength

4

Providing High-Quality
Products and Services
International Sanitary and Heating 2019
(Germany)

TOTO products are used in the everyday lives of our customers forlong periods of time. For that reason, we operate 100 showrooms
across Japan and 14 overseas so that customers can actually observeand gain a firsthand experience with our products and feel assured inselecting them. Through these showrooms, we are able to caterclosely to the needs of our customers and offer them optimal
choices. Also, we hold global exhibitions in Germany, the UnitedStates, and China. These exhibitions allow us to introduce newlifestyles to an even greater number of people and showcase spaces
where people can get a sense of what their home would be like with
our products. They also allow us to communicate our unique functions and designs in an easy-to-understand manner.
Furthermore, as our products are used by customers over thecourse of years, we place importance on offering after-sales services
in the event of any product issue.
By providing customers with high-quality products and services,
the TOTO Group will continue to contribute to enriched lifestyles
across the globe.

19

TOTO GROUP Integrated Report 2 019

TOTO showroom(Vietnam)Strength

Relationships with Stakeholders

Special Feature

5

Strength 5

The TOTO Group’s business activities are supported by a wide variety
of stakeholders. This means that we must pursue collaboration andco-creation with these stakeholders. To create even better products
and services over the medium to long term, we must always value therelationships we have with our customers, employees, shareholders,
suppliers, and local community members and promote initiatives
that give consideration to society and the global environment. The
ideas of “Quality and Uniformity,” “Service and Trust,” and“Cooperation and Prosperity,” which are incorporated into theCompany Motto of “Take pride in your work and strive to do yourbest,” embody our approach to these relationships, and we havecontinued to put these ideas into practice through the various
business activities we have pursued since our founding. The relationships with our stakeholders we have cultivated through our businessactivities over the years have become a significant strength for thecontinuation of our business operations going forward.

TOTO Water Environment FundTOTO GALLERY·MA

Akihisa HIRATA: Discovering New (2018)© Nacása & Partners Inc.

TOTO Museum

Volunteer activities

TOTO GROUP Integrated Report 2 019

20

Awareness of Opportunities and Risks

External Environment

Opportunities and Risks

Purchasing behavior ofage group suitable for
remodeling

EconomyInterest in quality of living andlifestyles
Uneasiness regarding remodeling

Gradual growth in the global
economyExtension of healthy life expectancies

Expansion in Asian markets
Increasing middle classGrowing population in
urban areas

Japan

Changes indemographics

Revitalization of the market forexisting houses
Shortage of construction workers

Tourism Nation andinbound tourists

Society
Increasing global population

Increased construction of lodging
facilities
Establishment of public toilets

Aging population in advanced
countries
Declining population in Japan
Progression of the rapidly
aging population

Establishment of urban
infrastructure

Decline in the working-age
population

Environment
Progression of measures toaddress climate change

Widespread use of housing facilities
such as flush toilets following theestablishment of sewage systems
Need for water-saving products

Overseas

Changes in purchasing
behavior and markets

Preference for high-value-added
products
Diversification of purchasing behavior

Rising demand for resourcesand energy
Growing number of regions
facing water shortage

Government policies
and regulations

Impact of economic and housing
policies
Tightening of environmental
regulations

Arrival of the 5G era
Technology
Expanded use of AI, IoT,
and robots

Information
Technology

Advancement of semiconductors andoptical communication devices
Introduction of AI and IoT in housing
facilities

Progression of open
innovation

Progression of workstyle reforms

Workforce

21

TOTO GROUP Integrated Report 2 019

Human resources development andcompetition in securing personnelWe maintain an awareness of opportunities and risks related to the external environment, including in terms of the economy,
TOTO WILL2022 Mid-Term Management Plansociety, the environment, and technology, from a medium- to long-term perspective. Based on this awareness, we are
simultaneously promoting the TOTO WILL2022 Mid-Term Management Plan and the TOTO Global Environmental Vision.

TOTO’s Initiatives
TOTO WILL2022 Mid-Term Management Plan
Japan Housing Equipment Business

New Business Domains

Housing
Promoting the Anshin Remodeling Strategy to provide additional
levels of Anshin, the Japanese word for peace of mind, to remodeling

Evolving our unique technologies to provide distinctive value tocustomers (Advanced Ceramics Business)

Offering attractive products that meet customer needs andstrengthening proposal-making capabilities

Contributing to the global environment and continuing to provide
products that offer value and help improve lifestyles(Green Building Materials Business)

Public Facilities
Communicating Japanese toilet culture created by TOTO
—Turning Japan into a showroom for the rest of the world

China & Asia Housing Equipment Business /Americas & Europe Housing Equipment Business
Increasing the number of TOTO fans around the world with the aim of
becoming a trustworthy brand in each country and region—Executing strategies that cater to the marketing stages of eachcountry and region
Promoting the sale of water-saving toilets
Boosting recognition and expanding sales of WASHLET
Supplying products to landmark properties

Cross-organizational Innovation Activities
Continuously providing world-leading, beautiful products that deliver
comfort and communicating the evolution of design and functionality to
the world through unified marketing promotions (Marketing Innovation)
Expanding the supply chain on a global scale and taking on new
challenges in manufacturing (Demand Chain Innovation)
Creating a company that attracts a diverse group of human resourcesand offers a vibrant, challenging working environment where employees can work with peace of mind (Management Resource Innovation)

Establishing and subsequently reinforcing sales networks

TOTO Global Environmental Vision
Cleanliness and Comfort

Environment

Relationships

Realize cleanliness and comfort throughout
the worldProtect our limited water resources andconnect with the future

Build deep, long-lasting relationships withcustomers

Pursue ease of use for everyone

Undertake initiatives to fight global warming and coexist with the earth

Offer cultural support and contribute tosociety for the next generation

Aim for sustainable development together
with local communities

Create and share joy in work together

Clean
technologies

Universal design

WASHLET™

Water-saving
products

TOTO Water
Environment Fund

Energy-saving
factories

Showrooms

Volunteer
activities

Workstyle reforms

TOTO GROUP Integrated Report 2 019

22

TOTO WILL2022
Mid-Term
Management
Plan

TOTO WILL2022 Mid-Term Management Plan
In 2017, the TOTO Group celebrated its 100th anniversary. Looking at the next 100 years, the Group aims to increase the numberof TOTO fans around the world. To this end, the Group commenced its five-year TOTO WILL2022 Mid-Term Management Plan in
April 2018.
Under TOTO WILL2022, with corporate governance acting as our foundation, we will continue efforts to strengthen our
global business promotion structure through our two business segments of Global Housing Equipment Business and New
Business Domains, as well as our three cross-organizational innovation activities of Marketing Innovation, Demand Chain
Innovation, and Management Resource Innovation.
Furthermore, we will actively carry out investments aimed at achieving sustainable growth while promoting well-balanced
financial strategies that give consideration to shareholder returns. As performance indicators, we have set targets of achieving
net sales of ¥720.0 billion, operating profit of ¥80.0 billion, ROA of 12.0% (based on operating profit), and ROE of 13.0% (basedon net profit) by fiscal 2022, and will move forward with plans to accomplish these targets.

Performance Indicators and Promotion Structure

Fiscal 2022 Plan
Net sales:

Operating profit:¥

23

720.0 billion

TOTO GROUP Integrated Report 2 019¥

80.0 billion

ROA (based on operating profit):

12.0 %ROE (based on net profit):

13.0 %

Looking toward the next 100 years, we are promoting our five-year TOTO WILL2022 Mid-Term Management
Plan in order to achieve our “will” of continuing to gain TOTO fans around the world. We aim to increase ourcorporate value through our two business segments of Global Housing Equipment Business and New
TOTO WILL2022 Mid-Term Management Plan

Business Domains, as well as our three cross-organizational innovation activities, which are pursued ona Companywide, cross-departmental basis from the perspective of optimization.

Review of Fiscal 2018 and Forecasts for Fiscal 2019
In fiscal 2018, the first year of TOTO WILL2022, we recorded net sales of ¥586.0 billion, down ¥6.3 billion year on year, andoperating profit of ¥40.1 billion, a decrease of ¥12.5 billion. In addition, ordinary profit came to ¥43.1 billion, declining ¥11.2 billion,
and profit attributable to owners of parent was ¥32.3 billion, down ¥4.4 billion. Also, the Company adopts ROA and ROE as
important management indicators. In the fiscal year under review, ROA came to 7.1%, a decline of 2.3 percentage points, andROE stood at 9.6%, down 2.1 percentage points.
In the Global Housing Equipment Business, frequent natural disasters in Japan led to a depressed consumer mindset for
housing. In China, market conditions worsened due in part to a decline in the number of high-class properties, which resulted
from the tightening of real estate sales regulations centered on 1st tier cities. This, coupled with the delay in launching our new
products, led to declines in both sales and profit. Furthermore, profit decreased in New Business Domains, despite increased
sales in the Advanced Ceramics Business.
As for key initiatives to pursue in fiscal 2019, we will strengthen the Anshin Remodeling Strategy in Japan and further promote the WASHLET Global Strategy overseas. We will also expand sales and step up our marketing activities around the world insuch ways as continuing to release products globally. By implementing these initiatives, for fiscal 2019 we forecast net sales of¥618.0 billion, an increase of ¥32.0 billion year on year; operating profit of ¥45.0 billion, a gain of ¥4.9 billion; ordinary profit of¥46.0 billion, up ¥2.9 billion; and profit attributable to owners of parent of ¥33.0 billion, a rise of ¥0.7 billion.

Fiscal 2018 Results and Fiscal 2019 Plan
(Billion yen)

Fiscal 2017

Fiscal 2018

Fiscal 2019 plan

Net Sales

592.3

586.0

618.0

Operating Profit(Operating Margin)

52.6(8.9%)

40.1(6.9%)

45.0(7.3%)

Ordinary Profit

54.3

43.1

46.0

Profit Attributable to Owners of Parent

36.7

32.3

33.0

ROA (Based on operating profit)

9.4%

7.1%

7.7%

ROE (Based on net profit)

1 1.7%

9.6%

9.6%

TOTO GROUP Integrated Report 2 019

24

TOTO WILL2022
Mid-Term
Management Plan

Global Housing Equipment BusinessJapan Housing
Equipment BusinessWe will further promote our remodeling strategy that
does not rely on new housing demand. In addition,in the public market, we will work to communicate
Japanese toilet culture, which the TOTO Group has
helped create, with the aspiration of turning Japan
into a showroom for the rest of the world.

TOTO Group Strategy
In Japan, for nearly 30 years, the TOTO Group has been creating demand for remodeling with the aim oftransitioning to a management model that does not rely on new housing demand. Currently, the remodeling business accounts for 70% of total sales in the Japan Housing Equipment Business, and we havesucceeded in establishing our intended management model.
As each remodeling project entails different on-sight conditions and customer needs, the remodelingbusiness requires multiple abilities in areas such as construction expertise, planning, and customer communication. To this end, we have cultivated the product appeal and abilities required for performing remodelingwork and have rolled out showrooms across Japan. At the same time, we have made swift efforts to establish
a network with home improvement stores that have deep ties to local communities. In 2002, we formed the
TDY alliance together with DAIKEN and YKK AP, both top-class manufacturers of key housing materials, inorder to further accelerate the growth of our remodeling business. To make proposals for comfortablebathroom and kitchen spaces made possible through the high-quality products of each alliance member, allthree companies in the TDY alliance made cooperative efforts to open TDY Collaboration Showrooms,
organize Remodeling Fairs, and undertake other activities with the aim of realizing sustainable growth.

Review of Fiscal 2018 and Forecasts for Fiscal 2019
Fiscal 2018 saw declines in both net sales and operating profit as net sales decreased ¥0.5 billion fromthe previous year, to ¥425.1 billion, and operating profit fell ¥4.2 billion, to ¥24.4 billion. The primarycauses of these declines were the depressed consumer mindset for housing and delays in supply to
public facilities resulting from the frequent natural disasters in Japan. In light of these results, we will
promote the following key measures in fiscal 2019.
In the housing market, new home construction is expected to decline with the continuing transition
Housing
Markettoward a stock-based society. The remodeling business is therefore becoming more important than ever.
In light of such market changes, we will continue to build on our Anshin Remodeling Strategy in theremodeling business in an effort to revitalize the market. Under the Anshin Remodeling Strategy, we will
work to spur remodeling demand by turning customers’ concerns over remodeling projects into Anshin,
the Japanese word for peace of mind. By earnestly addressing their needs and concerns, we will pursue
efforts to enrich the lifestyles of our customers through superior remodeling in collaboration with ourbusiness partners. Rather than chasing short-term increases in sales or market share, we will aim for therevitalization and qualitative improvement of the renovation market by building up genuine trust with ourcustomers over the next five to ten years.
In fiscal 2019, we will continue to enhance our business activities by focusing on our three goals of
relating closely to customers, delivering Anshin through information, and providing high-quality remodeling.
In the new housing market, we will look to capture demand by strengthening our appealing products
and proposal capabilities that meet the needs of customers.

25

TOTO GROUP Integrated Report 2 019

TOTO WILL2022 Mid-Term Management Plan

Relating
closely tocustomers

Overview of Anshin RemodelingThree Areas

Deliveringof Focus
Anshin to customers throughinformation

Remodeling “Anshin” Declaration

Providinghigh-quality
remodeling

TOTO’s Anshin Remodeling
Remodeling Library

Remodeling Pro Shop

Visualize and understand

Visualize and understandexamples and appropriate prices
for remodeling

1993

Remodeling
Declaration
Turning customers’
problems into joy

2003

New Remodeling
Declaration
Exceedingcustomers’
expectations

2018

Remodeling “Anshin”
Declaration
Bringing more Anshin to
remodelingshops recommended by TOTO

Examples of actual cases include
price information

TOTO remodelingclub shops

Showroom

Support Desk for Remodeling

Visualize and understand

Visualize and understandlife after remodeling

our response to customers’questions and concerns

Attractive showrooms

Consultation desk
for remodelingJapan
In the public market, as part of the WASHLET
PublicMarketGlobal Strategy, we will strengthen our proposals
for clean toilets to the rising number of overseas
visitors to Japan. In doing so, we will increase ouropportunities for promoting the attractiveness of
WASHLET and other products, thereby bolstering
activities to encourage the purchase of our products in not only Japan but also overseas.

Net sales

Operating profit

Operating margin(Billion yen)
500

(%)
425.6

425.1

25

439.1

400

20

300

15

200
100
0

7

6

6

28.6

24.4

24.7

2017

2018

2019
Plan

10
5
(FY)

0

Launching “experience TOTO,” the Ultimate in Toilet Hospitality Utilizing IoTIn April 2019, we launched “experience TOTO”—the ultimate in toilet hospitality utilizing
IoT—at Terminal 1 of Narita International Airport. By having visitors from overseas indulge in“experience TOTO” immediately after arriving in Japan, we aim to introduce the beauty ofJapanese toilet culture to the rest of the world.
“experience TOTO” features large LCD panel design images outside the toilet to attract visitors
as well as a dedicated remote-control tablet*1 inside the toilet that offers instructions and visual
guidance in five different languages. Through these features, visitors will be able to get a first-handexperience of WASHLET. Additionally, “experience TOTO” comes equipped with a voice guidance “experience TOTO”
Welcoming visitors to state-of-the-art
function, which provides instructions in four languages, to enable visitors from overseas, who have Japanese toilets through four captivating
LCD panel design images
little or no experience using such highly functional toilets, to use them without any constraints.
We have also provided greater convenience through the use of IoT by displaying congestion status in real time on the LCD panels*1 outside the toilet. Additionally, we have made public toilets more efficient in termsof management by enabling the monitoring of their use and by displaying information effective for their maintenance.*2*1 Designed in collaboration with Nippon Telegraph and Telephone East Corporation and Vacan, Inc.
*2 Designed in collaboration with KDDI Corporation

TOTO GROUP Integrated Report 2 019

26

TOTO WILL2022
Mid-Term
Management Plan

Global Housing Equipment Business
China & Asia Housing
Equipment Business
In China, by responding to market changes andactively making proposals, we are aiming to become
the most trusted brand that our customers continue
to need and want. Our operations in the rest of Asia
will help drive growth in the overall Global Housing
Equipment Business, which in turns acts as an engine
for the growth of the TOTO Group. In the high-end
markets of each country and region, we aim tobecome the most trusted and beloved brand.

TOTO Group Strategy
In China, spray seats* are becoming more common with the rising average income of Chinese citizens.
Meanwhile, greater emphasis is being placed on appropriate marketing strategies that address the changing
market conditions such as intensifying competition and diversifying customer needs. In the China Housing
Equipment Business, we are working to ascertain changes in the market environment and consumer purchasing behavior as we leverage the strengths of TOTO as a high-class brand to promote our business activities.
In various other countries and regions in Asia, including Taiwan, Vietnam, India, and Thailand, the
TOTO brand continues to gain recognition as a result of rising income levels and the proliferation of sewage
systems. While further reinforcing our sales foundation in each country and region, we are building production plants to establish them as a global supply base that can respond to increased demand in the future.
* “Spray seat” is a generic name for an ordinary toilet seat equipped with a water-washing function.

Review of Fiscal 2018 and Forecasts for Fiscal 2019
Fiscal 2018 saw declines in both net sales and operating profit as net sales decreased ¥8.4 billion fromChina

the previous year, to ¥63.5 billion, and operating profit fell ¥5.8 billion, to ¥12.3 billion. Net sales dropped
particularly in urban areas due to the impact of measures to control real estate prices. The lower operating profit was a result of the decline in net sales and the inability to offset the impact of increases in raw
material and labor costs through cost-reduction efforts. Based on these results, we will implement thefollowing key measures in fiscal 2019.
In the China Housing Equipment Business, we will strive to keep gaining TOTO fans in China byimplementing a strategy and PDCA cycle that focuses thoroughly on the customer, enabling us tobecome their preferred choice.
In the retail building materials market, we will makeproactive efforts to introduce new products and bolster China
our sales proposals for WASHLET/toilet sets thatleverage our strengths as a comprehensive manufacturer of bathroom and kitchen plumbing products.
In large-scale buildings, we will move ahead with thedifferentiation of our products in terms of both quality

Net sales

Operating profit(Million yuan)
4,308
5,000

Operating margin

(%)
3,782
21

4,000

30

4,434

27

24

22

3,000

18

and functionality as well as supplies to high-class housing properties. We will also enhance the adoption of our
products at five-star hotels and large-scale office buildings in public markets with the intention of achieving
greater sales throughout the entire China business.
27

TOTO GROUP Integrated Report 2 019

2,000

1,150

1,000
0

2017

12
800

2018

992
6
2019
Plan

(FY)

0

Asia

¥1.3 billion, to ¥5.4 billion. In Taiwan, both net sales and operating profit fell as a result of a drop in new
housing demand and a reduction in the number of properties to which TOTO products are supplied. In
Vietnam, net sales rose while operating profit fell due to such factors as higher depreciation and amortization resulting from the operation of new plants and the stagnant housing market. In light of theseresults, we will implement the following key measures in fiscal 2019.
In the Asia Housing Equipment Business, in order to fulfill our role as TOTO’s growth engine, we will
look to establish a market presence for products unique to TOTO centered on WASHLET and toilet bowls
and solidify our position in the high-end brand.
In Taiwan, we will actively roll out promotions to heighten recognition of WASHLET in order to establish a sales structure that does not rely on new housing demand.
In Vietnam, we will seek to improve sales of WASHLET in the retail market.
Throughout the entire Asian market, we will continue to examine the construction of new plants tocater to the anticipated growth in global demand going forward.
VietnamTaiwanNet sales

Operating profit(Million Taiwan dollar)

Net sales

Operating margin

5,000

24

23

4,000

3,606

3,438

22
3,672

Operating profit(%)(Billion dong)

25

5,000

20

4,000

Operating margin

(%)
22

3,369

3,671
14

3,000
2,000
865

796

0

2017

2018

2019
Plan

(FY)

20
14

15

3,000

15

10

2,000

10

5

1,000

0

0

802

1,000

25

4,249

743

2017

522
2018

581
2019
Plan

5
(FY)

0

Exhibiting at Kitchen & Bath China 2019
In May 2019, TOTO held an exhibit at Kitchen & Bath China 2019, Asia’s most influential trade
show for kitchen and bathrooms, in Shanghai, China. Based on our corporate message ofLife Anew, we communicated to the world our desire to “generate value unlike ever before
and go above and beyond everyone’s expectations.”

Constructing a New WASHLETTM Production Plant in Thailand
TOTO (THAILAND) CO., LTD. is constructing a new WASHLET production plant (tentative
name: TOTO Thailand No. 3 Plant) in a newly acquired location.
Construction of this new plant began in May 2018 and the facility will be used for themass production of WASHLET. It is scheduled to fully begin operating from April 2020. ThisWASHLET production plant is the fifth of its kind to be established globally and the third to
be constructed overseas.

TOTO GROUP Integrated Report 2 019

28

TOTO WILL2022 Mid-Term Management Plan

Fiscal 2018 saw net sales increase ¥0.2 billion year on year, to ¥31.8 billion, and operating profit decrease

TOTO WILL2022
Mid-Term
Management Plan

Global Housing Equipment BusinessAmericas & Europe Housing
Equipment Business
The bathroom culture of Europe has a significant
impact on the rest of the world, and we will therefore
further promote the Americas & Europe Housing
Equipment Business. In addition, we aim to become acompany that can bring about change to the bathroom culture in the Americas and Europe, thereby
increasing the number of TOTO fans around the world.

TOTO Group Strategy
In the Americas and Europe, our unique technologies have received high praise from customers. These
technologies include water-saving toilets equipped with TORNADO technology, which uses only one
gallon (3.8 liters) per flush, as well as CEFIONTECT, RIMLESS, and TORNADO FLUSH, which support thisTornado technology. In the Americas & Europe Housing Equipment Business, we are enhancing our brandvalue and working to achieve differentiation through efforts to communicate the superior quality andvalue of our products. Also, for WASHLET, we are enhancing our showroom exhibits and website content
and stepping up efforts to establish new sales routes through e-commerce.

Review of Fiscal 2018 and Forecasts for Fiscal 2019
In the Americas, fiscal 2018 saw net sales increase ¥0.6 billion from the previous year, to ¥31.3 billion, andThe
Americas

operating profit decrease ¥0.9 billion, to ¥1.6 billion. The higher net sales was mainly as a result of growthin sales of WASHLET, while the lower operating profit was partly due to a rise in selling, general andadministrative expenses and higher costs associated with the deteriorating productivity of ceramic
sanitary ware. In light of these results, we have decided to move ahead with the following key measures
for fiscal 2019.
For the Americas Housing Equipment Business, we will look to achieve greater recognition of the
TOTO brand and WASHLET by expanding our contact points with customers. Further, we will expand our
supply of WASHLET particularly to high-end hotels and condominiums in major cities with the aim of
maximizing its ripple effects on the presence of the TOTO brand.
From a manufacturing point of view, we will
focus on stabilizing the supply of ceramic sanitaryware by enhancing its productivity. Also, with oursights set on building customer satisfaction forpurchases, we will strengthen our after-sales
service network through timely responses and

The Americas
Net sales

Moreover, through proposals that incorporate
IoT, we will help resolve the issues of public toilets.

TOTO GROUP Integrated Report 2 019

(%)
20
326

300

283

274
11

15
9

9

200

100

0

29

Operating margin400

outstanding quality, thereby earning the trust andsupport of our customers.

Operating profit(Million dollar)

10

29

24

31

2017

2018

2019
Plan

5

(FY)

0

loss of ¥1.1 billion, a decrease of ¥0.1 billion. Given these results, we will take the following key measures
for fiscal 2019.
In Germany, we will strengthen our partnership with plumbers, who propose our products to customers, and draw on our showrooms to heighten awareness of the cleanliness and comfort of WASHLET inorder to solidify the presence of the TOTO brand in the country. While our efforts to strengthen partnerships in fiscal 2018 were centered on the southern region of Germany, we will expand on this in fiscal
2019 by focusing on the entire country.
In the United Kingdom and France, we willcontinue to promote the adoption of our products at high-end hotels and other high-classfacilities toward our goal of establishing TOTO asa high-class brand. We will also strengthen our
distribution of information on previous adoption
examples and customer opinions to provide
more opportunities to experience our products
in pursuit of our next adoption.

EuropeNet sales

Operating profit(Million euro)
36

40
30

26

26

20
10
0
−10

−6

2017

−7
2018

−5

2019
Plan

(FY)

Showcasing Our Products at CES 2019
In January 2019, TOTO participated as an exhibitor at CES 2019, the world’s largest international electronics trade show, held in Las Vegas, U.S.A.
Based on our corporate message of Life Anew NEXT, our exhibit focused on the themeof “bringing more enrichment and enjoyment to the everyday lives of our customers throughIoT.” Included in our presentation was a film on TOTO’s next-generation bathroom andkitchen spaces as well as an introduction on examples of our state-of-the-art public toilets.
Additionally, we proposed bathroom and kitchen spaces that provide comfort and enrichment to the everyday lives of our customers. Our lineup included TOTO’s premier productseries “NEOREST COLLECTIONS,” the FLOTATION TUB, a bathtub for our overseas market
that offers the ultimate relaxation experience, and other products combining both functionalityand design, as well as exhibits combining toilets, bathroom vanity units, and bathtubs.

Exhibiting at International Sanitary and Heating 2019
In March 2019, TOTO took part as an exhibitor at the International Sanitary and Heating
2019, the world’s leading international trade show for bathrooms, buildings, energy, airconditioning technology, and renewable energy, held in Frankfurt, Germany.
Based on our corporate message of Life Anew, our exhibits focused on the themes of
TOTO CLEANOVATION, TOTO RELAXOLOGY, TOTO DESIGN, and Life Anew NEXT. In termsof restroom space, we garnered the attention of the attendees by demonstrating andshowing visuals to clearly present the four synergistic effects for cleanliness generated
through the combination of TOTO toilets and WASHLET technology. We also received rave
reviews for the design features of our new global lavatory faucet series. Through such
efforts, we were able to leave a lasting impression on the European market, where TOTO
continues to advance its technological innovations.

TOTO GROUP Integrated Report 2 019

30

TOTO WILL2022 Mid-Term Management Plan

In Europe, fiscal 2018 saw net sales of ¥3.7 billion, an increase of ¥0.2 billion year on year, and operating
EuropeTOTO WILL2022
Mid-Term
Management Plan

New Business Domains
Advanced Ceramics Business
TOTO will roll out its high-quality, high-precision
advanced ceramics, including air bearings, electrostatic chucks, bonding capillaries, and receptacles,
for the semiconductor, FPD manufacturing, andoptical communication industries. By further leveraging these unique technologies, we will create value
together with our customers and suppliers.
Electrostatic chucks

TOTO Group Strategy
With the arrival of the Internet of Things (IoT) society, the demand for leading-edge devices such as semiconductors and high-speed optical communication and display devices has been rising. Amid these circumstancesin the Advanced Ceramics Business, demand is expected to rise for electrostatic chucks used in manufacturing
semiconductor memory devices, which are increasingly employing a three-dimensional design. Going forward,
we will continue to bolster our production facilities and strengthen our development structure through Demand
Chain Innovation, Cross-organizational Innovation Activities. At the same time, we will aim to establish arobust business foundation by employing a customer-oriented business approach and improving profitability.

Review of Fiscal 2018 and Forecasts for Fiscal 2019
Fiscal 2018 saw net sales increase ¥2.1 billion year on year, to ¥22.1 billion, and operating profit decrease¥0.5 billion, to ¥1.2 billion.
While the focus of the Advanced Ceramics Business till now has been on increasing its production
and strengthening its development structure to

Advanced Ceramics Businessmeet the overwhelming demand for semiconductors, the goal for fiscal 2019 will be to improve

Net sales

Operating profit

Operating margin(Billion yen)profitability through automation and labor saving

25

and the shift to next-generation smart factories.

20

(%)
22.1

25

21.3

20.0

20

Moreover, with the aim of continuing to create
unique technologies and products, we will proac-

15

tively invest in research and development to rein-

10

force our material-handling technology, technology
for combining with other materials, and production
technology that facilitates mass production.

15
9

5
0

8

6
1.7

1.2

1.6

2017

2018

2019
Plan

10
5
(FY)

Electrostatic Chucks
An electrostatic chuck is a component inside semiconductor equipment that is used to hold the semiconductor wafer. In the IoT society,the demand for semiconductors is growing, which in turn has led toannual increases in the need for installing semiconductor manufacturing equipment. Moreover, there has been a need for semiconductors with higher precision. Our electrostatic chucks, which areincorporated within semiconductor equipment, have received highpraise from our customers in light of the fact that they are highly
durable and produce very little impurities within the equipment itself.

31

TOTO GROUP Integrated Report 2 019

Upper electrode
Etching/depositionmaterial
plasmaSemiconductor waferInternal electrode

Electrostatic chuck
Cooling channel
Cooling plate
Energy supply
Structure of semiconductor manufacturing equipment

0TOTO WILL2022 Mid-Term Management Plan

Establishing a New Production Facility for Advanced Ceramics
With our sights set on capturing the globally expanding demand for semiconductor
manufacturing equipment, we will establish a new advanced ceramics production
facility at the Nakatsu Plant of TOTO Fine Ceramics LTD. Construction of this new plantcommenced in January 2019 and its operations are set to begin in October 2020. By
utilizing the new factory for the mass production of electrostatic chucks, assembling ourcutting-edge advanced ceramics processing technology and know-how we haveaccumulated to date, and leveraging our IT technology, we will strive toward our goal oftransitioning to next-generation smart factories and improving productivity as a result.

Rendering of new production facility at
TOTO Fine Ceramics

Green Building
Materials Business
TOTO will offer building materials utilizing its
HYDROTECT environmental cleaning technology.
TOTO will also enter into license agreements withcompanies worldwide handling exterior building
materials, including tile, paint, metal panels, glass,and architectural stone.
Ceramic tiles that utilize HYDROTECT—Hydrocera Wall

TOTO Group Strategy
HYDROTECT, a green building material technology that makes use of a photocatalyst, has already been
adopted by a significant number of partner companies. Looking to the future, we will redouble our efforts
to promote HYDROTECT technology globally by engaging in more partnerships with various companies.

Review of Fiscal 2018 and Forecasts for Fiscal 2019
Fiscal 2018 saw net sales of ¥8.0 billion, a decrease of ¥0.4 billion from the previous year, and operating
loss of ¥0.3 billion, an increase of ¥0.1 billion.
In the Green Building Materials Business, we aim to contribute to the global environment by continuing to provide products that help create more
comfortable lifestyles and cultures. To that end,

Green Building Materials Business

we will enhance the efficiency of its operations

Net salesby bolstering the selection and concentration of(Billion yen)products in all segments, including HYDROTECT,
ceramic tiles, high-performance mirrors, andtiles for homebuilders.
We will continue to focus on providing andproposing value for products that leverage the9Operating profit

8.4

8.0

8.6

6

3

strengths of our unique HYDROTECT technology.
0
−1

−0.4
2017

−0.3
2018

0
2019
Plan

TOTO GROUP Integrated Report 2 019

(FY)

32

TOTO WILL2022
Mid-Term
Management Plan

Cross-organizational Innovation Activities
Nozomu Morimura
Representative Director,
Executive Vice President

Marketing Innovation
By visualizing the global market, we will propose the products needed bycustomers around the world and communicate them through impactfulmarketing promotions.
The TOTO Group has a history of utilizing its high level of technological capabilities to enhance the functionality of its products. Fiscal 2018, the first year of
TOTO WILL2022, was a year in which we saw our efforts lead to improvement
in not only our functionality, but also in our design. In March 2019, we held an
exhibition at International Sanitary and Heating 2019 (ISH2019)—the world’s
largest trade fair focused on the responsible management of water—which took
place in Frankfurt, Germany. At the event, we received high praise for our efforts
to steadily evolve the design of not only our toilets but also our faucet parts to theextent that we are now able to compete with the leading manufacturers in Europe. The results of our manufacturing efforts,
which aim for the advanced fusion of design and functionality, have been recognized in other ways as well, including
the reception of international awards such as the Red Dot Design Award and the iF Design Award. On the other hand,fiscal 2018 was also a year in which various issues came to light, including issues related to our marketing promotions,which communicate our product value to customers, and the provision of products and services that utilize AI, IoT, andother technologies.
In fiscal 2019, we will continue to focus on sales of high-value-added products that offer both functionality anddesign in Japan. To that end, we will further enhance the SYNLA bathroom module and the THE CRASSO modular
kitchen design, among other products.
Globally, we will roll out “clean marketing promotions”—centered on EWATER+—that resonate with customers
based on the message of TOTO CLEANOVATION, which is a combination of the words “clean” and “innovation.” We
will also commence new proposals for using IoT technologies to ascertain the congestion status of public toilets andoptimize our response to toilet maintenance.
Our mission is to provide customers with unique, unrivaled products that offer both functionality and design. Guided
by this mission, we will create marketing promotions that communicate the story behind the creation of our products,from the design concept to product development based on human engineering and the evolution of clean technologies.
In fiscal 2019, by refining and strengthening our marketing activities to an extent greater than ever before, we willoffer impactful products and marketing promotions to customers around the world. In these ways, we will contributeto creating enriched and comfortable lifestyles.

Ryosuke Hayashi
Director,
Managing Executive Officer

Demand Chain Innovation
To deliver TOTO products to people around the world, we will reorganize
our structure for distributing products and information on a global basis
and enhance activities aimed at doing so.
For Demand Chain Innovation, we are rethinking our conventional approachof local production for local consumption in order to swiftly provide support
for our product lineup transformation, which we are promoting in response tochanges in the global market and tightening environmental regulations.
In addition, we are reorganizing our global supply chain and promoting
manufacturing-related efforts around the world.
In terms of supply chain innovation, various issues came to light in fiscal
2018, including the fact that we have yet to gain a sufficient understanding oftrends in overseas markets. Reflecting upon such issues, in fiscal 2019 we will strive to enhance visualization of theentire supply chain process through consistent production, sales, distribution, purchasing, and information
33

TOTO GROUP Integrated Report 2 019

production, and sales, as well as work to stabilize our supply structure.
As for manufacturing innovation, by incorporating IoT into our seed technologies, we will advance the creation of
unprecedented technologies centered on the concepts of cleanliness, eco-friendliness, and universal design. To rollout these technologies worldwide from an early stage, we will realize smart factories that leverage AI and IoT.
Adopting dynamic improvement in productivity as our goal, we will pursue these efforts comprehensively in Japan in
fiscal 2019 and aim to expand them globally in the future.
In our cost-reduction efforts, we aim to reduce costs by a total of over ¥8.0 billion each year on a global basis. To
that end, we will steadily promote the streamlining and mechanization of not only our production materials but also
our products, in addition to enhancing inventory management.
To deliver products with unique TOTO functions that society has yet to experience across the world, we will makeGroupwide efforts toward establishing a global supply chain structure and strengthening our manufacturing capabilities.

Noriaki Kiyota
Representative Director,
Executive Vice PresidentManagement Resource Innovation
We will create a company that attracts a diverse group of human resourcesand offers a vibrant, challenging working environment where employees canwork with peace of mind.
We believe our employees are the most important resource in becoming atrustworthy organization that is deeply rooted in the cultures of each country
and region and in improving the lifestyles of customers around the world.
Starting in fiscal 2018, we have been promoting a three-pronged approachthat focuses on human resources, information, and finance and accounting
with a view to realizing workstyle reforms.
In terms of human resources, we introduced a “work-from-home system”
in fiscal 2018 in order to offer peace of mind to our diverse group of personnel

and encourage them to take on challenges. Currently, approximately 140 employees are making use of this system.
Life events such as child-rearing and nursing care are something that everyone experiences, and the insight ouremployees gain from these experiences becomes valuable know-how for the TOTO Group, which deals with productsthat are used in everyday life. This know-how can be leveraged to improve our products and services and evolve ourbusiness as a whole. By establishing a “work-from-home system” based on the circumstances of each division andemployees utilizing the system, as well as feedback from the supervisors of these employees, we believe we canreduce the turnover rate of employees due to life events and further improve the quality of our products and services.
Also, to raise the percentage of paid holidays taken and realize an environment where diverse human resources canplay an active role, in fiscal 2019 we will take note of the various operational procedures that each division has conducted and work to streamline important procedures and eliminate unnecessary ones. By doing so, we will seek toadjust the allotment of personnel and enhance our overall efficiency.
Also, in terms of information, which plays the role of connecting our diverse group of human resources, we will
move forward with efforts that utilize IT tools. To that end, we will establish frameworks to enable global collaborationin such ways as sharing operational procedures and enabling remote group work in real time. In these ways, we willencourage collaboration between employees as well as organizations within the Group.
For finance and accounting, we are strengthening our financial foundation to support the growth of the Group.
In fiscal 2019, we will continue to focus our efforts on “establishing a cash management system for overseas Groupfinances” and “promoting business activities with an awareness of ROIC.”
While our efforts related to human resources are something that will be promoted over the long term, we will aim
to realize a workplace environment where all employees of the TOTO Group around the world can work in a lively
manner and with a sense of pride.
TOTO GROUP Integrated Report 2 019

34

TOTO WILL2022 Mid-Term Management Plan

communication activities. We will take steps to ascertain changes in the market and in the structure of manufacturing,TOTO Global Environmental Vision
CSR
Activities

MissionMateriality

Cleanliness andComfortEnvironment

Relationships
In light of the changing times and social trends, the TOTO Group revised its mission in October 2017, which declares its intent toimplement in the medium to long term the primary items for the sustainable growth of the TOTO Group. Based on this new
mission, we identified Cleanliness and Comfort, Environment, and Relationships, themes that impact both our business andsociety, as material issues.

Global Environmental Goals
Aims

Cleanliness and Comfort

Realize cleanliness and comfort throughout the world
Pursue ease of use for everyone

Protect our limited water resources and connect withthe future

Environment

Major Initiatives

Global expansion of clean andcomfortable toilets

Widespread adoption of water-saving products

Undertake initiatives to fight global warming andcoexist with the earth

CO2 emission reductions

Aim for sustainable development together with local
communities

Social contribution activities entrenched inlocal communities
Improved customer satisfaction

Build deep, long-lasting relationships with customers

Relationships

35

TOTO GROUP Integrated Report 2 019

Offer cultural support and contribute to society for the
next generation

Promotion of employee volunteer activities

Create and share joy in work together

Become a company that is pleasant to work at

Coinciding with the implementation of our mid-term management plan, TOTO WILL2022, the TOTO Global Environmental
Vision was revised and put into effect in April 2018. This vision acts as a driving force for TOTO WILL2022. By strengthening
the promotion of this vision, we are aiming to further integrate our management and CSR activities and increase our corporate value.
TOTO Global Environmental Vision

TOTO Global Environmental Vision
The TOTO Group is promoting its TOTO Global Environmental Vision, forwhich the number of themes expanded from one, Environment, which was
already established, to three, Cleanliness and Comfort, Environment, andRelationships, in order to include social themes closely related to our business.
Each theme has a set of key initiatives and specific indicators and targets
determined based on our aims. We are working toward achieving these targets
by fiscal 2022.
Through activities centered on the three global themes specified in thisvision, we will also contribute to the achievement of the Sustainable
Development Goals (SDGs) set by the United Nations in 2015.

Indicators

Fiscal 2018 Results

Fiscal 2022 Targets

CEFIONTECT shipment ratio (overseas)

71%

79%

TORNADO FLUSH shipment ratio (overseas)

36%

53%

0.58 million units

2 million units

860 million m3

1,100 million m3

WASHLET shipment volume (overseas)
Reduction of water consumption during product use*1

351 thousand tons

450 thousand tons

Total CO2 emission reductions due to measures implemented

9 thousand tons

22 thousand tons

Total CO2 emission reductions during product use*1

3.23 million tons

3.7 million tons

38 cases(total number since FY2018)

Total CO2 emissions from business sites

Number of projects contributing to solve regional issues

SDGs

100 cases

Customer satisfaction from after-sales services (Japan)

91.5%

90%

Ratio of repairs completed within two days of reception (overseas)

75.7%

80%

Volunteer activity participation rate (total number of participants /number of consolidated employees = participation rate)

100% or more

100% or more

Annual paid leave usage rate (Japan)

80.8%

100%

Ratio of female managers (Japan)

10.5%

20%

Employee turnover rate due to life events (Japan)*2

3.4%

0%

*1 Reduction effect when compared with the case where products of 2005 continue to be used
*2 Job turnover rate for employees raising children or providing nursing care but still wish to work

TOTO GROUP Integrated Report 2 019

36

TOTO Global
Environmental
Vision1

Cleanliness and Comfort
Realize Cleanliness and Comfort throughout the World
By providing “clean toilets” through a combination of our technologies that remove bacteria, prevent thebuildup of dirt, and support easy cleaning, and “comfort toilets” exemplified by our WASHLET, we willrealize cleanliness and comfort throughout the world.

Technologies That Maintain Cleanliness and Comfort
The TOTO Group has refined its manufacturing technology over the last one hundred years. To createclean and comfortable toilet spaces for our customers, we have developed a range of clean technologies
unique to TOTO, such as EWATER+, CEFIONTECT, RIMLESS, and TORNADO FLUSH. Based on TOTO
CLEANOVATION, derived from the words “CLEAN” and “INNOVATION,” in fiscal 2019 we will continue toinnovate technologies toward achieving “cleanliness and comfort to everyday lives” around the world.

EWATER+
Keeps water clean by removing
bacteria, which can cause
darkening of the toilet bowl.

Removebacteria
Prevent
the buildup
of dirtEasy
cleaning

CEFIONTECT

RIMLESS/TORNADO FLUSH

WASHLET™–Gaining Popularity throughout the World

Launched in 1980, WASHLET has created a new lifestyle and culture for Japanese toilets. After launchingin Japan, WASHLET products were introduced to the U.S. market in 1986. From then, we began moving
forward with the installation of these products in luxury hotels in countries and regions throughout theworld, thereby expanding our sales in China, Asia and Oceania, and Europe. As a result, cumulative
WASHLET shipments exceeded 50 million units globally as of March 2019. Going forward, we will continue to evolve our WASHLET technology according to the needs of each country and region in order torealize cleanliness and comfort throughout the world.
Trends in Cumulative WASHLET™ Sales
June 1980
Sales begin

November 1987
Cumulative sales
exceed 1 million units

July 1998
Cumulative sales
exceed 10 million units

18 years, 1 month

1980

37

TOTO GROUP Integrated Report 2 019

1990

June 2005
January 2011
July 2015
March 2019
Cumulative sales
Cumulative sales
Cumulative sales
Cumulative sales
exceed 20 million units exceed 30 million units exceed 40 million units exceed 50 million units

6 years, 11 months

2000

5 years, 7 months

2010

4 years, 6 months 3 years, 8 months

2015

(FY)

SDGs

Pursue Ease of Use for Everyone
We propose and develop products by considering the livelihood of each and every one of our customers,
including their age, physical condition, family structure, and lifestyle, in pursuit of the development andproposal of new products that blend seamlessly into everyday life.

TOTO’s Universal Design
The key principle of universal design at TOTO is to make

TOTO’s Five Principles of Universal Design

products as easy and comfortable to use as possible foras many people as possible. We firmly believe that the1

Easy posture and movement

starting point for universal design is to define what “easy2Simple, easy-to-understand operation

to use” and “comfort” means. To that end, we have set out

3

Coordination to address differences andchanges in users

employees always keep in mind to help them develop

4

Comfortbetter products and improve product ideas.

5

SafetyTOTO’s Five Principles of Universal Design, which

Inspection at TOTO UD Research Center

Universal design (UD) activities are promoted throughout theCompany, centering on the TOTO UD Research Center, established in 2006.

Proposing Public Toilets That Regard Sexual Minorities
The TOTO Group has been utilizing its universal design concept as the platform to creating toilet spacesthat are easily accessible for as many people as possible, including wheelchair users, ostomates, parents
with babies or young children, and the elderly. Making use of the expertise and verification methods wehave amassed over the years, we are now incorporating the perspectives of the LGBT* community in
our efforts toward improving accessibility. We have been holding a series of seminars on the introduction of plans for public toilets that regard the LGBT community since 2016. Further, in 2018, we conducted a survey targeting the LGBT community on the use of toilets, and announced its results throughan analysis focused on transgender people, who tend to encounter a variety of issues when using toilets.
* LGBT: Lesbian, Gay, Bisexual, and Transgender; a term used to represent sexual minorities

考 え ようみ ん な の パ ブ リックト イ レ
性 の 多 様 性に配 慮して“Providing Public Toilets for All”
(published in June 2018)
A pamphlet on enhancing the use of public
toilets for everyone including those of theLGBT community
Participated in Tokyo Rainbow Pride 2019,an event celebrating diversity for gender and living

TOTO GROUP Integrated Report 2 019

38

TOTO Global Environmental Vision

2

TOTO Global
Environmental
Vision1

Environment
Protect Our Limited Water Resources and Connect with
the Future
The depletion of water resources has a remarkable impact on the lives of people and, as a supplier ofbathroom and kitchen plumbing products, TOTO has a duty to help resolve this issue. With this duty inmind, the TOTO Group will continue to evolve its water-saving technology and contribute to the conservation of water resources by spreading this technology to the rest of the world.

Reduction of Water Consumption through Water-saving Products
The surface of the earth is mostly covered in water, but only 0.01% of that water can be consumed by humans.*
In addition, as a result of such factors as the global population increase in recent years, economic
development, and climate change, by 2050 the amount of water that can be consumed annually byeach individual is estimated to be
reduced to three-quarters of theWater Consumption during Product Useamount in 2010.*

In cases when
products with
Assuming
advanced
products ofwater-saving
2005 continue
performance
to be usedwere released
and promoted

The TOTO Group continues topromote the reduction of water
consumption during product use andWater reduction
1.1 billion m3
Water reduction
Water reduction 860 million m3
780 million m3

is working toward the conservation ofwater resources by developing its
water-efficient and comfortable2005(base)

products and spreading them on a
global scale.
* Source: Current State of Water Resources in Japan (2018),
Ministry of Land, Infrastructure, Transport and Tourism

2

2017(actual)2018(actual)2022(target)(FY)“Water consumption during product use” refers to the overall volume of water consumed byproducts during the period of use within the particular fiscal year that said products were shipped.
“Water reduction” refers to the effect when compared with the case where products of 2005
continue to be used.

Undertake Initiatives to Fight Global Warming andCoexist with the Earth
The TOTO Group recognizes the possible impact of climate change on its business and society as one of its
business risks. Based on the TOTO Global Environmental Vision, we are making efforts from a long-term
perspective toward realizing decarbonization by promoting reductions in CO2 emissions generated from ourprocesses involving manufacturing and product use.

Curbing Total CO2 Emissions from Business Sites
We are contributing to the prevention of global warming by curbing the CO2 emissions generated from ourbusiness sites, which are increasing in line with the growth of our business. To that end, we are moving
ahead with the implementation of various energysaving measures. These measures include minimizing
energy consumption in our business activities

Total CO2 Emissions from Business Sites
351,000 tons

through use of the latest energy-saving devices andJapan/overseas
Total

high-efficiency equipment and the sharing of know-

450,000
tons

how on energy conservation activities, as well as
proactively expanding the use of renewable energy
throughout the Group in line with the increasing
demand for such energy in each country and region.
39

TOTO GROUP Integrated Report 2 019

2018(actual)2022(target)

(FY)

SDGs

CO2 emissions from toilets, as well as bathroom and kitchen plumbing comprise 23% of all CO2 emissions
produced by Japanese households.*
This is due to the energy used by pumps to deliver water to water purification plants and households
as well as energy used in sewage treatment plants. In addition, the energy used to generate hot water
also emits CO2. The TOTO Group continues to promote the reduction of CO2 emissions during productuse through the global expansion of products that make effective use of water and hot water.
* Source: Calculated based on the GHG Emissions Data of Japan (2011), Greenhouse Gas Inventory Office of Japan3

Aim for Sustainable Development Together with
Local Communities
Carrying on our founder’s conviction of “providing a healthy and civilized way of life,” the TOTO Group will
help revitalize and sustain local communities as well as carry out activities that contribute to their development as part of its role as a good corporate citizen.

TOTO Water Environment Fund
The TOTO Group aims to be a company that contributes to the development of an affluent and comfortable society through its focus on plumbing products. To develop a sustainable society that uses its water
effectively into the future, not only are the business activities of corporations important, but the role ofcivic activities is also essential. Accordingly, we established the TOTO Water Environment Fund in 2005 insupport of the environmental activities of citizens in various regions of Japan. Since 2008, TOTO has
been supporting NPOs and NGOs with environmental conservation activities overseas and the creationof sanitary and comfortable living environments. As of 2018, these efforts have expanded to 40 prefectures in Japan and 14 countries and regions worldwide.

Announcing Support for TCFDIn May 2019, the TOTO Group announced its support for the Task Force on Climate-related Financial
Disclosures (TCFD), established by the Financial Stability Board (FSB).
The TOTO Group views climate change as a material issue facing society. Accordingly, guided by
the TOTO Global Environmental Vision, we will undertake initiatives from a long-term perspective
toward the year 2050 for the realization of a decarbonized society on a global scale and proactively
disclose information on climate change.

Please refer to the following section for details on our initiatives related to climate change.

https://jp.toto.com/en/company/csr/environment/warming/tcfd.htm

TOTO GROUP Integrated Report 2 019

40

TOTO Global Environmental Vision

Reduction of CO2 Emissions during Product Use

TOTO Global
Environmental
Vision1

Relationships
Build Deep, Long-lasting Relationships with Customers
We make proposals at showrooms to ensure that customers can purchase our products with peace ofmind. We also make various efforts through our call centers to respond to any questions or concerns ourcustomers may have when using our products. In addition, we provide an after-sales service that focuseson being fast, reliable, and courteous. In these ways, we will continue to develop strong, long-lasting
relationships of trust with our customers.

Initiatives for Showrooms
To enable our customers to feel and experience our products
first-hand and thereby provide them with peace of mind whenremodeling, we have established 100 showrooms in Japan and
14 directly managed showrooms overseas. Our Japanese locations include 12 showrooms that are operated in collaboration
with DAIKEN and YKK AP, where we exhibit and propose living
spaces featuring products of the three companies for ourcustomers to immerse themselves in.

Initiatives for After-sales Services“TOTO quality” refers not just to the quality of the products themselves but also to their assembly andmaintenance if a problem were to arise. To enhance quality in this regard, we strive, for example, toimprove maintenance skills and educate employees on proper
etiquette when interacting with customers. We also aim to
reduce the amount of time between the receipt of a service
request and the completion of necessary repairs by setting
goals in our major countries and regions of operation andenhancing our after-sales services.
In Japan, as a way to improve the quality of this service, wesend a postcard questionnaire to customers in order to gather
information on their satisfaction with the service.

2

Offer Cultural Support and Contribute to Society for
the Next Generation
The TOTO Group contributes to the revitalization and development of local communities through the support of activities in architecture, art, and sports, in addition to encouraging its employees to participate involunteer activities. In doing so, the TOTO Group strives to become a company that contributes to thedevelopment of a better society through its business activities.

TOTO GALLERY·MA
TOTO GALLERY·MA was established in 1985 with the goal of supporting the development of the architecture that is deeply tied to our business. As a gallery specializing in architecture and design, we have sincefacilitated a multifaceted exposure to the varying works, ideas, and worldviews of architects and designers from both Japan and abroad through exhibitions and lectures. These kinds of activities help create a

41

TOTO GROUP Integrated Report 2 019

SDGs

TOTO Global Environmental Visionsense of appreciation among people from different generations
as well as countries and regions, and help us to keep gaining
TOTO fans around the world.

Tsuyoshi Tane | Archaeology of the
Future—Search & Research (2018)© Nacása & Partners Inc.

Promotion of Employee Volunteer Activities
The promotion of employee volunteer activities stands as oneof our Global Environmental Goals. We actively support

Total Number of Volunteers in Fiscal 2018

employee participation in volunteer activities across a broad
range of fields, starting with social contribution activities suchas tree-planting and city cleanups, as well as activities to

48,300 volunteers

provide aid to disaster-affected regions and assist with sports.

3

Create and Share Joy in Work Together
We conduct activities to promote diversity and implement workstyle reforms in order to be a company
where a variety of personnel can gather, prosper, and be inspired to take on new challenges. In addition,
the TOTO Group will continue to work with its suppliers to undertake activities that address CSR issues inareas such as human rights and labor, safety and health, and environmental consciousness.

Promotion of Diversity
The TOTO Group respects the individualities inherent in a diverse workforce, including age, gender, andnationality. It is our belief that diversity gives rise to fresh, new ideas that lead to the creation of prosperous and comfortable lifestyles.
In particular, one of the flagship goals we are strongly
pursuing is increasing the percentage of women in managerial
positions in Japan. To this end, we are supporting the continued success of women in the workplace through various
efforts for our female employees such as step-up training andtraining for management position candidates.

Promotion of Work–Life Balance
We promote efforts to improve work–life balance because we believe that harmonizing the work and home
life of employees will result in greater productivity and a greater sense of accomplishment from work.
In addition to encouraging employees to take paid leave, we have also put inplace various systems that facilitate the adoption of diverse workstyles andhelp employees balance work and child/nursing care responsibilities.
Further, the TOTO Group introduced its “work-from-home system”
in April 2018 in order to establish an environment that allows its employees
in Japan to keep working while balancing their childcare and nursing care
responsibilities. Through this “work-from-home system,” employees will beable to work from home for a few hours per day or even the entire day

Platinum Kurumin certification markwhile managing their childcare and nursing care duties.
TOTO GROUP Integrated Report 2 019

42Offering Satisfaction That Goes Above andBeyond Customer Expectations
Through the provision of highly attractive products and services, the TOTO Group strives to offer lifestyles that go above andbeyond customer expectations. To that end, we believe that the true quality of TOTO is evident during the process frommaking proposals at our showrooms to providing after-sales services, and we are promoting a broad range of efforts toimprove customer satisfaction throughout this process.

Offer lifestyles that go beyond expectations

A Wordfrom aCustomer

We are so happy we can enjoy meals and relax as a family

Husband and Wife
Before the remodeling, our house was so dark that you basically had to have thelights on all day to do much of anything. Now, the natural light during the day is morethan enough to light our entire home. The brightness and use of natural materials
make our living room, dining room, and kitchen extremely comfortable to be in, andwe are so happy we can enjoy meals and relax together as an entire family, including
our parents, in such a home. Also, we are now able to use our bathroom and kitchen
spaces in a clean and comfortable manner, and cleaning the house has become somuch easier.
Parents
We are very happy we can live together with our son’s family with just the rightsense of space between us. There is a secondary living room with a mini kitchenright next to the entrance of the home, which makes living in the neighborhood
more fun as we can easily have visitors. I also really enjoy the wonderful entryway as it almost feels like a veranda.
S.K. residence, Nagano Prefecture
Details of the Remodeling Project (Conducted by SUNPRO DESIGN WORKS)
Remodeling conducted by SUNPRO-REFORM, SUNPRO LTD.
This remodeling project involved turning a store/residence with a narrow doorReceived Grand Prize and the national TDY REMODEL
SMILE CONTEST 2018
way and long interior dimensions into two-family residence. By establishing along hallway and windows on the north side of the residence, we ensured ample lighting and an appropriate line of flow. In theliving room, dining room, and kitchen area, which is on the second floor, we installed TOTO’s open-type kitchen in order toencourage conversation between family members.

TOTO
Initiatives

Implementing Customer
Satisfaction Surveys

Sharing Examples of Activities Emphasizing theCustomer’s Perspective

To find out just how much we are satisfying customers
through our daily service activities, we implement customer
satisfaction surveys that evaluate customer satisfaction using
four indices.

With the aim of sharing examples of activities for improving
customer satisfaction, we hold the TOTO Group Customer
Satisfaction Convention every year. At this convention, we
select and present outstanding examples of the activities
conducted by each division.
In fiscal 2018, 27 teams, which included participants from
China, Taiwan, and Vietnam, gave presentations. By sharing
examples of the outstanding initiatives being carried out at our
locations in each country and region, we are promoting activities
to improve customer satisfaction on a Groupwide level.

Results of Customer Satisfaction Surveys
（%）

100

89.6%

90.7%

91.5%

80

68.1%

69.9%

71.0%

60
40

64.1%

51.2%
65.6

(Score)

57.5%
69.0

70.3

100
50

20
0

2016

2017

After-sales service satisfaction rate
Total satisfaction index ofshowrooms

43

TOTO GROUP Integrated Report 2 019

2018

(FY)

Ratio of customers impressedwith bath module assembly
Evaluations on customer
response quality0

Presentation by TOTO VIETNAM at the TOTO Group
Customer Satisfaction Convention

Together with Our Employees
To realize the sustainable growth of the TOTO Group, we are promoting various efforts with the aim of creating a workplace that
resources management that embraces diversity and work–life balance. At the same time, we are also working to develop humanresources in order to pass on our technologies, which represent our strengths as a corporation, to the next generation.

Work lively and utilize individuality
TOTO
Initiatives

A Wordfrom anEmployee

Fostering a Corporate Culture of
Self-Study and Continuous Growth

A Corporate Culture That
Encourages Growth

In addition to level-specific training, we have established and are
implementing such programs as “open training,” in which employees can select their field of study; “musha (warrior) training,” where
employees acquire insight from other industries and leverage that
insight to achieve growth; the “management school,” which works
to cultivate the leaders of the next generation; and the “in-houseforeign language school,” which helps employees enhance theirwork performance from a global perspective. Going forward, we
will continue to encourage ashared perspective among
employees of all generations
to learn and develop together
in order to foster a corporate
culture of self-study andcontinuous growth.
In-House Foreign Language School

I am making use of the “in-house foreign
language school” to maintain andimprove my foreign language ability. I
used to go to a foreign language schooloutside of work to study English, but I
often found it difficult to schedule
Ai Iwasakiclasses because I had to make reservaPublic Relations
tions ahead of time and ensure a balDepartment
ance with my work schedule. With the
In-House Foreign Language School, teachers come directly
to the office, which makes it easy for me to attend classes as
they are held in the conference room after work. Also, theseclasses allow me to interact with personnel from otherdivisions who I often do not have a chance to communicate
with in my daily work.

Realizing Workstyles That Make Flexible Use ofTime and Location
To prevent employees from leaving their position due to life
events such as child-rearing and nursing care, we are promoting
policies to support work–life balance, such as the “shortened
work hour system” and the “leave-of-absence/holiday system.”
Additionally, we have introduced the “work-from-home system”
as an initiative to support the balance between work and childrearing or nursing care by allowing our employees’ time to be
used more efficiently. As part of our efforts to reform workstyles,
we have established a dediNumber of Employees Using thecated website on the in-house“Work-From-Home System”
intranet where we introduce
Fiscal 2018 result:
systems related to workstyle
TOTO Group (Japan)
reform as well as role models
for other employees.

135

Balancing Work Life and Nursing CareI am making use of the “work-fromhome system” so that I can work while
supporting and providing nursing careto my mother, whose cognitive abilities
have been weakening. When I told myfamily that I was considering the use of
Yuko Etothe “work-from-home system,” they
Cultural Promotion
were extremely pleased and expressed
Department
their appreciation to TOTO for havingsuch a wonderful system. When I work from home, my family
members occasionally forget that I am on the clock and cometo talk with me, but there really aren’t any major hindrances
to my work. This system allows me to use the early morning
hours for work and provides me with peace of mind as I am
constantly able to be near my mother.

Hosting the Ceramic Sanitary Ware Technical Skills Competition
We hold the Ceramic Sanitary Ware Technical Skills Competition every year with the aim of sharing
and passing on our know-how on the spirit of craftsmanship cultivated in Japan, in addition tofurther improving our technological capabilities.
In fiscal 2018, preliminary competitions were held at 15 locations in nine countries and regions
around the world, including Japan. There were 30 representatives from these locations who competedin the glazing division, and 32 representatives who competed in the molding division. As for the results,
representatives from BEIJING TOTO CO., LTD. won the competition in the glazing division while representatives from TOTO SANITECHNO LTD.’s Kokura Factory were the winners in the molding division.

Molding division of the Ceramic Sanitary
Ware Technical Skills Competition

While steadily passing on our technologies in each country and region, we will strive torealize “Quality and Uniformity” across the globe.

TOTO GROUP Integrated Report 2 019

44

TOTO Global Environmental Visionutilizes the individuality of all employees and allows them to work in a lively manner. To realize this aim, we are pursuing humanTogether with Our Suppliers
The TOTO Group considers its suppliers to be its partner in contributing to society and the global environment and realizing
co-creation and growth. Together with its suppliers, the Group is providing valuable products and services to its customers
through fair purchasing practices while giving ample consideration to the environment and social issues such as human rights.

Coexist and grow together while contributing to society and the environment
TOTO
Initiatives

Contributing to Excellent Manufacturingin High-Quality Environments

We have established specific standards for our raw materials, such as earth and stone materials, and are conducting
questionnaires and interviews with all supplier mines.
Through these questionnaires and interviews, we verify
whether or not suppliers are working to restore forests andother natural surroundings after mining has been completed. We also confirm the status of supplier efforts toensure that rivers, lakes, and marshes do not become
polluted with mining drainage or pulverized waste. As aresult of such efforts, we were able to confirm that all of our
supplier mines are fully complying with the Standards for
Sustainable Procurement of Raw Materials. Going forward,
we will continue to conduct biodiversity-conscious procurement while working to bolster our efforts across the entire
supply chain.

We supply TOTO with over
30 different kinds of raw
materials for ceramic sanitary ware, including pottery
stones. High-quality materials are crucial to the efficient
Employees of ETO INDUSTRY CO., LTD.
production of high-functioning, high-quality products. We have adopted “promoting
proposal-making capabilities,” “providing peace of mind,”and “maintaining the highest levels of satisfaction” as our
corporate policies, and each of our employees thoroughly
adheres to these policies. For example, we implement
rigorous control measures to prevent foreign materials frommixing with our raw materials. We also hold a certain amountof domestic inventory for raw materials that come fromoverseas. In these ways, we offer peace of mind to TOTO.
The level of quality that TOTO expects for its CSR procurement are extremely strict. I believe that the steadyprovision of high-quality raw materials will help TOTO realize
stable operations and yield improvements at its factories,
which in turn will help them utilize their
Toshio Maeda
resources more effectively.
Executive Director

Achievement Rate of Compliance Item
Standards of Mines
Fiscal 2018 result:100%
CSR Procurement Activities
We work with our suppliers to undertake activities that
address CSR concerns in areas such as human rights andlabor, safety and health, and the environment. In addition toholding policy briefings for our suppliers, we carry out survey
research and conduct interviews and investigations throughon-site visits. In fiscal 2018, we held a total of 12 policy
briefings, in which 635 of our suppliers in Japan participated.
Overseas, we conduct CSR procurement activities that caterto the circumstances of each country and region, giving theutmost respect for local laws and customs as we strive todeepen mutual understanding and achieve mutually beneficial relationships.
Achievement Rate ofCompliance with the
TOTO Standards
Fiscal 2018 result:100%
Policy briefing for suppliers

45

A Word from a
Supplier

Biodiversity-conscious
Procurement Activities

TOTO GROUP Integrated Report 2 019

ETO INDUSTRY CO., LTD.

Realizing Growth through Transactions andSupporting World-Leading Levels of Quality
We supply TOTO with copper alloy, a raw
material for faucets. In addition, wecollect and recycle the copper alloy
chips that are created during TOTO’s
manufacturing process. By doing so, we
collaborate with TOTO in conserving the
Kyohei Mano
global environment.
(on right)
For its faucets, TOTO strives for
Sales Division andOsaka Branch Manager
world-leading levels of functionality,
SAN-ETSU METALS
quality, and design. To that end, we have Co., Ltd.
established rigorous standards for both
TOTO and other companies. TOTO also pursues high levels ofeffectiveness in terms of BCP. As a result of our efforts to provide
TOTO with such high levels of effectiveness, our BCP functioned
flawlessly during the Great East Japan Earthquake, allowing us tomake deliveries without delay. This in turn earned us high praise.
Going forward, we would like to build a relationshipthrough which we can grow together based on our mutual
efforts toward CSR procurement.

For Society
The corporate activities of the TOTO Group are only made possible through the sound and sustainable development ofcoexistence activities aimed at the resolution of local and global social issues. Through the establishment of “preserving thewater environment,” “creating a sanitary and comfortable living environment,” and “developing the next generation” as core
issues, we are promoting a broad range of activities.

Realize a sustainable society

TOTO
Initiatives

A Word from a
Stakeholder

Preserving the Water Environment

Providing Support Based on Local Needs

As a company that offers bathroom and kitchen plumbing
products, TOTO strives to preserve water environments suchas rivers and oceans.
We established the TOTO Water Environment Fund in
2005. Through this fund, we are supporting the activities ofcitizens and organizations that work to protect water environments. At the same time, our employees participate voluntarily in such activities. Also, we established the TOTO Water
Environment Fund in China in 2008. With this fund, we havecontributed CNY10 million thus far and have been conducting educational activities on water conservation and establishing water supply facilities.

To resolve local issues through our activities
in support of developing countries, it isimportant that we adopt a participationbased approach where we consider aspects
from the perspective of local community
members and propose solutions thatthese members are able to realize. Based Aya Yamagata
Leaderon the experience we have gained thus far, Private Sector &Individual Partnershipwe have often seen the most dramaticMarketing &Communication Dept.
results when we offer support in a way
Plan International Japanthat balances the establishment of infrastructure with the development of human resources.
Among government and other subsidy programs, there
are programs that can be utilized for infrastructure establishment but not for covering labor and personnel costs, making
it difficult for us to make use of such programs. This is why
we are extremely grateful for the TOTO Water Environment
Fund, which can be used for both establishing infrastructureand developing human resources.

TOTO Water Environment Fund24.7 million¥

14th grant assistance:

Cumulative amount of assistance:

337.8 million¥

Supporting the Development of Architectural Culture

Contributing to the Culture of Japanese Architecture

Through the activities of TOTO GALLERY·MA and TOTO
Publishing, we have been supporting the development ofarchitectural culture, with which our businesses have a deep
connection. By holding exhibitions and lectures featuringarchitects who are active on a global scale, we are introducing the latest developments in the architecture industry to
students and others who will oversee the future. Furthermore,
we publish books that offer more detailed information on theideas and works of architects. Our architecture-oriented
activities have been highly praised by members of thearchitectural community around the world.

In fall 2018, I held a solo exhibit for the
first time at TOTO GALLERY · MA. When
we held the first meeting regarding theexhibition, I was asked to present
something that offered a sense of the
future for the exhibition itself, and for myTanecollection of works, I was asked to create Tsuyoshi
Architect(Atelier Tsuyoshi Tane
something that would last for a long
Architects)
time. These requests, although simple,
Photo: Yoshiaki Tsutsui
were quite difficult. However, TOTO staff
members helped me search for answers to these requests. In
order for the exhibition to be a success, the staff at thegallery offered me words of encouragement and provided mewith comprehensive support. They also helped me compile
my collection of works up until the very last minute, remaining committed to quality throughout the entire process fromensuring paper quality to checking the final colored proof.
Results are everything in the work of professionals. Thelove and passion that TOTO staff members have for theirwork in order to achieve results is an unmeasurable strength
for contributing to the culture of Japanese architecture. I wastruly moved by the strong will of TOTO staff members, and I
am extremely grateful for the opportunity to experience these
emotions with them.

TOTO GALLERY·MA,
Tsuyoshi Tane | Archaeology of the
Future—Search & Research (2018)© Nacása & Partners Inc.

TOTO Publishing© Yukikazu Ito

TOTO GROUP Integrated Report 2 019

46

TOTO Global Environmental Visionsociety. To that end, the Group uses its management resources effectively in conducting social contribution and community

Dialogue with Shareholders and Other Investors
TOTO conducts investor relations (IR) activities that reflect the high priority we place on communication with our shareholders
and other investors in Japan and overseas. Through the timely and appropriate disclosure of information pertaining to our
corporate philosophy, management policies, business strategies, and financial and non-financial data, we aim to establish
long-term, trust-based relationships with our shareholders and other investors by deepening their understanding of theCompany and engaging in repeated dialogues with them.

Working to Ensure Transparency and Fairness in Our IR Activities
Based on our IR Policy, we make timely disclosures through a dedicatedwebpage, hold individual meetings and financial results briefings, and con-

IR Policy

duct other activities to ensure transparency and fairness in our communica-

https://jp.toto.com/en/company/ir/
disclosuretion with individual and institutional investors.

Relations with Institutional Investors
For domestic investors, we announce financial results twice a year, holdmeetings to explain our strategies, and conduct showroom and plant tours. In
addition, our top management engages in overseas activities aimed at institutional investors outside of Japan. Recently, investor interest in TOTO has been
increasing year after year in tandem with the heightened awareness of our
products overseas.

IR Activities in Fiscal 2018
4

5

6

External
Dialogue with institutional
announcements
investors

Fiscal 2017 financial
results briefing

7

Financial results briefing

8

9

10

11

12

1

2

3

First-quarter financial Second-quarter financial Third-quarter financial
results presentation
results briefing
results presentation

Number of dialogues with institutional investors in Japan and overseas: approx. 350

August:LondonSeptember:
New York
City, Boston

December:Los Angeles,
San Francisco

March:
Frankfurt
Meeting with overseas investors

Dividend Policy
We consider the return of profit to shareholders as an important part of ourmanagement policy. We therefore make it a rule to retain sufficient earnings
to secure funds for building a firm corporate structure and expanding ourbusiness while assuring a stable return of profit to shareholders.
We will place priority on utilizing our acquired profit and cash to conduct
growth investments in order to establish a long-lasting and solid managementfoundation. These investments include improving product appeal, streamlining and strengthening production and sales systems, and developing new andoverseas businesses. Any funds remaining after conducting such investments
will be returned appropriately to our shareholders.
Each fiscal year, we aim for a dividend ratio of 40% of our net consolidated profit for the term. In addition, we will determine the acquisition oftreasury stock from a comprehensive standpoint, based on the need forflexibility in capital policies and the impact on our financial position.

47

TOTO GROUP Integrated Report 2 019

Dividend Ratio
In conjunction with the formulation of the
TOTO WILL2022 Mid-Term Management Plan,
we have raised our target dividend
ratio to 40% from fiscal 2018.

40%

Stakeholder Engagement
TOTO considers the concept of stakeholder engagement to be vital in building relationships of trust with stakeholders and in
TOTO Global Environmental Vision

facilitating cooperation. By doing so, TOTO aims to improve societies for generations to come.

CSR Communication with Stakeholders
We place importance on communication with all stakeholders, including customers, employees, shareholders, business partners, and society at large, and endeavor to develop closer relationships with them.
We deepen interaction with our customers through various settings, such as events at our showrooms and factories, and weengage in direct dialogue with our business partners through policy briefing sessions and CSR questionnaires. In addition, for
our shareholders, we disclose appropriate information in a timely manner and promote understanding of the spirit of TOTO
manufacturing through such means as factory tours. Going forward, we will continue to make concerted efforts toward stakeholder engagement through two-way communication.
Showrooms
Customer Consultation Center
Factory remodeling fairs
Various exhibitions

Customers
Sending lecturers to seminars andeducational institutions for training
Assistance for NPOs and community
organizations; various volunteer activities(TOTO Water Environment Fund, etc.)
Cultural activities (TOTO GALLERY · MA,
TOTO Publishing)
TOTO Museum
Factory tours, TOTO Summer Festivals
Skull sessions with NPOs and CSR
specialists

Society

Shareholders

Employees

Various workplace meetings
Employee awareness surveys
Intranet and Group magazine
Whistleblowing system(in-house/external contacts)

Business
partners

General Shareholders’ Meeting
Various briefings
Shareholder questionnaires
Dialogue with institutional investors

Policy briefing sessions
CSR questionnaires
CSR interview sessions
Whistleblowing system (external contacts)

Participating in a Stakeholder Engagement Program
We participate in the Human Rights Due Diligence Workshop, a stakeholder engagement program sponsored by Caux Round
Table Japan.
This workshop aims for the corporate application of the UN Guiding Principles on Business and Human Rights. Under thisaim, the workshop has identified human rights issues by sector based on the input of multiple stakeholders, including companies, NGOs/NPOs, and various experts.
In fiscal 2018, we worked to revise these human rights issues by sector
together with the companies who also participated in the workshop. By doing
so, we deepened our understanding of the importance of valuing humanrights in our business activities.
Furthermore, we shared the content of this workshop internally, andestablished and implemented the TOTO Group Supplier Code of Conduct inorder to ensure the protection of human rights within our supply chain. This
code of conduct states the expectations we have of our suppliers in terms ofhuman rights, labor, the environment, and the prevention of corruption.

Discussion about “Human Rights Issues by Sector”©2018CRT-Japan

TOTO GROUP Integrated Report 2 019

48

CSR Management
The TOTO Group considers CSR management to be management by the use of CSR initiatives for the purpose of bringing the
TOTO Group Corporate Philosophy to life. Our Corporate Philosophy, based on the thoughts of the founder to be passed down
through the generations, communicates to all of our stakeholders the purpose for which our company exists, our businessdomains, and the type of company we aim to be.

CSR Philosophy
Process for Identifying Materiality

The TOTO Group views CSR as “a commitment
toward creating sustainable value and realizing abetter society by building a mechanism for developing

Step 1:

Identify issues

synergy between businesses and society.” Guided bythis belief, the Group is moving ahead with initiatives to

Step 2:

We analyzed issues that should be resolved through ourbusiness from a medium- to long-term perspective.

Step 3:We held discussions at meetings of the CSR Committee, which
is chaired by the president and attended by all Company
directors.

Step 4:

We established and are promoting a CSR Action Plan based on
our materiality.

Analyze issues

realize the TOTO Group Corporate Philosophy.

We identified issues based on the United Nations Global
Compact, the Sustainable Development Goals (SDGs), ISO, andother international guidelines, as well as on evaluations of the
CSR activities we have promoted thus far.

Based on this belief, we have identified material
issues as themes that impact both businesses and society
according to our mission, which declares our intent to

Hold discussions
by management

implement in the medium to long term the primary items
for the sustained growth of the TOTO Group.
In October 2017, in line with the revision to our mission

Develop plans

attuned to the changing of the times and society, we established “Cleanliness and Comfort,” “Environment,” and “Relationships” asmaterial issues, and they have been determined as three global themes under the TOTO Global Environmental Vision.

CSR Promotion System
We started our CSR activities in 2004 with the establishment of the CSR Committee and a full-time CSR department. The CSR
Committee holds meetings once a year and is chaired by the Company’s president. The committee works to strategically integrate our business and CSR activities by taking a comprehensive approach to ESG (environmental, social, and governance)
fields. The committee holds discussions on the formulation of plans for CSR activities based on identifying materiality, as wellas on climate change and other issues related to CSR. Each subcommittee of the CSR Committee formulates CSR promotion
plans, which are then implemented in relevant divisions and at domestic and overseas Group companies. In these ways, we arepromoting CSR activities on a cross-organizational basis.
Promotion System of the CSR Committee
CSR Committee (chaired by the president)(Secretariat) ESG Promotion Department

Environmental (E)Social (S)Governance (G)Products and services subcommittee

Supply chain management subcommittee

Group management subcommittee

Energy-saving measure subcommittee

Customer satisfaction subcommittee

Risk management subcommittee

Packaging and logistics environmental subcommittee

Human resource management subcommittee

Compliance subcommittee

Waste management subcommittee

Social contribution and Corporate citizenship subcommittee

Promoting Widespread Understanding of ESG
At the TOTO Group, we undertake concerted Groupwide efforts in CSR and governance andspread awareness of our corporate philosophy and mission to each and every employee. In
Japan, we conduct level-specific training programs targeting new hires and newly appointed
managers. In fiscal 2018, we provided all employees with e-learning opportunities in order topromote understanding of our new mission, material issues, and the TOTO Global
Environmental Vision throughout the Group. Overseas, we prepared educational materials in
English and Chinese and held training programs tailored to each country and region as partof our efforts to raise awareness of ESG throughout the entire TOTO Group.

49

TOTO GROUP Integrated Report 2 019

Guideline training for newly appointed
managers of Group companies

Risk Management
The TOTO Group makes relentless efforts to eliminate all factors that could hinder the implementation of management policies
in order to maintain the confidence of society and fulfill its corporate social responsibilities. In cases of unexpected problems,
maximum efforts will be made to minimize various effects on stakeholders and restore the confidence of related parties bydeveloping appropriate preventive measures.
Under the guidance of the president, we have established the Risk Management Committee, which is chaired by the executive vicepresident. In accordance with the TOTO Group Rules for Risk Management, the committee assesses any risks that may have a significant impact on our business and society, and identifies major risks that the Company must work to address. The identified risks are
addressed through collaboration between the risk management divisions designated for each field and all Company divisions andGroup companies by striving to prevent such risks and enhancing the Group’s risk management response.

Risk Simulations
To improve our prevention and response capabilities to major risks, we have been continuously
carrying out practical risk simulations at all locations in Japan and overseas. The risks simulated
include natural disasters and product-related accidents. In addition, as part of our efforts toestablish a robust risk management structure, we conduct level-specific risk management training
targeted at employees newly appointed to positions, from department head to the managerial ranks.
We are also moving forward with a broad range of other efforts, including unified simulation trainingthat uses a safety confirmation system in anticipation of earthquakes and other large-scale disasters.

Risk simulation training

Compliance
Basic Approach and Promotion Structure
The TOTO Group adheres to laws, regulations, and social
norms within its corporate activities and strives to foster an

Compliance Activity Cycle
Do

Plan
Establish annual plansand priority issues

Promote compliance management systems

organizational culture that promotes fair and transparent action.
In 2013, we established the TOTO Group Business Conduct
Guidelines with the aim of implementing and raising awarenessof the Common Group Philosophy, particularly the Charter of
TOTO Group Corporate Behavior. With the aim of building ethicalstandards and enhancing awareness of compliance, we arerolling out the guidelines throughout the Group, including ouroverseas businesses. In addition, to create a solid compliancestructure, the Group has promoted actions to clarify the roles andAct
Improve activities andframeworks

Check
Evaluate implementationof planned activities
Conduct employee
compliance awarenesssurveysCompliance
Committee
Create an organizationthat values compliance
Legal Control
Division

All divisions andGroup companies

Implement a compliance andcorporate ethics program (yearly)

Perform audits

authority of the Compliance Committee and the Legal Control Division. The Compliance Committee meets four times a year andworks to incorporate processes into the Company’s structure to verify the progress of compliance education, monitoring, and othercompliance-related activities. In these ways, the Group is promoting compliance activities that are highly effective and transparent.

Developing Employees by Setting High Ethical Standards
In accordance with the 2017 revisions to Keidanren’s Charter of Corporate Behavior and social trends, in June 2018
we updated our Charter of TOTO Group Corporate Behavior. The contents of the charter were revised to incorporate the Company’s aim of continuing to integrate its management and CSR. To that end, each and every employeeof the TOTO Group will contribute to the resolution of human rights and other social issues on a global scale
while adhering to high ethical standards and take a proactive approach in helping to realize a sustainable society.
At the same time, we have also revised the TOTO Group Business Conduct Guidelines, which werolled out in Japan and overseas, and promoted its awareness to all employees in order to develop
their understanding of proper conduct according to the charter.

TOTO Group BusinessConduct Guidelines

TOTO GROUP Integrated Report 2 019

50

TOTO Global Environmental Vision

Basic Approach and Promotion System

Corporate Governance
Basic Stance on Corporate Governance
The TOTO Group strives to be a great company, trusted by people all around the world, contributing to the betterment of society. In
addition to being a corporate entity engaged in the pursuit of profit through fair competition, the Group conducts its business insuch a way as to continue to benefit society broadly. In order to realize this target, we believe it is important to build a system forpursuing and supervising fair and equitable management, and clearly define a philosophy that serves as the basis of such a system.
Please see pages 1–2 for the management philosophy system for TOTO Group management.

Composition of the Board of Directors and Audit & Supervisory Board in Fiscal 2019
We believe that in order to supervise business operations and to make important decisions, TOTO’s Board of Directors must becomposed of members with diverse perspectives, experience, and highly professional skills. Meanwhile, for the purpose of performing the double-check function of supervision by the Board of Directors and of audits by Audit & Supervisory Board Members,
Outside Directors need to include not only auditors required by law, but also Directors with voting rights at Meetings of the Board of
Directors; and both Audit & Supervisory Board Members and Directors must have considerable independence.
As of June 26, 2019, we have 13 Directors with voting rights at Meetings of the Board of Directors, of whom 10 are Inside
Directors with careers in the TOTO Group and three are highly independent Outside Directors. These members use their respective
skills in discussions to make legal and business management decisions and supervise business operations. The Audit & Supervisory
Board consists of two standing members with careers in the TOTO Group and two outside members with a high level of independence, and conducts audits from the perspectives of legality and appropriateness.

Reasons for Adoption of Current Corporate Governance System
The TOTO Group considers that an essential aspect of corporate management is ensuring the satisfaction of stakeholders andconstantly expanding corporate value by improving objectivity and transparency in management and by clarifying management
responsibilities. To achieve this, for matters requiring management decisions, TOTO recognizes the importance of systematizing“who makes decisions about what and where” as well as “what checks are implemented” in a fair and honest manner. TOTO has
adopted the Audit & Supervisory Board system and is building a structure of decision-making, supervision, and more efficient andeffective business execution, with the aim of continuously increasing corporate value.
1. Clarifying the allocation of management responsibility (introduction of the Executive Officer system and the like)
2. Enhancing management transparency and soundness (establishment of the Nominating Advisory Committee and theCompensation Advisory Committee)
3. Reinforcing supervisory and auditing functions (nomination of highly independent Outside Directors and Outside
Members of the Audit & Supervisory Board)
4. Strengthening decision-making functions (establishment of the Management Committee and the like)In order to strengthen these functions, TOTO has adopted the framework of a company with an Audit & Supervisory Board
system as its base while integrating the superior functions of a company with a Nomination Committee, etc.
Corporate Governance System
Three-party
audit team(Appointment/Dismissal)(Audit)TOTO Audit & Supervisory Board
Two standing members,
two outside members

TOTO Independent Accounting Auditors

TOTO General Meeting of Shareholders
TOTO Board of Directors(Direction)

Five Independent Directors,
two Representative Directors(Report)Ten Inside Directors,
three Outside Directors(Report)TOTO Internal Audit OfficeNominating Advisory Committee(Appointment/Dismissal)

Compensation Advisory Committee

Six outside members including five Independent
Directors and one Director without the right ofrepresentation as an inside member(Appointment,delegation,
supervision)(Consultation)

TOTO President

TOTO Management Committee

TOTO Executive Officers(Internal audit)

CSR Committee(Delegation)(Direction, supervision)

Japan Housing
Equipment Business

China & Asia Housing
Equipment BusinessAmericas & Europe Housing
Equipment Business

Cross-organizational tasks

51

TOTO GROUP Integrated Report 2 019

Other meetings and committees
New Business Domains

Company-wide Divisions

Please see our corporate website for more details.

https://jp.toto.com/en/company/profile/governanceCompensation for Directors and Audit & Supervisory Board Members
The maximum amount of compensation for Directors and Audit & Supervisory Board Members is determined respectively forCompensation for Directors of TOTO comprises fixed compensation in the form of base compensation, and performancelinked compensation, The performance-based payment consists of a bonus and the share-based payment. The upper limit tothe bonus is 0.8% of the consolidated sales revenue of the previous fiscal year. The payment is synchronized with businessperformance. In the 152nd annual shareholders’ meeting on June 26, 2018, we decided to adopt share-based payments because
it would motivate board members to continuously improve corporate value. In addition, we decided to incorporate share-based
payments with restricted transfer rights, in addition to the stock options with share-based payments, to further promote thesense of value-sharing with shareholders. As seen in these decisions, we are designing the payment systems to motivate theboard of directors to engage in business administrations from the mid-to-long-term perspectives rather than individual years.
In addition, the Compensation Advisory Committee was set up to help ensure that the compensation for Directors is reasonable and objective. The Board of Directors determines the compensation after confirming with the Compensation Advisory
Committee that the compensation system and allocation balance are in line with the Articles of Incorporation, the resolutions of
the General Meeting of Shareholders, and the Basic Policy for Directors’ Compensation. Note that Outside Directors, who are
independent from the business operations, are entitled to only fixed compensation. The base compensation for individual Audit& Supervisory Board Members is determined depending on his/her duties and responsibilities upon consultation with Audit &Supervisory Board Members. In order to preserve the functionality of their role as supervisors of management, Audit &Supervisory Board Members are entitled to only fixed compensation.
Total amount of compensation by type for Directors and Audit & Supervisory Board Members

Directors(Outside Directors included above)
Audit & Supervisory Board Members(Outside members of Audit &Supervisory Board included above)
Total

Number of
officers(person)Base
compensation(million yen)Bonus(million yen)

Stock-compensation typestock options(million yen)

Share-based payments withrestricted transfer rights(million yen)Total
(million yen)

15
(4)
5

401
(34)
68

223
—
—

16
—
—

48
—
—

690
(34)
68

(2)

(22)

—

—

—

(22)

20

470

223

16

48

759

* Stock options with share-based payments have not been additionally issued this business year because of the start of share-based payments with restricted transfer rights. Thus, the amounts appropriated ascosts this business year are stated among the amounts issued in past years.
* The total amount of compensation approved at the shareholders’ meeting is as follows. (Decision in the 145th Regular Shareholders’ Meeting on June 29, 2011, and decision in the 152th Regular Shareholders’Meeting on June 26, 2018)

Fixed compensation

Performance-linked compensation

Base compensation

Director
Audit & Supervisory Board Member

Up to 500 million yen per annum(including an amount up to 50 million yen in total
for Outside Directors)
Up to 150 million yen per annum

Bonus

Share-based payments with restrictedtransfer rights

Up to 0.8% of the previous fiscal year’s
consolidated operating income

Up to 200 million yen And within 100,000 shares——

Amounts of compensation, etc. of Directors whose total amount of compensation, etc. exceeds 100 million yen, by type of payment
Directors of 100 million yen or more are as the following in Fiscal 2018.

Representative Director
Kunio Harimoto
Representative Director
Madoka Kitamura

Base compensation(million yen)Bonus(million yen)

Stock-compensation typestock options(million yen)

Share-based payments withrestricted transfer rights(million yen)Total
(million yen)

63

39

2

7

113

63

39

2

7

113

* Stock options with share-based payments have not been additionally issued this business year because of the start of share-based payments with restricted transfer rights. Thus, the amounts appropriated ascosts this business year are stated among the amounts issued in past years.

Outside Directors and Outside Members of the Audit & Supervisory Board
Since all Outside Directors and Outside Members of the Audit & Supervisory Board are invited to join their respective boards as
members who can make decisions materially independent of the management of TOTO and all other specific stakeholders, we
designate all Outside Directors and Outside Members of the Audit & Supervisory Board as Independent Directors/Audit &Supervisory Board Members. We nominate candidates for Outside Directors and Outside Members of the Audit & Supervisory
Board who fully satisfy the Nominating Advisory Committee’s Requirements for Independent Directors/Audit & Supervisory Board
Members*, the satisfaction of which is set forth by TOTO as a mandatory requirement.
* Please refer to “Requirements for Independent Directors/Audit & Supervisory Board Members” in the Corporate Governance section of our website.

TOTO GROUP Integrated Report 2 019

52

Corporate GovernanceDirectors, Outside Directors, and Audit & Supervisory Board Members by resolutions of General Meetings of Shareholders.

Corporate GovernanceEvaluation of Effectiveness of the Board of Directors
In February 2019, a questionnaire survey was provided for all Outside Directors and outside members of Audit & Supervisory Board
Member to evaluate the status of improvements in information sharing, which had been identified as an issue as a result of thequestionnaire survey conducted in fiscal 2016.
In March 2019, the entire members, including Outside Directors and outside members of the Audit & Supervisory Board,
attended the meeting of the Board of Directors to evaluate the effectiveness of its activities from the perspective of related items of
the Board of Directors in the context of its roles within the company based on the corporate governance code, including the operational status of the internal control system, corporate strategy, and other agendas of the Board of Directors to define general direction. In addition, information sharing was identified as an issue to be tackled from the result of a questionnaire in fiscal 2016answered by all directors and Audit & Supervisory Board Members and the progress of the improvement was checked.
The results of these analyses and evaluations concerning the effectiveness of the Board of Directors as a whole are as follows:
In accordance with the Basic Policy for Development of Internal Control System, the system ensures that the execution of Directors’ duties complies
with the laws and regulations and the articles of incorporation, and all other items are operated positively.
Matters to be resolved at Meetings of the Board of Directors are submitted in accordance with the relevant rules, and the system is so operated that thestatus of the execution of significant deals, such as matters to be resolved at Management Committee meetings, is reported to the Board of Directors.
The members engage in detailed inspections of all items of the corporate governance codes, especially the related items of the Board of Directors, tocorrespond properly.
It is recognized that all members are engaged in active discussions at meetings of the Board of Directors and that the enhancement of our governancesystem is being conducted incorporating the opinions from outside officers.
For the information sharing, which was identified as an issue from the questionnaire result, measures have been taken for the improvement of the conditions:Improvements in reporting to Outside Directors the content of discussions and deliberations at the Management Committee meetings
Promotion of information sharing by the participation of outside directors in the Executive Officers’ meeting as observers
Sharing of information on executive management candidates, including the performance of their job duties, through on-site visits to the Company’sbusiness locations both in Japan and overseas

From the above, we have confirmed that the operation of the Board of Directors is functioning properly and its effectivenessis ensured. Going forward, we will continue to monitor conditions to ensure the effectiveness of the Board of Directors andfurther enhance its functions.

Messages from Outside Directors
In fiscal 2018, the first year of TOTO WILL2022, thefor realizing customer satisfaction. If a company can suc-Company saw difficult business results. One of the major

cessfully accomplish these tasks, then it will be able toreasons for such results was TOTO’s delayed response inrealize a simple, virtuous cycle in which it generates profit

the Chinese market, which underwent fierce changes. In

and returns it to shareholders, which in turn will no doubt

terms of new product development, production, and mar-strengthen its governance. TOTO’s corporate culture allows

keting activities, TOTO was unable to successfully leverage

employees to experience many different kinds of work andthe insight it has cultivated in Japan within the Chineseemphasizes their personal development. I believe this is one

market. In fiscal 2019, it is imperative that TOTO tacklesof the most wonderful aspects of the Company.

these issues head on through such means as promoting

Also, TOTO is simultaneously promoting TOTO

new projects in the China business, which has newly

WILL2022 and the TOTO Global Environmental Vision.

commenced operations.

CSR activities are something that should directly, not

Being honest and sincere with society is the foundationand share price. In that sense, it is clear that TOTO’s

too much importance on establishing organizations for thewater-saving functions, which benefit the environment,

sake of formality cannot function effectively. Instead, sincer-

provide the Company with an excellent competitive edge.

ity and honesty with stakeholders need to form the basis of

TOTO subscribes to the idea that CSR is directly linked to

a company’s governance. This means that to strengthenbusiness performance, and I hope that, going forward,

governance, a company needs to foster a corporate culture

TOTO becomes a company that continues to earn the trustthat values sincerity and honesty and ensure that such aof society based on its motto of “Take pride in your work

culture is adopted companywide. Strengthening gover-and strive to do your best.”

nance means consistently prioritizing customer satisfaction
and valuing and developing employees, who are responsible

53

indirectly, impact a corporation’s business performanceof corporate activities. In that sense, governance that places

TOTO GROUP Integrated Report 2 019

Kazuhiko Masuda
Outside Director

In fiscal 2018, a variety of business issues came to light for

For a Japanese company to realize sustainable growth,
globalization, digitization, and environmental management

accumulation of various factors, including an intensifying(sustainability) have become more important than ever before.

competitive environment, market stagnation, and produc-

As globalization continues to progress, considering ation-related issues. Accordingly, the Company needs toJapanese perspective separately from an overseas one is norevise its business strategies and operational processes

longer viable. It is therefore necessary to adopt a managementwith a multifaceted focus on these issues.

approach and develop human resources who can properly

TOTO’s corporate governance system is well designed andrespond to these circumstances. In terms of digitization, digital

operated and is steadily improving. The Board of Directors’transformations are occurring across the world, with new

meetings are conducted appropriately within an environment

technologies bringing forth dramatic changes to business asthat encourages the active involvement of the Outside Directors.

we know it. In light of this, the creation of new products andUntil around 2000, IBM—where I serve as a director—

services that leverage AI and IoT has become indispens-

operated its business centered on local management teams,

able. Regarding environmental management, as symbolized

but with the development of the IT industry, managementby the SDGs, the role of corporations in ensuring the sus-

based on business segments became increasingly impor-tainability of society has increased in significance, and con-tant. In light of this, IBM transitioned to a management

tributing to the resolution of social issues now has a significant

approach that was carried out by a matrix of businesses andimpact on improving the corporate value of corporations.

local teams. While implementing such management is

TOTO is already promoting a broad range of efforts toextremely difficult due to the fact that languages and cul-

address social issues, but it needs to do so to a greatertures differ by region, a similar kind of mechanism is needed

extent than ever before going forward. I feel that TOTO needs

for TOTO’s management. With my experience, I believe I can

to continue to promote efforts aimed at enhancing corporate

help TOTO set up such a mechanism. Furthermore, in terms

value based on the perspectives of globalization, digitization,of diversity in management, TOTO needs to promote theand environmental management, and actively communicate

active role of women in each division and develop personnel

the progress of these efforts

who can become role models to future employees.

to the outside world.

A company that does not evolve will eventually cease tooverseas Group employees. To that end, the Company must

exist. Furthermore, as corporations are a public institution of

constantly confirm that its way of thinking will be acceptedsociety, a company cannot sustain itself if it does not play ain each region in which it wishes to expand.

role in leading social change.

Masatsugu Shimono
Outside Director

Also, I believe that TOTO has a high level of awareness

TOTO has an extremely high level of brand power intoward ESG initiatives. In particular, TOTO is thoroughly

Japan, and this brand power is starting to extend overseas.

promoting environmental efforts at all of its locations, as

In addition, visitors to Japan who have used TOTO’s toilets

such efforts are closely related to the Company’s busi-

have helped ensure that the value TOTO offers is communi-

nesses. TOTO is also engaging in various social initiatives,cated overseas. However, to leverage this trend in an effort

which have helped establish strong relationships withto expand overseas, TOTO needs to further consider andstakeholders. Furthermore, TOTO is gradually strengthening

evolve the measures it needs to take.

its corporate governance. Within these efforts, I believe my

TOTO’s in-house culture will set the stage for its efforts torole is to promote active governance. To help the Company

advance overseas. To that end, TOTO needs to consider its

realize sustainable growth, I will focus my attention on

vision for the next 10 and 20 years and what approach it

examining how TOTO should allocate its personnel,

should adopt in order to realize this vision. TOTO also needs toresources, and finances and where it should take risks withconsider how it should change its standards for employee

a view toward growth.

conduct. These are all extremely important themes that need

TOTO has a culture of actively incorporating the opin-

to be thoroughly considered throughout the organization.

ions of Outside Directors. Going forward, I hope to engage

When it comes to overseas expansion, fusing TOTO’s culture

in lively discussions with the aim of realizing TOTO’s sustain-

with that of each region to create a new culture is no easy task.

able growth.

Meanwhile, only when this task is accomplished canvalue systems and conduct standards be established for

Corporate Governance

the Company in China. These issues resulted from theJunji Tsuda
Outside Director

TOTO GROUP Integrated Report 2 019

54

Board of Directors
Directors
Representative Director,
Chairman of the Board

President,
Representative Director

Kunio Harimoto

Madoka Kitamura

Date of Birth: March 19, 1951

Date of Birth: May 24, 1957
In charge of Global Business Promotion,
Management Planning, Design, andSecretary’s Office

55

Representative Director,
Executive Vice President

Representative Director,
Executive Vice President

Noriaki Kiyota

Nozomu Morimura

Date of Birth: October 8, 1961

Date of Birth: July 10, 1957

In charge of Business Divisions & Research &Technology, Human Resources, Purchasing,and Engineering Works
Also in charge of TOTO WILL2022
Management Resource Innovation

In charge of Sales Groups, Customer
Service, and Cultural Promotion
Also in charge of TOTO WILL2022
Marketing Innovation

Director,
Senior Managing Executive Officer

Director,
Managing Executive Officer

Soichi Abe

Ryosuke Hayashi

Date of Birth: August 22, 1961

Date of Birth: September 4, 1963

In charge of China Business Innovation,
China & Asia Housing Equipment Businessand Internal Audit Office
Also in charge of TOTO WILL2022
China & Asia Housing Equipment BusinessIn charge of New Business Domains Group,
Bathroom, Kitchen & Lavatory Vanity
Business, and Faucets & Appliances Division
Also in charge of TOTO WILL2022 New
Business Domains and TOTO WILL2022
Demand Chain Innovation

Director,
Managing Executive Officer

Director,
Managing Executive Officer

Taiichi Aso

Satoshi Shirakawa

Date of Birth: March 5, 1960

Date of Birth: August 12, 1962

In charge of Restroom Business Group and
Production Technology Business GroupIn charge of Sales Promotion Group andLogistics
Also in charge of TOTO WILL2022
Japan Housing Equipment BusinessDirector,
Managing Executive Officer

Director,
Managing Executive Officer

Tomoyuki Taguchi

Shinya Tamura

Date of Birth: September 24, 1965

Date of Birth: March 13, 1967

In charge of Finance and Accounting,
Legal Affairs, Information System
Planning, and General Affairs

In charge of Americas & Europe Housing
Equipment Business,
General Manager, Americas Housing
Equipment Business Division
Also in charge of TOTO WILL2022
Americas & Europe Housing Equipment
Business

TOTO GROUP Integrated Report 2 019

Outside Directors

Outside Director

Outside Director

Outside Director

Kazuhiko Masuda

Masatsugu Shimono

Junji Tsuda

Date of Birth: April 24, 1942

Date of Birth: December 11, 1953

Date of Birth: March 15, 1951

Mr. Kazuhiko Masuda has been involved in the management of
Sumitomo Light Metal Industries, Ltd. (currently, UACJ
Corporation) for many years. He provides valuable opinions at
Meetings of the Board of Directors based on the expertise hehas developed in his career as a professional corporate
manager and displays outstanding supervision skills byreflecting his views unfettered by the conventional way of
doing things in the Company’s management.
TOTO believes that he has experience and knowledge ofgeneral management and corporate governance as well as ofthe production technology of manufacturers, and therefore theCompany selected and appointed him as Outside Director.

Mr. Masatsugu Shimono has been involved in the managementof IBM Japan, Ltd. for many years. He provides valuable
opinions at Meetings of the Board of Directors based on his
expertise he has developed in his career as a professional
corporate manager and displays outstanding supervision skills
by reflecting his views unfettered by the conventional way of
doing things in the Company’s management.
TOTO believes that he has experience and knowledge ofgeneral management and corporate governance as well as ofthe management of a global company, and therefore theCompany selected and appointed him as Outside Director.

Mr. Junji Tsuda has been involved in the management of
Yasukawa Electric Corporation for many years. He provides
valuable opinions at Meetings of the Board of Directors basedon his expertise he has developed in his career as a professional corporate manager and displays outstanding supervisionskills by reflecting his views unfettered by the conventional wayof doing things in the Company’s management.
TOTO believes that he has experience and knowledge ofgeneral management and corporate governance as well as ofthe management of a global company, and therefore theCompany selected and appointed him as Outside Director.

Audit & Supervisory Board Members
Audit & Supervisory Board Member,Standing

Audit & Supervisory Board Member,Standing

Yuichi Narukiyo

Hirotoshi Naka

Date of Birth: March 18, 1962

Date of Birth: January 14, 1957

Outside Members of the Audit & Supervisory Board
Audit & Supervisory Board Member,
OutsideAudit & Supervisory Board Member,
OutsideShuichi Sarasawa

Yasushi Marumori

Date of Birth: October 12, 1948

Date of Birth: September 19, 1957

Mr. Shuichi Sarasawa has been involved in the management ofCentral Glass Co., Ltd. for many years. He has experience andknowledge of the general management of a global corporationand of corporate governance developed during his career, as
well as of a broad range of businesses from chemicals tosemiconductors.
Based on the above, TOTO believes he is highly capable ofauditing the business execution of general management, andtherefore TOTO selected and appointed him as Outside Audit &Supervisory Board at the 153rd Ordinary general meeting ofshareholders.

Mr. Yasushi Marumori was involved in the management offinancial institutions for many years. He has experience andknowledge of finance and corporate governance developed
during his career, as well as abundant experience andknowledge as an Audit & Supervisory Board Member of listedcompanies.
Based on the above, TOTO believes that, based on his
considerable knowledge of financing and accounting, he ishighly capable of auditing the business execution of generalmanagement, and therefore TOTO selected and appointed him
as Outside Audit & Supervisory Board at the 153rd Ordinary
general meeting of shareholders.

TOTO GROUP Integrated Report 2 019

56

Corporate Information
Participation in the UN Global Compact
TOTO announced its participation in the “Global Compact,” which is put forward by the United
Nations, and registered as a participating company on November 8, 2011. In order to announce to theinternational community the company’s intent to further strengthen its CSR (Corporate Social
Responsibility) management, which TOTO has long been promoting, behave as a responsible corporate citizen on a global scale, and constructively carry out its social responsibilities, TOTO will upholdthe 10 principles on “Human Rights, Labor, Environment, and Anti-Corruption” that are cited by the“Global Compact” and put them into practice through all its business activities.

Evaluations of Our CSR Management Practices by External Parties

Notable Awards from 2018 Onward
CategoryAward Description

Technology

Received the “Award for Chairman of Board of ARIB” at the29th Radio Achievement Award for the commercialization of
micro-wave sensor for toilet seats

PackagingReceived the WorldStar Award for “uncrushed” cushioning
partition using the springiness of cardboard at the WorldStar
Competition 2019 held by the World Packaging Organisation

DesignReceived the iF Product Design Award 2018 and Red Dot
Design Award 2018 for the NEOREST NX WASHLET integrated toilet
Received the Gold Selection at the JIDA Design Museum
Selection vol.20

DesignReceived the iF Product Design Award 2019 for the NEOREST
AH/RH WASHLET integrated toilet, wall-hung RP toilet +WASHLET RX, and GM Series single lever faucet with
washbasin

Design“Uncrushed” cushioning partition
using the springiness of cardboard

NEOREST NXNEOREST AH/RH

Received the Red Dot Design Award 2019 for the GM series,
ZA series, GE series, and GC series single lever faucets with
washbasin
ZA series single lever faucet with washbasin

57

TOTO GROUP Integrated Report 2 019

Corporate Profile (As of March 31, 2019)
Company NameTOTO LTD.

Fiscal Year End

Headquarters

1-1, Nakashima 2-chome, Kokurakita-ku,
Kitakyushu, Fukuoka, Japan

Exchange Listings

Tokyo, Nagoya, Fukuoka

Securities Code5332

Establishment

May 15, 1917

Capital¥35,579 million

Shareholder Registry
Administrator

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku,
Tokyo, Japan

Number of Employees Consolidated: 33,431

March 31

Non-consolidated: 8,034

Group Companies and Main Affiliates (As of April 1, 2019)
Overseas Group Companies

Domestic Group Companies
TOTO SANITECHNO LTD.

The Americas

TOTO WASHLET TECHNO LTD.

TOTO AMERICAS HOLDINGS, INC.

TOTO Bath Create LTD.

TOTO U.S.A., Inc.

TOTO High Living LTD.

TOTO MEXICO, S.A. DE C.V.

TOTO AQUATECHNO LTD.

EuropeSUNAQUA TOTO LTD.

TOTO Europe GmbH

TOTO PLATECHNO LTD.

TOTO Germany GmbH

TOTO Maintenance LTD.

Asia

TOTO AQUAENG LTD.

TOTO (CHINA) CO., LTD.

TOTO MTEC LTD.

BEIJING TOTO CO., LTD.

TOTO Kansai Sales LTD.

TOTO (BEIJING) CO., LTD.

TOTO Hokkaido Sales LTD.

NANJING TOTO CO., LTD.

TOTO Tohoku Sales LTD.

TOTO DALIAN CO., LTD.

TOTO Chubu Sales LTD.

TOTO (SHANGHAI) CO., LTD.

TOTO Chugoku Sales LTD.

TOTO EASTCHINA CO., LTD.

TOTO Shikoku Sales LTD.

TOTO (FUJIAN) CO., LTD.

TOTO Kyushu Sales LTD.

TOTO (GUANGZHOU) CO., LTD.

CERA TRADING LTD.

TOTO (H.K.) LTD.

TOTO Remodel Service LTD.
TOTO Finance LTD.

VORETO (XIAMEN) PLUMBING TECHNOLOGY CO., LTD.
(Affiliate Company)

TOTO INFOM LTD.

TAIWAN TOTO CO., LTD.

TOTO BUSINETZ LTD.

TOTO ASIA OCEANIA PTE. LTD.

TOTO LOGICOM LTD.

TOTO VIETNAM CO., LTD.

TOTO Fine Ceramics LTD.

TOTO (THAILAND) CO., LTD.

TOTO MATERIA LTD.

TOTO India Industries Private Limited

TOTO OKITSUMO Coatings LTD.

TOTO MALAYSIA SDN. BHD.
TOTO KOREA LTD.
P.T.SURYA TOTO INDONESIA (Affiliate Company)

Independent Assurance
To ensure the reliability of information contained in this report, TOTO has received independent assurance for environmental and social data indicated within the TOTO GROUP Integrated Report 2019 Financial and Non-Financial Data on

its website.
TOTO GROUP Integrated Report 2019 Financial and Non-Financial Data

https://jp.toto.com/en/company/profile/library

TOTO GROUP Integrated Report 2 019

58

TOTO LTD.
1-1, Nakashima 2-chome, Kokurakita-ku, Kitakyushu,
Fukuoka, Japan
URL: https://www.toto.com

Published in August 2019No.1 190