Sustainability Report 2019

Contents

25

Respectful
CEO Message

3

CSVCO Message

4

Society

Shiseido’s ESCG – Sustainable
Beauty Initiative

5

39

Enriched

Culture7

Clean

Environment

Trustworthy Governance47

Implementation Framework

49

Actions Toward COVID-19

49

External Evaluations and Awards

51

Environmental Data

52

Social Data

54
2

CEO Message

Our mission is

BEAUTYINNOVATIONSFOR A BETTERWORLDFirst of all, I would like to extend my condolences to the families ofthe victims of COVID-19 and express my deepest sympathy for all
those who have found themselves in difficult circumstances becauseof this pandemic.
Shiseido’s corporate mission is to create BEAUTY INNOVATIONS FORA BETTER WORLD. Moreover, respect for the planet and its people iswritten into our name, which means ‘praise the virtues of the Earth.’
As the world grows more volatile and complex – and has to deal withthe tremendous crisis caused by COVID-19 – we are reinforcing ourcommitment to people and the planet. By strengthening our global
initiatives within environment, society, culture, and governance(ESCG), we work to solve social issues through our business activities
and, in this way, contribute to making the world a better place.

		
We work to solve
social issues through ourbusiness activities and, in thisway, contribute to making
the world a better place
Beauty gives people confidence, courage and new energy. But webelieve it also has the power to reinvigorate society and ultimatelychange the world.
We thank all our stakeholders for their continuous support and belief
in the Shiseido Group. Working as One Shiseido, we will continue tomake steadfast progress towards realizing our goal of a better world.

MASAHIKO UOTANI
Representative Director,
President and CEO

3

CSVCO Message

Sustainable
Beauty Initiativefor Realizing
a Better World

In order to create a better world through our beauty innovations,
we have defined the Shiseido Sustainable Beauty Initiative.
The initiative includes three key pillars: Clean Environment, RespectfulSociety, and Enriched Culture, which will support Shiseido’s sustainability efforts for the next 100 years. We are committed to deliveringon our targets within each of these three pillars to realize a betterworld. In addition, we have set Trustworthy Governance, whichguarantees the long-term continuation of our activities to support
sustainable beauty.

		
We are committed
to delivering on our targets
to realize a better world
Corporate culture, which is included in Culture and is the core of ourvalue proposition, has been helping both leaders and employees to
set a clear direction of our activities.
In January 2019, we set up our Social Value Creation Division. This
team is composed of environment, society, and culture functions andhas been responsible for developing eight strategic actions and commitments across the three pillars. Along with our ESCG framework(Environment, Society, Culture, and Governance), we have defined
18 material issues based on their importance to all stakeholders andShiseido’s business. Each team works to accelerate social value
creation through our business by guiding the activities of our brands,
regional businesses, and all corporate functions such as Research& Innovation, Supply Network, HR, etc.
In this report, we would like to share our long-term commitment,
activities and progress with our ESCG framework that are
corresponding to SDGs.

JUN AOKI
Executive Corporate Officer
Chief Social Value Creation Officer4• CLEAN ENVIRONMENT: Striving for the ideal of a global
environment that supports lives of vibrancy.
• RESPECTFUL SOCIETY: Advancing a society that embraces
diversity through respect, and supports lives of beauty.

SOCIETY

HIGH

ENVIRONMENTCULTURE

GOVERNANCE

Deforestation
Responsible procurment

IMPORTANCE TO STAKEHOLDERS

Shiseido’s ESCG Sustainable Beauty Initiative

Shiseido’s ESCG –Sustainable
Beauty Initiative

ESG stands for environment, social and governance – concepts
valued by modern society – while C represents culture, a uniquestrength of Shiseido. Accordingly, we are working to promote ourSustainable Beauty Initiative, which aims to realize a better world, andwe have defined the following key areas that require our attention asa beauty company:

Development of eco-friendly formulas

Diversity and inclusion

Water usage

Waste reduction

Quality assurance

Occupational healthand safety
Respect for human rights

Information security and privacy
Strengthening of governanceand accountability
Fair business transactions• ENRICHED CULTURE: Using our heritage to create new value
and enrich culture.

Climate change
Sustainable packaging
Quality of life

Responsible marketing and advertisement
Human resource development

Art and heritage

IMPORTANCE TO SHISEIDO’S BUSINESSHIGH

The following process was implemented to define materiality.

Based on our mission BEAUTY INNOVATIONSFOR A BETTER WORLD, our sustainability
strategy centers on ESCG.

To deliver on our goals in each area, Trustworthy Governance forms
the basis of how we will achieve the targets that we are committed toover the medium-to-long term.

Step 1: Identify social issues in consideration of all stakeholders
based on their expectations and demands along with various perspectives collected from:

Shiseido’s Material Issues••

As a framework for creating social value unique to a beauty company,
we defined the Shiseido Group’s material issues in April 2019, basedon interviews and discussions with our stakeholders.
Categorizing issues taking into consideration their impact on all our
stakeholders (consumers, business partners, employees, shareholders, society and the earth) and their impact on the Company’s businesses, we established an order of priority and selected 18 material
issues. In addition, we revised our definition of social value from theperspectives of the environment, society, and culture. The details
and positioning of each issue were reviewed, as needed, throughdiscussion by corporate officers at Executive Committee in 2019 andSustainability Committee in 2020.

••

Experts in environmental and social fields in Japan and overseas
Consumer feedback (from company surveys conducted infive countries)
External surveys, reports from major international organizations,and investor feedback
Employees and board members feedback (in Japan and overseas)

Step 2: Shortlist the identified issues based on their relevance tobusiness management and make an advanced analysis by following
the process below:
Discussions are held with corporate officers and board members andvarious divisions to select issues highly relevant to business management. The selected issues are subjected to impact assessment basedon two perspectives: importance to all stakeholders and Shiseido’s
businesses. The assessment scores are used to narrow down the list
and finalize the 18 material issues. The details and strategic actions
for the 18 issues are confirmed by the board members.
Step 3: Submit the finalized materiality list to the management
committees for approval.

5

Shiseido’s ESCG Sustainable Beauty Initiative

Shiseido’s Key Strategic Actions With SDGs
Following are our eight key strategic actions based on our material
issues. They correspond to the SDGs indicated under each action.

Message fromESG Expert

CLEAN ENVIRONMENT
1. Reducing our Environmental
Footprint
CONGRATULATIONS ON ISSUINGSHISEIDO’S FIRST GLOBALSUSTAINABILITY REPORT.

2. Developing Sustainable
Products
3. Promoting Sustainable andResponsible Procurement

It shows the company’s commitment
to external and internal stakeholders.
That is, to pursue both economic andsocial value creation with the aim ofrealizing long-term corporate value
creation through its unique environment, social, culture, and governance(ESCG) framework.

RESPECTFUL SOCIETY
1. Advancing Gender Equality
2. Empowering People Throughthe Power of Beauty
3. Promoting Respect for Human
RightsENRICHED CULTURE
1. Drawing on our Heritage andCulture to Imagine a Better Future
2. Inspiring the World with a New
Sense of Japanese Beauty

HIROMICHI MIZUNOPRI Association Board Member

In terms of ENVIRONMENT, Shiseido’s
first report in compliance with the Task
Force on Climate-related Financial Disclosures (TCFD) is a major step toward
the climate actions. Shiseido’s attention to the circular economy and clear
commitment to it deserve recognition.
As for SOCIAL, it is noteworthy that
Shiseido intends to keep its leadership
position within the Japanese business
community with regards to the empowerment of women, and has strong

aspirations to do the same within the
global community. I have high expectations for Shiseido to tackle the diversity
and inclusion issues at a global level inevery market they serve.
I highly appreciate Shiseido’s approachto add CULTURE to their ESCG framework. Especially the fact that Shiseido
regards corporate culture as an effective method of internal governance,
and aims to achieve corporate sustainability and value creation by leveraging
it. Giving culture more meaning thanjust art and business collaboration isa reflection of Shiseido’s 148 years of
heritage.
I look forward to seeing how Shiseidodelivers environmentally and socially
positive impacts by implementing its
unique ESCG framework, using corporate culture to engage employees andcustomers, and external corporate
governance to create long-term value
for all stakeholders.

6CleanEnvironment

01

01 Clean Environment

Striving for the idealof a global environmentthat supports lives ofvibrancy.
COMMITMENT 1

COMMITMENT 2

COMMITMENT 3
8

Respect for the planet
and its people is written into ourname and embedded in our
culture. ‘Shiseido’ comes froma phrase in the Chinese classicaltext, I Ching: ‘Praise the virtues of
the Earth, which nurtures new lifeand brings forth significant values.’
In everything we do — fromdevelopment and procurement
to production — we work to preserve the global environment that
we all depend on. That is how wecreate sustainable value.
In this chapter, we report on thestrategic actions we have taken
to contribute to the health of
our planet.

COMMITMENT 1

COMMITMENT 2

Reducing ourEnvironmental Footprint

Developing Sustainable
Products
Formula and Packaging

We are reducing the environmental footprint of our activities by taking actions infive key areas:
CO2: We will be carbon neutral by 2026
Water: We will reduce our water
consumption by 40% by 2026 2
Waste: We will send zero waste to landfills
by 2022 3
Deforestation
Palm oil: We will achieve 100% sustainablepalm oil 4 usage by 2026
Paper: We will achieve 100% sustainable
paper 5 usage for product packaging by 2023
1

1
At all our sites
2
For all our sites, intensity per sales, compared with 20143
For owned factories
4
Physical supply chain options, identity preserved,
segregated, and/or mass balance5
Such as certified paper, recycled paper

We use innovation to minimize the environmental impact of our products:
Formula/Ingredients
We improve our environmental and social
profile by using sustainably sourced materials and ingredients that are selected fortheir safety and environmental properties.
We also disclose our policies on productdevelopment.
PackagingComplying with 5Rs (Respect, Reduce,
Reuse, Recycle, and Replace), we willachieve 100% sustainable packaging by
2025 1.

1

COMMITMENT 3

Promoting Sustainable
and Responsible
Procurement
We procure materials based on our codesand principles (e.g., Shiseido Group Supplier
Code of Conduct and Shiseido Group Procurement Policy):
We work to ensure supplier traceability
by conducting supplier assessments andaudits. Our suppliers assess themselvesusing third-party self-assessment tools(e.g., Sedex, EcoVadis) and/or our original
self-assessment questionnaire (SAQ).
We aim to improve labor conditions,address issues and take actions in humanrights and environment by participating in
global initiatives and having ongoing discussions with external experts, and educationand training to stakeholders.

For selling products with plastics packaging

9

COMMITMENT 1
CO2
Carbon neutral

Reducing ourEnvironmental
Footprint

PALM OIL
100% sustainable
usage

0

To help combat climate change, we are stepping up
efforts to reduce greenhouse gasses (GHG) emissions,particularly carbon dioxide (CO2) emissions. To put
a halt to deforestation, we are promoting the ethicalprocurement of palm oil and paper. And to make thebest use of natural resources, we are continuing tofind ways to minimize water and energy consumption,
reduce and recycle waste, and develop new sustainable
solutions for products and packaging.

22

WASTE
Zero landfill

Across all areas of our business, we are promoting
initiatives that reduce the environmental impact of ouractivities and ensure a sustainable use of resources.

20

PAPER
100% sustainableusage

2 02 32 02 6WATER
40% less water
consumption

10

Commitment 1

Reducing CO2
Emissions54%of the electricity usedin our Osaka, Kuki,
and Kakegawa factories
is sourced fromhydroelectric power

Improving Energy Efficiency
We have been making dedicated efforts to reduce GHG emissions related to energy consumption by introducing and installing equipment,
and using electric power. We introduced a cogeneration system 2 atour Kuki factory, and CO2 emissions have been reduced by improving
energy efficiency.

UTILIZING WATER POWER
About 54% of the electricity used in our Osaka, Kuki, and Kakegawa
factories is sourced from hydroelectric power, which contributes toa reduction in CO2.
UTILIZING SOLAR POWER
Our East Windsor factory in Shiseido America, Inc. has been equippedwith a fixed-tilt solar power system since 2007, and a solar-tracking
solar power system since 2010. With an annual power generation of
approximately 2.3 million kWh, more than 70% of the factory’s annual
power consumption was covered by solar power. This amounts to a
total reduction of 1,100 ton CO2 annually. These efforts meant thatthe factory won the 2010 New Jersey Governor’s Environmental
Excellence Awards.

At all our production sites 3, we carefully select equipment in orderto save and use energy efficiently, as well as improve environmental
measures based on the environmental management system
ISO 14001.

To mitigate climate change, we work to reduce
the emission of CO2 and other greenhousegasses (GHG) at all our production sites andbusiness locations.

We will continue our efforts to further improve energy efficiency
across the Shiseido Group. This includes formulating an energy
efficiency improvement plan that sets the direction for investments
in in-house power generation equipment as well as equipment that
reduces environmental impact.

In February 2020, we announced ourcommitment to CO2 reduction 1: We aim to
be carbon neutral by 2026.

Using Renewable Energy

In order to achieve this target, we are taking
actions to improve energy efficiency, and use
renewable energy.

We have been increasing the use of renewable energy, particularly
in our factories that have high power consumption. In 2019, we
increased our usage of renewable energy by 52% versus the previous
year. In particular, at our East Windsor factory in Shiseido America,
Inc. (New Jersey, USA), 100% of electricity is now derived from renewable energy.

Provided by TEPCO Renewable Power, Incorporated

East Windsor
factory in USA
1
CO2 emissions of scope 1 & 2
2
Cogeneration system: An efficient system that simultaneously obtains different energies(electricity, heat) from a single energy source3
Except at our Nasu factory, which began operation in Dec. 201911

Commitment 1

Assessing
Climate Risks

Scenario Analysis
We have identified significant potential risks we may encounter by the endof this century based on the important geographic points for our business,and scientific insights such as meteorology, hydrology, and statistical data.
The risks resulting from the transition towards a decarbonized society, andthe physical risks brought about by changing environmental conditions, areconsidered in the 1.5°C scenario and in the 4°C scenario, respectively.
The 1.5°C scenario identifies transition risks such as carbon pricing andmarket trend changes. When carbon pricing is determined by taking into
account the social cost of carbon – such as the costs of climate measuresand compensation for the predicted damage caused by climate disasters– the financial impact will be significant.
In the 4°C scenario, we expect to face physical risks due to rising temperatures and associated phenomena. According to the IPCC reports, water-

related issues will occur more frequently. We anticipate that changing
weather conditions will affect factory operations and disrupt logistics;
we also expect that they will have an impact on crop cultivation for the
production of raw materials. We have to prepare long-term measuresthat take into account the natural conditions of each region.
In the meantime, increasing awareness among consumers will open
new opportunities for environmentally conscious products and brands.
Especially the products and services that support climate adaptation,such as UV care products and cool touch products, are expected tomeet consumers’ needs 1.
In order to mitigate climate-related risks, we have committed to thelong-term target of carbon neutral operations by 2026. Moreover, weare taking action on our climate change risks and will actively seek out
ways to realize opportunities and benefits that arise across our value
chain, in line with the outputs from the scenario analysis.

Summary of the risks/opportunities

Transition(seen mainly in 1.5°C scenario)

In April 2019, Shiseido announced its support
for the Task Force on Climate-related Financial
Disclosures (TCFD), recognizing that the
mitigation of climate-related risks is criticalto our continued sustainable growth.
Based on the TCFD recommendations, we
identify and report on the climate-related risks
and opportunities pertinent to our business.

Physical(seen mainly in 4°C scenario)

Acute

Chronic

Risks

Opportunities• Cost increase with carbon tax• Fuel price increase• Energy efficiency improvement• More ethical products (e.g. Clean beauty)• Operation stop with natural disaster (e.g. typhoons, floods)• Logistics disruption with natural disaster• Procurement cost increase for crops-derived materials due to rain condition change• Operation stop due to water shortage (in France)

The scenario analysis was carried out based on the “Recommendations of the Task Force on Climate-related Financial
Disclosures” in Final Report (published in 2017).
SSP 2 and RCP 3 were applied for this study as the socioeconomic and the climate pathway.

• Green products dev. (e.g., Dry SP/CD)• Cooling products dev.

1
JAMSTEC (Japan Agency for Marine-Earth Science and Technology) has shown that harmful
UV radiation reaching the Earth’s surface is projected to increase in the northern mid-latitudes,
including Japan, in the latter half of the 21st century – despite the expected recovery of the stratospheric ozone layer. In fact, an increase in UV radiation has been observed by the Japan Meteorological Agency during the last 20 years. JAMSTEC suggested some reasons for this increase, one ofthem being climate change. https://agupubs.onlinelibrary.wiley.com/doi/full/10.1029/2011JD015749
2
Shared Socioeconomic Pathway
3
Representative Concentration Pathway

12

Commitment 1

Water

Across the Shiseido Group, we aim to ensure thesustainable use of water by preserving water circulation in water systems as well as the water utilization by local communities.
To that end, we identified the actual use of water
resources across our value chains. Based on thisassessment, we work to reduce the impact of ourbusiness activities on water circulation and water
utilization. In February 2020, we announced ourcommitment on water: We will reduce water consumption by 40% compared with 2014 across all
Shiseido Group, per unit sales, by 2026 1.
In order to achieve this target, we are taking two
actions. One is to install equipment that can reuse
and recycle water; the other is to introduce watersaving initiatives in product development and at
production sites.

New Installments
Our production sites have been working to reduce water consumption since they were established. In order to make more effective useof water, we will be making capital investments, particularly in water
circulation equipment.

27%

water reduction(intensity per
sales) comparedwith 2014

In the manufacturing process, water for cooling and cleaning ofequipment accounts for about half of the total water consumption in
our factories. In the coming years, we will gradually introduce equipment that will enable us to use water more efficiently.

IN PRODUCT DEVELOPMENT
To contribute to the protection of water resources, we develop
products that can reduce water consumption when used by ourconsumers.

At our Val de Loire factory in France, the water used for cleaning
equipment is recycled and new cleaning equipment has been introduced to significantly improve the water utilization.

In 2016, Shiseido developed a new foamy facial wash that can berinsed off quickly, and with less water consumption, by improving
dispersibility of dirt into the water. This facial wash reduced theamount of water necessary for rinsing by about 35% compared tostandard cleansers. We are expanding the technology developed
for water-saving to products such as Clé de Peau Beauté SOFTENING
CLEANSING FOAM and UNO Whip Speedy.

Water-saving Initiatives
At the Osaka factory, we also looked into the rinsing process to verify
the effect of reducing the temperature of the water used for cleaning
equipment. By using lukewarm rather than hot water, we reduced
the amount of water lost to evaporation in the process, which subsequently reduced CO2 emissions.
Our Gien factory in France switched their water-cooled vacuum
pump to an air-cooled type. In addition, the water cleaning of thefragrance manufacturing equipment was changed to alcohol cleaning, and the alcohol used for this process is recycled. These measures significantly improved water utilization at the factory by
reducing water usage by 77% 2.
In 2019, the Shiseido Group reduced water consumption by
30,000 m3 in absolute terms.

Gien factoryin France1
Per unit sales: unit value is the total amount of water consumed per product manufactured
2
77% reduction compared with 2009 in terms of water usage per production. (Water consumption (L) per content production (kg)13Commitment 1

Waste

To reach this goal we conducted a thorough classification of waste,
and turned it into a resource for accelerating reuse and recycle. In
addition, 47% of unnecessary materials such as plastics and metals
are sold as recycled resources, contributing to resource recycling byseparating and collecting waste at the factories. The activities at oursites resulted in a 94% rate of recycling 1 in 2019. And, 10 out of 11
factories have achieved this target.
We have also taken actions to improve manufacturing and packaging
processes to minimize production losses and optimize the transportation of packaging in factories and through distribution.
On top of that, we are optimizing our use of materials, and minimizing
the total volume of industrial waste across the value chain by taking
part in circular economy initiatives locally and globally.
Our specific initiatives include the redesign of products (e.g. launchingrefillable packaging, using less wrapping for our packaging, simplifying
packaging design, eliminating the need for inserting leaflets inside thepackaging, designing light-weight cardboard), and the redesign of theordering management system, using the Business Transformation
Framework (BTF).

10/11

In 2019, the Shiseido Group reduced waste at factories by 394 tons
in absolute terms.

Employee Training for Proper Disposalof Industrial Waste
Across the Shiseido Group, we work to accelerate
our contribution to the reduction of waste.
In February 2020, we announced our commitment on waste: We aim to divert all solid wastefrom landfills, achieving zero landfill by 2022 at
all Shiseido Group factories.

factories achieved
zero landfill

We hold industrial waste seminars twice a year for all managers andpeople in charge of industrial waste in all departments and Shiseido
Group companies in Japan. The aim is to share knowledge, understanding and compliance with laws and regulations.
As a result of these activities, there were no accidents or legal
violations associated with waste in 2019.

1

Including thermal recovery

14

Commitment 1

Deforestation
Palm Oil and Paper

Sustainable Use of Palm Oil
Palm oil is a raw material used in cosmetics for its moisturizing andtexturizing properties. It is mainly produced from oil palms in a vast
tropical rainforest in Southeast Asia. The chaotic development of
tropical rainforests not only destroys these forests and the valuableecosystems they grow, but also releases large amounts of carbon
into the atmosphere, accelerating climate change.
Environmental protection in palm oil production areas, and consideration of human rights of the people working on plantations (seeCommitment 3, p. 21 and Sustainable Procurement of Palm Oil andMica, p. 23), are essential to building an ethical supply chain.
As part of our efforts in this area, we joined the Roundtable on
Sustainable Palm Oil (RSPO), an international non-profit organization,in 2010.

To promote environmental protection, we havecommitted to sustainable procurement across all
our business activities, including the procurementof raw materials, especially palm oil and paper.
This is because the rainforest where palm oil andpaper pulp are procured conserves valuable biodiversity and provides valuable ecosystem services.
We are strengthening our response to the protection of the environment, particularly with regard to
the use of sustainable palm oil and paper, both ofwhich can contribute to preventing deforestation.

In order to support the sustainable production of palm oil, since 2018
we have purchased certificates (credits) equivalent to 100% palm oiland palm-derived materials. In 2019, the Shiseido Group purchased
credits equivalent to around 9,700 tons of palm oil and palm kernel
oil derivatives.
For our next step, we aim to achieve usage of 100% RSPO-certified
sustainable palm oil and palm kernel oil derivatives from physicalsupply chain options (identity preserved, segregated and/or massbalance) by 2026.

100%
sustainable palm
oil by 2026

sustainable
paper by 2023

Sustainable Use of Paper

We aim to achieve 100% use of sustainable paper by 2023. We are
currently in the process of switching to (third-party) certified paper(e.g., FSC, PEFC) or recycled paper for all Shiseido products.

To protect the environment and prevent deforestation, we are promoting the procurement of sustainable paper such as (third-party)
certified paper and recycled paper.

For more details on other sustainable and responsible raw material
procurements, please see the section on Responsible Procurement,
p. 21.

15

COMMITMENT 2

100%
sustainable
packaging

Respect

ReduceReuse

RecycleReplace

Shiseido’s 5Rs

Developing
Sustainable
Products
Formula and Packaging

2025

Utilizing our extensive dermatological research and formulation technologies, developed over more than 100
years, we have been cultivating formulas that comply withhigh standards of quality and safety.

2020

Our approach to the development of these cutting-edge
technologies has always been informed by a sustainablemindset, reflecting our wish to protect and respect people, societies, and environments touched by our activities.

Sustainable andharmless materials
and ingredients

Disclose ourpolicies on productdevelopment
2019

Improve ourenvironmental andsocial profile

Complying with 5Rs (Respect, Reduce, Reuse, Recycle,
and Replace), we aim to make the packaging 1 of our
products 100% sustainable by 2025. Going forward, we
also want all our products to be developed according to
5Rs, minimizing the environmental impact throughout
the product life cycle.
1

For selling products with plastics packaging

16

Commitment 2

Sustainable
FormulaUV CareAs a result of climate change 2, the total UV radiation that our consumers are exposed to is likely to increase during this century, andpeople living in certain regions will be more exposed than others 3.
Based on the results of our dermatological research and development activities, we have initiated new research that explores therelationship between environment and the skin (including UV rays).
We will use these results to develop innovative products and services(e.g., UV care, anti-aging care) that protect the skin.

Animal TestingbareMinerals

Drunk Elephant

Shiseido’s mission is to provide safe and effective products to
consumers, and to comply with the cosmetics regulations in force,
while understanding and respecting the principles behind animal
protection.

We are committed to developing and offering
products and services that are safe and meethigh quality standards by leveraging over 100
years of our extensive research and results ondermatological and material science.

For all our products, we have established a safety assurance system based on methods that do not involve animal testing. We continue to develop effective alternative methods for testing products
safety, and work with administrative agencies in various countries
to get these methods certified as official, according to laws andregulations of the given countries/regions 4.

Actions Toward Consumer Needs
Reflecting our wish to protect the health of thehuman body as well as the environment, we havepublished our corporate policies on productdevelopment. In terms of ingredients, we havescreened and assessed key ingredients (e.g.,
microplastic beads, oxybenzone, parabens), andstated our actions such as not-using/stop-using/continuously using to our products 1.

Shiseido responds to the increasing number of consumers that put
social responsibility and environmental impact at the top of their purchasing decisions by promoting brands that focus on sustainability
such as bareMinerals, and BAUM, a new brand that was launched inJapan in 2020.
bareMinerals, the original pioneers of natural mineral-based makeup
since 1995, was acquired by the Shiseido Group in 2010. Since then,it has been our flagship natural brand, and today, it is positioned asa clean brand with a significant level of natural ingredients and freeof controversial ingredients such as parabens, phthalates, chemicalsunscreen, and microbeads. Our last addition to our clean brandportfolio is Drunk Elephant. Acquired in 2019, it is free of essential oils,
drying alcohols, silicones, chemical sunscreens, fragrances/dyes andSLS (the Suspicious 6™), and it is committed to use only ingredientsthat either directly benefit the health of the skin or support the integrity of its formulations.
1
For more information, please visit https://our-products-policy.shiseido.com/en/
2
The fact that climate change influences on atmospheric circulation (Hadley circulation)and the total amount of UV ray exposure increase in the middle latitudes was indicated by the
research result of JAMSTEC (Japan Agency for Marine-Earth Science and Technology)
3
Most affected are the densely populated regions in the earth’s middle latitudes where
economic activity is booming
4
We do not test our cosmetic products or ingredients on animals except when
mandated by law

17Commitment 2

Sustainable
Packaging

Reduce/Reuse

Shiseido’s 5Rs

REFILL
Since the launch of our first refill products in 1926, Shiseido has led
the refill innovation in cosmetics. Currently, we offer refill solutions formore than 1,200 SKU globally.

In order to reduce our environmental footprint and support
the concept of a circular economy, Shiseido defined 5Rs as
follows:

By providing refill products and by making containers lighter and easierto separate after use, we are reducing the resources used for containers across a wide range of categories, such as skincare, makeup, andpersonal care.

Respect

Respect people, society, and the environment. Based on this, we aim to achieve
100% sustainable packaging 1.

ReduceReduce the amount of plastics by optimizing packaging weight, and the usageof plastic promotion materials.

Reuse

Reuse regular packaging by launchingrefills. Implement recharging systems
that guarantee product integrity.

Reuse also helps to stop single-use plastic usage and accelerate themove towards refill containers as primary packaging.

Respecting and protecting the planet and its
resources lie at the heart of our culture; it is also thepremise for the circular economy, which is why wesupport this concept.
Within packaging, we have set our mid-term target
with 5Rs. Based on it, the packaging guidelines
were developed.
The guidelines on packaging based on this policy
were issued globally for various kinds of environment-friendly packaging such as refills, monomaterial containers, recyclable PET packaging.

1,000+
Shiseido’s products with refill
solutions offered globally

RecycleRecycle by designing easy-to-be-takenapart packaging and by using materials
suitable for each country’s recycling
streams. Use PE/ PP/ PET mono materials.

Replace

Replace virgin materials with
bio-degradable, bio-based or post
consumer recycled (PCR) materials.

1

For selling products with plastics packaging

18

Commitment 2

Message from
External Expert
By using a refill container,
we reduced the amountof plastics used by

WHAT ARE THE ACTIONS THAT
NEED TO BE TAKEN IN ORDER TOREALIZE SUSTAINABILITY?

60%

To realize sustainability, there are a
few things producers can do. They
can focus on moving to recyclable
packages that actually have value torecyclers, which often means highly separated material with a strong
end-market, or pay the cost to collectand process the material themselves.
However, while recycling is really important, it’s not the answer to garbage.
Producers can move to a reuse model
which solves the problem on the frontend by not creating the waste in thefirst place. The Loop program is one
example of the reuse model.

We have been offering refill containers for HAKU Melano Focus V
since 2011. By using a refill container, we reduced the amount ofplastics used by 60% compared with the amount used for theoriginal product container.
In order to make it easy to recycle the used containers, we are working to provide packaging that can be easily separated for productsthat combine different materials such as plastic and metal(e.g., brand SHISEIDO).
We also work on innovations that help to reduce the use of plastics.
In 2019, we partnered with the Loop program to develop the newcircular business model.

Shiseido is already a founding partnerof the Loop program in Japan, so as
a next challenge, I expect Shiseido
to drive value combining core components of the circular economy. To
achieve this goal, will require not only
considering material recycling, but also
rethinking the structure and value of
packaging and supply chain.

WHAT ARE THE EXPECTATIONSAND CHALLENGES FOR THE
SHISEIDO GROUP?

Packaging that canbe easily separated

A challenge to the Shiseido Group is
to take authentic steps towards supporting a circular economy. Circular
economy has three main pillars, reuse,recycling and reduction.

TOM SZAKY
CEO and Founder of TerraCycle

19

Commitment 2

RecycleReplace

Since 2015, we have been using mechanically recycled PET 1 resin
which has been reproduced from post-consumer packaging waste
for the bottle material of SEA BREEZE Super Cool Body Shampoo.

Since 2009, we have been switching the material of the cartons forour skincare products (single-unit cases), such as lotion and emulsion, from plastic to paper.

Most of the glass we use for packaging skincare products contains
recycled glass cullet. Recycled cullet contributes to decreasing theglass melting temperature. It also cuts down on the amount of silica
sand needed for the process. As a result, energy consumption as
well as CO2 emissions are reduced. In addition, we have standardized the glass material to colorless and transparent soda-lime glassfor its high recyclability.

With regard to paper materials, we actively promote the use of
FSC-certified paper 2 and recycled paper.
Since 2011, sugarcane-derived polyethylene 3 has been adopted as
the packaging material for the domestic hair care brand, SUPER MiLD.
This has reduced CO2 generated from the packaging by more than
70% throughout the product life cycle.

We will further
minimize theenviron­mental
impact of our
products

In April 2019, we started a collaboration with Kaneka Corporation,with a view to utilizing Kaneka Biodegradable Polymer® PHBH® – aproprietary material with high biodegradability in seawater – for ourcosmetics containers, tools, fixtures, etc. By combining Kaneka’s
proprietary technology on material development with our knowledge
in container development for cosmetics, which we have accumulated
over many years, we will further minimize the environmental impactof our products.

Carbon footprint of Elixir Lifting
Moisture Lotion packaging
REGULAR

Product Life Cycle Assessment (LCA)
REGULAR + REFILL0

The development of sustainable products is carried out by applying
Life Cycle Assessment (LCA), which helps to confirm whether theenvironmental footprint will be reduced or not.
0.1

0.2

0.3

0.4
(kg-CO2e)PROCURMENTMANUFACTURING

DISTRIBUTIONEND OF LIFE

For example, 40% of the environmental footprint of skincare lotion
comes from the processes and materials related to the packagingof these products. In order to reduce the environmental footprintof cosmetic packaging, Shiseido has provided more than 1,200 SKU
of refillable products. In the case of Elixir lotion, LCA indicates thatusing refillable product can reduce over 50% of its carbon footprint.

1
Mechanical recycling: A technology for efficiently producing high-quality recycled PET
resin from PET bottles for beverages. Compared to using petroleum-derived PET resin, CO2
emissions could be reduced by 39 tons in 2018.
2
FSC-certified paper: Certified to the international standard of Forest StewardshipCouncil® (FSC®) as materials used in this product are responsibly sourced and have low risk ofenvironmental and social problems such as deforestation and illegal logging.
3
Sugarcane-derived polyethylene: The CO2 generated when sugarcane-derived polyethylene is incinerated is equivalent to the CO2 absorbed as the sugarcane grow. In addition,
the energy consumption in the manufacturing process is less than that of petroleum-derived
polyethylene due to the lower temperature in the process and the electricity consumed by the
raw material production being generated from the incineration of sugarcane fiber. Sugarcane-derived polyethylene can reduce the CO2 emissions by over 70% throughout the life cycle
compared to petroleum-derived polyethylene.

20

COMMITMENT 3

We work to ensure supplier
traceability by:

Supplier
assessments
and audits 1

Globalinitiatives

Education

We willprocure materials
based on our codesand principles

1

Our suppliers assess themselves using third-party assessment tools (e.g., Sedex, EcoVadis) and/or our original self-assessment questionnaire

Promoting
Sustainable andResponsible
Procurement
At Shiseido, we strive to grow our business as well as
stimulate the growth of the societies we work in. But wewant this growth to be sustainable. In all our activities,
we seek ways to prevent human rights problems andpreserve the environment.
We have issued the Shiseido Group Supplier Code of
Conduct and conduct supplier assessments and monitoring on a regular basis to ensure an ethical supply chain.
In addition, the Shiseido Group Procurement Policy andthe Shiseido Group Sustainable Raw Materials
Procurement Guidelines have been enforced across theGroup to ensure the procurement of sustainable raw
materials (e.g., palm oil, paper) on a global scale.
We strive to share and resolve issues with our stakeholders and liaise with international human rights experts
and people working in raw material producing regions tomake sure our actions always rely on expert knowledge.

21

Commitment 3

Ethical Supply
Chain Policies
and Standards

In addition, we have defined and issued the following
policies to ensure better supplier management:
SHISEIDO GROUP SUPPLIER CODE OF CONDUCTThe business partners that are subject to the Shiseido Group Supplier Code of Conduct have agreed to the standards. In this code,
suppliers are required to accept periodic monitoring through surveys
and audits. In the event that any supplier is identified to have violated
it, they are requested to implement corrective actions by following
guidance.
SHISEIDO GROUP PROCUREMENT POLICY
We established this policy in 2018 based on positive collaboration
with consumers, business partners, and society. Our procurement
policy is based on a consumer-oriented perspective, including thefollowing principles:• we carry out procurement activities to create better products,
through co-creation with business partners• we comply with all relevant laws and regulations, prioritizing respect for human rights and protection of the global environment

Following our participation in the United Nations
Global Compact, we have been working closelywith our business partners to define and update
principles and policies on ethical business conduct. These are reflected in the Shiseido Group
Supplier Code of Conduct, which we issued in2006. This code stipulates the standards that govern and direct our behavior on human rights, legal
compliance, labor practices, intellectual property
protection, confidentiality, environmental protection, and fair trade.

SHISEIDO GROUP SUSTAINABLE RAW MATERIALSPROCUREMENT GUIDELINES
We created guidelines for palm-derived materials and paper, which
exacerbate environmental and human rights problems in the countries of origin.

(Supplier Ethical Data EXchange, that is one of the world’s leading ethical trade service providers), original Self-Assessment Questionnaire(SAQ) revised in 2019, and EcoVadis are used in cooperation with the
supplier.
In 2019, we have carried out risk assessments for the primary suppliers at the headquarters and EMEA. At the headquarter, all 271
companies that have been in business in 2019, have had their ethicalinformation including but not limited to corporate activities related
to compliance, the environment, human rights, and occupationalsafety evaluated. In addition, in EMEA, 85 suppliers were evaluated by
EcoVadis.
Based on the results of our assessment, we classify suppliers into
four categories and request corrective action from those deemed
to be high risk. In 2019, 49 suppliers fell into the high-risk category,and for those suppliers that do business with the headquarters, we
provided a direct explanation of the issues and the reasons for theissues, and requested that they be corrected.
Regarding the secondary suppliers, we confirmed the results ofSedex and EcoVadis via the primary suppliers for 15 companies.
It was confirmed that the risk is not high with 15 companies.
REPORTING AND CONSULTATION CENTER FOR SUPPLIERS
Since 2013, we have been hearing opinions from, and consulting with,our business partners using the Business Partner Hotline – a center
that receives reporting/consultations from suppliers in writing andby email.

Supplier Monitoring and Assessment
We procure raw materials and indirect materials (promotional materials) for our products from various suppliers in the global market.
Of these, there are more than 900 primary suppliers who conduct
direct transactions. In order to evaluate and confirm the status ofcompliance with the Shiseido Group Supplier Code of Conduct, Sedex

22

Commitment 3

Sustainable
Procurementof Palm oiland Mica

Palm Oil
Palm oil and mica production can be subject to cases of human rights
abuses. By participating in international initiatives, we are strengthening our measures to prevent this.
Environmental protection in palm oil production areas and consideration of human rights of people working on plantations are essential
to building an ethical supply chain.
Shiseido joined RSPO (Roundtable on Sustainable Palm Oil) in 2010
and formulated Shiseido Group Sustainable Raw Materials Procurement Guidelines to procure palm oil and palm kernel oil that is environmentally and socially friendly.

We will continue topromote sustainableprocurement.

4-0103-10-100-00

Since 2018, we have been supporting sustainable production of palm
oil by purchasing certificates (credits) equivalent to 100% of palm oiland palm-derived materials. In 2020, we acquired RSPO supply chain
certification 1 at our three new factories, bringing our certification status to a total of 10 factories. We will continue to promote sustainableprocurement, including the procurement of certified raw materials,
using physical supply chain options, identity preserved, segregated,
and/or mass balance.
In 2018, we became a member of the Consumer Goods Forum (CGF),
and Japan Sustainability Local Group Palm Oil Working Group, andin 2019 we joined the Japan Sustainable Palm Oil Network (JaSPON).
Through the activities of CGF and JaSPON, sustainable use of Japanese palm oil is now possible, and we will contribute to the promotion of this.

We will cooperate with NGOs
to improve the working conditions of mica miners andthe educational system for
local children.

In recent years, there have been cases where child labor is suspected
to have been involved in the mining of India-produced mica. In May
2017, we joined the Responsible Mica Initiative (RMI), an initiative
to ensure sustainable mica procurement. The goal of the RMI is towork with members of various industries to turn all Indian mica into asustainably produced raw material by 2022. Through the activities of
RMI, we will also cooperate with NGOs to improve the working conditions of mica miners and the educational system for local children.

Mica
Mica is a mineral used in various industries such as electrical machinery and painting. It is also used as an ingredient mainly in cosmetic
products to add shimmer, sparkle or a glow effect to the skin.

1
RSPO Supply Chain Certification: The certification to ensure logistically reliable deliveryof RSPO-certified raw materials

23Commitment 3

abuses, and labor issues involved in palm oil production. In order tobe a company that fulfils our responsibility to human rights, we will
act on these discussions by setting up an ethical supply chain.
WORKING WITH HUMAN RIGHTS EXPERTS
In October 2019, we had a series of talks with World Benchmarking
Alliance/ Corporate Human Rights Benchmark, the leading researchcompany, Verisk Maplecroft, and Rishi Sher Singh – business andhuman rights experts and supply chain experts in India. Their experts
advised us on key areas and elements we should investigate in ourcompany. We are currently working to implement this knowledge
through our supply chain following the results of our Self-Assessment
Questionnaire.

HONEYBEE PROTECTION IN PRODUCTION SITES IN FRANCE
Many crops rely on bees to be pollinated. But in Europe, there areconcerns about the decline in the number of bees 1. At our Val deLoire factory and Gien factory (Shiseido International France S.A.S.),
we have included the conservation of bees and the ecosystem of
the local community in our sustainability plan. Along with setting up
beehives, we have banned the use of agrochemicals on the factory
premises. About 150 kg of honey was produced in only a year fromthe beehives installed 2.

Stakeholder Engagement
Program in 2019

Dialogues with Stakeholders
In order to ensure sustainable and responsible procurement andrespect for human rights in the course of our business activities, wework with various stakeholders to discuss environmental and social
issues, share information, and create solutions.
WORKING WITH NGOS/NPOS AND OIL PALM
SMALLHOLDER FARMERS
To understand human rights issues in palm oil procurement, we participated in the Stakeholder Engagement Program in 2019. This program was held in Indonesia and hosted by Caux Round Table, Japan.
Through conversations with NGOs/NPOs and oil palm smallholder
farmers, we deepened our understanding of the human rights risks,

We recognize that the activities of the Shiseido Group have a considerable impact on the biodiversity of our planet – from procurement of raw
materials, through sales and distribution, to the disposal of our products.
To preserve biodiversity, we have defined a number of initiatives.
We understand the importance of biodiversity and will work moreproactively.
AFFORESTATION AT RAW MATERIAL PRODUCTIONSITES IN NAGASAKI, JAPAN
Since 2011, we have promoted camellia planting and conservation
activities at the abandoned farmlands of the Goto Islands in Nagasaki Prefecture, the production site of raw material for our hair carebrand, TSUBAKI.
To ensure sustainable and socially responsible raw material procurement, we protect and grow camellias in collaboration with the local
residents. Over nine years, 352 Shiseido employees have joined thisactivity and planted 738 seedlings of camellia japonica across 0.194
hectares of land in Nagasaki.

1 yearBiodiversity Conservation

150 kgof honey produced in only a year
from installing the beehives at our
Val de Loire and Gien factories

1
Regarding the bee population, a beehive counts around 15,000 bees in winter and80,000 in summer
2
The beekeeper gives 600 jars of honey each year, which are distributed to employees

24

02

RespectfulSociety02 Respectful Society

Advancing a societythat embraces diversity
through respect, andsupports lives of beauty.
COMMITMENT 1

COMMITMENT 2

COMMITMENT 3
26

Our mission is BEAUTYINNOVATIONS FOR A BETTERWORLD. We aim to use this toinspire people around the world
by embracing diversity in beauty,celebrating the value of beauty,
and by incorporating diverse
knowledge and perspectives.
On April 8, 2018, we celebrated
our 146th anniversary with thelaunch of LOVE THE DIFFERENCES.
a message that represents our
mission. And since then, it has beencommunicated.
It is our hope that, together, we
can create a society where people
accept and respect each other,regardless of background ordifferences in circumstances.

COMMITMENT 1

Advancing Gender
Equality

COMMITMENT 2

Empowering People
Through the Power ofBeautyCOMMITMENT 3

Promoting Respectfor Human Rights

27

COMMITMENT 1

30% ClubJapan

Education
for girls especiallyin Asia

SOCIETY

for women’s
empowerment

Advancing
Gender Equality
For more than 100 years, we have not only supported,
empowered, and inspired women around the world
through our cosmetic innovations and new perceptions of beauty; we have also worked to increase theirvisibility and elevate their role in society.

50%

40%

ratio of female
department heads
in our global key
positions

SHISEIDO

ratio of female
managers in ourJapan division

Gender equality needs to be addressed worldwide.
In recent years, along with the globalization of our business, we have been strengthening efforts to promotea variety of initiatives with the aim of solving genderissues and empowering women around the world.

Continue reading
The above KPIs are included in the long-term incentive target (LTI) for
corporate officers and CEOs (at global as well as regional headquarters).

28

In March 2019, Masahiko Uotani, President and CEOof Shiseido, delivered a message at the 5th International Women’s Congress WAW! / W20 held in Japan 1:“Shiseido aims to realize diversity, inclusiveness, anda happy life for people, especially women, globally. Our
business activities will bring the world pleasure, confidence, empowerment, and happiness.” In addition, as
an Asia Pacific sponsor of WomenCorporateDirectors(WCD) — a global network of female directors aroundthe globe — Mr. Uotani made keynote speeches atdifferent events in Japan and Korea where participantsjoined from each country. He presented the reform
efforts our company has pushed forward, led by our
employees, and spoke about the success of female
leaders. Our management continues to champion theimportance of gender equality in all areas of businessand everyday life.
According to the latest Gender Gap Index (GGI) published by the World Economic Forum in 2019, Japan,
where our head office is located, ranked 121st among
153 countries, down from 110th position the previous
year 2. In order to advance Japanese society and thebeauty industry, Shiseido supports our female employees in developing their careers and we encouragethem to take active part in internal decision-making.
From 2019, as a leading company, we began participating in the 30% Club Japan, a cross-industry campaign
to eliminate the gender gap in Japanese society.

Naomi Yamamoto,
Deputy Chief
Social Value
Creation Officer inthe panel
discussion of 5th
WAW!/W20

Among the issues causing such gender disparity insome Asian societies is the fact that too many girls
fall into a vicious cycle, passing up educational opportunities to get a job at young age — in most cases,
a low-skilled and low-paid one — which makes it almost
impossible for them to become financially independent.

Our management continues
to champion theimportance ofgender equality
in all areas ofbusiness andeveryday life.

Focusing on the unique issues of each region, we willcontinue to harness our strength as a Group and work
together to realize a society where everyone, regardlessof gender, feels respected and encouraged to live theirlife to the fullest.

1
The 5th WAW!/W20: W20 is a group led by the private sector that advocates the economic activities of women to the G20. As the G20 chair in 2019, Government of Japan hosted
the events
2
The Gender Gap Index is an indicator of gender disparities in countries around theworld, published by the World Economic Forum. It ranks each country by analyzing 14 issues
within the areas of politics, economics, education, and health29Commitment 1

Efforts to Resolve
Gender Issues inSociety
Participants of theGirls Learning &Leading Program

Global Action for Gender Equality
We promote a variety of initiatives to solve gender issues andempower women around the world.
INTERNATIONAL WOMEN’S DAY
With the aim of empowering women around the world, Shiseido Groupcelebrated International Women’s Day across our regional headquarters.
Shiseido Travel Retail sponsored a networking event for 50 female industry executives at Singapore Changi Airport. In Hong Kong, our makeup
artists held a makeup photo session for 40 participants from the mentor
program event of The Women’s Foundation (TWF).
From 2020 onward, we will strengthen our efforts to raise awarenessof gender equality both inside and outside the company, focusing on
gender issues and working with five overseas regional headquarters.

Left: Yukari
Suzuki, Chief Brand
Officer of Clé dePeau Beauté
Right: Henrietta
Fore, Executive
Director, UNICEF

SHISEIDO ASIA PACIFIC: SUPPORTING GIRLS’ EDUCATION
In 2019, Shiseido Asia Pacific (Singapore) collaborated with The Asia
Foundation to run the Girls Learning & Leading Program, providing
educational support for female students in Cambodia. The programprovided 102 students aged 16 to 19 with materials such as books andrice; leadership and communication training; and mentorship by our
employees to support their academic endeavors.

CLÉ DE PEAU BEAUTÉ:SUPPORTING EDUCATION FOR GIRLS
In 2019, our luxury brand, Clé de Peau Beauté launched its global charity
program, The Power of Radiance Awards. Advocating for girls’ education as the key to women’s social advancement and empowerment, thisannual program honors inspirational women who have contributed to
women’s education and supports their activities through donations.
On International Day of the Girl Child on October 11, Clé de Peau Beautéannounced a global partnership with United Nations Children’s Fund
(UNICEF 1) to support girls’ education and empowerment around theworld. Through the three-year partnership, Clé de Peau Beauté will makethe world’s largest contribution of US$8.7 million to support UNICEF’s
Gender Equality Program.

BAREMINERALS: SUPPORTING WOMEN’S EMPOWERMENTIn 2019, clean beauty brand bareMinerals launched The Power ofGood Fund by bareMinerals, a charitable initiative supporting women’s
empowerment. Through this program, the brand has donated 1%
of sales from US boutiques and bareMinerals.com to the Hopewell
Fund 2 to benefit organizations that support women’s education,
mentorship, and entrepreneurship. Additionally, bareMinerals employees have the opportunity to volunteer 1% of their time under thisprogram. In 2019, employees volunteered 600 hours, and the branddonated US$750,000, which helped to empower 142,000 womenand girls around the world.

Supporting the Empowerment of Womenin Japanese Society
Our efforts to empower women in the workplace do not stop at ourown door. We are dedicated to closing the gender gap in Japanesesociety, and work to promote gender equality and a healthy work-lifebalance for working women in Japan. Our initiatives include:
THE 30% CLUB JAPANIn May 2019, the 30% Club, a global campaign led by Chairs andCEOs working to boost female representation on company boards 3,
launched in Japan. Masahiko Uotani, President and CEO of Shiseido,

1
UNICEF does not endorse a specific company, brand, product, or service
2
The Hopewell Fund is a public charity that specializes in helping donors, social entrepreneurs, and other changemakers launch new, innovative social change projects. Donations will bemade based on sales (excluding returns or discounts), running from April 1 2019 through to
December 31 2020 and include a minimum contribution of US$1 million3
The 30% Club was established in the UK in 2010 to increase female representation on company boards through various approaches. It has been implemented in 14 countries and regions so far
and contributed significantly to the improvement of the percentage of female executives

30

Commitment 1

was appointed as the first chair of the 30% Club Japan and sent astrong message to Japanese society: “Given that Japan’s gender gap
index ranks 121st, Japanese companies should play a central role inpromoting social change.”
By participating in the 30% Club Japan, we aim to increase the female
representation on company boards of TOPIX 100 to 30% by 2030.

30% ClubJapan launch
event

And we will contribute outside the beauty industry by taking the initiative to resolve the gender gap in Japanese business community.
THE GENDER EQUALITY AWARENESSPROGRAM FOR YOUNG PEOPLE
Since 2017, in collaboration with United Nations Entity for Gender
Equality and the Empowerment of Women (UN Women), Shiseido
has run the Gender Equality Awareness Program 4. 2,405 people haveparticipated during the three years. The program has taught young
people about the significance of gender equality and provided a forum for discussing how to solve such issues.
SUPPORTING FEMALE RESEARCHERS
Every year since 2007, we have awarded grants to 10 female researchers from the Shiseido Female Researcher Science Grant. This enables
them to access and afford services including childcare more easily.
So far, we have supported 119 researchers, over 40% of these haveadvanced to higher positions. By supporting female researchers, we
contribute to advancing research and innovation in cosmetics as well
as science and technology.

SUPPORTING CHILDCARE
We recognize the concerns young families have, particularly during theearly child-raising years. To support them during this time and ensure
a better work-life balance for parents, Shiseido has established two
daycare nurseries — Kangaroom Shiodome (opened in 2003) and
Kangaroom Kakegawa (opened in 2017). They provide a stimulating
environment for our employees’ children. A limited number of places
are available to families who work or live nearby.
In 2017, we set up KODOMOLOGY Co., Ltd. (‘kodomo’ means child inJapanese), a childcare business advising on how to set up in-house day
nurseries at other companies. It also organizes workshops for employees who are raising children, and develops programs to support
children’s behavioral development.

Internal Support for Women’s Empowerment
At Shiseido, we work to establish an organizational culture that unleashes the potential of our employees, helping them to develop theskills and opportunities they need to move forward in their careers.

The Shiseido Female Researcher
Science Grant award ceremony

Given the barriers women still encounter in the workplace, women’s
empowerment is one of our top priorities. We actively promote theappointment of female leaders and support their professional development. As of March 2020, 46.2% of our Board of Directors were women.
As of January 2020, the percentage of women in leadership positions
across our global organization was 52.7%. In our Japanese division,
33.1% of our leaders are female, and we aim to increase this to 40% by
the end of 2020.

Shiseido global leaders
for regions and brands

4
The Gender Equality Awareness Program, co-hosted by UN Women, was concluded uponcompletion of a three-year contract at the end of March 2020

31

COMMITMENT 2

BY 2022

Empowering
People Throughthe Power ofBeautyAt Shiseido, we support a society where people feel empowered and able to lead fulfilling lives. For those whohave an illness or injury, that might not be so easy. They
may feel their social life has been reduced by the physicaland emotional trauma that such conditions have caused.

14 countries/
regions

For more than 60 years, we have supported those suffering from skin and appearance concerns, providing themwith the knowledge and products they need to alleviate
their condition and rebuild their confidence.
Here are the initiatives we have taken to empower people through beauty.

Shiseido Life Quality Makeup
Activity to be Developed
32

Commitment 2

Empowering
People Throughthe Power ofBeautyPerfect Cover Series
In 1956, we initiated Shiseido Spots Cover to help relieve the distresspeople affected by keloid scars felt. Applying light technology (complementary colors), we launched Perfect Cover Foundation, a foundationthat naturally covers skin concerns including birthmarks and scars.
Alongside Perfect Cover Series, we developed Shiseido Life Quality
Makeup, a makeup method that responds to serious skin problems
such as bruises and scars. This program currently operates in fivecountries/regions around the world: China, Hong Kong, Japan, Singapore, and Taiwan.

Supporting Cancer Survivors

Reception at Shiseido Life Quality
Beauty Center in Singapore

Since 2008, we have provided consultation for appearance-related
concerns, many of which were the side effects of cancer treatment.
In 2019, we published the Beauty Book for Cancer Patients, whichcontains beauty techniques to cover skin discoloration and loss ofeyebrows and eyelashes. This book has been given to 385 hub hospitals for cancer treatment in Japan and is available free of charge on
the Shiseido Life Quality Makeup website (https://corp.shiseido.com/
en/sustainability/slq/).

LAVENDER RING MAKEUP& PHOTOS WITH SMILES

Since 2018, we have co-sponsored the LAVENDER RING. The LAVENDER
RING is a multilateral project involving volunteers from Shiseido,
local governments, corporations from other industries, patientgroups, and medical institutions, all of whom share the same visionof a society in which cancer fighters and survivors can live their lives
feeling confident and good about themselves.
Shiseido is a principal supporter of MAKEUP & PHOTOS WITH SMILES,
which uses the power of makeup and creativity to encourage thesocial reintegration of cancer patients and survivors. Our support
promotes understanding of the illness to realize a society where
people can live with a smile even if they have cancer.

33

Commitment 2

Supporting the Elderly

Supporting People with Visual Disorders

In 2013, we developed an evidence-based cosmetic therapy program, which integrates elder care skills and many years of researchfindings. At present, we organize seminars for healthy elderly people
as well as those who need care, with the aim of extending healthy life
expectancies.

In the 1980s, we began developing beauty teaching materials, including Braille textbooks and adhesive labels embossed in Braille, tosupport the visually impaired. We publish a CD four times a year entitled Fashionable Moment (Oshare-na Hitotoki) with beauty tips anddonate it to about 80 Braille libraries throughout Japan. Our cosmetics advice website, Shiseido Listener’s Café uses text-to-speech (TTS)
software. In 2019, in cooperation with organizations for the visually
impaired, we developed Guide Make, a makeup method for people
with visual impairments. We plan to organize Guide Make seminars
throughout Japan.

In these seminars, Shiseido beauty therapists give makeup tips andteach exercises for the mouth and arms in order to promote physical and mental health. We also have a training program with lectures on cosmetic therapy for healthcare professionals, nursing careproviders, and general attendees. These seminars are held uponrequest from nursing facilities and various organizations in China,
Japan, and Taiwan.

Supporting Patients with Xeroderma
Pigmentosum (XP) 1
In order to support patients who suffer from ultraviolet hypersensitivity, and cannot be exposed to sunlight, we donate sunscreen
products and conduct seminars on sunscreen usage, given byresearchers and beauty consultants to help XP patients effectively
protect their skin and enjoy outdoor activities.

We developed
an evidencebased cosmetic
therapy program1
XP is an intractable disease that causes a severe sunburn reaction, such as redness andswelling of areas exposed to UV rays. As the fundamental treatment has not yet been established, a proper light shield (i.e., blocking UV rays) is the only viable countermeasure

We donate sunscreen
products and conduct
seminars on sunscreen
usage to XP patients34

COMMITMENT 3
FOR SOCIETY

FOR EMPLOYEES

Shiseido Group Supplier
Code of Conduct

Behavior expected of every individual
working for the Shiseido Group

Shiseido Group
Procurement Policy

Safe and rewarding
place to work

Shiseido Group Sustainable
Raw Materials Procurement
Guidelines

Business is always conductedaccording to high ethicalstandards

Shiseido Group
Standards of BusinessConduct and Ethics

Shiseido Group
Policy on Human
RightsPromotingRespect for
Human Rights
Respect for human rights is written into our DNA and is
integral to our working principles. It is part of our definitionof running a sustainable business and contributing to therealization of a sustainable global society.
Across the Shiseido Group, we have standards and policies
to protect the human rights of our employees and partners.
It is how we build trust among consumers, partners, and societies around the world; and it is how we ensure thatcurrent and future stakeholders find our company a safeand rewarding place to work.
Since 2015, we have followed the Shiseido Group Standardsof Business Conduct and Ethics, which stipulate the mandatory behavior expected of every individual working for the
Shiseido Group. With this code of conduct, we ensure thatour business is always conducted according to high ethicalstandards, as well as in compliance with national, local, andinternal laws and regulations.

35

Commitment 3

Respecting
Human Rights

Shiseido Group’s Policies on Human Rights
Adopted in 2017 and revised in May 2020, the Shiseido Group Policyon Human Rights acts as our corporate philosophy and is basedon the United Nations Guiding Principles on Business and Human
Rights. It promotes our efforts to respect human rights and sets out
guidelines as to how we can fulfil our responsibilities. It applies to
the Shiseido Group and all our business partners 1.
These policies are approved by Shiseido’s Board of Directors. Our
Chief Social Value Creation Officer, Chief Supply Network Officer, andChief People Officer are responsible for communicating all policies toour employees and implementing them throughout our value chain.
This includes human rights due diligence and risk assessment.

Human Rights Due DiligenceThrough dialogues with local and global human rights experts, andvarious NGOs and NPOs, we have deepened our understanding of
human rights abuses and labor problems and identified areas where
the related risks are likely to be high. For example, in the procurement of raw materials such as palm oil and mica.

Every year
we conduct training on the
Shiseido Group Standards ofBusiness Conduct and Ethics
and/or related policies and rules

Since 2017, we have participated in a stakeholder engagement
program, organized by Caux Round Table Japan in Tokyo. Throughdiscussions with experts, NGOs, and NPOs, delegates identified
important issues for the industries represented, using the humanrights guidance tool produced by the United Nations Environmental
Program / Finance Initiative (UNEP FI). These discussions confirmedthat child labor and forced labor are likely to exist in the cosmetics
industry supply chain.
In 2019, we met with World Benchmarking Alliance (WBA), Corporate Human Rights Benchmark (CHRB), Verisk Maplecroft, and Rishi
Sher Singh (an Indian consultancy with expertise in human rights

and supply chain) to discuss human rights. The aim was to identify
issues that need to be addressed in companies as well as in society
in general.
In addition, we continue to assess and manage human rights risks in
our cosmetics product development, especially in our supply chain.
For more details on risk assessment and management, please see
the ‘Responsible Procurement’ section on p. 21.

Education and Training in Ethics and Equality
Every year, we conduct training on the Shiseido Group Standards ofBusiness Conduct and Ethics and/or related policies and rules. Thistakes place through various internal programs, such as position-specific training, in order to promote a better understanding of ethicalbehavior among all Shiseido employees. Everyone at Shiseido, fromtop management to all employee levels, must undertake this training.
In 2019, we held harassment training sessions for officers and department managers in Shiseido HQ and the Japan region. For all our
employees in Japan, we conduct equality training. The sessions focus
on realizing a work environment where all employees are treatedfairly and equally.
To support our supply chain, we brought in external experts totrain buyers belonging to the Global Headquarters Procurement
Department. The training covered the latest trends within sustainable procurement, and topics included risks related to human rights
and labor conditions; health and safety; the environment; and ethics.
1
For other policies relating to business partners, please see the ‘Responsible Procurement’ section on p. 21:• Shiseido Group Supplier Code of Conduct• Shiseido Group Procurement Policy• Shiseido Group Sustainable Raw Materials Procurement Guidelines36

Commitment 3

The participation rate for these sessions was 70%. In addition, allof our EMEA buyers attended responsible procurement training
sessions to support the implementation of EcoVadis, the new socialand environmental audit system.

Supporting our People
BASIC POLICY REGARDING PERSONNEL AFFAIRSOur employees are our most important asset. As part of our
PEOPLE FIRST policy, we promote personal development to increaseindividual competencies and help each of our employees to fulfill
their potential. Boosting competencies across our organization is,in our view, the key to enhancing the corporate strength of theentire Group.

We aim tobuild a culturethat respects
the diversity of
our workforce

DIVERSITY AND INCLUSION
We aim to build a culture that respects the diversity of our workforce
and encourages discussions to stimulate new thinking and value creation. By promoting the empowerment and employment of people
from various backgrounds, we work to create an environment where
each employee feels valued, included, and able to perform to thebest of their ability.

to advance to the next level. The courses offered help participants
gain greater self-awareness, enhance their strategic insight and business acumen, and build global networks.

To address any activity that might compromise our quest for diversity,
we conduct employee awareness sessions where issues are identified
and discussed. We also have reverse mentoring sessions where officers/general managers exchange ideas with junior staff, with a view toensuring transparent and open communication.

HEALTH AND SAFETY OF EMPLOYEESWe promote initiatives that help employees and their families to live
healthily. In cooperation with the Shiseido Health Insurance Society,we launched a domestic campaign in Japan in 2019 to promote‘well-Bi-ing’ (‘Bi’ is the Chinese character depicting beauty). The
campaign consists of six themes: beautiful lifestyle; women’s health;mental health; anti-smoking measures; cancer prevention; work stylereform; and workplace improvement.

CREATING A REWARDING WORKPLACE
Since 1990, we have helped employees advance their careers, while
taking care of their families. This includes childcare facilities (seep.31); up to two weeks of paid leave to encourage male employees
to take parental leave; and a support system for colleagues withyoung families to reduce working hours 2. We are also promoting
alternative work arrangements such as flextime and telecommuting.

The Asia Learning Center was established in Singapore in January
2019 to provide opportunities for employees in the Asia Pacific,
China, and Japan Regions to learn together.

We have also established an office hygiene committee at all our Japanese facilities, and we strive to create a safe and comfortable work
environment through surveys and discussions.

FAIR EVALUATION OF EMPLOYEESWe set out rules and guidelines regarding evaluations, work conditions, and other standard personnel affairs issues. Based on these,
we evaluate individual performance, thereby building a system witha high degree of fairness and transparency. To give employees theopportunity to share their opinion, we conduct the Shiseido GroupEngagement Survey once every two years, to solve any concerns.
DEVELOPMENT OF EMPLOYEES
We motivate employees to acquire leadership skills, functional expertise, and change management capabilities; we also encourage them
to be self-driven when it comes to moving forward in their career.
The Shiseido Leadership Academy gives selected talents the chance2
Shiseido introduced the Kangaroo Staff System throughout Japan in 2007. To support
evening storefront activities, temporary workers take the place of Beauty Consultants (BC)engaged in consumer service activities, allowing them to work shorter hours so they can carefor their children

37Commitment 3

Employees’SocialContribution

Camellia Day: Supporting Women’s Empowerment
Shiseido employees
from France helping out
with renovation workat AFJ, an association
helping women going
through difficulties.
Shiseido has an intra-company donation system and a wide rangeof social activities for our employees to participate in. In Japan, forexample, our Social Studies Day scheme enables our employees toparticipate in social contribution activities instead of coming to work,for up to three days in a year. Under this scheme, employees takepart in activities outside the workplace 1.

As part of our commitment to sustainable development, Shiseido Group contributes to society
through programs that help communities overcome common challenges. We design these programs according to our principles of environment,
society, and culture.

Beach clean-up
with WSL PURE
and Kanoa Igarashi,
one of the world’s
leading professional surfers, inSoorts-Hossegor,
France.

Through initiatives such as these – in Japan and across our organization – employees can become involved in programs that enable themto demonstrate their responsibility to society. We believe that the collective insight, knowledge, and social consciousness gained throughsuch social activities have a positive effect on our everyday work andour endeavor to create value.
Here are some examples of the activities we have initiated to contribute to society:

In May 2019, Shiseido EMEA regional headquarters and local offices
in Europe co-hosted Camellia Day, which saw employees in each location engaging in different activities in support of women’s empowerment. More than 500 employees in 11 countries contributed theirprofessional skills and know-how to different projects such as renovation work at women’s shelters and homes for the elderly; operational
assistance to refugee support groups; and face and body care services. These activities helped to provide support for women in needand people facing difficulties.

The Shiseido Camellia FundThe Shiseido Camellia Fund is backed by charitable contributions
from current and retired Shiseido Group employees. We use it tofinancially support NPOs and NGOs tackling social issues. The minimum donation is 100 yen for employees, and 1,000 yen for retirees(long-term employees over the age of 60).
The list of candidate organizations that are eligible for financial
support from the Camellia Fund is examined and revised based on
feedback from employees, and according to our environmental, social, and cultural principles. In 2020, it became a global initiative withdonations now being made by Shiseido employees all over the world.

SHISEIDO Blue Project
Under the title of Respect Oceans, Protect Beauty, brand SHISEIDO
introduced the SHISEIDO BLUE PROJECT in 2019. As part of our sponsorship of the World Surf League Championship Tour, we launchedthis global project to protect the oceans. Beach clean-ups are amongits key activities. We will continue to sponsor WSL competitions andpromote environmental activities alongside WSL PURE (the WSL’s
ocean protection nonprofit).

At Shiseido Spain,
employees offer faceand hand massage services for elderly people
at Sanitas association.
1

The Social Studies Day scheme is mainly implemented in Japan

38

03

Enriched
Culture03 Enriched Culture

Using our heritage
to create new value
and enrich culture.

COMMITMENT 1

COMMITMENT 2
40

We believe it is important to nurture our heritage and usethat experience to continuously create social value — now and in
the future.
At Shiseido, we build on almost 150 years of company history — one
that reflects continuous transformation and dynamic innovation.
This is our anchor as well as our source of inspiration for the future.
We use our heritage to enrich corporate culture, giving our leaders
the long-term view they need to perpetuate the cycle of social andeconomic value creation driven by beauty. By sharing our heritage
with the world, we hope to inspire other cultures with a vision of
beauty born in Japan.

COMMITMENT 1

Drawing on our Heritage
and Culture to Imagine
a Better Future

In this chapter, we show how we share our corporate values andculture with our leaders and employees, as well as our stakeholders
and society.
COMMITMENT 2

Inspiring the World witha New Sense of Japanese
Beauty41

COMMITMENT 1

Drawing on our
Heritage andCulture to Imagine
a Better Future

Shiseido’s DNA

PEOPLEFIRSTART &SCIENCEUNCOMPROMISINGQUALITY

DIVERSITY

JAPANESEAESTHETICSOMOTENASHI

Our corporate culture has been passed down from one
generation to the next. We will continue to do this using
our unique heritage to stimulate talent development andcultural growth.
Through institutions such as the Shiseido Corporate
Museum and digital platforms like our website, we sharethe underlying DNA of Shiseido, which we have inherited from our founders and predecessors. By making ourarchives accessible to Shiseido employees as well as
people outside the company, we hope that our philosophy and aesthetics will be an inspiration and the sourceof new values and cultural initiatives.
Our cultural heritage also inspires a leadership mindset.
Shiseido’s core principles and culture are used to train
global leaders. By passing on our high ethical standards
and the aesthetics of beauty to the leaders of tomorrow,
we hope to enrich society in the long run.

42

Commitment 1

Promoting Our
Corporate Heritage

The First Shiseido
Exhibition at the
Takashimaya
Department Store

Shiseido Exhibitionat Nihombashi
Takashimaya
department store

Through the Shiseido Corporate Museum and various
digital platforms, we provide learning tools and offer
training opportunities to visitors and employees fromall over the world, with a view to sharing our corporate
philosophy and DNA.

In 2019, we held our first exhibition in collaboration with the
Nihombashi Takashimaya department store in Tokyo. Entitled Beauty,
and Beauty, and Beauty. Shiseido Styles (in Japanese: ‘Bi to, Bi to, Bi.
Shiseido no Sutairu’), the exhibition focused mainly on communicating
our craftsmanship and unique aesthetic sensibility through productdesign and advertisements.

Thanks to our dedicated media and communication efforts, combinedwith liberal sharing of archive material and articles on cosmetics, ourcorporate heritage has become widely known.
Shinzo Fukuhara (1883-1948), son of Arinobu Fukuhara and inheritor of
the Shiseido Corporation, was a photographer himself. He used art toelevate the value of cosmetic products and in this way achieve businessgrowth. Shiseido Corporate Museum also preserves many materials andworks related to the founders’ philosophy.

ShinzoFukuhara

Thanks to great exposure on social media, the exhibition attracted
more than 30,000 visitors, many of whom were younger people. The
exhibition was also a great opportunity for Shiseido employees to revisit
our cultural heritage and take pride in our company’s achievements.

43

COMMITMENT 2

Let the productspeak for itself
Richness ineverything

Inspiring theWorld with a
New Sense ofJapanese Beauty
Art and science are deeply ingrained in Shiseido’s DNA,and we continue to nurture both through our activities.

Brands must be
international

Shinzo Fukuhara, the first president of Shiseido once
said, “richness in everything,” meaning that art and science come together to create the sense of richness thatis the source of beauty and essential to value creation.
In life as well as in business.
To put this idea into practice, we tap into our network ofartists and exhibition venues to develop programs thatcan educate and inspire our employees. By stimulating
their sense of beauty and appreciation of aesthetics, wehope to inspire value creation and product innovation.

WORDS BY SHINZO FUKUHARA, WHO BECAME
THE FIRST PRESIDENT OF SHISEIDO IN 1927

44

Commitment 2

Nurturinga Sense of Beauty
Through Art

In 2019, the Japanese artist Shuta Hasunuma was awarded the 69th
Art Encouragement Prize for New Artists in the field of media artsfor the exhibition Shuta Hasunuma ~ ing. The prize was given by the
Ministry of Education, Culture, Sports, Science, and Technology.
Alongside our external art-promoting activities, we also give our employees the opportunity to learn more about art and artistic craftsmanship, which we hope will inspire them to transform art into value
creating activities for our business.

Shuta
Hasunuma :~ ing

In 2019, we put together a special program of exhibitions and workshops for our employees. It included an exclusive guided tour of thesixth Tsubaki-kai1 member; Chiharu Shiota’s large-scale solo exhibition, The Soul Trembles at the Mori Art Museum; a trialogue held byparticipating artists of the exhibition, Craft for All of Us II at Shiseido
Art House; and a workshop by the British architect group ASSEMBLE
at the Shiseido Gallery.

Granby Workshop: The Rules of
Production, Art Changes theEveryday—Shinzo Fukuhara’s
Aesthetics Shinzo Fukuhara/
ASSEMBLE, THE EUGENE Studio II
2019 marked the 100th anniversary for Shiseido
Gallery, the oldest art gallery in Japan. The gallery
has always been renowned for its constant efforts
to support young and future-oriented artists, andfor the way it explores and pushes the frontiers ofcontemporary art.

1
Tsubaki-kai is a group exhibition established when Shiseido Gallery resumed activities
after temporary disruption during the Second World War, with hopes for peace, revival, andmanifestation of Japanese art culture. It was named Tsubaki-kai after Hanatsubaki (camellia
flower in Japanese), the corporate mark of Shiseido. Since its start in 1947, the Tsubaki-kai
exhibitions have become one of the Gallery’s most popular and representative activities. The
membership of the group has changed with each iteration over 70 years. Upon the conclusionof the seventh Tsubaki-kai in 2017, a total of 86 artists participated45

Commitment 2

Hanatsubaki Cultivates
New Insight and Brand
Awareness

Shiseido began publishing a corporate magazine in
the early 1920s. The first magazine was published in
1924 under the title, Shiseido Geppou (Japanese forMonthly Report). In 1933, the title was changed to
Shiseido Graph and four years later to Hanatsubaki(Japanese for camellia flower), which is the name it
has held ever since.
Hanatsubaki is now published in two versions, a quarterly printed
magazine and an online web magazine. Even though the content ofeach version is different, both editions seek to inspire their readerswith a broad variety of topics – from insights on cosmetics to social
issues and activities, and the latest trends in lifestyle and fashion.
This way, the magazine provides its readers with new knowledge on
key topics while cultivating an awareness about Shiseido’s brands
and business.
To communicate our heritage and aesthetic sense more effectively
to a wider audience, Hanatsubaki was issued in English in 2019 andin Chinese in 2020.

Opening of the
S/PARK Museum

Hanatsubaki
magazine

Introspection of
S/PARK Museum

In April 2019, we opened the S/PARK Museum.
Housed on the second floor of The Shiseido Global
Innovation Center, S/PARK is an admission-free interactive beauty complex, where visitors can learn aboutstate-of-the-art technologies unique to our researchlabs and explore different manifestations of beauty
through various interactive installations and activities.
We hope S/PARK Museum will inspire consumers and partners fromall over the world. At the same time, we hope it will be the place
where Shiseido employees go to revisit the craftsmanship and theheightened aesthetic sense we inherited from our founder. Since
opening, the museum has welcomed 50,000 visitors.

46

Trustworthy
Governance04

Trustworthy Governance

Trustworthy
Governance

Shiseido’s Policy on Corporate Governance
Shiseido regards Corporate Governance as a basis for both economic
and social value creation for sustainable growth, and as one of the
key elements for our ESCG management.
By implementing transparent, fair and agile management throughdialogues with our stakeholders (consumers, business partners, employees, shareholders and society and the earth), we aim to maximize
our corporate value. In addition, while fulfilling social responsibilities,
the Company aims to achieve optimized distribution of values torespective stakeholders.

Key Attributes
DIVERSIFIED BOD MEMBERS
The Company believes that its Board of Directors should be composed of directors with various viewpoints and backgrounds, on top
of multilateral sophisticated expertise, for effective supervision overthe execution of business as well as decision-making on critical matters. Furthermore, the Company believes that audit and supervisoryboard members should have the same diversity and sophisticatedexpertise as the directors since they have a duty to attend meetingsof the Board of Directors and state opinions as necessary.

CORPORATE GOVERNANCE WITH AUDIT AND SUPERVISORY
BOARD STRUCTURE
The Company has adopted the framework of a company with theaudit and supervisory board system, which exercises the dual checking functions whereby business execution is supervised by the Boardof Directors and audited for legality and appropriateness by the audit
and supervisory board members. In order to maintain and improve
management transparency, fairness, and speed that are provided in
the basic policy for corporate governance within the framework, theCompany has incorporated superior functions of a company with anominating committee, etc., and a company with an audit and supervisory committee, reinforcing supervisory functions of the Board of
Directors.
Read more

PROMOTING SCHEME, ORGANIZATIONThe Company sets up meetings of the Executive Committee, in which
corporate officers study and discuss matters of important businessexecution from various aspects before final decisions. Thereby,
the Company drives delegation of power for business execution byclarifying corporate officers’ responsibilities and accelerating business execution. In addition to the above, corporate officers hold
Decision-Making Meetings of Corporate Officers to make decisions
regarding the execution of business in their respective businessdivisions, as well as deliberate matters to be proposed to the Boardof Directors and the Executive Committee. The Board of Directors isable to make decisions quickly.
The Board of Directors has a function of supervision over the execution of business as well as decision-making on critical matters of theCompany. With a view to promoting transparency and objectivityof the Board of Directors, the Company has a policy of the ratio of
external directors on the board.
Read more

In addition, the Global Risk Management & Compliance Committee
and the Headquarters/Shiseido Japan Compliance Committee havebeen established to handle compliance and risk management andreport directly to the President and CEO. These committees collaborate with compliance organizations at regional headquarters locatedin major regions around the world and provide overall direction for
activities that improve corporate quality, including the promotion oflegal compliance, fair business practices, and risk countermeasuresacross the Group. The President and Representative Director makes
proposals and reports on important issues and progress of compliance activities to the Board of Directors as appropriate.
REMUNERATIONThe Company regards the directors and corporate officers remuneration policy (remuneration policy for the directors who concurrently
serve as corporate officers, as well as for the corporate officers) as
an important matter for the corporate governance. For this reason,in accordance with the following basic philosophy, the directors, audit
and supervisory board members and corporate officers remuneration policy of the Company is deliberated in the Remuneration
Advisory Committee chaired by external directors by incorporating
objective points of view, and the outcome is reported to the Boardof Directors for resolution.
Read more

AWARDED IN JAPAN
Selected as winner of the METI Minister’s Awardfor the Corporate Governance of the Year 2019
Selected as one of the winners of the Corporate
Value Improvement Award for FY2019

Read more48

Implementation Framework and Actions Toward COVID-19

Implementation
Framework

Actions Toward
COVID-19

Shiseido is pursuing and realizing sustainability
across the Company, including in our brand andregional businesses.
In 2019, the Social Value Creation Division was set up. The newly
formed division was formed to accelerate the creation of social
value by integrating three key functions: Sustainability Strategy,
CSR, and Corporate Culture. Its major responsibilities are:
1.
2.
3.
4.
5.

Defining areas that need particular focus,
Setting company-wide goals and KPIs,
Committing to internal and external achievements,
Tracking progress and support as necessary, and
Educating our employees and all stakeholders.

In 2020, we launched the Sustainability Committee, a dedicated unit aimed at ensuring timely management decisions anda stronger awareness of this theme. The committee is held ona regular basis to discuss Group-wide sustainability initiatives,to decide on the strategies, policies, and activity plans, and tomonitor progress. It consists of the CEO and corporate officers
in charge of Corporate Strategy, Finance, R&I, Supply Network,
Corporate Communications, HR, and Brands, as well as corporate auditors. Other corporate officers are periodically involved
depending on the matter at hand.
Particularly important matters are submitted to the Board of
Directors for approval.

Hand Sanitizer
The COVID-19 pandemic has deeply affected our lives
and will have long-lasting consequences for economies and societies worldwide. The pandemic has also
caused shutdowns in the retail sector globally, putting
a stop to our activities.
Despite this situation, we have strived to support
those most in need. From the early stage of the pandemic, we put the safety of our employees, business
partners, and consumers first, promptly responding to
the situation by creating a COVID-19 Emergency Task
Force in early February 2020. This team has been
responsible for channeling our safety guidelines
across all the regions we operate in.

As the virus spread, we have implemented a number of initiatives
across all regions. They include the production of a hand sanitizer
specially developed for sensitive rough skin, which was distributed
to medical institutions around the world, as well as the launch of
the Relay of Love Project in China.

Hand Sanitizer Production
Shiseido EMEA at the Val de Loire factory began the production ofhand sanitizer as early as March, producing 375,000 units in total;
Shiseido Americas at the East Windsor factory followed, distributing
mainly to New York and New Jersey medical institutions, local seniorcenters, and first responders.
Factories in Japan started hand sanitizer production in April, witha total monthly quantity of 200,000 units. Supplies were mainly
distributed to medical institutions and facilities in Japan. To satisfy thehigh demand for hand sanitizer from consumers, we initiated direct
sales to the public in August, firstly distributing to stores in Tokyo,
Japan. We plan to expand sales areas in response to market needs.

49Actions Toward COVID-19

Other regional headquarters/affiliates have also contributed tocommunities. Shiseido EMEA donated to the Red Cross, and Shiseido
Korea to Hope Bridge Korea Disaster Relief Association. In terms ofrelief supplies, Shiseido Indonesia distributed face masks to NPOs;
Drunk Elephant provided skincare products to healthcare workers
at US hospitals; and Shiseido Japan prepared hand sanitizer andskincare kits for Japan Medical Association.

Relay of Love ProjectInternal Actions

Below is a list of the key organizations we supported in China.

Guided by our PEOPLE FIRST principle, we promptly implemented
working from home (WFH) and other flexible work arrangements forour employees around the world. In Japan, flexibility in work styles
was provided to up to 23,000 Shiseido Group employees. In addition,
we have given our employees the option of flextime, reduced working
hours, and a special paid leave scheme for up to 20 days for those
who have to provide care for their children, as a result of the government-imposed school closures.

RELAY OF LOVE PROJECT, PHASE 1 (FROM FEBRUARY):• Wuhan Charity Federation and Shanghai Charity Foundation(a fund donation);• China Women’s Development Foundation, specifically the frontline medical teams in the Hubei province and at the hospitals in
Shanghai (hand cream distribution); and• Hospitals/medical teams (hair care services and productdonations).

While continuing to focus on the wellbeing of our employees andserving our consumers with the utmost care and safety, we are also
responding to the new market realities. Our measures include accelerating digital transformation; increasing flexible work arrangements;
and deploying some of the new practices suggested in Shiseido’s
internal SMART WORKING STYLE guideline. Turning what was initiallya challenge into an opportunity, we believe this is the chance for all of
us to maximize our productivity regardless of where we work.

RELAY OF LOVE PROJECT, PHASE 2 (FROM END OF JUNE):• China Women’s Development Foundation and the China Youth
Development Foundation formed the Woman Support LOVE Fundand the Youth Support LOVE Fund, respectively.

The pandemic has brought people, businesses, and governments
together. At Shiseido, we are working to harness the momentum of
this cooperation into a ‘new normal’ that is more sustainable, collaborative, and resilient.

Shiseido began the Relay of Love Project in February in the hopethat everyone affected may return to health and safety as soon as
possible. Our support has come in the form of fund donations aswell as relief supplies, amounting to CNY 75 million in total by theend of June.

We are working
to harness themomentum of thiscooperation intoa ‘new normal’ thatis more sustainable,collaborative, andresilient.

50

External Evaluations and Awards

External Evaluations
and Awards
SRI Indexes Selection Status
Shiseido received positive evaluations from Socially Responsible Investment (SRI) evaluation institutions ofcountries worldwide and was selected for inclusion as a constituent company for SRI indexes, which takeaccount of companies that are highly trusted by society in terms of ethics, environment, employment, andsafety in their operations, in Japan and overseas. The period of selection appears in brackets.

Global

FTSE4GOOD INDEX SERIESSRI indexes that are announced by the UK’s FTSE
Russell and used by investors as one of the sets of
ESG ratings. They are a series of indexes designed
to promote investment in companies that meetglobal environmental/social/governance standards.
(June 2019)MSCI ESG LEADERS INDEXES 1
Index that is designed by the US’s MSCI and selects companies that demonstrate strong environmental, social, and governance (ESG) practices.
(July 2019)1
The inclusion of Shiseido Company, Limited in any MSCI INDEX, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement or promotion of Shiseido Company, Limited by MSCI or any of its affiliates. The MSCI INDEXES are
the exclusive property of MSCI. MSCI and the MSCI INDEX names and logos are trademarks or service marks of MSCI or its affiliates

Japan
Shiseido was selected for inclusion in all three ESG indexes that the Government Pension Investment
Fund (GPIF) adopted at the start of ESG investment operations in July 2017.

FTSE BLOSSOM JAPAN INDEX
Index that is designed by the UK’s FTSE Russelland selects Japanese companies that demonstratestrong environmental, social, and governance(ESG) practices. (June 2019)MSCI JAPAN EMPOWERING WOMEN INDEX (WIN) 1
Index that is designed by the US’s MSCI and selects
Japanese companies that receive a high score for
empowering women and promoting gender diversity.
(July 2019)

Shiseido has been continuously selected forexcellence in ESG practices since the introductionof the index in 2017.

Shiseido has been continuously selected forexcellence in ESG practices since the introductionof the index in 2017.

MSCI JAPAN ESG SELECT LEADERS INDEX 1
Index that is designed by the US’s MSCI and selects
Japanese companies that receive positive evaluations of environmental, social, and governance(ESG) practices. (July 2019)

SNAM SUSTAINABILITY INDEXSNAM sustainability index is a proprietary active
index created by Sompo Japan Nipponkoa AssetManagement which combines ESG (environment,social, and governance) and equity fundamental
evaluation. (June 2019)

Shiseido has been continuously selected forexcellence in ESG practices since the introductionof the index in 2017.

Shiseido has been continuously selected for excellence in ESG practices since the introduction of theindex in 2012.

51

Environmental Data

Environmental
Data

Energy
Unit

2016

2017

Energy consumption

MWh290,691

288,760

Coverage rate 1

%

97%

97%

Unit

2017

Total of CO2

t

89,00091,483Coverage rate 2

%

97%

97%

t

31,63831,332

%

95%

96%

Scope 2t57,36360,151

Coverage rate 2

%

98%

98%

Scope 1
Coverage rate

1
2

2016

2

2018
83,24096%
29,623
94%
53,617
97%

2019

1
2
3

97%

MWh

117,145

115,933

108,452

115,228

Gas 2

MWh

139,342

138,922

126,255

131,330

LPG

MWh

3,336

3,932

2,941

2,771

Fuel 3MWh

24,98825,13624,112

24,169

Steam

MWh

5,879

4,837

5,771

24,286

Unit

2016

2017

2018

2019

Water consumption

Mil. m3

1.2

1.2

1.2

1.2

Coverage rate 1

%

100%

100%

100%

100%

All our sites
Total value of city gas and natural gas consumption
Total value of gasoline, kerosene, diesel oil, and fuel oil consumption

97%
31,995Water

95%
51,71498%

Scope 3

Total of Scope 3

96%

297,784

83,709The performance data was calculated based on the GHG Protocol. Scope 2 was based on the market-based method
All our sites

Unit267,530

2019

Electric power

CO2
Scope 1&2 1

2018

2019

t

2,649,895

Purchased goods and services (Category 1)

t557,375

Use of sold products (Category 11)t

1,595,207

End of life treatment of sold products (Category 12)t99,999Total of other categories 1

t397,3141

Municipal water

Mil. m3

0.9

0.9

1.1

1.0

Surface water

Mil. m3

0.2

0.1

0.1

0.1

Ground water

Mil. m3

0.1

0.1

0.1

0.1

Net fresh water consumption

Mil. m3

0.2

0.3

0.3

0.3

Water discharged

Mil. m3

1.0

0.9

1.0

0.9

All production sites

Calculation method: https://corp.shiseido.com/en/sustainability/env/policy/pdf/footprint.pdf
1

Total of the categories of 2, 3, 4, 5, 6, 7 and 13

52

Environmental Data

Waste

Responding to Environmental Risks
Unit

1
2

2016

2017

2018

2019

Waste dischargedt13,823

14,915

15,665

16,890Coverage rate 1

%

89%

91%

88%

92%

Recycled 2t

13,041

14,423

14,425

15,944

Disposed

t

783

492

1,240

946

All our sites
Including thermal recovery

In terms of environmental law, the operation of our production sites is key. Including
those functions, Shiseido observes environmental laws and regulations thoroughly byconducting compliance evaluation based on ISO 14001 standards.
Investigations of domestic and overseas affiliates revealed no major violations of environmental laws or regulations in 2019.
Shiseido is committed to appropriate operation that complies with the environmental
laws and regulations continuously.

Environmental Pollution (Air/Water)
Unit
NOx emissions
Coverage rate 1
SOx emissions
Coverage rate 1
Chemical oxygen demand
Coverage rate 1
1

2016

2017

2018

2019

t

6

5

4

13

%

85%

54%

55%

82%

t

1

0

0

0

%

77%

54%

55%

82%

t

213

98

116

103

%

85%

92%

100%

100%

All production sites

53Social Data

Social Data

Ratio of Female Leaders (%)
Indicator

Indicator

2017

2018

2019

2020

54.8

52.7 1All Shiseido
Group

Ratio of female
leaders

As of January 1 each year inJapan and as of December 31 of
the previous year outside Japan

53.2

53.9

Japan

Ratio of female
leaders 2
Target: To achieve
40.0% in 2020

As of January 1 each year

29.0

25.1

32.3

33.1

Number of Shiseido Group Employees
SCOPE: Shiseido Group in Japan (22 companies)
Indicator

PeriodTotal (persons)

As of January 1 each year in Japanand as of December 31 of theprevious year outside Japan

Female Ratio(%)

All ShiseidoGroup

As of December 31 of theprevious year

2017

2018

2019

2020

45,09444,90045,493

46,763

84.7

83.8

83.1

85.6

1
2

Ratio of female junior managers in all Shiseido Group: 54.2%
Leaders: Manager position holders and annual salary system employees

Diversity in Top Management
Indicator
Ratio of Female Directors on the Board (%)

April 2019

April 2020

33.3

37.5

Number of Employees by Region (persons)
Indicator

PeriodJapan

As of January 1 each year

SCOPE: Shiseido Group in Japan (22 companies)

2017

2018

23,27623,505201924,346

2020
24,884

Ratio of Employees with Disabilities 1 (%)
Indicator

PeriodShiseido Company, Limited
Shiseido Group in Japan 2
TargetAs of June 1 each year

2017

2018

2019

3.3

3.19

3.25

2.02
2.0

2.05
2.2

2.12
2.2

1
Ratio of Employees with Disabilities: Physically and intellectually disabled persons are included, and the employment rate for disabled persons is indicated by three significant figures
Shiseido Group in Japan: 10 special subsidiary companies of Shiseido Group2

54

Social Data

LTIFR 1 and OIFR 2

Editorial Policy

Indicator

Shiseido
Group inJapan 3

1
2
3

2016
LTIR

2017
LTIR

2018
LTIR

0.96

0.59

0.73

Employee coverage (%)

100

100

92.1

Indirectly hired employees (temporary staff)
3 major companies

—

—

0.00

Employee coverage (%)

—

—

38.8

Directly hired employees

2019
LTIFR
0.87

The Sustainability Report is edited according to the following policy.
OIFR
0.00

100
0.00

0.00
39.6

Lost Time Injury Frequency Rate (LTIFR) = Number of work-related accidents/Total hours worked x 1,000,000
Occupational Illness Frequency Rate (OIFR) = Number of work-related illness or disease cases/Total hours worked x 1,000,000
Shiseido Group in Japan (2019): Shiseido Company, Limited and 9 consolidated subsidiaries

Percentage of Corporations with Labor Union (%)
Indicator

Period

2017

2018

2019

2020

Shiseido Group in Japan

As of January 1
each year

25.0

26.3

29.4

29.4

45.9

68.4

68.4

68.4

Shiseido Group outside Japan 1 (coverage 100%)
1• We report the activities that lead to the solution of social issues and the rolethat we play in a sustainable society. We explain how we create social value that
we provide as a company to various stakeholders.
• Scope: Based on Shiseido Company, Limited and the Shiseido Group(81 consolidated companies, as of December 31, 2019).
• Target period: Mainly fiscal 2019 (from January 1, 2019 to December 31, 2019).
Some data include content which is prior to the target period or is more recent.
• Our sustainability initiatives are also disclosed in our Annual Report.
• Some environmental and social data are third-party certified, which is marked
with for environmental data and for social data.
• Assurance Statement— for Environmental Data
— for Social Data

Including work council

Spending on Social Contribution Activities (millions of Japanese yen)
Indicator
Shiseido Group in Japan 1

Spending on donations
Breakdown

All Shiseido Group

Donations made by product offerings

Spending on donations
Breakdown

1

Donations made in cash

2018

2019

210

563

210

562

1

0.37

324

687

Donations made in cash

311

673

Donations made by product offerings

13

14

Shiseido Group in Japan: Shiseido Company, Limited and 19 domestic affiliated companies subject to consolidation (as of December 31, 2019)55

SHISEIDO SUSTAINABILITY REPORT 2019
PUBLISHED BY SHISEIDO CO., LTD.
WROTE AND EDITED BY SOCIAL VALUECREATION DIVITION, SHISEIDO CO., LTD.
DESIGNED AND PRODUCTION BY:
KONTRAPUNKT WITH CREATIVE DIVISION,SHISEIDO CO., LTD.

SHISEIDO CO., LTD.
7-5-5, GINZA, CHUO-KU, TOKYO, JAPAN+81-(0)3-3572-5111
https://corp.shiseido.com/en/