SECTION 03

SECTION 01

Responding to Social Issues —Foundation for Sustainable Growth—

Daio Abundant and Affable Future 2030
The Daio Group will achieve the Three Well-beings (Hygiene, Life, and Regeneration) to realize anabundant and affable future through the four pillars of our management philosophy that haveunderpinned our business operations since our establishment.

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

We will ensure a link between solutions to social issues that we have beenaddressing and the SDGs to be achieved by the world community, thereby
contributing to the attainment of the SDGs through our business operations.
Daio Group
Sustainability Vision

1. Hygiene
Three Well-beings

Protect well-beingof the bodyD
Four pillars of ourmanagement
philosophy andsocial issues that
we have beenaddressing

Hygiene

2. Life

We will make hygiene products
accessible, inspire good habits, protect
people’s health, and realize an inclusive
society in every community.

A

Dedicated

Dedication to manufacturing

Enhance well-being of lifestyles

Attentive

Bonds with local communities

1. Strategic transformation of our business portfolio

4. Coexistence with local communities

2. Acceleration of global expansion

5. Establishment of a sustainable supply chain

3. Creation of new businesses
As a manufacturer that is the closest to customers, we
embody our sales philosophy: “What is made by Daio is soldonly by Daio sales representatives.”
By identifying society’s needs quickly, we have reflected theminto our business operations, products, and services.

Our united efforts with local government andcommunities, as well as related industries, including
papermaking, conversion, distribution, and logistics,
have led to the development of Shikokuchuo City, theplace of our founding, into Japan’s top city of paper.

Life

We will provide services that enhancelifestyles, improve the quality of life, andenable people to lead happy andenriching lives.

I

3. Regeneration
Restore well-being of theearthIntegrated

Corporate culture providing safety andmotivation to work

6. Respect for human rights, development of human resources,
and compassion for employees

O

Regeneration

We will actively conserve the environmentand regenerate the earth back into a planetwith abundant nature where diverse
organisms coexist and thrive.

Organic

Contribution to the global environment

8. Response to climate change
9. Realization of a recycling-oriented society

7. Fair and highly transparent management

10. Forest conservation and maintenance of biodiversity

Believing that employees are a company’s driving force, we establisheda health insurance association in 1958. Since then, we have beenworking on employee health and vitality from a management viewpoint,
and are fully committed to human resource development (e.g., foreign
language training, study abroad programs, and technical skills training).

Inheriting our founder’s tenet, “Should our business cause pollution in
my hometown and disturb the local community, we had better not carryon that business,” we have been engaged in forest recycling(afforestation), paper recycling (achievement of a high utilization rate ofrecovered paper), etc.

Structural shift of product mix需要に応じた品種シフ
according to demand ト

Business
operations

Pulp and
紙・
paper
パルプ製品
products

Paper and Paperboard
紙・板紙事業
Business

New
新規事業
Businesses

H&PC事業
H&PC Business

Maintain競争優位を維持
a competitive edge

Newsprint
新聞
and
・洋紙
paper

Industrial
産業用紙
paper

Household
衛生用紙
paper products

※1 *1
CNF
CNF

Converted
加工品
products

Printing
印刷

Corrugated
段ボール
containers

Absorbent
吸収体商品
products

※2 *2
RFID
RFID

Increase 高付加価値化
added value

マーケッ
Market-oriented
ト志向の営業スタイル
sales style
Major initiatives

Sales of environmentally friendly products● Environmentally conscious products

Contribution toachieving the SDGs

(e.g., using recovered paper)● Products that reduce plastic waste● Forest Stewardship Council (FSC)-certified
paper● Reduction of plastic use

Sales of products against infectious diseases● Masks, sanitizing wet wipes, and paper towels

Provision of products and services for an
aging population● Provision of services to reduce caregivers’ anxiety

and burden● Sales of products for active seniors

57

Integrated Report 2023

Major initiatives

Contribution to invigorating and developing
local communities● Coexistence together with local business

partners● Preservation and creation of employment

through capital investment● Formation of a pulp and paper industrial

cluster

Coexistence with and support for the local
community of each production base
● Invigoration of the local economy● Cooperation with local communities toward

establishing essential infrastructure,including water supply for daily use andirrigation

※1 *1
CNF
CNF:
：セルロースナノファイバー
Cellulose nanofiber
※2 *2
RFID
RFID
（Radio(radioFrequency
frequency
Identification）
identifier): Contactless：ICタグ（非接触型の電子タグ）
electronic smart tag

Major initiatives

Major initiatives

Respect for human rights and diversity

CO2 emissions reduction, absorption, and fixation● Empowerment of female employees (increasing the● Transition to biomass fuelpercentage of female managers)● Promotion of paternity leave uptake● Employment of the disabled● Effective use of waste fuelDevelopment of global human resources● CO2 absorption and fixation through forestation● Energy saving and improvement in energy use efficiency● Improvement of logistics efficiency and promotion of modal

shift● Reinforcement of language training programs● Overseas training programs for young employees

Work-style reform and health and productivity management● Promotion of paid leave uptake● Promotion of smoking cessation rates and improvement

Reduction, reuse, and recycling (3Rs)● Achievement of a high utilization rate of recovered paper● Recycling and reuse of waterof mental health care

Integrated Report 2023

58

SECTION 01

SECTION 03

Material Issues and Contribution to Achieving the SDGs
To solve each of the material issues that it has identified, the Daio Group has formulated business

Four Pillars of Our Management Philosophy

D

Life

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

strategies and initiatives, and has set numerical targets for the relevant key performance indicators (KPIs).

Solving Social Issues through Business Operations[Newsprint and paper business]

Acceleration of global expansion[H&PC domestic business][H&PC overseas business]● Increase the domestic market share of the absorbent products business● Promote multi-category business in the countries of the Daio Group’s operation● Establish a multi-category business model● Enter new markets and build the business foundation

Creation of new businesses[Industrial paper and containerboard business]● Strengthen the downstream printing business● Continue to ensure a stable supply in Japan[New businesses]● Radio frequency identifiers (RFID, or IC tags)

KPI Targets for FY2030
Number of fields where CNF is commercialized
Major Initiatives

A
Attentive

Coexistence with local communities

Life

Establishment ofa sustainable supply chain

Respect for human rights,
development of humanresources, and compassion for
employees

I

Life

Contribution to
the global
environment

Regeneration

59

FY2021 Results

FY2022 Results

2

2

2

FY2020 Results

FY2021 Results

FY2022 Results

22,000

1,805

2,778

4,787

● CSR procurement● Forest certification

Supplier survey response rate
Suppliers with a survey score of 3.5 or higher out of 5
Retention of forest certification in Japan and abroad

100％
90%
100%

87%
56%
100%

95%
62%
100%

96%
61%
100%

● Promotion of diversity & inclusion

Female managers(entire company)*1 10.0%(H&PC)*2 13.0%(assistant managers and supervisors)*2
Female leaders
Number of female leaders (assistant managers and supervisors)*2
Female managerial-track employees*2
Paternal leave uptake*1
100.0%
Annual paid leave uptake*1
90.0%
Disabled employees*1
2.8%
Average overtime work hours (of non-managerial employees)*1 10.0h
Number of applicants for the Daio Career Challenge system*2,*3
Number of employees using the distance learning subsidy scheme*2
Employees with a TOEIC score of 600 or higher*2
30.0%
Number of participants in overseas career workshops*2
Three-year retention of new-graduate employees*4
90.0%
22.0％
Employees with a smoking habit*1
0.69
Lost time injury frequency rate*1

2.2%
3.5%
9.0%
21
15.0%
6.3%
67.2%
2.3%
20.8h
20
158
14.4%
23
75.0%
26.1%
1.11

2.8%
5.4%
8.3%
19
15.8%
28.9%
71.7%
2.4%
22.5h
36
143
15.7%
74.7%
23.9%
1.14

5.2％
5.6%
11.1%
24
18.4%
79.3%
72.6%
2.2％
19.9ｈ
14
113
15.6%
176
82.2%
30.0％
1.01

46%
Reduction in fossil fuel-based CO2 emissions (compared to FY2013)*5
Energy intensity
1% reduction per year

10.3%
Not achieved

3.2%
Not achieved

7.0%
Achieved

15.7%

15.7%

14.2%

98.7%
Water: 1.6%
COD: 3.0%

98.4%
Water: 5.6%
COD: 9.9%

97.1%
Water: 10.5%
COD: 6.0%: Promote women’s advancement

Fair and highly transparent management● Sustainably enhance effective and highly transparent governance system

Response to climate change● Transit to biomass-derived fuel, effectively use waste fuel,and adopt other measures toward decarbonizationLife

FY2020 Results

Number of certified Attento Meister Professionals: Provide compassion for employees: Promote smoking cessation● Safety and health: Eliminate lost time injuries

Organic➡ Improve technological and development capabilities
and create and preserve employment● Use RFID to enhance operating efficiency and promote work-style reform● Sell environmentally friendly products (e.g., those that reduce plastic use)
● Sell products against infectious disease (masks, sanitizing wet wipes, etc.)● Number of certified Attento Meister Professionals● Health and productivity managementO

KPI Targets for FY2030● Contribute to local development at each overseas base

Relevant SDGs

● Provide stable supply of water for daily use and irrigation that supports local: Promote paternity leave uptake: Promote annual paid leave uptake: Employ the disabled: Reduce overtime work hours: Develop human resources

Integrated

Corporate culture
providing safety
and motivation
to work7➡ Preserve employment by continuing the operation of machines

agriculture and dairy farming in Chile

HygieneBonds withlocal communities Regeneration

Relevant SDGs

● Make a shift from paper to containerboard● Accelerate overseas expansion● Cellulose nanofiber (CNF)
Regeneration

SECTION 04

Fulfilling Our Purpose

Business Strategies● Review the production system and sales structure

SECTION 03—Value Creation Story of the Daio Group—

Strategic transformation of ourbusiness portfolio

HygieneDedicated

Dedication to
manufacturing

Material Issues

SECTION 02

Realization ofa recycling-oriented society

Forest conservation andmaintenance of biodiversity● Promote the use of hard-to-recycle recovered paper (by increasing the content ofRecovered paper content in containerboard

recovered pulp in containerboard at the Mishima Mill, our core paper mill)● Realize zero waste emission● Promote water circulation for reuse and purification of wastewater throughproper wastewater treatment

Waste recycled
Reductions in water intensity andwastewater COD intensity● Protect the Patagonian cypress, a designated natural treasure in Chile, in cooperation with a local NGO● Breed and release endangered fish Kawabata-moroko in cooperation with Tokushima Prefecture

30%
100%
1% reduction per year
(sales-based)

Preservation of the approx. 280 km2 of existing natural forests
Increase in the forested area
150 km2 (by FY2050)

Canceled due to the
COVID-19 pandemic

No change
No change
No change
Approx. 0.3 km2 Approx. 4.0 km2 Approx. 2.0 km2*1 The KPI targets for FY2030 and the FY2022 results are consolidated figures. The FY2020 and FY2021 results are non-consolidated figures. *2 The KPI targets for FY2030 and the FY2020, FY2021, and FY2022
results are non-consolidated figures. *3 The Daio Career Challenge system is an internal open call system. *4 The KPI targets for FY2030 are consolidated figures. The FY2020, FY2021, and FY2022 results are
non-consolidated figures. *5 The amount of emissions from subsidiaries that became part of the Daio Group in and after the reference year 2013 is included.

Integrated Report 2023

Integrated Report 2023

60

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

Dedicated

SECTION 02

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Acceleration of global expansion Elis Heart Support Project
HygieneLife

Mishima Mill, Daio Paper

Material Issues:

Strategic transformation of our business portfolio / Acceleration of global expansion / Creation of new businesses

As a manufacturer that understands its customers’ needs, weoperate based on the belief “what is made by Daio is sold only
by Daio sales representatives.” While providing high-quality
and value-added products and services, we are striving torealize people-friendly manufacturing in harmony with theglobal environment.
As a full-range paper manufacturer engaged in the production
and sale of paper, containerboard and home and personal

Our sustainable growth● Increase of our brand profile at home
● Establishment of a foundation for making inroads into the African market

We are keen to help developing countries solve social issues, such as the spread of infectious diseases caused by the lack of widespreadhygienic practices and the inability to escape poverty since insufficient access to proper education prevents people from becoming self-reliant.
Since 2018, under the Elis Heart Support Project, we have been working in Africa to reduce infectious diseases through education on anddissemination of how to make cloth sanitary pads, and to support access to vocational training. In FY2023, we supported the making of clothsanitary pads, fostered peer educators,*1 provided information on sexuality and hygiene, and offered counseling by nurses in a community
space in Zambia. We will continue to provide support for hygiene improvement and women's independence, and expand our businessglobally at the same time by building a foundation for expansion into Africa as well as increasing our brand profile at home, in conjunction
with projects aimed at solving social issues.
Utilize social
networking services
in Japan to call for
support, increase ourbrand profile, andenhance purchaseintention.

care products, we quickly identify new social needs andissues in a wide range of fields, reflect that knowledge into
our research and development that creates new value andalso into our flexible production systems, and ensure hightransparency in our procurement process and thoroughness
in quality management. By doing so, we will realize “trusted
manufacturing” and co-create value and achieve sustainablecorporate growth and the solution of social issues.

Shaping an abundant and affable future for the world
Co-creation of value

Trusted manufacturing

Solution of social issues

Thorough quality management

Major Initiatives
Strategic transformation of our business portfolio Entry into the pet care products market

Regeneration

61

Integrated Report 2023

Solution of social issues● Reduction, reuse and recycling (3Rs)

The total number of dogs and cats kept in Japan has reached approximately 15.89 million.*1 Spending on each pet is increasing due to the increasein the average life span of pets and the change in pet-keeping styles as pets become part of the family, leading to the expansion of the pet-related
market. Under the Daio Group Sustainability Vision, we aim to realize a society where people and diverse organisms coexist and thrive. To thisend, we have entered the pet care products business with the desire to deliver products and services that enrich the lives of pets and their families
and make them feel happy by utilizing the product development capabilities and production technologies that we have cultivated through the
Elleair brand. By utilizing production rejects and scraps generated in the process of producing household paper and disposable diapers as raw
materials for paper-based cat litter, we have established anenvironmentally-conscious business model*2 and will continue to
For system toilet
For normal litter box
Pet
Diapers
Wipes
Cat litter/toilet sheet
Cat litter
sheetsreduce environmental impact at the same time.

*1: A ccording to the “2022 National Survey
on Dogs and Cats Ownership in Japan,”conducted by the Japan Pet Food Association*2: F or details on the establishment of anenvironmentally-conscious business model,
please refer to page 79.
* I nitiatives for achieving Target 5 of Goal 12

Teach local girls how tomake cloth sanitary pads.

Distribute the clothsanitary pads at thecommunity space.

HygieneOur sustainable growth● Business expansion through new business launch

Build a foundation for future
expansion into Africa andenhancement of brand profile incountries where we provide support.

Solution of social issues● Development of environmentally-friendly products in the automobile, sports, beauty care andother fields contributing to a better quality of life
● Transition from fossil fuel materials to non-fossil fuel derived materials

Flexible production systems

Market-oriented sales style: what is made by Daio is sold only by Daio sales representatives

Our sustainable growth● Launching new products in growing fields

Make cloth sanitary pads.

Creation of new businesses Application development of cellulose nanofibers

Life

Identify social needs and issues and reflect that knowledge into products and services quicklyLife

Prepare cloth and sewing
machines to make clothsanitary pads.

*1: Peer educators are people who provide education and communicate information to their peers. “Peer” means “companion” or “friend.”* Initiatives for achieving Target 3 of Goal 3, Target 5 of Goal 4, Target 1 of Goal 5, and Target 17 of Goal 17

Management Philosophy

Our sustainable growth

Solution of social issues● Hygiene improvement (control of infectious diseases)● Access to vocational training, etc.

https://www.elleair.jp/hs/

Basic Approach

Highly transparent procurement process

SECTION 04—Value Creation Story of the Daio Group—

Dedication to Manufacturing

Research and development that creates new value

SECTION 03

Regeneration

Regarding cellulose nanofibers (“CNF”), whose related market is expected to be worth 6 trillion yen by 2050, we are developing manufacturing
development processes that make full use of the facilities, technologies, and know-how that we have accumulated as a pulp and paper manufacturer,
and developing applications that take advantage of the various functions of CNF, which paper and pulp do not have. Furthermore, with the growing
need for CNF as a material that can contribute to the realization of a low-carbon society through the use of CNF to reduce product weight and plastic
usage, the number of CNF samples we have provided increased significantly, and product development and adoption are progressing. Based on our
Mishima Mill's strengths of utilizing diverse pulp and being able to supply CNF in various forms and fiber sizes to meet user needs, as well as our vision
of “Three Well-beings,” we are aiming to commercialize products using CNF in seven fields, including medical & healthcare products, paper products,
household goods, and automotive parts, and have so far commercialized products using CNF in two fields. To develop new applications, we have also
started semiconductor material development in collaboration with Tohoku University, the University of Tokyo, and the National Institute of Advanced
Industrial Science and Technology. We will accelerate the development of CNF manufacturing technology and applications by maximizing the use of
the pilot plant for CNF composite resin, which has been in operation since FY2021, and aim for early commercialization of a wide range of applications,
including construction materials, functional additives, and consumer electronics products. https://www.daio-paper.co.jp/en/development/cnf/❷ Paper products and❸ Sports products Commercialized
household goods Commercialized❶ Medical & healthcare
products

1

Hygiene❹ Construction materials ❺ Functional additives

ThreeWell-beings

2

Life

3

❻ Automotive parts❼ Consumer electronics products

Regeneration©SAMURAI SPEED(FY) 2018 result

CNF commercialization
fields1

2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

1

2

2

2

3

5

7

* Initiatives for achieving Targets 2 and 4 of Goal 8, Target 5 of Goal 9, Target 2 of Goal 12, and Target 16 of Goal 17

Integrated Report 2023

62

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

Attentive

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Contribution to invigorating and developing local communities
Life

Bonds with Local Communities① Through dialogues with local residents and internal studies,
Forestal Anchile proposed and constructed facilities for taking
water from the Puquitrahue River, which runs through the foreststhat it owns, and storing it in tanks via approximately 2,300 mof water pipes. The company is currently in discussions with the
Chilean government to construct a drinking water supply system
for approximately 70 households in the area using the facilities.
② Forestal Anchile is protecting approximately 60 water sources
for domestic use and irrigation in the forests that it owns bydesignating them as areas with high conservation value, and is
improving water intake facilities and providing water storage
tanks as needed.

Material Issue:

Coexistence with local communities

Basic Approach
As a global corporate group with operating bases in eight countries,
the Daio Group aims to be a good corporate citizen and earntrust throughout the world. We actively support local initiatives tocontribute to local development while realizing coexistence withlocal communities through our business operations.

Our group company, Forestal Anchile LTDA. (Chile, South America), practices sustainable forest management and continues to engage in dialogue
with indigenous communities and strengthen their rights in accordance with the New York Declaration on Forests. The city of Purranque, Chile,where the forests owned by the company are located, suffers from water shortages every year during the dry season, and the company is working todevelop infrastructure together with the community to help secure water for local residents' daily needs.

Both at home and abroad, we will continue to hold plant
tours for local residents and students and participate in local
communities. We hope to enhance their understanding of ourbusiness operations and we aim to grow harmoniously with local
communities.

Forestal Anchile also offers materials and skills training in fruit
cultivation, knitting, cooking, and other skills to indigenous groups,
as well as cooperates in cultural activities. The company supports
local residents in the acquisition of skills and knowledge that willlead to local economic development and personal growth.

Irrigation tank

Skills training for local residents

Intake from the Puquitrahue River

Two water tanks set on the premises ofa school in Los Riscos* Initiatives for achieving Targets 3 and 4 of Goal 2, Target 4 of Goal 6, Target 1 of Goal 11, and Target 16 of Goal 17

Management Philosophy

Shaping an abundant and affable future for the world

Material Issue:

Establishment of sustainable supply chain
Harmonious growthwith local communities

Basic Approach

Response to declining birthrate and aging population

Contribution to invigorating and developing local communities

Coexistence with and support for local communities

We are striving to contribute to community development sothat vulnerable communities can live without worry, by, forexample, providing services that will lead to the extensionof healthy life spans and supporting the establishment of
a community-based integrated care system. To respondto the declining birthrate and aging population, we areproviding support for people to enjoy comfortable lives.

While respecting various international norms and eachcountry and region’s laws, cultures, religions, customs,
etc., we will contribute to developing people’s daily
lives, cultures and industries around the world throughour global business operations.

We are striving to enhance understanding of ourbusiness operations by, for example, holding plant
tours for local residents and students, promoting
local sports, and participating in volunteer activities.
While contributing to each country and region’s
development, we will continue to grow together withlocal communities.

Major Initiatives

Lifehttps://www.daio-paper.co.jp/wp-content/
uploads/2210en.pdf

Integrated Report 2023

suppliers, conduct fair and equitabletransactions, and work to mutually
improve and develop quality and technicalcapabilities.

3. We cooperate with our suppliers toformulate a business continuity plan
(BCP) and monitor and promote its
implementation, aiming to secure a stablesupply system.

Establishment of sustainable supply chain CSR Procurement: Procurement based on the Daio Group Sustainable Procurement Guidelines Based on the SDGs
Life

Regeneration

If a company that does not take social responsibility in terms of human rights and the environment is left unchecked in our supply chain,
this may lead to boycotts of our products and a decline in our brand value. To avoid this, we have formulated the Sustainable Procurement
Guidelines Based on the SDGs, which include compliance with laws and regulations on human rights, environmental conservation andpreservation, and health and safety, and fair and equitable transactions, as well as BCP and contributions to local communities, so that
we and our suppliers can work together to fulfill our social responsibilities. To confirm that our procurement is in accordance with theguidelines, we conduct a questionnaire survey of our suppliers every year. With a response rate reaching 96%, 61% of the respondents
received a rating of 3.5 or higher on a 5-point scale this year. We have provided explanations to small-scale suppliers with low
evaluation scores for the purpose of promoting the SDGs, and will continue to request and provide support for improvement to achieve
CSR procurement throughout the supply chain.
(FY) 2018 result

Attento Meister Professional Search(FY) 2018 result

2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

465

1,273

1,805

2,778

4,787

6,700

12,70022,000*1: “Comfortable and effective incontinence care” means incontinence care that is secure and comfortable for both the caregiver and the recipient.
*2: Daio Paper’s adult disposable diaper brand* Initiatives for achieving Target 4 of Goal 3, Target 5 of Goal 8, Target 3 of Goal 11, and Target 16 of Goal 1763

2. We build good partnerships with our

Major Initiative

As the birthrate declines and the population ages, there is the risk of a decline in the quality of care
at nursing care facilities due to a shortage of nursing personnel. In addition, research has shown thatincontinence problems can affect healthy life spans, and we believe that it is necessary to improve thequality of care by increasing the number of human resources with knowledge of incontinence care
at nursing care facilities. To that end, under the slogan of “comfortable and effective incontinencecare,”*1 we are encouraging nursing care workers and others to get certified as “Attento Meister
Professional” to promote the acquisition of appropriate knowledge about the correct use of Attentobrand*2 disposable diapers and advice, suggestions, and support related to incontinence care. We
began this initiative in 2017, and as of the end of June 2023, we have certified a total of 5,011 people
as an “Attento Meister Professional,” with the goal of having 22,000 certified by FY2030. Through the“Attento Meister Professional” initiative, we are aiming to realize effective support for incontinencecare that is secure and comfortable for both the caregiver and the recipient.
Number of certified Attento Meister
Professionals

social norms and internal rules,
respect the cultures and customs ofthe countries where our suppliers
are located, and fulfill our corporatesocial responsibility by giving due
consideration to human rights,
environmental conservation, safety
and health, and contributions to local
communities in our supply chain inorder to realize a sustainable society.

Daio Group Sustainable Procurement Guidelines
Based on the SDGs

Realization of comfortable and effective incontinence care Secure and comfortable for both the caregiver and the recipient
Hygiene1. We comply with laws and regulations,

At the Daio Group, we perform
procurement activities based on the Daio
Group Sustainable Procurement Guidelines
Based on the SDGs in line with the stancedescribed on the right.

Supplier survey response
rate
Number (percentage) of
suppliers rated 3.5 or higher
on a 5-point scale
Retention of forest
certification at home andabroad2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

‐

‐

87%

95%

96%

100%

100%

100%

‐

‐

56%

62%

61%

75%

85%

90%

100%

100%

100%

100%

100%

100%

100%

100%

* Initiatives for achieving Target 7 of Goal 8, Target 3 of Goal 10, Targets 4 and 6 of Goal 12, Targets 1 and 2 of Goal 15, and Target 16 of Goal 17

Integrated Report 2023

64

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Major Initiatives

Integrated

Promotion of diversity & inclusion
To expand our domestic and international Home and Personal Care (“H&PC”) Business, which is a growth engine for sustainable
development, as well as new businesses, we are focusing on the development of diverse human resources. In FY2019, we established theDiversity Committee, chaired by the President and Representative Director, to reform our corporate culture and create an environment
so that diverse human resources can take on challenges and play an active role. In particular, we consider the empowerment of female
employees to be one of the most important issues for the expansion and growth of our H&PC Business, and we are working to increase
the number of female employees on the managerial track and to increase the percentage of female managers to 10% by FY2030 (5.2% in
FY2022) through various training programs, including cross-industry exchange training for women.
To date, we have been developing female leaders (section heads and chiefs) who are candidates for next-generation managers whileworking to (1) recruit and foster excellent human resources, (2) introduce support and systems for balancing work and childcare, (3)promote understanding of diversity within the company and reform the corporate culture. We will continue to promote the empowermentof female employees by focusing on the implementation of leadership development training programs, mid-career recruitment of female
managers, improvement of the gender gap in balancing family and work, and measures against unconscious bias.

Life

Corporate Culture Providing Safety and Motivation to Work

Material Issues:

Respect for human rights, development of human resources, and compassion for employees / Fair and highly transparent
management ▶ Corporate Governance from p.81

Issues and Actions in Human Resources Strategy and Future Vision
Aiming for sustainable growth, the Daio Group is promoting
human capital management through measures for promotionof diversity & inclusion, development of human resources, andcompassion for employees.
We will also create innovation by increasing the engagementof each and every employee, which will lead to a sustainable
increase in corporate value and realize our management

philosophy of “Shaping an abundant and affable future for theworld.”
To further improve employee engagement, we have changed
from the conventional “Employee Satisfaction Survey” to the“Engagement Survey” from FY2021, to visualize engagement
and identify operational issues at each unit.

Reinforcement of the diversity promotion system

OutcomeAchievement of 10% female
manager percentage (FY2030)● Established the Diversity Committee (2019)● Innovation through achieving diversity in decision-making in

feminine care product planning and other specialized areas● Mid-career recruitment (female managers)● Next-generation leader (manager) training

Declarations and statements

External evaluations

Increase in female leaders(section heads and chiefs)● Endorsement of WEPs (2021)● Nadeshiko Brand (2014, 2016 and 2018)● Declaration of commitment to being a company where● Bloomberg Gender-Equality Index (2021 and 2022)

100% of male employees take childcare leave (2021)❶ Recruit and foster excellent human resources

Paternity
leave uptake● Increase in the number of female employees on the managerial track

Management Philosophy
declaration

Shaping an abundant and affable future for the world● Provision of designated distance learning courses (e.g., fundamentals for managers)● Introduction of GOO.N SukuSuku Leave (paid leave for childcare purposes) (2017–)● Opening of GOO.N SukuSuku House (facility for employer-provided childcare

FY2019Engagement

p.66

Best efforts

Growth ofindividuals

Opportunities

FY2021● Diversity training for executives and general managers (2021–)● Training to promote understanding of women's health (2021–)

FY2022

FY2023

FY2026

FY2030p.68

p.67

Investment in human capital
p.68

Target company

Percentage of female managers

2.0%

2.2%

2.8%

2.7%

5.2%

6.0%

8.0%

10.0% Consolidated companies*

Percentage of female leaders (section
heads and chiefs)

11.3%

9.0%

8.3%

11.1%

ー

ー

ー

ー

Daio Paper (employees on
the managerial track)

Number of female leaders (section
heads and chiefs)

16

21

19

24

ー

ー

ー

ー

Daio Paper (employees on
the managerial track)

Percentage of female employees on
the managerial track

13.8%

15.0%

15.8%

18.4%

ー

ー

ー

ー

Daio Paper

Percentage uptake of paternity
leave

4.0%

6.3%

28.9%

82.7%

79.3%

100.0%

100.0%

100.0% Consolidated companies*

Percentage uptake of annual paid
leave

78.7%

67.2%

71.7%

75.0%

72.6%

70.0%

80.0%

90.0% Consolidated companies** Consolidated companies (Domestic consolidated subsidiaries subject to legal disclosure requirements)

Development of
human resources

Compassion for employees

Respect for human rights

FY2020● LGBTQ understanding training (2020–)

ResultResultResultResultResultTargetTargetTarget(Unconsolidated) (Unconsolidated) (Unconsolidated) (Unconsolidated) (Consolidated) (Consolidated) (Consolidated) (Consolidated)

Human resources strategy for creating value
Promotion ofdiversity & inclusion● Unconscious bias training (2019–)

services) (2018–)● Introduction of the flextime program, promotion of remote work and promotionof annual paid leave uptake (2020–)● Promotion of paternity leave uptake (2021–)

Innovation

Growth of theorganization❸ Promote understanding of diversity within
the company and reform the corporate culture❷ Introduce support and systems for balancing work and childcareuporate groe corpwth of thle groSustainab(new graduate hires) (2012–)● Provision of female cross-industry exchange training for female leaders (2014–)

TOPICS

Female cross-industry exchange training

Impressions of the training from a participant

The training program, which involves forty to forty-five female employees from nine companies in different
industries, requires participants to work together on an assignment. This enables them to gain exposure
to different corporate cultures, broaden their perspectives,and acquire the practical leadership skills required. Througha curriculum of main training (2 days), 4-month assignment
preparation, and follow-up training (1 day), as well as
dialogue with female managers and networking unique tothe cross-industry training program, each participant learns
how to become a leader who is uniquely herself. The goal
is for participants to be able to further demonstrate their
Scene from the group training
abilities in the workplace after the training program.

During the dialogue with female managers in the main training
session, I was struck by the fact that all of them did not place toomuch weight on “becoming a manager,” which made me realizethat I had unconsciously raised the bar for female managers myself.
Collaborating on a shared assignment with individuals from various
industries was also a rewarding experience. It felt akin to a cultural
exchange and offered a completely different kind of experience
compared to my daily work. It was a valuable opportunity for me toreconsider my career and the way I work.
Participant in FY2022 Mika Eto
Sustainability Promotion Department* Initiatives for achieving Targets 1, 5 and C of Goal 5, and Target 3 of Goal 10

65Integrated Report 2023

Integrated Report 2023

66

SECTION 01

SECTION 03

Mid-level employees

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Health andproductivity
management

Sound and competitive company

Follow-up training

Self-reporting system
Subsidy scheme for distance learning
Workshop by employees with experience working overseas (2018–)
Subsidy scheme for language training
Subsidy scheme for TOEIC test

Feature 1
Overseas Feature“Increase the capabilitiesof human resources”
p.54❶ Promotion of health and productivity management❷ Promotion of safety and health

External evaluations● Daio Group Declaration of Health (FY2014)● Establishment of annual safety activity policy

Committee (2018–)● Smoking cessation program (2019–)● Establishment of Health Consultation Desk (2020–)● Sports club management / Partnership withexternal sports clubs● Implementation of Safety Wednesday web conference● Establishment of Health Management“Daio Career Challenge” internal open call system (2020–)❷ Developmentof global
human
resources

We aim to create a vibrant workplace environment that puts safety and security first, where each employee is able to work with vitality byalways prioritizing safety and security in our operations above all else. We believe that if employees and their families are not in good health,they will not be able to maintain their motivation and focus, which will reduce productivity and even affect business performance. The Daio
Group announced the Daio Group Declaration of Health in FY2014 and continues to hold Health Management Committee meetings chairedby the Chief Health Officer (CHO: General Manager of General Affairs and Personnel Division) to create an environment where employees canwork in good health through efforts to promote their physical and mental health. In addition, with the three pillars of “safe awareness,” “safeenvironment,” and “safe work” to achieve zero accidents, we are committed to protecting the safety of all people working in our business sites
and are engaged in safety and health activities on a daily basis.

New employee training

Designated distancelearning courses

New manager training

Life

Young employees

Career design training❶ Self-directed
careerdevelopment
support /level-based
education

SECTION 04

Compassion for employees

To respond flexibly to the rapidly changing business environment and diversifying needs of consumers, and to remain a sound andcompetitive company, we believe that it is important for each and every employee to think deeply, discuss issues with relevant personnel,
and work as one across organizational boundaries to solve day-to-day problems. As part of our measures to develop self-directed humanresources who think, decide, and act on their own initiative, we have introduced systems to support self-directed career development,such as the Daio Career Challenge (internal open call for employees to select their own career), a self-reporting system (a system thatallows employees to report their preferences for department, work location, etc.), and a subsidy scheme for distance learning. Furthermore,
we are working on measures focused on expanding our domestic and international H&PC business, as domestic demand for paper andcontainerboard is declining year by year due to the progress of digitalization and a declining population. To accelerate global expansion
with the goal of realizing our future vision, “an Abundant and Affable Future” (a future where hygiene habits and products are prevalent
and women are empowered across the world), we are working in particular to develop global human resources.
Managers

SECTION 03—Value Creation Story of the Daio Group—

Development of human resources
Life

SECTION 02

Support system for MBA acquisition

Training at overseas
subsidiaries

Overseas training for technical employees(2019–)

common to all group companies (2014–)(2012–)

Main actions taken

Health & Productivity Stock Selection brand(2019 and 2022)● Workplace improvement through risk assessment● Conducting mutual patrols among group companies● Establishment of counseling desk (2014–)

Mentalhealth care

● Disaster drills based on the assumption of● Mental health awareness training for managers (2016–)

a large-scale disaster● Implementation of mental health check (stress check)● Holding of AED lifesaving training sessions

Selected as White 500(6 consecutive years from 2017)

FY2019FY2020

FY2021

FY2022

FY2023

FY2026

FY2030ResultResultResultResultTargetTargetTarget

Health and productivity
management

Smoking rate

30.5%*1

26.1%*1

23.9%*1

30.0%

29.0%

26.0%

Safety and health

Lost time injury
frequency rate*2

0.90

1.11

1.14

1.01

0.90

0.80

Target company

companies (Member companies of
22.0% Consolidated
the Daio Paper Health Insurance Association)

0.69 Consolidated companies*3*1: The smoking rates from FY2019 to FY2021 are results of Daio Paper on a non-consolidated basis. *2: The lost time injury frequency rate is for the full year.
*3 Consolidated companies (manufacturing subsidiaries in Japan, etc.)

TOPICS

Implementation of “Safety Wednesday”

With the goal of reducing lost-worktime injuries, we hold a “Safety Wednesday” web conference every Wednesday. All groupmanufacturing companies in Japan participate in the conference, with over 200 attendees each time, to share corrective actions
to prevent similar accidents and preventive actions for potential accidents based on accident case studies.
Scene from “Safety Wednesday”* Initiatives for achieving Targets 4, 6 and 9 of Goal 3, Targets 5 and 8 of Goal 8, and Target 2 of Goal 10● Referral recruitment system (2019–)❸ Recruit and foster excellent
human resources● Stock-based incentive system for managers (2021–)

Commitment to human rights● Comeback (rehiring of retirees) system

FY2019FY2020

FY2021

FY2022

FY2023

FY2026

FY2030ResultResultResultResultTargetTargetTargetTarget company

Number of applicants for Daio Career Challenge*1

19

20

36

14

－

－

－

Daio Paper

learning

161

158

143

113

－

－

－

Daio Paper

14.1%

14.4%

15.7%

15.6%

16.5%

20.0%

30.0% Daio Paper

Canceled due to the

176

－

－

74.7%

82.2%

85.0%

87.0%

❶ Number of employees using the subsidy scheme for distance
Percentage of employees with TOEIC 600+

❷ Number of participants in the workshops by employees withexperience of working overseas❸ Retention rate of new graduates after 3 years*

－
75.3%

23 COVID-19 pandemic
75.0%

－

Daio Paper

90.0% Daio Paper

LifeIn May 2021, the Daio Group formulated the Daio Group Sustainability Vision with the aim of realizing our management philosophy of“Shaping an abundant and affable future for the world.” In August of the same year, we expressed our support for the UN Global Compact,which sets forth principles for the protection of human rights, and in October of the same year, we formulated the Daio Group Human
Rights Policy in compliance with the UN Guiding Principles on Business and Human Rights. The Daio Group clearly states “respect forhuman rights” as one of its material issues, based on the belief that a society where the freedom, dignity and inherent rights of every
individual are upheld is imperative to shaping “an Abundant and Affable Future”, which is the Group’s future vision. As we continue toexpand our business globally under the Daio Group Human Rights Policy, we will continue to contribute to the realization of a sustainable
society by establishing a human rights due diligence process and implementing thorough education on respect for human rights, with thecooperation of our business partners.
Implementation of human rights due diligence (2022–)*1: Internal open call system*T he retention rate of new graduates after 3 years is calculated as a 3-year average. (The rate for FY2022 is a weighted average of the 3-year retention rate for new graduates on the
managerial track hired between FY2018 and FY2020.)

TOPICS

Signing of the
UN Global
Compact

Workshop by employees with experience of working overseas(August 2021)

To help employees deepen their understanding of the realities of working overseas, we regularly hold an overseas career
workshop online, in which employees working overseas serve as panelists to explain both the work and personal aspectsof their experience working overseas, such as job scopes and workplace scenes in their respective countries, and engage
in panel discussions. In FY2022, a total of 176 employees participated in the workshop on two occasions, and the rate ofunderstanding and satisfaction with the workshop was extremely high, at approximately 90%.

https://www.daio-paper.co.jp/en/csr/integrated/
respect/* Initiatives for achieving Targets 3 and 4 of Goal 4

Integrated Report 2023

(October 2021)

Commitment to respect for human rights

Scene from a remotely held workshop by employees with experience of working overseas

67

Formulation of
the Daio Group
Human Rights
Policy❶ Assessment of
human rights risks(2022–)❹ Disclosure of
information toexternal parties❷ Implementation of
prevention andmitigation measures❸ Monitoring

Stakeholder engagement
Ongoing human rights education and training (2023–)

Establishment of a grievancehandling mechanism● Establishment of an internal

whistle-blowing system (Corporate
Ethics Hotline)● Establishment of a complaints desk
for suppliers (2023–)● Establishment of the Sustainable

Procurement Guidelines Based on the
SDGs (2020–)* Initiatives for achieving Target 7 of Goal 8

Integrated Report 2023

68

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

SECTION 02

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Major Initiatives

Organic

Response to climate change Reduction of fossil-based CO2 emissions through the development of black pellets
Life

Contribution to the Global Environment

Regeneration
Plantation owned by Forestal Anchile

Material Issues:

Response to climate change / Realization of a recycling-oriented society / Forest conservation and maintenance of biodiversity

We recognize decarbonization as a top priority issue and have formulated a roadmap to achieve carbon neutrality by FY2050. As part of thisroadmap, we are working to stop the use of three coal-fired boilers (full phasing-out of coal) at the Mishima Mill. As one of the measures, weare reducing GHG emissions in the entire region where the mill is located by introducing waste-to-energy boilers that use locally generated
garbage and other waste as fuel, and at the same time we are working to reduce internal consumption of fossil fuel. To further reduce theuse of coal, we are also working on the development of black pellets using bark and sawdust generated in the process of sawing lumber fromlogs. In FY2026, we will start an experiment of mixed firing of black pellets at coal boilers, and eventually, by fueling one boiler with only
black pellets, we will be able to stop two coal boilers*1 and achieve
our fossil-based CO2 emissions reduction target for FY2030 (46%reduction compared to FY 2013).
*1: A chieved through a combination of measures including the shift
from selling biomass-generated power under the FIT scheme to selfconsumption* I nitiatives for achieving Target 2 of Goal 7, Target 5 of Goal 12, and Targets
1 and 2 of Goal 13

Torrefaction

Basic Approach
Daio Paper established the Daio Global Environmental Charter in1993 ahead of any other company in the papermaking industry.
Since then, the Daio Group has been actively committed tosolving environmental problems through its business operations
based on the charter. In May 2021, we established the Daio
Group Sustainability Vision, laying out our initiatives toward
accomplishing the SDGs. To ensure a link between those initiatives

and the previous initiatives in which we have been engaged sofar, as well as to incorporate these initiatives into our business
management, we revised the Daio Global Environmental Charter at
the same time. We will continue environmentally-friendly business
operations toward realizing a sustainable carbon-free society inharmony with the global environment, a recycling-oriented society,and a society that coexists in harmony with nature.

Wood pellets

Promotion of the use of hard-to-recycle recovered paper (hard-to-recycle recovered

Regeneration

The Daio Group will expand its business globally in harmony with the global environment while actively tacklingenvironmental problems with the aim of realizing a sustainable society.

Basic
PolicyFor details of each item,
1. Mitigation of global warming
5. Development and deployment of technologies
read this QR code.
2. Forest conservation and maintenance of biodiversity
and products with lower environmental impact
3. Effective use of resources and environmentally
6. Reduction of environmental load together with supply chain partners
friendly procurement of raw materials
7. Legal compliance and active environmental communication/coexistence
4. Reduction and effective use of wastewith local communities(FY) 2018 result
Ratio of hard-to-recycle recovered paper
pulp in containerboard

14.8%

2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

18.7%

15.7%

15.7%

14.2%

15.4%

17.1%

30%

* Initiatives for achieving Target 4 of Goal 8, Target 5 of Goal 12, and Target 1 of Goal 14

Forest conservation and maintenance of biodiversity

Shaping an abundant and affable future for the world

Regeneration

Future Visions
Carbon neutrality throughout
the supply chain

A recycling-oriented society
with less waste

A borderless society thatcoexists in harmony with nature

Use of clean energy throughout
the world

A shift from plastic to non-fossil
fuel derived materials

An earth that is regenerated backinto a planet with abundant natureand its forest area restored

Reduced GHG emissions

Lower environmental impact

Response to climate change

Realization of a recycling-oriented society

Effective use of sustainable resources

Sustainable recycling of resources

Forest conservation andmaintenance of biodiversity
Sustainable forest management

Energy saving
Energy transition

Reduction, reuse and recycling (3Rs)Material transition

Forestation
Protection of flora and fauna

Integrated Report 2023

At the Mishima Mill, our core paper mill, we collect paper waste that was previously landfilled or incinerated, categorizing it
as hard-to-recycle recovered paper. By separating paper from other non-paper materials, such as film, using our proprietaryprocessing technology, we recover paper as a raw material for papermaking, while recovering the residual waste as fuelfor waste-to-energy boilers for power generation. In FY2022, production activities at domestic mills that generate hard-torecycle recovered paper stagnated, resulting in a decrease in the amount of hard-to-recycle recovered paper generated andcollected, and a decline in the usage of hard-to-recycle recovered paper pulp and its ratio in containerboard. To achieve thetarget (KPI) of 30% of the ratio of hard-to-recycle recovered paper pulp in containerboard by FY2030, we will (1) strengthen
our partnerships with recovered paper generating companies that are not affected by market conditions for recovered
Example of hard-to-recycle recovered
paper exports and discover new types of hard-to-recycle recovered paper through proposal-based purchasing leading topaper <Paper bags with vinyl interiors>
reduction of environmental impact, and (2) consider introducing equipment that can process water- and oil-resistant hardto-recycle recovered paper and miscellaneous paper mixed with vinyl and other materials.
* Ratio of hard-to-recycle recovered paper pulp in containerboard at the Mishima Mill, our core paper millManagement Philosophy

69

Black pellets

Realization of a recycling-oriented society paper that contains contaminants, such as film and plastic)

Daio Global Environmental Charter
Principle

SECTION 04

CO2 absorption and fixation① The Daio Group has set “Forest conservation and maintenance of biodiversity” as an important policy in the Daio Global
Environmental Charter, which was established in 1993, and is working on sustainable forest management based on the
Daio Group Policy on Forest Management. Located in Chile, South America, Forestal Anchile owns approximately 280
km2 of forested land as natural forests, and is also committed to the protection of Alerce (Patagonian Cypress), a natural
treasure said to have a lifespan of over 5,000 years.
The company holds discussions with Chile’s National Forest Corporation and NGOs, and also arranges for a
specialist organization to conduct a habitat survey. It is also using drones to take photos of the areas of operationfrom the sky to confirm that forest management does not have a negative impact on the ecology of plants andanimals. In 2022, Forestal Anchile cooperated with a research group from the University of Los Lagos to conduct
an ecological survey, which revealed that the puma (Felidae),a near-threatened species in Chile, is living in the forests of its
holdings. The company will continue to strengthen cooperation
with related organizations to ensure sustainable forest
management and maintain biodiversity.

大王グループの森林経営に関する方針について大王グループは、「森林と土地利用に関するグラスゴー首脳宣言（Glasgow Leaders’ Declaration on Forest and Land Use ）」（※注 1）
を支持し 、2030 年までに森林減少を終わらせることに貢献します。
森林減少に歯止めをかけて、パリ協定が掲げる 1.5 度目標達成を支援するため「森林に関するニューヨーク宣言（New York Declaration
on Forests: NYDF）」に準拠した次の取組みを持続してまいります。
１） 保護すべき天然林は伐採しません。天然林を伐採して農地や植林地に転換することなく天然林エリアとして維持することで天然林および、そこに生息する絶滅危惧種を始めとする動植物を保護し、生物多様性の保全を推進します。
２） すべての人の人権を尊重し、差別や偏見のある行為を一切行いません。また、児童労働、強制労働はこれを一切認めません。
３） 先住民コミュニティとの対話を継続し、森林認証標準（FSCⓇ、
PEFC 等）に則り持続可能な森林経営に努めます。
４） NDPE （ 森 林 減 少 禁 止 、 泥 炭 地 開 発 禁 止 、 搾 取 禁 止 ＜ No
Deforestation, No Peat, No Exploitation＞）方針に示されている基準を遵守して森林拡大に努めます。
５） TNFD（※注 2）に準拠した情報開示を支持し、生物多様性に関する情報開示に努めます。
６） 植林木の生長量拡大のための品種改良に努めると共に、CO2 吸収、固定化に寄与する植林木の生長量拡大と植林地の拡大に努めます。
※注 1）イギリス・グラスゴーで開催された COP26（国連気候変動枠組条約第 26 回締約国会議）の開幕 2 日目となった 2021 年 11
月 1 日に、国･地域の首脳や代表が、2030 年までに森林減少を食い止めるために各国が協力することを宣言。
※注 2）TNFD（Taskforce on Nature-related Financial Disclosures：自然関連財務情報開示タスクフォース）は、組織が自身の経済活動における自然環境や生物多様性に関するリスクと機会を評価し財務に与える影響を開示する枠組みを決めるタスクフォースとして 2021 年 6 月に設立された。β版のレビューを経て2023 年 9 月にバージョン 1 のフレームワークが公表される予定である。

② The Tokushima Factory of Daio Paper Products
Puma living in the forests owned by Forestal Anchile
Corporation, which is a member organization of
Daio Group Policy on Forest Management
an association breeding and releasing Kawabata-moroko, is working to breed 200 fish that it received from
Tokushima Prefecture in January 2016 using water tanks on its property to breed and release them into the natural environment. The fish population
declined by approximately 50 in the first two years. However, by protecting the remaining fish from birds, setting protective cases for its fry, andmanaging the water temperature, the factory has been successfully increasing the number of the fish since the third year. As of June 2023, 1,466
individual fish were identified. Aiming for further breeding, the factory has added various measures, such as monitoring the water quality, setting
spawning beds, and cleaning the protective cases. The factory will continue to work with local governments and local companies to solve social issues
Kawabata-moroko, endangered
while contributing to environmental education at elementary schools and other schools.
freshwater fish inhabiting the
Yoshino River* Initiatives for achieving Target 6 of Goal 6, Targets 1, 2, 4, and 5 of Goal 15, and Targets 16 and 17 of Goal 17

Integrated Report 2023

70

SECTION 01

FeatureInitiatives toward a Carbon-free Society
The Daio Group declared its commitment to achieving carbon neutrality by FY2050 in May 2021.
In accordance with the Daio Global Environmental Charter, we have been promoting a variety ofenvironmentally friendly initiatives, including energy conservation and the use of biomass fuels.
Recognizing that addressing climate change is one of the most important management

SECTION 02

SECTION 04

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

issues, we will continue to formulate and implement measures in line with the roadmap that we haveestablished to achieve carbon neutrality, while making disclosures and efforts in accordance with therecommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

We will actively work to reduce dependence on fossil fuel by using alternative fuels and applying newtechnologies in cooperation with local communities.
5th MTBP (2024–2026)

6th MTBP (2027–2029)

Timeframe for achieving what is feasible with current technology

FY2030FY204046% reduction in fossil fuel-based
CO2 emissions (compared to FY2013)
Shutting down of 1 + α coal-fired boiler(s)*1

Energy transition

Roadmap to Achieving Carbon Neutrality by 2050

4th MTBP (–2023)

Fullphasing-out
of coalShift from selling biomassgenerated power under the FIT
scheme to self-consumption.

Newly install waste-to-energy power generation equipment.
Reduce coal use by utilizing biomass fuels and waste-derived fuels.

FY2050

Toward achievingcarbon neutrality

Timeframe for trying and implementing new technology
Shutting down of 2 + α coal-fired boilers

Shutting down of all coal-fired boilers

Switch from existing fuels to new fuels (hydrogen, ammonia, methane, etc.).

Reduce coal use at Dainichi Paper (Fuji City, Shizuoka Prefecture).
Full phasing-out ofcoal in the Fuji area

Low-carbon
fuelFull phasing-out of coal
Zero emission energy

Utilize city gas and LNG.

Introduce solar power generation systems.

RenewableenergyStart of operation of mega solar power generationequipment for private consumption
・Kawanoe Mill and Kani Mill, Daio Paper
・Shimada Mill, Daio Paper Products Corporation

Expand utilization through introduction of new technologies(perovskite solar cells, offshore wind power generation, etc.).

Improve efficiency of existing equipment.

Energyconservation

Carbon fixation

Shutting down of the No. 3
paper machine (newsprint)
at Mishima Mill

Start ofexpansion ofplantation area
(Increase 150km2
by 2050)

Estimated CO2 emissions
reduction

4,500

Reduce energy consumption (1%/year) through continued
implementation of efforts for energy conservation.
Enhance CO2 absorption throughforest plantation in Chile, South America.

Collect information on CCUS technologies, including BECCS.
Collaborate with the Shikokuchuo City Carbon Neutrality Council.

Implement CCUS technologies, including BECCS.
Collaborate with the Shikokuchuo City Carbon Neutrality Council.

Contribution to reductionof life cycle environmental
impactDevelop and implement biorefinery technologies (biochemicals, bioplastics, biofuels, etc.).

• Shift from selling power generated
through biomass boilers under the
FIT scheme to self-consumption• Waste-to-energy boiler (Iwaki)

Reference

4,000
3,500

GHG emissions
reduction rate
1.6%
CO2 reduction
rate 3.2%

3,000

Restoration of No. 4biomass boiler at Iwaki
Daio Paper*1: Includes the scenarios where we manage to shut down the next coal-fired boiler or repurpose the next coal-fired boiler to be shut down to use alternative fuels in place of coal.

Use of biomass fuel asan alternative to coal

■ Fossil fuel-based CO2

Start of waste-to-energy boiler
operation at Mishima Mill (shutting
down of first coal-fired boiler)

6.9％
7.2％

10.7％

7.0％
12.5％

11.5％
16.1％

■ Other GHGs

20.1％

Shutting down of
second coal-fired
boiler

4,000
3,500
3,000

42.2％

2,500

40.6％

2,000

46.0％

1,500

2,000

67.4％

1,500

50.7％

1,000

1,000

68.2％

500

500

83.4％
FY2013FY
FY
FY
2021 2022 2023

FY2026(thousand t)
5,000
4,500

23.1％

2,500

0

Negative emission
technologies

Develop and implement applications/products of cellulose nanofiber.

External
contribution(thousand t)
5,000

Transitioning away froman energy-intensive model

FY
FY2029 2030

FY2035FY2040FY2045

FY20500* The amount of emissions from subsidiaries that became part of the Daio Group in and after the reference year FY2013 is included.

71

Integrated Report 2023

Integrated Report 2023

72

SECTION 01

FeatureSECTION 02

SECTION 04

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Initiatives toward a Carbon-free Society

Message from the General Manager of the Production Division

Accelerating our efforts to realize carbon
neutrality in response to the shift toward acarbon-free society
Toshikatsu Tanahashi
Director, Managing Executive Officer
Responsible for Production Unit; General Manager of Production Division;
General Manager of Mishima Mill

Phasing out coal ahead of schedule
Responding to climate change is a pressing global issue,
and it is a natural responsibility for companies to work
to reduce greenhouse gas (GHG) emissions, which are afactor in causing global warming. The paper industry, inparticular, is heavily dependent on fossil fuels at present,
and it is an imperative that we achieve carbon neutrality
by FY2050 through a conscious shift away from fossil fuels
while maintaining the economic rationality necessary forthe company’s survival.
We have established a roadmap for achieving carbon
neutrality by FY2050 from the three approaches of“phasing-out of coal,” “promotion of energy conservation,”and “expansion of carbon sinks.” We aim to reduce fossilbased CO2 emissions in our production activities by 46%
from the FY2013 level by FY2030 and to achieve carbon
neutrality by FY2050, as the basic policy of the roadmap.
The most important initiative is to shut down coal-fired
boilers, and we are working to bring forward the plan to
shut down the three coal-fired boilers at the Mishima Mill,
which I am responsible for, one by one every ten years by
FY2030, FY2040, and FY2050, and to gradually replacethem with alternative power generation facilities.
Looking back to FY2022, the logistical disruptions causedby the COVID-19 pandemic, combined with the impact
of Russia's invasion of Ukraine, caused fossil fuel prices,
mainly coal, to soar sharply especially after the summerof 2022. Due to these rapid changes in the businessenvironment, the Mishima Mill, which uses a large amountof coal, also suffered a major blow to its performance dueto the soaring raw material and fuel prices. In response tothese sudden changes in the business environment, webrought forward the shift from selling power generated
through biomass boilers under the FIT scheme to selfconsumption, which was originally planned for FY2030 orlater, switched 63,000 kW worth of electricity from coal tobiomass power generation in April 2023, and shut down
the No. 3 paper machine that manufactures newsprint inApril, thereby optimizing the mill's energy efficiency. As
a result, we expect to achieve a gradual reduction in theannual coal consumption at the entire company from 1.2
million tons in 2013 to an estimated 950,000 tons in 2023.

 ccelerating energy conservation activities
A
as well73

Integrated Report 2023

Energy conservation efforts are something that each
employee can carry out at the production site tocontribute to achieving carbon neutrality. At our mill, weare conducting the “From the Ground Up Movement,” inwhich we accumulate energy conservation efforts from theemployees one by one. Each member of the production
staff proposes ways to improve energy conservationand shows a sense of ownership by prioritizing andimplementing these proposals. This movement, driven
by the “on-site capabilities” of the production staff, has
become deeply entrenched at our mill. The Daio Group’s
target for energy conservation is 1% reduction in base unit
per sales every year. However, at the Mishima Mill, as raw
material and fuel prices soared, momentum to accelerate
efforts grew throughout the mill, and since the summer of2022, we have concentrated on implementing the energy
conservation improvement activities based on the on-site
capabilities and also made equipment improvements. As aresult, we achieved energy savings of approximately 2.5%.
These activities are being deployed throughout the Daio
Group's production mills.

 hallenges and anticipated risks for futureC
initiatives
To further accelerate our initiatives toward carbon
neutrality, it is important to continue to procure stable
and inexpensive alternative fuels to coal. At the Mishima
Mill, while we have plans to decommission the coal-fired
boilers, we have a plan to build a waste-to-energy boiler.
This is a significantly effective measure for phasing outof coal; however, with the rapid acceleration of efforts toachieve carbon neutrality, not only in the paper industry
but also in other industries, competition to procure fuels
for waste-to-energy boilers is expected to intensify. We are
currently discussing measures to expand the number ofcollection points for stable fuel procurement.
The main raw material for waste-to-energy boilers isrefuse paper & plastic fuel (RPF), which is solid fuel madeby solidifying waste paper and waste plastics amongindustrial waste, which are generally difficult to recycle asmaterials, into pellet form. However, we plan to make thewaste-to-energy boiler to be constructed at the Mishima
Mill able to effectively utilize, in addition to RPF, wastematerials that have been simply incinerated in the past.
The first boiler with this specification in Japan was installed

and started operation at Iwaki Daio Paper in February 2023, andwe have already started collecting and using waste-derived fuelsthat could not be used before. From now on, we will accumulate
know-how on the collection and use of new waste-derived fuels
and accelerate the reduction of coal consumption through theconstruction and operation of the waste-to-energy boiler at theMishima Mill.
Talks are underway in Japan to introduce a carbon tax (carbon
pricing) in 2028, and we believe that the longer we delay ourefforts toward carbon neutrality, the more pronounced thenegative impact will be on our company, both in terms ofcosts, including those related to carbon pricing, and in termsof operation. In the process of increasing our brand appeal toconsumers by shifting our focus toward the Home and Personal
Care Business, our brand image will also be affected by our stancetoward creating a carbon-free society. We place a high priority on
the capital investments necessary to advance carbon neutrality,
and we will continue to make decisions quickly while balancing
investment timing and costs, carbon neutral management, andeconomic rationality.

in waste-to-energy boilers to be constructed in the future. The
majority of household waste is currently incinerated, but many
incinerators are aging and will need to be rebuilt in an increasing
number of municipalities in the coming years. Under thesecircumstances, a growing number of municipalities, particularly
in Ehime, Kagawa, and Tokushima prefectures, are considering
the use of in-vessel composting, which was adopted by Mitoyo
City in Kagawa Prefecture, located approximately 30 km from ourmill. By procuring and using such solid fuel as an alternative tocoal and other fossil fuels, we will be able to both mitigate global
warming and achieve cost savings, which makes economic sense.
This scheme also allows municipalities to dispose of waste at alower cost and at the same time sell the waste as fuel. Since thiswill lead to GHG emissions reduction in the entire Shikoku region,
we would like to be actively involved in what we call the “win-win
cycle for all” of the local government, region, and company.
In terms of logistics, too, we have begun to use double-trailer
trucks to ship products, which will help reduce GHG emissions
while improving transportation efficiency.

 lso contributing to achieving carbon neutrality inA
the region

Pulp and paper manufacturing requires a large amount ofwater. Shikokuchuo City, where the Mishima Mill is located, isan area with little rainfall due to its topography. We have beenable to secure the necessary water volume due to three dams
(Shingu, Yanase, and Tomisato Dams) that were constructedon the Dozan River with the cooperation of the national andprefectural governments, and with thanks to the wisdom andgreat labor of those who came before us. The Mishima Mill puts
in efforts to make effective use of such precious water. It uses
different qualities of water for different purposes, such as for pulp
manufacturing, papermaking, and cooling water. It also reuses
approximately 10% of the used water, such as by filtering it for
use as reclaimed water.
Due in part to climate change, we are suffering from drought
more and more these days. In FY2022, there was a period
in which the water supply was once again restricted, witha reduction of up to 35% at one point, from the standard
availability due to a significant decrease in rainfall. Our culture ofwater conservation and water reuse has been handed down fromgeneration to generation, and with our accumulated know-how
from the past, we have built a system that enables us to operate
without affecting product quality even if we raise the amountof reclaimed water used to about 30%, allowing us to keep themill's production facilities in full operation and continue supplying
customers even under such circumstances. We will continue
to operate with constant awareness of water and energy
conservation.

Based on the idea that activities to achieve carbon neutrality
should be carried out throughout the entire supply chain andregion, the Shikokuchuo City Carbon Neutrality Council in
Shikokuchuo City, Ehime Prefecture, where the Mishima Mill islocated, was established in 2021 to promote the activities. The
council, which initially started with three managing companies,
Daio Paper Corporation, Marusumi Paper Co., Ltd., and Ehime
Paper Mfg. Co., Ltd., has now grown to encompass 24 general
member companies situated in the Shikokuchuo City area. To
date, the council has held a total of five meetings attended
by general member companies in addition to the managing
companies, and with the cooperation of the Ministry of Economy,
Trade and Industry, the Ministry of the Environment, andbusinesses with energy conservation-related technologies, hasprovided information on the latest trends in carbon neutrality
and energy conservation technologies, and conductededucational activities. To realize carbon neutrality by FY2050,
in the first phase until FY2030, the managing and general
member companies are aligning their efforts to utilize biomass,
black liquor, and renewable energy, and to improve the energy
efficiency of existing equipment. The government is promoting
the establishment and implementation of subsidies and othermeasures to support the introduction of renewable energy, while
financial institutions have decided to provide funding for existing
technologies and support for the visualization of emissions.
In this way, the scope of issues handled through the regional
councils is expanding, encompassing matters that would be
difficult for a single company to address, and we are aware that
expectations are growing for companies to take an active role inthe management of regional carbon neutral councils and theiroperations.
In terms of community involvement, we have begun toconsider the use of in-vessel composting technology, whichuses microorganisms to solidify general waste into fuel for use

Effective use of water resources

Message to stakeholders
As a paper mill that uses a large amount of fossil fuels, withunwavering determination and will to become carbon neutral,
we are advancing our initiatives, and we are prepared to expedite
our plans even if just a little ahead of schedule, in anticipation ofchanges in the business environment. On top of that, we will doour utmost to deliver products that will be selected by and satisfy
our customers, and we hope for your continued support.

Integrated Report 2023

74

SECTION 01

SECTION 03

Response to the Task Force on Climate-related Financial Disclosures (TCFD)SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Scenario Analysis

At the same time as formulating the Daio Group Sustainability
Vision in May 2021, the Daio Group expressed its support for
the TCFD recommendations, and it is working to evaluate
climate-related risks and opportunities in line with the TCFD
recommendations and reflect them in the managementof information, including financial impacts.

Governanceunder the FIT scheme to self-consumption.

● Switch from fossil fuels to waste-based fuels through the

Mandatory CO2emissions reduction
obligation scheme
Tightening of
regulations on GHG
emissions● Introduction of GHG emissions

regulations and carbon pricing● Increase in costs due to rising energy

LargepricesRising carbon pricing● Increase in prices of various materials

Shift toenvironmentallycompliant products

Low-carbon energy
transition in goods
transport

installation of waste-to-energy boilers and other measures toshut down one or more coal-fired boilers by FY2030.
● Implement and continue investments in energy conservation
Mediumtechnologies.
● Expand area of forest plantations.
● Promote initiatives such as those through the Shikokuchuo
City Carbon Neutrality Council (including CCUS).
● Burn black pellets in waste-to-energy boilers and coal-fired
boilers.
● Introduce hydrogen and ammonia combustion technology.

Medium

Large

ー

ー

● Choose low-GHG-emitting materials from the first stage of

product development to curb cost increases.

non-compliant products● Decrease in sales due to delay in CFPlabeling● Decrease in demand due to ethicalconsumption● Increase in costs due to the adoptionof new technologies and othermeasures to lower carbon intensity oftransport modes● Fuel switch● Change product design to be environmentally compliant.
● Promote and respond to CFP labeling, etc.
● Promote the use of recycled plastic.

● Promote the modal shift from trucks to coastal vessels and

Small

Small

2030
4°C

2050
4°C

Small

Small

roll-on/roll-off ships, the reduction in transport distances, theuse of double-trailer trucks, etc.
● Adopt new technologies in line with advances in autonomousvehicles, hydrogen or synthetic fuel-powered trucks, etc.

4°C scenario
Furthermore, we recognize that as time
lapses to 2030 and 2050, wildfires andother hazards will increase in some foreigncountries due to the effects of climate change.
With regard to forest resources, we will
diversify procurement sources, increase tree
planting to secure sufficient procurement
volume, select, breed and develop tree
species suitable for the region and climate, as
well as take other measures to reduce risks.

Risks

Description of implications

Strategies and actions● Impact of natural disasters on

Increase in frequencyof typhoons andtorrential rains

Changes inprecipitation andweather patterns
and an increase inaverage temperature

production activities (flooding)● Damage to roads, railroads, andport facilities leading to supply
chain disruptions and suspensionof transportation of goods and raw
materials● Damage to plantation forests andraw material suppliers affecting
procurement stability● Continue to enhance BCP and BCM.

● Diversify suppliers for stable procurement.

Small

Small

● Increase tree planting to secure sufficient quantity of

raw materials.

● Select, breed and develop tree species suitable for theregion and climate of afforested areas.

1.5°C scenario
Opportunities

Description of implications

2030
1.5°C

2050
1.5°C

Changes in consumer
needs
Development of new
products and services
through technologicalinnovation

Effective use of waste
and surplus resources
Recycling of raw
materials
Reuse of materials

environmentally conscious products(FSC products, plastic-replacing andplastic-reducing products)● Increase in demand for products that
help consumers adapt to climatechange (products for sweat control
and emergency preparedness)● Changes in perceptions of recycling● Pressure to reduce industrial waste● Increase in water efficient products
to conserve water resources● Increase in demand for bio-materials

and products

Small

Small

ー

ー

● Cost reduction by establishing a

recycling system for raw materials● Higher consumer satisfaction via

compliance with environmental
policies and requirements

Strategies and actions[Paper & Paperboard Unit]● Increase lineup of products to replace plastic, and lineupof packaging and functional materials.
● Increase lineup of products with forest certification (e.g.
FSC-certified paper).
● Develop CNF materials and RFID technology andincrease lineup of such products.

● Increase in demand for

Resource
efficiency

In FY2022, as part of our social contribution
activities, as shown on page 78, we reduced
the amount of plastic used in productpackaging in the Home & Personal Care(“H&PC”) Business, and released productsthat can help to eliminate and reduce plastic
in the Paper and Paperboard Business. As forcellulose nanofibers (“CNF”), a new material,
we also promoted application development
by supplying samples of CNF-containing
composite resin, which can reduce theweight and increase the strength of products.
We also began developing biorefining
technology that utilize materials from thepaper industry. We will strive to makesignificant improvements in product life cycle
environmental impact for society as a whole.

Products and services

Integrated Report 2023

Strategies and actions● Adopt renewable energy sources such as solar energy.

Chronic

75

2050
1.5°C

● Decrease in sales of environmentally

Opportunities
In the 1.5°C scenario, while climate change poses risks tous, opportunities could also arise from it. As shown in our
Roadmap to Achieving Carbon Neutrality (pages 71 and 72),
we will actively work to reduce our dependence on fossil fuels
by applying our know-how and new technologies to enable
us to use a wide variety of fuels. We will also promote energy
transition by installing waste-to-energy power generationequipment, solar power generation facilities and other such
facilities, as well as promote energy conservation through the
adoption of new technologies. We will work on these as partof our initiatives toward coexistence with local communities.
In addition, by promoting the development of products thatare environmentally conscious or help consumers adapt toclimate change and launching such products in the market,
we will work toward achieving the Three Well-beings(Hygiene, Life, and Regeneration) to embody our philosophyof “Shaping an Abundant and Affable Future for the World.”

2030
1.5°C

● Shift from selling power generated through biomass boilers

Acute

The Daio Group has conducted a scenario analysis in the medium term (until 2030) and longterm (until 2050) based on a 1.5°C scenario and a 4°C scenario to determine how climatechange would impact the domestic businesses of the Paper and Paperboard Unit and theHome & Personal Care (“H&PC”) Unit. When setting the conditions of each scenario, withregard to the transition scenario, we referenced scenarios such as the SSP1-1.9 and SSP5-8.5
scenarios in the Sixth Assessment Report of the Intergovernmental Panel on Climate Change(IPCC), and the NZE and the STEPS in the World Energy Outlook 2022 of the International
Energy Agency (IEA). With regard to physical risks, we conducted risk assessments based ondata from Aqueduct provided by the World Resources Institute (WRI), “Climate Change inJapan 2020” published by the Ministry of Education, Culture, Sports, Science and Technologyof Japan and the Japan Meteorological Agency, Four Twenty Seven, Inc., ENCORE, “Spreading
like Wildfire: The Rising Threat of Extraordinary Landscape Fires” (2022) issued by UNEP,
and other sources. As regards the scale of financial impact of risks and opportunities in the
scenario analysis shown on the right, “Large” indicates an impact of 15 billion yen or more,“Medium” indicates an impact of 5 to 15 billion yen, “Small” indicates an impact of less than 5billion yen, and “-” indicates under analysis.

Description of implications

due to the introduction of a carbon tax

Physical risks
We expect that physical risks such as droughts, storm surges
and tidal waves anticipated in the 4°C scenario will not have asignificant impact on the Group’s domestic and overseas sites,
based on their locations. However, we are aware of the risk ofshort-term disruption of logistics due to flooding of less than
50 cm in the mills and surrounding areas caused by torrential
rains, etc. To reduce such risks, we will enhance our business
continuity plan (BCP) and business continuity management(BCM), including for logistics, as well as continue to promotewater-saving technologies and the use of water recycling.

Risks

Technologies

Strategy

1.5°C scenario
energy transition initiatives, and energy
conservation in the future.
Furthermore, we analyzed the supply chainof raw materials in this fiscal year, taking
into account the increase or decrease involume due to future changes in market
conditions, and analyzed the maximum
risks. We will also work on establishing a
low-carbon supply chain of raw materials,
particularly in logistics activities, to reducerisks, including Scope 3.

Market andreputation

At the Daio Group, the Daio Group Sustainability Vision, its sustainability strategy, wasestablished by the Board of Directors in May 2021. In conjunction with that, the Sustainability
Committee meets once every three months to assess climate-related risks and opportunities,
set the targets, policies, and strategies, and confirm and deliberate on the progress of its
initiatives. The Sustainability Committee is chaired by the President and Representative
Director and comprises Managing Executive Officers and Directors, attended by full-time
Audit & Supervisory Board Members, Outside Directors and Outside Audit & Supervisory
Board Members as observers. Matters decided by the Sustainability Committee are reported
once each quarter to the Board of Directors’ meeting. All members of the Board of Directors
oversee the implementation and progress of the initiatives related to climate change, as well
as approve and decide important matters. Under the Sustainability Committee is the ESG
Subcommittee, under which eight working groups (WGs) are established. Specific initiatives
related to climate-related risks and opportunities are examined and promoted by the Global
Warming Countermeasures WG, the TCFD Response WG, the Logistics GHG Emissions
Reduction WG, the Forests & Biodiversity Response WG, and the Value Co-Creation WG,
and monitored by the ESG Subcommittee. The Group has identified “Response to Climate
Change” as one of its material issues, and among the areas, it identified decarbonization as apriority. The promotion of the full phasing-out of coal, in particular, is taken charge of by theManaging Executive Officer and Director responsible for the Production Unit, and initiatives
are reported and monitored also at the Production Meetings and the Medium-Term Business
Plan Implementation Meetings, which are attended by Directors and Executive Officers.

We recognize that in the 1.5°C scenario, we face legal
and regulatory risks such as carbon taxes although there
are differences in carbon pricing between domestic andoverseas manufacturing sites, raw material price increaserisks, and market and reputational risks due to responses
regarding information on the carbon footprint of products(CFP).
In terms of energy, we have analyzed that the Paperand Paperboard Business accounts for most of the risk;
however, we will also take actions in the domestic andoverseas H&PC Business, and the Group as a wholewill work toward the reduction target by FY2030 (46%reduction of fossil fuel-based CO2 emissions by FY2030
compared to FY2013), and make further efforts to achievecarbon neutrality by FY2050. In particular, with respect tothe domestic operations, we reviewed the roadmap forenergy-related measures to be implemented mainly by
the Mishima Mill. In March 2023, we shifted from selling
power generated through biomass boilers under the FIT
scheme to self-consumption at the Mishima Mill. We willcontinue to actively promote fuel switching and other

Policies and regulations

strategies and risk management, thereby enhancing disclosure

Transition risks[H&PC Unit]● Switch to plastic-free packaging materials.
● Increase lineup of products that help consumers adapt
to climate change, such as masks and hygiene products.
● Develop and increase sales of sweat control products
and products to stay cool in heat waves.
● Develop products to support water conservation, e.g.
products that easily disintegrate in water.
● Develop and expand sales of biomass chemical products

and materials using papermaking materials.
● Establish a system for collecting and recycling usedーーdisposable diapers.

● Install facilities to reuse materials.

● Introduce environmentally conscious products onto

the market.

Integrated Report 2023

76

SECTION 01

SECTION 03
Response to the Task Force on Climate-related Financial Disclosures (TCFD)

Risk Management

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

H&PC products: Initiative to reduce the amount of plastic used in product packaging

At the Daio Group, the Sustainability Committee takes charge of thecomprehensive management of all sustainability-related issues, including
climate change.
Its subcommittee, the ESG Subcommittee, consists of eight working
groups (WG), among which five are in charge of identifying climaterelated risks and opportunities: the Global Warming Countermeasures
WG, the TCFD Response WG, the Logistics GHG Emissions Reduction
WG, the Forests & Biodiversity Response WG, and the Value Co-Creation
WG. The climate-related risks and opportunities that are identified
by the WGs are then evaluated by the ESG subcommittee. Ultimately,
the elements of risks and opportunities that need to be addressed aredeliberated at the Sustainability Committee.
In developing strategies for TCFD, we performed a scenario analysis
to identify and assess climate-related risks. In the process, we
comprehensively extracted all possible drivers of climate change (risks
and opportunities) by classifying them into the following three groups to
identify the items that would affect finance: 1) Transition risks (a. Policies
and regulations, b. Market, c. Reputation, d. Technologies), 2) Physicalrisks (a. Acute, b. Chronic), and 3) Opportunities (a. Energy source, b.
Market, c. Resilience, d. Products and services, e. Resource efficiency). We
assessed the scope of impact and the degree of uncertainty (high/low)
for these items. We also conducted both qualitative and quantitative

assessments to determine the magnitude of the financial impact of these
items. In carrying out these assessments, scenarios such as the NZE andthe STEPS in the World Energy Outlook 2022 of the International Energy
Agency (IEA) were referenced for transition risks, and parameters (carbon
pricing, raw material prices, etc.) from sources such as Aqueduct provided
by the World Resources Institute (WRI), “Climate Change in Japan 2020”
published by the Ministry of Education, Culture, Sports, Science andTechnology of Japan and the Japan Meteorological Agency, Four Twenty
Seven, Inc. and ENCORE were used for physical risks. Matters discussed
by the Sustainability Committee are reported to the Board of Directors’
meeting once each quarter and integrated into the management of theGroup. Similarly, matters regarding the identification and assessmentof risks that may have a significant impact on management, including
compliance violations and misconduct are discussed at the Risk andCompliance Committee, and are reported regularly to the Board of
Directors and integrated into the management of the Group. The risks
and opportunities identified at the Sustainability Committee and the Risk
and Compliance Committee, together with the comprehensiveness ofidentification of the risks and opportunities and the responses to them,
are shared and managed in an integrated manner by the Sustainability
Promotion Department and the General Affairs Department, which are
the respective secretariats of these committees.

The H&PC Unit is working to reduce the amount of plastic used in product packaging in response to growing awarenessof ethical consumption, the practice of purchasing products that are considerate of the global environment, people, andsociety.
In response to the Plastic Resource Circulation Act, we are promoting paper packaging and development ofenvironmentally friendly products as follows, with the goal of reducing waste plastic emissions intensity from H&PC
products by 10% or more by FY2025, compared to FY2020.

Paper packaging for products

Initiative to reduce environmental impact“Ellever Paper Towel”
Adopted environmentally friendly paper
packaging“Kirekira! Toilet Cleaning Wipe”
Reduced height and thickness ofthe container to reduce theamount of plastic used

Paper products: Track record of efforts to develop and launch plastic-replacing andplastic-reducing products
Metrics and Targets
In conjunction with the Daio Group Sustainability Vision, we have set thegoal of achieving carbon neutrality by FY2050 as our long-term vision
for global warming countermeasures. As a milestone goal, we have also
set a target of reducing Scope 1 and Scope 2 CO2 emissions from fossil
fuel combustion by 46% (from 2013 levels) by FY2030. Our Roadmap toAchieving Carbon Neutrality presents our target to shut down all threecoal-fired boilers at the Mishima Mill, our core mill, by FY2050. We haveset milestone targets for a gradual shift away from coal of shutting down
at least one boiler by FY2030, the second boiler by FY2040 and thethird boiler by FY2050. Based on the TCFD scenario analysis and market
conditions for raw materials and fuels, we are moving up the timing for
shutting down the coal-fired boilers, and have completed the shift fromselling power generated through biomass boilers under the FIT scheme
to self-consumption and the shutting down of the No.3 paper machinefor newsprint. We are also working on the development of black pellets
Target (Scope 1 + 2)

FY2050Long-term vision for global
warming countermeasures

as a substitute for coal and also co-combustion of black pellets andcoal, and aim to achieve the shutdown of at least one coal-fired boiler
by FY2030. Internally, we will carry out a fuel transition to renewableenergy and low-carbon fuels (such as LNG) and undertake further
energy-saving measures. To contribute to reducing GHG emissions of
the entire community, our waste-to-energy boiler will also make use ofwaste generated in the region for thermal recycling. Furthermore, we
are working to expand the area of our forested land. By balancing theCO2 emissions reduction and the carbon absorption and fixation, we will
ultimately achieve carbon neutrality by FY2050. With regard to Scope
3 emissions, we have completed calculations for Daio Paper on a nonconsolidated basis in FY2021 and for Daio Paper on a non-consolidated
basis plus domestic production companies in FY2022. We will work toquantify and set targets for emissions of the entire Group.

Results (Scope 1 + 2)

4,156

Scope2400- To achieve carbon neutrality by 2050 -Scope1
3,661

FY2030 Target for global warming countermeasures
Target

4,518
4,061

Scope2509
Scope1
3,878

Emissions in FY2022
4,194*
Scope2
667

Scope1
3,491

Reduce CO2 emitted through production
activities by 46% compared to FY2013.
FY2018FY2019FY2020Since the launch of the
Elipla Series (10 types)
in February 2022, thenumber of product types
in the Elipla Series has
been expanded and has
now grown to 31 types.

New brand of environmentally friendly paper “Elipla
Series” received the “Plastics Smart Excellent Case Award”
from the Ministry of the Environment
We received the Plastics Smart Excellent Case Award in the Useand Reduce category from the Ministry of the Environment
for our Elipla Series, which is a product series that can help
to eliminate and reduce plastic. To realize our management
philosophy of “Shaping an abundant and affable future forthe world,” the Daio Group is working to solve social issues
through our business activities under its vision of the Three
Well-beings: Hygiene, Life and Regeneration.

Result (Scope 3)■ GHG emissions (thousand t)
4,403

Development/launch

FY2021

Scope 3: 2,297,000 tCO2
See pages 79 to 80 for details on GHG
emissions by category and initiatives with
suppliers.

Scope 3
Reduce GHG emissions
throughout the supply
chain in cooperation with
suppliers.

Track record of efforts to develop and launch cellulose nanofibers (CNF)
Utilizing the CNF composite resin pilot plant equipment that started operation in March 2022, we succeeded in developing
a composite resin with higher cellulose concentration of 67% from the previous 55%, and started supplying samples of“ELLEX-R67.” We are promoting application development through sample evaluation by users.
As other examples of application development, a new product “Fan Zhendong CNF” was launched in September 2022 by atable tennis racket manufacturer that started using our CNF in their rackets in 2020, and in October, CNF was adopted andcommercialized as a wax material for skis and snowboards.

FY2022* FY2022: Net GHG emissions excluding the amount equivalent to green
power certificates sold: 4,158,000 tCO2

77

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78

SECTION 01

SECTION 03
Response to the Task Force on Climate-related Financial Disclosures (TCFD)SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Initiatives to reduce Scope 3 emissions
To achieve carbon neutrality by 2050, regarding Scope 1 and Scope 2, we are working on activities to reduce GHG
emissions throughout the region, as indicated in the Roadmap. In addition, the Daio Group has visualized Scope 3
emissions, which are indirect emissions from its supply chain, and is promoting activities to reduce GHG emissions incooperation with suppliers and competitors.

Emissions throughout the supply chain
Emissions throughout the supply chain(Unit: thousand tCO2)

FY2021

FY2022

Target range

Scope1

Direct emissions

3,878

3,491

Daio Group

Scope2

Indirect emissions

509

667

Daio Group

Scope3

Other emissions

1,782

2,297

683

1,321

Category 2

Capital Goods

166

124

Daio Group

Category 3

Fuel- and Energy-Related Activities Not Included in Scope 1 or
Scope 2

320

123

Daio Group

Category 4

Upstream Transportation and Distribution

313

408

For FY2021, Daio Paper on a non-consolidated basis, for FY2022 Daio Paperon a non-consolidated basis plus domestic production companies

Category 5

Waste Generated in Operations

26

27

Daio Group

Category 6

Business Travel2

2

Daio Group

Category 7

Employee Commuting

6

6

Daio Group

Category 8

Upstream Leased Assets

Not applicable Not applicable

Category 9

Downstream Transportation and Distribution

Category 10
Category 11
Category 12

End-of-Life Treatment of Sold Products

Category 13

Downstream Leased Assets

Not applicable Not applicable

Category 14

Franchises

Not applicable Not applicable

Category 15

Investments

Not applicable Not applicable

91

109

Processing of Sold Products--

Use of Sold Products

-

-

176

178

In the logistics sector, the entire Daio Group is promoting initiatives to build an environmentally friendly delivery network.
Specifically, in Japan, we are promoting a modal shift from trucks to coastal vessels and roll-on/roll-off ships, joint use of 31foot containers for rail transportation, and joint distribution with other companies to reduce GHG emissions. In anticipationof future changes in the external environment of the logistics industry, we are also considering new means of transportation,such as the use of double-trailer trucks, which will also lead to truck driver work style reform.

Initiative to share one-way 31-foot containers with Suntory Logistics Ltd.

Purchased Goods and Services

Category 1

Scope 3: Initiatives to reduce GHG emissions in the logistics sector

For FY2021, Daio Paper on a non-consolidated basis, for FY2022 Daio Paperon a non-consolidated basis plus domestic production companies* The transportation of master rolls of paper for converting
between Daio Paper and its domestic production companies
and other affiliated companies is included in Category 9.

Since FY2022, we have been carrying out joint distribution by
mixing paper products of our Group in rail containers from
Osaka to Tokyo used by Suntory Holdings Limited. Furthermore,
we have established a new scheme of one-day round-trip
trailer transportation in the Kanto and Kansai regions by using
our intermediate location as a switch point, as well as started
mixed loading in available space in such trailers. This enabled
the operation of new routes in addition to an increase in
Loading and transporting colored linerboard of Daio Paper in a 31-foot container
the number of operations on existing ones. This initiative is
Photo provided by: Suntory Logistics Ltd.
expected to reduce CO2 emissions by approximately 216 tons
per year, and we achieved an annual reduction of 35 tons in FY2022. This will also lead to a reduction in drivers’ working
hours, contributing to an improved working environment (work style reform).

Initiative to introduce double-trailer trucks

Scope 3: Establish an environmentally friendly business (recycling) model
Our Scope 3 Category 12 emissions are mainly due to the disposal of disposable diapers. In June 2022, we began research
on a business for recycling used disposable diapers in collaboration with Livedo Corporation and Total Care System Co., Ltd.
We are also utilizing production rejects and scraps generated in the process of producing household paper and disposable
diapers in the manufacture of cat litter at Daiki Co., Ltd., which became a Group company recently. We will strive to reduce
GHG emissions by establishing an environmentally friendly business model through a diaper collection scheme.
Photo provided by: Seishin Sangyo Unyu Co., Ltd.

Daio Group

Recycled pulp

Fluff pulp
production line

Production factories

Production rejects and scraps generated in
the process of producing household paper,
absorbent products, wet wipes, etc.
(Recycled as cat litter material)

Start of operationin July 2023

Processing company

Used disposable diapers

Modal shift to coastal vessels and roll-on/roll-off ships

Manufactureand sale ofpaper-based
cat litter

Disposable
diapers

Used disposable diapers recycling business
Recycled
polymer

Daiki

Cat litter

Disposable diaper users

Cat litter users(return to raw material state)
In June 2022, joint research on a business for recycling used disposable diapers
started in collaboration with Livedo Corporation and Total Care System Co., Ltd.

Collection
company

Households

Hospitals/
institutions

We are considering the introduction of a double-trailer truck as
one of the measures to address the 2024 logistics problem, and we
conducted a four-day demonstration test of relay transportation
using it (approximately 850 km between Saitama and Ehime) from
June 5. Double-trailer trucks have been permitted on roads in selected
sections since 2018, and the number of sections increased in November
2022. This has made it possible to operate from Ehime and Shizuoka
prefectures, where the Group's core sites are located, which led to theimplementation of this test. This is the first time in Japan that a doubletrailer truck ran on the Seto Ohashi Bridge and Akashi-Kaikyo Bridge aswell as transported freight within Shikoku Island. We expect to reduce
CO2 emissions by approximately 40% compared to operating two trucks.

Households

In FY2021, we achieved a modal shift of paper and paperboard products from the Mishima Mill bound for Nagoya to coastal
vessels, which, together with the shift of H&PC products bound for Gyoda (Saitama Prefecture) to roll-on/roll-off ships in FY2018,
contributed to a reduction of approximately 752 tons of CO2 emissions per year. In FY2022, we also achieved a modal shift of paper
and paperboard products bound for Kyushu and Shizuoka tocoastal vessels, which is expected to reduce CO2 emissions byapproximately 215 tons per year. Furthermore, in FY2023, we
will work to achieve a modal shift of fluff pulp from the Mishima
Mill bound for the Kanto region to coastal vessels, and transport
paper and paperboard products from the Kani Mill bound for the
Kyushu region by sea, which is expected to reduce CO2 emissions
by approximately 574 tons per year.
Photo provided by: Daio Kaiun Co., Ltd.

79

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80

SECTION 01

SECTION 03

Corporate Governance
Our Measures to Strengthen the Corporate Governance Structure

Key Measures Implemented to Strengthen Corporate Governance
FY2012FY2013

FY2014FY2015The First Medium-TermBusiness Plan

Medium-Term Business Plans

FY2016FY2017FY2018The Second Medium-TermBusiness Plan

Restart

FY2019FY2020

FY2021The Next Growth Stage, to a New Future

Yorifusa Wakabayashi
Disclosed Corporate Governance Basic Policy

Clarification ofroles of supervisionand execution

From 201913

Number of independent
Outside Directors

Responding to Social Issues

Data and Information—Foundation for Sustainable Growth——Financial and Corporate Data—

2021

16

From 201212

From 2017

2

Major Issues Examined by the Board of Directors in FY2022

Review of the committee structure to enhance governance, enhancement of risk
management structure, status of compliance with Corporate Governance CodeDividend policy, review of capital plan, loans and debt guarantees● Capital policy

2022

2023

11

Percentage of Directors who are Outside Directors

12

From 2020

1

0

4 out of 12

From 2021

1

From 2016

Effectiveness evaluation of the Board of Directors

Establishment ofNomination Committee andRemuneration Committee

From 2018

Established the Nomination Committee

Nomination Committee

From 2021

Disclosed skills matrix of
Directors
From 2012

Established the Remuneration Committee

Internal
Directors
830%Committees

From 2020

Sustainability Committee

Established the Sustainability Committee

Name

From 2019

Diversity Committee

Position

Established the Diversity Committee

Corporate Governance Structure (as of July 1, 2023)

Audit

ReportingBusiness
execution

Supervision

Inquiries/reporting

Reporting

Nomination
Committee
Remuneration
Committee

Appointment/dismissal

General Meeting of Shareholders
Audit

Audit

Members of the Audit &Supervisory Board
Audit and Supervisory
Assistance
Board Office

Collaboration

Accounting Auditor
Accounting audit

Appointment/dismissal

Management Meeting
Sustainability Committee
Risk and Compliance Committee
Diversity Committee

President andRepresentative Director
Inquiries/reporting

7 out of 17

8.3%

Independence (1) Corporate (2) Corporate
management planning / M&A(3) Sales /marketing

◯

◯

◯

◯

◯

◯

President andMembers of the Board of Directors

OutsideOfficers
7

Internal
Officers
10

41.2

%

The fields in which we expect our Directors to contribute significantly

Established the Compliance Committee

Supervision/decision making

FemaleDirectors
1

The table below shows the fields in which we expect our Directors to contribute significantly based on their insight andexperience.

From 2008

Appointment/dismissal

Percentage of Officers who are Outside Officers

Skills Matrix of Directors (as of July 1, 2023)
From 2019

Introduced the stock-based incentive system

Integrated Report 2023

1 out of 12
Male
Directors
11

Yorifusa
Representative Director
Wakabayashi Chief Executive Officer

81

Percentage of Directors who are female

OutsideDirectors
4

4

From 2017

Effectiveness evaluation of theBoard of Directors

Risk and Compliance
Committee

Progress of the Medium-Term Business Plan and consideration of the next Medium-TermBusiness Plan, global strategies, status of initiatives concerning sustainability● Governance

From 2021

3

Number of female Directors

Remuneration Committee

members, as stipulated in the Articles of Incorporation.
That is the necessary and appropriate number ofmembers to ensure an effective management structureand substantial discussions at the Board of Directors
meetings. Adequate consideration is also given to
ensuring diversity and sufficient expertise on the Boardof Directors.

The Board of Directors of Daio Paper bears the functionof supervising overall management and works to ensure
the fairness and transparency of management while
making decisions on important matters for businessexecution as specified by laws and regulations or the
Articles of Incorporation.
The Board of Directors shall consist of no more than 15

Composition of the Board of Directors (as of July 1, 2023)

From 2015

From 2012

Number of Directors

Achieving Sustainable Growth—Strategy for Continuing to Provide Value—

From 2021

Masayoshi Sako

Corporate Governance Basic Policy

Fulfilling Our Purpose

FY2023

GEAR UP

Reform and Soar Above

From 2011

President

FY2022The Fourth Medium-Term Business Plan
(until FY2023)

Move onLeap and Expand

SECTION 04—Value Creation Story of the Daio Group—● Management strategies

The Third Medium-TermBusiness Plan

Step-up

Solid Reform and Further Growth

SECTION 03

Board of Directors

Directors and initiatives to address issues pertaining tosustainability. As a result, we strengthened the Board of
Directors’ function to monitor business execution andestablished a structure in which the Board of Directors
takes initiative in promoting sustainability management.
We will continue to work to strengthen the practicalaspects of the governance structure and enhance
disclosure.

Daio Paper continuously reviews and strengthens
its governance structure through adapting to the
Corporate Governance Code and exchanging opinionswith Outside Officers and investors.
In FY2022, based on the revised Corporate Governance
Code, we reviewed the relationship between the
Board of Directors and voluntary committees from theperspectives of effective functioning of the Board of

SECTION 02

Instructions
andcommands

Executive
Officers

Business execution
departments

Group companies

Audit

Internal Audit
Department

Executive Vice President
and Representative
Kunihiro
Director
OkazakiExecutive Vice President
Director
HiroshiManaging Executive
Yamasaki
Officer
Director
YukihiroManaging Executive
TanakaOfficer
Director
Atsushi Ishida Managing Executive
Officer
Director
Hiroyuki Fujita Managing Executive
Officer
Director
Toshikatsu Managing Executive
Tanahashi
Officer
Director
ShuheiManaging Executive
Shinagawa Officer◯(7) Legal affairs (8) Overseas(4) Manufactur(9) Sustainability(5) Finance / (6) Personnel // risk manage- business / globing / technology/ ESG
accounting HR development
al experiencementdevelopment

◯

◯

◯

◯

◯

◯

◯

Yoichi Takei

Outside Director◯

Yoshinobu
Hiraishi

Outside Director◯

Haruko Ozeki Outside Director

◯

◯

◯

◯

◯

◯
◯

◯

◯

◯

◯
◯

◯
◯

◯
◯

◯

◯

◯

◯

◯

◯

◯
◯

◯

◯

◯

◯

◯

Naosuke Oda Outside Director

◯

◯
◯

◯

(10) IT / DX

◯

◯

◯

◯

◯

◯

Integrated Report 2023

82

SECTION 01

SECTION 03
Corporate Governance

Effective Evaluation of the Board of Directors
We conduct an annual evaluation of the effectiveness of
the Board of Directors to ensure its proper functioning,
addressing any identified issues and implementing
measures for improvement as needed.
● Method of Evaluation

We conducted an anonymous self-evaluationquestionnaire targeted at all Directors and Audit &Supervisory Board Members. Using the results of thequestionnaire, which were collected by an externalorganization, we carried out analysis and evaluation. We
also interviewed our Officers.
● Overview of the Evaluation Results

We evaluated the Board of Directors from 10
standpoints: vision; composition; operation; discussions;monitoring function; support system for Directors andAudit & Supervisory Board Members; training; dialogue
with shareholders (investors); Directors’ self-initiatedexecution of business; and operation of committees.
As a result, we confirmed that the Board of Directors islargely functioning properly and that its effectiveness issufficiently ensured.

Measures

Frequency

Holding briefing sessions for
Outside Officers before theBoard of Directors meetingsOnce amonth

Distributing materials for the
Board of Directors meetingsin advance and utilizing
briefing materials
Ensuring that our Officers
perform site inspections
Holding informationexchange sessions between
Outside Directors and Audit &Supervisory Board Members
Providing a wide variety
of information for Outside
Officers

83

Integrated Report 2023

Once amonth
A few times
a yearTwice a yearAt
appropriate
times

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Remuneration of Officers● Actions Taken to Address Issues Identified in the

FY2022 Board of Directors’ Effectiveness Evaluation
In response to the issues identified in the FY2022
Board of Directors’ effective evaluation, namely,“reviewing the relationship between the Board of
Directors and committees thereunder” and “delegating
more authority to the Management Meeting,” wereviewed the detailed rules on matters to be discussed
at the Board of Directors’ meetings and clarified thecommittees’ duty to report to the Board of Directors,
thereby enhancing the Board of Directors’ monitoring
function over business execution. We also added
new matters for discussion, creating a conducive
environment for the Board of Directors to engage
in in-depth discussions on medium to long-term
management issues.
● Issues for the Future

In light of the rapidly changing business environment,
we will continue to have discussions on sustainability, IT,
DX, and other related issues at the Board of Directors’
meetings for the achievement of sustainable long-term
growth. In parallel, we will create avenues for acquiringknowledge to enhance the depth of the discussions asneeded.

Measures to Enhance the Effectiveness of the Board of Directors
To promote substantial, productive discussions at
the Board of Directors meetings and to enhance theeffectiveness of the Board of Directors, we will continue

SECTION 02

to implement the measures indicated below, including
providing information that will help Outside Officers
deepen their understanding of our operations.

Basic Policy on Remuneration of Directors

The appropriate remuneration levels of Directors are
determined based on various elements, including thebusiness environment, performance, and consistency
with employee compensation. The remuneration systemaims to effectively attract outstanding individuals andmotivate Directors to improve business performance,
ultimately leading to an increase in our corporate value.

Overview of the Remuneration System for Officers● Composition of Remuneration of Officers

The remuneration for our Officers is composed of basic
compensation, which is fixed remuneration, bonuses,
which are tied to business results, and stock-based
compensation. The types of remuneration paid to
Directors, Audit & Supervisory Board Members, andOutside Officers are as follows.
Officer category
Directors(excluding Outside
Directors)
Audit & Supervisory Board
Members(excluding Outside Audit& Supervisory Board
Members)
Outside Officers

Basiccompensation

Bonuses

Stock-based
compensation

◯

◯

◯

◯

−

−

◯

−

−

We hold information-exchange sessions between our Outside Directors and Audit &Supervisory Board Members twice a year to ensure even closer cooperation between
them.
We share materials and minutes of the Management Meeting and other internal
meetings, such as meetings of various committees, with Outside Officers, thereby
striving to help them understand the background of examination of the matters. We
also share a wide variety of industrial reports, information on our IR efforts, etc. with
our Outside Officers, with the aim of helping them deepen their understanding ofindustrial trends and our operations.

● Stock-based Compensation

The purpose of stock-based compensation is to directly
link the remuneration of Directors to our stock value.
This aligns the Directors’ interests with our shareholders
by involving them in the profits and risks associatedwith fluctuations in the stock price, thereby raising
their motivation to contribute to medium to long-term
improvements in business performance and corporate
value. In this stock-based compensation system, we
have created a trust by contributing cash, and the trust
acquires shares of Daio. Through the trust, each Director
will receive a number of shares equivalent to thenumber of points allocated to them.

● Policy on Deciding Percentages for Basic

Compensation, Bonuses, and Non-monetary
Compensation

Details
We hold a briefing session for Outside Officers before the monthly meeting of theBoard of Directors so that they can deepen their understanding of the discussion
points, the background, purposes, etc. of the proposals to be presented at the meeting.
By doing so, we strive to secure time for substantial discussions at the meeting.
We distribute the relevant materials before each meeting of the Board of Directors andalso utilize briefing materials that outline the key points, background, objectives, risk
countermeasures, etc. of the proposals to be presented at the meeting. By doing so, we
strive to ensure that the points of the proposals are understood clearly.
We ensure that our Officers conduct periodic inspections at our mills and other facilities
to enhance their understanding of our operations.

performance indicator. The base amount of a bonus
for a Director of the base position (“base bonus
amount”) is calculated by multiplying the amount ofconsolidated ordinary profit for the previous fiscal year
by a certain percentage specified in the Regulations
on Remuneration of Officers. The amount to be paid
to each individual is calculated by multiplying the basebonus amount by a percentage determined by position
and a percentage determined by the performance
evaluation rank of each individual. No bonuses are paid
if a consolidated ordinary loss is recorded in the previous
fiscal year.

● Basic Compensation for Directors

Full-time Directors receive a fixed amount specified
by position in the Regulations on Remuneration of
Officers. Representative Directors receive an additional
fixed amount. The remuneration for Outside Directors
comprises only basic compensation. The amount paid
to each Outside Director is based on the status of theirmembership on committees of the Company.

● Performance-linked Remuneration (Bonuses)

To serve as an incentive for improving businessperformance and corporate value, bonuses are decidedin correlation with the amount of consolidated ordinary
profit. This design ensures that the proportion of
bonuses increases with improved performance.
Percentages if the target consolidated ordinary profit
is achieved (FY2023)(* The figures may differ slightly depending on the position.)

Monthly salary

Bonuses

Stock-based

79%

7%

14%

In order to boost motivation for annual performancetargets, bonuses are paid in accordance with aconsolidated performance indicator. The amount ofconsolidated ordinary profit, which is an objective
performance measurement indicator, is used as theIntegrated Report 2023

84

SECTION 01

SECTION 03
Corporate Governance

Voluntary Committee Activities● Nomination Committee

The Nomination Committee is established as an advisory
body to the Board of Directors to enhance objectivity andtransparency in the nomination of candidates for Directors,
etc. and the appointment and dismissal of Directors, etc.
It is chaired by an independent Outside Director, andindependent Outside Directors constitute the majorityof its members. Two Outside Audit & Supervisory Board
Members attend as observers.
The Nomination Committee receives inquiries from theBoard of Directors regarding the nomination, appointment
and dismissal of candidates for Directors and Executive
Officers of a Managing Executive Officer position or higher.
It reports back on the inquiries in accordance with thenomination policy set out in our Corporate Governance
Guidelines.
● Remuneration Committee

The Remuneration Committee is established as anadvisory body to the Board of Directors to ensure theobjectivity and transparency of decisions on remunerationof Directors, etc. It is chaired by an independent Outside
Director, and independent Outside Directors constitute themajority of its members. Two Outside Audit & Supervisory
Board Members attend as observers with the aim offurther enhancing the objectivity and transparency of theprocesses to decide the remuneration of Officers.
The Remuneration Committee receives and reports backon inquiries from the Board of Directors regarding thepolicy, etc. on deciding the remuneration of our full-time
Directors and Executive Officers of a Managing Executive
Officer position or higher. The Committee also decides on
the evaluation and the amount of remuneration of eachof these officers in accordance with the remuneration
decision policy resolved by the Board of Directors.

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

IR Activities
Sustainability Committee, consists of eight working groups
that are aligned with sustainability trends and material
issues: (1) global warming, (2) logistics GHG emissions
reduction, (3) environmental load reduction, (4) SDGbased procurement promotion, (5) response to TCFD, (6)forests and biodiversity, (7) value co-creation, and (8) ESG
information disclosure enhancement. Each working grouphas specific initiatives and key performance indicators,
and they are working toward the goals through thedeliberation of measures and progress checks.
● Risk and Compliance Committee

The Risk and Compliance Committee is established underthe Board of Directors to manage risks and enhancecompliance of the Daio Group. It is chaired by the
Director responsible for risk and compliance and consistsof a total of nine members, including other executive
officers. Outside Directors, full-time Audit & Supervisory
Board Members and Outside Audit & Supervisory Board
Members, and the General Manager of the Internal Audit
Department attend as observers.
The Committee comprehensively identifies and assesses
risks, implements unified management of the risk control
measures, and deliberates on those risk control measuresin accordance with the severity of the risks. Through theseactions, it checks the risk management structure of the
Daio Group.
Subcommittees are established under the Risk andCompliance Committee. Each subcommittee reports on
the status of its initiatives to the Risk and Compliance
Committee as necessary. Specific implementation
measures according to the characteristics of each risk are
examined, determined, and promoted, thereby making
the risk management structure highly effective.

● Policy for IR Activities

At the Daio Group, we follow our corporate motto “Passion with Sincerity” and focus on making timely, appropriate andfair information disclosure to our stakeholders, including shareholders, investors and analysts, and promoting sincere andproactive dialogue with them. We will continue to make efforts to explain the direction of our management policy andbusiness strategies clearly and to provide feedback on opinions received to management (including Outside Directors)
and reflect them in our corporate activities appropriately.

● Major IR Activities and IR Structure

Details of the dialogues are promptly relayed to the management team after each event.
Activities

FY2020

FY2021

FY2022One-on-one meetings with institutional investors

67

77

91

Earnings and strategy briefing for analysts andinstitutional investors

6

6

5

Overseas IR events*

4

1

2

Events for institutional investors (mill tours, etc.)

0

0

3

Events for individual investors

0

1

2

Major persons in charge (FY2022)
General Manager and Manager in chargeof IR
President, CFO, General Manager ofCorporate Planning Division
President
General Manager and Manager in charge
of IR
General Manager of Corporate Planning
Division, General Manager in charge of IR*Events geared toward overseas investors mainly took place online due to COVID-19.

Meetings with investors in Japanaccounted for about 75% of
one-on-one meetings in FY2022.

Asia and Oceania
13%
Europe and the U.S.
12%

Locations ofinvestors
FY2022

Japan
75%● Diversity Committee● Sustainability Committee

The Sustainability Committee is established under the
Board of Directors for the purpose of formulating thesustainability strategy (a sustainable corporate strategy
that integrates environmental, social, and governanceconcerns) for the entire Daio Group. This strategy seeks to
improve the Group’s social value through solving social
issues while enhancing its corporate value. It is chaired by
the President and Representative Director and consists ofa total of nine members, namely, all the full-time Directors,
including the General Manager of the Sustainability
Promotion Division, and the General Manager of theOverseas Business Group. Outside Directors, full-time
Audit & Supervisory Board Members, and Outside Audit &Supervisory Board Members attend as observers.
The Sustainability Committee decides material issues
related to sustainability and determines targets,
commitments, and initiatives for such material issues.
The ESG Subcommittee, established under the85

Integrated Report 2023

The Diversity Committee is established under the Boardof Directors to realize diversity across the entire Daio
Group through initiatives to facilitate an inclusive work
environment that enables flexible working style and thatis accommodating to individuals regardless of gender,
age, nationality, disability, the form of employment andother factors. The Committee is chaired by the President
and Representative Director and consists of a total of nine
members, including Directors and Managing Executive
Officers. Outside Directors, full-time Audit & Supervisory
Board Members and Outside Audit & Supervisory Board
Members attend as observers.
The Diversity Committee formulates the basic policy forpromoting diversity, material issues, measures to promote
diversity and workstyle reform for the entire Group, andit works to implement the measures through reportingto the Board of Directors, distributing messages from top
management, and inputs to executives, managers, andemployees.

● Major themes of dialogue· Response to the soaring costs of raw materials andfuels caused by historic exchange rate fluctuations andgeographical risks· Performance results and strategies for growth businessesof H&PC domestic business and overseas business· Demand trends after COVID-19· Progress in the Medium-Term Business Plan
Briefing for individual investors· Policy for shareholder return

Please check the website below for IR materials.
https://www.daio-paper.co.jp/en/ir/

Web-based briefing for individual investors

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SECTION 03
Corporate Governance

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Directors, Audit & Supervisory Board Members and Executive Officers (As of July 1, 2023)● Representative Directors● Audit & Supervisory Board Members

Yorifusa Wakabayashi

Kunihiro Okazaki

President and Representative Director
Chief Executive Officer
Responsible for Home & Personal Care
Unit

Executive Vice President andRepresentative Director
Executive Vice President
Responsible for Sales and Global
Logistics Division

July 2018: Director and Managing Executive Officer
General Manager of Home & Personal Care
Domestic Business Group
April 2019: Director and Managing Executive Officer
General Manager of Domestic BusinessGroup, Home & Personal Care Unit
April 2021: President and Representative Director
Chief Executive Officer

June 2012: Director and Managing Executive Officer
June 2015: Director and Senior Managing Executive Officer
April 2016: Representative Director and Senior
Managing Executive Officer
April 2019: Executive Vice President andRepresentative Director
April 2021: Executive Vice President andRepresentative Director
Executive Vice President● Directors

Hiroshi Yamasaki

Yukihiro Tanaka

May 2017: Director, Deputy General Manager of Production
Division, and General Manager of Mishima Mill
April 2019: Director, Deputy General Manager of Production
Division, Production Unit and General Manager ofMishima Mill
April 2021: Director, Managing Executive Officer Responsible
for Production Unit; General Manager of Production
Division

April 2019: Director, General Manager of Corporate Planning
Division, Corporate Unit
April 2021: Director, Managing Executive Officer
General Manager of Corporate Planning Division,
Corporate Unit
June 2021: Director, Managing Executive Officer
General Manager of General Affairs and Personnel
Division, Corporate Unit

Atsushi Ishida

Hiroyuki Fujita

Director, Managing Executive Officer
General Manager of Resources and Procurement
Division and General Manager of Sustainability
Promotion Division, Corporate Unit

Director, Managing Executive Officer
General Manager of Domestic Business Group,
Home & Personal Care Unit
July 2018: Executive Officer, General Manager of Paper
Business Group
June 2019: Director, General Manager of Newspaper andPaper Business Group, Paper & Paperboard Unit
July 2020: Director of Daio Paper; Chairman and Director ofSanther-Fábrica de Papel Santa Therezinha S.A.
June 2021: Managing Executive Officer of Daio Paper;
Chairman and Director of Santher-Fábrica de Papel
Santa Therezinha S.A.

April 2021: Managing Executive Officer
General Manager of Industrial Paper and Containerboard
Business Group, Paper & Paperboard Unit
June 2021: Director, Managing Executive Officer
General Manager of Industrial Paper and Containerboard
Business Group, Paper & Paperboard Unit
May 2023: Director, Managing Executive Officer
General Manager of Paper & Paperboard BusinessGroup, Paper & Paperboard Unit

Toshikatsu Tanahashi

Shuhei Shinagawa

Director, Managing Executive Officer
Responsible for Production Unit; General Manager
of Production Division; General Manager ofMishima Mill

87

Director, Managing Executive Officer
General Manager of Corporate Planning Division
and Business Administration Division, Corporate
Unit

July 2019: Executive Officer
Senior Deputy General Manager of Mishima Mill,
Production Division, Production Unit <Responsible
for Manufacturing Department>
April 2021: Senior Executive Officer
Deputy General Manager of Production Division,
Production Unit and General Manager of Mishima Mill
April 2023: Managing Executive Officer
Deputy General Manager of Production Division,
Production Unit and General Manager of Mishima Mill

April 2021: Senior Executive Officer
General Manager of Corporate Planning
Department, Corporate Planning Division,
Corporate Unit
June 2021: Senior Executive Officer
General Manager of Corporate Planning Division,
Corporate Unit
July 2022: Managing Executive Officer
General Manager of Corporate Planning Division,
Corporate Unit

Audit & Supervisory Board
MemberYoichiro Yamakawa

Takemi Nagasaka

Kyoko Okada

Audit & Supervisory Board
Member (Outside)

Audit & Supervisory Board
Member (Outside)

Audit & Supervisory Board
Member (Outside)

Appointed in 2008

Appointed in 2016

Appointed in 2020

● Executive Officers

Managing
Hiroyuki Shidara
Executive Officers
Toshiki Yamagami
Hiroshi Mizobuchi

Chairman and Director of Santher-Fábrica de Papel Santa Therezinha S.A.
President and Representative Director of Elleair International Turkey Kişisel Bakım Ürünleri Üretim A.Ş.
General Manager of Product Development Division, Home & Personal Care Unit; Responsible for Global Marketing Division,
Home & Personal Care Unit

Takahisa Kashiwabara President and Representative Director of Elleair International China (Nantong) Co., Ltd.
Senior Executive Michihiko Tamaki
Officers
Takashi Yoshida

General Manager of Advanced Materials R&D Center, Production Division, Production Unit
General Manager of Intelligence Technology Planning Division, Corporate Unit

Mitsuru Ogawa

General Manager of Human & Family Care Sales Division, Domestic Business Group, Home & Personal Care Unit

Makoto Saito

General Manager of Overseas Business Group, Home & Personal Care Unit; General Manager of Overseas Business Promotion
Division, Overseas Business Group, Home & Personal Care Unit

Yukio Kume

Executive Vice President and Director of Elleair International China (Nantong) Co., Ltd.

Executive Officers Mikiro Shiramine

Deputy General Manager of Resources and Procurement Division (Responsible for Purchase Planning Department andOverseas Resources Department)

Takashi Imaizumi

General Manager of Intellectual Property Department, Corporate Planning Division, Corporate Unit

Junichi Ikawa

Deputy General Manager of Sustainability Promotion Division, Corporate Unit

Akihisa Yano

Acting Manager of Mishima Mill, Production Division, Production Unit (Responsible for Utility Unit)

Masahiko Takeshima

President and Representative Director of Elleair International (Thailand) Co., Ltd.

Yoshitsugu Fujii

General Manager of Newsprint Sales Division, Paper & Paperboard Business Group, Paper & Paperboard Unit

Akio Nagaoka

President and Representative Director of Daio Package Corporation

Shuji Ozaki

Acting Manager of Mishima Mill, Production Division, Production Unit（Responsible for Paper Production Unit）

Akihisa Masuda

General Manager of General Affairs Department, General Affairs & Personnel Division, Corporate Unit（Responsible forGeneral Affairs in Shikoku)

Haruko Ozeki

Takeshi Kojima

Deputy General Manager of Business Administration Division, Corporate Unit

Kazuyoshi Tagami

General Manager of Global Logistics Division

Naosuke Oda

Yoichi Takei

Yoshinobu Hiraishi

Director (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Appointed in 2022

Appointed in 2020

Appointed in 2021

Appointed in 2021

Integrated Report 2023

Tsutomu Ariyasu

Audit & Supervisory Board
MemberDirector, Managing Executive Officer
General Manager of General Affairs and Personnel
Division, Corporate Unit; Responsible for Risk &ComplianceDirector, Managing Executive Officer
General Manager of Paper & Paperboard BusinessGroup, Paper & Paperboard Unit; Responsible forIntelligence Technology Planning Division, Corporate Unit

● Outside Directors

Hiromitsu Fujii

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Round-table Talk by Outside Directors

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Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

The four Outside Directors of Daio Paper had a round-table talk on our governance structure and issues inbusiness management from two perspectives: review of the previous fiscal year and the future direction.
Here are the contents of the talk.

Review of FY2022
 lease give us your evaluation of our governanceP
initiatives in FY2022.
Ozeki: Last year, the three committees, Risk andCompliance, Sustainability, and Diversity, were clearly
positioned as organs of the business execution
segment, and their structures were reviewed. The Risk
and Compliance Committee enhanced the activities
for risk assessment, which had been conducted by theCompliance Committee, its predecessor, by modifying
the direction of activities so that various risks can be
identified not only through a bottom-up approach but
also from a top-down perspective. For these committees,in addition to reviewing matters handled by eachcommittee, it is necessary to define more specifically the
relationship between these committees and discussions
at the Board of Directors’ meetings. Through trial anderror, a first step toward reform has been taken. So I willcontinue to keep an eye on their progress with further
structural enhancement.
Takei: Regarding the three committees you mentioned,
the position of Outside Directors on the committees
was changed from committee members to observers.
Also, Outside Directors are now assigned to different
committees as observers. As a result, I feel that it has
become difficult to obtain information about thecommittees to which I am not assigned as an observer.
Therefore, there is room for further improvement inYoichi Takei

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enhancing cooperation with the Board of Directors tofacilitate better sharing of information on committee
discussions and, in particular, ensure timely reportingof significant matters. For the Nomination Committee
and the Remuneration Committee, we must continue
to consider ways to bring their operation closer to what
the Corporate Governance Code requires. On the other
hand, I recognize certain improvements in the efficiencyof the Board of Directors’ operation, such as theintroduction of tablet devices at the Board of Directors’
meetings.
Oda: I was appointed as an Outside Director only
last year, but my impression about the committees,
especially the Risk and Compliance Committee and theSustainability Committee, is that regarding each of their
themes of discussion, they should go through a processof thoroughly considering and discussing within thecompany the stance and direction of the approach of thecompany before bringing them to discussion with theBoard of Directors. Sharing of information and reportingto the Board of Directors are important. However, rather
than just listing themes like a textbook, I think it isnecessary to have more in-depth discussions within thecompany about its stance and approach on each of thethemes.
Hiraishi: As all of you have pointed out, I, too, havenoticed the structural issue of a significant disparity
in the information available to me depending on
my participation in a committee. Regarding the

Haruko Ozeki

Outside Director

Outside Director

Became Outside Directorof Daio Paper in June 2020.
Has expertise as an attorneyat-law and served as an
officer at other companies.

Became Outside Directorof Daio Paper in June
2021. Served as the legal
head and an officer at
another company.

Integrated Report 2023

reorganization of the Risk and Compliance Committee,
the aim was to recognize risks much earlier than before
so as to accelerate consideration of responses thereto.
I think the direction for improving awareness of risk
management is right. I participated in the Sustainability
Committee as an observer last year for the first time.
As international standards and frameworks are being
developed, I think it is noteworthy that awarenessof sustainability has been recognized and sharedthroughout the company as demonstrated in actions
such as the release of the Sustainability Vision and thedeclaration of achieving carbon neutrality by FY2050. Of
course, we could argue that Daio Paper, as a company
in the manufacturing industry, which has a significant
impact on the environment, should have strengthened
its recognition and awareness of sustainability earlier
and reflected them in business management. However,
it is making steady progress with reform, and I would liketo keep paying attention to future development.
 lease share with us your suggestions for furtherPenhancement of our governance structure.
Takei: Although there are many issues to be discussed
by the Board of Directors, improvements can be seen in
the content, time allocation, format, etc. of the agenda
items. Going forward, the company will increase theweight of its Home & Personal Care (H&PC) business,while the Japanese government has set a target of

Naosuke Oda
Outside Director
Became Outside Director of DaioPaper in June 2022. Served as
the president and representative
director at another company.

a 30% female executive ratio. In response, we must
consider the number of members of the Board of
Directors, including Audit & Supervisory Board Members,
and its composition. Of course, the urgent priority forthe moment is to rebuild the business performance.
However, we must also continue to consider the ideal
governance structure.
Oda: After I became an Outside Director last year,
what surprised me most was the thickness of thepaper documents shared as reference materials for the
Board of Directors’ meetings and the detailedness of
their contents. I think this represents the company’s
culture of placing emphasis on reporting. But what ismore important than reporting is to clarify the themes
and issues to be discussed at the Board of Directors’
meetings and deepen discussions from multiple angles.
Matters that need to be confirmed in advance should
be confirmed in the advance briefing held before theBoard of Directors’ meeting, and then discussions
should be deepened during the meeting. In this sense,
thanks to the introduction of tablet devices as Mr. Takei
mentioned, the operational aspect has been gradually
improved over the past year.
Hiraishi: Yes. Since I first joined the Board two years
ago, I have been overwhelmed by the “paper culture”
that the company has inherited, from materials foradvance briefings to those for the actual Board of
Directors’ meetings, and to the minutes prepared after
the meetings. The use of tablet devices has facilitatedYoshinobu Hiraishi
Outside Director
Became Outside Director of DaioPaper in June 2021. Served as a
diplomat in various countries.

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Round-table Talk by Outside Directors

organization and simplification of the meeting
agenda, improving efficiency of operation. The overall
governance system cannot be improved overnight.
However, based firmly on the history and traditions thatthe company has inherited, the company must boldly
change what should be changed in light of the emerging
global standards for governance structure, without
decelerating the governance reform. What I can pointout as a step of improvement is that in response to arequest of us, Outside Directors, meetings to exchange
opinions between the three Representative Directors
and the four Outside Directors began to be held once
every few months on top of the Board of Directors’
meetings. These are very good opportunities for us toexchange opinions with the execution side beyond thescope of the agenda of Board of Directors’ meetings, so I
would like to see this trend continue in the future.
Ozeki: I heard it was difficult to obtain tablet devices
due to the COVID-19 pandemic, but with support from
Outside Directors, it was finally realized. Everyone
involved, including not only the secretariat but also
members of the Board of Directors, is benefiting fromthem. Also, as Mr. Takei said, the discussion about theideal Board of Directors for the company was delayed
because the highest priority was on issues related tobusiness performance, but of course it has not been
shelved. As to the target ratio of 30% for women in
executive positions, the level of social requirement will
never decline in the future. Since diversity on the Boardof Directors is insufficient, I recognize this as a theme
that should be discussed in line with the direction that
the Corporate Governance Code aims at.
 ow do you evaluate our human capital strategy,Hand what are the issues?
Oda: In line with going paperless, under the leadershipof President Wakabayashi, the company has begun
to promote a shift from “a job for the end goal ofreporting” to “a job that involves thinking actively forthe end goal of driving changes.” Over the past year, I
have felt that the company is good at having top-down
instructions thoroughly followed, while the bottomup awareness of employees to question the current
situation in a positive sense and make changes is rather
weak. Cultivating a corporate culture in which employees
think for themselves and make changes will definitely
lead to a stronger corporate structure. And I strongly
agree with the policy of promoting the developmentof such highly independent and autonomous humanresources.
Hiraishi: While placing importance on training new91

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graduates, Daio Paper also actively hires competenthuman resources from outside the company andpromotes them even to core positions, such as General
Managers of Divisions or Departments. In view of
future business expansion overseas, I am confident
that the direction of human resource recruitment anddevelopment is right. On the other hand, when looking
at sustainable growth on a global scale, we must
consider human resources in a broader and multilayered
range. It is important to help employees build career
paths over the medium to long term through suchmeans as having young employees experience overseas
duties and assigning personnel with global experience
to core positions of the Headquarters. If such humanresource development and promotion becomes
established as part of the corporate culture, I think it will
attract talented human resources in terms of hiring new
graduates and developing next-generation successors.
Not only for global human resources, the same goes fordevelopment of female executives. As a company listedon the Prime Market, Daio Paper will be sooner or later
urged to disclose the targets for the numbers of female
officers and managers and their percentages. So, a majortask for the company would be robust planning andsuccessful implementation of a human resource strategy
that can achieve such targets.
Ozeki: In order for the company to continue to exist andthrive in the future, it is necessary to continuously hire
personnel who have a skill set different from before.
In the Sustainability Committee, we are discussing thetheme of how to be a company of choice. There aremany issues that need to be addressed to become acompany that will be chosen in the job market and, inparticular, to become an attractive company that canappeal to the pool of human resources that the company
wants. In addition to enhancing diversity in skill sets, I
think it is important for not only the Corporate Unit but
also subsidiaries and plants to proactively introduce a
job-based personnel system that makes it easier to clarify
the responsibilities of each position and the required skill
sets and competencies.
Takei: Looking back on this year, there are several points
that I evaluate highly, such as reviewing employee
career paths and encouraging male employees to takechildcare leave. On the other hand, for the developmentof female managers and global human resources, I think
it is necessary to consider stronger initiatives with theDiversity Committee placed at the core. I think there arealso many other important issues to be addressed, suchas increasing engagement by employees of subsidiaries
and group companies and making investment in
human resources in the technology and digital aspects.

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Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

I hope that the company will prioritize and organize its
human resources strategies and thereby strengthen the
structure. Due to the severe business results in FY2022,
the company was unable to raise the wages of its
hard-working employees, which must have affected theemployees’ motivation. I think it is necessary, from theperspective of securing competent human resources,
to consider the introduction of a job-based personnel
system.

For future growth or growth in the future, what are the social issues
F
that the company should address? And what do
you think are the societal expectations placed
upon the company?
Hiraishi: There are a wide range of social issues thatthe company should address. But efforts toward
decarbonization and climate actions are particularly
important in order to achieve the target of carbon
neutrality by FY2050. The company has launched someplastic-replacing products, and I expect it will further
advance development of technologies that contributeto the environment. In terms of human resources, whileworking to secure diversity in its human resources, thecompany should develop an environment to makethe company itself continue to be attractive to its
existing human resources through such initiatives asestablishing a fair evaluation system based on abilities
of individuals. I think this will address at the company
the issue of human rights in a broad sense. In addition,in view of natural disaster risks, I expect the company
to strengthen measures to prevent or mitigate disasters
and to establish a supply chain structure that is resilient
to disasters if they occur so that the company can fulfill
its social responsibility.
Ozeki: The company has already been working on social
issues and risk management. In terms of manufacturing,in particular, I think that the risk associated with theconcentration of various functions at the Mishima Mill isa critical and urgent issue to be addressed. Meanwhile,the company has shifted its focus for the future from
B2B-oriented paper and paperboard business to the B2Coriented field of household and hygiene products. It is
expected that the company will increase its presence andpopularity in the general consumer goods market. On
the other hand, instead of relying on the fields in which
it currently has strengths, in line with structural changes
in the domestic population pyramid, the company
needs to sharpen its awareness of trends and changes
in the market segments in which the company may

demonstrate its meaning of existence and which may
serve as a source of profits.
Takei: Social issues are not issues that arise fromthe company but emanate from outside. I think it isdangerous to have the idea that tackling social issues
is good enough for a company. As movements andchanges in society have been accelerating significantly,
the company will not be able to survive unless it keeps
up with them and works to solve the social issues.
With such a sense of crisis, I think it is important for thecompany to undergo a painful structural change. As
for manufacturing bases, the risk of concentration at
the Mishima Mill is as mentioned by Ms. Ozeki. On theother hand, manufacturing sites have been constantly
suffering from a water shortage for the past few years.
I think the entire region, including the government,
should take steps to address the issue of water resources.
Oda: The company has been enhancing its sustainable

management through such actions as upgrading
the Sustainability Promotion Department to the
Sustainability Promotion Division in the organizational
reform this year. I think the enhancement of sustainable
management is very important to solve social issues. I
hope that the establishment of a structure to enhancesustainable management, including the Sustainability
Committee, will lead to solving social issues.
 lease give us your advice for strengthening ourP
growth foundation, such as the H&PC Business andoverseas business expansion.
Ozeki: The company has several unique strengths
that other companies do not have, such as productionof fluff pulp. These strengths in the value chain fromprocurement to manufacturing are useful for sustainable

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Round-table Talk by Outside Directors

growth of the company. Ideas from within the company
are of course important. But in order to grasp various
changes with a sense of speed, I think it is also importantto actively bring in insights from outside the company.
Takei: In the automobile industry, for example, amid
what is said to be a once-in-a-century period of greatchange, there are companies that are rapidly shifting
to EVs and companies that see EVs as an option.
Similar changes are taking place in the papermaking
industry. The company initially attempted to make a softlanding while reaping benefits by becoming one of theremaining players in the paper industry. But now this isbecoming difficult. In Europe and the U.S., most paper
manufacturers have shifted to the paperboard business.
The company has positioned H&PC as the priority area
and will change the allocation of resources, including
human resources. In this process, I think the conventional
mindset of pursuing “merits of scale” should also bechanged. At the same time, as the trend of emphasizing
ESG is likely to continue, forward-looking actions need
to be taken. In determining a management direction,such as making effective use of human resources anddigital technologies to focus on core businesses with asmall number of selected employees and placing priority
on creating profits, the company’s ability to adapt its
mindset and execute changes is tested.
Oda: With domestic demand stagnant and growth
opportunities sought overseas, it is important to change
the business structure while developing high-valueadded products to differentiate the company fromcompetitors. The shift of the priority area to H&PC andoverseas is not wrong. So, it will become extremely
important to have a function to control ASEAN as awhole, overseas as a whole, or H&PC as a whole, fromthe perspective of total optimization while allowing
individual local bases, such as those in Thailand, Vietnam,
and Indonesia, to work hard to expand their respective

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businesses. President Wakabayashi has taken charge of
H&PC. I see this as a positive move. I believe discussing
thoroughly on individual issues to find answers andconsidering total optimization from a broad perspective
are both important.
Hiraishi: As ESG perspectives are becoming increasingly
important, management based on ESG will befundamental to companies. When expanding businessoverseas in the H&PC area, lessons learned from the past
successes and failures should be reflected in overseas
investment in the future to prevent the recurrence ofthe same failures. To make overseas business profitable,
I think it is important to have a time span that takes
into account various possible twists and turns that
may arise from local history and social and economic
circumstances.
 ow do you envision the Daio Group of theH
future?
Takei: Since around 2000, the company has recognizedthat paper would eventually be replaced by digital, andthe speed of the shift has been accelerating these days.
In the past couple of years, it has become necessary
to materialize the future picture we envisioned in thepast ahead of schedule. It seems that the company is
now urged to change not only its business portfolio
but also its entire business structure. I expect thecompany will consider and carry out dynamic structuralchanges, including leveraging pulp instead of paper as
its mainstay and enhancing technology in areas thatare not paper, such as cellulose nanofibers, without
dismissing even the possibility of removing “paper” fromits company name, and envision growth toward future.
Oda: The business results of FY2022 were very severe.
The company can no longer manage the situation
by following what it has done so far. And I hope thecompany will turn this situation into a positive engine
to change its fundamental structure. In terms of carbon
neutrality, the initial policy was to shut down one coalfired boiler every 10 years. However, due to soaring coalprices and rapid weakening of the yen, the company
has begun to move ahead of schedule, including
technological development. Reform may be opposedby conservatives. But when the situation has become
this severe, there is no choice but that “we must do it.”I believe that we have come to such a point. So, witha strong awareness of the company’s Purpose (raisond’être), “with Passion with Sincerity, we will achieve
Three Well-beings and realize an abundant and affable
future,” I hope that the company will undergo a major
reform by deepening constructive discussions to turn thisSECTION 02

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Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—difficult situation into a positive vector, and all individual
employees will voluntarily play active roles in it.
Hiraishi: As Mr. Oda said, it is important to make use of
the experience of the drastic fall from the record-highprofits in FY2021 to deficits in FY2022 for the future. At
present, under these severe circumstances, the company
is struggling to find ways to make improvements in the
future through identifying the features of its businessstructure. In a sense, having experienced rock bottom
has helped the company improve its resilience. Seeing
it now as standing at a new starting point, I hope thecompany will leverage its strengths to implement
structural reform, which is a shift to H&PC. For the future,
I think it is also necessary to establish a brand image
that makes it easier for general consumers and society
to understand the company’s social mission and roles. I
feel strong empathy for the Three Well-beings, namely,
Hygiene, Life, and Regeneration, which the company
values. No matter what its business structure is like in the
future, I think it is important for the company to continue
to communicate to society the value the company
creates for society in an easy-to-understand manner.
Ozeki: Imagining the company existing in the future,say, 30 years or 50 years from now, which is difficult
to predict, it would be no surprise if the company isengaged in a business completely different from now. It
is highly possible that “paper” will no longer be includedin the company name. I want not only the current
executives but also young members, who will lead thecompany at that time, to discuss how the “Daio” brandshould be rooted in society in the future. Looking backat history, under the leadership of the founder andhis successors, the company continued to improve its
business performance until around FY2021. But theperformance declined significantly in FY2022, and thecompany decided to make a major shift to H&PC, partly
due to the trends of the times. I guess that Daio Paper
is now at a major turning point in its history. I believe
we need to ask ourselves what will be the company’s
purpose (raison d’etre) 30 years from now, why weengage in business, and what are our unchanging corevalues. In the talk last year, I mentioned the importanceof individuals with sound skepticism and an enterprisingspirit. I think this is a good opportunity to have suchindividuals to actively discuss the future of the company
without fixating on the preservation of what it is now
and with an eye to even starting a completely different
business.
Finally, please give a message to our stakeholders.
Oda: In order for the company to increase its corporate

value in the future, I believe it is essential to leverage
the sense of crisis under the current severe situation topromote and accelerate reform of the business structure.
The company is at the stage of seeing the reform of
its business structure over the medium to long term,
strengthening the human resources base, and designingand implementing the reform in a speedy manner. In my
own experience on the side of promoting businesses,
I was sometimes bound by immediate tasks in front ofme or past experience and tended to have a narrowperspective. Now, from a position a little distant fromthe company’s frontline operations, I will do my best to
provide positive stimulations, based on my past failuresand successes.
Hiraishi: I think the company has increased its resiliencethrough trial and error, facing various difficulties during
the past year. The company will have to overcome
every issue for its growth, such as expanding business
into new markets abroad, entry into the pet careproducts market, and exploring new businesses throughdevelopment of cellulose nanofiber and other materials.
In particular, in the course of the company’s overseas
business expansion, my overseas experience during mytime as a diplomat may be useful in several situations,such as M&A and PMI of overseas companies. Throughcontributing to improving the company’s global
corporate value, I will do my best to respond to the
expectations of the stakeholders.
Ozeki: The urgent task for the company is to rebuild
and strengthen its business. But it does not mean thatthe governance reform can be relaxed. I will continue toaggressively express my opinions and recommendations
while monitoring the executive side through the Boardof Directors so that governance reform can be steadily
implemented. Reform of the committee system has only
just begun. I will do my best to help the executive team
set a direction and firmly hold the steering wheel as they
move forward.
Takei: In FY2022, what the company thought were theirstrengths turned into weaknesses. At the same time, I
think that the move toward carbon neutrality served
as a good opportunity to encourage reform within thecompany. As it has become difficult to imagine what the
future will look like beyond the 5th MTBP, the company
is being forced to draw a different picture of the future
and make plans from a new stance. While the company
will move forward with drastic reform after clarifying
its new direction, I will personally offer various opinionsfrom market and legal perspectives, thereby contributing
to turning the current crisis into a positive opportunity
for all members of the company to head in a new
direction.

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