SECTION 01

Fulfilling Our Purpose —Value Creation Story of the Daio Group—Management Philosophy of the Daio GroupSECTION 01

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—

Shaping an Abundant andAffable Future for the World
Under our corporate motto of Passion with Sincerity(our value), we will achieve Three Well-beings (our vision)and realize an abundant and affable future (our mission).
This is the embodiment of our management philosophy—“Shaping an abundant and affable future for theworld.” This is our raison d’être—our purpose.

Management Philosophy

Shaping an Abundant andAffable Future for the WorldOur mission:
To realize an abundant
and affable future

Dedicated
Dedication to manufacturing

Integrated
Corporate culture providing
safety and motivation to work

D

Attentive

Four pillars of
our management philosophy

I

A

O

Bonds with local communities

Organic
Contribution to
the global environment

The four pillars of our management philosophy form the foundation to realize our goal of an abundant
and affable future. The embodiment of these four principles will “shape an abundant and affable future
for the world.”
We will incorporate the Three Well-beings that must be achieved into our business management.
Keeping in mind our corporate motto and unchanging values, “Passion with Sincerity,” we will continue
to take on challenges.

3

Integrated Report 2023

Protecting the well-being of the body
We will make hygiene products
accessible, inspire good habits, protect
people’s health, and realize an inclusive
society in every community.

1

Hygiene3
Three
Regeneration
Well-beings
2

Enhancing the well-being of lifestyles

Life

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

Corporate Motto:
Passion with Sincerity

Restoring the well-beingof the earth
We will actively conserve theenvironment and regenerate theearth back into a planet with
abundant nature where diverse
organisms coexist and thrive.

Integrated Report 2023

4

SECTION 01

SECTION 01

Message from the President and CEO
Looking back on FY2022
Looking back on FY2022, the external
environment was extremely challenging
for Daio Paper with soaring resource prices
resulting from the protracted situation in
Russia and Ukraine and successive pricehikes for food and other daily necessities,
which put pressure on household budgets,coupled with unprecedentedly high raw
material and fuel prices and the rapid
depreciation of the yen. As I mentioned in代表取締役社長
last year's
Integrated Report, we are now
in the 社長執行役員
era of VUCA (volatility, uncertainty,
complexity, and ambiguity), but the past year
has been particularly challenging for us due
to continuing high procurement prices for
major raw materials and fuels such as coal,fuel oil, wood chips, and pulp, and risinglogistics and packaging material costs, as wellas the historic depreciation of the yen. All
these combined have resulted in a significant

若林 賴房

Building a resilient business foundation andachieving a V-shaped recovery by accelerating
the shift of focus to the Home and Personal
Care Business and the shift away from coal

Yorifusa Wakabayashi
President and Representative Director
Chief Executive Officer

5Integrated Report 2023

SECTION 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—

increase in the production costs of paper
products, converted products, and all otherproducts for our company, which imports a
lot of raw materials and fuels from overseas.
In addition to these factors, a disaster loss
from the boiler breakage accident that
occurred at our subsidiary Iwaki Daio Paper
Corporation in September 2022, and therestructuring costs including the restructuringof the production system had a massive
adverse impact on our performance. As
a result, for FY2022, although net sales
increased 5.5% year-on-year to 646.2 billion
yen, hitting a record high for 10 consecutive
years, operating profit fell to a loss of 21.4
billion yen, and we posted the first operating
loss since listing on the stock exchange in
1979. Ordinary profit and profit attributableto owners of parent posted losses of 24.1
billion yen and 34.7 billion yen, respectively. I
am ashamed of these severe financial results.
By business segment, the Paper andPaperboard Business implemented measures
to pass on increased production costs toselling prices, but was unable to absorb thefull impact of the soaring raw material andfuel prices, resulting in an increase in sales
and a decrease in profit, thereby posting asegment loss. With regard to the Home andPersonal Care (H&PC) Business, although
net sales increased year-on-year due toprice revisions in overseas operations andthe impact of foreign exchange rates, theincreased production costs caused by therising pulp and packaging material prices
could not be offset by self-reliant efforts suchas price revisions, energy conservation, andcost reductions, both in Japan and overseas.
As a result, the H&PC Business posted
increased sales and decreased profit, resulting
in a segment loss.
Since the First Medium-Term Business Plan
(hereinafter “MTBP”) in FY2012, we havesteadily increased our business performancethrough three successive MTBPs, underwhich we implemented various measuresto drive growth such as capital investment.
These efforts bore fruit, and one year ago,
in FY2021, we recorded our highest everprofits. However, in FY2022, the second yearof the 4th MTBP, our performance took a
sharp downturn, making it difficult to achieve

the numerical targets in the final year of
the 4th MTBP. Under these circumstances,
we have initiated measures to restore ourbusiness performance as soon as possible
and strengthen our resilience. In FY2023,
the effects of these measures will materialize
throughout the year, and we will achieve a
V-shaped recovery, as well as year-on-yearincreases in both sales and profit.

Shifting focus from the Paper andPaperboard Business to the H&PC
Business
In order to strengthen our resilience even inthis severe business environment, we haveannounced the following four measures:phased price revisions, thorough cost
reductions, further promotion of structuralreforms, and a shift in investment policy
during the 4th MTBP period, and have
implemented specific activities accordingly.
We have already completed price revisionsof the products in the Paper and Paperboard
Business and also of the household
paper products. As for cost reductions,
we have reviewed our coal suppliers andprocurement items, and streamlined ourorganization through restructuring andintegration. Regarding the review of woodchip sourcing areas, we plan to increase theratio of domestic materials by 10% fromthe current level by FY2026. With regard to
structural reforms, we carried out a majorrevision of our energy policy, and in March
2023, commenced in-house consumptionof biomass-generated power that had beensold under the feed-in tariff (FIT) scheme.
In addition, we shut down the No. 3 paper
machine (for manufacturing newsprint)
at the Mishima Mill and restructured the
production systems of the Newsprint Sales
Division and the Paper Sales Division. For the
H&PC Domestic Business Group, in addition topromoting structural reforms by establishinga new organization dedicated to improving
S&OP (sales and operations planning) in
April 2023, we started in-house productionof fluff pulp in July this year. With regard toinvestment policy, we have decided to makea major shift from the initial policy for the 4th
MTBP period, giving priority to energy-related

Integrated Report 2023

6

SECTION 01

SECTION 01
Message from the President and CEO

investments.
Comparing the current situation with thatenvisioned in the original 4th MTBP, although
we had planned to welcome the epochmaking moment in which the sales ratio of
the H&PC Business would exceed that of
the Paper and Paperboard Business during
the 4th MTBP period, the current situation
is far from what we initially expected. We
have concluded that in order to get to theenvisioned ideal state, we need to further
strengthen the H&PC Business. Positioning
FY2023 as the year to start building afoundation for growth from the 5th MTBP
onward, we have clarified our policy ofshifting the focus largely from the Paper andPaperboard Business to the H&PC Business.
We will reallocate resources to the H&PC
Business in all aspects of people, equipment,
and money (capital investment).
However, this is in no way meant to makelight of the existing Paper and Paperboard
Business. Due to structural reforms centeredon the Mishima Mill and a review of thesales structure, the Paper and Paperboard
Business is now more than able to competewith its competitors. Going forward, we will
pursue further efficiency by shifting fromquantity to quality, and after solidifying ourbusiness foundation in Japan, we will shift
to a business model that seeks to generate
profits from overseas operations centered on
the H&PC Business, using the stable earnings
from the Paper and Paperboard Business as asource of funds. Although demand for paper
and paperboard is not as strong as it used tobe, we are seeing a certain level of demand,
and we will secure solid profits by selling ourvalue-added products.

H&PC Domestic Business enters
the pet care products market while
maintaining its competitiveness
The H&PC Business is our core business,and is a growth field that will drive ourcompany in the future. In Japan, demandfor health care is growing due to the agingof the population, and economic activities
are expected to revive as the COVID-19
pandemic gradually subsides. However,
we expect a contraction in demand for

7

Integrated Report 2023

baby care and feminine care products due
to a decline in the number of births, and asignificant decline in demand for sanitizing
wet wipes and face masks, whose sales
had been boosted by special demand fromthe COVID-19 pandemic. As we position
the H&PC Business as our core business,
we must find and nurture new growth
opportunities while ensuring profits even in
categories where market contractions areinevitable in Japan. To this end, in addition
to carrying out structural reform of the S&OP
process to leverage digital transformation
to advance the automation of production
and logistics planning, we commenced inhouse production of fluff pulp in July of thisyear as a structural reform in terms of costs.
While regaining competitiveness throughthese structural reforms, we will enter thepet care products market this fall as a new
initiative. Pet care products specifically refer
to absorbent pads, cat litter, diapers, wetwipes, etc. The average lifespan of both dogs
and cats, which are the most common pets,
has been increasing, and people feel closer
to and regard their pets as family members
rather than as objects to “keep.” The market
for pet care products is expected to grow toabout 145 billion yen by 2026, far exceeding
the individual markets for baby care andfeminine care products. If we can successfully
develop the pet care product business into apillar of our domestic business by leveraging
the strength of the Elleair brand, it would
open up the possibility of horizontally
expanding that successful experience tooverseas markets, including China, which
is a “pet superpower.” Furthermore, in thisfield, not only can we apply the technology
we have cultivated in the absorbent productbusiness, we can also make maximum useof the cat litter manufacturing technology
and know-how of Daiki, whose shares weacquired in 2022. We are also considering a
recycling business model that contributes to
the global environment, such as producing
pet care products using rejects from theproduction of sanitary paper and disposable
diapers. As consumers become increasingly
environmentally conscious, this recycling
business model could become an elementthat differentiates us from our competitors.

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—

Positioning H&PC Overseas Business asa growth driver
We aim to achieve net sales of 800 billion
yen to 1 trillion yen and an operating
margin of 10% in FY2026, the final year of
the 5th MTBP. We envision that the H&PC
Overseas Business will account for morethan 30% of the Group’s consolidated
sales, and we will more vigorously promote
the shift to overseas business as a driver of
future growth. Currently, we are actively
directing efforts to improve profitability,with priority on the productivity of thefactories in China and Brazil, which arehuge markets. In China, our core businessis baby care and feminine care. In the baby
care business, we will further strengthen
our presence in the super-premium market.
At the same time, we will promote thedevelopment of the standard market byenhancing the lineup of products for users
in second- and third-tier cities in China,
while leveraging the high recognition of
the DaWang brand that we have cultivated
to date. In the feminine care business,as the zero-COVID policy has ended andsales activities at stores have resumed,
we will expand our product lineup andaccelerate sales by taking advantage of the
production capacity of the new machine,which commenced operation in 2022. In
Brazil, following the premium strategy for
toilet tissue, which we have been pursuing,
we are working to enhance profitability
by strengthening the premium category
in absorbent products, and it has been
going very well. In September 2022, welaunched premium diaper pants in thebaby care category, and sales of this new
product have steadily increased, taking an
8% share in the premium market in termsof volume in just six months. Our next stepis to promote the development of premium
products in the feminine care category. In
Southeast Asia, we are working to rebuild
and strengthen our business structure tocapture growing demand. The demandfor disposable baby diapers in ASEAN is
2.6 times that of the Japanese market, andthe population is expected to continue togrow. In the past, our activities have been

limited to Indonesia and Thailand, where
we have bases. Going forward, we intend
to enhance our presence by shifting ourstrategy to extend the coverage of ouroperations to the neighboring countries ofour current bases. To promote this strategy,
we established a sales subsidiary in Vietnam
in July 2023. Vietnam is expected to havethe third largest demand for disposablebaby diapers in ASEAN, after Indonesia andthe Philippines. So, starting with disposablebaby diapers, we will work to increase ourpresence in the ASEAN region, with a viewto expanding into the sale of feminine careproducts in the future.

Shifting the focus of human resources
as well
In executing the strategy to shift focus
to the H&PC Business, human resources
will be critical. Based on our belief thatpeople are valuable assets, we have beenworking to create an environment in which
each individual can demonstrate their fullpotential.
In order to successfully shift focus to
the H&PC Business, we will promote a
personnel strategy based on the two pillars
of increasing the number of employees

Integrated Report 2023

8

SECTION 01

SECTION 01
Message from the President and CEO

central role in implementing strategies toenhance the diversity of human resources.
This includes strengthening measures toensure female employees can participate
actively in the workforce, and encouraging
male employees to take childcare leave, withthe target of a 100% acquisition rate. Also, asa measure to improve employee engagement,
surveys are conducted to visualize
engagement, identify operational issues at
each unit, and make improvements.
Through structural reforms, we will promote
the integration of some group companies,
and seek to create a synergistic effect throughincreasing personnel exchanges, thereby
leading to new developments.

Actively promoting sustainability andaccelerating the shift away from coalin the H&PC Business, and strengthening
the internal development of global humanresources who can play an active roleoverseas. More specifically, we will shift
human resources from the Paper andPaperboard Business to the H&PC Business,and the Paper and Paperboard Businesswill be operated by a small number ofhighly skilled employees to support theCompany as a revenue base. In addition,
we will strengthen the development of
global human resources by giving young
employees the opportunity to experienceoverseas assignments as part of theircareer path, in addition to providing
language training. We are planningto dispatch approximately 100 people
overseas for training. We are encouraging
motivated people under the age of 35 tostep forward through open recruitment,
self-nomination, or peer-nomination. We
are considering personnel measures thatwould allow employees to experience anoverseas assignment at least once earlyin their career, return to Japan to acquire
further business expertise, and subsequently
experience working overseas again, but thistime as a manager at an overseas subsidiaryor an acquired company.
Promoting diversity is also essential for theadvancement of overseas business. The
Diversity Promotion Department plays a

9Integrated Report 2023

I believe that sustainability initiatives canpresent major risks and at the same timebusiness opportunities for our company.
I feel a sense of urgency in that unless weaccelerate our sustainability efforts, oursurvival could be at stake, and any delay in
our efforts will only lead to our decline.
In terms of organizational structure, wehave upgraded the Sustainability Promotion
Department to the Sustainability Promotion
Division, to step up our sustainability efforts
even further.
Daio Paper upholds the management
philosophy of “Shaping an abundant andaffable future for the world,” and has set
the vision of becoming a company thathelps realize a sustainable society and solve
social issues through its business activities.
Unfortunately, we are currently using a large
amount of coal, which emits greenhousegases (GHG). Unless we resolve this situation,
I fear that we may not even be able topass down our company itself to future
generations. This sense of crisis that I feelis, of course, shared with our employees.
I stress to employees that our generationmust avoid actions that could negatively
impact the future, including exacerbating
global warming through GHG emissions,which could impede the achievement ofeven the 1.5°C scenario set forth in the Paris
Agreement.

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—

To achieve carbon neutrality by 2050, we
had planned to shut down a total of threecoal-fired boilers, one every 10 years, in
2030, 2040, and 2050. However, with theJapanese government moving to introduce
a carbon pricing system as early as FY2028,
we believe that if we do not accelerate
the shift away from coal, it could have asignificant negative impact on our businessperformance. Therefore, in March of thisyear we switched to using power generated
by our biomass-fired boiler internally,
instead of selling it externally under the FIT
scheme, and shut down the No. 3 paper
machine at the Mishima Mill to improve
our energy balance. This decision was very
difficult for me, but I would like to take amajor turn toward shutting down coal-fired
boilers as soon as possible. However, it is
not so easy to promote decarbonization
while continuing the business of providing
products to customers. Therefore, weare promoting various initiatives, such as
reducing CO2 emissions through the use of
black pellets as an alternative fuel to coal,and accelerating the construction of wasteto-energy boilers. Furthermore, with regard
to the fuel for waste-to-energy boilers, inaddition to procuring RPF (Refuse Paper &Plastic Fuel: a fuel made from waste paper
and waste plastic), which is the mainstream
fuel for waste-to-energy boilers, we areconsidering the use of compost produced
through in-vessel composting, which is
being carried out by Mitoyo City in Kagawa
Prefecture. In-vessel composting is abeneficial solution for municipalities as
it allows them to sidestep the high costs
associated with waste incineration. As acompany who seeks to procure the compost
as fuel for waste-to-energy boilers, I believethat we can forge a mutually advantageous
relationship with the municipality.

To shape an abundant and affable
future for the world
The Daio Group states that with our
founding spirit of “Passion with sincerity
leads to greatness” in mind, we strive toachieve the Three Well-beings of Hygiene(protect the well-being of the body), Life

(enhance the wellbeing of lifestyles), andRegeneration (restore the well-being of theearth) in order to realize our management
philosophy of “Shaping an abundant
and affable future for the world.” We
will accomplish the Three Well-beings
through the four pillars of our management
philosophy: “Dedication to manufacturing,”“Bonds with local communities, “Corporate
culture providing safety and motivation
to work,” and “Contribution to the global
environment.” We believe that ourmanagement philosophy embodies the goalof sustainability management. Our ultimate
goal is to improve hygiene and the standardof living globally by distributing our
products worldwide, thereby enriching the
lives of people around the world. At present,
we are working to realize sustainablegrowth in order to deliver, through our
products, the social value of hygiene andimproved living standards to countries
across the world, including the African
continent, which we have not yet entered at
the moment.
In our interactions with investors, we haveoften been praised as a company with theability to transform. We must leverage thisstrength to accelerate our sustainability
management. On the other hand, we areaware of the need to improve PBR as quickly
as possible as it is currently below 1x. Ourfinancial results deteriorated significantly in
FY2022. Therefore, in order to improve PBR, it
is important above all to steadily implement
our growth strategies and thereby enhance
our corporate value as quickly as possible.
We are also strengthening management
through figures within the Company, suchas examining capital efficiency and costeffectiveness by business segment, andconducting detailed analyses for investment
execution. Also, we are sharing ROIC trees
with frontline staff to raise their awareness ofimportant financial KPIs.
In FY2023, we will first focus on improving
our financial strength, and then steadily
promote the shift to the H&PC Business tobring us closer to our target for the next step,
the 5th MTBP.

Integrated Report 2023

10

SECTION 01

SECTION 01

History of the Daio GroupSECTION 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—

East Asia—Relentless pursuit of value creation through speedy decision-making andexecution, and global expansion by leveraging brand power—(Billions of yen)
600

500

“What is made by Daio is sold only by Daio sales representatives”—this saying has been passed down in the Daio
Group, and in keeping with this, Daio’s sales representatives visit customers directly one by one to understand theirneeds and the quality required by them, and communicate such firsthand information to the production team tocreate what customers truly want. The Daio Group has grown to the present day through this unique system that is
not seen in other paper manufacturers.
In addition, its culture of responding to social needs and fostering manufacturing by visiting actual sites andlistening to customers' voices is still carried on today as its basic stance of emphasizing genba (actual place),
genbutsu (actual object) and genjitsu (actual situation) based on the San Gen (three actuals) Shugi principle.
Furthermore, the Group quickly senses and responds to market changes, and continues to strategically transform
its business portfolio through speedy decision-making and execution, thereby actively expanding its global
presence.
Paper and Paperboard Business

H&PC Business

Overseas H&PC BusinessCentral and SouthAmerica©Disney

Turkey andsurrounding countries

Expanding Daio’s
presence around theworld(Billions of yen)
600

500

Other

Acquired the Attento brandbusiness from U. S.-based P&G

1979

Acquired the paper productbusiness of Nisshinbo Holdings Inc.

400

Elleair brand born

300

200

300

—Entered the Japanese tissue paper
market, the last of the major paper
manufacturers, and captured the top
market share in just seven years—

1943

2023

Transformation of our business portfolio

Ceremony for thecompletion of a paper mill

1947

The founder Isekichi Ikawa
decided to switch from theproduction of washi (traditional
Japanese paper) to yoshi(Western-style paper) because
he foresaw a downturnin demand for washi anddetermined that the switch to
yoshi would be the only way
forward. Daio Paper thus started
producing modern-style paperand newsprint.
Integrated Report 2023

FY1960Kawanoe Mill serving as thecore of linerboard production

1954

Daio Paper decided tostrengthen the foundation
for its development into anindustrial paper manufacturer
and newly installed kraft pulping
equipment. As a result, theCompany began to produce
newsprint containing kraft pulp
and pioneered kraft linerboard
production by launching K Linerand KS Liner.

FY1970Construction of the New
Mishima Mill

1972

Daio Paper decided to increase
its production capacity to ensure
the stable supply of all typesof products, including not only
newsprint and paperboard
but also printing paper andpackaging paper. The Company
started construction of the New
Mishima Mill with the aim ofestablishing a foundation for its
development into a full-range
paper manufacturer.

FY1980Facial tissue and toilet
tissue at launch

1979

Daio Paper decided to enter thehousehold paper product market
and began to produce and sell
Elleair-brand facial and toilet
tissue as part of its growth as afull-range paper manufacturer.

200Entered the pet care products
business with the “Elleair Pet
Kimi Omoi” brandFounded to produce and sell washi(traditional Japanese paper)

FY1951

11

2017

2007

400

100

Southeast Asia

Disposable baby diapers
and sanitary napkins atlaunch1980

Daio Paper decided to enter
the absorbent product market.
It started producing and selling
disposable baby diapers in 1980and sanitary napkins in 1982.

FY1990

A stretch of forest owned
by Forestal Anchile

1989

Aiming to achieve sustainable
forest management, Daio Paper
decided to establish Forestal
Anchile in Chile, South America,
and went into the forestry
business.

FY2000

Iwaki Daio Paper

1996

Daio Paper decided to establish
Iwaki Daio Paper in Iwaki City,
Fukushima Prefecture, 180 kmfrom Tokyo, the largest sourceof recovered paper in Japan. The
new company began to produce
and sell newsprint made from
100% recovered paper, Japan’s
first such product.

FY2010

Elleair International China(Nantong)

2011

In anticipation of a decline indomestic demand, Daio Paper
decided to expand into overseas
markets on a full scale andestablished a subsidiary for the
local production of disposablebaby diapers in Thailand in
2011, in China in 2012, and inIndonesia in 2014.

FY2020Kawanoe Mill, which was converted
into a household paper mill

2018

As part of its production
structure reform, Daio Paper
converted the Kawanoe Mill
into a household paper mill witha view to not only supplying
household paper products to
the Japanese market but also to
Asian countries, including China.
A household paper machine wasadded at the Mill in 2021.

100

FY2022

Santher (Brazil)

2020

In order to accelerate its global
expansion, Daio Paper acquired
hygiene product manufacturers
in Brazil and Turkey.

Integrated Report 2023

12

SECTION 01

SECTION 01

At a Glance
The Daio Group manufactures and sells a full range of paper products including newsprint, printing paper
and packaging paper, and consumer household goods including facial tissue and other household paper
products, disposable baby and adult diapers, and feminine care products.

Net Sales

646.2

Achieving Sustainable Growth

Responding to Social Issues

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

We operate our businesses while leveraging our various tangible and intangible assets to achievesustainable growth and provide value for stakeholders.

Household Paper
Products Market
Share in Japan24 9bases in Japan

3.5

Daio Group
Business Basesbases in8

billion yen

612.3■ Paper and Paperboard

Business

Production and sale of newsprint, printing
and publication paper, communication
paper, packaging paper, containerboard
and corrugated container products, pulp,
etc.

546.4

317.8

646.2

Consolidated
Workforcecountries overseas

Other
4.5%

562.9

302.5

327.4

■ Other Businesses

Transportation, engineering, managementof sports clubs and golf courses, etc.

13

Integrated Report 2023

Paper and
Paperboard
Business
53.7%

347.0

Consolidated net
sales for FY2022■ H&PC Business

Production and sale of household paper
such as facial tissue, disposable baby andadult diapers, feminine care products, wetwipes, etc.

Net Sales Composition by Segment

646.2

204.7
23.9
FY2019238.0
22.5
FY2020257.3
27.6
FY2021billion yen

270.3
28.9
FY2022

H&PC Business
41.8%

No.

*Source: Intage SRI+, sanitary paper market (facial
tissues, toilet tissues, kitchen towels, and paper
towels), April 2022 – March 2023, cumulative
total sales by manufacturer

590
12,634

km2

The Daio Group owns 590 km2 of forested land—roughly the same area as Tokyo’s 23 special wards—in Chile,
South America. About half of this, 280 km2 of land, is preserved as natural virgin forest toward the conservationof biodiversity and sustainable forest management.

employees*Bases: Daio Paper Corporation and its consolidated subsidiaries (headquarters) (as of August 31, 2023)

Net Sales (Billions of yen)

1

Elleair is the signature brand of DaioPaper. The Company entered theJapanese tissue paper market with thebrand in 1979, the last of the Japanesemajor paper manufacturing companies
to do so, and captured the top market
share in just seven years. With products
developed through market-driven
approaches, Elleair is the top brand in
the Japanese household paper industry.

Group-owned Forest Area

In Japan, a total of 24 bases—comprising production bases and Group company business bases—operate various businesses. Outside Japan, the Group
has nine bases in eight countries, including Thailand, China, and Indonesia.

Business Description

SECTION 04

Fulfilling Our Purpose

Founded in Ehime Prefecture in 1943, Daio Paper
Corporation celebrates its 80th anniversary in 2023.
Starting as a manufacturer of newsprint and paperboard,
the Company later entered the paper business and thehousehold paper business, and has grown into a full-range
paper manufacturer. As a result of entering overseas
markets and increasing sales in various countries, theGroup’s consolidated net sales for FY2022 totaled 646.2
billion yen. The Group continues to pursue sustainablegrowth while transforming its business portfolio, with theaim of achieving sales of over 800 billion yen
in FY2026.

R&D Expenses

SECTION 03—Value Creation Story of the Daio Group—

billion yen

In FY2022, the Daio Group spent 3.5 billion yen on research anddevelopment. With the aim of achieving sustainable growth, theGroup has continued to conduct research and development to addressenvironmental and social issues as well as consumer needs. The
Group has been working to develop products that can contributeto decarbonization and reducing the use of plastic, including paper
products and a new material, cellulose nanofiber (CNF), fromrenewable wood resources.

SECTION 02

Results and Targets of the Three-Year Medium-Term Business Plans (MTBP)(Billions of yen)

Results of theFirst MTBP(FY2014)

Results of theSecond MTBP(FY2017)

Results of theThird MTBP(FY2020)

Targets set
in the Fourth
MTBP (FY2023)

Long-term vision toachieve during theperiod of the Fifth
MTBP (FY2026)

450.2

531.3

562.9

720.0

800 -1,000

Operating proﬁt(operating profit
margin)21.8（4.8%）

11.1（2.1%）

36.9（6.6%）

51.0（7.1%）

80.0 -100.0（10%）

H&PC overseas net
sales ratio

4.9%

7.7%

11.1%

18.8%

30% or above

ROE

10.0%

2.2%

10.1%

10% orabove

12% or above

1.9

1.6

1.3

1.0

1.0 or below

Net sales

Net debt-toequity (D/E) ratio

The total number of employees inthe Daio Group is about 13,000. The
Group aims to create a positive work
environment where diverse employees
can demonstrate their abilities to thefullest. To this end, the Group promotes
diversity management through various
initiatives, such as supporting female
employees’ career development andencouraging male employees to takechildcare leave.

Number of Employees (Consolidated)■ Employees (consolidated)■ Non-Japanese employees
12,6583,449

FY202012,9173,646

FY2021

12,6343,389

FY2022Integrated Report 2023

14

SECTION 01

SECTION 01

Strengths of the Daio Group

Competitive Advantage 1

Product Value Chain❶ Sustainable forest
management (tree planting)❷ Sustainable resource recycling(advanced use of recovered
paper)❸ Sustainable and effective useof resources (reuse of waste)

Competitive Advantage 3

The Group strives to increase its brand power, sales capability, and corporate value based on its
market-oriented sales policy embodied by the slogan, “What is made by Daio is sold only by Daio
sales representatives.”

Integrated production, beginning with raw
material production (tree planting ▶ wood chips▶ paper ▶ converting)

Cost
competitiveness[Production]

Association named “DAIO Partner
Ship Greenterasu” comprising 33
wood chip suppliers in Japan

Wood
chips

White
liquor

Pulp

Reusedas pulp

Wood
Treeplanting

CausticizedFlexible production
system that can meetchanging demand

Used to makeall kinds of paper

Reusedas energy

Biomass boiler orwaste-to-energy boilerBlackliquorHarvestingPaper
products

Developmentof fast-growing
trees andtree-planting
technology

Plastic film and other waste
items mixed in with recovered
paper reused as fuelSorting of recovered
paper into material
and fuel

Recoveredpaper

Sustainable forest
management

Sustainable recycling ofresources

Sustainable and effective
use of resources

Tree planting

Advanced use of recovered paper

Reuse of waste

Association named “DAIO Partner Ship Aoiterasu,” comprising 26 recovered paper suppliers
As a manufacturer that aspires to know its customers best, the Daio Group has devoted its efforts to
expanding its sales networks and training its sales representatives based on its basic stance: “What is
made by Daio is sold only by Daio sales representatives.” All sales representatives are encouraged tograsp market trends through their day-to-day marketing activities with customers, thereby contributing tospeedy product development and proposals that meet customer needs. Crucial to our innovation
activities, integrated operations of development, production and sales drive progress in our priority
issues: the development of plastic-reducing technologies and environmentally-friendly products/services,and the development and implementation of new businesses such as CNF*1 and RFID*2. This management
strategy is implemented not only in Japan but also worldwide, and it contributes to broadening our lineupof high-performance and high-quality products that fit the local culture and customs of eachcountry/region and to enriching the lifestyles of local consumers.
In addition, toward the achievement of the targets in the 4th MTBP, we are strengthening our intellectual
capital—the seeds of an abundant and affable future—in step with our key strategies of further global
expansion and innovation in priority fields. We aim to enhance our corporate and brand value across theglobe by implementing intellectual property strategies that contribute to the achievement of our businessgoals.
Intellectual Property Strategies to Enhance Corporate Value
pp.55-56*1 CNF: Cellulose nanofiber*2 RFID (Radio Frequency Identification): Contactless electronic smart tag*3 Number of intellectual property rights owned as of the end of March 2023
*4 The number of intellectual property rights owned and applications submitted may not match previously published figures due to changes in internal tabulation standards and other factors.
*5 Number of applications submitted in FY2020. The number of patent applications filed abroad is the number of PCT applications.
*6 Number of kinds of products registered in our database*7 Source: Intage SRI+, sanitary paper market (facial tissues, toilet tissues, and kitchen towels), April 2022 – March 2023, cumulative total sales by manufacturer

Integrated Report 2023

Data and Information—Financial and Corporate Data—

Speedy decision-making and great implementation ability
Shifting between different kinds of products according to demand
Pulp and paper
products
Maintain acompetitive edge
Converted products
Increase added value

Paper and
Paperboard Business

H&PC Business

New Businesses

Newsprint
and paper

Industrial
paperHousehold paper
products

CNF*1

Printing

Corrugatedcontainers

Absorbent products

RFID*2Market-driven style of sales activities
Style of sales activities closest to customers: “What is made by Daio is sold only by Daio sales representatives.”
Association named “DAIO Partner Ship Sakuraterasu,” comprising 32 regional distributors
Technological anddevelopment
capabilities❶ Speedy decision-making andgreat implementation ability❷ Integrated operations (integration
between product development,
production and sales; integration
between paper and printing,containerboard and corrugatedcontainer converting; integration
between the Paper andPaperboard Business and the
H&PC Business)❸ Style of sales activities closest
to customers: “What is madeby Daio is sold only by Daio
sales representatives.”

Responding to Social Issues—Foundation for Sustainable Growth—Integrated operations

Market-driven
Business Strategy

Achieving Sustainable Growth—Strategy for Continuing to Provide Value—

Brand power

Environmentally
Conscious Company

Since its establishment, the Daio Group has been engaged in environmental conservation through various
initiatives, including utilizing a high percentage of recovered paper, lowering energy consumption, andrecycling industrial water. We own 590 km2 of forested land—roughly the same area as Tokyo’s 23
special wards—in Chile, South America, and are practicing sustainable forest management there. Abouthalf of this, 280 km2 of land, is preserved as natural forest to conserve biodiversity. In addition, we now
use a higher percentage of recovered paper than the average in the industry as a result of our efforts toincrease our use of hard-to-recycle recovered paper, which was previously disposed of as waste. We also
aim to achieve zero waste emissions by separating hard-to-recycle recovered paper into material (pulp)
and fuel (such as plastic film mixed in with recovered paper) and utilizing both. In addition, we havepartnered with Livedo Corporation and Total Care System Co., Ltd. to jointly develop a technology forrecycling used disposable diapers, and we are producing paper cat litter at Daiki Co., Ltd. using scraps
from production rejects. Through these activities, we aim to establish an environmentally friendly
business model and reduce our environmental impact.

Fulfilling Our Purpose

Human resource
capabilities

Technological capabilities to produce a wide range of paper products that meet changing demand and further broaden
the product range at the Mishima Mill, one of the world’s largest coastal paper mills, which is highly cost competitive
due to its coastal location, as well as the sales capability to market this wide range of products

Competitive Advantage 2

SECTION 04

Sales capability to market a wide range of products❶ Integrated production,
beginning with raw material
production❷ Coastal location and one ofJapan’s largest pulping
facilities❸ Flexible production system thatcan meet changing demand

The Daio Group has built a product value chain capable of efficient production to provide a timely
response to changes in paper demand to achieve sustainable growth. The Mishima Mill, our core papermill, is one of the world’s largest coastal paper mills and engages in the integrated production of paper
and paperboard with in-house produced pulp. Its annual production output is about 2.1 million metrictons, which accounts for about 9% of Japan’s annual paper and paperboard production. The Mishima Millhas one of Japan’s largest pulping facilities, which is connected through a network of pipes to 18 paper
machines and feeds the appropriate types of pulp to each machine according to the quality of paper to be
produced. This system enables us to flexibly switch between different product types to always meetchanging market demand. In July 2023, we converted a paper machine at the Mishima Mill into a facility
that produces roll pulp for conversion into fluff pulp, which is an essential raw material for diapers andabsorbent products. By producing in-house some portion of the fluff pulp that was previously imported,
we will further strengthen our stable supply system for absorbent products.

SECTION 03—Value Creation Story of the Daio Group—Sales
capability

Production
capability

Core competence
15

The Mishima Mill, one of the world’s largest coastal paper mills, is the principal source of the Daio
Group’s competitiveness.
The Mill supports the Group’s sustainable growth through various measures, including
establishing a resilient production system that can respond to changes in the demand structure
and reducing the environmental impact of its operations.

SECTION 02

No.1

*7

market sharein Japan

Facialtissue:27.4%
Toilettissue:30.8%
Kitchentowels:28.6%

Capability to develop novel materials and products using wood resourcesIntellectual properties (IP)owned (Japan/overseas)*3*4● 3,353 / 2,085 patents● 391 / 1,081 registered designs● 1,145 / 1,454 registered trademarks

Facilitate
innovation
andutilize IP

Develop futuretechnologies
and products

Applications submitted(Japan/overseas)*4*5● 206 / 88 patents● 51 / 231 designs

A wide lineup of
high-quality products*6
Approx. 11,000 kindsof products● 73 / 361 trademarks

Joint research partners: Ehime University, Chiba Institute of Technology, University of Tokyo, Tokyo Kasei University, Tohoku
University, Tottori University, University of Maine (U.S.), National Institute of Advanced Industrial
Science and Technology, VTT Technical Research Centre of Finland, etc.

Integrated Report 2023

16

SECTION 01

SECTION 01

Material Issues of the Daio GroupSECTION 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—

The Daio Group observes social trends from a global perspective and reviews key issues that it should tackle
to increase its corporate value over the medium to long term, not only from the perspective of the current
situation but also from a future-oriented perspective, in order to focus on its goal. We have identified ourpriority material issues by taking the following steps.

STEP 1

Understand the environment surrounding theGroup and social issues, and from among these,
identify and organize those issues expected to havean impact on the Group’s corporate value(1) Issues of stakeholder concern
We detected issues of considerable concern to stakeholders fromamong issues related to the Group’s operations and among socialand other issues through dialogue with stakeholders.
(2) Important issues for the Group
From among the risks and opportunities identified, we picked out
issues that would have an impact on our corporate value unless weaddressed them.

Analyze and organize

STEP 2 important themes(1) Business strategies
We analyzed and organized the issuesof stakeholder concern and important
issues for our Group selected at Steps
1-(1) and 1-(2) to determine whichissues are important themes related toour business strategies.

(3) Things we should do to achieve our goal (future vision)
We set our future goal and defined the future vision that would
come to be when we achieved our goal. We then determined andorganized the things we should do and the things we could do toachieve the goal and future vision in linkage with each of the SDGs.

● CSR procurement and supply chain management

products● Risks entailed by the global business expansion and theprogress being made in this effort● Progress in the development of advanced cellulose nanofiber(CNF) technologies and their application● Relationships with local communities (such as social contribution
activities)● Progress in diversity initiatives and human resource development● Population decrease and a decline in paper demand in Japan● Establishment of a powerful governance system and risk

management● Decarbonization and other responses to climate change, use ofrecovered paper, and water resource management● Conservation of biodiversity and forests● Responses to the impact of the COVID-19 pandemic, etc.

Picked out from among our risks and opportunities, and analyzed
that can respond to business globalization● Increases in income and improvement of living conditions of● Respect for human rights and the safety and health of employees

those at the bottom of the pyramid (BoP), which is estimated tocomprise 4 billion people● Development and practical application of new high-performancematerials● Working in harmony with local communities and supply chain
management, including business continuity planning (BCP)● Securing an organizational structure and management talentand their family members● Responses to international CSR requirements and risk management● GHG emissions reduction by FY2050● Decrease in the amount of plastic used and exploration of alternative
materials● Reduction and reuse of industrial waste and water resource management● Sustainable forest management and paying due attention to biodiversity

Integrated Report 2023

(1) Comparing the important themes with the things we should do toachieve our goal (future vision)
We compared the important themes organized at Step 2 with the things weshould do to achieve our goal (future vision) determined at Step 1-(3), and singled
out the themes included in both groups as candidates for material issues.
(2) Determining material issues through discussions at important meetings
From the candidates for material issues, we further picked out the important
issues that must be addressed immediately. We then raised them fordiscussion at the Sustainability
Committee meeting, theManagement Meeting, andthe Board of Directors meeting.
Through multiple discussions, wefinally identified our material issues.

Our goal (future vision)Material issues
1. Strategic transformation of our business portfolio
2. Acceleration of global expansion
3. Creation of new businesses
4. Coexistence with local communities
5. Establishment of a sustainable supply chain
6. Respect for human rights, development of humanresources, and compassion for employees
7. Fair and highly transparent management
8. Response to climate change
9. Realization of a recycling-oriented society

Backcasting from the perspective of our goal

● Current sales and future potential of environmentally conscious

Important issues for the Group (examples)

17

Identified through dialogue(2) Social issues
From among the issues of
stakeholder concern and important
issues for the Group picked out at
Steps 1-(1) and 1-(2), we organized
the important themes that are
related to social issues that are
expected to have an impact on
our corporate value unless weaddressed them, in considerationof global trends and the current
social situation, while comparing
those issues with key issues in the
Global Reporting Initiative (GRI)
standards and other standards set
by ESG evaluation organizations.

Forecasting from the perspective of the near future

Issues of stakeholder concern (examples)

STEP 3 Identify material issues

We defined thefuture vision thatwould come to bewhen we achieve ourgoal in linkage witheach of the 17 SDGs
and identified how
we can contribute to
the SDGs.

Our goal: An abundant andaffable future

10. Forest conservation and maintenance of biodiversity

Integrated Report 2023

18

SECTION 01

SECTION 01

Risks and Opportunities of the Daio GroupAs social and market conditions change, we believe that in order to continue to provide value tosociety through our business, it is not enough to develop plans and countermeasures based on current
predictability. In order to sustainably provide value, the Daio Group has analyzed medium- to long-term
Material issues● Decrease in demand for graphic paper● Growth of the EC market

Population outflow abroad● Economic growth in emerging countries

Responding to Social Issues

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

issues that could affect the creation of value and has identified various risk factors. Viewing these risk
factors as opportunities to create future businesses, we have reflected them in our medium- to longterm business strategy planning.

● Transformation of our business portfoliotransport applications● Decrease in demand for household

paper and feminine care/baby careproducts
Establishment of a foundation

Increase in infectious diseases and deaths
due to poor sanitation / Poverty issues● Entry into the pet care products market● Expansion of overseas business through M&A / Increasein the value of companies grouped through M&A

Daio Group’s Vision and Medium-Term Business Plans pp.33-34
Paper & Paperboard Business Group
Paperboard Sales Division and Packaging Paper Sales Division pp.45-46
Entry into the pet care products market p.61
Home & Personal Care Unit
Overseas Business Group pp.49-50
Overseas Business Initiatives in Preparation for the Fifth Medium-TermBusiness Plan pp.51-54
Elis Heart Support Project p.62

● Dissemination of hygiene products and habits● Support for women’s independence (vocational▲

for business expansion in Africa,
where we are considering
expanding in the future

Strategy▲● Population growth in developing countries /Achieving Sustainable Growth—Strategy for Continuing to Provide Value—

Opportunities (including responses)● Increase in demand for paper for packaging and● Changes in lifestyles● Decrease in Japan’s population /Fulfilling Our Purpose▲ ▲Acceleration of global
expansion● Progress of digitalization

training, etc.)
Creation of new
businesses● Increasing need to extend healthy life

products are bad for the environment● Decrease in demand for baby careproducts● Survival risk facing the Mishima Mill● Growing public concern about human● Existence of companies that do not

and local companies
rights and environmental issues● Environmental and other pollution

Respect for humanrights, developmentof human resources,
and compassion for
employees● Decrease in working-age population /Japan’s lag in gender equality● Decline in Japan’s industrial● Shortage of

Ultimately leading to thedeterioration of businessperformance andcorporate image

human resources● Decline in thecompany’s competitiveness● Increase in employee turnover anddecrease in employee concentration,
productivity, and motivation due tothe workplace environment

aging population• Providing products and services that extend healthy life
expectancy, reduce the burden on caregivers, etc.
• Establishment of a community-based integrated caresystem based on regional collaboration● Creation of an industrial cluster centered on our company /Promotion of local production and consumption● Creation of a sustainable supply chain

Realization of comfortable and effective support for incontinencecare p.63
Initiatives through a community-based integrated care system p.28

Establishment of sustainable supply chain

p.64

We recognize that we cannot continue our business unless we consider theinterests of all stakeholders, including local communities. Many business
partners, along with the local government and residents of Shikokuchuo
City, Ehime Prefecture, which is home to our core paper mill, the Mishima
Mill, contribute to the growth of our business. We will give consideration to
all stakeholders and continue to develop and grow together with themwhile coexisting with local communities.

● Environmental communication and improvement of relationships

with local communities / Social contribution activities● Promotion of diversity● Development of human resources● Health and productivity management● Work style reform● Safety and health● Enhancement of systems such as the Group Long-term

Integrated
Corporate culture providing safety and motivation to work▲

competitiveness● Emphasis placed on company climate
and culture, work style, welfare, etc.
when choosing a company

consider human rights and theenvironment in the supply chain● Difficulty in operating mills due tocomplaints from local residents● Increase in demand for products and services for an▲● Decline of local economy

Paper & Paperboard Business Group
Paperboard Sales Division and Packaging Paper Sales Division pp.45-46
Application development of cellulose nanofibers p.62
Intellectual Property Strategies to Enhance Corporate Value pp.55ｰ56▲

Establishment ofsustainable supply
chain

products and services (natural materials, reuse,resource saving)• Plastic-free and low-plastic products• Application development of cellulose nanofibers (CNF)● Use of intellectual capital▲

expectancy● Increase in demand for environmentally friendly

We recognize that the progress of digitalization and a decline in Japan’s
population will lead to a decrease in demand for paper and consumer
household goods, which will have a major impact on our business. In Japan,
we will secure profits by allocating human resources and investments to theHome and Personal Care Business and use these profits to develop overseas
businesses and new businesses. We will quickly solve the material issues oftransformation of our business portfolio, acceleration of global expansion,and creation of new businesses so that our business can survive andsustainably grow. We will also align the initiatives of our material issues,
such as the dissemination of hygiene products and habits to people aroundthe world and support for women’s independence, with solutions to social
issues in order to achieve our goal of realizing an abundant and affable
future.

▲ ▲● Aging society with a declining birthrate● Growing recognition that disposable▲

Coexistence withlocal communities● Changes in consumer preferences

SECTION 04—Value Creation Story of the Daio Group—

Major risks and opportunities expected to have a significant impact on our business
Risks

SECTION 03▲ ▲Strategictransformation of ourbusiness portfolio

Changes in the social environment,
market trends, etc.

SECTION 02

pp.65-68

Disability (GLTD) Benefit plan

We recognize that enhancing human capital by recruiting and securing
excellent human resources, developing human resources, and promoting
diversity will have a significant positive impact on the growth of ourbusiness. We believe that by offering our employees opportunities for
growth and creating an environment where they can take on challenges,
they can unleash their full potential. This, in turn, drives innovation, paving
the way for the sustainable growth of the Company.

● Improvement of the workplace environment

Response to climatechange● Global warming● High CO2 emissions● Increase in the number of natural● Transition risks / Physical risks● Forest destruction, reduction, and loss
● Heightened public awareness ofconservation of the global environment

19

Integrated Report 2023

● Use of plastic● CO2 emissions from product disposal(Scope 3 / Category 12)● Misconception that the company's

operations contribute to deforestationand negatively affect the ecosystem● Establishment of a corporate governance system aimed

at building a fair and equitable corporate structure● Initiatives to reduce CO2 emissions● Increase in demand for environmentally friendly products and services● Development of and replacement with alternative materials(use of paper technology)● Recycling of disposable diapers● Advanced use of recovered paper (use of hard-to-recycle
recovered paper)● Development and sales of high-purity sorting machines(machines that sort crushed waste plastic pieces)● Sustainable forest management (tree planting and expansionof plantation areas)● Protection of approximately half of the owned forest land as
natural forest● Protection of endangered species and natural treasures, etc.

Corporate Governancepp.81-88

In the past, we have had the experience of putting our company’s survival at risk due
to issues such as falsification of recycled pulp content and violation of the Company
Act in 2011. We are committed to fair and highly transparent management and wevow to never repeat the mistakes of the past.

Initiatives toward a Carbon-free Society pp.71-74
Response to the Task Force on Climate-related Financial
Disclosures (TCFD) pp.75-80
Establish an environmentally friendly business (recycling) model
Realization of a recycling-oriented society
Promotion of use of hard-to-recycle recovered paper p.70

p.79

Strengths of the Daio Group (Environmentally Conscious Company)

pp.15-16

Forest conservation and maintenance of biodiversity▲● Extinction of endangered species

misconduct and scandals▲

Forest conservationand maintenance of
biodiversity

disasters due to climate change● Marine pollution caused by waste plastic● Increase in waste output / Diversificationof waste quality● Survival risk facing the company due to▲ ▲Realization of arecycling-oriented
society

as a corporate social responsibility▲ ▲● Corporate governance strongly required▲

Fair and highly
transparent
managementp.70

We use fossil fuels and emit large amounts of CO2 in the process ofmanufacturing paper. We recognize that responding to climate change will
have a major impact on our future business. We have therefore formulateda roadmap to achieve carbon neutrality by 2050 and are working toward
the realization of a decarbonized society while being open to the possibilityof expediting our plans. Meanwhile, our environmentally friendly businessmodels, such as forest recycling (afforestation) and paper recycling (use ofrecovered paper), are our strengths. By leveraging these strengths, we areworking to realize a recycling-oriented society.

Integrated Report 2023

20

SECTION 01

SECTION 01

Value Creation of the Daio GroupSECTION 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—Management Philosophy● Changes in consumers’ preferences and lifestyles

Major social
issues● Decrease in Japan’s population, especially its

working-age population● Poverty issues and emerging countries’ economic

growth● Increasing need to extend healthy life expectancy

Material issues 1. Strategic transformation of our businessportfolio
pp.17-18
2. Acceleration of global expansion
3. Creation of new businesses

Our mission▶

To realize an abundant
and affable future

Four pillars of our management philosophy

rights issues● Responses to the aging society with adeclining birthrate● Corporate misconduct and scandals

4. Coexistence with local communities
5. Establishment of sustainable supply chain
6. Respect for human rights, development of
human resources, and compassion for
employees
7. Fair and highly transparent management② Social andmaterial issues① Our purpose (raison d’être)● Growing public concern about human③ Six capitals

Input

disasters due to climate change● Global warming● Marine pollution caused by waste plastic● Heightened public awareness ofconservation of the global environment
8. Response to climate change
9. Realization of a recycling-oriented society
10. Forest conservation and maintenance of
biodiversity④ Corecompetence▶

Three Well-beings

Visions to be fulfilledLife
Enhancing thewell-being oflifestyles

Corporate culture
providing safety
and motivation
to work

Regeneration
Restoring thewell-being of
the earthCore competenceSocial andrelationshipcapitalHuman capital
Contribution to
the global
environment

Product value chain● Competitive advantage 2:

Integrated Report 2023

People around theworld are living
happier and more
fulfilling lives

The earth has been
restored to a planet with
abundant nature where
diverse organisms coexist
and thrive

Newsprint andpaper businessIndustrial paperand containerboard
business

Domestic and overseas
H&PC Business• Packaging paper• Containerboard• Corrugatedcontainers• Forest StewardshipCouncil (FSC)certified paper• Products withrecycled pulp
content• Paper products that
help reduce the useof plastic

A greater number ofpeople are enjoying
life after retirement• Disposable baby diapers• Disposable adult diapers• Sanitary napkins©Disney

pp.29-30
Waste has been
reduced, and arecycling-oriented
society achieved

Women play aneven more activerole in society

Carbon neutrality
has been achieved
throughout theentire supply chain

Hygienic toilets areavailable
throughout theworld

An age in which everyone
is able to balance workwith childcare andnursing care

A switch from plastics
to naturally-derived
materials is inprogress⑥ Value: The impacts we bring (outcome)p.23[FY2026 targets]

Other businesses• Facial tissue• Toilet tissue• Kitchen towels• Face masks• Wet wipes• Body soap
• Shampoo• Newsprint• Printing paper• Communication
paper• Printing• Stickers/labels

pp.27-28

Infectious diseases
are controlled

OutputFinancial capital● Net sales: 800 billion to 1 trillion yen

H&PC net sales ratio: 50.0% or above● Operating profit margin: 10.0%

Manufactured
capital● ROE: 12.0% or above● Net D/E ratio: 1.0 or below● Rating (JCR and R&I): A-level rating• RFID• Golf courses• Sports clubs• Transportation• Engineering• CNF• Waste sorting
machine• Forestry

Intellectual
capitalSocial andrelationshipcapitalMaterial Issues andContribution to
Achieving the SDGs
pp.59-60

Human capital

Natural capital

Corporate Motto:
Passion with Sincerity

2020

Corporate governance: Fair and highly transparent management

21

Poverty has been
eliminated, people’s
living standards have
improved, and a healthy
lifestyle for all is assured

Environmentally conscious company● Competitive advantage 3:

Natural capital

Values▶

Regeneration● Competitive advantage 1:

pp.15-16

p.23

Intellectual
capitalLife

Poverty has been
eliminated, and people’s
living standards have
improved⑤ Products and services bybusiness segment

Manufactured
capitalBonds with local
communities

Hygienepp.25-26

Market-driven business strategy

Dedication to
manufacturing

Protecting thewell-being of
the body

https://www.daio-paper.co.jp/en/csr/● Increase in the number of natural

Financial capitalHygieneOur goal: An abundant and affable future

An abundant and affable future

At the Daio Group, we have continued to create value by striving to solve social issues through our businessand by carrying out business activities that utilize various kinds of capital and strengths while working toenhance our corporate governance.
By continuing to provide all stakeholders with new value, we will fulfill our purpose (raison d’être) ofachieving the Three Well-beings and realizing an abundant and affable future based on our corporatemotto “Passion with Sincerity,” and we will realize our management philosophy: “Shaping an Abundantand Affable Future for the World.”

Shaping an Abundant and Affable Future
for the World

pp.81-88

Business strategies

pp.33-56

DAIO Abundant and Affable Future 2030

2030

pp.57-70
Integrated Report 2023

22

SECTION 01

SECTION 01
Value Creation of the Daio Group

Impact of Value Creation

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—

Toward the Realization of an Abundant and Affable Future

Invested capital (input) and business results (output)

Input

Financial capital

Financial capital● Total assets:

Accumulation of capital for growth and shareholder return,external evaluation, etc.

923.5 billion yen
244.7 billion yen
387.7 billion yen● Net assets:● Net interest-bearing debt:● Net sales:

646.2 billion yen-14.0%
1.6 times
29.4 billion yen
A-● ROE:

Manufactured capital● Net D/E ratio:● EBITDA:● Mishima Mill: Cost-competitive coastal paper mill that is(for the three years 2021–2023, including expenditures for M&A)

Intellectual capital

pp.55-56● Intellectual property owned (Domestic / Overseas):

Patent: 3,353 / 2,085
Registered design: 391 / 1,081
Registered trademark: 1,145 / 1,454

Social and relationship capital● DAIO Partner Ship(an association of regional distributors, recovered paper supplies,
and domestic chip suppliers)“Sakuraterasu,” “Aoiterasu,” and “Greenterasu”
400,000 members (as of June 2023)● Attento Meister Professionals*2:
5,011 qualified persons (as of the end of June 2023)● Shikokuchuo City Carbon Neutrality Council● club elleair*1:

Human capital● Consolidated number of employees: 12,634

including 3,389 employees of non-Japanese nationality● Promotion of diversity & inclusion (p.66)● Health and productivity management (Smoking cessation program:

subsidies for smoking cessation outpatient clinic fees, etc.)● Safety and health (Safety Wednesday*3 activities, etc.) (p.68)● Rating (JCR / R&I):

Manufactured capital / Intellectual capital /Social and relationship capitalBusiness activities using core competence

one of the world’s largest(Area of approx. 36 times the size of Tokyo Dome)● Production bases / Group company business bases:
24 bases in Japan, nine bases in eight countries overseas● Capital expenditures:
155.0 billion yen

Intellectual capital

Realizing an abundant and affable future is our mission envisioned from the aspiration for a better future for people andthe planet. In line with our mission, we have defined the optimal states of people and the planet upon the realization of anabundant and affable future. The achievement of our vision, the Three Well-beings of “Hygiene”, “Life” and “Regeneration”,
will lead us toward the attainment of the optimal states.

OutputImprovement of competitive advantage for businessexpansion, etc.
● Production output of Mishima Mill:

Approx. 2.1 million t/year● YK value*4 by technical field:

Ranked first in three fields (as of the end of March 2023)

Human capital
Diversification of human resources, maintenance andimprovement of employee health, external evaluation, etc.

Anchored by our mission and guided by our vision, we strive every day to ensure that what we create will lead to an abundant
and affable future enriching people’s lives and the environment.

5.2% (FY2022)
30.0% (FY2022)● Lost time injury frequency rate:
1.01● Recognized as a Certified Health & Productivity
Management Outstanding Organization /Selected for the Bloomberg Gender-Equality Index● Creation of opportunities for the empowerment of
women through the domestic women’s professionalgolf tour

To realize an abundant and affable future

MissionWhat is an abundant
and affable future?
The optimal states ofpeople and the planet● Female managers:

A better future for people
Poverty has been eliminated, people’s
living standards have improved, and ahealthy lifestyle for all is assured

A better future for the planet

People around the world are living
happier and more fulfilling lives

The earth has been restored to a planetwith abundant nature where diverse
organisms coexist and thrive● Smoking rate:

VisionThree Well-beings(What to achieve)

HygieneProtect well-being of the bodyLife

Enhance well-being of lifestyles

Good: Happy and enriching lives

Natural capital● Water resource management

Integrated Report 2023

For “Regeneration,” we will take proactive measures to conserve the environment. This aspect endeavors to restore the planet
from a critical state, where many organisms are at risk of extinction due to increasing deforestation, to a state where diverse
organisms can coexist and thrive.

of paper in Japan (for 17 consecutive years)(Kawabata-moroko, Patagonian Cypress, etc.)• Water discharged:
166.016 million m3/year• Actual water consumption (Water intake - Water discharged):
9.867 million m3/year• COD base unit:
6.0% reduction● GHG emissions:4.518 million t/year (FY2021)→4.194 million t/year (FY2022)● CO2 emissions reduction rate: 7.0% (from the 2013 level)*1 club elleair: A membership program where you can enjoy various experiences, limited edition products, campaigns, and other benefits through Elleair products.
*2 Attento Meister Professional: Certification provided by Daio Paper Corporation

23“Regeneration” is related to a better future for the planet.

● Elleair: Japan’s top household paper product brandBenefit plan
● Introduction of a stock-based incentive system for managers

including approx. 28,000 ha preserved as natural forest● Water resource management• Water intake:
175.884 million m3/year

As for “Life,” we will provide services that bring happiness and fulfillment to people worldwide. Together, the two aspects
strive to enable people to lead happy and enriching lives in good health.

(Approx. 9% of Japan’s paper and paperboard production)● Protection of endangered species● Forest land owned: Area of approx. 59,000 ha

In terms of “Hygiene,” we will make hygiene products accessible and inspire good hygiene habits. This aspect of our vision
endeavors to raise people’s living standards and to provide them with the means to escape bad conditions such as poor
hygiene and poverty for a life in good health.

● Shikokuchuo City: The city with the largest shipments● Introduction of the Group Long-term Disability (GLTD)

Natural capitalOf the Three Well-beings, “Hygiene” and “Life” are related to a better future for people.

The concept ofThree Well-beings

Life

Healthylife

Hygienepp.25-26

pp.27-28

Raise people’s
living standards to alevel that ensures ahealthy life

Bad: Poor hygiene, poverty, etc.

Regeneration

Restore well-being of the earth

Good: Restoration and prosperity
Ensure prosperity
for people and theRegeneration
earth

Ensure that people
live happier andmore fulfilling lives
Coexistence

pp.29-30(Sustainability)

Restore from a
critical state towardcoexistence
Regeneration(sustainability)
pp.29-30

Bad: Climate change issues,
biological extinction crisis, etc.

*3 Safety Wednesday: Web conference to share safety activities conducted jointly with all Group manufacturing companies in Japan (more than 200 participants each time)*4 YK value: Patent technology competitiveness index developed by Kudo & Associates, which measures the strength of a patent’s monopoly and exclusivity

Integrated Report 2023

24

SECTION 01

SECTION 01
Toward the Realization of an Abundant and Affable Future

HygieneHygienefurthering products and habits that promote hygiene

The optimal states when “an abundant and affable future” is realized,
and the ways we can contribute to its achievement

Primary industries have developed, andhunger has been eradicated● Our RFID solutions will make complex inventory● We will help prevent and control infectious diseases byHygienic toilets are available
throughout the world● We will globalize our operations and promote the habitPrimary industries have developed, and hunger has
been eradicatedInfectious diseases are controlled● We will globalize our operations and are committed to furthering● Our RFID solutions will make complex● We will help prevent and control infectious diseases byproducts and habits that promote hygiene● We will also develop our operations in regions around the world
and create local employment opportunities

inventory management easier, helping
solve food loss and other issues

Employees of PT. Elleair International Manufacturing
Indonesia→ Initiatives to make hygiene products accessible and inspire good habits inpeople around the world to contribute to local development
pp.49-50 (Overseas Business Group, H&PC Unit)
pp.51-54 ( Feature 1: Overseas Business Initiatives in Preparation for
the Fifth Medium-Term Business Plan)

We believe that we can contribute to the spread and expansion of flushable
toilet tissue, which supports the improvement of the sanitary environment of
toilets, through the Toilet Revolution in China.

● We will promote the habit of using medium-grade paper

other materials in the countries in which we operate

Integrated Report 2023

5-ply toilet tissue in China

Everyone has equal opportunity topurchase (use) paper and hygiene products
hygiene products
We provide products and services that respect the culture, religion, andcustoms of each country, such as halal-certified products and individually
packaged products (sold in small quantities) for low-income groups, so that all
people can live equal and healthy lives.

Case ❶and hygiene products● We will establish systems for collecting used paper andCase ❺

RFID reader (canbe installed in up
to four layers)

https://www.daio-paper.co.jp/wp-content/
uploads/20210301_1.pdf● We will provide services that link afforestation technology to improved

agricultural productivity
Forestal Anchile LTDA., a subsidiary of ourGroup, works on the selection of excellent
tree species and the development of newvarieties (that grow quickly and are resistantto adverse conditions) through artificial
pollination with the aim of increasing
productivity. We believe that thesetechnologies can be used to create services
that improve agricultural productivity.
● We will provide products that protect fruit trees from insect pests and increase

productivity● We will promote the habit of using medium-grade paper andCase ❶

furthering products and habits that promote hygiene
We provided masks and sanitizing wet wipes during the COVID-19
pandemic. We believe that we can contribute to the prevention
and control of infectious diseases by disseminating these products.

Daio Engineering Co., Ltd., a subsidiary of
our Group, provides RFID tags equippedwith highly radiation-resistant FeRAM,
thereby helping to improve the efficiencyof goods management in the medical andpharmaceutical industries. We believe that we
can contribute to solving the issue of food loss
by applying such technology to food inventory
management.

sanitary paper

Antibacterial toilet tissue in China

Case ❹

Case ❸

Poverty has been eliminated, and people’s
living standards have improved

Case ❹of using sanitary paper

Everyone has equal opportunity topurchase (use) paper and hygiene products

We will continue to embody our efforts to realize an abundant and affable future.

● We will globalize our operations and promote the habit of using

Case ❸

Women play an even more active role insocietyhygiene support● We will provide education related to hygiene and sexual
matters

Connecting the optimal states of an abundant and affable future that is aligned with the 17 SDGs to theCase ❷

education on how to make hygiene products● We will promote a culture of learning by writing on paper● We will help women maintain their health by providing

Data and Information—Financial and Corporate Data—

Hygienic toilets are available throughout
the world

Equal opportunities for education areavailable worldwide

Waste has been reduced, and arecycling-oriented society achieved

25

Case ❷

furthering products and habits that promote hygiene● We will provide vocational training support andResponding to Social Issues—Foundation for Sustainable Growth—

ways we will contribute to these goals, we provide an overview of our ongoing and prospective initiatives.

Employees of Elleair International(Thailand) Co., Ltd.

the world and create local employment opportunities

Infectious diseases are controlled

Achieving Sustainable Growth—Strategy for Continuing to Provide Value—

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

Case ❶● We will also develop our operations in regions aroundmanagement easier, helping solve food loss and otherissues● We will provide services that link afforestation
technology to improved agricultural productivity● We will provide products that protect fruit trees from
insect pests and increase productivity

Fulfilling Our Purpose

In this section, we explore the “Hygiene” aspect of the Three Well-beings that we seek to achieve.

Poverty has been eliminated, andpeople’s living standards have improved● We will globalize our operations and are committed to

SECTION 04—Value Creation Story of the Daio Group—

Case ❶

A future in which poverty has been eliminated,people's living standards have improved, and ahealthy lifestyle for all is assured

SECTION 03

Protect well-being of the body

The abundant and affable future that we envision

A better future for people

SECTION 02©Disney

Halal-certified product©DISNEY. Basedon the “Winnie thePooh” works by
A.A.Milneand E.H.
Shepard.

Individually packaged products sold at
Indonesian traditional retail shops (warung)In collaboration with Agro-Kanesho Co., Ltd., we have developed a soil sterilization covering sheetthat uses paper, which is made from natural materials, instead of plastic. It effectively preserves
sterilizing agents in the soil. Moreover, after disinfection, it can be directly plowed into the soil due
to its biodegradability, thereby simplifying the process as there is no need for removal or disposal of
the covering sheet. By providing products and services that not only reduce environmental impact
but also improve agricultural
productivity, we willcontribute to the sustainable
development of agriculture.
KSB148

Case ❹
Equal opportunities for education
are available worldwide● We will provide vocational training support andeducation on how to make hygiene products●W e will promote a culture of learning by writing on paper

Women play an even more activerole in society● We will help women maintain their health by providing

hygiene support● We will provide education related to hygiene andsexual matters
Toward a world where
menstruation is no reason to give up→ Support for women’s independence through the Elis Heart
Support Project p.62

SearchCase ❺
Waste has been reduced, and arecycling-oriented society achieved● We will establish systems for collecting used paper andother materials in the countries in which we operate

Our founder, Isekichi Ikawa, was initially a paper raw materials dealer (a recovered paper
supplier). However, through a turn of events, he found himself running a paper mill overnight.
This was the beginning of Daio Paper Corporation. We are currently working on sustainable
resource recycling together with DAIO Partner Ship “Aoiterasu,” an association of recovered
paper suppliers. We believe that we can contribute to the realization of a recycling-oriented
society by rolling out our used paper collection system overseas.

Integrated Report 2023

26

SECTION 01

SECTION 01
Toward the Realization of an Abundant and Affable Future

Life

Life

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—

Enhance well-being of lifestyles

In this section, we explore the “Life” aspect of the Three Well-beings that we seek to achieve. Connecting

We will provide services that enhance lifestyles, improve quality of life andenable people to lead happy and enriching lives.

will contribute to these goals, we provide an overview of our ongoing and prospective initiatives. We will

the optimal states of an abundant and affable future that is aligned with the 17 SDGs to the ways wecontinue to embody our efforts to realize an abundant and affable future.

The abundant and affable future that we envision

Case ❶

A better future for people

A greater number of people are enjoying
life after retirement● We will provide products and services that help extend healthy

A future in which people around the world
are living happier and more fulfilling lives

A greater number of people areenjoying life after retirement● We will provide products and services that help extend

We offer disposable adult diapers under the Attento brand to help extend healthy life
expectancy and facilitate self-actualization. Our products have appropriate specifications forincontinence care, supporting the maintenance of mental and physical health, and we alsooffer disposable incontinence underwear that anyone can use without hesitation due to an
innovative discreet design that allows users to wear them out
in public without worrying about it showing through.
Case ❶

to develop their careers● We will provide opportunities and services that help
women flourish and be independent

An age in which everyone is able tobalance work with childcare and nursing
careCase ❷

Case ❸

Case ❹

value-added products

Communities that offer peace of mind
for vulnerable groups● We will develop systems to provide one-stop services forCase ❺

Case ❻

furthering products and habits that promote hygiene● We will achieve CSR procurement throughout our entire
supply chain

in cooperation with administrative agencies and othercompanies

Integrated Report 2023

develop their careers● We will develop systems to provide one-stop services for housing,that enable people to balance work withchildcare and nursing care

medical care, nursing care, preventive care, and lifestyle support

Located adjacent to the Mishima Mill, “GOO.N
Sukusuku House” is a childcare facility for the childrenof Daio Group employees. Through this facility, we
aim to support the growth of children in a safe andsecure environment and nurture their creativity andsociability. This facility plays an important role inensuring the happiness of the families of our Group
employees and their ease of work.

A borderless welfare society has beenrealized● We will enhance our efforts to improve the quality of life incooperation with administrative agencies and other companies
Initiatives through a community-based integrated care system(Support and services provided jointly by our company, hospitals, facilities, and stores)
Marketing forSame community
professional-use products
1 Disposable diapers for professional use, etc.
Our

Case ❹
Technological innovation is driving a shift tonaturally-derived materials

Use in hospitals, facilities, etc.

2 Provide a set of Attento-brandWe are involved in promoting the empowerment offemale employees to achieve sustainable growth.
In order to help with their career development, wehold cross-industry exchange trainings for female
employees, where they will learn practical skills
needed to become leaders together with peers fromother companies.

5 Ask stores to sell commercial

p.66

flourish and be independent
With the desire to support the independence of women by contributing in any way
to solving the issue of menstrual poverty, we have been running a period productprovision program to provide
free sanitary napkins to students
who have difficulty obtaining
sanitary napkins.

The Daio Paper Elleair Ladies Open, which has been held annually since 1982,
will be held for the 42nd time this year. As a company engaged in the feminine
care business, wehope to continue
to provide suchopportunities for
women to flourish.

Commercializable applications and prospective solution of social issues
Other
Lightweight
Porefunctional
Gas barrier Transparency Size stability and highcontrollability
featuresstrength
CNF
OxygenLightAs high as 1/5 the weight Large specific Fine particle
featuresbarrierpermeable silica glass of steel, 5 times surface area dispersion andthe strength ofmoisturization
steel
Food bag
Artificial bone Paint, ink,
Replacement for glass, etc. Car body, etc. reinforcing
cosmetic
Applications with gas
barrier, etc.
agent, etc. products, etc.

Available forms
Aqueousdispersion

Molded sheets

Dry powder

Highly-transparent
aqueous dispersion

Resin composite
pelletCase ❺ELLEX-S

ELLEX-M

ELLEX-P

ELLEX-☆

(ELLEX-star)→ Application development of cellulose nanofibers

ELLEX-R67

p.62

4

アテント
選び方・使い方ハンドブック

大人用おむつの使い方動画

home after
discharge
from hospital

Stores
無 料 ご自由にお持ちください。

アテント
ブランドサイト

3 Treatment at

3′Treatment at

hospitals/facilities
as necessary

Persons requiring care at home

products of ❶● We will commercialize cellulose nanofiber and provide value-

Cellulose nanofiber (CNF) is produced by refining wood fiber (pulp), an
environmentally-friendly material, to nanosized fibrils. It has many properties.
When used as a high-performance material (for electronic devices, opticalcomponents, medical and healthcare, etc.), it is expected to contribute to therealization of a digitally-transformed society, the enhancement of QOL, and theimprovement of medical and healthcare. When used as a lightweight and highstrength material (for automobiles/aircraft, home appliances, housing/construction,etc.), it is expected to improve LCA results (improvements in environmental impact
or recyclability). Daio Paper is aiming for its commercialization in fields such as
medical and healthcare, consumer household goods, and sporting goods.

2

products for discharged patients(Enclosed with commercial productsamples of ❶ and a handbook withproduct names, usage instructions,etc.)

added products● We will provide opportunities and services that help womenAll conflicts have ended, and more
people are using paper and hygiene
products

A borderless welfare society has beenrealized● We will build systems that enable our female employees to→ Promotion of diversity & inclusion

housing, medical care, nursing care, preventive care, andlifestyle support● We will globalize our operations and are committed to● We will provide opportunities and services

Case ❷
Women play an even more active role insocietypeople to balance work with childcare and nursing care

● We will commercialize cellulose nanofiber and provide

Communities that offer peace of mind forvulnerable groups

company● We will provide opportunities and services that enable

Technological innovation is driving ashift to naturally-derived materials

An age in which everyone is able to balance
work with childcare and nursing carehttps://www.daio-paper.co.jp/wp-content/uploads/20220803_
sukusukuhaouse.pdf

Women play an even more active role insociety● We will build systems that enable our female employees

Case ❺

Marketing forcommercial products

The optimal states when “an abundant and affable future” is realized,
and the ways we can contribute to its achievement

healthy life expectancy● We will enhance our efforts to improve the quality of life

27

life expectancy

Case ❸～初めての方から既にお使いの方まで安心サポート～

受付時間：土・日・祝日・年末年始を除く 9：30～16：30

Ask stores to sell thesame thing as ❶Providing hospitals andfacilities with free items
that are useful for hospitaldischarge guidance as support
for patients returning homes

Attento Handbook on how to choose
and use disposable adult diapers

A set of Attento-brand products
for discharged patients

2023 年 4 月発行

本文内容・図版の無断転載・複写を禁止します。

Case ❻All conflicts have ended, and more people
are using paper and hygiene products● We will globalize our operations and are committed to furthering

products and habits that promote hygiene→ Initiatives to make hygiene products accessible, inspire good habits in people
around the world  pp.49-50 (Overseas Business Group, H&PC Unit)
pp.51-54 (Feature 1: Overseas Business Initiatives in
Preparation for the Fifth Medium-Term Business Plan)●W e will achieve CSR procurement throughout our entire supply chain

The Daio Group conducts procurement in accordance with the Daio Paper Group
Sustainable Procurement Guidelines Based on the SDGs in order to ensure legal
compliance in the fields of human rights, environmental preservation, and safety
and health within the supply chain and to conduct fair and equitable transactions.
→ Procurement based on the “Establishment of sustainable supply chain”
p.64

Integrated Report 2023

28

SECTION 01

SECTION 01
Toward the Realization of an Abundant and Affable Future

Regeneration

Regeneration

Clean energy is used worldwide● We will shift from fossil-based energy sources to clean

Achieving Sustainable Growth

Responding to Social Issues

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

We will actively conserve the environment andregenerate the earth back into a planet with abundantnature where diverse organisms coexist and thrive.

ways we will contribute to these goals, we provide an overview of our ongoing and prospective initiatives.

Connecting the optimal states of an abundant and affable future that is aligned with the 17 SDGs to theWe will continue to embody our efforts to realize an abundant and affable future.

Case ❸

Case ❺

Clean energy is used worldwide

Waste has been reduced, and a recyclingoriented society achieved● We will shift from fossil-based● We will develop and market sorting machines capable of handlinga wide variety of waste materials

energy sources to clean energy
We are promoting the installationof solar panels on the roofs of ourmills and factories, including thoseof Group companies, as part of ourefforts to shift to renewable energy.

● We will develop and market systems for separating paper andplastic at the time of disposal

Shimada Mill, Daio Paper Products Corporation

Case ❶

Daio Engineering Co., Ltd., a subsidiary of our Group, manufactures and markets the“Aerosorter” series, high-purity sorting machines that sort waste plastics generated
from discarded home appliances and vehicles as well as crushed pieces of waste
plastics (trays, PET bottles, etc.) discharged from businesses and households. Various
lineups are available to accommodate a wide variety of materials.

The optimal states when “an abundant and affable future” is realized,
and the ways we can contribute to its achievement● We will work with local governments and businesses toKani Mill, Daio Paper Corporation

Case ❷of handling a wide variety of waste materials

Case ❸

Hangers● We will become a zero GHG emission company by

Zero GHG emissions at local government
level

Case ❹

fully leveraging fuel switching, afforestation, and othermeasures

We will reduce GHG emissions in cooperation with regions through theintroduction of waste-to-energy boilers. We will also contribute to reducing
incineration facilities and landfill sites in regions by reusing waste generated
by them as an alternative energy source to coal.
Hard-to-recycle recovered
paper that contains
plastic, etc.

A switch from plastics to naturallyderived materials is in progress● We will develop and market alternative materials toplastics● We will develop absorbent products made from non-fossil-based materials
Coal

The earth’s abundant nature has
regenerated, and forests have been restored● We will enhance the usage value of wood and develop

our plantation business● We will provide solutions that utilize plantation
technology● We will work with administrative agencies and othercompanies to maintain biodiversity

Integrated Report 2023

Region (municipality)

Used
as energy

Contaminants

CO2

Incineration

Landfill
disposal

Recycling

CO2

Case ❼

Moreover, in Shikokuchuo City, where the Mishima Mill is located, theShikokuchuo City Carbon Neutrality Council has been established, in which
our company participates as a managing company. On March 30, 2023,
we published a roadmap to reduce CO2 emissions across the region. Since
then, we have been discussing the implementation of new fuel and energy
technologies.
Roadmap of the Shikokuchuo City Carbon Neutrality Council

Carbon neutrality has been achieved
throughout the entire supply chain→ Initiatives toward carbon neutrality
pp.71-74 (Initiatives toward a Carbon-free Society)pp.75-80 (Response to the TCFD)

Paper packaging for
products

Search● We will develop absorbent products made from non-fossil-basedmaterials
Super absorbent polymer (SAP) is used as an absorbent for sanitary napkins anddisposable diapers. Currently, fossil-based raw materials are used to make SAP.
However, as the development of technology to use plant-based raw materials,
such as wood chips, progresses, it is expected that SAP made from biomass
materials will be manufactured in the future. As a company that owns forest
land (wood chips), we will proceed with research to develop absorbent products
made from non-fossil-based materials.

Case ❻The earth’s abundant nature has
regenerated, and forests have been restored

New power
generation facilities

Case ❻

Paper containers

Case ❹

fuel switching, afforestation, and other measures

Used
as fuelRecoveredpapermaterials

Mixed metal after sorting● We will become a zero GHG emission company by fully leveraging

Waste(industrial, general)

Daio Paper
Case ❺

Mixed metals sent on ahigh-speed belt conveyor

Stir sticks

https://www.daio-eng.co.jp/business/env/

measures for achieving zero greenhouse gas (GHG) emissions

paper and plastic at the time of disposal

Carbon neutrality has been achieved
throughout the entire supply chain

Hard mixed plastics sent
on a high-speed belt
conveyor● We will work with local governments and businesses to implement● We will develop and market systems for separating

Paper is a natural and sustainable material that has high potential as analternative to plastic. Its raw material is renewable through planting trees, andit can be recycled as recovered paper. Using our Group’s technology, we havedeveloped biodegradable Elipla Paper series, which is already being used tomake hangers, stir sticks, and other products. We also have paper products forthe exterior packaging of products as an alternative to film.

Kawanoe Mill, Daio Paper Corporation

Case ❷● We will develop and market sorting machines capable● We will develop and market alternative materials to plastics

Aerosorter CS-AI

implement measures for achieving zero GHG emissions

Waste has been reduced, and arecycling-oriented society achieved

A switch from plastics to naturally-derived
materials is in progress

Examples of the highpurity sorting machines“Aerosorter” series
Aerosorter V

A borderless society in coexistence withnature has been realized

29

Fulfilling Our Purpose

In this section, we explore the “Regeneration” aspect of the Three Well-beings that we seek to achieve.

energyZero GHG emissions at local
government level

SECTION 04—Value Creation Story of the Daio Group—

Case ❶

A future in which the earth has been restored
to a planet with abundant nature where
diverse organisms coexist and thrive

SECTION 03

Restore well-being of the earth

The abundant and affable future that we envision

A better future for the planet

SECTION 02● We will enhance the usage value of wood and develop ourplantation business● We will provide solutions that utilize plantation technology
Forestal Anchile LTDA., a subsidiary of our Group, works on the selection of excellent
tree species and the development of new varieties (that grow quickly and areresistant to adverse conditions) through artificial pollination with the aim of increasing
productivity. We believe that these technologies can be used as our strength when thevalue of forests increases, which leads to a movement toward forest restoration.

Case ❼
A borderless society in coexistence withnature has been realized● We will work with administrative agencies and other companies

to maintain biodiversity
In cooperation with the Association
for the Breeding and Release of
Kawabata-Moroko, we are involved inconservation activities for Kawabatamoroko, which is designated as anendangered species.

Breeding in a water tankinside the mill

→ Forest conservation and maintenance of biodiversity

Kawabata-moroko fry

p.70

Integrated Report 2023

30

SECTION 01

SECTION 01

Financial and Non-Financial Highlights
Financial Data

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—

Non-Financial Data
Environmental related■ Net Sales (Millions of Yen)

■ Operating Profit (Loss) (Millions of Yen)
Operating Margin (%)
612,314533,890

546,433

6.6

646,213
5.6

562,928

6.1(Millions of Yen: FY2022)■ Paper and Paperboard Business■ H&PC Business

28,866（4.5%）

37,56936,873■ Composition of Net Sales and Operating Profit by Segment

30,6282.3■ Other

347,037（53.7%）■ Greenhouse Gas (GHG) Emissions■ GHG Emissions (1,000 t)

4,403

4,156

(21,441)

181

4,518

※

4,194

4,061

Scope2509

Scope2400

7.2

FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022

181
168

0.33

Scope1
3,491

186
172

174

176
166

FY2018FY2019FY2020

8,105

8,331

8,325

0.015

0.015

8,158

8,091

0.32
0.30

0.015

FY2021

FY2022

0.013

0.27

6.5

270,308（41.8%）

COD per Unit of Net Sales (t/million yen)

7.4

(12,570)
(3.3)

178
164

0.34

8.2
7.6

■ COD (t)Scope2
667

Scope1
3,878

Scope1
3,661■ COD Emissions■ Wastewater (million m3)

Water per Unit of Net Sales (1,000 m3/million yen)

GHG Emissions per Unit of Net Sales (t/million yen)

Outside: Net sales by segment
Inside: Operating profit (loss)
by segment
3,500(12,407)12,122■ Water/Wastewater■ Water (million m3)

FY2018FY2019FY2020

FY2021

FY20220.013
FY2018FY2019FY2020

FY2021

FY2022* FY2022: Net GHG emissions excluding the amount equivalent togreen power certificates sold were 4,158,000 tCO2, and emissions
per unit of net sales were 6.4 tCO2 per million yen.

■ Profit (Loss) Attributable to Owners of Parent(Millions of Yen)

22,115■ Total Assets (Millions of Yen)
■ Net Assets (Millions of Yen)

■ Capital Expenditures (Millions of Yen)
■ Depreciation (Millions of Yen)

23,721■ Waste Created/Waste Reused■ Waste Created (1,000 t)

849,801
745,866

840,441
59,590763,059363 360
53,411

4,697

33,331

31,84334,137338 334
290 287

266,704

307 302

6,514

6,428

6,610

6,256

289 281

254
223

217
179
18.7

99.0
246,788

NOx per Unit of Net Sales (t/million yen)

43,128(34,705)
209,536■ Hard-to-Recycle Recovered Paper Usage (1,000 t)
Ratio of Hard-to-Recycle Recovered Paper Pulp in Containerboard (%)

6,626

47,85737,810■ Hard-to-Recycle Recovered Paper Usage■ NOx (t)251

64,16561,934■ NOx Emissions

Reuse Ratio (%)

923,531

19,199■ Waste Reused (1,000 t)

0.012
98.9

98.7

0.012

98.4

0.011

244,670

15.7

14.8

15.7

0.011

14.2

97.1

199,338

0.010
FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022* Ratio of hard-to-recycle recovered paper pulp in containerboard
at the Mishima Mill, our core paper mill

Human resources related■ Net Debt to Equity Ratio (Times)■ Net Interest-Bearing Debt (Millions of Yen)
387,669
301,906

285,426

299,785

Integrated Report 2023

23.0

(39,492)

22.5

23.0

20.8
78.7

71.0
(84,183)

1.1

31

22.0

5.6

8,975

(21,823)

FY2021

Daio Paper (unconsolidated) (h)Daio Paper (unconsolidated) (%)

3.1

67.2

71.7

75.0

3.5

3.4

2.8
2.0

FY202082.7■ Average Overtime Work Hours(nonmanagerial employees)
Paid Leave Uptake Rate

5.4

1.3

FY2019

Daio Paper (unconsolidated) (%)

297,445

1.4

FY2018■ Paternity Leave Uptake Rate

■ Daio Paper (unconsolidated) (%) ■ H&PC (%)

20,143

1.6

1.6■ Female Manager Rate

■ Free Cash Flow (Millions of Yen)

2.7

28.9

2.2

1.5

FY2022FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY20225.0

4.0

FY2018FY20196.3

FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

FY2022Integrated Report 2023

32