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Daio Group Integrated Report 2023

Daio GroupINTEGRATEDREPORT 2023
Shaping an Abundant andAffable Future for the WorldThis product is made of material fromwell-managed FSC®-certified forests,
recycled materials, and other controlled
sources.

Contents
SECTION 01

Fulfilling Our Purpose 03 Management Philosophy of the Daio Group—Value Creation Story of the
Daio Group—

05 Message from the President and CEO
11 History of the Daio Group
13 At a Glance
15 Strengths of the Daio Group17 Material Issues of the Daio Group19 Risks and Opportunities of the Daio Group
21 Value Creation of the Daio Group23 Impact of Value Creation
24 Toward the Realization of an Abundant andAffable Future

Hygiene/Life/Regeneration

31 Financial and Non-Financial Highlights

SECTION 02

Achieving Sustainable 33 Daio Group’s Vision and Medium-TermBusiness Plans
Growth—Strategy for Continuing toProvide Value—

35 Review of the Medium-Term Business Plans
37 Overview and Progress of the Fourth MediumTerm Business Plan
39 Message from the Officer Responsible forFinancial Affairs
43 T oward Achievement of the Targets of the
Fourth Medium-Term Business Plan

Paper & Paperboard Unit
Paperboard Sales Division and Packaging Paper Sales Division
Paper & Paperboard Business Group
Home & Personal Care Unit Domestic Business Group
Home & Personal Care Unit Overseas Business Group

51 Feature 1 Overseas Business Initiatives in

Preparation for the Fifth MediumTerm Business Plan
55 Intellectual Capital—Intellectual Property Strategies to Enhance Corporate
Value—

Paper & Paperboard Unit

SECTION 03—Foundation for Sustainable
Growth—57 Daio Abundant and Affable Future 2030
59 Material Issues and Contribution to Achieving

81 Corporate Governance

Our Measures to Strengthen the Corporate
Governance Structure/Key Measures Implemented
to Strengthen Corporate Governance/Board of
Directors/Major Issues Examined by the Boardof Directors in FY2022/Composition of the Boardof Directors/Skills Matrix of Directors/Effective
Evaluation of the Board of Directors/Measures toEnhance the Effectiveness of the Board of Directors/
Remuneration of Officers/Voluntary Committee
Activities/IR Activities/Directors, Audit & Supervisory
Board Members and Executive Officers

the SDGs
61 Dedicated Dedication to Manufacturing
63 Attentive Bonds with Local Communities
65 Integrated	Corporate Culture Providing Safety
and Motivation to Work
69 O rganic	Contribution to the Global Environment
71 Feature 2 Initiatives toward a Carbon-free Society
75 Response to the Task Force on Climate-related 89 Round-table Talk by Outside Directors
Financial Disclosures (TCFD)

Data and Information 95 Financial Highlights

1

Integrated Report 2023

Reporting Period
April 1, 2022 to March 31, 2023 (Some information from outside the reporting
period is also included.)Turkey Kişisel Bakım Ürünleri Üretim A.S.; Forestal Anchile LTDA; Elleair
International Korea Co., Ltd.; Elleair International (Thailand) Co., Ltd.;
Elleair International China (Nantong) Co., Ltd.; PT. Elleair International
Trading Indonesia; PT. Elleair International Manufacturing Indonesia;
Oregon Chip Terminal, INC.

This report covers the 35 Daio Group companies.

Guidelines Used as References

Note: Some environmental and social data covers Daio Paper Corporation and its
subsidiaries (specified in the text)

Environmental Reporting Guidelines 2018 (Ministry of the Environment,
Japan); ISO 26000; International Integrated Reporting Framework,
Japanese translation (IFRS Foundation); Guidance for Collaborative Value
Creation (Ministry of Economy, Trade and Industry, Japan)

Daio Package Corporation; Yorii Insatsu Shiki Co., Ltd.; Uemura Shiko
Corporation; Yoshikawa Shigyo Corporation; Yoshizawa Kogyo
Corporation; Daio Miura Corporation; Iwaki Daio Paper Corporation;
Dainichi Paper Corporation; Otsu Paper Corporation; Daio Paper Techno
Corporation; Marubishi Paper Tec. Corporation; Elleair Paper Technology
Co., Ltd.; Elleair Texel Corporation; Elleair Paper Co., Ltd.; Elleair ProductCo., Ltd.; Daio Mill Support Tokai Corporation; Daio Paper Products
Corporation; Daio Engineering Co., Ltd.; Daio Logistics Co., Ltd.; Daio
Express Co., Ltd.; Tokyo Pulp & Paper International Co., Ltd.; EBS Co.,
Ltd.; Daiki Co., Ltd.; Elleair Resorts Golf Club Co., Ltd.; H&PC Brazil S.A.;
Santher-Fábrica de Papel Santa Therezinha S.A.; Elleair International

Inquiries

Publication Period
September 2023 (Publication of the next report is scheduled for
September 2024.)

Period Covered by Fiscal YearIn this report, FY2022 denotes the consolidated fiscal year ended March
31, 2023. The same applies to other fiscal years.

External Evaluations

Sustainability Promotion Department, Daio Paper
Corporation
Iidabashi Grand Bloom, 10-2 Fujimi 2-chome, Chiyoda-ku,
Tokyo 102-0071, Japan
Tel.: +81-3-6856-7500 Fax: +81-3-6856-7605

SECTION 04—Financial and Corporate Data—

https://www.daio-paper.co.jp/en/

Scope of ReportNewsprint Sales Division and Paper Sales Division
Paper & Paperboard Business Group

Responding to Social
IssuesVisit the Daio Group website.

97 Consolidated Financial Statements

Consolidated Balance Sheet/Consolidated Statementof Income/Consolidated Statement of Comprehensive
Income/Consolidated Statement of Cash Flows

100 Investor Information
101 Corporate Data
102 Third-Party Assurance

Description of Future OutlookForward-looking statements included in this report are
based on various assumptions and do not assure or
guarantee the achievement of future financial figures orthe attainment of measures.

Recognized as a Healthand Productivity
Management Outstanding
Organization “White 500”
(large enterprise category)for six consecutive years

Selected for Bloomberg
Gender-Equality Index
for two consecutive
years

Acquired a DBJ BCM (BusinessContinuity Management)
rating from the Development
Bank of Japan (DBJ) for two
consecutive years

Integrated Report 2023

2

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.

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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

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—

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

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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

SECTION 02

SECTION 01

Achieving Sustainable Growth —Strategy for Continuing to Provide Value—

Daio Group’s Vision and Medium-Term Business Plans

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

H&PC net sales ratio

Business and 30% or more from the H&PC overseas business, and an operating margin of 10%. Aiming

High-quality,
high-value-added
products and services

50% or more 30% or more

toward the next growth stage and a new future, the Group will strategically transform its businessportfolio to become a corporate group capable of continuous growth.

Operating margin

Increase inpersonnel for the
H&PC business2020 2021

Planning through10%

2nd MTBPThe Group’s Medium-Term Business Plans,
formulated by backcasting from the targets
set out in the long-term vision, are centeredaround two business strategies: structuralreforms to reinforce its business foundationand transform its business portfolio; andexpansion into overseas growth markets tostrengthen and expand the H&PC Business.
With regard to structural reforms, the Grouphas carried out a strategic shift of the productmix while maintaining full pulp production at
the Mishima Mill—it has even increased its
kraft pulp production. By increasing the shareof household paper and containerboard,which are experiencing growing demand, in
its product mix and maintaining its machineutilization rate, the Group has amplified its
competitive advantages.
Regarding overseas business expansion, by
establishing production bases that produce

Three Well-beings

3rd MTBP

vision of an “Abundantand Affable Future”

2024

mainly baby diapers in China, Thailand andIndonesia, the Group has developed an
infrastructure for local production andconsumption in Asia. Under the Third
Medium-Term Business Plan, the Group
conducted M&A in Brazil and Turkey,
establishing new entry points in SouthAmerica and MENA (Middle East and North
Africa).
While implementing these businessstrategies, the Group is also taking actions tocombat the urgent global challenge ofclimate change and other ESG(environmental, social and governance) issues
and to contribute to the creation of asustainable society, which is the objective of
the SDGs. Through these initiatives, theGroup aims to realize its management
philosophy of “Shaping an abundant andaffable future for the world.”

Safety-first workplaceenvironment

Suppliers2030

5th MTBP

Enhancement of
in-house training
for global humanresources

Daio Abundant andAffable Future 2030

growth after theJapanese
Grow together
government’s target
year for achieving Local communities
carbon neutrality

Initiatives
toward a
Carbon-freeSociety

5th MTBP

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

2050

Contribution
to theachievementof the SDGs

Measures for

1. Hygiene Protect well-being of the bodyHygieneIntegrated Report 2023

4th MTBP

Employees andtheir families

backcasting from the2026

1st MTBP

33

H&PC overseas net sales ratio

p.71

p.57

2. Life Enhance well-being of lifestyles
Life

We will provide services thatenhance lifestyles, improve thequality of life, and enable people tolead happy and enriching lives.

Lifestyle, industrial
and culturaldevelopment

Shareholders
and investors

Stable dividend andimprovement ofshare priceShaping an abundant and affable future for the world

800 billion to ¥1 trillion

billion to ¥1 trillion, 50% or more of which will be generated by the Home and Personal Care (H&PC)

2023

Management
Philosophy

Customers¥

The Group set out its long-term vision with speciﬁc targets to be achieved by FY2026: net sales of ¥800

2014 2015

SECTION 04

Net sales

structural reforms and overseas expansion under its Medium-Term Business Plans (MTBPs).

2012

SECTION 03—Value Creation Story of the Daio Group—

The Group made a fresh start as the restructured Daio Group in FY2012, and has since primarily pursued

2017 2018

SECTION 02

3. Regeneration Restore well-being of the earth
Regeneration

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

Integrated Report 2023

34

SECTION 01

SECTION 02

Review of the Medium-Term Business Plans
Over the nine years from the First to Third Medium-Term Business Plans (FY2012–FY2020), the Group achieved
signiﬁcant improvements in business performance through the expansion of the Home and Personal Care
(H&PC) Business, while maintaining stable sales in the Paper & Paperboard Business through structural reforms.
The Group recorded increases in net sales and operating proﬁt for eight and three consecutive years,
respectively, and successfully built the foundation for the next growth stage to a new future.

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—

The Group will continue to implement radical cross-business structural reforms of the Paper and Paperboard Businessand the H&PC Business under the Fourth Medium-Term Business Plan, which has been underway since FY2021, andsubsequent medium-term business plans. In its eﬀorts toward overseas expansion, the Group plans to extend thecoverage of its operations from its bases in Asia, Brazil and Turkey to surrounding areas, and also to promote multicategory business expansion by diversifying the range of its product categories in those markets with a view to multilayering its businesses.

■ Newsprint and Paper Business■ Industrial Paper and Containerboard Business■ H&PC Overseas Business■ Other Businesses● Operating Profit■ H&PC Domestic Business

Net Sales and Operating Proﬁt by BusinessNet sales (Billions of yen)
600

562.9

531.3
450.2

11.1%

7.7%

4.9%

400

36.9

21.8

200

11.1
0

FY2012FY2013

FY2014FY2015The First Medium-Term Business Plan (FY2012–FY2014)

Restart —Solid Reform and Further Growth
Basic
Policies

business

reduction and change in the product mix● Strengthening of the containerboard and corrugated container business● Expansion of H&PC Business

Review

Targets

Results

Net sales
Ordinary profit

450.0
22.5

450.2
21.8

Interest-bearing debt

400.0

375.0

Equity ratio

17%

23.7%

3.8

2.4

Promoted structuralreforms and improvementof ﬁnancial strength
to rebuild the businessfoundation(Billions of yen)

Restartmachines to respond to increasing demand forcontainerboard. It also merged and integrated
the operations of its corrugated container
subsidiaries to strengthen the containerboard
and corrugated container business.
Meanwhile, to further expand the H&PC
Business as part of its growth strategy, theGroup established factories in Thailand in
2011, in China (Nantong) in 2012, and inIndonesia in 2014 to produce mainly baby
diapers, thereby building an infrastructure for
local production and consumption in Asia.
The Group also worked on revamping its
governance structure and improving its
ﬁnancial strength in order to rebuild its
business foundation.

The First Medium-Term Business Plan
(FY2012–FY2014):

Review

Under the First Medium-Term Business Plan,in response to a continuing decline in demandfor paper and in order to maintain full pulp
production at the Mishima Mill, the Groupembarked on a structural reform. Aiming to
improve the proﬁtability of the paper businessthrough thorough cost reduction and achange of the product mix, the Group worked
to reduce pulp costs by increasing kraft pulp
production and improve the proﬁtability of
paper products by shifting to higher valueadded products. At the same time, in orderto build an optimal production system thatmeets demand, the Group converted paper
machines at the Kani Mill into containerboard

35● Restructuring of the paper● Improvement of proﬁtability of the paper business through cost

—Solid Reform and Further GrowthIntegrated Report 2023

Issues● Further structural shifting of the paper

business● Strengthening of production facilities

of H&PC Business

FY2017FY2018● Further growth and acceleration ofcontainerboard and corrugatedcontainer business
Promoted H&PC overseas businessexpansion
Achieved signiﬁcant expansion of
net sales through domestic M&A
Failed to achieve the proﬁt target

Step-up—Leap and Expand
The Second Medium-Term Business Plan
(FY2015–FY2017):

Review

Under the Second Medium-TermBusiness Plan, the Group continued topromote the restructuring of the paper
business and changed the product mix
to maximize proﬁt. It also worked tofurther strengthen the containerboard
and corrugated container business bystarting operation of the No.3 paper
machine at Iwaki Daio Paper.
With regard to the H&PC domestic
business, the Group acquired thepaper products business of Nisshinbo
Holdings, achieving an increase inmarket share of household paper

FY2020Move on: Reform and Soar Above● Radical cross-business structural reform of Paper and Paperboard

H&PC Business● Strengthening of the

FY2019The Third Medium-Term Business Plan (FY2018–FY2020)

Step-up —Leap and Expand● Rebuilding of business foundation

Net debt to equity ratio

FY2016The Second Medium-Term Business Plan (FY2015–FY2017)

Business and H&PC Business● Development of new businesses /● Global expansion and strengthening of proﬁtability of H&PC

Cellulose Nanoﬁber (CNF)

Business● Early commercialization of cellulose nanoﬁber (CNF)

Targets

Results

Net sales
Ordinary profit

500.0
25.0

531.3
12.8

Net interest-bearing debt

250.0

280.0

Equity ratio

28%

25.9%

1.5

1.6

(Billions of yen)

Net debt-to-equity (D/E) ratio

products. The Group also worked to increase salesof high value-added products by leveraging thestrength of the Elleair brand, and expanded thedomestic supply capacity for absorbent products
by commencing operation of Elleair Product’s
Fukushima Factory. As for overseas business, inaddition to expanding its production facilities andbroadening the product lineup to increase sales inThailand, China and Indonesia, the Group increased
exports from Japan to Korea, Russia, Taiwan, etc.
Furthermore, with regard to the Cellulose Nanoﬁber(CNF) business, a new business that it hopes will
drive future growth, the Group worked to expand
the CNF product lineup by starting the operation ofa pilot plant for the production of dry powder-type
CNF.
Issues● Radical structural reform from paper business togrowth business● Expansion into new overseas markets

Targets Results

Conducted cross-businessstructural reforms and overseas
M&A
Achieved targets for all items
other than net sales(Billions of yen)

* Operating proﬁt is used as a proﬁt indicator from the 3rd MTBP.

Move onthe H&PC overseas business focused on
expanding sales of premium toilet tissue
in China. Furthermore, the Group gained
operation bases in new markets in SouthAmerica and MENA through the acquisitionof Santher S.A. (Brazil) and EITR (Turkey). In
new businesses, the Group commenced thebiomass power generation business using thefeed-in tariﬀ (FIT) scheme in July 2020. Also,
progress was seen in the commercialization of
CNF as material for table tennis rackets, partsof electric racing cars, etc.

Reform and Soar Above
The Third Medium-Term Business Plan
(FY2018–FY2020):

Review

Under the Third Medium-Term Business Plan,
the Group launched a radical cross-businessstructural reform of the Paper & Paperboard
Business and the H&PC Business. The Group
resumed operation of the Kawanoe Mill in
October 2018 to produce household paper
by using pulp that was made available
by shifting from paper to containerboard,and also strengthened the paper products
business acquired from Nisshinbo Holdings.
Through these measures, the Group increased
its share of the household paper products
market and strengthened the proﬁtability of
the H&PC Business. As for growth strategies,

Net sales
Operating profit*

615.0
32.0

562.9
36.9

H&PC overseas net sales
ratio

15% 11.1%

ROE

8% 10.1%

Net debt-to-equity (D/E) ratio

1.6

1.3

Issues● Continuation of ongoing structuralreforms and promotion of overseas
growth strategies (bringing overseas
business into the black)● Promotion of management that is
conscious of capital efficiency andstrengthening of ﬁnancial position

Integrated Report 2023

36

SECTION 01

SECTION 02

Overview and Progress of the Fourth Medium-Term Business Plan

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—

Material issues
Strategic transformation of business portfolio

P&P Business

Environmental
changes

Basic Policies of the Fourth Medium-Term Business Plan
Improve ﬁnancial

a strong and1 Establish
resilient business portfolio

to climate change
3 Respond(Carbon neutrality by 2050)

2 strength● Build an even greater competitive advantage in● Strengthen cash generating capacity and● Promote the use of renewable energy, aiming to achieve decarbonization

the Paper and Paperboard (P&P) Business throughcontinuous structural reforms● Lead the Group’s growth through faster multicategory business expansion and further M&A in the
Home and Personal Care (H&PC) Business● Create future growth opportunities through new
businesses such as cellulose nanoﬁber (CNF)

improve cash ﬂow by capitalizing on the
results of structural reforms and strategic
investment● Promote management conscious of thecost of capital and return on capital byintroducing ROIC as a management indicator● Obtain and maintain a credit rating of A

by 2050● Continually engage in proper plantation management and expansion ofplantation areas● Promote a shift to environmentally friendly materials through CNF andplastic-free product businesses● Started operating a paper towel machine at the● Obtained an A rating in September 2021

Mishima Mill● Started operating the second machine for household
paper products at the Kawanoe Mill● Entered the pet care products market● Started operating a pilot plant for CNF composite
resin● Selected performance monitoring indicators

Progress highlights● Started conducting an environmental impact assessment in preparation forthat link to existing indicators using the
ROIC tree● Reduced cross-shareholdings (Percentage inconsolidated net assets: 6.8% for FY2020,
5.2% for FY2022)

the installation of a waste-to-energy boiler at the Mishima Mill

Operating proﬁt(operating profit margin)● Baby care products● Feminine care products● Pet care products● Further decline in demand for graphic● Changes in consumer psychology before and after the COVID-19 pandemic (increased

paper due to price revisions and growing
environmental awareness● Expanding demand for packaging paper
due to further increase in the desire to
avoid plastics● Expanding demand for packaging paperand corrugated containers due to therevival of economic activity after the
COVID-19 pandemic

awareness of hygiene)● Expanding demand for health careproducts due to aging population● Shrinking demand for baby care andfeminine care products due to a decreasein the number of births● Significant decline in demand forsanitizing wet wipes and masks due tothe end of the COVID-19 pandemic

Thoroughly improve efficiency with theaim of creating a cash cow business● Improve productivity and profitability at
the Mishima Mill, our core paper mill
● Reduce logistics costs by decreasing
manufacturing costs and SKUs
● Review the organizational structure
to pursue profits (improve proposal
capabilities and expand the sales ofhigh-value-added products)● Capture e-commerce demand anddemand generated by a growing trend
toward plastic reduction

Shift to focus on profitability in existing
categories and develop new growth areas● Improve the accuracy and efficiency of
production/sales/inventory (logistics)● Procure important materials in a stablemanner (Produce fluff pulp in-house)● Strengthen the production and sales ofsoft pack tissues with growing demand● Enter the pet care products market, oneof the few growing markets in Japan● Collected information on CCUS technologies including BECCS (Shikokuchuo

4th MTBP

2nd MTBP(FY2017)

3rd MTBP(FY2020)(FY2021)

531.3

562.9

612.3

646.2

720.0

800 -1,000

21.8（4.8%） 11.1
（2.1%） 36.9
（6.6%） 37.6
（6.1%）(21.4)

51.0（7.1%）

80-100（10%）(FY2022)(FY2023 forecast)

Vision for the 5th
MTBP (FY2026)

4.9%

7.7%

11.1%

12.1%

13.8%

18.8%

30% or above

ROE

10.0%

2.2%

10.1%

9.5%

-14.0%

10% or more

12% or above

1.9

1.6

1.3

1.1

1.6

1.0

1.0 or below

Progress of the Fourth Medium-Term Business Plan
Prioritized investments in the growth-driving H&PC Business● Health care products

Paper and Paperboard

Operating Operating
profit(Billions of yen) (Billions of yen)marginOperating Operating
profit(Billions of yen) (Billions of yen)marginOperatingmargin

327.4

22.3

6.8%

347.0

(12.4)

-3.6%

370.0

11.5

3.1%

(Billions of yen) (Billions of yen)

Net sales

Net sales

257.3*

11.9

4.6%

270.3

(12.6)

-4.6%

300.0

4.0

1.3%

183.2

15.5

8.5%

181.2

(6.5)

-3.6%

200.0

4.0

2.0%

Overseas

74.1

(3.6)

ー

89.1

(6.1)

-6.9%

100.0

0

ー

27.6

3.3

12.0%

28.9

3.6

12.5%

30.0

2.5

8.3%

612.3

37.6

6.1%

646.2

(21.4)

-3.3%

700.0

18.0

2.6%

Other businesses(including adjustments)

Total

Plan for FY2023

Domestic

H&PC(Breakdown)

FY2022

OperatingprofitNet sales* This net sales amount is a downward revision from the previous disclosure due to the application of accounting standards for revenue recognition.

37

Integrated Report 2023

● CNF business ● RFID business (IC tags)● Initiatives toward carbon neutrality● Increase in consciousness ofenvironmental conservation● Economic growth in emerging● China’s birth population decline (2022:

countries-14% compared to the previous year)● Change in social issues● Intensification of price competition● Polarization between purchasing

psychology focusing on cost performanceand on quality

Enhance marketing functions
Establish new sales subsidiaries[China]Strengthen profitability by acquiring newcustomer base for baby care products andexpanding feminine care products[Brazil]Strengthen the revenue base by expanding
the lineup of premium products by leveraging
our product development capabilities[ASEAN region]
Establish overseas subsidiaries tostrengthen sales[Company-wide human resources strategy]
Enhance in-house training for global humanresources

Create future growth opportunities[CNF business]
Shift from fossil-based materials tonaturally-derived materials[RFID business (IC tags)]
Provide environmentally friendly RFID
tags made of paper that does not use
plastic film (PET film)[Carbon neutrality]
Promote the use of renewable energy toachieve decarbonization
Phase out coal
Promote energy conservation, etc.

Paper and Paperboard Business

H&PC Domestic Business

H&PC Overseas Business■ Net sales (Billions of yen)
■ Operating profit (Loss) (Billions of yen)

■ Net sales (Billions of yen)
■ Operating profit (Loss) (Billions of yen)

■ Net sales (Billions of yen)
■ Operating profit (Loss) (Billions of yen)

317.8

302.5

19.9

19.6

347.0

327.4

370.0

22.3

175.4

170.2

15.5

183.2

15.5

181.2

200.0

9.9

11.5

62.6

100

89.1

74.1

34.5

4.0

0

FY2020

FY2021

(1.9)

(6.5)

(12.4)FY2022 FY2023(target)

FY2019FY2020

FY2021

FY2022

FY2023(target)

FY2019(0.8)
FY2020(3.6)
FY2021(6.1)

FY2022

FY2023(target)Building a Foundation for Growth for the 5th Medium-Term Business Plan and beyond
H&PC BusinessBusiness segment

Create a third business pillar andpromote environmental initiatives

Net Sales and Operating Proﬁt Results and Outlook by Segment

FY2019FY2021

New Businesses● Started operating a waste-to-energy boiler at Iwaki Daio Paper

H&PC overseas net sales ratio

Net debt-to-equity (D/E) ratio● Household paper products● Industrial paper and corrugated containers

South America(Billions of yen)

450.2

Consistently turn a profit andstrengthen organizational structure● Newsprint and paper● Started using biomass boilers under the FIT scheme for self-consumption

City Carbon Neutrality Council)

Net sales

Drive performance as a core business● Obtained about 6.0 km2 (nearly 1,500 acres) of land for plantation in Chile,● Decreased coal purchase quantity (a decrease of 13.6% compared to FY2021)

1st MTBP(FY2014)Creation of new businesses

H&PC Domestic Business H&PC Overseas Business

Generate sustainable cash flow for
growth investment

Since FY2021, the Daio Group has been actively committed to implementing the Fourth Medium-TermBusiness Plan under the slogan “GEAR UP: The Next Growth Stage, to a New Future.”
Aiming to realize the Three Well-beings, the Group has been accelerating its initiatives to shape a new
future in high gear.

Acceleration of global expansion

Business
divisions

Corporatefunctions

Domestic

Overseas

Pursue increased sales andprofits by achieving both
efficiency and growth

Expand business and improve
profitability through new
categories

Purchasing
Human resources / Organization

Cashgeneration forinvestment
Shift ofhuman
resources

P&P Business
Improve the efficiency of the newsprint
and paper business and expand
business in the industrial paper field

Build strategies and organizational structures that respond to globalization
Shift human resources and build a human resources training system to strengthen the H&PC Business

For the Paper and Paperboard Business, we recognize that we now have a system in place that allows us to compete effectively with our domestic competitors
as a result of starting structural reforms from the 1st Medium-Term Business Plan. However, the continued shrinkage of demand for graphic paper is inevitable.
As a business structure change with an eye to the future, we will significantly shift resources from the Paper and Paperboard Business to the H&PC Business
and work to transform our business portfolio in consideration of solving social issues with a stronger determination than ever.

Integrated Report 2023

38

SECTION 01

SECTION 02

Message from the Officer Responsible for Financial Affairs

SECTION 02

Shuhei Shinagawa
Director
Managing Executive Officer(General Manager of Corporate Planning Division andBusiness Administration Division, Corporate Unit)

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 decline in our business performance. Although wewill not change our net D/E ratio target of 1.0 or lower,
the achievement of this target is expected to be delayed
until the 5th MTBP period or later. Securing free cash
flows for medium- and long-term growth has become
very important. We will achieve this through the dual
approach of improving capital efficiency and bolstering
cash generation. We believe that our sustained
efforts to improve our financial health and lay a solid
foundation for growth and expansion investments
will lead to an improved financial position of the Daio
Group.
As for ratings, we have set a target of obtaining a credit
rating of “A” from the Japan Credit Rating Agency(JCR) and Rating and Investment Information, Inc. (R&I)
during the 4th MTBP period, and we obtained “A”

Forging a solid return to a growth path
to restore our financial health as early as
possible toward further business growth

SECTION 03

ratings from both agencies in FY2021 for the first time.
The key to maintaining these ratings is to generatecash from our business activities and get back on a
growth track. It is also necessary to improve our capitalefficiency and demonstrate our potential for future
growth. The impact of the inflated raw material andfuel prices has been declining from its peak. We expectthat price revisions made in FY2022 will make a positive
contribution to our business performance throughout
FY2023. Our business performance is therefore
recovering steadily. Furthermore, we will improve our
profitability and demonstrate our potential for future
growth mainly in the Home and Personal Care (H&PC)
Business in Japan and abroad, which is a growth engine
for us.

Financial responses to expanded overseas transactions

Review of FY2022 results
In FY2022, we experienced a rapid deterioration in
the business environment surrounding us partly due
to significant fluctuations in foreign exchange rates, inaddition to sharp rises in raw material and fuel prices
in the second half of FY2021. We implemented various
measures to minimize the downside impact of suchenvironmental changes on our business performance.
Specifically, we revised our product prices multiple
times, mainly in the Paper and Paperboard Business,
our core business. While striving to procure raw
materials and fuels stably, we also devoted all-out
efforts to minimizing the impact of soaring costs forcoal, which could have a massive impact on our businessperformance, by reviewing our coal sourcing areas andthe types of coal we would use. However, we wereunable to offset the cost increase. As a result, FY2022
was a very tough year for us in terms of profitability, as
seen by the fact that we recorded an operating loss forthe first time since our listing.
Facing challenges in generating cash through our core
operations, we worked on generating cash outside
our core business, including reducing inventories anddownsizing strategic cross-shareholdings. This helped us
maintain a sufficient level of liquidity and stabilize ourcash flow.

Basic policies on ﬁnancial strategy
We anticipate that uncertainty will persist in ourbusiness environment going forward, but there will
be no change to our basic financial strategy from theprevious fiscal year.
To maintain liquidity even in such an uncertain
situation, we have adopted a policy of diversifying
our financing means while continuing to use indirect
funding (borrowing from financial institutions) as astable means of financing. We had set a target of raising
the ratio of direct funding (from corporate bonds andcommercial paper) out of all interest-bearing debt to
20% by the final year of our 4th Medium-Term Business
Plan (MTBP), and to 25% by the end of the 5th MTBP.
However, we opted not to issue corporate bonds in39

Integrated Report 2023

FY2022 in consideration of the rapid deterioration in
the business environment, which has made it difficult
for us to meet our initial target.
From FY2023 onward, we will raise the ratio of direct
funding again by actively issuing corporate bonds
in conjunction with improving profitability, thereby
increasing the amount of available funds for the 5th
MTBP. In addition, in anticipation of a further increase
in investments for achieving carbon neutrality in the
future, we will explore financing options such astransition finance.
The net debt-to-equity (D/E) ratio, for which the target
is 1.0 or lower, deteriorated from 1.1 as of the end of
March 2022 to 1.6 as of the end of March 2023 due toI believe that the expansion of business operations andtransactions outside Japan entail three major kinds ofrisks. First, when expanding business abroad, we facerisks associated with capital recovery and reduced
capital efficiency. Factoring in international tax treaties,
along with the laws and regulations applicable inforeign jurisdictions, we recognize that it is essential
to establish an optimal system for fund distribution
and repatriation. We are also examining the feasibilityof establishing regional headquarters in the future
for the efficient allocation of surplus funds built up at
overseas bases. Moreover, we are actively developing an
emergency response policy while responding to current
geopolitical risks, such as those related to the war in
Ukraine.
Secondly, international trade transactions and the
expansion of overseas investments entail foreignexchange risks. To mitigate foreign exchange risks, weincorporate forward exchange contracts into certaintransactions denominated in foreign currencies, suchas import transactions. Furthermore, since FY2023,
we have broadened the scope of transactions andcurrencies to which forward exchange contracts apply
to reduce cost fluctuation risks. Likewise, in overseas

investments or meeting the funding needs of ouroverseas subsidiaries, we are taking measures to directly
secure funds in local currencies. This is in addition
to parent-to-subsidiary loans from Japan, with theobjective of mitigating the impact of exchange rate
fluctuations on our financial performance.
The third kind of risk is related to the governanceof overseas subsidiaries. We devote serious efforts
particularly to preventing fund-related frauds suchas embezzlement and misappropriation. While wehave a plan to roll out a global cash management
system (GCMS), the implementation will be deferred.
At present, our priority is on reinvestment and we
recognize that an immediate introduction of a GCMS
is unlikely to offer substantial improvements in capitalefficiency. Nevertheless, we are actively working toestablish and maintain a robust management systemthat prevents the formation of the fraud triangle(opportunity, motivation, and rationalization) and havealready put in place various governance enhancement
measures. These include utilizing specific functions of
the GCMS to visualize account information, minimizing
cash on hand, and distributing workflow responsibilities
to prevent concentration of power in a single person.

Vision for asset allocation toward sustainable growthWith the intent of making the H&PC Business inJapan and abroad a key driver of profit growth, wewill rebalance the allocation of various resources. The
overseas business in particular is expected to achievesignificant growth under the 5th MTBP, so we must
make growth investments, including investments in
M&A. We plan to utilize the stable cash flows generated
by the Paper and Paperboard Business to fund our
growth investments and our goal is to establish andrealize a sustainable growth cycle while making steadyprogress in structural reforms. One of our strengths
lies in having packaging paper and household paper
products, which will remain in relatively firm demand,as mainstays in our product lineup. This sets us apartfrom those heavily reliant on graphic paper, for which
demand will decline in the future as more people aretransitioning toward paperless practices in both workand lifestyle, among other factors. Another importantIntegrated Report 2023

40

SECTION 01

SECTION 02
Message from the Officer Responsible for Financial Affairs

asset of ours is the sales skills that we have developed
while establishing an integrated system for producing
and selling a whole range of paper-related products,from pulp as an upstream product in the industry to
B2C products, such as household paper, which are final
downstream products. While leveraging these strengthsof ours, we will also allocate growth funds to businesses
in new fields, including Cellulose Nanofiber (CNF) andproducts that will contribute to a reduction in plastic

use, and foster them as new business pillars.
Furthermore, pressing global trends toward action
for sustainability have necessitated us to shift awayfrom our conventional coal-centered energy policy.
To invest in decarbonization and deliver returns to
our shareholders, we commit to ensuring that evenour growth fields, such as the H&PC Business and its
overseas business, will generate operating cash.

Progress in our efforts to increase return on invested capital (ROIC)
Up until recently, we mainly used income-statementbased indicators as KPIs for business management,
and made decisions on each investment project inconsideration of such factors as the payback period
and the ﬁnal return rate. While this approach certainly
allowed us to make quick decisions, we recognized theneed to incorporate a capital-cost-related indicator in
our investment decisions in order to more accurately
respond to the current business environment, which ismarked by growing uncertainty. Therefore, we began touse return on invested capital (ROIC) as a management
KPI under the 4th MTBP.
By expanding the adoption of ROIC throughout theGroup, we seek to foster a shared awareness among themanagement team and staff. The Corporate Planning
Division is leading efforts to promote the use of ROIC
across the Group. We're actively tackling the challengeof enhancing staff awareness of ROIC by carrying out
awareness-raising activities, leveraging the ROIC tree
to break down ROIC into its elements. This will vividly
illustrate the link between these elements and thecurrent departmental indicators in use. For instance,
sales staff currently rely on indicators like selling

prices, marginal income ratio, and the percentage of
unsold long-term inventories. To further familiarize
each business group's staff with the ROIC tree, we'reconducting workshops to demonstrate how theirindicators directly contribute to increasing ROIC.
Moving forward, as we progress with ROIC-driven
management, we aim to optimize resource allocation
and business portfolio, as well as improve our capitalefficiency and make better investment decisions.
In addition, in May this year, new business withdrawal
criteria were formulated and adopted under theleadership of the Corporate Planning Division.
These withdrawal criteria are not intended toencourage withdrawal. Their key aim is to support thereconstruction of any struggling business or subsidiary.
This would require the involvement of not only thepertinent business group but also the participation of
the Corporate Planning and Business Administration
Divisions in devising countermeasures. It is only when
every conceivable effort toward reconstruction has
been exhausted, and it is still considered difficult toreconstruct such a business or subsidiary, that we will
execute the appropriate withdrawal procedure.

Investments in environmental initiatives, human resource strategy, and intellectual property strategy
During the 3rd MTBP period, we made capital
investments of 175 billion yen (or over 200 billion yen
if M&A investments are factored in) with high leverage,
while implementing structural business reforms
mainly at the Mishima Mill. As a result, we were able
to carve a growth path. During the 4th MTBP, whileenvisioning further progress in our growth strategy,
we are continuing to work on the improvement offinancial strength as one of our three basic policies.
Therefore, our budget for investments, including
M&A investments, has been reduced from that forthe previous MTBP to 155 billion yen. However, ourdeteriorated financial results for FY2022 have brought
our efforts to improve financial strength to a standstill.
In light of this situation, I recognize that, under the 5th
MTBP, which will start in FY2024, we will need to focus

41

Integrated Report 2023

our growth investments on more carefully selected
targets.
Meanwhile, from a medium- to long-term perspective,
we must make growth investments in energy transition
to break away from our dependence on coal. We
predict that the introduction of carbon pricing in
FY2028 or later will cause a gradual decline in profitsand cash flows from the Paper and Paperboard
Business. I am therefore aware of the need toincorporate decarbonization-related risks into ourinvestment evaluation and decisions.
In the field of human resources, we are facing theurgent challenge of developing globally effective
human resources in preparation for overseas businessexpansion. Alongside offering training, including
language learning, we are partnering with the General

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—

Affairs and Personnel Division to roll out a strategy
that offers our employees career paths that involve
overseas assignments within a few years of joining
the company. We are also exploring the possibilities
of recruiting globally effective human resources fromoutside. Moreover, we are working to shift humanresources from the Paper and Paperboard Businessto the H&PC Business. The efforts that the Paper andPaperboard Business has made in organizational
integration and efficiency improvement since the 1st
MTBP have allowed it to compete effectively with its
competitors in Japan with a small but competent staff.

We are planning to have the Paper and Paperboard
Business continuously pursue efficiency with a small but
competent staff, and to scale out its know-how to the
H&PC Business.
Our efforts in intellectual property strategy are focusedon innovations in priority fields, such as the H&PC
Business, CNF and other new materials as new businessfields, and environmentally friendly products that help
reduce plastic waste. In conjunction with our overseas
business expansion, we are devoting sustained efforts
to augmenting our global portfolio of intellectual
property, thereby enhancing our brand value globally.

Vision for shareholder return
Positioning offering return to shareholders as one of
our top priorities, we have adopted a basic policy ofcontinuing stable dividend payments while taking into
account our ﬁnancial results, internal reserves, andother factors. From the perspective of ensuring stabledividend payments based on equity, we have used thedividend on equity ratio (DOE) as an indicator since
FY2021. Our medium- to long-term target for DOE is
2.0%.

Mainly because we recorded a loss attributable toowners of parent for FY2022, we regrettably reduced
the dividends for that year. As a result, DOE deteriorated
from 1.5% for FY2021 to 1.1% for FY2022. For FY2023,
we plan to continue to pay the same level of dividends
as in FY2022. This is regrettable; however, we aim toincrease dividends by improving our profitability as earlyas possible with a view to achieving our medium- tolong-term DOE target of 2.0%.

Message to stakeholders
Our price-to-book ratio (P/B ratio) remained at alevel of approximately 1.0 until the end of March

2022, but it has recently continued to fall below 1.0.
We recognize improving the P/B ratio as a major
challenge we should solve. We acknowledge thatthe delay in improving the profitability of the H&PC
Business is the main cause of the decline in our
corporate value. We believe that the key to achievinga breakthrough in this situation and improving
our corporate value is to clearly demonstrate toall stakeholders an obvious improvement in our
profitability and remarkable progress in our overseas
business expansion, which will naturally result in
an increase in our P/B ratio. We will work to restore
our profitability as soon as possible with a view torealizing corporate management that is consciousof the cost of capital and the stock price. We will
also continue our efforts in investor relations (IR)activities to have constructive dialogue with ourshareholders and investors about such topics as ourviews on the P/B ratio, the price-to-earnings ratio (P/E
ratio), and the cost of capital, thereby incorporating
their opinions into our corporate management. By
adopting these measures, we will strive to further
increase our corporate value.
We look forward to the continued support of our
stakeholders.

Integrated Report 2023

42

SECTION 01

SECTION 02

Toward Achievement of the Targets of the Fourth
Medium-Term Business Plan

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Major products

Paper & Paperboard Unit

Rems, a system for accepting orders for mixed-pulp paper—Reusing residues of production processes as araw material for paper—

Newsprint Sales Division and Paper Sales Division
Paper & Paperboard Business Group● Message from the General Manager of the Business GroupWe will further enhance our integrated
operations through organizational reforms,
and increase the added value of our
products and the efficiency of our operations
with the aim of improving our profitability.

Future vision of these divisions
In FY2022, in face of raw material and fuel prices soaring and remaining
high, we found ourselves in the unprecedented situation of having torevise the selling prices of our newsprint and paper products three times.
As a result, our profitability improved, but the increased prices of our
products caused a drastic decline in demand. We believe that, in view ofthe future, we need to further accelerate our efforts in product-mix shifts
and structural reforms, which we have resolutely launched. Until FY2022,with 19 paper machines in operation, the Mishima Mill, our core mill,used to produce approximately 2.1 million metric tons per year. However,in response to reduced demand, we implemented paper machine
conversion and adjusted our product mix. Furthermore, in April 2023, as
the downturn in demand intensified, we made a pivotal decision to cease
the operation of a newsprint paper machine. This decision was based on
our judgment that it would be better to trim energy costs by stopping
the machine than to keep it running on a reduced scale. We will continue
to resolutely execute such structural reforms and optimize the balance
between production, sales, and inventories, with the aim of maintaining
the profitability of the entire mill.

Atsushi Ishida

Examples of final
products using
mixed-pulp paper that
contains residues

Director, Managing Executive Officer
General Manager of Paper &Paperboard Business Group
Paper & Paperboard Unit

● Development of the product lineup

In October 2022, Rems products were newly added to Daio Paper’s product lineup. “Rems” is the name of a system whereby paper is made bymixing residues, such as rice husks and coffee grounds, in pulp fiber. Although some particles appear on the surfaces of paper sheets, this systemfor producing mixed-pulp paper containing residues that otherwise would have been disposed of contributes to the effective use of resources.
The residues that are used in this system are provided by other companies and organizations. We mix those residues in pulp to recycle them into
new paper. We have received a lot of requests for the utilization of residues of production processes to produce mixed-pulp paper for many years,
so the Rems system has enabled us to meet such requests in a timely manner. Many companies and organizations have made inquiries to us about
this system during the very short period since its launch.

pulp production, we had to raise the prices of our newsprint and graphic
paper products three times during the year, while we raised the pricesof our paper products with a high content of recovered pulp only twice.
Although we fell into the red in FY2022, we predict that the progress of
not only such selling price revisions but also product-mix shifts and productintegration through structural reforms will enable us to return to the blackin FY2023.

Daio Group’s strengths and challenges
I believe that the major strength of our Group lies in integrated
operations. The way we hold and share necessary information beyond
departmental and company boundaries consistently has enabled us toproactively propose total product and service solutions in response tocustomers’ requests and questions. The Newsprint and Paper BusinessGroup and the Industrial Paper and Containerboard Business Group haverecently integrated into one business group. We aim to increase the sales
volume of profitable products in the future by enhancing our marketing
activities encompassing all types of products through integrated
operations. Our ability to conduct sales activities across our entire productlineup means that we can serve as a one-stop provider of all types of
paper that customers need from a market-oriented perspective, thereby

Business results for FY2022
For FY2022, the Paper & Paperboard Unit as a whole achieved sales of347 billion yen, but recorded an operating loss of 12.4 billion yen. In thenewsprint and paper business, sales volume decreased due to the falling
circulation of newspapers and declining demand for graphic paper, but
our efforts to revise selling prices resulted in an increase in the amountof sales year-on-year. However, this increase was not adequate to offset
the increase in production costs caused by the soaring raw material
and fuel prices, resulting in a decrease in operating profit year-on-year.
The situation whereby the high raw material and fuel costs caused the
profitability of paper in general to decline made it difficult for us to earn
profits, particularly from paper containing a high percentage of virginpulp. Since the production cost for this kind of paper is higher than that for
paper containing recovered pulp due to the difference in the cost of the43

Integrated Report 2023

■ Net sales of the Newsprint Sales Division and the Paper Sales Division(Billion yen)

181.6

182.6
160.5

FY2018FY2019FY2020[Socially conscious product]
Tasukeai-no-wa+ copy paper, 1% of thesales amount of which is donated to theJapan Committee for UNICEF

169.0

173.0

FY2021

FY2022

evolving our sales organization. In terms of production, the Mishima
Mill, our core mill, is unique in that it manufactures all types of paper in
one site. This provides us with a distinct advantage, allowing us to adjust
our production and product mix easily and agilely. Having a printing
company in our Group benefits us by allowing us to receive feedbackon user needs. We are testing a business model of elevating the valueof printed materials by innovating value-added paper that enables
value-added printing, with the aim of increasing the added value of ourprinting company. Ultimately, our goal is to scale out this model to otherprinting companies, and establish a process whereby our customers willconsistently choose and purchase our paper products. On the other hand,
we are facing a logistical challenge. The progress of our shift from graphic
paper, which is in declining demand, to industrial and household paper
products has caused drastic changes in the total weight of our products.
Such a production shift is likely to have an impact on logistics, impeding
us from completely transporting our products and thereby causing us
to lose business opportunities. Therefore, we will foster collaboration
in logistics in such forms as mutually supplementing logistics together
with customers and shipping products jointly with companies in otherindustries. By doing so, we aim to devise effective measures, including
securing return cargos, to overcome the logistical challenge we are facing.

Views on the current market environment(opportunities and risks)
The COVID-19 pandemic accelerated digitalization and the shift fromgraphic paper to electronic devices. We had anticipated a certain levelof decline in demand due to the progress of digitalization. However,
the rises in raw material and fuel prices and their subsequent prolonged
high levels triggered by the Russian invasion of Ukraine have had an
impact on our profits, forcing us to revise our selling prices, which has
caused us to severely suffer from a more serious decline in demandthan expected. The risk of price revisions creating general trends toward
avoiding immediate purchase and resulting in the shrinking of themarket is common to all companies in our industry, including ourselves.
Nevertheless, I believe that our strengths—integrated operations, ourability to produce a wide range of paper products at the Mishima Mill,
which is located in a coastal area, and our sales system in place forflexible development—will enable us to differentiate ourselves from ourcompetitors and create business opportunities even amid the declineof the entire industry. I predict that price revisions and growing public
environmental awareness will continue accelerating the decline indemand for graphic paper. However, we will work to take advantage oftrends toward plastic-free lifestyles and create new demand for paper
products, including environmentally friendly ones.

Resolving social issues through our businessStreamlining logistics is a major challenge for us to solve, but tackling thischallenge will also lead us to reduce greenhouse gas (GHG) emissions.
I believe that, against a backdrop of recently mounting concern abouta shortage of drivers, we can make further progress in contributing to
the achievement of the SDGs by streamlining logistics. We will be able
to not only reduce logistics costs but also build win-win relationships
with customers who have bought our paper products, by cooperatingwith them in sharing return cargos to be loaded onto carriers. We havealso contributed to environmental conservation by effectively recycling
recovered paper into Forest Stewardship Council (FSC)-certified paperand other products. At the Mishima Mill, efforts are under way to reduce
production costs by stopping a large paper machine and rebuilding the
production system. We are also working to reduce coal usage at themill by adopting energy-saving measures and switching the biomass
power that we generated and sold externally through the feed-in-tariff(FIT) program to in-house consumption. We will also devote efforts todeveloping products that help reduce plastic waste, for which demandis expected to further grow significantly in the future, to fulfill the Daio
Group’s Management Philosophy: “Shaping an abundant and affable
future for the world.” We will contribute to the creation of a sustainable
recycling-oriented society based on the shared recognition that
promoting the effective use of recovered paper and other resources will
also lead to the achievement of SDG 12: Responsible Consumption and
Production.

Integrated Report 2023

44

SECTION 01

SECTION 02
Toward Achievement of the Targets of the Fourth Medium-Term Business Plan

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Major products

Paper & Paperboard Unit

Paperboard Sales Division andPackaging Paper Sales Division
Paper & Paperboard Business Group

Dear-Natura
from Asahi Group Foods, Ltd.

Atsushi Ishida● Message from the General Manager of the Business Group

Director, Managing
Executive Officer
General Manager of Paper& Paperboard Business
Group
Paper & Paperboard Unit

We will increase the sales volume ofprofitable products by establishing a new
Direct Demand Department, which canpropose paperboard and plastic-reducing
products in combination.

Future vision of these divisions
In April this year, we established a new Direct Demand Department in the
Paperboard Sales Division as an organization that proposes a total packageof solutions, including not only containerboard and corrugated containers
but also packaging paper, to end users. This organization embodies aGroup-wide style of proposing a wide variety of paper products, including
packaging paper and functional materials, transcending boundaries
between product types. I recognize its establishment as one of thehighlights of our FY2023 activities. We hope to use this new approachto organizational reforms as a model case to be scaled out in the Group,
rather than limiting it only within the Paperboard Sales Division. The Direct
Demand Department is currently in charge of proposing a total packageof solutions, including corrugated container, packaging paper, and paperbags, but we hope to broaden the lineup handled by the Direct Demand
Department to include newsprint and graphic paper products, such as
printing paper, in the future. The Direct Demand Department started
with 10 staff members. However, since the Paper & Paperboard BusinessGroup has a sales workforce of about 300, we are considering the ultimate
possibilities of engaging all sales staff members in marketing all types of
products. While proposing a total package of solutions to end users incooperation with converting companies, we focus on building networks bypromoting not only product-related measures but also logistics measures,such as joint shipment and the utilization of return cargos after delivery.

containers themselves. We will differentiate ourselves by providing added
value that other corrugated container companies cannot, such as designs
that increase the value of the corrugated container itself and its content,with a view to increasing the prices of the corrugated container products
themselves, thereby improving our profitability. In FY2022, we revised theprices of corrugated container products twice, but we should have increased
prices within a few months after the price hike of containerboard. In reality,
last fiscal year, it took about half a year for us to pass on the material cost
increase to selling prices, resulting in an increase in net sales and a decreasein operating income in the corrugated container business. We have alreadyalmost succeeded in rolling out our cost pass-through efforts, which we
expect to make a positive contribution to sales throughout FY2023, enabling
us to achieve a year-on-year increase in both net sales and operating profit.
Under the upcoming 5th MTBP, the Daio Group as a whole will adopt a
policy of enhancing its overseas businesses, mainly the overseas Home andPersonal Care (H&PC) Business. In addition, the plan also envisions overseas
expansion of the corrugated container business in the future. During the 5th
MTBP period, we will not only enhance our businesses in Japan, but also makea strong commitment to expanding our businesses abroad. The Overseas
Business Group of the H&PC Unit currently has factories in China, Thailand,
Indonesia, Turkey, and Brazil. Those factories use a huge volume of corrugatedcontainers. We will consider the possibilities of producing corrugatedcontainers locally, including M&A of corrugated container factories.

173.9
158.4

45

Integrated Report 2023

134.9

135.2

FY2018FY2019141.9

FY2020

FY2021

FY2022

MaMa Aerudake Pasta Sauce
Ippin
from Nisshin Seifun Welna Inc.

Daio Paper’s environmentally friendly products include the Elipla series, a series of products that contribute to plastic-free and low-plastic lifestyles. This
series started with stir sticks, but its lineup has so far been dramatically expanded and enriched to include hangers and toothbrushes, as well as spatulas
for use by cosmetics companies or as disposable amenities, all of which are made of FS Elipla Paper intended to serve as an alternative to plastic. FS Elipla
Heat Seal, an alternative to film, is used in packaging products for foods, including fried foods such as donuts. We have also received an increasing numberof customer requests for packaging paper that contains recovered pulp or is certified by the Forest Stewardship Council (FSC). In 2020, we launchedenvelopes and paper bags made of FS Unbleached Recycled Paper 100, which is FSC-certified paper made from 100% recovered pulp. During the past
year, the number of inquiries made to us regarding these products has been soaring, resulting in more widespread use of this recycled paper. We recognizethat the main factor behind such a strong interest in this kind of product is changes in environmental awareness of the general public. Even luxury brands
use this kind of paper for bags for sample products.

Daio Paper’s strengths and challenges
As embodied by the newly established Direct Demand Department, one of
our strengths lies in our Group-wide integrated organizational operations.
Against a backdrop of growing social demand for plastic waste reduction,
we established the Direct Demand Department to have a system in place
for proposing both containerboard and the plastic-reducing Elipla series
at the same time, which has made it easier for us to meet customers’
needs and their requests for products that facilitate their environmental
activities. We will make maximum use of our Group’s power to propose
total solutions ranging from upstream products to downstream final
products in order to increase our sales. One of the strengths of our businessgroup lies in our alliances and networks with independent converting andprocessing companies, as well as with other departments within the Group.
Such challenges as addressing logistics issues, reducing GHG emissions,and realizing closed-loop recycling are difficult for us to solve alone, andrequire us to build networks. Horizontal recycling, whereby used items arerecycled into the same kinds of items, has recently been a focus of growing
public attention. In the paper industry as well, it is now possible to collectused paper and recycle it into paper for the same use. We would not beable to implement this initiative without our networks with convertingand processing companies, as well as with end users. We hope to propose
solutions with higher added value to our customers from now on.

the market for newsprint and graphic paper. However, since October 2022,
demand for containerboard in Japan has remained lower than in previous
years. Since December of the same year, the country has also been seeing
lower demand for packaging paper than in previous years. I suppose thatfactors behind such weak demand for packaging materials in Japan include
reduced demand due to price increases, the declining birthrate, and thedecrease in the number of international tourists to the country. Now that the
COVID-19 pandemic is approaching an end, there is a potential for recovery
in the number of international tourists and in demand. Nevertheless, amid
the general trend toward a population decline, we should anticipate therisk of a subsequent decrease in demand for packaging materials, which has
remained firm and stable thus far. I basically believe that it is important for
us to increase the added value of our products so that we will be able to takeadvantage of even such a risk as an opportunity. Our business group will shift
the focus of our sales style from quantity to quality. For example, we may
provide the kind of paper package that makes its content look better andmore luxurious, rather than being a mere box for transportation. By adopting
such approaches, we will help increase the value of the products containedin the packages we provide, which will have an impact on the selling prices of
those products, hopefully leading to our paper products being purchased at
the prices that they more truly deserve.

Resolving social issues through our business■ Net sales of the Paperboard Sales Division and the Packaging Paper
Sales Division (Billion yen)

Business results for FY2022
For FY2022, these two divisions collectively achieved the expansion of theirbusiness scale and an increase in net sales year-on-year, but experienced
a decrease in operating profit year-on-year despite selling price revisions
made in response to the sharp rises in raw material and fuel prices. Thisdecrease can be explained by a delayed pass-through of the increase in
raw material and fuel costs. I recognize that the key challenges we shouldsolve in FY2023 include not only expanding the downstream corrugatedcontainer business and making a quick pass-through of the cost increase, butalso implementing initiatives to increase the added value of our corrugated● Development of the product lineup[Environmentally friendly products]
The Elipla series,
a new brand of the entire
range of products that
contribute to plastic-freeand low-plastic lifestyles

Premium Sweet
from Dole Japan, Inc.

Views on the current market environment(opportunities and risks)
It is said that demand for industrial paper, such as containerboard andpackaging paper, generally remains firmer and more stable than that fornewsprint and graphic paper. For example, the expansion of e-commerce
and the increased proportion of nuclear families have caused the downsizingof product packages. The downsizing of corrugated containers means
an increased amount of containerboard used. In addition, containers forvegetables, fruits, beverages, and processed foods account for about 60%of the corrugated container market. Demand for food products is stable,
so in that sense, the containerboard market is firmer and more stable than

Corrugated containers and paper bags are 100% recyclable, environmentallyfriendly packages. We will devote efforts to further reducing ourenvironmental load by increasing the ratio of recovered pulp contained in
our products and utilizing hard-to-recycle recovered paper, which has been
disposed of as waste thus far. Furthermore, in anticipation of continuing
steady growth in demand for products that contribute to plastic-free andlow-plastic lifestyles, we will continue to develop such products. At the sametime, we will also build networks and collaborate with external parties inpromoting various initiatives, including those to realize horizontal recycling
and to solve the so-called “2024 issue” in the Japanese logistics industry, thatis, the issue of truck driver shortages expected to be exacerbated by an upper
limit that will be imposed on the working hours of drivers in 2024.

Integrated Report 2023

46

SECTION 01

SECTION 02
Toward Achievement of the Targets of the Fourth Medium-Term Business Plan

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Major productsHome & Personal Care Unit

Domestic Business Group
Hiroyuki Fujita● Message from the General Manager of the Business GroupOur vision is focused on carrying out
structural reforms in what we alreadyhave in order to generate maximum
profits at minimum costs.

Future vision of this business group
The Home & Personal Care (H&PC) Business Group is committed toenhancing activities aimed at generating maximum profits at minimum
cost and initiatives to accelerate business growth through M&A. Last fiscal
year, our focus was on achieving results cost-effectively, in the face of the
difficulty in remaining profitable and the increase in raw material andfuel costs. For example, we adopted the approach of sharing information
about our social contribution projects with the general public to raise
general awareness of our products, while arousing our customers’
empathy. I believe that our sustained efforts to scale out such approaches
toward the 5th MTBP will become the core of our next future vision. In
October last year, we acquired shares in Daiki Co., Ltd., a manufacturer
and distributor of cat litter. We will enter the pet care business on a fullscale in the second half of FY2023. Our basic business model was to earn
profits through making capital investments in our own facilities. However,in a situation where we have to limit such capital investments, M&A could
serve as an effective method to acquire know-how in new ventures, which
not only enhances our brand power but also quickens and streamlines
the process of establishing and nurturing new businesses. Therefore, wewill keep in view the possibility of utilizing M&A to accelerate our businessgrowth.

Business results for FY2022
For FY2022, the Domestic Business Group of the H&PC Unit recorded salesof 181.2 billion yen, a decrease of 1.1% year-on-year, and an operating
loss of 6.5 billion yen. The main factor behind the operating loss was a lossof several tens of billions of yen caused mainly by the sharp rises in raw
material and fuel prices, which we were ultimately unable to completely
offset throughout the year even with selling price revisions and major
structural reforms. In preparation for FY2023, we slowed down our paceof launching new products and resolutely implemented no-holds-barredmeasures, including changing product specifications and reducing costs,
to increase the profitability of each product. Additionally, the market
positively responded to the price revisions we made throughout 2022. We

47

Integrated Report 2023

©Disney

Director, Managing Executive
Officer
General Manager ofDomestic Business Group
Home & Personal Care Unit

● Development of the product lineup[Collaboration-based products]• elis × M / mika ninagawa, featuring adesign created in collaboration with thephotographer and film director• Elleair Alcohol-based Disinfectant Wipes
in bottles designed in collaboration with
CHUMS

[Environmentally friendly products]
Products using paper packages:• elis Suhadanokimochi
Natural Series• Kirekira! Toilet Cleaning Wipes
in the Too-Nice-to-Throw-away
Package• Ellever Paper Towel
in a paper package (200 single-ply
sheets)In FY2021, we worked to increase the sales ratio of new products. By contrast, in FY2022, we slowed down our pace of launching new products and switched
our direction to increasing the added value of products and present the appeal of each product compellingly during business talks. In addition, as a strategy for
expanding the settings for use of our products, we developed a product series in collaboration with a popular outdoor brand. Our sanitizing products are typicallyused at home, especially during the COVID-19 pandemic. Going forward, we hope customers would also use them in outdoor activities, such as camping. To thisend, we have also increased where this series is placed on shelves in stores, placing them on shelves for camping goods as well as instore fairs, in addition to sections
for sanitizing products. In this way, we have been implementing further novel initiatives. Meanwhile, we believe that we will be able to reduce our stock, promote
optimal logistics, and improve production efficiency by accelerating our efforts to reduce the number of stock keeping units (SKUs) in parallel with launching various
limited edition products seasonally. Moreover, in the growing elderly care products market, we hope that our Attento brand disposable incontinence underwear
products, which are developed with the tag line, “For better comfort,” as well as in collaboration with Wacoal Corporation, can provide consumers with a bright
future where they can casually try on and wear them out with a smile.

believe that the outcomes of these measures will significantly contributeto improving our operating profit for FY2023, thereby enabling us toachieve the financial targets. Furthermore, in April 2023, we established a
new Structural Reform Promotion Division to speed up our responses tothe revamped mission-critical system based on our achievements during
FY2022. This division was established as a new organization that would
work collaboratively across departments in charge of sales, marketing, IT
systems, and logistics, as well as mills and factories. Its primary focus for
FY2023 and toward the 5th MTBP is on increasing efficiency, sales, andprofits through structural reforms of existing resources, equipment, andpersonnel without requiring additional investments.

recognition nudges consumers toward choosing our elderly care products,
masks, and wipes by appealing to their fondness for our family brand.
Furthermore, we will also leverage our strengths to develop the pet careproduct business into a new growth field in anticipation that, in the petcare goods industry, one of very few growth markets in Japan, we will beable to produce a lot of synergetic effects using our existing technologies
and in terms of production technology and raw materials. On the other
hand, we have also striven for sales expansion through low-cost marketingin various projects, resulting in opportunities for consumers to learn about
our products. I also believe that our joint research on the feasibility of adisposable diaper recycling business will give us a differentiating factor to
set us apart from other companies, against a backdrop of further growing
public environmental awareness in the future.

consumer buying behavior and awareness is changing. Demand for suchproducts as masks and wipes is predicted to decline from now on, so wewill consider marketing products to replace them. Amid an accelerating
population decline in Japan, the markets for baby care and feminine careproducts will inevitably shrink. Therefore, it is important for us to shift
our resources to promising growth markets, such as the elderly care andpet care markets. The depreciation of the yen and the sharp rises in raw
material and fuel prices appear to have begun to fall from their peaks
since the beginning of FY2023. As the industry leader in the household
paper category, we will continue our efforts to stabilize the selling pricesof household paper and other personal care products, thereby raisingourselves to a higher position in the industry.

Daio Paper’s strengths and challenges
Daio Paper’s strengths lie in its exceptional capability to meet the demandfor household paper products and its facilities that can adapt flexibly tochanges in the market situation. Our efforts to adapt to lifestyle changes
have enabled us to shorten the preparation period for the launch of new
regular or limited edition products, thereby increasing our ability to adapt
to changes in the market. In addition, our efforts to make maximum useof the brand power of Elleair and increase its affinity with other productcategories have contributed to sales expansion. Elleair's high brand■ Net sales of the Domestic Business Group, H&PC Unit (Billion yen)

160.6

FY2018170.2

FY2019175.4

FY2020

183.2

181.2

FY2021

FY2022

Resolving social issues through our business
Views on the current market environment(opportunities and risks)
Incineration of used disposable diapers requires a large amount of energy.
In the super-aging Japanese society, the volume of disposable diapers
consumed per se is rapidly increasing. Therefore, it can be predicted thatthe issue of disposal of disposable diapers will become more serious in the
future. Under these circumstances, Daio Paper aims to establish a uniqueenvironmentally friendly business model. In June last year, we launch a
joint research initiative with Livedo Corporation and Total Care System
Co. to explore the possibilities of establishing the recycling of disposable
diapers as a business. By establishing a system for the recycling of useddisposable diapers and insourcing the manufacture of fluff pulp, we aim
to launch a horizontal recycling process for disposable diapers, whereby a
mixture of fluff pulp and recycled pulp will be used to manufacture DaioPaper disposable diapers. Furthermore, we have already established amaterial recycling process that utilizes production rejects and scraps fromthe manufacture of household paper products and disposable diapers
to produce cat litter. This form of diaper recycling as an environmentallyfriendly business model, which also includes a strength entirely unique tous, will also help enhance our brand value as an initiative for sustainableproduct recycling. Now that the COVID-19 pandemic is reaching an end,

One of the important themes that our business group is pursuing is tosolve social issues of particular concern to us—including gender equality,
period poverty, long-term care issues due to population aging, and a
decline in close in-person contact triggered by the COVID-19 pandemic—
through our business activities. The “meet my elis” project, which has beenongoing since last year, embodies our desire to create a society where
no one has to forgo something they want to do just because they arehaving a period. This project also recognizes that those who menstruate
encompass a diverse range of identities. The period product provision
program that we launched under the project offers a solution to period
poverty during the COVID-19 pandemic. The “Egao-ni Touch” Projectis aimed at resolving the issue of the decline in close in-person contact
triggered by the pandemic. In this project, we are conducting activities that
respond to people’s concerns and questions about close in-person contact
while acknowledging the heightened hygiene consciousness. Moreover,as part of our efforts to reduce plastic waste, we are replacing plastic
packaging for some Kirekira! products with paper packaging. As a paper
manufacturer, we will place high priority on working on environmental
improvement by providing alternatives to plastic and make a meaningful
contribution to society by promoting sustainable business with the aim of
becoming a company fully approved by various stakeholders.

Integrated Report 2023

48

SECTION 01

SECTION 02
Toward Achievement of the Targets of the Fourth Medium-Term Business Plan

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Major productsHome & Personal Care Unit

Overseas Business Group
Makoto Saito
Senior Executive Officer
General Manager of Overseas
Business Group andGeneral Manager of Overseas
Business Promotion Division
Home & Personal Care Unit

● Message from the General Manager of the Business GroupWe will strive to build a foundation for
the Overseas Business Group to serve as a
growth driver, with the aim of achieving
our financial targets through systemreconstruction and an intense focus on the
ASEAN region.

Future vision of this business group
As Daio Paper is devoting further efforts to implementing its generalpolicy of shifting weight from paper and paperboard products
to home and personal care (H&PC) products, the presence of theOverseas Business Group has grown even more prominent than in
FY2022. In FY2022, we failed to completely execute our plan despite
striving to achieve the goal of becoming a driving force for the entire
Daio Group. Based on the results of our review of our own FY2022
operations, we will go back to the starting point and revise ourfinancial targets to more reliably achievable ones, while maintaining
the lofty goal. By doing so, we hope to make FY2023 a new starting
point for the Overseas Business Group’s giant leap. In FY2022, wefaced even more drastic environmental changes than expected,
particularly in China, Brazil, and Turkey. Taking into account thechallenges we faced last year, we have devised new countermeasures.
We are currently implementing them to improve our strategies andoperations. Currently, we have overseas manufacturing and sales
bases in five countries, and bases dedicated to sales in two countries,
including Vietnam, where we established a new base in July 2023.
Around these countries are many markets with untapped growthpotential. From now on, we will focus on the ASEAN region, where
we will be able to explore markets at an increased speed and obtain
more reliable opportunities than elsewhere. We will concentratevarious resources in this region while capturing ever-expanding
demand. Specifically, we will strengthen local marketing functions andat the same time, explore the possibilities for reorganization and theestablishment of new sales subsidiaries.

Business results for FY2022
In FY2022, the business results in China, Brazil, and Turkey fell shortof the initial targets. In China, immediately after the local in-houseproduction of sanitary napkins started, a shortage of retailer staff
occurred due to strict activity control under the zero-COVID policy.
Many retailers long postponed starting to sell our new products,

49

Integrated Report 2023

despite agreements to include them as regular offerings in their stores.
Our failure to achieve the targets in Brazil and Turkey was causedby the faster progress of cost-increasing changes there—the drastic
increase in pulp prices in Brazil, and the massive depreciation of thelocal currency, hyperinflation, and the sharp rise in raw material prices
in Turkey—than of our pass-through efforts. In China, our sanitarynapkins have been on full-scale sale since this fiscal year. In Brazil, nowthat raw material and fuel prices have stabilized, the step-by-step passthroughs we made last fiscal year are expected to produce positiveeffects throughout FY2023. Furthermore, our business in Thailand
achieved profitability last year. Our strategy for the ASEAN region,
including the establishment of a new sales subsidiary in Vietnam,
is now beginning to make progress. The Turkish economy has longremained unstable, but we will continue our pass-through efforts,
focusing on expanding sales of high-value-added products.

Daio Paper’s strengths and challenges
Daio Paper’s strengths lie in its abilities to develop products and to
conduct marketing activities that match local needs. As part of the
Daio Group’s shift of weight to the H&PC Business, our marketing
divisions have recently been reorganized so as to sharply accelerate
the shift from the domestic business to the overseas business. One■ Net sales of the Overseas Business Group, H&PC Unit (Billion yen)
89.1
74.1
62.6

34.5

34.5

FY2018FY2019FY2020

FY2021

FY2022China elis-series sanitary napkins
elis Super Premium Napkin series (front); elis Premium Napkin series(back left); elis Fantasy Funie Napkin series (back right)● Development for the product lineup for each country

Turkey Premium liquid products
Komili Tea Tree Oil Hand Soap series (left)
Komili Premium Liquid Soap (center)
Komili Ecologic Soap (right)

Brazil Disposable baby diaper pants
Premium variety (left)
Standard variety (right)

Disposable baby diaper pants in Brazil and liquid-category products in Turkey have sold even better than expected. In particular, in Brazil, which is not yet a large
market for diaper pants, our premium-variety disposable baby diaper pants were launched onto the market in September last year and have since proved very
popular. Following that, we launched new standard-variety disposable baby diaper pants in February 2023. We are therefore marketing a two-tier lineup of
products in FY2023. Diaper pants account for about 15% of the entire Brazilian disposable baby diaper market. However, during the six months since their launch,sales of our diaper pants have grown so significantly that they currently account for about 20% of the total sales of our disposable baby diapers in Brazil. Meanwhile,in Turkey, we focused on increasing the added value of disposable baby diapers in the initial period of our local operations after business acquisition. Since the fall of2022, we have also enhanced and broadened our lineup of premium liquid-category products, which are our main products in Turkey. As a result, for the first quarterof FY2023, sales of liquid-category products grew 2.6-fold year-on-year. It was our first experience dealing with liquid-category products, but I am pleased to reportthat our efforts are yielding positive results and this category is finally gaining momentum. I envision that, if these products are successful in Turkey, we will be able
to scale out the know-how we have acquired there to other countries, such as China and Thailand.

of the challenges that Daio Paper has long faced is its lack of globallyeffective human resources who can play a central role in overseas
businesses. To address this challenge, the Company is currently making
a significant investment in increasing the number and capabilities ofglobally effective human resources. The Company is almost completely
ready to send about a quarter of its domestic marketing staff towork abroad. I hope this move will bring us major new strengths,
providing great support for our efforts in overseas business expansion.
Daio Paper entered overseas markets later than other Japanesemanufacturers, so it may be undeniable that we are still following
in their wake in some ways. However, the COVID-19 pandemic has
triggered radical changes in consumer needs and buying patterns.
Since we are still in a transition period in terms of overseas expansion
and capital investment, we can introduce the latest equipment,
whose high performance will arm us with great agility in responding
to new market needs. Therefore, I believe that our current position
as a latecomer will rather provide us with significant business
opportunities. We hope to leverage this as a strength of Daio Paper toaccelerate our efforts to increase the profitability of our business.

Views on the current market environment(opportunities and risks)
Daio Paper has so far positioned increasing the added value of its
products as the core of its overseas business strategy. However, thepandemic has changed consumer attitudes. For example, among
consumers in China, there had been a trend of buying for themselves
and their children without caring about costs. However, I recognizethat they are inclining toward cost-performance-focused attitudes,considering the balance between quality and price. Nevertheless, they
are still as uncompromising about product quality as before, so it isexpected that price competition will become fiercer in the future. On
the other hand, an increasing number of consumers are beginning toplace high importance on quality while being not very particular about
price. Polarization in terms of consumer attitudes is occurring between
customers who focus on cost performance and those who placehigher priority on quality than price. Keeping an eye on such changes
in customer segmentation, we will enhance product lineups thatappeal to respective types of consumers. Now that the sharp rises in
raw material and fuel prices are passing their peaks, we will speed up
our efforts to improve our profitability. In addition, our main strategy
of local production of products for local consumption helps to reduce
foreign exchange risks. In Brazil, the prices of raw materials and fuelspassed their peaks and have been falling since the start of this year. We
also hope that the selling price revisions that we have made four times
since March 2022 will produce major obvious effects this fiscal year. In
Turkey, the depreciation of the local currency and the soaring pricesof raw materials and fuels have severely affected our profitability.
However, we expect that the effects of our pass-through efforts willappear in FY2023.

Resolving social issues through our businessI believe that the mission of the Overseas Business Group is to maintainthe Daio Group’s business growth in the countries of its operation,
thereby creating local employment and providing stable returns to the
local communities. Therefore, I believe that our current top priority is tomake a solid contribution to the local economies. Meanwhile, we willcontinue our current activities, including period education for studentsin Thailand and diaper education for expectant mothers in Indonesia,
so as to deliver benefits to the local communities. In product terms,
we have developed a new technology for bonding elastic thread todisposable baby diapers using ultrasonic waves in place of hot-meltadhesive. This technology has prepared us for the launch of low-plastic
disposable baby diapers in each country in FY2023. Moreover, as partof our product and material recycling activities, in Brazil, we reuse
pulp and polymers recovered from rejects from the disposable baby
diaper production process. In Thailand, Indonesia, and China, we havelaunched an initiative to recycle production rejects of disposable baby
diapers, whereby Daiki Co., Ltd., an affiliated subsidiary of Daio Paper,collects such diapers to recycle them as a raw material for a pet careproduct: cat litter.

Integrated Report 2023

50

Overseas Business Initiatives in Preparation
for the Fifth Medium-Term Business Plan

FeatureWe will build a foundation for achieving our target forthe overseas net sales ratio under■ Ratio and amount of overseas net sales
the Fifth Medium-Term Business Plan (MTBP).

4.9%
22.2 billion yen

7.7%
41.1 billion yen

11.1%
62.6 billion yen

13.8%

12.1%
74.1 billion yen

14.3%

30%

or above

SECTION 01

2nd MTBP(FY2017)

3rd MTBP(FY2020)

FY2021Results

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Promoting multi-category business expansion* and increasing added product value

Multi-category business expansion: EICN (China)
Proportion of products outside the baby care category

89.1 billion yen

5th MTBP(FY2026)■ Baby care

73.3%

Promote multi-category business expansion
and increase added value of products

Increase the capabilities ofhuman resources

47.0%

ThailandFY2022China

FY2023China

Basic Policies
Enhance operations in the
ASEAN region■ Other

77.6%

BrazilFY2023
Forecast* Multi-category business expansion: Business expansion
through the provision of products in multiple categories

In our overseas business, we aim to strengthen our business foundation and improve our profitability by promoting multi-category businessexpansion and increasing added value of products according to the circumstances of each local subsidiary. Specifically, in China, Elleair
International China (Nantong) Co., Ltd. (EICN) will leverage the firmly established brand image of DaWang as a brand of high-quality disposablebaby diapers to expand sales of feminine care and household paper products, thereby promoting multi-category business expansion. In Brazil
and Turkey, where we conduct business through the two subsidiaries we acquired in 2020, Santher-Fábrica de Papel Santa Therezinha S.A.
(Santher) in Brazil and Elleair International Turkey Kişisel Bakim Ürünleri Üretim A.Ş. (EITR) in Turkey, products outside the baby care productcategory already constitute the majority of our product portfolio. However, a significant percentage of these are standard products. Therefore,
they are working to market high-value-added products and expand their sales by introducing Daio Paper’s proprietary technologies.

100.0 billion yen

FY2022
Results

SECTION 04—Value Creation Story of the Daio Group—

Turkey1st MTBP(FY2014)

SECTION 03

SECTION 02

11.2%

0.0%

50%

100%

In contrast to our progress in multi-categorybusiness expansion in other countries, COVID
lockdowns in China prevented us fromachieving our desired progress last fiscal year as
we were made to defer the launch of sanitarynapkins as a new category in the Chinese
market. This fiscal year, we will leverage thesales capabilities we have developed throughour sales activities for disposable baby diapers
to facilitate our sales expansion and upgrade
product displays at stores, while enhancing our
production facilities. By doing so, we aim to
broaden our product lineup, which is presently
limited, and launch our sanitary napkins on afull scale in China as soon as possible.

Enhancing operations in the ASEAN region
Recognizing that the demand for disposable baby diapers in the ASEAN region is 2.6 times that of Japan on a volume
basis, we position the region as the largest growth market for us. This is underscored by the anticipated population
growth in the future. We will speed up our expansion into each of the markets in the region by reinforcing themarketing and sales staff and reviewing our product supply system.
We have so far provided consumers in ASEAN countries, excluding Indonesia, with the same products as we offer inThailand. However, those countries differ in terms of market and consumer needs. While many of them are promisingmarkets for standard and economy products, few are likely to match Thailand’s strong demand for premium products.
Therefore, we will implement the following measures to speed up our expansion into those markets:

Reinforcing sales and marketing staff inboth number and capability
National markets for disposablebaby diapers in the ASEAN region

Research by Daio Paper

Daio Group bases

51

Demand volume

Rank

Country

1

Indonesia

624

2Philippines

190

3

Vietnam

176

4

Thailand142

5

Malaysia

72

6Myanmar

39

…

…

…

(million diapers)

10

Laos

6

Integrated Report 2023

Manufacture

Sales

●

●
●

●

●

Manufacturing and providing productsthat meet the market and consumer
needs of each country
Vietnam: Establishment ofa sales subsidiary
In July 2023, we established a
new sales subsidiary in Vietnam, apromising market with high demandand great potential for further growth.
We will reinforce our sales andmarketing staff working in the country
to speed up our expansion into theVietnamese market.

Philippines and Malaysia
Sales in the Philippines or Malaysia weremanaged by our base in Thailand as
we lack a sales base in either country,
despite the two being among the top
five that account for 90% of demandin the ASEAN region. In a move toprovide products better suited to local
needs and advance our expansion in
the two markets by enhancing logistical
efficiency, we recently shifted this
responsibility to our base in Indonesia. To
support this move, we will reinforce ourIndonesian sales and marketing team inIndonesia in both capacity and capability.

Efforts to increase the added value of products: Santher (Brazil)
Business foundationof Santher

Technological prowessof the Daio Group

サンテル主要カテゴリ売上推移

Sales growth in toilet tissue, sanitary napkins,
and disposable baby diapers■ Volume■ Amount*T his graph shows the total rate of increase in sales volume andamount of products in these categories
with FY2021 results set as 100.

2021

Three-ply toilet rolls

2022

2023 forecast

Premium sanitarynapkins

Premium diaper pants

Efforts to increase the added valueof main products,
resulting in a net increase in salesof premium products
After our acquisition of Santher, thecompany began selling value-added
products in its main categories, resulting
in significant sales growth thanks inpart to synergetic effects with standard
products.

Standard diaper pants

Integrated Report 2023

52

SECTION 01

FeatureSECTION 03

SECTION 02

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—

Overseas Business Initiatives in Preparation for the Fifth Medium-Term Business Plan

Before our acquisition of the predecessor of EITR,
the company mainly dealt with standard products.
However, since it joined the Daio Group, it has
devoted enhanced efforts to developing new valueadded disposable baby diapers and liquid products,
and expanding their sales. The company’s endeavor
to pass on the increase in raw material and fuelprices to selling prices and expand sales of valueadded products helped improve the unit prices of its
products, resulting in remarkable growth in the sales
amount when compared with the sales volume.
This acquisition also introduced expertise in theliquid category to our Group. Moving forward, we
will gradually scale out their know-how in the liquid
category to other countries where we operate.

Efforts to increase the added value of products:
EITR (Turkey)
Proprietary
technologies of EITR

Marketing prowess of
the Daio Group■ Volume

Sales of liquid-category products

2021

2022

■ Amount

Scaling out their know-how inthe liquid category from Turkey
to other Daio Group companies

2023 forecast

Thailand
Komili Tea Tree Oil
Hand Soaps

Komili Premium
Liquid Soaps

Training andstaffing

1. Enriching the staff training system▶Developing globally effective human resources
2. Reinforcing personnel in overseas business, which will continue to grow in the future
3. I ncreasing the staff of subsidiaries in ASEAN countries▶Boosting our marketing anddevelopment prowess in the ASEAN region

Systemimprovement

Komili Ecologic
Soaps

We are devoting increased efforts to developing environmentally friendly products that do not require additional costs.

Prices affordable for those whoneed those products

New technology: Ultrasonic bonding technology usedin newly launched disposable baby diaper pants
Reduction of costs and petroleumderived raw material used

Reducing the use of plastic by25%

We used a new technology for bonding
elastic thread to disposable baby diaper
pants using ultrasonic waves. Together withother efforts, we reduced plastic in a pair ofdiaper pants by 25%. Disposable baby diaper
pants using this technology were launched
in Turkey in December 2022, and in Brazil in
February 2023. We will also launch productswith the same specifications in othercountries.

AbroadCreation of new kinds of added value in addition to luxury and high quality

Environmentallyfriendly products

To expand our overseas business, we will shift our human resources to the Home & Personal Care (H&PC) Overseas
Business and enhance the capabilities of our overseas organizations and human resources. We will train our staff tobe able to take the initiative in taking on new challenges even among people with different cultural backgrounds
from their own, by such measures as providing young managerial-track staff with career paths that involve overseas
assignment. We will also recruit human resources with great expertise in marketing and other fields from outside. By
doing so, we aim to establish a system for ensuring speedy implementation of our overseas strategy.

Japan

Japan

Reinforcing human resources

Introduction of an overseas
career system

Organizational structure designed
in consideration of staff’s life plans

Creating an environment that facilitates the developmentof a global mindset in staff
Training system for local staff
at overseas bases

Appointment of local staff to
executive positions

Consistently creating local employment

Environmental conservation activities, team bonding with locally employed staff, and social
contribution activities* Compared with other Daio Group baby diaper pants of the same size
Elleair International (Thailand)Co., Ltd. (EIT)
Installation of additional solar panels

PT. Elleair International
Manufacturing Indonesia (EIMI)
Guided factory tour for local
residents

EICN (China)
In-house event for celebrating the 10th
anniversary of the company’s founding

Scaled out

Scheduled tobe launched inother countries
as well

53

GOO.N FRIEND
diaper pants

Personal baby TOTAL PROTECT
diaper pants

Launched in Turkey in December 2022

Launched in Brazil in February 2023

Integrated Report 2023

PT. Elleair International Trading
Indonesia (EITI)Recycling of disposable baby diapers
production rejects

EICN (China)

EICN (China)

Solar panels

Guided factory tour organized by the government body in charge of the
Nantong Economic and Technological Development Zone

Integrated Report 2023

54

SECTION 01

SECTION 02

Intellectual Capital

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——Intellectual Property Strategies to Enhance Corporate Value—
The Daio Group’s basic principle for intellectual
property is to “Maximize the value of seeds that will
shape an abundant and affable future for the world.”
The Intellectual Property (IP) Department is involved
actively in all steps in the innovation process in order toincrease the value of “seeds” that could serve as our future
revenue streams. The IP Department staff listen sincerely
to the management team and related departments, suchas development and marketing departments, as well as
overseas bases, to ensure that no “seed” goes unnoticed,
no matter how small it might be. In our IP activities, wewill adopt a proactive stance toward co-creation and cocultivation with related departments.

Support for the creation of innovation
Responses to material issues
55

1 Development and protection of the Elipla seriesof environmentally friendly products

Takashi Imaizumi
Executive Officer
General Manager ofIntellectual Property
Department, Corporate
Planning DivisionCorporate Unit

Raising seeds into
ideas

Raising ideas into
our competitive
advantages

Good listeners and advisors

Good partners in co-creationand co-cultivation

The IP Department staff listen sincerely to thestaff of related departments, such as development
and marketing departments, as well as the staffof overseas bases, to identify promising “seeds.”
They also keep an eye out for information
about the external environment, and propose
new perspectives and directions to relevant
departments while utilizing such analysis methods
as IP landscaping. By doing so, they raise theidentified seeds to be “buds” of ideas for specificproducts and services that can offer high value tocustomers.

Major Initiatives

Raising our competitive
advantages into our
profit sources

The Daio Group views global trends toward plastic-free lifestyles as abusiness opportunity, and provides various paper materials and products asalternatives to plastic. To increase public recognition for those products, inFebruary 2022, Daio Paper consolidated products that contribute to plasticfree and low-plastic lifestyles under a single brand, and launched the new
Elipla series.
Among the Elipla-series products is FS Elipla Paper, high-density heavyweight
paper developed by leveraging Daio Paper’s proprietary technology. The
Company not only provides corporate users with this product as an alternative
to plastic, but is also developing highly functional and well-designed products
using this paper, including paper hangers. The IP Department protects thebrand name, logo, technology, and designs from various aspects, by obtaining
patents and trademark and design rights in order to ensure that the Daio
Group can continue to manufacture and sell environmentally friendly products
while maintaining its own advantages, thereby contributing to the Company’ssustainable growth and sustainable social development.

Solid offense and defense

To further develop those ideas into the Daio
Group’s competitive advantages, the IP
Department staff collaborate with related
departments and external partners with aproactive stance toward co-creation andco-cultivation. In addition, through departmentwide dialogues, they secure strong strategic
combinations of rights to patents, designs, andtrademarks, thereby building an intellectual
property portfolio that is finely tuned to the Daio
Group’s requirements.

The IP Department staff will fortify the Daio
Group’s offense and defense through intellectual
property rights, and work together with related
departments to cultivate the Daio Group’s products
and brands into its strengths and profit sources.
[Offense] Protecting and enforcing IP rights
globally, implementing proactive countermeasuresagainst counterfeits, etc.
[Defense] Performing thorough IP clearance
searches, providing the staff of related departmentswith IP training, disseminating IP-related
information throughout the Daio Group, etc.

● More than 30 applications have been submitted for patents anddesign registration for the entire Elipla series (including alreadyapproved or undisclosed applications), eight of which are forregistration of designs related to hangers and have been approved.
● The brand name and logo have also been trademarked.
Web page featuring the Elipla series

https://www.daio-paper.co.jp/en/csr/dedicated/environment/

2 Offensive and defensive IP strategies linked to brand strategies
The Daio Group respects the rights of other companies, and promotes brand protection activities closely linked to its brand strategies in Japan and abroad. We
promote a hybrid IP strategy that combines trademark rights, design rights, and copyrights with a view to scaling it out globally. Our main measures to achieve
this include selecting likely competitive brands from the planning and development stages for new products, checking that the names and designs of our
products will not infringe other companies’ rights, and obtaining rights that are highly effective in holding other companies in check.
Our recent progress in overseas business expansion has helped increase global public recognition of our brands, including Elleair and GOO.N, resulting in
growing obstacles to our business operations due to the distribution of counterfeits and imitations. The entire Daio Group rigorously monitors trends in thirdparty products in the market, and is ready to make resolute responses to any infringement on our rights or unfair competitive acts committed by third parties,
including even legal actions against such cases, by leveraging the IP rights that the Group has in Japan and abroad.

Leveraging the IP Department’s position that allows for a holistic view of the entire Group from a management standpoint
At Daio Paper, IP activities are regularly reported to the management team twice a year at Management Meetings. Important IPrelated matters are also reported to the management team as needed to consult the team about those matters. In April 2023, theIP Department made a new start as part of the Corporate Planning Division. This strategic shift that allows for a holistic view of theGroup from a management standpoint positions the department to play a pivotal role in driving innovative strategies across theentire Group. Each IP staff member will reframe their mindset as a member of the Corporate Planning Division, seek to understandthe business strategy and the current IP portfolio of their areas of responsibility, and identify the factors that differentiate the
Daio Group from its competitors and the ways the Group can cultivate and maximize the value of “seeds.” Ultimately, we aspire toestablish a framework where IP staff members can actively propose new avenues for product development to related departments
and fresh business directions to the management team.

IP Dataumber of patents held by the Daio
1 N
Group
■ In Japan■ Abroad
5,438
4,889

ercentages of patent applications
2 Prelated
to new businesses andenvironmentally friendly technologies■ Applications related to existing business fields■ Applications related to environmentally friendly technologies■ Applications related to new businesses
100%

Strategictransformation of ourbusiness portfolio
The IP Department supports thecreation of products and services thatcan provide high value to customers
and the protection of the Daio
Group’s competitive advantages,
both of which help increase theprofitability of each business.
→ Major Initiatives 1→
IP Data3

Integrated Report 2023

Acceleration of global
expansion

Creation of new
businesses

The IP Department protects
important technologies by obtaining
patents for them globally.
The IP Department protects
important brands by obtaining
trademark and design rights globally.

The IP Department contributes
to establishing competitive
advantages by applying for patents
for technologies related to cellulose
nanofiber (CNF) and radio frequency
identifiers (RFID; also known as “ICtags”), which are integral to the Daio
Group’s new businesses.

→ Major Initiatives 2→→

IP Data1

IP Data2

Realization of arecycling-oriented
society
The IP Department strategicallyapplies for patent for environmentallyfriendly technologies and utilizes the
Daio Group’s IP to aid in enhancing
product recognition.
→ Major Initiatives 1→
IP Data2*4

aio Paper’s rank in total YK Value
3 Din each technological field(as of the end of March 2023)

No.1
No.1
No.1

Hygiene products

3,849

Medical products

2,746

Cleaning tools

Daio Paper

1st MTBP(FY2014)

2nd MTBP(FY2017)

3rd MTBP
4th MTBP(FY2020) (as of FY2022)

2nd MTBP

3rd MTBP
4th MTBP(including applicationsin the planning)ranks top
in three fields!

[Notes] 1. The number of patents held by the Daio Group, the number of patent applications, and other figures shown here may not match previously published figures due to changes in internal tabulation standards andother factors.
2. The number of patents held by the Daio Group is as of the end of the final fiscal year of each Medium-Term Business Plan (MTBP). Only the number for the 4th MTBP is as of the end of the latest fiscal year.
3. The percentages of patent applications related to new businesses and environmentally friendly technologies are calculated based on the total number of patent applications submitted during the three-year periodof each MTBP. Although this graph shows the percentage of the number of patent applications related to environmentally friendly technologies only for FY2022, the Daio Group’s efforts to apply for patents forenvironmentally friendly technologies date back to before FY2022.
4. The YK Value is an indicator for the competitiveness of a patented technology. This indicator was developed by KUDO & Associates to measure the strength of a patent’s monopoly and exclusivity.

Integrated Report 2023

56

SECTION 03

SECTION 01

Responding to Social Issues —Foundation for Sustainable Growth—

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

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

1. Hygiene
Three Well-beings

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

Hygiene

2. Life

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

A

Dedicated

Dedication to manufacturing

Enhance well-being of lifestyles

Attentive

Bonds with local communities

1. Strategic transformation of our business portfolio

4. Coexistence with local communities

2. Acceleration of global expansion

5. Establishment of a sustainable supply chain

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

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

Life

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

I

3. Regeneration
Restore well-being of theearthIntegrated

Corporate culture providing safety andmotivation to work

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

O

Regeneration

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

Organic

Contribution to the global environment

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

7. Fair and highly transparent management

10. Forest conservation and maintenance of biodiversity

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

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

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

Business
operations

Pulp and
紙・
paper
パルプ製品
products

Paper and Paperboard
紙・板紙事業
Business

New
新規事業
Businesses

H&PC事業
H&PC Business

Maintain競争優位を維持
a competitive edge

Newsprint
新聞
and
・洋紙
paper

Industrial
産業用紙
paper

Household
衛生用紙
paper products

※1 *1
CNF
CNF

Converted
加工品
products

Printing
印刷

Corrugated
段ボール
containers

Absorbent
吸収体商品
products

※2 *2
RFID
RFID

Increase 高付加価値化
added value

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

Sales of environmentally friendly products● Environmentally conscious products

Contribution toachieving the SDGs

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

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

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

and burden● Sales of products for active seniors

57

Integrated Report 2023

Major initiatives

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

partners● Preservation and creation of employment

through capital investment● Formation of a pulp and paper industrial

cluster

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

establishing essential infrastructure,including water supply for daily use andirrigation

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

Major initiatives

Major initiatives

Respect for human rights and diversity

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

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

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

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

Integrated Report 2023

58

SECTION 01

SECTION 03

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

Four Pillars of Our Management Philosophy

D

Life

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

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

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

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

A
Attentive

Coexistence with local communities

Life

Establishment ofa sustainable supply chain

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

I

Life

Contribution to
the global
environment

Regeneration

59

FY2021 Results

FY2022 Results

2

2

2

FY2020 Results

FY2021 Results

FY2022 Results

22,000

1,805

2,778

4,787

● CSR procurement● Forest certification

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

100％
90%
100%

87%
56%
100%

95%
62%
100%

96%
61%
100%

● Promotion of diversity & inclusion

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

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

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

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

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

10.3%
Not achieved

3.2%
Not achieved

7.0%
Achieved

15.7%

15.7%

14.2%

98.7%
Water: 1.6%
COD: 3.0%

98.4%
Water: 5.6%
COD: 9.9%

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

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

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

FY2020 Results

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

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

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

Relevant SDGs

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

Integrated

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

agriculture and dairy farming in Chile

HygieneBonds withlocal communities Regeneration

Relevant SDGs

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

SECTION 04

Fulfilling Our Purpose

Business Strategies● Review the production system and sales structure

SECTION 03—Value Creation Story of the Daio Group—

Strategic transformation of ourbusiness portfolio

HygieneDedicated

Dedication to
manufacturing

Material Issues

SECTION 02

Realization ofa recycling-oriented society

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

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

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

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

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

Canceled due to the
COVID-19 pandemic

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

Integrated Report 2023

Integrated Report 2023

60

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

Dedicated

SECTION 02

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Acceleration of global expansion Elis Heart Support Project
HygieneLife

Mishima Mill, Daio Paper

Material Issues:

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

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

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

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

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

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

Trusted manufacturing

Solution of social issues

Thorough quality management

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

Regeneration

61

Integrated Report 2023

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

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

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

Teach local girls how tomake cloth sanitary pads.

Distribute the clothsanitary pads at thecommunity space.

HygieneOur sustainable growth● Business expansion through new business launch

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

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

Flexible production systems

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

Our sustainable growth● Launching new products in growing fields

Make cloth sanitary pads.

Creation of new businesses Application development of cellulose nanofibers

Life

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

Prepare cloth and sewing
machines to make clothsanitary pads.

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

Management Philosophy

Our sustainable growth

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

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

Basic Approach

Highly transparent procurement process

SECTION 04—Value Creation Story of the Daio Group—

Dedication to Manufacturing

Research and development that creates new value

SECTION 03

Regeneration

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

1

Hygiene❹ Construction materials ❺ Functional additives

ThreeWell-beings

2

Life

3

❻ Automotive parts❼ Consumer electronics products

Regeneration©SAMURAI SPEED(FY) 2018 result

CNF commercialization
fields1

2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

1

2

2

2

3

5

7

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

Integrated Report 2023

62

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

Attentive

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Contribution to invigorating and developing local communities
Life

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

Material Issue:

Coexistence with local communities

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

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

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

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

Irrigation tank

Skills training for local residents

Intake from the Puquitrahue River

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

Management Philosophy

Shaping an abundant and affable future for the world

Material Issue:

Establishment of sustainable supply chain
Harmonious growthwith local communities

Basic Approach

Response to declining birthrate and aging population

Contribution to invigorating and developing local communities

Coexistence with and support for local communities

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

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

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

Major Initiatives

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

Integrated Report 2023

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

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

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

Regeneration

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

Attento Meister Professional Search(FY) 2018 result

2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

465

1,273

1,805

2,778

4,787

6,700

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

2. We build good partnerships with our

Major Initiative

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

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

Daio Group Sustainable Procurement Guidelines
Based on the SDGs

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

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

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

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

‐

‐

87%

95%

96%

100%

100%

100%

‐

‐

56%

62%

61%

75%

85%

90%

100%

100%

100%

100%

100%

100%

100%

100%

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

Integrated Report 2023

64

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Major Initiatives

Integrated

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

Life

Corporate Culture Providing Safety and Motivation to Work

Material Issues:

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

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

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

Reinforcement of the diversity promotion system

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

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

Declarations and statements

External evaluations

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

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

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

Management Philosophy
declaration

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

FY2019Engagement

p.66

Best efforts

Growth ofindividuals

Opportunities

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

FY2022

FY2023

FY2026

FY2030p.68

p.67

Investment in human capital
p.68

Target company

Percentage of female managers

2.0%

2.2%

2.8%

2.7%

5.2%

6.0%

8.0%

10.0% Consolidated companies*

Percentage of female leaders (section
heads and chiefs)

11.3%

9.0%

8.3%

11.1%

ー

ー

ー

ー

Daio Paper (employees on
the managerial track)

Number of female leaders (section
heads and chiefs)

16

21

19

24

ー

ー

ー

ー

Daio Paper (employees on
the managerial track)

Percentage of female employees on
the managerial track

13.8%

15.0%

15.8%

18.4%

ー

ー

ー

ー

Daio Paper

Percentage uptake of paternity
leave

4.0%

6.3%

28.9%

82.7%

79.3%

100.0%

100.0%

100.0% Consolidated companies*

Percentage uptake of annual paid
leave

78.7%

67.2%

71.7%

75.0%

72.6%

70.0%

80.0%

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

Development of
human resources

Compassion for employees

Respect for human rights

FY2020● LGBTQ understanding training (2020–)

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

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

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

Innovation

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

TOPICS

Female cross-industry exchange training

Impressions of the training from a participant

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

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

65Integrated Report 2023

Integrated Report 2023

66

SECTION 01

SECTION 03

Mid-level employees

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Health andproductivity
management

Sound and competitive company

Follow-up training

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

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

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

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

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

New employee training

Designated distancelearning courses

New manager training

Life

Young employees

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

SECTION 04

Compassion for employees

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

SECTION 03—Value Creation Story of the Daio Group—

Development of human resources
Life

SECTION 02

Support system for MBA acquisition

Training at overseas
subsidiaries

Overseas training for technical employees(2019–)

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

Main actions taken

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

Mentalhealth care

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

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

Selected as White 500(6 consecutive years from 2017)

FY2019FY2020

FY2021

FY2022

FY2023

FY2026

FY2030ResultResultResultResultTargetTargetTarget

Health and productivity
management

Smoking rate

30.5%*1

26.1%*1

23.9%*1

30.0%

29.0%

26.0%

Safety and health

Lost time injury
frequency rate*2

0.90

1.11

1.14

1.01

0.90

0.80

Target company

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

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

TOPICS

Implementation of “Safety Wednesday”

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

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

FY2019FY2020

FY2021

FY2022

FY2023

FY2026

FY2030ResultResultResultResultTargetTargetTargetTarget company

Number of applicants for Daio Career Challenge*1

19

20

36

14

－

－

－

Daio Paper

learning

161

158

143

113

－

－

－

Daio Paper

14.1%

14.4%

15.7%

15.6%

16.5%

20.0%

30.0% Daio Paper

Canceled due to the

176

－

－

74.7%

82.2%

85.0%

87.0%

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

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

－
75.3%

23 COVID-19 pandemic
75.0%

－

Daio Paper

90.0% Daio Paper

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

TOPICS

Signing of the
UN Global
Compact

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

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

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

Integrated Report 2023

(October 2021)

Commitment to respect for human rights

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

67

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

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

Establishment of a grievancehandling mechanism● Establishment of an internal

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

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

Integrated Report 2023

68

SECTION 01

SECTION 03

Initiatives to Achieve the SDGs

SECTION 02

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Major Initiatives

Organic

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

Contribution to the Global Environment

Regeneration
Plantation owned by Forestal Anchile

Material Issues:

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

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

Torrefaction

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

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

Wood pellets

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

Regeneration

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

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

14.8%

2019 result

2020 result

2021 result

2022 result

2023 target

2026 target

2030 target

18.7%

15.7%

15.7%

14.2%

15.4%

17.1%

30%

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

Forest conservation and maintenance of biodiversity

Shaping an abundant and affable future for the world

Regeneration

Future Visions
Carbon neutrality throughout
the supply chain

A recycling-oriented society
with less waste

A borderless society thatcoexists in harmony with nature

Use of clean energy throughout
the world

A shift from plastic to non-fossil
fuel derived materials

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

Reduced GHG emissions

Lower environmental impact

Response to climate change

Realization of a recycling-oriented society

Effective use of sustainable resources

Sustainable recycling of resources

Forest conservation andmaintenance of biodiversity
Sustainable forest management

Energy saving
Energy transition

Reduction, reuse and recycling (3Rs)Material transition

Forestation
Protection of flora and fauna

Integrated Report 2023

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

69

Black pellets

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

Daio Global Environmental Charter
Principle

SECTION 04

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

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

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

Integrated Report 2023

70

SECTION 01

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

SECTION 02

SECTION 04

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

6th MTBP (2027–2029)

Timeframe for achieving what is feasible with current technology

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

Energy transition

Roadmap to Achieving Carbon Neutrality by 2050

4th MTBP (–2023)

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

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

FY2050

Toward achievingcarbon neutrality

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

Shutting down of all coal-fired boilers

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

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

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

Utilize city gas and LNG.

Introduce solar power generation systems.

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

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

Improve efficiency of existing equipment.

Energyconservation

Carbon fixation

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

Start ofexpansion ofplantation area
(Increase 150km2
by 2050)

Estimated CO2 emissions
reduction

4,500

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

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

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

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

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

Reference

4,000
3,500

GHG emissions
reduction rate
1.6%
CO2 reduction
rate 3.2%

3,000

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

Use of biomass fuel asan alternative to coal

■ Fossil fuel-based CO2

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

6.9％
7.2％

10.7％

7.0％
12.5％

11.5％
16.1％

■ Other GHGs

20.1％

Shutting down of
second coal-fired
boiler

4,000
3,500
3,000

42.2％

2,500

40.6％

2,000

46.0％

1,500

2,000

67.4％

1,500

50.7％

1,000

1,000

68.2％

500

500

83.4％
FY2013FY
FY
FY
2021 2022 2023

FY2026(thousand t)
5,000
4,500

23.1％

2,500

0

Negative emission
technologies

Develop and implement applications/products of cellulose nanofiber.

External
contribution(thousand t)
5,000

Transitioning away froman energy-intensive model

FY
FY2029 2030

FY2035FY2040FY2045

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

71

Integrated Report 2023

Integrated Report 2023

72

SECTION 01

FeatureSECTION 02

SECTION 04

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Initiatives toward a Carbon-free Society

Message from the General Manager of the Production Division

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

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

 ccelerating energy conservation activities
A
as well73

Integrated Report 2023

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

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

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

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

 lso contributing to achieving carbon neutrality inA
the region

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

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

Effective use of water resources

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

Integrated Report 2023

74

SECTION 01

SECTION 03

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

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

Scenario Analysis

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

Governanceunder the FIT scheme to self-consumption.

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

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

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

LargepricesRising carbon pricing● Increase in prices of various materials

Shift toenvironmentallycompliant products

Low-carbon energy
transition in goods
transport

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

Medium

Large

ー

ー

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

product development to curb cost increases.

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

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

Small

Small

2030
4°C

2050
4°C

Small

Small

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

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

Risks

Description of implications

Strategies and actions● Impact of natural disasters on

Increase in frequencyof typhoons andtorrential rains

Changes inprecipitation andweather patterns
and an increase inaverage temperature

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

● Diversify suppliers for stable procurement.

Small

Small

● Increase tree planting to secure sufficient quantity of

raw materials.

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

1.5°C scenario
Opportunities

Description of implications

2030
1.5°C

2050
1.5°C

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

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

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

and products

Small

Small

ー

ー

● Cost reduction by establishing a

recycling system for raw materials● Higher consumer satisfaction via

compliance with environmental
policies and requirements

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

● Increase in demand for

Resource
efficiency

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

Products and services

Integrated Report 2023

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

Chronic

75

2050
1.5°C

● Decrease in sales of environmentally

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

2030
1.5°C

● Shift from selling power generated through biomass boilers

Acute

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

Description of implications

due to the introduction of a carbon tax

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

Risks

Technologies

Strategy

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

Market andreputation

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

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

Policies and regulations

strategies and risk management, thereby enhancing disclosure

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

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

● Install facilities to reuse materials.

● Introduce environmentally conscious products onto

the market.

Integrated Report 2023

76

SECTION 01

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

Risk Management

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

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

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

Paper packaging for products

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

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

FY2050Long-term vision for global
warming countermeasures

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

Results (Scope 1 + 2)

4,156

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

FY2030 Target for global warming countermeasures
Target

4,518
4,061

Scope2509
Scope1
3,878

Emissions in FY2022
4,194*
Scope2
667

Scope1
3,491

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

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

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

Development/launch

FY2021

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

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

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

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

77

Integrated Report 2023

Integrated Report 2023

78

SECTION 01

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

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

FY2021

FY2022

Target range

Scope1

Direct emissions

3,878

3,491

Daio Group

Scope2

Indirect emissions

509

667

Daio Group

Scope3

Other emissions

1,782

2,297

683

1,321

Category 2

Capital Goods

166

124

Daio Group

Category 3

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

320

123

Daio Group

Category 4

Upstream Transportation and Distribution

313

408

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

Category 5

Waste Generated in Operations

26

27

Daio Group

Category 6

Business Travel2

2

Daio Group

Category 7

Employee Commuting

6

6

Daio Group

Category 8

Upstream Leased Assets

Not applicable Not applicable

Category 9

Downstream Transportation and Distribution

Category 10
Category 11
Category 12

End-of-Life Treatment of Sold Products

Category 13

Downstream Leased Assets

Not applicable Not applicable

Category 14

Franchises

Not applicable Not applicable

Category 15

Investments

Not applicable Not applicable

91

109

Processing of Sold Products--

Use of Sold Products

-

-

176

178

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

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

Purchased Goods and Services

Category 1

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

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

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

Initiative to introduce double-trailer trucks

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

Daio Group

Recycled pulp

Fluff pulp
production line

Production factories

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

Start of operationin July 2023

Processing company

Used disposable diapers

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

Manufactureand sale ofpaper-based
cat litter

Disposable
diapers

Used disposable diapers recycling business
Recycled
polymer

Daiki

Cat litter

Disposable diaper users

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

Collection
company

Households

Hospitals/
institutions

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

Households

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

79

Integrated Report 2023

Integrated Report 2023

80

SECTION 01

SECTION 03

Corporate Governance
Our Measures to Strengthen the Corporate Governance Structure

Key Measures Implemented to Strengthen Corporate Governance
FY2012FY2013

FY2014FY2015The First Medium-TermBusiness Plan

Medium-Term Business Plans

FY2016FY2017FY2018The Second Medium-TermBusiness Plan

Restart

FY2019FY2020

FY2021The Next Growth Stage, to a New Future

Yorifusa Wakabayashi
Disclosed Corporate Governance Basic Policy

Clarification ofroles of supervisionand execution

From 201913

Number of independent
Outside Directors

Responding to Social Issues

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

2021

16

From 201212

From 2017

2

Major Issues Examined by the Board of Directors in FY2022

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

2022

2023

11

Percentage of Directors who are Outside Directors

12

From 2020

1

0

4 out of 12

From 2021

1

From 2016

Effectiveness evaluation of the Board of Directors

Establishment ofNomination Committee andRemuneration Committee

From 2018

Established the Nomination Committee

Nomination Committee

From 2021

Disclosed skills matrix of
Directors
From 2012

Established the Remuneration Committee

Internal
Directors
830%Committees

From 2020

Sustainability Committee

Established the Sustainability Committee

Name

From 2019

Diversity Committee

Position

Established the Diversity Committee

Corporate Governance Structure (as of July 1, 2023)

Audit

ReportingBusiness
execution

Supervision

Inquiries/reporting

Reporting

Nomination
Committee
Remuneration
Committee

Appointment/dismissal

General Meeting of Shareholders
Audit

Audit

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

Collaboration

Accounting Auditor
Accounting audit

Appointment/dismissal

Management Meeting
Sustainability Committee
Risk and Compliance Committee
Diversity Committee

President andRepresentative Director
Inquiries/reporting

7 out of 17

8.3%

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

◯

◯

◯

◯

◯

◯

President andMembers of the Board of Directors

OutsideOfficers
7

Internal
Officers
10

41.2

%

The fields in which we expect our Directors to contribute significantly

Established the Compliance Committee

Supervision/decision making

FemaleDirectors
1

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

From 2008

Appointment/dismissal

Percentage of Officers who are Outside Officers

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

Introduced the stock-based incentive system

Integrated Report 2023

1 out of 12
Male
Directors
11

Yorifusa
Representative Director
Wakabayashi Chief Executive Officer

81

Percentage of Directors who are female

OutsideDirectors
4

4

From 2017

Effectiveness evaluation of theBoard of Directors

Risk and Compliance
Committee

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

From 2021

3

Number of female Directors

Remuneration Committee

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

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

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

From 2015

From 2012

Number of Directors

Achieving Sustainable Growth—Strategy for Continuing to Provide Value—

From 2021

Masayoshi Sako

Corporate Governance Basic Policy

Fulfilling Our Purpose

FY2023

GEAR UP

Reform and Soar Above

From 2011

President

FY2022The Fourth Medium-Term Business Plan
(until FY2023)

Move onLeap and Expand

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

The Third Medium-TermBusiness Plan

Step-up

Solid Reform and Further Growth

SECTION 03

Board of Directors

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

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

SECTION 02

Instructions
andcommands

Executive
Officers

Business execution
departments

Group companies

Audit

Internal Audit
Department

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

◯

◯

◯

◯

◯

◯

◯

Yoichi Takei

Outside Director◯

Yoshinobu
Hiraishi

Outside Director◯

Haruko Ozeki Outside Director

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◯

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◯

◯

◯
◯

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◯

◯
◯

◯
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◯
◯

◯

◯

◯

◯

◯

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◯
◯

◯

◯

◯

◯

◯

Naosuke Oda Outside Director

◯

◯
◯

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(10) IT / DX

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◯

◯

Integrated Report 2023

82

SECTION 01

SECTION 03
Corporate Governance

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

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

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

Measures

Frequency

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

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

83

Integrated Report 2023

Once amonth
A few times
a yearTwice a yearAt
appropriate
times

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

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

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

SECTION 02

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

Basic Policy on Remuneration of Directors

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

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

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

Basiccompensation

Bonuses

Stock-based
compensation

◯

◯

◯

◯

−

−

◯

−

−

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

● Stock-based Compensation

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

● Policy on Deciding Percentages for Basic

Compensation, Bonuses, and Non-monetary
Compensation

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

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

● Basic Compensation for Directors

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

● Performance-linked Remuneration (Bonuses)

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

Monthly salary

Bonuses

Stock-based

79%

7%

14%

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

84

SECTION 01

SECTION 03
Corporate Governance

Voluntary Committee Activities● Nomination Committee

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

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

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

● Policy for IR Activities

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

● Major IR Activities and IR Structure

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

FY2020

FY2021

FY2022One-on-one meetings with institutional investors

67

77

91

Earnings and strategy briefing for analysts andinstitutional investors

6

6

5

Overseas IR events*

4

1

2

Events for institutional investors (mill tours, etc.)

0

0

3

Events for individual investors

0

1

2

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

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

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

Locations ofinvestors
FY2022

Japan
75%● Diversity Committee● Sustainability Committee

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

Integrated Report 2023

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

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

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

Web-based briefing for individual investors

Integrated Report 2023

86

SECTION 01

SECTION 03
Corporate Governance

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

Yorifusa Wakabayashi

Kunihiro Okazaki

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

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

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

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

Hiroshi Yamasaki

Yukihiro Tanaka

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

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

Atsushi Ishida

Hiroyuki Fujita

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

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

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

Toshikatsu Tanahashi

Shuhei Shinagawa

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

87

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

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

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

Audit & Supervisory Board
MemberYoichiro Yamakawa

Takemi Nagasaka

Kyoko Okada

Audit & Supervisory Board
Member (Outside)

Audit & Supervisory Board
Member (Outside)

Audit & Supervisory Board
Member (Outside)

Appointed in 2008

Appointed in 2016

Appointed in 2020

● Executive Officers

Managing
Hiroyuki Shidara
Executive Officers
Toshiki Yamagami
Hiroshi Mizobuchi

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

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

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

Mitsuru Ogawa

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

Makoto Saito

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

Yukio Kume

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

Executive Officers Mikiro Shiramine

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

Takashi Imaizumi

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

Junichi Ikawa

Deputy General Manager of Sustainability Promotion Division, Corporate Unit

Akihisa Yano

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

Masahiko Takeshima

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

Yoshitsugu Fujii

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

Akio Nagaoka

President and Representative Director of Daio Package Corporation

Shuji Ozaki

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

Akihisa Masuda

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

Haruko Ozeki

Takeshi Kojima

Deputy General Manager of Business Administration Division, Corporate Unit

Kazuyoshi Tagami

General Manager of Global Logistics Division

Naosuke Oda

Yoichi Takei

Yoshinobu Hiraishi

Director (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Appointed in 2022

Appointed in 2020

Appointed in 2021

Appointed in 2021

Integrated Report 2023

Tsutomu Ariyasu

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

● Outside Directors

Hiromitsu Fujii

Integrated Report 2023

88

SECTION 01

SECTION 03

Round-table Talk by Outside Directors

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

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

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

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

89

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

Haruko Ozeki

Outside Director

Outside Director

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

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

Integrated Report 2023

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

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

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

Integrated Report 2023

90

SECTION 01

SECTION 03
Round-table Talk by Outside Directors

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

Integrated Report 2023

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

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—

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

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

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

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

Integrated Report 2023

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SECTION 01

SECTION 03
Round-table Talk by Outside Directors

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

93

Integrated Report 2023

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

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

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

Integrated Report 2023

94

SECTION 04

SECTION 01

Data and Information —Financial and Corporate Data—

Financial Highlights

Daio Paper Corporation and its Consolidated Subsidiaries
As of and for the fiscal years ended March 31

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—(Millions of Yen)

Fiscal year

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022For the Fiscal Year:Net sales

407,362

430,054450,239

474,076

477,139

531,311533,890

546,433

562,928

612,314646,213

Selling, general and administrative expenses

70,44579,892

84,20689,821

95,600110,312104,255

109,677

122,706

124,105

131,641

Operating proﬁt (loss)

11,577

16,04921,79624,322

23,534

11,061

12,122

30,62836,87337,569(21,441)

Ordinary profit (loss)

6,637

11,257

21,783

21,25821,346

12,7799,841

28,111

34,47837,696(24,050)

Profit (loss) attributable to owners of parent

15,1096,293

13,208

14,594

12,136

3,970

4,697

19,19922,11523,721(34,705)

Comprehensive income

22,075

11,82627,942

9,599

14,904

2,734

1,582

13,476

19,98725,088(18,795)

EBITDA

43,63747,18059,13757,72458,24851,17749,86966,714

77,187

84,24529,400Capital expenditures

21,72624,94831,58737,30932,45339,52359,59061,93453,41164,16547,857

Depreciation

26,40926,403

27,202

26,98729,016

31,17133,331

31,84334,13737,81043,128

Research and development expenses

2,149

2,836

2,683

2,791

2,901

3,280

2,809

3,042

3,109

3,547

3,533

Net cash provided by operating activities

50,80558,09144,74047,01062,93128,28440,28768,01264,21071,395(26,233)

Net cash used in investing activities(41,455)(26,826)(28,580)(26,073)(31,393)(51,484)(62,109)(47,869)(103,702)(62,420)(57,950)

Net cash provided by (used in) financing activities(13,441)(37,242)(29,429)(17,475)(22,037)386

65,897(14,049)

63,589(50,609)

96,4379,350

31,265

16,16020,937

31,538(23,200)(21,822)

20,143(39,492)

8,975(84,183)

Total assets

659,112646,112652,744656,310

657,747

686,140

745,866

763,059

849,801

840,441

923,531

Net assets

107,969

119,252

164,494

174,819

191,079

193,064

199,338

209,536

246,788266,704

244,670

Current assets

246,258

243,871

252,489

257,154

257,048

256,965

299,650

299,018

328,364

291,300

355,058

Net interest-bearing debt

363,533

331,825

292,466

281,456

255,077

279,994

301,906

285,426

299,785

297,445

387,670

Cash and cash equivalents

82,45779,046

69,072

72,16982,73360,086

103,407

109,384

130,301

88,897

102,405

129,018,785

129,018,785

149,348,785

149,348,785

149,348,785

149,348,785

153,713,191

154,531,953

169,012,926

169,012,926

169,012,926

Basic earnings per share

126.51

51.52

93.48

100.15

83.28

27.25

31.70

127.91138.73142.91(209.01)

Net assets per share

821.21875.391,059.78

1,119.24

1,211.33

1,221.65

1,236.58

1,319.57

1,440.33

1,561.52

1,414.73

8.50

8.50

8.50

10.50

10.50

10.50

10.50

13.50

17.00

22.00

16.00

ROE (%)

16.8

6.1

10.0

9.2

7.1

2.2

2.6

10.0

10.1

9.5

(14.0)ROA (%)

2.3

1.0

2.0

2.2

1.8

0.6

0.6

2.5

2.6

2.8

(3.8)

Equity ratio (%)

14.7

17.0

23.7

24.9

26.8

25.9

24.9

26.1

28.2

30.8

25.5

Net debt to equity ratio

3.7

3.0

1.9

1.7

1.4

1.6

1.6

1.4

1.3

1.1

1.6

Free cash flow

At Fiscal Year-End:

Number of shares issued (shares)

Per Share Data (Yen):

Cash dividends per share

Financial Ratios:

Notes
1. A
 mounts are rounded down to the nearest million yen.
2. E
 BITDA = Ordinary profit + interest expenses + depreciation + amortization of goodwill + amortization of negative goodwill + equity in earnings of affiliates
3. E
 ffective from the fiscal year ended March 31, 2019, the “Partial Amendments to Accounting Standard for Tax Effect Accounting” have been adopted, and all the deferred tax assets
are presented under investments and other assets of non-current assets.
Consolidated financial statements for the fiscal year ended March 31, 2018 are restated in accordance with the presentation method after the amendments.

95

Integrated Report 2023

4. Effective from the fiscal year ended March 31, 2019, interest and dividends received and interest paid are presented under “Cash flows from operating activities.”
Consolidated financial statements for the fiscal year ended March 31, 2018 are restated to reflect the change in the classification.

Integrated Report 2023

96

SECTION 01

SECTION 04

Consolidated Financial Statements
Consolidated Balance Sheet(Millions of Yen)

(Millions of Yen)

As of March 31,

As of March 31,

As of March 31,

As of March 31,

2022

2023

2022

2023

AssetsLiabilities

Current assets

Current liabilities

Cash and deposits

89,165

102,638

Notes and accounts payable—trade75,384

88,167

Notes and accounts receivable—trade, andcontract assets
Electronically recorded monetary claims—
operating

92,641

106,851

Short-term borrowings

13,73813,6597,988

10,753

Commercial papers－

20,000

Merchandise and finished goods

48,00861,061

Current portion of bonds payable

15,00056

Current portion of long-term borrowings

65,58078,812

Accounts payable—other

31,02927,596Work in process

7,275

8,947

Raw materials and supplies

31,621

43,081Other

15,06322,002

(465)

(279)

291,300

355,058

Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment

257,887

273,981

Accumulated depreciation(160,706)(169,437)

Buildings and structures, net

97,181

104,544

Buildings and structures

Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net

LandConstruction in progress

980,885

1,015,112

Current portion of long-term accounts
payable—facilities

Income taxes payable

25
1,472

Contract liabilities

613

919

Provision for bonuses

5,550

5,474

156

77

－

300

Provision for bonuses for directors (and otherofficers)

Provision for loss on guarantees
Other

27,960

16,235

Total current liabilities

238,321

252,797

Non-current liabilities(785,957)(812,473)

194,928

202,639

Bonds payable

45,00045,136

83,18387,099Long-term borrowings

239,324

324,000

18,388Retirement benefit liability

23,93723,986

Provision for retirement benefits for directors(and other officers)

81

60

Provision for share awards

310

521
12

28,63434,86839,252

Accumulated depreciation(17,600)(19,817)

Other, net

17,267

19,434

Provision for environmental measures12

432,106

Provision for loss on business of subsidiaries
and associates

37

36

Provision for fixed asset removal costs

－

430

Other

Total property, plant and equipment

421,195

Intangible assets
Goodwill

50,48945,847

Other

26,71031,879Other

31,52938,619Total non-current liabilities

335,415426,063

Total intangible assets

82,01884,466

573,736

678,860

53,88453,884

Investments and other assets
Investment securities

21,924

21,048

1,674

1,554

Deferred tax assets

6,322

11,281Other

15,99618,034

Allowance for doubtful accounts

(130)

(118)

Total investments and other assets

45,78751,800549,001

568,373139

99

840,441

923,531

Deferred assets
Total assets

Total liabilities
Net assets

Retirement benefit asset

Total non-current assets

Shareholders’ equity
Share capital
Capital surplus

55,112

55,112Retained earnings

156,450

117,493

Treasury shares(4,122)(3,600)Total shareholders’ equity

261,325

222,890

3,445

3,968

Valuation difference on available-for-salesecurities

Deferred gains or losses on hedges

Remeasurements of defined benefit plans
Total accumulated other comprehensive
incomeNon-controlling interests
Total net assets
Total liabilities and net assets

Integrated Report 2023

SECTION 03

219

329

(7,189)

6,907

1,288

1,026

(2,235)

12,231

7,614

9,549

266,704

244,670

840,441

923,531

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—

Consolidated Statement of Income(Millions of Yen)

Fiscal year ended
March 31, 2022
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity method
Foreign exchange gains
Subsidy income
Ship lease income
Gain on net monetary position
Other
Total non-operating income
Non-operating expenses
Interest expenses
Expenses for ship lease
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
National subsidies
Gain on sale of non-current assets
Gain on sale of investment securities
Insurance claim income
Other
Total extraordinary income
Extraordinary losses
Loss on sale and retirement of non-current assets
Loss on tax purpose reduction entry of non-current assets
Impairment loss
Loss on disaster
Early retirement expense
Adjustment of payment
Other
Total extraordinary losses
Profit (loss) before income taxes
Income taxes—current
Income taxes refund
Income taxes—deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent

646,213536,012110,200
131,641(21,441)

382
712
95
2,793
281
331
－
2,863
7,460

808
988
184
1,181
277
120
311
2,344
6,216

4,194
378
2,761
7,333
37,696

5,626
511
2,688
8,826
(24,050)

513
83
987
2,099
31
3,715

5,680
108
1,518
706
398
8,412

900
510
2,031
350
－
888
140
4,822
36,58812,554(703)
865
12,71723,871150
23,721

1,089
5,661
12,660
2,833
909
－
407
23,562(39,201)
2,233
(275)
(6,220)(4,263)(34,937)(231)(34,705)(Millions of Yen)

Fiscal year ended
March 31, 2022
Profit (loss)
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests

Fiscal year ended
March 31, 2023

612,314450,640
161,674
124,105
37,569Consolidated Statement of Comprehensive Income

Accumulated other comprehensive income

Foreign currency translation adjustment

97

174
3,133

SECTION 02

Fiscal year ended
March 31, 2023

23,871(34,937)

(766)
197
1,849
(48)
(14)
1,216
25,088513
109
15,768(257)
916,142(18,795)

24,529559(20,239)1,444

Integrated Report 2023

98

SECTION 01

SECTION 04
Consolidated Financial Statements

Consolidated Statement of Cash Flows

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Impairment loss
National subsidies
Early retirement expense
Amortization of goodwill
Share of loss (profit) of entities accounted for using equity method
Gain on the net monetary position
Loss (gain) on sale of investment securities
Increase (decrease) in retirement benefit asset or liability
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)
Loss on tax purpose reduction entry of non-current assets
Increase (decrease) in provision for fixed asset removal costs
Subsidy income
Decrease (increase) in consumption taxes refund receivable
Insurance claim income
Loss (gain) on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in accounts payable—other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in other assets or liabilities
Other, net
SubtotalInterest and dividends received
Interest paid
Proceeds from subsidy income
Proceeds from insurance income
Income taxes paid
Income taxes refunded
Net cash provided by (used in) operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment securities
Purchase of intangible assets
Loans receivable granted
Collection of loans receivable
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Net increase (decrease) in commercial papers
Repayments of long-term borrowings
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from issuance of common shares assigned to non-controlling interests
Proceeds from sale of treasury shares
Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation
Repayments of finance lease obligations
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of hyperinflation
Increase (decrease) in cash and cash equivalents resulting from change in scope of consolidation
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of period

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—

Investor Information(Millions of Yen)

Fiscal year ended
March 31, 2022

SECTION 02

Fiscal year ended
March 31, 2023

Status of Shares
36,58837,810
2,031
(513)
－
4,450
(95)
－
(779)
464
(1,095)
4,194(2,718)510－(281)(1,047)(2,099)
(55)
872
6,306
(4,304)
9,921(7,510)(977)(1,740)169
80,101
1,561(4,479)2,953
2,103(11,964)
1,118
71,395(39,201)
43,12812,660(5,680)
909
4,512
(184)
(311)
(1,518)(261)(1,796)
5,626
(438)
5,661
430
(277)
(7,340)
(706)
(54)
1,035
(14,067)(23,874)
10,020(3,317)(976)(3,856)794(19,083)
1,902(5,633)
6,029
707(16,437)
6,281(26,233)

170(63,789)
231
1,861(3,314)
(664)
3,687
－
(602)
(62,420)

53(46,611)277
3,529(2,586)(999)
998(12,550)(62)(57,950)(6)
20,300－(65,157)
14,932(15,000)
509
248(1,500)(1,913)(3,352)
330(50,609)(104)(41,739)
130,301－318
17
88,897151
163,053
20,000(66,840)－(15,056)－304－(2,123)(3,184)131
96,437
1,334
13,58888,897(97)
17－102,405(As of March 31, 2023)

Authorized Shares

300,000,000 shares

Number of Shares Issued

169,012,926 shares

Number of Shareholders

24,977

Shareholder Distribution
Number of Shareholders by
Type of Shareholder
Individuals, others

95.9％

 ther domestic
O
companies
Foreign institutions
and individuals

24,977

169,013

2.7％

Financial institutions

27.4%

F oreign institutions
and individuals

11.4%

0.2％

Individuals, others

8.6%

Securities companies

0.2％

Securities companies

1.7%

Treasury stock

0.0%

Treasury stock

0.8%

thousand shares

1.1％

Financial institutions

Major Shareholders

Number of Shares by Type of
Shareholder
Other domestic
50.1%
companies

Name

Number of shares held Shareholding ratio(Thousands of shares)(%)

Hokuetsu Corporation

41,58924.8

The Master Trust Bank of Japan, Ltd. (Trust Account)

12,413

7.4

Daio Kaiun Co., Ltd.

8,452

5.0

Custody Bank of Japan, Ltd. (Trust Account)

7,126

4.3

The Iyo Bank, Ltd.

7,072

4.2

The Ehime Bank, Ltd.

6,920

4.1

Ehime Paper Manufacturing Co. Ltd.

5,331

3.2

Kami Shoji Co. Ltd.

4,700

2.8

OASIS JAPAN STRATEGIC FUND LTD. (Standing Agent: Citibank N.A. Tokyo Branch)

4,700

2.8

The Norinchukin Bank

4,110

2.5

1. The shares held by The Master Trust Bank of Japan, Ltd. (Trust Account) and Custody Bank of Japan, Ltd. (Trust Account) are related to trust service.
2. Shareholding ratio does not include treasury stock (excluding the shares held by trust bank as Trust for Delivery of Shares and Employee Stock
Ownership Plan Trust).

ROE and PBRStock Price and Trading Volume
Trading Volume (Thousands of shares, monthly average)■ Trading volume (left scale)Closing price (right scale)

2,500

400

2,000

300

1,500

200

1,000

100

500

0

2021/04

2021/102022/04

2022/10

ROE (left scale)

Stock Price (Yen)5002023/030

PBR (right scale)(Times)

20%

2.0

10%

1.5

0%

1.0

-10%

0.5

-20%

2021/04

2021/102022/04

2022/102023/03

0.0* Estimated figures based on internal management data

99

Integrated Report 2023

Integrated Report 2023

100

SECTION 01

SECTION 04

Corporate Data

May 5, 1943

Capital¥53.9 billion

3 Otsu Paper Board Co., Ltd. Otsu City, Shiga Prefecture

2 Dainichi Paper Corporation Fuji City, Shizuoka Prefecture

Tokyo Headquarters: 10-2, Fujimi 2-chome, Chiyoda Ward, Tokyo
Tel: +81-3-6856-7500
Shikoku Headquarters: 628, Mishimakamiya-cho, Shikokuchuo City, Ehime Prefecture
Tel: +81-896-23-9001

Mills

Mishima Mill (Ehime Prefecture), Kani Mill (Gifu Prefecture)

Branches

Osaka Branch, Nagoya Branch, Kyushu Branch (Fukuoka Prefecture)

Websitehttps://www.daio-paper.co.jp/en/

Main Products

Newsprint, coated paper, wood-free paper,
printing paper for publication, PPC paper,carbonless paper, adhesive printing paper,
wrapping paper, functional specialty
paper, paperboard, various types of pulp,
household paper (facial tissue, toilet tissue,
paper towels), disposable baby and adultdiapers, sanitary napkins, masks, etc.

4 Daio Paper Techno Corporation Tsuyama City, Okayama
Prefecture

Responding to Social Issues

Data and Information—Foundation for Sustainable Growth——Financial and Corporate Data—● GHG emissions: Scopes 1, 2 and 3● Water use: Amount of water use and wastewater● Waste: Amount of waste and waste reuse● Occupational accident data: Lost time injury frequency rate

7 Elleair Product Co., Ltd. Shikokuchuo City, Ehime Prefecture8 Daio Paper Products Corporation Fuji City, Shizuoka
Prefecture 9 Daiki Co., Ltd. Chiyoda Ward, Tokyo
Printing

VERIFICATION STATEMENT

10 Daio Miura Corporation Sumida Ward, Tokyo

Corrugated containers

Statement No.: PRJN-10446303

11 Daio Package Corporation Chiyoda Ward, Tokyo

13 Uemura Shiko Corporation Kanda-machi, Miyako District,Fukuoka Prefecture
14 Yoshikawa Shigyo Corporation Kawanishi City, Hyogo Prefecture

Verification of Daio Groupʼs Non-financial Information (2022)

15 Yoshizawa Kogyo Corporation Mishima District, Niigata Prefecture< Verification Objectives >16 Tokyo Pulp & Paper International Co., Ltd. Chuo Ward, Tokyo

2 Kani Mill17 EBS Co., Ltd. Chuo Ward, Tokyo

Kani City, Gifu Prefecture

Paper Converting

15

Page 1 of 2
initiate reporting of

12 Yorii Insatsu Shiki Co., Ltd. Honjo City, Saitama Prefecture

Distribution

3

Scope of verification

6 Elleair Paper Co., Ltd. Fujinomiya City, Shizuoka Prefecture

Production Bases

14

April 1, 2022 to March 31, 2023

H&PC Manufacturing(now Elleair Paper Co.,Ltd.)

19
2 20

Period covered:

5 Marubishi Paper Tec. Corporation Shikokuchuo City, Ehime
Prefecture

Former Akabira Paper
Corporation1

18 Elleair Paper Technology Co., Ltd. Shikokuchuo City, Ehime
Prefecture
19 Daio Mill Support Tokai Corporation Kawabe-cho, Kamo
District, Gifu Prefecture

12

20 Elleair Texel Corporation Kani City, Gifu Prefecture

9 10
2 6 8 11 16
17

Engineering
21 Daio Engineering Co., Ltd. Shikokuchuo City, Ehime Prefecture

1
13

Achieving Sustainable Growth—Strategy for Continuing to Provide Value—

Paper Manufacturing

Offices4

Fulfilling Our Purpose—Value Creation Story of the Daio Group—(As of August 31, 2023)

Number of Employees 2,445 (Unconsolidated), 12,634 (Consolidated)

Shikokuchuo City,
Ehime Prefecture

SECTION 04

Daio Paper has received assurance by DNV Business Assurance Japan on the environmental data, etc. presented in
Daio Group Integrated Report 2023 to enhance its reliability and accuracy.

Business Bases of the Group
Companies in Japan

1 Iwaki Daio Paper Corporation Iwaki City, Fukushima Prefecture

1 Mishima MillSECTION 03

Third-Party Assurance

Corporate Information (As of March 31, 2023)
Established

SECTION 02

23 5 7 22
18 21

DNV Business Assurance Japan K.K. (hereinafter, "DNV") has been commissioned by Daio Paper
Corporation (hereinafter "the Organization") to perform an independent verification of the calculation
results of the Daio Group's non-financial information, including environmental data and occupational
accident data for FY2022 (hereafter “the non-financial information") . The objective of this verification is
to confirm that the non-financial information claimed by the Organization has been calculated andreported appropriately based on the calculation standards, and to express an independent opinion.

< Verification Scope >The scope of this verification is as follows.

Page 2 of 2

 GHG emissions

︓Scope1、Scope2、 Scope3（Category 1、2、3、4、5、6、7、9、12） Water use

︓Amount of water use and wastewater Waste︓Amount of waste and waste reuse Occupational Accident Data

︓Lost Time Injury Frequency Rate

The period covered by the FY2022 non-financial information is 1 April 2022 to 31 March 2023.
※Only for the lost time injury frequency rate, the period covered is 1 January 2022 to 31 December 2022.

< Organization Boundary of Verification >Management Control

Other Businesses
23 Elleair Resorts Golf Club Co., Ltd. Matsuyama City, Ehime Prefecture

Equity Share

DNVʼs opinion is that the GHG data results in the quantification of GHG emissions that are real, transparent

The criteria for identification, calculation, monitoring, and reporting of GHG (greenhouse gas), water use,
waste, and occupational accident data to be verified are the calculation and reporting procedures
established by Daio Paper. The criteria for verification include ISO 14064-3:2019, ISAE 3000, as well as thecriteria required by the calculation and reporting procedures established by Daio Paper.

and measurable.

 Type of GHGs

︓

（Scope3）

24 Forestal Anchile LTDA. (Chile)< Verification Process and Methodology >25 Elleair International Korea Co., Ltd. (South Korea)

27

25

27 Elleair International China (Nantong)
29 PT. Elleair International Manufacturing Indonesia (Indonesia)

26
28 29
32

31 Elleair International Turkey Kişisel Bakım Ürünleri Üretim A.Ş. (Turkey)

101

Integrated Report 2023

SF6

NF3

︓2,296,972 tCO2e

1,320,575 t-CO2e
123,902 t-CO2e

Category 3: Fuel- and energy-related activities (not123,318 t-CO2e

included in Scope 1 or Scope 2)
Category 4: Upstream transportation and distribution

408,208 t-CO2e

Category 5: Waste generated in operations

26,749 t-CO2e
1,642 t-CO2e
5,943 t-CO2e

Category 7: Employee commuting
Category 9: Downstream transportation and distribution

109,108 t-CO2e

Category 12: End-of-life treatment of sold products

177,526 t-CO2e※ The scope of each category is the Organization and its group (Up to 30 consolidated subsidiaries).

< Water use, Waste and Occupational Accident Data verified >DNVʼs opinion is that the water use, waste and occupational accident data results in the quantification ofwater use that are real, transparent, and measurable.

Tsuyoshi Katori

Koichiro Tanabe

Naoki Maeda

Approved Verifier

Approved Verifier, Technical Reviewer

Managing Director

 Amount of Water use
 Amount of Wastewater Amount of Waste
 Amount of Waste Reuse

︓175,883,720 m3
︓166,016,355 m3
︓289,285 t
︓280,785 t

 Lost Time Injury Frequency Rate︓1.01

The reported values above are fully covered by the verification.

< Verification Opinion >30 Oregon Chip Terminal INC. (U.S.A.)
32 Santher-Fábrica de Papel Santa Therezinha S.A. (Brazil)

PFCs

Category 6: Business travel

26 Elleair International (Thailand) Co., Ltd. (Thailand)
28 PT. Elleair International Trading Indonesia (Indonesia)

HFCs

Category 2: Capital goods

Place and date: Kobe, Japan, 31 August 2023
DNV Business Assurance Japan K.K.

30

N2O

︓4,157,928 tCO2e

Emissions by Scope 3 Categories

The reviews of the non-financial information, relevant documents, and subsequent follow-up interviews
have provided DNV with sufficient evidence to determine the fulfilment of stated criteria.

31

CH4

Category 1: Purchased goods and services< Verification Statement >(As of August 31, 2023)

CO2

 Amount of GHG emissions（Scope1&2）

The reviews of the non-financial information, relevant documents, and subsequent follow-up interviews
have provided DNV with sufficient evidence to determine the fulfilment of stated criteria.

Business Bases of the Group Companies Overseas

Others< GHG data verified >< Verification Criteria >Transportation
22 Daio Logistics Co., Ltd. Shikokuchuo City, Ehime Prefecture< Period Covered by Calculation >24

This Verification Opinions is based on the information made available to us and the engagement conditions detailed above. Hence, DNV cannot guarantee
the accuracy or correctness of the information. DNV cannot be held liable by any party relaying or acting upon this Verification Opinion.
DNV Business Assurance Japan K.K. Sannomiya Bldg. South 11th Floor, 7-1-15, Goko-dori, Chuo-ku, Kobe 651-0087

Unmodified Opinion

Modified Opinion

Adverse Opinion

As an independent third party, DNV has no financial dependencies on the Organization.

This Verification Opinions is based on the information made available to us and the engagement conditions detailed above. Hence, DNV cannot guarantee
the accuracy or correctness of the information. DNV cannot be held liable by any party relaying or acting upon this Verification Opinion.
DNV Business Assurance Japan K.K. Sannomiya Bldg. South 11th Floor, 7-1-15, Goko-dori, Chuo-ku, Kobe 651-0087

Integrated Report 2023

102