GLOBAL SUSTAINABILITY SERVICES

CSR in JapanCSR in Japan

Yoshito NakamuraKPMG AZSA Sustainability Co., Ltd. Japan

Yoshito NakamuraKPMG AZSA Sustainability Co., Ltd. Japan

Inaugural Symposium on Industrial Sustainability　Spt.26 2005

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ⅼ. Japan Market Overviewⅼ. Japan Market Overview

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CSR Topics Japan 2005CSR Topics Japan 2005CSR Topics Japan 2005

Ratification of Kyoto protocol

2005

Ratification of Ratification of Kyoto protocolKyoto protocol

20052005

Start AA1000

AssuranceIn Japan

Start AA1000

AssuranceIn Japan

New Value CreationThorough CSR 2005

Chairman of Keizai Doyukai

New Value CreationThorough CSR 2005

Chairman of Keizai DoyukaiEffective Law Concerning

the Promotion of Business Activities with Environmental Consideration

2005

Effective Law Concerningthe Promotion of Business Activities with Environmental Consideration

2005

KPMG International Survey of CR Reporting Japanese Version 2005

KPMG International Survey of CR Reporting Japanese Version 2005

Start BigCo2 Business

Start BigCo2 Business Emissions Credit Can be

considered as asets from 2005

Emissions Credit Can be considered as asets from 2005

Co2 Emission trading Accounting StandardCo2 Emission trading Accounting Standard

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Law Concerning the Promotion of Business Activities with Environmental Consideration Law Concerning the Promotion of Business Activities with Environmental Consideration

Environmental ReportEnvironmental Report

The assurance provider shall strive to be independent of the writers of theenvironmental report, and to maintain a framework that ensures fairnessand accuracy when providing assurance for the environmental report.

Large enterprises shall strive to publish an environmental report. Large enterprises should take into consideration to enhance the reliability of the environmental report.

Come into force on April 1, 2005

Purpose of lawPurpose of lawBasic frameworkBasic framework

Promotion of E-reportAssure the reliability

Promotion of E-reportAssure the reliabilityPublic body has the

Obligation　to publish E-reportPublic body has the

Obligation　to publish E-report

Specified Corporations must publish an environmental report. Specified Corporations should take into consideration to enhance the reliability of the environmental report

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Charter of Corporate Behavior-- Nippon Keidanren (The Japan Business Federation) -- 4th version released: May 18, 2004

• Keidanren contends that members need to take social responsibilityflexibly and voluntarily.

• With the evolution of civil society, CSR has received greater attentionand has become an important criterion for selecting products and services,as well as　evaluating corporations.

• There should be the freedom to allow a diversity of approaches and at the same time, members must understand that legal compliance isthe core of social responsibility.

• Corporations need to enhance their social significance and value, corresponding social needs and communicating with stakeholders.

• Businesses, in a rapidly globalizing economy, are expected to address concerns including human rights, child and forced labor, and poverty.

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Dual Industrial Structure in Japanese economyDual Industrial Structure in Japanese economyShare of Small and Medium Share of Small and Medium Number of EmployeesNumber of Employees

EnterpriseEnterprise--SMEs SMEs in the in the Japanese Economy Japanese Economy

Number of EnterprisesNumber of Enterprises　　　　　　

Value of Shipment in Manufacturing

SMEsSMEs: : enterprises with capital of not in excess of \300 million or 300 or fewer regular employees

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CSR　Guideline & Check List For Small and Medium Enterprises 　　　　　　CSR　Guideline & Check List For Small and Medium Enterprises 　　　　　　

Small and Medium Enterprise Agency, METI published CSR　Guideline in 2005

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CSR as expanded environmental effortsCSR as expanded environmental efforts

In Japan, the focus on CSR began with environmental efforts, but today it has expanded to include human rights, fair labor standards, consumer protection, and health and safety issues. In recognition of their dedication to the environment, a very high proportion of Japanese companies hold the ISO14000s certifications compared to other industrialized countries.

JAPAN

KOREA

Source：http://www.ecology.or.jp/isoworld/iso14000/registr1.htm

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CSR Survey in Japan 2003

CorporateSocialResponsibility(CSR) in JapanCurrent Status and Future ChallengesCSR Survey 2003

K E I Z A I D O Y U K A I　　経済同友会<Japan Association of Corporate Executives>January 2004

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CSR Departments Established by 32% of Firms in JapanOne major trend is to establish either dedicated CSR departments or CSR committees gathered from various departments. The reason for this trend is that, because of the extremely wide-ranging nature of CSR, companies have perceived the necessity to oversee and promote the efforts carried out by various divisions and sections in a unified manner. About 32% of all the companies that submitted self-evaluations reported that they had established a department (or position) in charge of CSR.

Department (or Position) for CSR Established

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CSR in the Supply Chain- Few companies go beyond “green” purchasing and procurementWhen goods are manufactured or sold using materials or parts with CSR issues,responsibility extends to the manufacturer of the final goods and the retailers that sellthem. For this reason, the trend worldwide is to include CSR issues in purchasing andprocurement standards. Among the firms that submitted self-evaluations, 44% indicated that they had established procurement standards that incorporated CSR, butaccompanying comments suggested that in the majority of cases, those standards did not extend beyond environmental responsibility in purchasing and procurement.

Establishment and Publication of Procurement Standards That Incorporate CSR

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Sustainability Report - Prepared by about half of large corporations

23% of companies in Japan (51% of large corporations) had prepared a “sustainability report” covering both society and the environment.

Compilation of a Sustainability Report (Social & Environmental)

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Dialogue and joint action with NGOsIn Japan today, individuals and nonprofit organizations are working to create a civilsociety, fostering hopes for a new form of social governance. Corporations, too, arebeing called on to incorporate society’s values into their management practices andcontribute to the creation of a better society, not merely through financial support butalso through active dialogue, cooperation, and joint action with a wide variety of social entities. In that sense, such tasks as “joint action with NPOs” and “mechanisms for direct dialogue with various stakeholders” deserve to be pursued yet more energetically.

Joint Action with Domestic and Overseas NGOs (NPOs)

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Corporations must re-examine their social responsibilities for 4 reasons

Growing mutual influences on business and societyGlobalization has extended the scope of corporate activities. In this process, both the influence that a corporation has on society and the influence that society exerts on a corporation have grown significantly.

Society’s changing view of the corporationThe IT revolution has greatly facilitated access to information and expertise. This has encouraged the development of NPOs and other elements of civil society, and has fostered a far more critical view of corporations.

Rectifying the excesses of “shareholder capitalism”As a result of the excesses of the so-called "American model of management," the demand has emerged to re-establish a better balance.

Changing individual valuesIndividual values have undergone major changes as people opt to new work styles and lifestyles.

K E I Z A I D O Y U K A I　<Japan Association of Corporate Executives>

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Ⅱ. CSR Management Japanese Company

Ⅱ. CSR Management Japanese Company

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TOP 20 CSR Ranking in Japan 2005 by NIKKEI BUSINESS PUBLICATIONSTOP 20 CSR Ranking in Japan 2005 by NIKKEI BUSINESS PUBLICATIONS

SCORESCORE11　　 Sharp CorporationSharp Corporation　　 83.783.72 2 　　Denso Corporation Denso Corporation 83.583.53 3 　　Fuji Photo Film CoFuji Photo Film Co.,., Ltd. Ltd. 83.183.14 4 　　Hitachi Chemical CoHitachi Chemical Co.,., Ltd. Ltd. 82.082.05 5 　　Toppan Printing CoToppan Printing Co.,., Ltd. Ltd. 81.881.86 6 　　Unicharm Corporation 81.881.87 7 　　Canon Inc. Canon Inc. 81.681.688　　 Matsushita Electric Industrial CoMatsushita Electric Industrial Co.,., Ltd. Ltd. 80.880.89 9 　　 Toshiba Corporation Toshiba Corporation 80.280.2

10 Nissan Motor Co10 Nissan Motor Co.,., Ltd. Ltd. 80.080.01111　　 OMRON Corporation OMRON Corporation 79.879.812 12 　　SONY CORPORATIONSONY CORPORATION 79.479.413 13 　　Toshiba Corporation Toshiba Corporation 78.678.614 14 　　SevenSeven--Eleven Japan CoEleven Japan Co.,.,Ltd. Ltd. 78.678.615 15 　　TDK Corporation TDK Corporation 78.278.216 Ito16 Ito--Yokado Yokado CoCo.,.,Ltd. Ltd. 　　　　　　　　　　 77.977.917 17 AstellasAstellas PharmaPharma Inc.Inc.　　　　　　 77.977.918 Eisai Co18 Eisai Co.,., Ltd. Ltd. 　　　　　　　　 77.877.819 19 Dai Nippon Printing Co. Ltd.　　 77.277.220 DAIKIN INDUSTRIES, LTD.20 DAIKIN INDUSTRIES, LTD.　　 77.177.1

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Reporting trend by country for Top 100companies in 16 countriesReporting trend by country for Top 100companies in 16 countries

The number of CR reports published as separate reports and those published as part of annual reports for 2005

Japan (80 percent) and the UK (71 percent) take the lead in publishing stand-alone CR reports.

KPMG International Survey of Corporate Responsibility Reporting June 2005

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Number of Companies publishingEnvironmental/CSR Reports in Japan Number of Companies publishingEnvironmental/CSR Reports in Japan The number of companies publishing environmental reports is increasing steadily. 21.9% of the businesses answered that they issued environmental reports. In FY 2002, 34% of the companies listed in the stock market.

Increasing number of companies began issuing Sustainability Reports or CSR Reports in order to add a social aspect to the conventional environmental aspect. These companies account for one-fourth of the companies thatalready compile and issue environmental reports.

743 companies 2003

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Number of CSR Report with third party review in JapanNumber of CSR Report with third party review in Japan

0

100

200

400

600

800

2003 2004

CSR report with third party reviewconsider assurance

no plan others

113

201

231

131

190

288

• Data from ministry of environment • Include comment report

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Assurances by third partyAssurances by third party

Assurance

Third party

DemandsAssurance

fee

Disclosed Information should be verified by the third party.

Disclosed Information should be verified by the third party.

Company should own the responsibility for reliability of the disclosed information.

It is important to assure accuracy and reliability of disclosed information by the third party in the guaranteed scheme. Information

StakeholdersCompanyInvestment

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Third-Party Review Report by AZSA SustainabilityThird-Party Review Report by AZSA Sustainability

Sharp CorporationSharp CorporationMatsushita ElectricMatsushita ElectricIndustrial Co., Ltd. Industrial Co., Ltd. Toppan Printing Co., Ltd. Toppan Printing Co., Ltd. Tokyo Gas Co., Ltd.East Japan Railway CompanyCosmo Oil Co., Ltd. Kirin Breweries Co., Ltd.Sumitomo Chemical Co., Ltd.OthersOthers

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PDCA Cycle of CSR Sharp CorporationPDCA Cycle of CSR Sharp Corporation

To truly establish CSR values inTo truly establish CSR values in--house and not just raise its house and not just raise its awarenessawareness‚‚ the application of CSR in onethe application of CSR in one’’s daily work is essential.s daily work is essential.

For that reason our company began to study how all business For that reason our company began to study how all business groups could apply CSR to their daily tasks. In late FY 2004 worgroups could apply CSR to their daily tasks. In late FY 2004 work k started on the compilation of themes and action plans designed started on the compilation of themes and action plans designed to fully realize CSR.to fully realize CSR.

Sharp also set up a followSharp also set up a follow--up PDCA "planup PDCA "plan‚‚ dodo‚‚ checkcheck‚‚ and action"and action"‚‚cyclecycle‚‚ which confirms the progress of its action plans and which confirms the progress of its action plans and identifies problem areas. identifies problem areas.

As it implemented the PDCA cycleAs it implemented the PDCA cycle‚‚ Sharp discovered that the Sharp discovered that the progress of its business groups varied greatlyprogress of its business groups varied greatly‚‚ and therefore and therefore required all of them to set CSR strategy objectives and a PDCA required all of them to set CSR strategy objectives and a PDCA cycle to be added to all business performance evaluations.cycle to be added to all business performance evaluations.

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Commitment to Origins Starbucks Coffee Japan Purchasing Guidelines Commitment to Origins Starbucks Coffee Japan Purchasing Guidelines

　　　　 "Contributing positively to our communities to our environment" "Contributing positively to our communities to our environment" We're committed to addressing social and environmental issuWe're committed to addressing social and environmental issues in order to help es in order to help sustain the people and places that produce Starbucks coffees.

Starbucks Mission StatementStarbucks Mission Statement

sustain the people and places that produce Starbucks coffees.

< Quality Standard >< Quality Standard >Satisfy the original severe quality standard of Starbucks fSatisfy the original severe quality standard of Starbucks from cultivation to the harvest in all. rom cultivation to the harvest in all.

< Environmental Standard >< Environmental Standard >The cultivation method of considering the environment so thThe cultivation method of considering the environment so that growing coffee should not lead to at growing coffee should not lead to

the destruction of nature. As a result, maintain the environmentthe destruction of nature. As a result, maintain the environment that keep various living things live. that keep various living things live.

< Social Standard >< Social Standard >Improve the quality of life for the people who work at the coffeImprove the quality of life for the people who work at the coffee farm. As an example, the level of e farm. As an example, the level of

wages and welfare satisfies the national and local government stwages and welfare satisfies the national and local government standards. andards.

< Economic Standard >< Economic Standard >The profit from the cultivation of coffee should benefit the cofThe profit from the cultivation of coffee should benefit the coffee producer, improves job fee producer, improves job

opportunities and the educational opportunities, promote infrastopportunities and the educational opportunities, promote infrastructure and public service in the ructure and public service in the region. region.

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ÆON Supplier CoC (Code of Conduct)ÆON Supplier CoC (Code of Conduct)More than 500 suppliers in Japan and abroad asked to observe CoC ÆON wishes to assume accountability not only for the quality and safety of products that ÆON sells, but also for their manufacturing environment and processes. ÆON formulated in 2003 the ÆON Supplier CoC(Code of Conduct), which is applicable to its business partners in 24 countries around the world.

The contents of the ÆON Supplier CoC are aimed at ensuring the basic compliance of ÆON suppliers andvendors with national and local laws and regulations

governing production/manufacturing processes.ÆON has conducted explanations and has requested more than 500business partners to observe the ÆON SupplierCoC, and has receivedwritten declarations ofobservance from them.

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CSR throughout the supply Chain ToshibaCSR throughout the supply Chain Toshiba

Toshiba Group has established the Toshiba Group Procurement Policy in which Toshiba gives priority to suppliers that are in compliance with laws and regulations and give careful consideration to human rights and the environment.

The Toshiba Group Procurement Policy,which was established in February 2005,

requires suppliers to promote legal complianceand operations that respect human rights and the environment in accordance with the Toshiba Group Standards of Conductand the UN Global Compact.

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Supplier Evaluations Including CSR Supplier Evaluations Including CSR

TDK CorporationTDK CorporationSupplier Evaluations Including CSR Checkpoints Supplier Evaluations Including CSR Checkpoints Started Started In order to enhance the competitivenessIn order to enhance the competitivenessof its business partners, of its business partners, TDK began evaluating the performanceTDK began evaluating the performanceof business partners in April 2003. of business partners in April 2003. The evaluation items include CSR activitiesThe evaluation items include CSR activitiesso that our business partners too canso that our business partners too canenhance their CSR activities.enhance their CSR activities.

Main Field:Information DMain Field:Information Devices, Broadband Networks, Car Electronics evices, Broadband Networks, Car Electronics

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CSR Keywords that Reflect Shiseido ValuesCSR Keywords that Reflect Shiseido Values

Three keywords to substantiateShiseido CSR activities

1. we cannot proceed without reference to our main business, “cosmetics.”

2. Activities related to the “aesthetic sense” that Shiseido has nurtured ever since its founding.

3. “Women,” as it is women who comprise 70% of the Shiseido employees and 90% of our customers, leading us to undertake activities that support women’s pursuits.

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CSR communication toolsCSR communication toolsMany of the IR activities undertaken at Toppan focus on communication andinformation disclosure to shareholders.

Business Fields: Securities and Cards, Commercial Printing, Publications Printing, E-business, Packaging Electronics

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KPMG AZSA Sustainability KPMG AZSA Sustainability

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GSS Organization JapanGSS Organization Japan

KPMGKPMGAZSA & Co.AZSA & Co.

AZSA Sustainability Co., Ltd.AZSA Sustainability Co., Ltd.

Advisary & Assurance- Advise for Environment/CSR Management, Strategy Planning, Environment Accounting, Reporting,CO2 Management- Independent Review / Verification - Compliance, Due Diligence- Environmental Seminar & Training- Environmental Related Research

- ISO 9001 Quality Management System Registration Audits

- QS-9000, ISO/TS16949 Quality Management System Registration Audits

- ISO 14001 Environmental Management System Registration Audits

- BS7799-2, Information Security Management System Registration Audits

KPMG Registrar Co., Ltd.KPMG Registrar Co., Ltd.Established 2004

TOKYOTOKYO OSAKAOSAKATOKYO Established 1995

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AZSA & Co. GroupAZSA & Co. Group

KPMG AZSA & Co. is one of Japan’s largest audit corporations, fielding a team of approximately 3,000 people in 47 offices across the country. KPMG AZSA & Co. offers clients a variety of high quality professional services tailored to the emerging needs of today‘s business environment, including audit, related attestation services and advisory services. KPMG AZSA & Co. a member firm of KPMG International, was newly formed in January 2004 with the merger of Asahi & Co. and AZSA & Co.

Number of Employees : CPA 1,514　Junior CPA 762　Other 724　Amount of Capital :3.3 billion yen Number of Clients : 5,296 ; Audit 3,963 Other 1,333 　Office Locations　47 offices in JapanOffices where Japanese-spoken Staffs are available47 offices in 24 countries

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Thank you for your attention !Thank you for your attention !

Yoshito NakamuraKPMG JAPAN+81 (3) 3266 7520Yoshito.nakamura @jp.kpmg.comhttp://www.kpmg.or.jp/english/azsus/index.html (English)http://www.kpmg.or.jp/profile/azsus/index.html (Japanese)

YoshitoYoshito NakamuraNakamuraKPMG KPMG JAPANJAPAN++8181 (3(3) ) 32663266 77520520YoshitoYoshito..nakamuranakamura @@jpjp..kpmgkpmg..comcomhttp://www.http://www.kpmgkpmg.or..or.jpjp//englishenglish//azsusazsus/index.html/index.html (English)(English)http://http://www.www.kpmgkpmg.or..or.jpjp/profile//profile/azsusazsus/index.html/index.html (Japanese)(Japanese)

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© 2005 KPMG AZSA Sustainability Co., Ltd, member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in Spain