Our Leaders Message

Navigating the Impact Journey: Our Leaders Talk

Kinya Seto and Jin Song Montesano discuss the progress of LIXIL’s Impact Strategy.

Kinya Seto Director, Representative Executive Officer, President, and CEO (right)
Jin Song Montesano Director, Representative Executive Officer, Executive Vice President, Human Resources, Communications, External Affairs, and Impact Strategy, and Chief People Officer (left)

LIXIL PLAYBOOK & IMPACT STRATEGY

How does LIXIL’s Impact Strategy fit into your overall business strategy?

Seto: The business environment surrounding LIXIL has changed significantly in recent years. While we work to overcome various global challenges, including inflation, logistics crisis, and supply chain disruptions, we continue our pursuit to fulfill our purpose of making better homes a reality for everyone, everywhere. We can achieve this by securing sustainable growth and creating a positive impact on society through our business activities.

At LIXIL, our Playbook ensures that everyone in our company knows what we want to achieve and has a clear roadmap of how to get there. In FYE2023, we updated the Playbook, integrating our environmental strategy into our business strategy. Our Impact Strategy sits at the foundation of our LIXIL Playbook, and our philosophy and commitments are integrated into our core business operations.

Montesano: In April last year (2023), we transitioned from a Corporate Responsibility Strategy to our Impact Strategy to more accurately articulate our proactive, holistic approach and further accelerate our initiatives that go beyond the boundaries of corporate responsibility and obligations. The Impact Strategy, with three core pillars, Global Sanitation & Hygiene, Water Conservation & Environmental Sustainability, and Diversity & Inclusion, not only represents our commitments as a global corporation but is foundational to how we will improve profitability, enhance brand equity, and create long-term value.

Over the past year, our employees have gradually internalized and embraced the concept of our Impact Strategy. The shift has already made a difference in our people and culture as we accelerate our drive to be a proactive, solutions-oriented organization. Focusing on measurable impact and accountability, we aim to create a positive impact on society and the environment while pursuing stronger financial results.

Seto: Our employees are the driving force behind our value creation to ensure sustainable growth and create an impact on society. We are focused on securing a diverse workforce and enhancing human capital, which we will touch on further when we discuss our Diversity & Inclusion initiatives. However, let us first discuss the impact achieved by our employees in furthering our progress against the other two pillars of the Impact Strategy.

GLOBAL SANITATION & HYGIENE

What is the status of LIXIL’s drive toward meeting the target of improving sanitation and hygiene for 100 million people around the world by 2025?

Seto: We set an intentionally ambitious target to challenge ourselves to develop innovative business models at scale to maximize our impact toward the UN SDG Target 6.2 (Achieving access to adequate and equitable sanitation and hygiene for all and to end open defecation by 2030). While it has been a challenging environment over the last few years, we have made significant progress to achieve our target. Our employees are totally dedicated to expanding our reach and fulfilling this challenge, and I am confident that we will meet our target.

Montesano: To add some details to Kinya’s comment, we are proud to report that we have reached approximately 68 million people in 45 countries (as of March 31, 2024). When we launched SATO as a social business, we started with basically one SKU, the original SATO Pan for households. Since 2020, we have expanded the SATO brand to include a broader portfolio of toilet and hand hygiene solutions that allow a range of use situations. We have also focused on diversifying SATO’s footprint through partnerships with local governments and humanitarian organizations. These collaborations have enabled the installation of SATO products in schools, healthcare facilities, community toilets, refugee camps, and other locations used by many people, expanding the number of people reached per product compared to the initial focus on home installations.

Last year marked the fifth year of LIXIL and UNICEF’s pioneering effort, Make a Splash!, the largest shared-value partnership for water, sanitation, and hygiene (WASH) within UNICEF. Since its inception, the partnership has made remarkable strides, enabling 12.7 million people across diverse geographies to gain access to basic sanitation and hygiene, with a strong focus on leveraging both public and private finance as catalysts for change. Not to mention that the partnership enabled over USD 2.2 million government funding and USD 4.9 million consumer financing to be mobilized toward sanitation and hygiene improvements, bridging the gap between policy intent and tangible action. We have published the lessons learned from the five years of partnership to inspire and empower sanitation and hygiene champions around the world to work toward sanitation and hygiene for all.

Do you have any update on LIXIL’s sanitation initiatives other than SATO?

Seto: Yes, one exciting update is that LIXIL has been named the first commercial license partner of the Generation 2 Reinvented Toilet (G2RT) technologies. G2RT is a stand-alone toilet system that treats waste on-site, and recycles liquid for flushing. This is a result of years of collaboration with the Bill & Melinda Gates Foundation and a four-year partnership with Georgia Institute of Technology.

The technology enables access to safe sanitation without the need for traditional infrastructure such as sewer and septic tank systems and eliminates pathogens at the source, preventing water contamination and the spread of diseases. It has the potential to really change global sanitation issues, especially in overcrowded rising cities. LIXIL is committed to playing its part in solving the global sanitation and hygiene challenges and will invest in further development to refine the technologies into products suitable for use in both public and individual households.

WATER CONSERVATION & ENVIRONMENTAL SUSTAINABILITY

What progress have you been making in the field of environmental sustainability?

Seto: To expand the positive impact LIXIL can make on environmental issues, in FYE2023, we announced mid-term targets toward achieving the LIXIL Environmental Vision 2050, focusing on three areas: Climate Change Mitigation and Adaptation, Water Sustainability, and Circular Economy. We have been making significant progress in these areas, and I am pleased that the integration of our environmental and business strategies last year has accelerated our efforts in the environmental field with internal and external stakeholders.

This March, LIXIL became the first Japanese company in the Building Products Sector to receive SBT (Science Based Targets) Net-Zero approval based on our long-term target to reach net-zero carbon emissions by 2050, and LIXIL's near and long-term targets have now both been approved by the SBT initiative (SBTi) as net-zero science-based targets, meeting the quantitative and qualitative criteria. This indicates the potential of achieving our Environmental Vision 2050 commitment “Zero Carbon and Circular Living,” and we will continue to expand our impact by transitioning to a low-carbon society.

How does LIXIL view the increasing rigor surrounding environmental disclosures?

Montesano: Since FYE2022, LIXIL has been publishing reports based on Task Force on Climate-related Financial Disclosures (TCFD) recommendations. We endorsed the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations and guidance, joined the TNFD Forum in December last year, and registered as a TNFD Early Adopter at the beginning of this year. Accordingly, from the report published in June, we have integrated our environmental disclosures based on TCFD and TNFD recommendations to include climate change, natural capital, and biodiversity, which were previously part of our disclosures in association with environmental issues.

For the first year of working with TNFD recommendations, we examined how our business activities positioned against TNFD guidance, specifically concerning two aspects of obtaining raw materials: our dependencies and impacts on the environment. We found that, among the materials we engage in, wood appears to have the highest environmental dependencies, and aluminum is likely to cause the most significant environmental impacts. Accordingly, we will focus on wood and aluminum to examine risks and opportunities and determine what we need to do. We intend to further our work in this area this year and onwards.

Seto: On the topic of environmental sustainability, I would also like to mention that it was an honor for LIXIL to be included in CDP’s Climate Change A List for the first time this year. We believe it is a clear indication of the recognition of our commitment to embedding our environmental strategy into our business. We remain committed to continuing to innovate sustainable environmental solutions and accelerate our efforts in collaborating with business partners, end-users, and all other stakeholders to make a positive impact on our planet.

DIVERSITY & INCLUSION (D&I)

Why is D&I important for LIXIL, and how are you enhancing D&I?

Seto: Innovation is critical to executing the strategic initiatives of the LIXIL Playbook. Whether it is a product, a business model, or a service, any business without the drive to innovate is likely to become commoditized and lead to low profitability. At LIXIL, our employees are the ultimate drivers of value creation. To build an organization capable of autonomously developing new core businesses that can become pillars of LIXIL’s future earnings, we are continuing to nurture a culture of diversity and inclusion and create a work environment that fosters innovation.

Specifically, we are investing in developing and enriching our human capital, providing our employees with the flexibility and tools they need to learn for their development and growth. We offer various options ranging from innovation-related leadership programs in collaboration with the Tuck School of Business at Dartmouth to GROW, a long-term, self-paced program designed to help managers in Japan become coaches and further improve their talent development, and other management skills through LinkedIn Learning. Our employees have recognized the value of our approach, with 75% of them expressing that they benefit from the learning opportunities in LIXIL Voice, our employee survey.

What other initiatives have you taken to enhance D&I, and how are the employees embracing the change?

Montesano: Over the last four years, we also took a close look at the needs of our employees, especially in Japan, our largest market in terms of sales, and made it a priority to revamp people policies to enhance engagement, wellbeing, and a sense of belonging in order to enrich the employee experience. We have adopted hybrid and flexible work arrangements to allow our employees to continue contributing to LIXIL while fulfilling their personal responsibilities, such as caregiving, promoting greater autonomy and inclusion for all.

I am pleased that our D&I initiatives are clearly making a difference. According to LIXIL Voice, inclusion scores for female employees in their 30s have risen 3% in Japan over the past two years. Our efforts to provide greater flexibility and support employees throughout different life stages have also allowed an increase in the ratio of male employees who took childcare leave within LIXIL Corporation to 87.3% in FYE2024 from 77.3% in the previous year*. In the People & Organizational Development review held in FYE2024, we identified 187 employees as high-potential talents for key roles across the company, with females constituting 57 (30.5%) of this group.

* Includes LIXIL's own "Papa's Childcare Leave" paid childcare leave system for male employees.

Seto: Our drive to foster an inclusive and equitable workplace has been noticed globally. We were incredibly proud to be recognized by Forbes as one of the World’s Top Companies for Women in 2023, ranking 46th of the top 400 companies worldwide, first amongst the companies headquartered in Japan, and second within the Engineering and Manufacturing Industries globally. By adopting people-centric policies, we have made LIXIL a company of choice. Going forward, our top priority regarding our Global People Strategy is to ensure retention of key talent. We will pay particular attention to Japan employees who would be able to work globally.

SOCIETAL AND ENVIRONMENTAL IMPACT THROUGH INNOVATION

Lastly, can you provide some examples of how your innovations impact society and the environment?

Montesano: Absolutely. As a strategic initiative under the LIXIL Playbook, we have made it a priority to embed robust environmental strategy into our business strategy, and we have made quite a bit of progress already, launching differentiated products with societal and environmental impact. For example, PremiAL R100, a low-carbon aluminum extrusion product made from 100% recycled aluminum, will significantly contribute to realizing a decarbonized and recycling-oriented society. GROHE Everstream, a shower system that recycles water, not only saves water but also reduces CO₂ emissions.

KINUAMI, a foaming shower system, meets a wide range of consumer needs, including healthcare workers who assist clients in bathing. G2RT, which Kinya mentioned earlier, has the potential to solve sanitation issues in overcrowded urban settlements. Success in such product innovations can only be achieved by creating an environment where employees with diverse perspectives and values – who truly understand the needs of our diverse customers – can fully demonstrate their abilities.

Seto: LIXIL is committed to helping resolve social and environmental issues through our business activities, which will benefit society and is extremely important in enhancing the sustainability of our business. In line with the LIXIL Playbook, we will continue our path of becoming a diverse, inclusive, and agile organization so that we are well-positioned to deliver results in our business activities while making a sustainable and lasting impact.