KSA

CSR Report 2011

Kao Specialties Americas LLC

Photograph by Hidetoshi Nomoto

Kao Specialties Americas LLC is

committed to the values and principles of its corporate culture

Company Profile…

Kao Specialties Americas LLC (KSA) is a wholly owned subsidiary of Kao Corporation, Tokyo, Japan. Established in 1887, Kao Corporation is a global company that develops, manufactures and markets personal hygiene, laundry, food, cosmetic, and specialty chemical products. The majority of their global product lines are based on surface active or “surfactant” chemistries.

KSA‟s manufacturing facility is located on a 60-acre site in High Point, NC. The site houses administrative and sales offices, R & D labs, warehousing, a biological waste treatment plant and three manufacturing plants:

Performance Chemicals Production Unit (Plant 1)

Surfactant Production Unit (Plant 2)

Toner Binder Production Unit (Plant 3)

Our business is as diversified as our chemistries. As a chemical company, we are constantly expanding our capabilities and developing new markets to help build a sustainable society.

Corporate Philosophy…

Our corporate philosophy is the basis of our business activities and the route we are taking as a team of Kao workers and collaborators. In October 2004, Kao introduced a unified corporate philosophy known as The Kao Way (TKW) that is embraced by all members of the Kao Group and is designed to ensure sustainable progress.

For KSA, the starting point for creating a sustainable future through Corporate Social Responsibility (CSR) is defined by the principles of The Kao Way. These principles embrace the rich history of Kao‟s Yoki-Monozukuri and focus on the importance of Genba-ism as tools to ensure customer satisfaction and enriching people‟s lives.

Yoki-Monozukuri represents our commitment to deliver good products at an affordable price that exceed the expectation of our customers. The term is derived from the concepts of “Yoki” meaning good/excellent and “Monozukuri” meaning development/manufacturing of products.

Genba-ism values the importance of observing things as they occur. This ensures that we truly understand the needs of both internal and external customers and allows us to be more effective and responsive to those needs.

The Kao Way (TKW)

Enriching lives, in harmony with nature

Mission Our mission is “to strive for the wholehearted satisfaction and enrichment of the lives of people globally” through the company‟s core domains of manufacturing added-value chemical products. Fully committed to this mission, all members of the Kao Group work together with passion to provide products and brands of excellent value created from the customer‟s perspective. In so doing, we “share joy with the consumer/customer.”

Vision

We aim to be “a global group of companies that is the closest to the customer in each market, earning the respect and trust of all stakeholders and contributing to the sustainable development of society.”

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Kao Group‟s CSR Policy

The Kao Group aspires to contribute to efforts to bring about sustainable global environment and to becoming and remaining a corporate group that has the respect and trust of all its stakeholders, including general consumers, corporate customers, suppliers, employees, local communities and shareholders. To clarify the steps we are taking to achieve these objectives, the Kao Group has defined all its corporate activities that “enrich the lives of people” based on The Kao Way, or in other words, put The Kao Way into practice, as CSR activities. Building upon Yoki-Monozukuri, innovation, and integrity – defined as the values of The Kao Way – Kao conducts its business with equal consideration given to three aspects: economics, the environment and social responsibility. The first relates to the pursuit of fairness in daily business activities and an appropriate economic balance. The second concerns unwavering efforts to address global warming and other issues. The third require us to fulfill responsibilities to each of our stakeholders.

Kao Specialties Americas LLC

243 Woodbine Street PO Box 2316

High Point, NC 27261 USA TEL: 800.727.2214 FAX: 336.884.8786

KSA-CSR Table of Contents

Management KSA‟s Statement of Commitment

CSR Promotion System

Integrated Management System

Corporate Governance

Compliance, Integrity, TKW

Product Quality Management

Society Community Services, Human Rights, &

Equal Partnership (EPS)

Carriers, Suppliers & Distributor

Performance

Health, Safety &

Environment

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Management

KSA‟s Statement of Commitment Kao Specialties Americas LLC is a specialty chemical manufacturing company located in High Point, NC and is a proud member of the Kao Corporation family. As part of the Kao global family, our actions are guided by our commitment to The Kao Way philosophy of Yoki-Monozukuri, which can be defined as providing products of excellent value for customer satisfaction. Quality, health, safety and protection of the environment are all integral parts of our Integrated Management System.

We embrace Kao‟s environmental philosophy of „eco together.‟ We will design products and processes that minimize the impact to our environment and protect the health and safety of our employees, neighbors and consumers.

As a team, we will continuously improve in all aspects of our business by measuring performance against objectives and targets.

We will comply with the guiding principles of Responsible

Care® and all other legal and agreed to requirements.

Our employees are committed to this policy and we are proud to share our quality, health, safety and environmental commitment with the public.

Hideaki Fujioka - President Kao Specialties Americas LLC

Certification of Registration

CSR Promotion System

CSR Committee

We have established a CSR Committee that is chaired by the President and CEO of Kao Specialties Americas LLC. Our CSR activities are designed to enhance corporate value, which includes corporate governance, risk management, compliance and other activities essential to our survival. We decide on themes that support medium and long-term corporate strategies from the perspective of our stakeholders.

CSR Leaders

Members of the CSR Committee are appointed by the President and have been charged to build good sustainable relationships with customers and various other stakeholders. The committee implements solutions to issues that affect society building upon Yoki-Monozukuri, innovation, and integrity.

CSR Strategy

Key Message…

“Center of Attention”

Themes for Yr. 2011

• Enhance Communication with All Stakeholders • Corporate Governance – Self Auditing System • Ongoing Improvement of Quality Management System • Environmental protection activities including sponsoring

local programs • Human Capital Development – Employee Education • Social Contribution - Programs that demonstrates our

support for Culture and the Arts • Formalize Environmental Management Reporting

(Green Management, Green Products, Green Factory & Green Communications

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Integrated Management System

CSR Leader: Terry Singleton

ISO9001 is the standard for quality management. Certification

indicates a company‟s commitment to quality, meeting customer

needs, and focus on continuous improvement. RC14001 is the

standard related to environment, health and safety, and security.

Prevention of injuries, legal compliance, increased security, and

waste minimization are some of the benefits to RC14001. KSA is

certified to both ISO9001 and RC14001 and is committed to

maintaining adherence to these requirements.

This past January, KSA welcomed representatives from Perry

Johnson Registrars, our external auditors, to review our adherence

to ISO9001 and RC14001. Both audits included extensive

document and process review and employee interviews. There

were no major non-conformances found, and KSA maintained

certification in both ISO9001 and RC14001. Auditor comments

were very positive. Several minor non-conformances were found

and these items will be used for our improvement. KSA will learn

from each audit and strive for continuous improvement as we move

to the future. Thanks to all employees who participated in these

audits.

Corporate Governance

CSR Leader: Gerald Sykes

KSA‟s position on corporate governance directly reflects Kao

Corporation‟s basic philosophy, which is to develop a managerial

framework and system of internal controls, checks, and balances

that provides the organization with a clear, concise and organized

way of operating and controlling our business operations with the

goal of continuously increasing corporate value.

Corporate governance has been in place many years at KSA but in

anticipation of the passing of JSOX in April 2008 (the Japanese

version of the American Sarbanes-Oxley Act) and to adhere to the

increased control requirements of the JSOX standard KSA

increased their efforts to standardize policies and procedures across

the organization. In March of 2008 the accounting team developed

and placed into service the KSA Accounting Policies and

Procedures Manual, which gives structure and organization to all

accounting policies, and procedures used in the company. Shortly

thereafter the Kao authorization guidelines as well as the internal

KSA authorization guidelines were revamped and reintroduced to

the company.

To ensure compliance and continuous improvement against these

standards internal audits are performed on a routine basis by the

corporate audit staff (organization formed by Kao in 2008) as well

as by internal KSA staff.

Compliance, Integrity, TKW

CSR Leader: Fred Koerwitz

Kao Specialties Americas LLC aims to conduct its business in an

ethical manner in compliance with laws and regulations in all

activities. KSA adheres to Kao Corporations code of conduct,

which is dictated in the Kao Business Conduct Guidelines.

In order to make sure that the corporate philosophy takes root at

KSA, several training sessions were completed this past year. All

employees were trained on the Revised Kao Business Conduct

Guidelines Policy. Training was accomplished in several small

group sessions with additional breakout sessions to discuss

hypothetical scenarios, which highlighted potential conflicts to

maintaining ethical corporate conduct and compliance with laws

and regulations. Issues of anti-corruption, human rights, and

environmental compliance received specific focus.

Additionally, all employees received refresher training on The Kao

Way and on use of the Integrity Hotline.

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Product Quality Management

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CSR Leader: Beth Kline The key to customer satisfaction is communication. In addition to

making the most of opportunities to strengthen communication such

as regular business negotiations and information exchange

meetings, we focus on two channels of customer communication to

measure customer satisfaction: customer complaints and customer

survey.

Each customer complaint is investigated thoroughly. Corrective

action plans are monitored for effectiveness. Customer feedback on

the effectiveness of the corrective action is crucial to resolving

problems. Our annual customer survey gives each customer an

opportunity to rate our service and products. Our new channel for

improving communication is the new Global Home Page for

Chemical Products (http://chemical.kao.com). KSA has posted

specifications and material safety data sheets for over one hundred

products on the Kao Chemical Global Home Page at

http://chemical.kao.com/us/. In addition we have an inquiry form

that allows customers to request product information via the

internet.

Market needs change rapidly in our business, thus research and

development-keeping pace is essential. Close communication with

our customers is crucial to ensure that the products we provide are

high quality and used safely. We look forward to developing new

products for our customers during the coming year.

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CSR Leader: Peter Gursky

At KSA our ultimate goal is 100% right-first-time product quality.

The High Point site has three manufacturing plants:

Plant 1: Performance Chemicals Production Unit

Plant 2: Surfactants Production Unit

Plant 3: Toner Binder Production Unit

Over the recent years, an intensive program has been

implemented to improve the right-first-time product quality that

includes:

Capital Investment

Operator Training and Certification

Technical Staffing Expansion

Root Cause Analysis

Corrective and Preventive Action

Weekly Product Quality Meetings

Inclusion of product quality into company and personal

goals

90.0

92.0

94.0

96.0

98.0

100.0

102.0

2006 2007 2008 2009 2010 2011

% I

n-S

pe

c

PRODUCT QUALITY

Plant-1 Plant-2 Plant-3

As shown in the graph, the right-first-time product quality has

increased for all three plants producing material with a greater than

99% right-first-time product quality for the first quarter of 2011.

This accomplishment results in greater customer satisfaction,

reduced use of natural resources and a safer work environment.

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Society

Community Service, Human Rights, EPS

CSR Leader: Connie Smith Kao Specialties Americas LLC works to establish itself as a

responsible corporate citizen. In 2010 and 2011, KSA participated

in many community activities and supported many organizations

with their generous giving.

In January 2010, when Haiti was struck by a magnitude 7.0

earthquake, KSA employees responded quickly to needs of the

Haitian people. Employees were asked to come together to supply

“Health Kits” to send to the earthquake victims. The health kits

provided basic necessities for everyday hygiene including a

washcloth, hand towel, soap, comb, toothbrush, nail file or nail

clippers and plastic strip bandages. KSA‟s Management Committee

also responded with an incentive to match employee donations.

The kits were assembled and KSA contributed a total of 337 kits.

KSA participated in the 5K walk for the Juvenile Diabetes Research

Foundation (JDRF) in 2010 and 2011. On average, twenty

employees walk each year and raise money to benefit the research

efforts for JDRF. A total of $3500 was raised by employees during

2010 and 2011.

For many years, KSA has been a supporter of the American Red

Cross by holding blood drives at our facility. We average three to

four blood drives per year with about 60 pints of blood collected to

help the Red Cross in their efforts to supply blood to those in need.

Every two seconds someone needs a blood transfusion in the

United States and only about three out of every one hundred

people in the United States donate blood. Our employees are

making a difference in someone‟s life with their donations.

Kao Specialties is a responsible corporate citizen in the aspect of

the environment in our effort to recycle materials at work such as

paper, Styrofoam, batteries, aluminum and plastic bottles. In

addition, we have adopted a portion of a local roadway through the

“Adopt-A-Highway” program. Approximately twenty employees

participate by going out once a quarter to pick up trash that has

been thrown out by motorists along the roadway. This is just

another way that we make an impact with an environmental

project.

Haiti Earthquake

2010

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Kao Specialties and its employees is also a large contributor to the

United Way of Greater High Point. The primary goals of the United

Way are to improve education, help people achieve financial

stability and promote healthy lives in our local community. To help

them achieve these goals, KSA works with the United Way by

running a pacesetter campaign annually. With this campaign, our

employees pledge a monetary gift to the local United Way agencies

and the company makes a monetary donation. In 2010, KSA was

awarded the “Pacesetter of the Year” award, which is presented to

the company or organization that led the way for the High Point

community in conducting a successful United Way campaign, by

achieving the greatest increase in giving from among the Pacesetter

group of companies.

KSA also was awarded in 2010 the “Spirit of North Carolina” award

that is presented by the United Way of North Carolina, the state

organization that serves over 60 local United Ways across North

Carolina. Nominations for this award were made based on

exceptional support of United Way, and on criteria including

employee campaign performance, corporate gifts, management

involvement, special events, and incentives. Nominations are

judged by United Way professionals from across the state. The

United Way of North Carolina awarded “Spirit of North Carolina”

awards to 32 companies and organizations with outstanding United

Way campaigns. A panel of United Way professionals from all over

North Carolina judged applications. United Way of North Carolina

presents these awards annually to organizations that produce

successful campaign results while engaging in proven best

practices. Best practices and measures include, but are not limited

to Leadership Giving, management support, volunteerism,

employee participation and giving levels, year-round education,

corporate support, incentive programs, and campaign rallies. KSA

was the winner in the Manufacturing Category with 51 – 200

employees.

KSA was recognized by the Archdale-Trinity area schools in 2011 for the donation of two-way radios. The refurbished radios were donated to the schools for their use in communication efforts on the playgrounds and in bus lines.

Other CSR activities included support of the U.S. Postal Service

Food drive, teaching origami at a local school, volunteering at local

schools to judge projects, collecting school supplies for the local

“Tools for Schools” drive and participation in a school “Math at

Work Fair”. KSA continues to look for additional opportunities

where it can make an impact on the community in its volunteer

efforts.

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Carriers, Suppliers & Distributor Performance

CSR Leader: Mark Thomas In 2010 the KSA Supply Chain Group was reorganized to better

focus on efficient and cost effective management of our order to

cash processes. This includes the management of the logistics

partners that transport products to our customers. We are closely

working with those carriers to help promote safety and

environmental management.

Industry wide, a federally mandated program is driving this initiative

called CSA 2010. To meet the requirements of CSA 2010 trucking

companies must provide detailed data on their performance related

to maintenance, accidents, hours of service, cargo loading, and

impaired driving. New to the standard is the requirement that

problem drivers cannot hide their history and move from company to

company. At KSA we support this program and are working with our

logistics providers to support their compliance efforts.

Health, Safety &

Environment

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CSR Leader: Hidetoshi Nomoto

„eco together‟ in Action

●With consumers/customers

●With business partners

●With society

Developing eco-friendly, resource-conserving products that

make it easy for customers to live environmentally responsible

lifestyles.◆ Development of water- and energy-conserving products

◆ Development of refillable and reusable resource-conserving packaging and products

◆ Development of compact and concentrated resource-conserving packaging and products

Becoming proactively involved in society-wide environmental

activities.◆ Support for environmental conservation activities

(“Forests for Everyone” Urban Green Space Development)◆ Active participation in environmental activities conducted by

government, industry, and other groups

Engaging in environmentally responsible materials

procurement, manufacturing, distribution, and sales with our

business partners. Becoming proactively involved in society-

wide environmental activities. ◆ Use of recyclable PET resins in bottles and packaging◆ Improved distribution efficiency (reductions in delivery frequency and

packaging material)

◆ Accelerated conversion to plant-based and other renewable raw material sources

Environmental

communication logo

2020 Medium-term Objectives

CO2：Consumer products: 35% reduction(across product lifecycle, per unit sales in Japan, relative to FY2005)

Water：Water consumption during product use: 30% reduction(per unit sales in Japan, relative to FY2005)

Chemical substances：Active implementation of the Strategic Approach to

International Chemicals Management (SAICM) to

promote sound chemical management

Biodiversity：Implementation of measures to protect biodiversity

through responsible raw materials procurement and

other measures

• With regard to commercial/industrial products, CO2 reduction and resource

conservation measures will be undertaken jointly with customers.

* Medium-term objectives represent a first step in ongoing environmental

activities that will continue to be expanded in the future.

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Yr. 2010 CO2 Emission

CO2

own

[Ton]

CO2

other

Kao

[Ton]

CO2

other

[Ton]

CO2

container

[Ton]

CO2

disposal

[Ton]

CO2

Total

[Ton]

Plant 1 3,964 1,541 12,708 3 - 18,215

Plant 2 2,705 186 18,341 7 - 21,239

Plant 3 6,530 - 41,948 23 - 48,501

Total 13,198 1,726 72,997 33 - 87,955

2010 Production Analysis

CO2 own: Based on KSA's fininshed goods production

CO2 other Kao: Based on raw material from Kao group

CO2 other: Based on raw material from other company.

The data was calculated by High Point, NC Power

supply composition (nuclear and gas based).

NOTE:

Natural Gas Usage:

-

100

200

300

400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

NG

usa

ge

[k M

3]

Plant1-2009

Plant1-2010

Plant 1 Natural Gas Usage

-

100

200

300

400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

NG

usa

ge

[k M

3]

Plant2-2009

Plant2-2010

Plant 2 Natural Gas Usage

HHSSEE&&SS

CSR Leader: Pat Simcox At KSA, the Health, Safety, & Environmental (HS&E) department is

responsible for ensuring that our corporate activities do not present

a risk to the health and safety of our stakeholders. We are

committed to applying the principles of the Kao Way and Kao‟s CSR

policy to meet our obligation to protect our stakeholders, which

include our employees, customers, community, and the

environment. KSA is subject to many regulatory standards,

including OSHA Process Safety Management, EPA Risk

Management Program, and the Department of Homeland Security

Chemical Facility Anti-Terrorism Standards. Kao‟s CSR policy

integrates seamlessly with these regulations, creating a strong, well-

defined HS&E program.

The primary tool we use at KSA is the RC14001 environmental

management system. RC14001 incorporates employee safety with

environmental management. By adhering to the guidelines of

RC14001, we are able to incorporate CSR into our daily activities

at KSA, protecting our employees and community while striving to

ensure that KSA is contributing to a sustainable future.

Prior to 2010, HS&E activities focused largely on employee safety,

with particular emphasis on reducing OSHA recordable injuries and

loss of product through spills and process upsets. Focus on these

goals is consistent with the requirements of OSHA Process Safety

Management, which emphasizes protection of employees through

rigorous training, process risk analysis, and thorough investigation

of any incident with a potential impact on employee, and

environmental safety. In 2010, HS&E expanded focus by

incorporation of CSR initiatives into departmental goals through

introduction of metrics to track energy and water usage, waste

generation, and recycling activities.

55.0%

26.8%

12.3%

3.6%

2.3%

KSA Recycling Summary, 2010

Scrap Metal

Plastic Super Sacks

Cardboard

Mixed Office Paper

Other

OTHER - includes:• Plastic Packaging

• Styrofoam Packaging• Beverage Containers• Universal Waste

Total Pounds Recycled241,700 pounds

Please forward any inquires to:

Kao Specialties Americas LLC 243 Woodbine Street PO Box 2316 High Point, NC 27261 USA TEL: 800.727.2214 FAX: 336.884.8786 CSR Report is also available at http://chemical.kao.com/us/. Issued: July 31, 2011