MESSAGE from the PRESIDENT

For Our Customers and Society

TOTO Aims to Provide Comfortable and Healthy Lifestyles to All by Contributing to the Realization of a Carbon-Neutral and Sustainable Society

The Uncompromising Uniqueness of TOTO Began to

Blossom around the World in Fiscal 2022

In fiscal 2022, TOTO continued to conduct business activities in a difficult operating environment, dealing with such issues as restrictions due to the ongoing COVID-19 pandemic and divisions in the international community. However, in anticipation of the future, we are still uncompromising about our unique initiatives, which have become more and more successful over the last fiscal year. Undeterred by the pandemic, we launched new products able to meet the emerging needs of customers in all four of the key bathroom and kitchen plumbing domains—toilets, bathroom vanity units, kitchens, and bathrooms—simultaneously in August 2022. We developed creative and original expressions when promoting new product value that aligned with the characteristics of each media. Amid increasing needs for living prosperously and in comfort, I hope to continue such promotion and further evolve TOTO’s uniqueness going forward.

Among our new products, THE CRASSO modular kitchen received the internationally acclaimed Red Dot Design Award 2023 and, in a first for Japanese kitchen appliances, was also selected for the Best of the Best Award, which is the top award won by less than 2% of products nominated. I believe that being evaluated in Europe, the home of modular kitchens, is extremely significant. In addition, SMART TOILET NEOREST WX, a new product for the overseas market, won both the Red Dot Design Award 2023 and iF Design Award 2023.

In August 2022, the total shipment volume for WASHLET, which was launched in June 1980, topped 60 million units. While reaching 10 million units took nearly 20 years, the time to sell each subsequent 10 million units has grown shorter and shorter. The percentage of overseas sales has grown and the overseas shipment volume has increased five times in the past 10 years. WASHLET is a product that has changed Japan’s lifestyle culture, and we will popularize a clean and comfortable toilet culture around the world by further evolving the product in the future. In March 2023, TOTO ended International Sanitary and Heating 2023 (hereinafter, ISH 2023), the world’s largest international trade fair for baths, toilets, buildings, heating, air-conditioning, and renewable energy, held in Frankfurt, Germany, with great success after exhibiting at Forum, a single venue that has gained significant attention at ISH.

Europe is home to many companies that have existed for more than 200 years, making TOTO a relative newcomer. At ISH 2023, TOTO was the first non-European top brand to exhibit at Forum, the face of the exhibition, which was particularly significant as it placed us on the same level as Europe’s top brands, shifting the global position of the TOTO brand.

As a result of strengthening the business structure in new business domains within the Advanced Ceramics Business, TOTO has been able to respond to the sudden increase in demand for semiconductors with advanced ceramics technologies. Our efforts so far are showing results, and we are making steady progress in gaining TOTO fans around the world in the Advanced Ceramics Business. This is naturally growing into a third pillar of growth for the TOTO Group, after the Japan Housing Equipment Business and International Housing Equipment Business.

A Philosophy That Must Remain Unchanged—Kindness Must Always Come First

TOTO’s first president, Kazuchika Okura, wrote a letter to his successor, Saburo Momoki. The words contained in that letter have been treasured by the TOTO Group ever since as the Words of Our Founder. These words express the idea that “kindness must always come first” and state that our goal should be to provide good products and satisfy the customer and, by accomplishing that, profit and compensation will follow. The Words of Our Founder have been cherished by each president before me and passed down to the next generation. Every Group employee knows these words. I reflect on my actions as president with the awareness that employees are always watching to see whether they are based on this letter.

Based on the Words of Our Founder, we formulated the Company Mottos in 1962 as a foundation for our corporate activities in the future. To ensure that these words can be shared more easily throughout the TOTO Group and are appropriate for the times, we formulated the TOTO Group Corporate Philosophy and Charter of TOTO Group Corporate Behavior. Additionally, we established the Philosophy System for TOTO Group Management in 2004.

I learned about the Corporate Philosophy by watching senior coworkers, whose actions were always based on it. The Philosophy also spreads among each employee through their experience during daily business activities and the actions of superiors, senior coworkers, and colleagues. This is not merely a concept of knowing and remembering the Philosophy, but rather a corporate culture where taking such actions has become the norm.

Regardless of the circumstances, “kindness must always come first” is a priority that should never change. Every employee is able to understand what is important in a changing environment. The TOTO Group’s greatest strength is that each employee, in their own way, acts for the sake of its customers and society in a way that exceeds the boundaries between divisions, countries, and regions, based on “kindness must always come first.”

In fiscal 2022, TOTO caused a great deal of inconvenience for its customers due to global disruptions to the supply chain, such as suspension of orders and deviation from delivery for key products. However, despite these circumstances, I believe that we have devoted ourselves to improvement. All of TOTO’s divisions acted for the sake of its customers and colleagues throughout the TOTO Group, such as the Sales Division, which has coordinated logistics and the front line and continues to be close with customers; the Procurement and Distribution Division, which has rebuilt the supply chain; the Manufacturing Division, whose employees voluntarily stayed at factories to keep operations running, including at overseas sites; and the Administrative Division, which continued to provide support on the front line. The TOTO Group’s purpose is to put the Corporate Philosophy into practice under any circumstances, ensure that kindness always comes first in society, and act with customers in mind. As a result of sharing this with all employees, I believe that we are capable of joining together and ensuring the reputation of the TOTO brand.

TOTO WILL2030, Embodying the Founding Spirit of TOTO

The Common Group Philosophy is something that, as the “heart” of TOTO, we must continue carrying forward into the future, forever. Meanwhile, we must change the way our “body” (business activities) moves regarding various changes in the business environment. The TOTO Group formulated the New Shared Value Creation Strategy TOTO WILL2030 (hereinafter, WILL2030) in April 2021. We will achieve economic growth while helping resolve social and environmental issues by realizing a carbon-neutral and sustainable society by 2050 and by aiming to provide comfortable and healthy lifestyles to all. For this reason, the key material issues (materiality) we must thoroughly address as a group in 2030 to embody our Corporate Philosophy are Cleanliness and Comfort, Environment, and Relationships. We will also contribute to the United Nations (UN) Sustainable Development Goals (SDGs) through these activities. By understanding that social value and economic value are not separate and by addressing social and environmental issues, we will promote sustainability management to achieve economic growth.

The mission of our generation is to pass on the global environment in a sustainable manner. To achieve carbon neutrality, we will expand initiatives for promotion of fuel conversion under Scope 1, further expansion of renewable energy utilization under Scope 2, and further expansion of popularizing TOTO’s unique sustainable products, which are clean, comfortable, and environmentally friendly, under Scope 3. We will promote Groupwide initiatives for each employee to play a part in implementing, understanding, and participating in advancing WILL2030.

Current market conditions are still unclear and unexpected changes in the environment could continue to occur in the future. Amid these circumstances, fiscal 2023 is the final year of WILL2030 STAGE1. It has been a year where we have strongly resolved to address the priority issues and achieve the targets we have adopted in terms of business and task innovation.

We will actively invest and educate from all angles, including manufacturing, sales, development, and human resources, in anticipation of our vision for 2030 and 2050 and taking into account STAGE2 and STAGE3.

Organizational Growth as an Aggregate of Individual Growth

A company is a collection of individuals. The TOTO Group is a collection of approximately

36,000 individuals, demonstrating a great amount of strength. Since enhancing the capabilities of individuals leads to enhancing the capability of a company’s framework, enhancing these individual capabilities is extremely important.

In April 2023, the TOTO Group welcomed 232 new employees. TOTO’s in-house company magazine held a questionnaire to ask all new employees which phrase they would be the happiest to hear and the answer given by the majority of new employees made an impression—“thank you.”

Everybody wants to receive acknowledgment from those around them. If that recognition comes back in the form of “thank you,” it further increases their motivation. When supervisors and other coworkers say thank you and give recognition during employees’ daily work, it leads to an overwhelming increase in motivation and acts as an incentive for their next actions. This motivation leads to the desire to set the next target and work hard toward it. When the target is achieved, employees feel a sense of satisfaction, leading to the next target. This process is a key point in increasing the speed of growth and I believe that, if employees receive numerous such opportunities, it will lead to growth of the Company.

Furthermore, another key to maintaining high motivation is for employees to feel like a job is something personal rather than something done by other people, enabling them to definitely take further action. For example, regarding the three key material issues (materiality) we have adopted as “issues we want to address” personally instead of “issues we must address,” completely changes our actions. If all employees feel that these are issues that they want to address, the amount of motivation and energy each individual has will no doubt increase. If that occurs, the energy of all TOTO Group employees will be extremely high and the speed at which we can help resolve social issues will further increase. I am certain that this will lead to us becoming even more useful to our customers and society.

If each individual employee thinks a little further ahead, taking a step toward society and our customers, I believe that we can create a group that can take action with the customer in mind.

Opportunities for Employees to Take Action

With travel restrictions as a result of the pandemic finally loosened, I have finally been able to move around and the frequency of my visits to the front line and opportunities to directly exchange opinions with employees has increased. I have also continued to hold dialogues with employees online.

Employees feel that there are issues to be resolved at their respective locations, and they are eager to take on these issues and challenges. I hold skull sessions for various issues, but I never refuse proposals that are based on the location or circumstances and are well thought out. I have had a series of talks to encourage employees by motivating and inspiring them. As a result, there have been many cases where employees have been able to move ahead of my requests, and I believe that we are getting closer to becoming a group where it is a matter of course that each employee considers society and our customers and takes concrete action. It is my responsibility to create opportunities for employees to get off the ground.

New Value Brought about by Utilization of Digital technologies

We have adopted the utilization of digital technologies as an essential component in creating new value and made it the cornerstone of all our business activities. Since digital technologies are not something that only TOTO has access to, I understand that it is survival of the fittest as to whether we can properly utilize these technologies. The most important point is how much this leads to new value for TOTO and its customers. We will continue making proposals for resolving social issues by integrating digital technologies with existing technologies, which is a strength of the TOTO Group. We aim to create new lifestyle value while actively collaborating outside the TOTO Group.

In addition, we aim to enhance the quality and uniformity of manufacturing sites and further promote the shift to smart factories. We are currently developing data scientists. With these human resources at the core, we will utilize AI in all manufacturing sites to enhance efficiency. Naturally, there is a high volume of data in not only manufacturing sites but also sales, service, and administrative sites, so we will develop digital human resources in all divisions.

We will enhance the speed of operations by raising the IT and digital transformation (DX) literacy levels of all employees, not only through training but also in practice.

Together with Our Stakeholders

The TOTO Group’s business activities are made possible thanks to the support and cooperation of all our stakeholders. First, our starting point is that we ourselves must be sincere and thankful in our approach. In Relationships, one of the key material issues (materiality) we have adopted under WILL2030, we will sincerely work with each stakeholder and strive to enhance value for each of them.

We will strive to ensure our customers are lifelong TOTO fans by reinforcing activities that not only provide products that bring cleanliness and comfort but also services to them. We will enhance our relationship of trust by ensuring returns, such as dividends, for all our shareholders and by further deepening dialogues while providing non-financial information. We will aim for coexistence and co-prosperity with all our business partners by creating even stronger partnerships and setting and promoting targets, such as initiatives for the environment and human rights. We will further enhance initiatives outside of our business activities to gain the support of local communities for our activities. Above all else, employees are the most important. We aim to create an environment where all employees can safely take on challenges and work in a lively manner and to achieve a high level of organizational and human resource capabilities.

To maximize corporate value, my mission is to reinforce governance with an awareness of not only defensive but also offensive aspects, enhance value for all our stakeholders, and develop a better relationship. Our employees will unite in their efforts to open the way for a bright future for our customers and society.