Q. Let’s start with the big picture – how are you embedding sustainability into your core business strategy right now? Kao Our journey with sustainability goes back 130 years – it’s been part and parcel of how we do business. From innovations like our one-rinse laundry detergent, launched in 2009, to ongoing efforts to reduce raw materials, sustainability is built into our mindset. That said, today’s challenges, including rising global temperatures and shifting consumer behaviors, are making us more consciously strategic. We’re innovating solutions that meet real-world needs while supporting our sustainability goals. And while Japanese culture often values action over talk, the rise of mandatory reporting is prompting us to articulate our strategy more clearly, leading to stronger business processes and more transparent communication. Sonae Similarly, at Sonae, sustainability has been integral to how we operate for many years. It’s not a side agenda – it’s embedded in our mission to create economic, social and environmental value across all our businesses. When we talk about strategy, we’re talking about staying relevant and resilient in a changing world: understanding market trends, meeting societal expectations and ensuring we deliver for future generations. Some of our businesses exist precisely because of sustainability opportunities, from repair services to anti-waste initiatives. For us, sustainability is not only a responsibility, but a foundation for long-term growth. Q. What’s helped move sustainability reporting from a stand-alone task to something that informs strategic decisions and elevates the business case for sustainability? Sonae Reporting didn’t change our values – but it accelerated our progress and sharpened our focus. Structured reporting requirements made sustainability more tangible. Clearer data led to defined targets, and with targets came accountability and incentives. We conduct our double materiality assessments bottom-up across the group, aligning priorities and engaging new areas of the value chain. But this is also a major change management journey, with thousands contributing alongside their day jobs. The challenge is ensuring everyone sees this not just as compliance, but as a catalyst for collective progress. We’re talking about staying relevant and resilient in a changing world: understanding market trends, meeting societal expectations and ensuring we deliver for future generations. Sonae Kao First of all, I’m very impressed by Sonae’s double materiality work spanning the group. For us, the shift has also been about deepening alignment. Our leadership has long supported sustainability, but frameworks like the TCFD and TNFD have helped sharpen the focus across the business. They’ve pushed us to look at the full value chain and identify where we can have the most impact, like with palm oil sourcing, which now has clear ownership within procurement. We’ve also assigned internal owners for each material topic. That took time – years of dialogue, actually – but it’s paid off. More people now understand the strategic value of ESG performance and reporting. Our top management sees the connection to investor trust and that is further helping sustainability move from reporting to real action across Kao. Q. Has the shift to more rigorous mandatory reporting helped strengthen alignment between sustainability and other business functions? Kao In Japan, sustainability reporting is being integrated into the mandatory securities reports for listed companies, making finance teams key players in the process. Companies like ours will need to include sustainability disclosures alongside financial statements, so finance and sustainability teams are now working much more closely together. Sonae Alignment has deepened across multiple functions – from HR and risk to procurement, communications and commercial teams. Sustainability principles now influence the way we present products, design offers and communicate with customers. Investor relations play a pivotal role, with most of our loans now linked to ESG KPIs – a shift that has significantly raised the bar on performance. Kao I’d agree that legal and human resource teams have become more involved – particularly on board diversity, which is still a challenge here in Japan compared to companies in the US or Europe. That has triggered deeper conversations about how we nurture diverse talent into leadership roles. And on the finance side, we’re still facing challenges. When we reduce CO 2 emissions, for example, we want to quantify financial impact at every Genba (site), but some data still sits across spreadsheets and multiple systems. We’re pushing hard to modernize that. Reporting is definitely sparking the right conversations – and it’s also revealing how much transformation is still needed. Our leadership has long supported sustainability, but frameworks like the TCFD and TNFD have helped sharpen the focus across the business. Kao Q. Looking ahead, how do you see the role of sustainability reporting evolving and what advice would you share with others? Sonae We recently moved non-financial data collection from the sustainability team to our financial consolidation team, applying the same rigor to non-financial and financial reporting. We’re building a dedicated non- financial consolidation function, with full implementation planned next year. Our advice? Elevate these discussions to the highest levels of the company. Non-financial data deserves the same scrutiny as financial data. And just like in finance, it’s essential to focus on indicators that truly matter. That sharper judgment will be critical for the future. Kao For me, as reporting becomes more mandatory and comparable, what’s also going to matter is the narrative behind the numbers. I recently heard our CEO ask our business leaders, “I like your numbers, but what’s the bigger issue you’re tackling?” I thought that was a great question. It’s the kind of mindset shift we need – using reporting not just for compliance, but to drive transformation and innovation for sustainable business and society. And for other companies, my advice would be not to get lost in the data. Start with who you are – your culture, your strengths – and build from there. I recently heard our CEO ask our business leaders, ‘I like your numbers, but what’s the bigger issue you’re tackling?’ I thought that was a great question. It’s the kind of mindset shift we need – using reporting not just for compliance, but to drive transformation and innovation for sustainable business and society. Kao Sustainability strategy Q&A Kao and Sonae In this conversation, Kao Corporation and Sonae discuss how sustainability is becoming central to business strategy, moving beyond stand-alone initiatives to inform strategic decision-making. They reflect on how reporting is helping them build alignment, create value and drive transformation, while acknowledging the challenges of implementation. Junko Ohtani Vice President, ESG Global Strategy Kao Clara Louro Sustainability Manager Sonae Vera Bastos Head of Investor Relations Sonae Sonae is a holding company, with businesses across multiple geographies and sectors, with retail at its core. It holds majority stakes and takes an active management role in its investments aiming at creating long-term economic, natural and social value. Kao Corporation is a global household products, cosmetics, and chemicals company headquartered in Japan and with more than 32,000 employees. It develops sustainable and high-quality products and services that contribute to the well-being of people, society and the planet. More about Kao More about Kao More about Sonae More about Sonae