SUSTAINABILITY REPORT 2012

CSR Report 2012

Delicious tea comes from great tea plantations. Oi Ocha Contract Tea Plantation, Oita Prefecture Management Principle

“Always Putting the Customer First” The foundation of business management at ITO EN is our commitment to placing importance on each and every customer.

At the ITO EN Group, we believe that our commitment to placing importance on each and every customer is the cornerstone of our business management. At the ITO EN Group, we consider consumers, shareholders, retailers, suppliers, financial institutions, and local communities our customers. We have always regarded everyone involved with the ITO EN Group to be our customer, and we earnestly strive to address our customers’ needs through the feedback we have received, and by taking the perspective of our customers as the foundation of our management strategies. Thinking of our directors and employees as Team ITO EN, we will continue to remain true to our long-standing principle of “Always Putting the Customer First” and pursue new possibilities and challenges.

Company Overview The ITO EN Group: Main Companies

COMPANY NAME: ITO EN, LTD. Main Domestic Companies HEAD OFFICE: 47-10, Honmachi 3-chome, ITO EN SANGYO, LTD. Shibuya-ku, Tokyo OKINAWA ITO EN, LTD. DATE OF ESTABLISHMENT: August 22, 1966 ITO EN KANSAI CHAGYO, LTD. PAID-IN CAPITAL: ¥19,912,300,000 Tully’s Coffee Japan Co., Ltd. NUMBER OF EMPLOYEES: 5,285 ITO EN · ITOCHU MINERAL WATERS CO., LTD. BRANCHES AND SALES OFFICES: 30 districts and 200 bases nationwide GREEN VALUE CO., LTD. GROUP-OWNED STORES Chichiyasu Company (SPECIALTY STORES): 157 stores nationwide Main Overseas Companies PLANTS: Shizuoka Sagara Factory, 21 Mekami, ITO EN (USA) INC. Makinohara, Shizuoka ITO EN AUSTRALIA PTY. LIMITED Hamaoka Factory, 3406-4 Shinno, ITO EN (North America) INC. Omaezaki, Shizuoka Mason Distributors, Inc.  Fukushima Factory, 1-2-9 Araikita, Ningbo Shunyi Tea Products Co., Ltd. Fukushima, Fukushima Fujian New Oolong Drink Co., Ltd.  Okinawa Nago Factory, 112 Isagawa, Nago, Okinawa RESEARCH FACILITY: Central Research Institute, 21 Mekami, Makinohara, Shizuoka MAIN BUSINESS ACTIVITIES: Manufacture and sales of tea leaf and beverage products

(As of April 30, 2012)

1 ITO EN CSR Report 2012 Contents Editorial Policy

This report aims to examine the role that the ITO EN Group plays 1 Management Principle/Company Overview vis-à-vis society’s expectations and the fundamental thinking 2 Editorial Policy/Performance/Contents of the ITO EN Group with respect to CSR, while discussing the direction and substance of the Group’s approach to tackling core 3 Top Message CSR issues. Moreover, the report includes many examples of the Group’s CSR policy in action, so as to convey with greater clarity Special Feature the content of the report to everyone involved with the ITO EN Group (i.e., the Group’s stakeholders). 5 Providing Safe, Reliable Products The guidelines referred to in the editing of this report, as well as the organizations and time periods herein addressed, are set 7 “From the Tea Plantation to Used Tea Leaves,” forth below. At the ITO EN Group, we will continue to refine the Consistent Initiatives Aimed at Caring for report’s content selection process to ensure the most rational the Environment methodology going forward. Guidelines Consulted 9 Bonding with Regional Communities GRI Sustainability Reporting Guidelines Version 3.1 Through Tea Environmental Reporting Guidelines (2012 Version), Ministry of the Environment International Standard ISO 26000 and JIS Z 26000 regarding social 11 ITO EN Group CSR responsibility Organizations Addressed in This Report ISO 26000 Activity Report: Core Subjects In principle, this report covers the scope of the ITO EN Group’s CSR activities. In instances where the content refers to organizations other 17 Organizational Governance than the ITO EN Group, such organizations are specified accordingly. Time Period Addressed by This Report 19 Human Rights Focusing on activity in fiscal 2011 (May 1, 2011–April 30, 2012), this report also includes some reporting on activity prior or proximate to this period. 20 Labor Practices Assignments and position titles of concerned parties mentioned here are those held at the time of the activities reported. 23 The Environment The content of this report and related information are published on the 33 Fair Operating Practices ITO EN website: http://www.itoen.co.jp/csr/ Period of Issue: ‌Published September 2012; next issue scheduled for 35 Consumer Issues publication: September 2013 Previous publication: S-book Social/Environmental Report 2011 39 Community Involvement and Development Disclaimers 44 Main Initiatives of Group Companies This report contains statements of plans and strategies, as well as performance estimates and forecasts, regarding the future of the ITO EN Group. These statements 46 Third-Party Opinions/Response to Third- are forward-looking statements based on Group assumptions and beliefs that reflect information available at the time. Party Opinions

Performance

Net Sales (Consolidated) Operating Income (Consolidated) Ordinary Income

(Millions of yen) (Millions of yen) (Millions of yen) 500,000 24,000 24,000 19,236 18,907 369,284 18,215 351,692 17,679 16,526 17,985 375,000 328,071 332,847 332,984 18,000 18,000

12,453 11,679 250,000 12,000 10,613 12,000 10,376

125,000 6,000 6,000

0 0 0 ’08 ’09 ’10 ’11 ’12 ’08 ’09 ’10 ’11 ’12 ’08 ’09 ’10 ’11 ’12 (April 30) (April 30) (April 30)

Sales by Region (Non-Consolidated) Sales by Product (Non-Consolidated) Number of Employees (Non-Consolidated)

Tea leaves: 8.8% Japanese tea beverages: 48.8% (Employees) 5,346 6,000 Chinese tea beverages: 4.7% 5,223 5,237 5,278 5,285 Hokkaido/Tohoku: 10.4% Vegetable beverages: 12.9% Kanto: 54.2% 4,500 Fruit beverages: 3.9% Chubu: 9.6% Coffee beverages: 6.9% Kansai: 12.6% 3,000 Black tea beverages: 5.1% Chugoku/Shikoku: 5.8% Functional beverages: 1.8% Kyushu: 7.4% 1,500 Mineral water: 2.6% Other beverages: 3.7% 0 Supplements and other: 0.9% ’08 ’09 ’10 ’11 ’12 (As of April 30, 2012) (As of April 30)

ITO EN CSR Report 2012 2 Top Message Through CSR management we aim to contribute to the sustainable development of society in our quest to become a “Global Tea Company”

Bringing the appeal and culture of green To fully realize our principle of “Always tea to the world through distinctive Putting the Customer First,” we are ITO EN initiatives moving forward with CSR by using the international standard ISO 26000

Recently, social conditions surrounding the business world Since our establishment in 1966, ITO EN has adopted the core have undergone rapid changes. Just as the recession management principle of “Always Putting the Customer First” following the financial crisis of 2008 was showing signs and a corporate credo stating that “in putting the customer first, of abating, the Great East Japan Earthquake and nuclear we shall make it our policy to sell with sincerity, never neglect our accident that occurred in March 2011 had a major impact on efforts, and earn the trust of our customers.” Additionally, our Japan’s economy and industry. entire staff continually seeks to implement our core management Furthermore, the historic appreciation of the yen and principle by conscientiously identifying, and addressing through instability in the European financial system dealt a severe our products and services, the opinions and expectations of blow not only to Japan but to the global economy as a whole, consumers. This attitude is also reflected in our current CSR making 2011 a year in which the business environment was initiatives, and the philosophy represented by the fundamental severely impacted. In the midst of these circumstances, CSR principles of the ITO EN Group since it was first founded. the ITO EN Group devised medium-term and long-term In order to realize our medium-term and long-term management management plans commencing in fiscal 2011. Based on our plans begun in fiscal 2011, we are prioritizing and promoting a management principle of “Always Putting the Customer First,” further strengthening of CSR as an important strategy. In fiscal our medium-term plan calls for a sales target of over ¥400 2011, a system was created that included the establishment of a billion and an operating profit target of ¥23 billion by April CSR Promotion Committee, with myself as chairperson, for the 2014. At the same time, we have adopted a long-term vision purpose of using the international social responsibility standard of aiming to become a comprehensive beverage manufacturer ISO 26000, published in November 2010, and the domestic as well as a “Global Tea Company.” Tea, the Group’s core standard JIS Z 26000, subsequently enacted in March 2012. product, is natural in origin, healthy for the body, and makes a To assume responsibility for these programs, the Management wonderful addition to any meal. Whether conveying the appeal Planning Department’s CSR Promotion Office was established in of Japanese tea and its tea culture as enjoyed in Japan, such fiscal 2011, and in fiscal 2012 the CSR Promotion Department as seasonal shincha (newly harvested tea) throughout the was created with the added responsibility for Environmental year, or by providing quality black or Chinese tea varieties to Initiatives. It was our aim to promote CSR activities so as to the people around the world, it is our ongoing aim to become systemize our efforts to date, resulting in increased employee a “Global Tea Company.” awareness and communication with stakeholders.

3 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Through conversation with our stakeholders, community involvement and development. Processes such we can respond to expectations from as this formulation of policy by incorporating input from our society in three key areas of emphasis stakeholders and the review of activities of PDCA protocol are most essential in our view to promote CSR. In fiscal 2011, after seriously factoring in the views of our stakeholders gleaned through dialogue, among other means, Aiming to contribute to socially and in accordance with “stakeholder engagement” stipulated in environmentally sustainable development ISO 26000, we proceeded with the following activities. We believe that each of these areas represents an aggravation of If we are to be a company appreciated by everyone in risk if left untended, and conversely, an opportunity to create the regions where we operate, it is vital that each of our new value for society if squarely faced and dealt with. employees practice CSR with integrity through our business The first of these is our response to consumer issues. We activities. Currently at ITO EN, we have sales bases throughout believe that product safety and security are the fundamental Japan and continue to pursue our Route Sales system, reference point for the food industry, and the Group has fostering strong roots in our local communities. Moreover, always tackled the issue of quality control with thoroughness our Tea-Producing Region Development Project is spreading from raw ingredients all the way to the final product. Our throughout the Kyushu region, working in cooperation with confidence stems from an uncompromising dedication regional farmers and governments to revitalize abandoned to quality and a degree of professional earnestness that agricultural land and more. The communication that develops continues to win us the support and trust of our customers. between customers and participants as a result of these We were swift to implement measuring equipment to respond activities plays a significant role in creating bonds of trust to the issue of radioactive substances, creating a system that with the local community. I am convinced that this attitude is ensures our customers are able to enjoy our products with extremely vital wherever we are working. complete peace of mind. With respect to product development, the Company The second area of focus is our end-to-end methodology developed and launched Kan-iri Uron-cha (canned oolong in contributing to the solution of environmental issues. From tea beverage) in 1981 and Kan-iri Sencha (canned green tea reducing negative environmental impact at the procurement beverage) in 1985, thereby creating and further developing a stage through the recycling of containers after consumption sugar-free beverage market. Recently, we are challenged to by our customers, we employ a comprehensive approach in respond to a renewed health trend borne out of demographic caring for the environment. We are also putting more effort factors such as lower birthrates and an aging society. This than ever into our Used Tea Leaves Recycling System, a trend is also gaining momentum overseas, and the ITO EN proprietary product development technology that employs Group continues to maintain a frontier spirit, pursuing its tea leaves used in the beverage production process to create vision as a “Global Tea Company” by reinforcing its overseas products for daily use. business development in such areas as global expansion The third area of focus is community involvement. In of sugar-free beverages and the promotion of tea culture particular, in fiscal 2011 our activities focused on response worldwide. Through these efforts, we intend to provide solid to the Great East Japan Earthquake. With the occurrence value by creating a new gastronomic culture in various parts of of this unprecedented catastrophe, the Group engaged in a the world and contributing to quality of life. fundamental review of how to contribute to society. In addition It is my belief that amidst the intense changes of to initiating relief efforts such as shipping beverage products globalization, our ongoing anticipation of internal and external to the affected areas immediately following the disaster, we issues in the pursuit of CSR activities will contribute to socially held “Ochakko-kai” tea events to provide a few moments of and environmentally sustainable development and realize new refuge over tea to earthquake victims. In time of need, we value creation and shared value for our stakeholders. provided help where help was needed. Going forward, we intend to continue our support of the recovery in the stricken regions. While working to promote the implementation of these activities, we determined a new ITO EN Group 株式会社ITO EN, LTD. Basic CSR Promotion Policy that reflects the many views Daisuke Honjo, President of our stakeholders. Based on this policy, we are tackling 代表取締役社長 本庄 大介 three major areas in fiscal 2012 to ensure a sustainable social and environmental structure that builds upon our Group strengths: the environment, consumer issues, and

ITO EN CSR Report 2012 ITO EN CSR Report 2012 4 Special Feature Special Providing Safe, Reliable Products Plant tour by consumer affairs expert Hisa Anan

In commemoration of our 20th factory festival at ITO EN’s Shizuoka Sagara Factory on October 15, 2011, a stakeholder dialogue session was held. On the preceding day, consumer affairs expert Hisa Anan (National Liaison Committee of Consumer Organizations) toured the Shizuoka Sagara Factory, and Second Production Department Head, Yasumitsu Tokuhara, responded to questionsMs. Anan from pictured Ms. Anan. in the photo

Q What approaches are you implementing Q What is the traceability system that to ensure product quality? Moreover, ITO EN rigorously implements? please convey any type of engagement or innovation that you might have to further improve quality. The traceability system is a mechanism that A compiles and retains records of each step of the manufacturing process, from production through to sale At ITO EN, we engage in production outsourcing of the product, including suppliers, sellers, production/ A (manufacturing planning, etc., is conducted in- manufacturing methods, etc. In the unlikely event that house, and actual manufacturing is outsourced), and any problem with a food product should occur, it would our manufacturing takes place throughout Japan in an be possible to retrace its history and swiftly determine excellent system of cooperation with our outsourced the cause of the problem, preventing accidents before production partners. they happen and/or preventing recurrence in the future. The ITO EN Quality Control Department conducts ITO EN has established a mechanism by which inspections at the raw material stage to detect pesticide the manufacturing factory, date of manufacture, raw residue. Both the ITO EN Quality Control Department materials used, and farmer’s conditions of cultivation and our outsourced production facility partners conduct can all be determined by retracing by the lot number product flavor and equipment analysis, as well as that is printed on the final green tea product (beverages inspections to detect microorganisms. or tea leaf) that reaches the customer.

ITO EN products are manufactured at factories that Traceability Approach (Basic Flow of Green Tea Beverages) meet our quality control standards (beverage production and tea leaf production guidelines). By sharing information ‌Written pledge clarifying appropriate Tea on a daily basis and through quality assurance meetings use of pesticides Producer ‌Recording of plantation and cultivation with factory personnel across the country, we aim to data achieve ever-higher standards of safety and security in product manufacturing. ‌Written pledge and certification covering safety of raw tea leaves In addition, we have devised a quality management Raw Tea Leaf List of pesticides used at each factory ‌Recording of raw tea leaf manufacturing system based on ISO 9001 as part of our efforts to further Factory reinforce our quality control system. Going forward, every and management data Producer information employee strives to achieve the finest quality and security in the manufacture of our products, working to enhance Tea ‌Contract covering safety of tea to production through PDCA methodology. Wholesaler be sold Raw tea leaf factory data Also, we are proceeding with preparations to implement (Intermediary) the international standard FSSC 22000 concerned with ITO EN food safety. Shizuoka ‌Documentation of processes Sagara encompassing raw tea leaves to beverage ingredients Factory

Beverage ‌Documentation of processes Factory encompassing beverage ingredients to green tea beverages

Retailer

Customer

5 ITO EN CSR Report 2012 In manufacturing, water is as important Q How is the use of pesticides ascertained Q an element as the tea leaves used. and managed? What kind of water do you use and how is it managed?

A At ITO EN, daily work processes are recorded as part of our traceability system, but confirmation A For its green tea beverages, ITO EN uses “purified and inspection of pesticides are particularly water” in which mineral content is removed by emphasized. Written pledges are exchanged with ionic exchange. For the most part, purified water is our procurement suppliers, specifying proper use used, but there are some “natural water” products that of pesticides. Furthermore, scrutiny of the pesticide contain minerals not removed by physical or chemical sections of the cultivation management records kept treatment aside from deposition, filtration, or heat by our tea producers is particularly emphasized to sterilization. The testing and management of water manage pesticide use and volume documentation. quality are conducted according to legal standards, The raw leaves are subjected to physicochemical and only water that passes inspection is used. inspection (pesticide residue/component analysis) to ensure that only products demonstrating quality and safety are used.

Q Disclosure to the consumer is important, including with regard to radioactive substances. This is so that consumers can make the right choices based on the disclosed information. How do you intend to pursue product display and information disclosure going forward?

Q Radioactive substances have been A In response to the needs of our customers, we a major issue since the disasters conduct inspection for radioactive substances, of 2011. How do you manage and disclose on our website efforts to reduce contamination at the production stage for raw tea leaves, and respond inspect for these? flexibly to inquiries from our customers. In addition, the region of production for main beverage products is specified on our website as well as in the QR code A Based on standards for radioactive substances in displayed on product packaging. food applied in April 2012, we employ a system using two germanium semiconductor detectors and two automatic gamma counters to inspect every lot of product. Moreover, the water (purified water or natural water) used for our beverage products is inspected at each factory every manufacturing day to ensure safety. Every lot of domestically grown tea leaves used as raw materials in tea leaf and beverage products is also subjected to inspection. All lots of raw materials for farm products other than tea are also subjected to inspection. (From a dialogue on October 15, 2011) Post-tour observations Hisa Anan National Liaison Committee of Consumer Organizations As a result of this factory tour, it was my impression that thorough quality control Inspection scenario with germanium semiconductor detector is being performed. From the tour I could The standard value used for inspection is less than 10Bq*/kg or 50Bq/kg for easily see how proper checks are performed general foodstuffs and mainly beverage products, tea for drinking (extracted liquid), water used, milk, and dairy beverages. and safety is ensured for the final product. It was an excellent demonstration, and it seems to me that children and consumers would learn a great deal from touring the facility. Moreover, since consumer interest in issues surrounding radioactive substances is so high, communicating inspection Inspection scenario with NaI scintillation-type automatic gamma counter results to consumers will enable them to make informed The standard value used for inspection is less than 100Bq/kg for general foodstuffs and tea leaves (raw and processed tea). choices. In nutritional education activities, I encourage this type * Bq = becquerel of dissemination of information and clarification.

(The responses given are based on content from April 2012.)

ITO EN CSR Report 2012 6 Special Feature Special “From the Tea Plantation to Used Tea Leaves,”

Raw Material Manufacturing Procurement

Delicious tea comes from great tea plantations. Strict quality control and manufacturing Our Tea-Producing Region Development Project initiative processes for environmental consideration

The delicious flavor of Oi Ocha is created by high-quality All raw materials supplied from across the country are tea leaves. ITO EN conducts “direct purchasing” in which conscientiously subjected to ITO EN quality inspection. At the our employees themselves visit tea-producing regions and Shizuoka Sagara Factory, all incoming tea leaves are thoroughly tea markets to carefully purchase quality-inspected tea inspected using sensory inspection, inspection for pesticide leaves. We are also engaged in the Tea-Producing Region residue, microorganisms, and radiation, and component analysis Development Project aimed at cultivating flavor from the point inspection. Only those tea leaves that measure up to such of production for some of our raw materials. Our employees standards are transported to the beverage manufacturing facility. work together with tea producers to improve tea leaf quality The bulk of ITO EN product manufacturing is outsourced. All in our contract cultivation plantations, and as of April 2012, of the outsourcing factories are in compliance with the hygiene the formerly abandoned cultivated land, converted to actively management standard and environmental standards required by producing tea plantations, had increased to 845 hectares. ITO EN, and conduct beverage manufacturing under strict quality In the tea cultivation for our Oi Ocha product, we employ control. expertise, technology, and innovation gained over many Part of the production facility for Oi Ocha has introduced a years, carefully ascertaining appropriate fertilizer and pesticide production line termed NS (Non-Sterilant) System, which was amounts and timing according to tea field conditions to jointly developed with TOYO SEIKAN KAISHA, LTD. This is a improve quality and yield while minimizing environmental manufacturing system utilizing a room-temperature aseptic filling impact. Moreover, we method to sterilize PET bottles without a sterilizer, an eco-friendly promote recycling-based feature that makes unnecessary the large volumes of water agriculture using soil needed to rinse sterilizers. enriched with compost from food residue and Note: The NS System is also featured in more depth in the Consumption section to the right, as well as in The Environment section (see livestock waste from the page 30). surrounding regions. What do you do with the used tea leaves left over from manufacturing?

Examples of used tea leaf recycling initiatives at each stage Applying ITO EN’s strengths resulted in the Note: Details of used tea leaf recycling are featured in the Environment section (see pp. 31–32). Used Tea Leaves Recycling System

Tea beverage production produces about 47,000 tons of used Manufacturing Sales (circulation) Consumption tea leaves annually. Although most of this is reused as fertilizer The bulk is recycled as Corrugated cardboard Empty beverage container and fodder, ITO EN developed a proprietary Used Tea Leaves fertilizer and fodder in made with used tea leaves collection bin made with used Recycling System that effectively employs these used tea leaves, the areas surrounding tea leaves combining them with a broad range of everyday products such as outsourced beverage paper products, boarding, resin, construction materials, and more. manufacturing facilities. Since the leaves need not be dried but can be combined with paper and other materials while still moist, the aim is to achieve resource conservation by reducing the use of precious resources such as paper. Furthermore, the CO2 emissions normally produced by consuming fossil Three Environmental Benefits Expert Opinion (From a dialogue on September 20, 2011) fuels during the drying process are curbed. Yoichi Kaya, President, Research Institute of Innovative As outlined above, this Resource conservation Technology for the Earth (RITE) system provides the three environmental benefits of Used tea leaves possess beneficial qualities such as resource conservation, CO2 Three environmental fragrance, deodorization, and antibiotic properties. reduction, and recycling. benefits I believe that employing these benefits in recycling In recognition of these reflects a high level of environmental awareness. points, ITO EN has been Going forward, it will be important to apply this CO2 honored with a wide range Recycling approach to long-lasting products as well. reduction of environmental awards.

7 ITO EN CSR Report 2012 Consistent Initiatives Aimed at Caring for the Environment

Sales Consumption消費

Introduction of eco-friendly vehicles in Eco-friendly, lightweight PET bottle Route Sales and promotion of eco-driving development and employment

The Route Sales System: A network of about 200 sales bases The NS (Non-Sterilant) System reduces the quantity of water nationwide that enables our sales force to deliver products directly used in the manufacturing process, and has an environmental to our business customers. Through this community-based sales benefit as well. The NS System is a room-temperature aseptic system, we aim to provide products and services that reflect the filling method that does not use a sterilizer to sterilize PET viewpoints of our customers. ITO EN owns approximately 3,600 bottles. Since heat resistance of PET bottles may be lower sales vehicles (as of April 2012) to conduct Route Sales. This than that of the warm water filling method, 500ml makes the reduction of energy use for each vehicle an important PET bottles achieved a weight reduction of about issue in controlling air-polluting emissions. In addition to switching 30% compared with conventional bottles. 500ml to eco-friendly vehicles, we are encouraging everyone in our sales PET bottles are 19g lighter and are used together force to embrace eco-driving. with ultra-thin labels, enabling us to achieve reductions both in resources used in the packaging process and also in energy required in the delivery process saved by the lighter overall product weight. Note: ‌Sales regions for products manufactured using the Lightweight NS System are Kanto, Kansai, Chugoku, and part of PET bottles the Chubu region. (As of April 2012)

Facilitating waste classification with easy- to-remove labels requested by customers

To make trash sorting easier, our customers requested PET Reducing power consumption in our bottle labels that are easy to remove. To reflect this, we vending machines adjusted the hole size and spacing of perforation to make the labels easier to grip and to remove with less effort. This Vending machines are one of our important sales channels, but approach contributes to ease of waste classification and conversely they must be considered in terms of their negative operational efficiency in PET bottle recycling. environmental impact. ITO EN promotes the following approaches to reducing power consumption and environmental engagement What happens to containers after drinking? to respond to the conditions dictated by electricity supply and demand.

1. Reducing power consumption Container recycling · ‌Installation of heat pump-type vending machines that consume After beverage consumption, the less power containers are collected by municipalities - ‌As of April 2012, about 70,000 were and ITO EN salespeople and recycled. installed (approximately half of the total of vending machines installed). ITO EN actively adopts products made - ‌Our target operation ratio for the end of from recycled PET bottles such as fiscal 2013 is to exceed 60% heat pump- uniforms and empty container bins. type vending machines Heat pump-type vending · LED lighting machine · ‌Automatically activated lighting and reduction of lighting function Expert Opinion (From a dialogue on October 24, 2011) · Eco-vendor function (peak cutting function for refrigeration) · ‌Partial cooling and warming Tetsushige Nishio, Professor, School systems of Law, Meiji University · Adoption of vacuum heat insulator · ‌Promotion of switching off unused In addition to striving on behalf of consumers, ITO lights, etc. EN works to become part of the local community at 2. ‌Environmental and landscape the beginning of the supply chain through its regional stewardship development efforts, and continues to participate in the · Eco-friendly vending machine community after production through its Route Sales System. The interesting (employing resin made with used point here is how ITO EN, by serving as a B to C enterprise in this way, is able Vending machine employing to place great emphasis on CSR in terms of consumers and the environment. tea leaves) resin made with used tea leaves

ITO EN CSR Report 2012 8 Special Feature Special Bonding with Regional Communities Through Tea Relief efforts for areas affected by the Great East Japan Earthquake

Since the Great East Japan Earthquake, residents of the stricken areas have overcome many obstacles in striving toward recovery. At ITO EN, we engage in ongoing relief efforts under the concept of “Bonding through tea.” Here we will introduce the way in which we forge these bonds in a very uniquely ITO EN approach.

Policy in the Tohoku region Concept “Bonding 1 Assist the Tohoku region continuously and earnestly 2 Implement support according to the needs of the Tohoku region

through tea” 3 Make the most of the ITO EN approach by focusing on green tea in implementing assistance

ITO EN’s “heart” for relief efforts

ITO EN believes that continuation of sustained, earnest to the region, and we hold “Ochakko-kai” tea events at support activities based on the government and municipality temporary shelters, offering sustained support that responds recovery policy is the top priority in realizing the quickest to the needs of the region through close, direct involvement. possible recovery. On that basis, our “heart” for relief efforts Going forward, we intend to engage in a broad range of is expressed by engaging through green tea, a comforting activities to best be of service to everyone in the affected areas hallmark of the Japanese lifestyle, to provide a healing space by listening to the counsel of local experts and specialists, in to help the victims recover even a hint of their daily lives and our efforts to make the most of the ITO EN approach through regain energy. More specifically, we have established a “one our focus on green tea. yen for every product sold fund” whose proceeds are donated

Japanese Red Cross “One yen for every product sold Donated to fund” donations Society Amount of Approximately 400 For the period of May 1–August 31, 2011, the Company contribution million yen set aside one yen for every designated product* sold Relief and condolence money to support the Great East Japan Earthquake relief Use (compensation) to people in of 15 prefectures stricken by the efforts. During this period our total sales were around funds Great East Japan Earthquake 700 million units, and so the fund grew to a total of approximately 700 million yen. These proceeds will Fukushima Prefecture, be used as relief donations and support funds for Donated to Miyagi Prefecture, and earthquake survivors and regional reconstruction. Iwate Prefecture * Designated products: Japanese tea beverage Oi Ocha, black tea Amount of 100 million yen for each beverage TEAS’ TEA, coffee beverage TULLY’S COFFEE, and Japanese Red Cross Society President contribution prefecture all vegetable beverages in PET bottles and cans including Jujitsu Tadateru Konoe (left) and Education support for Yasai (vegetables galore) and Ichinichibun no Yasai (a day’s worth of ITO EN President Daisuke Honjo Use of children affected by the vegetables) funds Great East Japan Earthquake

Holding “Ochakko-kai” tea events

When friendly neighbors in the Tohoku region want to ask each Welfare Cooperation Council, and held “Ochakko-kai” events other “How about a cup of tea?” they use the phrase “Ochakko 10 times between November 2011 and April 2012. Moreover, in shiyo ka?” and gather to chat about all sorts of things. Because fiscal 2012 we are scheduled to expand these events to cities we wanted to help encourage everyone in the areas affected by including Ofunato and Kamaishi in addition to Rikuzentakata, the earthquake to continue enjoying “bonds and connections,” holding the events with a sustained frequency of three or four ITO EN continues to hold “Ochakko-kai” tea gatherings in the times per month. temporary shelters on a regular basis. In the city of Rikuzentakata in Iwate Prefecture, we obtained the cooperation of the city’s

9 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Holding “Ochakko-kai” tea events Field Report Nagahora Ward Temporary Housing, Rikuzentakata, Iwate Prefecture (Held on April 10, 2012)

On April 10, 2012, 13 people including infants and the elderly participated in an “Ochakko-kai” at Nagahora Ward Temporary Housing. An accredited graduate of our proprietary tea certification system, “Tea Taster System,” served as lecturer, and introduced participants on “how to prepare delicious tea.” With a basic theme of how the flavor changes depending on the temperature of the hot water and the amount of leaves, participants actually experienced a broad range of tea preparation styles, enjoying the subtle differences in taste and aroma. Participants praised the event with comments such as “It was my first time to try chilled tea, but it was mellow and delicious” and “I was happy to learn how to prepare my daily tea more tastily.” The same location is home to Kesen tea, known as one of the “teas in the northern limit,” and tea culture has firmly taken root in the region where people live who have experienced tea-making as children. Listening to reminiscences from those times in a relaxed atmosphere, the event became the venue for an active exchange between participants and ITO EN.

Opinions from Concerned Parties

Expert Opinion (From a dialogue on September 6, 2011)

Makoya Kageyama, Center Chief, CSR Center LLP, Kaori Kuroda, Managing Director, CSO Network Japan Yokohama City University When speaking of “working with local Disaster relief efforts must be based on communities,” I think it is advisable to the major premise of understanding local coordinate with well-informed stakeholders needs and issues. The fact that the company such as people on the ground, both official and president himself traveled to the stricken areas unofficial, networks of NPOs and NGOs, and immediately after the earthquake, and made so on. Considering how to contribute to local subsequent efforts to understand the current communities will result in more effective activity situation and demonstrate support, are points to on that basis, I believe. be appreciated.

ITO EN CSR Report 2012 ITO EN CSR Report 2012 10 ITO EN Group CSR

Basic CSR promotion policy and CSR target delineation process The ITO EN Group’s medium-term to long-term management plan is to establish itself as a “Total Beverage Manufacturer in Japan” and further declares the vision to become a “Global Tea Company.” One of the pillars of that basic strategy is “Reinforcing CSR Management.” In order to bolster our promotion of CSR, a CSR Promotion Committee was established in fiscal 2011, with our President as its chairman and composed of individuals responsible for production, sales, and management departments. In addition, the Basic CSR Promotion Policy and CSR targets were devised to reflect stakeholder input. Our CSR promotion strives to integrate the international CSR standard ISO 26000, guided by the seven principles of socially responsible behavior as outlined in the standard: accountability, transparency, ethical behavior, respect for stakeholder interests, respect for the rule of law, respect for international norms of behavior, and respect for human rights. These key principles are then applied to the seven core subjects that characterize socially responsible areas of focus, as specified in ISO 26000: organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development. Moreover, in order to fully understand expectations from society and prioritize internal Group roles and responsibilities, we employed a process that emphasizes stakeholder engagement through dialogue.

Understanding expectations from society and President Step1 prioritizing ITO EN Group roles and responsibilities Executive Board Meeting CSR Promotion Committee ‌Establishment of CSR Promotion Committee, with our President as chairman Secretariat: ‌Understand and meet expectations from society, according to the core CSR Promotion Office* subjects of ISO 26000 *CSR Promotion Examine the roles and responsibilities that the ITO EN Group should fulfill All posts/bases Department as of fiscal 2012

Conduct stakeholder dialogues ‌Conduct dialogue sessions four times, conduct hearings with local government and CSR Step specialists, etc., and gain an understanding of stakeholder needs and intentions 2 ‌Focusing on the CSR Promotion Office, confirm approach status with related posts, and conduct opinion exchange based on needs and requests from stakeholders

Determine basic CSR promotion policy and CSR targets ‌Based on an understanding of the content of the above intentions and opinion exchanges, etc., Step draw up the Basic CSR Promotion Policy, and formalize it internally 3 ‌Set CSR targets in accordance with the Basic CSR Promotion Policy and through examination by the CSR Promotion Office and related posts and internal processes

Step1 Understanding expectations from society and prioritizing ITO EN Group roles and responsibilities The expectations from society were understood and aligned with the issues enumerated for each of the seven core subjects of ISO 26000. Based on this understanding, the ITO EN Group roles and responsibilities were examined by the CSR Promotion Committee, and prioritized as follows.

Core Subjects of ISO 26000 Expectations from Society (Point of ISO 26000) Roles and Responsibilities of the ITO EN Group

Soundness of decision-making process and ‌Building a sound corporate structure based on our management Organizational the active conduct of business operations of principle: “Always Putting the Customer First” Governance an organization that influences sustainable Securing transparency, soundness, and regulatory compliance development of society and the environment Timely and appropriate disclosure of information ‌Development of business conduct in which basic human rights are Respect for human rights Human Rights respected ‌Enhancement of workplace environment to ensure that each employee can flourish and work with consideration for work–life Labor Practices Respect basic principles and rights of labor balance and diversity Promotion of ability improvement of employee ‌Implement ISO 14001, grasp the environmental impact of the Introduction of integrated approach to reduce entire supply chain, and voluntarily promote compatibility with The Environment environmental impact sustainable environmental conservation and nature

Ethical action when having dealings with other ‌Earnestly accept all customer expectations and wishes and Fair Operating Practices organizations and individuals sincerely respond to them by conducting ethical behavior ‌Based on a strict quality assurance system covering every stage Assume responsibility for the consumers and of the supply chain, provide products and services that conform to Consumer Issues customers who provide the products and services the product development concept Community involvement and participation for the ‌In response to the many factors that regional communities must deal purpose of contributing to community development Community Involvement with, including food, industry, the environment, and culture, promote must reinforce the strengthening of regional activities through our core business that contribute to the development and Development communities, and contribute to value enhancement of regional communities for regional communities

11 ITO EN CSR Report 2012 Step2 Conduct stakeholder dialogues

Based on the expectations from society and ITO EN Group’s roles and responsibilities, etc., that were understood and prioritized through Step 1, we conducted stakeholder dialogues. Also, giving due attention to the process of stakeholder engagement set forth in ISO 26000, we conducted not only the four dialogue sessions, but also conducted hearings with local government leaders and CSR specialists, the media, and so on. These became an opportunity to share issues and needs faced by society and expectations of the ITO EN Group with the many stakeholders involved with the ITO EN Group, bringing to light many matters related to the formulation of our Basic CSR Promotion Policy and CSR Targets.

The 1st Stakeholder Dialogue September 6, 2011 (ITO EN Headquarters) Stakeholder Dialogue Concerning Used Tea Leaf Recycling Theme: What approach to CSR would befit ITO EN in promoting CSR September 20, 2011 (Meiji Kinenkan) that conforms to ISO 26000? Theme: Toward future development of the Used Tea Leaves Recycling System

Ayako Ehara Makoya Kageyama Kaori Kuroda Yoichi Kaya Mariko Kawaguchi Kazuya Kojitani Professor Emeritus, Center Chief, CSR Managing Director, President, Chief Researcher, Managing Director and Tokyo Kasei Gakuin Center LLP, Yokohama CSO Network Japan Research Institute of Research Division, Secretary-General, University City University Innovative Technology Daiwa Institute of Green Purchasing for the Earth (RITE) Research Ltd. Network

(Partnering enterprises of the Used Tea Leaves Recycling System also participated) Hiroji Tanaka Tetsushige Nishio Masami Hadama Hiroji Tanaka Yoriko Tobe President, Professor, Lawyer, President, Senior Researcher, Tokyo College of Transport School of Law, Meiji TMI Associates Tokyo College of Transport Consumer Research Institute, Studies University Studies NACS

Shizuoka Sagara Factory, The 2nd Stakeholder Dialogue October 24, 2011 (ITO EN Headquarters) Factory Festival Stakeholder Dialogue October 15, 2011 (Shizuoka Sagara Factory) Theme: CSR capitalizing on ITO EN characteristics and its future Theme: Concerning the approach related to regional society, the development environment, dietary education, health, and food safety

Akikuni Ushikubo Makoya Kageyama Masami Kojima Eiichi Sato Hisa Anan Mami Oku Kazumi Oguro President, Center Chief, CSR Member of Editorial Board, President, National Liaison Committee Professor, Editor-in-Chief, Gekkan Tokyo University of Center LLP, Yokohama Lifestyle Information Sukoyaka Dietary of Consumer Organizations Tokyo Metropolitan Sotokoto Monthly Information Sciences City University Department, Life Public Interest University Magazine Mainichi Newspapers Foundation President, Kirakusha, Inc.

Hiroji Tanaka Yoriko Tobe Tetsushige Nishio Kazuhiko Noguchi Shigeki Nishihara Yoshikazu Yagi Katsuyuki Minami President, Senior Researcher, Professor, Research Fellow, Mayor of Makinohara, Superintendent Vice President, Tokyo College of Consumer Research Institute, School of Law, Meiji Mitsubishi Research Shizuoka Prefecture of Education, Kitasato University Transport Studies NACS University Institute, Inc. Makinohara, Shizuoka Prefecture

Notes: 1. Affiliations and position titles are those current at the time. 2. Views of the participants are presented in the Special Feature section and in the Activity Report on the seven core subjects. 3. Participant names are ordered according to the Japanese phonetic alphabet. ITO EN CSR Report 2012 12 Opinions and Suggestions from the Dialogues and ITO EN Group Approaches

In the dialogues, views were exchanged with external specialists on a wide variety of topics, and we received valuable opinions and suggestions with respect to our CSR initiatives. Here we present the views and Dialogue participants suggestions received and the corresponding ITO EN Group initiatives, prioritized by the core subjects as defined in ISO 26000.

Directors and employees of ITO EN participating in the dialogues

ISO Core Subject Main Opinion/Suggestion ITO EN Group Initiatives

Creating a friendly organization is the Regarding compliance, our promotion focuses on responsible, essence of organizational governance, and educated personnel, but as you point out we also want to value the interpersonal communication is vital. communication aspect of the initiative. Organizational Governance

CSR system implementation should be We will bolster our Groupwide approach going forward. Groupwide.

Interpersonal communication is important. Codes of acceptable practices and standards of behavior Human Rights Respect individual differences and build outlining respect for basic human rights have been developed and shared understanding on that basis. disseminated throughout the organization.

Further maintenance of a pleasant We are committed to further improving work–life balance and workplace and more complete work–life Labor Practices enhancing development of a pleasant working environment. balance measures are desirable.

For food and beverage manufacturers, We promote our Used Tea Leaves Recycling System, which, together reduction of waste volume (generation with our Tea-Producing Region Development Project, promotes end- control) is an issue in addition to the to-end (from tea plantation to used tea) environmental consideration. improvement of the recycling rate. The Environment We are aiming for the installation of heat pump-type vending It is important to actively promote the machines to exceed 60% by fiscal 2013, in our efforts to reduce reduction of power consumption in vending power consumption, and we continue to make further progress machines and efforts toward eco-friendly toward reduced fuel consumption by our sales vehicles based on sales vehicles to prevent global warming. targets we have established.

Supply chain management must be We recognize situational awareness of procurement sources around Fair Operating Practices structured from a global perspective. the world as an issue concomitant with globalization.

It would be desirable to take advantage of We are committed to the traceability system as a pillar of our overall the traceability system to facilitate prompt quality control system, which oversees our entire supply chain, transmission of information and further through which we deliver products of high value to our customers. quality enhancement. Consumer Issues I’d like to see the needs of the aged and We will continue to emphasize customer feedback and our product the handicapped further reflected in the development concepts of “natural,” “healthy,” “safe,” “well-designed,” making of your products. and “delicious” as we engage in product development going forward.

I can appreciate that your Tea-Producing Region Development Project contributes in In the future, we will continuously pursue business in a manner that areas such as reclamation of abandoned contributes to the profit of our agricultural producers and regional cultivated land and revitalization of regional communities. Community Involvement agriculture. It is important to focus on regional and Development We are boosting activities that bond us to regions with participation characteristics such as “cuisine,” “culture,” in regional culinary and environmental events around the country, as and “the environment,” and to promote well as cultural events such as large-scale tea parties and the like in revitalization in coordination with the various regions. regional populace.

13 ITO EN CSR Report 2012 Dialogue Considering ITO EN Group Stakeholder Engagement

From the perspective of ISO 26000 implementation and stakeholder engagement, Hiroji Tanaka and Hidemitsu Sasaya, the Manager of CSR Promotion Office, held a dialogue to consider the extent to which the ITO EN Group engages in CSR going forward, based on other dialogues to date.

Mr. Sasaya: In fiscal 2011, the ITO EN Group mapped out a Mr. Sasaya: It’s important to see how the valuable opinions we medium-term to long-term management plan that included a three- received on the one hand will be reflected in our management year medium-term management plan, establishing its status as “A and CSR activities as set out in ISO 26000, and how they will Total Beverage Maker in Japan” and, for the future, proclaiming contribute to sustainable development through our principal the vision of “Aiming to Become a Global Tea Company.” Since business. For instance, in the second dialogue we heard the view CSR management was deemed to be a key pillar of this effort, and that of the seven core subjects outlined in ISO 26000 we would in order to properly emphasize activities based on an international be especially able to leverage the strengths of the ITO EN Group’s perspective, we considered introducing the international standard principal business to develop three—consumer issues, the for social responsibility, ISO 26000, and since fiscal 2011 we have environment, and community involvement and development—and, decided to apply ISO 26000 in our promotion of CSR. as such, we should proceed selectively with those three.

Mr. Tanaka: ISO 26000 is a standard that took six years to Mr. Tanaka: I do think that you ought to proceed by positioning develop through debates with a wide variety of stakeholders, those three as select themes that work to your core business and is aimed at all organizations around the world (enterprises, strengths. One suggestion for the future might be to hear the universities, hospitals, municipalities, and non-profits). Its aim is to views of a wider scope of stakeholders such as local government promulgate worldwide social responsibility as a guidance standard leaders, consumers, and producers from tea-producing regions, without third-party accreditation. I believe the ITO EN Group has so as to hear an even broader range of stakeholder viewpoints. been a pioneer in promoting CSR by adopting the domestic JIS Z Mr. Sasaya: We would like to review these opinions internally and 26000 version of this international standard in March of 2012. see them reflected in the ITO EN Group’s Basic CSR Promotion Policy and CSR Targets. I’d like to bring the Basic CSR Promotion Mr. Sasaya: In the ITO EN Group, we applied ISO 26000 in Policy and CSR Targets to bear while actively applying the seven CSR promotion by implementing the concept in stakeholder core subjects of ISO 26000 and the three central activities of engagement of promoting CSR by carefully listening to stakeholder business models such as “Route Sales business model,” “product input. In fiscal 2011, we conducted four stakeholder dialogue development concept,” and “grouping.” We plan to engage in CSR sessions and hearings, garnering a wide range of views. based on these while developing them further through the PDCA Mr. Tanaka: I can say that the stance of listening to the opinions cycle approach. Our intention is to reinforce an even broader of a wide variety of people is the appropriate course from the stakeholder engagement going forward. viewpoint of stakeholder engagement, as defined by ISO 26000. Mr. Tanaka: As for the stance of the ITO EN Group that prioritizes I believe that the dialogues turned out to be diverse and profound the seven core subjects of ISO 26000 in the overall picture, this in terms of the overall discussions, the holding of specific is very much the appropriate course to take. I’d like to express discussions on topics such as used tea leaves and production my appreciation for the way in which these form the fulcrum of plants, the attendance of everyone from director-level executives CSR activities, guided by the management principle of “Always including the president to local employees and cooperating Putting the Customer First” and integrated into practical ongoing enterprises, and also in terms of the setting of the themes, the engagement. I anticipate continued timing, and the participants. development in the future.

Hiroji Tanaka Hidemitsu Sasaya President, Director, Tokyo College of Transport Studies Manager of CSR Promotion Office Former Japanese National Committee Member for ISO Working Group on Social Responsibility Former ISO 26000 JIS Integration Committee Member (Involved in integrating ISO 26000 domestically as a committee member)

ITO EN CSR Report 2012 14 Step3 Determine basic CSR promotion policy and CSR targets

Reflecting the stakeholder opinions obtained through Step 2, we proceeded to Step 3 in which the CSR Promotion Committee considered and devised a new Basic CSR Promotion Policy, which was decided in-house, as shown below (April 2012). At the same time, having identified the stakeholders with deep connections to the ITO EN Group, we organized their respective relationships and reviewed the ITO EN Group’s roles and responsibilities toward them. Moreover, in order to develop PDCA cycle-based activities in accordance with the core subjects of ISO 26000, activities to date were systematically analyzed and CSR targets for fiscal 2012 determined. ITO EN Group Basic CSR Promotion Policy Aiming to Become a Global Tea Company

Key Pillars of ITO EN Activities as a Total Beverage Manufacturer Business Model Product Development Concepts Group Power

Community-based Route Sales Natural Healthy Safe Demonstrating Group Synergy End-to-end Supply System Well-designed Delicious

Priority Theme Priority Theme Priority Theme (ITO EN Priority CSR) (ITO EN Priority CSR) (ITO EN Priority CSR) The Environment Consumer Issues Community Involvement Basic and Development CSR Organizational Human Rights Labor Practices Fair Operating Practices Governance

Management Principle: “Always Putting the Customer First” Implemented by Team ITO EN

ITO EN Group Basic CSR Promotion Policy

1. Based on our management principle of “Always Putting the 4. CSR activities will be promoted through application of the international Customer First,” all employees at “Team ITO EN” will conduct CSR ISO 26000 and domestic JIS Z 26000 standards. We will engage in activities as one unit. the seven core subjects set forth in these standards, concerning 2. The ITO EN Group will conduct business activities in such a way as organizational governance, human rights, labor practices, the to respond to the expectations of a broad range of interested parties environment, fair operating practices, consumer issues, and (stakeholders), including consumers, shareholders, customers, community involvement and development. suppliers, financial institutions, local communities, and employees. Based on this, we will position a fulcrum of three main initiatives: the environment, consumer issues, and community involvement and 3. The ITO EN Group will make best use of the pillars of its activities development (our Company’s priority CSR), and actively pursue CSR as a Total Beverage Manufacturer—“business model,” “product in this way. development concept,” and “grouping”—to strengthen its CSR activities through its principal business. 5. Therefore, we will enhance our competitiveness, enhance the Company’s value as expected by society of an enterprise, and aim to become a Global Tea Company.

ITO EN Group Stakeholders

Stakeholders Relationship to the ITO EN Group

Consumers We sincerely respond to the opinions and suggestions of consumers and reflect these in the making of our products.

We disclose appropriate information at the proper time, while carefully listening to shareholder opinions and suggestions at Shareholders shareholder meetings and regular information sessions, and reflecting these in company management.

Customers The ITO EN Group strives to earn trust by building healthy partnerships through the creation of equitable and fair business (Retailers, Suppliers, and relationships with customers. Financial Institutions) Society We strive to contribute to the revitalization of regional communities by deepening mutual understanding and bonds with (Regional Communities) people in the region, supporting the local industry, culture, environment, unique cuisine, among other features. Government, The ITO EN Group works hard to be properly understood, aiming for partnership building and realization of shared values, Municipalities, NGOs, also in terms of the promotion of CSR activities. and NPOs We esteem fundamental human rights, carefully listen to employee proposals and wishes, and work to achieve a pleasant Employees workplace environment.

15 ITO EN CSR Report 2012 ISO 26000 Core Subjects and ITO EN CSR Targets ITO EN sets CSR targets and annually discloses its progress status in order to continually improve its CSR activities based on PDCA cycles as a foundation. Here we will report on the targets set according to each core subject in ISO 26000, and report on the related activities from fiscal 2011. Core Subject Item CSR Targets for Fiscal 2012 Reference: Items Engaged in during Fiscal 2011 CSR is promoted focusing on three core subjects CSR management · Holding of CSR Promotion Committee (six times a year) Establishment of system of CSR promotion Organizational Governance Corporate governance Promotion of highly fair, transparent management · Holding of CSR Promotion Committee (six times a year) · Creation of a CSR prize Promotion of corporate understanding regarding ITO EN management policy and strategy and improved recognition level with respect to Maintaining system of corporate governance Stakeholder dialogue preferred shares Maintaining internal control system Conducting dissemination of information through timely disclosure Conducting of stakeholder dialogue sessions (twice a year) Execution of stakeholder dialogue sessions (four times a year) Conduct in-house assessment and training on revised BCP (business Review of risk management system Risk management continuity plan)

Promotion of human rights awareness activities Human Human rights initiatives Respect for human rights Rights Continue engaging in respect for human rights Human rights education

Pleasant workplace Support of pleasant workplace environment environment · Ongoing efforts to improve workplace atmosphere (hold biannual meeting)

Promotion of engagement of women Labor Practices Employment of global talent Promotion of diversity Fair and impartial personnel evaluation Employment of the handicapped (maintenance of legal employment rate) Improvement of workplace environment Creating a workplace characterized by diversity Rehire of the aged Strict enforcement of “no overtime” workday Approach on reduction of working hours Promotion of safe office environment Improvement of work–life Employee health management balance Law for Measures to Support the Development of the Next Generation

Promotion of safe office environment Employee safety and health Conducting of health management measures

The Environment Note: Described separately as environmental targets (see pages 25–26)

Strengthening of the ITO EN Group Code of Conduct and Standards of Fair Operating Practices Behavior (independent audit, etc.) Devising of compliance system Strengthening of compliance system · Holding of Compliance Committee (six times a year) Compliance · Holding of Compliance Committee (six times a year) · Promotion of traffic safety Continuing development of compliance education Strengthening of compliance education · Educational development intended for all employees (six times a year) · ‌Educational development intended for all employees (six Healthy and thorough approach to procurement dealings times a year) Fair competition and business dealings Promotion of fair competition and business dealings Fair dealings with outsourced manufacturers Promotion of protection and use of intellectual property Protection of intellectual Respect for and protection and use of intellectual property rights property rights

Maintenance and reinforcement of quality control system, reinforcement of Securing of quality traceability improvement and safety of products Thoroughness in inspections concerning radioactive substances Maintenance and reinforcement of quality control system Improvement in customer satisfaction · Ensure traceability Improvement in customer Improvements in products, etc., that appeal to customers’ sensibilities Thoroughness in inspections concerning radioactive Consumer Issues satisfaction (CS) (improvement substances in products and services) Conducting of universal design education Thorough awareness of ISO 10002 (International Standard of Provision of product information through product displays, etc. Management System for Complaints) Provision of universal design products Strengthening of communications with customer through website, booklets, company introduction, etc. Provision of product information Strengthening of Strengthening of communications with customer Promotion of approach that values point of contact with customer, communications with · Promotion of dietary education employing ITO EN’s knowledge of tea and vegetables customer · ‌Participation in such activities as FOOD ACTION NIPPON Conduct opinion exchange sessions with consumer’s union (more than as a promotion partner twice a year) Promotion of health value of food Research on health value of food and issuance of related announcements Promotion of health value of Strict management of individual information food Promotion of specially designated health foods (beverages) Protection of personal Appropriate protection and management of personal information information

Community Involvement Participation in environmental conservation activities Community involvement Social contribution campaign (Making Japan Beautiful Through and Development Participation in local revitalization activities Tea campaigns, etc.) Community beautification campaign (Adapt Program) Promotion of activities related to education and culture that meet the Education and culture Participation in regional events needs of the region Educational activities through tea culture Expansion of raw tea leaf production through the Tea-Producing Region Promotion of Tea-Producing Region Development Project (new Regional contributions (job Development Project (new tea plantation business) tea plantation development) creation; technology and skill · ‌Annual production: 675 tons (reference: tea plantation area is 321 development) Installation of “social contribution” vending machines hectares) Holding of ITO EN ladies golf tournament Disaster support Continued disaster relief assistance to the stricken areas Disaster relief assistance (“Ochakko-kai” tea events, donations, etc.)

ITO EN CSR Report 2012 16 ISO 26000 Activity Report: Core Subjects Organized according to the seven core subjects, under the headings of “Fundamental Concepts,” “Activities in Fiscal 2011,” and “Issues and Targets” Note: Unless otherwise noted, this section reports mainly on the activities of ITO EN, and the initiatives of Group companies are described on pages 44–45.

Organizational Governance

4. ‌To effectively maintain corporate assets by due process and Fundamental Concepts approval. The ITO EN Group has devised a comprehensive A basic internal control system policy was created to management system based on its management achieve these objectives in compliance with the Corporate principle “Always Putting the Customer First,” ensuring Law that came into effect in May 2006. With respect to the transparency, soundness, regulatory compliance, and maintenance and operation of the internal control system, our timely, appropriate disclosure of information. Internal Auditing Department conducts regular audits on an independent and impartial basis.

The ITO EN Group Code of Behavior: Maintaining a System of Corporate Governance Stable Corporate Platform General Meeting of Shareholders

Election, dismissal Election, dismissal Election, dismissal Audit Board of Directors Board of Corporate Auditors

[Management, supervision] [Management monitoring] Independent Auditor [Management monitoring]

Election, supervision Compliance Committee Audit

Representative Director Audit

[Business Execution] [Internal Control] Outside legal counsel, etc. Internal Auditing Executive Board Department

Legal Department

CSR Promotion Compliance Department Advice, guidance Committee Dedicated committees Organizational Governance • Budget Committee • ‌Long-Term Management • ‌Internal Control Planning Committee Promotion Committee CSR Promotion • ‌Personnel System • Environmental Committee Organizational governance is the fundamental structure of the Office* Improvement Committee • Others core subjects in ISO 26000. The ITO EN Group has singled out corporate governance as one of its top priority management *CSR Promotion Department as of fiscal 2012 issues, and pursues fair, highly transparent management in order to earn the trust and meet the expectations of the VOICE Group’s diverse stakeholders. Expert Opinion

Governance System Masami Hadama, Lawyer, TMI Associates The creation of a friendly organization is the essence of corporate As a company with a board of corporate auditors, ITO EN governance. It is important that communication is conducted works toward enhanced management flexibility, reinforcement in such a manner that statements from the top are reflected of supervisory functions, and improved transparency. Internal throughout the organization, and that events taking place within and external auditors attend every meeting of the Board of the organization are relayed to the top. Directors, providing fair and impartial and audit opinions on each project, in accordance with audit policy established at audit meetings in supervising the business execution of the Board. CSR Management

Internal Control System ITO EN has designated “CSR Management Promotion” as one of its pillars of management in conducting business. Since The ITO EN Group defines its objectives in formulating a fiscal 2011, we have promoted CSR under our CSR Promotion mechanism of internal controls as follows: System adopted in that year (see page 11). 1. ‌To improve operating effectiveness and efficiency in business activities; Implementation of CSR Training 2. To ensure reliability of financial reporting of the enterprise; In order to promote greater CSR awareness and engagement 3.‌ ‌To observe laws and other standards related to business in all ITO EN employees, we are conducting internal training on activities; the subjects of CSR and the environment.

17 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Creation of the CSR Award Dialogues with Stakeholders The ITO EN Group places importance on dialogues with The CSR Award was created by ITO EN in fiscal 2011 with the a broad range of stakeholders in the pursuit of CSR objectives of increasing individual employee awareness toward management. CSR, reinforcing bonds of mutual trust with customers, and ITO EN engaged in the following activities in fiscal 2011 and improving motivation among employees through CSR activities.

strengthened communication with stakeholders: Organizational

Our goal is to highlight as well as commend the examples Governance of excellence in engagement in fulfilling corporate social responsibility and sharing these examples of CSR activities. Conducting dialogues with stakeholders (four times a year); Hearing opinions from local administrative leaders; ‌Conducting dialogues with consumers and representatives VOICE Employee Feedback of consumer groups; Conducting consumer surveys; CSR Grand Prize Winner

(CSR Promotion System maintenance in the Chubu region and Conducting regular briefings for shareholders. Human Rights publication of CSR Information Report) Takahiro Iwata, CSR Team Leader, Chubu region In addition to the above, we convey a wide variety of 5th Volume Retail Section, Chubu Volume Retail Division corporate information to our shareholders using a broad range of communication materials, such as our Corporate It is my great pleasure that our team has been recognized for CSR Promotion System Book, Kabunushi no Minasama e (annual investor report), and maintenance at this time. In the pursuit of CSR Report. Moreover, in November 2011, a dedicated CSR these activities, I focused on having our section was established on the ITO EN website, featuring the employees believe that “CSR = practicing Company’s latest CSR activities. The Environment Labor Practices Always Putting the Customer First.” In the ITO EN CSR Website: future, I would like to work toward making these activities continuous and redoubling http://www.itoen.co.jp/csr/ awareness of the importance of our key management principle. Disclosure

The ITO EN Group believes that broad dissemination of information on the status of the Group’s management and Risk Management activities is one of its vital responsibilities, and we continually In order to deal with risk factors such as compliance, data strive to increase management transparency and integrity security, quality and environmental issues, debt collection, through proactive disclosure practices. disasters, and accidents, the ITO EN Group has drawn up ITO EN conducts the dissemination of such information internal regulations and guidelines and established the Risk according to its “Disclosure Policy” in compliance with the Department to administer them. Financial Instruments and Exchange Act and the timely disclosure rules established by the Tokyo Stock Exchange. Fair Operating

Risk Management Through BCP (Business Continuity Moreover, when public concern is deemed to be high Practices Planning) regarding information not covered by various laws and disclosure regulations, we endeavor to disclose information In the Great East Japan Earthquake that occurred on March as swiftly and accurately as possible in a spirit of fairness and 11, 2011, a massive earthquake and tsunami took place on a promptness. scale unlike any in the past, causing unprecedented damage. Disclosure Policy: At ITO EN, we reviewed our existing Companywide BCP http://www.itoen.co.jp/finance_ir/inquiry/policy/ efforts in light of the experience of this disaster and are working

to reinforce our business continuity capabilities. Consumer Issues

Reinforcing Data Security Issues and Targets

The ITO EN Group recognizes the asset value of all In order to achieve both maximization of corporate value information we handle, and we are reinforcing our data and sound corporate culture, we are reinforcing CSR

security by working on appropriate protection measures management with a focus on corporate governance. In Community Involvement

and management functions. Moreover, we have established fiscal 2012, we again planned our CSR management and Development a personal information policy, and protection of such promotion activities so as to realize effective and sound information is paramount. All personal information obtained is corporate activities through such efforts as six CSR appropriately handled and strictly managed. Promotion Committee meetings and two stakeholder dialogues for the year, as well as more comprehensive BCP.

ITO EN CSR Report 2012 ITO EN CSR Report 2012 18 Human Rights

Fundamental Concepts Cooperation in the Ogyaa TOPICS The ITO EN Group doesn’t discriminate based on gender, Donation Foundation age, ethnicity, race, religion, or creed, and we promote business activities that respect fundamental human rights. The Ogyaa Donation Fund is a movement conducted by the Ogyaa The ITO EN Group Code of Behavior: Respecting Human Donation Foundation to offer a helping hand to children with mental Rights and physical disabilities. Since 2003, ITO EN has donated to this fund a portion of sales from vending machines installed in areas in which obstetrics and gynecology clinics are located, in all parts of The ITO EN Group Code of Behavior: Respecting the country. Human Rights

Initiatives Toward Respect for Human Ogyaa Donation Foundation logo Rights

Respect for human rights is a cardinal rule of society. In the ITO EN Group, in addition to observing legal statutes, we VOICE have codified our thinking on respect for basic human rights, Feedback from a specifying codes of conduct and standards of behavior, Concerned Party as noted above. Along with these policies for business activities, we work to root out power harassment and sexual Yoshiyuki Rikitake, Managing Director, Ogyaa harassment, and to eliminate discrimination based on gender, Donation Foundation age, ethnicity, race, religion, or creed, in our ongoing effort to We are grateful for your initiative in assisting our efforts around maintain a pleasant workplace environment. the country with the donations and PR In the ITO EN Group, we conduct employee education information through your vending machines, and training in human rights issues as one component of making best use of the nationwide network our compliance training. In training, issues such as power of bases and brand recognition of your harassment and sexual harassment are examined within the company. In 2013, we will celebrate the 50th greater context of respect for human rights. anniversary of the Fund’s establishment, and we ask for your cooperation in further Initiatives Toward Respect for Human Rights Through developing this project. Business Activities

ITO EN cooperates through its business activities with a variety of initiatives toward respect for human rights. In response to requests from people engaged in human In the future, in cooperation with Sukoyaka Dietary Life Public rights activities to widely publicize their initiatives, ITO EN Interest Foundation, we plan to conduct activities to provide features human rights activities through advertising panels audio files for the visually impaired, including explanations on on its vending machines in all parts of the country, where how to prepare delicious tea. they will be seen by men and women of all ages. A typical example is our participation in the “Yume iku (going for your dreams) Work Support” art exhibition project for the disabled Issues and Targets conducted in Shimane and Tottori prefectures. In the pursuit of our business activities, society looks to Moreover, by contributing a portion of sales from our us to continue our initiatives for further improving human vending machines we can solicit wider donations, contributing rights awareness and respect for human rights. to the support received from a broad spectrum of the public. In fiscal 2012, we are promoting the development of Our cooperation in the “Ogyaa Donation Foundation” is a human rights activities by clearly displaying these initiatives representative example. In addition, we are involved in a wide to our employees, such as our human rights policy and range of human rights initiatives, such as our support for promotion system, to enhance activities that support crime victims through donating a portion of sales from our respect for human rights. vending machines to the Ishikawa Victim Support Center.

19 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Labor Practices

experience on-the-job trial employment as a support for finding Fundamental Concepts

actual employment, while fostering employee understanding. Organizational Governance Since its founding, the ITO EN Group has operated a performance-based evaluation system that promotes an Reemployment System environment of harmony and diligence in the workplace, ITO EN has established a system whereby employees can encouraging employees to hone their skills and abilities be rehired for a maximum of five years after retirement. As a together while discovering and enhancing their individual rule, all rehire applicants are employed on a contract basis. motivation and goals. The environment enables them to demonstrate, in a variety of We will continue to provide a workplace environment workplace settings, the experience, knowledge, and expertise in which employees can flourish and find fulfillment in Human Rights they have cultivated. furthering their professional goals and capabilities. Hiring of Global Talent The ITO EN Group Code of Behavior: Maintaining a Safe, Healthy Workplace The ITO EN Group aims to become a “Global Tea Company” and is proceeding with the hiring of employees of other nationalities. Four of these were among the new graduates

hired by ITO EN in fiscal 2011. Labor Practices

Initiatives Toward a Pleasant Workplace Environment

Creating an Inclusive, Pleasant Workplace At ITO EN, we have assessed overall problems and remedial Environment measures related to the workplace environment, and established a workplace environment improvement promotion In the ITO EN Group, we work toward creating an inclusive, committee to create a better workplace environment. Under

pleasant workplace environment where diverse people can the committee, a committee of representatives from each The Environment enjoy working together. region will create regional committees (in principle, held three times per year) to exchange views on a variety of issues. With Equal Gender Opportunity each employee fostering a spirit of improvement with respect to the various problems arising in daily business, improvements In fiscal 2011, the ITO EN gender ratio was 90.8% male and 9.2% are proceeding independently even as we work to construct an female. Although the length of service for women is trending internal cooperation system. upward, the current situation is that the male ratio is high Moreover, at ITO EN we conduct surveys each year of all because of our business model based on Route Sales, wherein our employees to gauge their sense of various systems and Fair Operating

delivery activities such Number of employees by gender (As of April 30, 2012) the workplace environment. The results of the surveys are Practices as the loading and Male Female Total analyzed and organized by department, and used to review unloading of product 4,799 people 486 people 5,285 people the personnel system and help to improve the workplace are conducted. We will (90.8%) (9.2%) environment. continue to work toward Number of executive jobs by gender (As of April 30, 2012) a pleasant, cheerful Male Female Total work environment for 1,003 people 12 people 1,015 people VOICE women, increasing (98.8%) (1.2%) Employee Feedback

opportunities to expand Number of new graduates hired (Fiscal 2011) Consumer

Munefusa Maeyama, Ikebukuro Branch Issues occupation type and Male Female Total 138 people 26 people develop professional 164 people Through participating in the regional committee abilities. (84.1%) (15.9%) of the workplace environment improvement promotion committee and sharing information with other branches, my awareness of the workplace environment has changed greatly. Hiring of the Disabled To ensure that this awareness permeates our Community Involvement

branch office, we engage in efforts such as and Development As of March 31, 2012, ITO EN employed 90 people with asking our employees to report without fail disabilities in a variety of occupational categories, making for when returning to the Company and working to improve the handling an employment rate for the disabled of 1.82% in fiscal 2011. of products, tackling the enhancement of the workplace as a whole. Prior to hiring, the candidate is trained for two weeks at the Moreover, in addition to the beneficial impact of improved efficiency designated place of employment to confirm compatibility of from implementing daylight saving time, which enabled us to prepare the candidate and the assignment, in order to increase the for the next day and review sales routes and so on, we saw benefits outside of business such as reduced fatigue and an increase in time to retention ratio. spend with our families. Moreover, we provide opportunities for the disabled to

ITO EN CSR Report 2012 ITO EN CSR Report 2012 20 Labor Practices

Equal Opportunity and Fair Evaluation Personnel Training In the ITO EN Group, we offer employees equal professional The ITO EN Group believes that its greatest asset is people, opportunities in education, deployment, and assignment and based on this we place great emphasis on personnel training. Herein we consider the basis of education to be irrespective of age, education, and gender, enabling them to “self-development,” and we maintain a broad range of self- work toward a career plan of their choosing through a wide development programs to support the motivation of our variety of workplace experiences. employees. Moreover, our personnel training initiatives are Moreover, regarding evaluation, sequential evaluations of conducted alongside an education system based on certification employee actions and achievements by direct and indirect type, position, year, and occupation, among other requirements. superiors are conducted only after employees have had a chance to evaluate themselves. ITO EN Business College and ITO EN Graduate School The results are given as feedback to the person, and reflected in their target settings for the next fiscal year. In the ITO EN internal training system, established in 1989 and known as “ITO EN Business College,” employees select subjects from the curriculum such as sales, finance, marketing, Promotion of Work–Life Balance or organizational studies, and work for one year toward the acquisition of knowledge by engaging in assignments and In the ITO EN Group, we believe that fulfillment in the life of group discussions (856 students were enrolled in fiscal 2011). employees is directly connected to the fulfillment of their work “ITO EN Graduate School,” an advanced curriculum offered for the Company. We promote work–life balance (harmony by ITO EN Business College, was founded in fiscal 2009, between an employee’s work and personal life) and aim to and serves as a platform for employees engaged in further maintain and expand upon systems that promote a pleasant personal growth to acquire a sense of management aptitude (22 workplace environment for everyone. students were enrolled in fiscal 2011). Support for Development of the Next Generation Training of Global Personnel ITO EN has established an action plan aimed at creation of The ITO EN Group aims to become a “Global Tea Company,” a system of child-care leave that can be used by employees and in connection with its Group companies advertises overseas regardless of gender, and we are steadily progressing internship opportunities and the like to systematically train essential toward that goal. As a result, in November 2011 we received global personnel as a skilled force to be deployed for international certification based on the Law for Measures to Support the development, which is vital to the future of the Group. Development of the Next Generation. In fiscal 2011, we created and distributed The Tea Taster System to all employees a booklet entitled The “Tea Taster (tea qualification) System,” established in 1994, “Support Book for Working Mothers,” is a proprietary ITO EN in-house system aimed at dissemination clearly explaining the various systems and of tea culture inside and outside the Company and enhances procedures for receiving maternity and knowledge and techniques regarding tea, in which qualifications child-care leave for female employees, are given to employees possessing superior expertise and aimed at promoting understanding. ability with respect to tea. Every year many employees take on the challenge, and in fiscal 2011 20.5% of all employees Initiatives to Reduce Working Hours possessed such qualifications. In May 2012, a primary 1st degree was newly established in addition to the existing 2nd ITO EN is promoting implementation of Companywide “No and 3rd degrees. Overtime Days” and the taking of five consecutive vacation days as part of its efforts to prevent long working hours. Internal Proposal System Initiatives aimed at the reduction of working hours will be further reinforced in the future. At ITO EN we established the “Voice System,” whereby all employees irrespective of occupational category can make suggestions for new products and sales promotions. In fiscal 2011, the proposals exceeded 20,000 in number for the TOPICS Promotion of Work–Life first time. Through this system, all employees recognize the Balance Through Introduction of importance of the “Still Now” principle of identifying areas of dissatisfaction among customers—and it also contributes to Daylight Saving Time employee motivation through the awarding of internal prizes for ITO EN received a request to limit electric power use following the excellent suggestions. Great East Japan Earthquake, and implemented daylight saving Products that Won the time in which the previous working hours of 9:00–5:30 were “Voice Grand Prize” in Fiscal 2011 changed to 8:00–4:30 (from June to September 2011). Number of “Voice” As a result of an employee questionnaire following the implementation, the shift in working hours, improvement of Proposals Received: working efficiency, reduction of overtime, and effective reduction Over 20,000 of electric power consumption were seen as an increase in energy (Fiscal 2011) conservation awareness throughout the Company.

21 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Moreover, we maintain a support system to assist with the VOICE Employee Feedback physical and mental health concerns of our employees and their families, including counseling by industrial physicians Creators of the “Support Book for Working Mothers” and public health nurses and arranging “24-Hour Health and (Below, from left): Medical and Mental Health Consultations” at offsite facilities. Tayu Mashiko, Product Planning Management Department Safety and Health Organizational Keiko Torigata, As part of our continuous efforts to improve industrial safety, Governance Personnel Department ITO EN conducts safety training for forklifts which have a high Sadako Hatano, usage rate. In fiscal 2011, there were 79 cases of industrial Personnel Department accidents, reflecting an ongoing downward trend beginning in Kasumi Takahashi, fiscal 2004. When an industrial accident occurs, an accident Regional Sales Promotion Department report is used to analyze its causes in order to prevent any recurrences. This support book was produced with the mutual cooperation of

Moreover, we are concerned with our employees’ health Human Rights the Personnel Department and ITO EN’s working mothers who in other ways. In order to institute basic measures to prevent wish to offer support to junior employees who plan to have a child. health impediments to employees, a health committee has We hope that it will be used to the fullest in reconciling work and child rearing, helping mothers to face childbirth with peace of been set up at Company headquarters and a safety and health mind, and to make even greater contributions following their return committee in the production department to hold seminars to work. When distributed to employees, we received feedback from industrial physicians about countermeasures against heat that those who were to begin maternity leave were delighted, and prostration, influenza, and other such industrial health themes. the wives of male employees and female employees considering marriage and childbirth found it a useful reference for future Promotion of Traffic Safety Labor Practices planning. We hope to continue to support women’s activities in the future as well. Since use of vehicles by sales staff is heavy in Route Sales, ITO EN conducts compliance education that includes thorough promotion of traffic safety and driver etiquette, aiming to make these issues thoroughly known to our employees. In addition to educating excellent drivers who strictly observe safe driving practices, we aim to achieve a goal of “Zero Accidents.” The Environment

VOICE Expert Opinion

Masami Hadama, Lawyer, TMI Associates In recent labor issues, mental health care issues such as overwork, depression, power harassment, and sexual harassment are central. Employee Health Care and Improvement Measures such as the introduction of daylight saving time could Fair Operating of Safety and Health perhaps serve as a chance to change one’s life, but to create an Practices environment where it is easy to work and with less mental stress, The ITO EN Group has established internal regulations with the components of work–life balance should be adjusted in a respect to safety and health, aimed at preventing industrial comprehensive range of aspects. accidents and maintaining and improving the health of employees. Moreover, employees work together to identify and solve problems related to industrial safety in the workplace using the “5S methodology”—seiri (orderliness); seiton (tidiness); Issues and Targets seisou (cleaning); seiketsu (cleanliness); and shitsuke (good Consumer Issues manners)—to ensure creation of a safe working environment on In order to develop the global personnel necessary to a daily basis. create a “Global Tea Company” and the personnel to thrive in all of our domestic employment locations, we Health Care Management Initiatives will continue to conduct ongoing efforts to provide more comprehensive personnel training systems and personal

ITO EN’s efforts regarding health care management exceed growth support, promoting greater improvements in the Community Involvement

legal requirements in health care for all of its employees. As one abilities of our employees. and Development example, the Company provides optional, partially subsidized In fiscal 2012, we will continue to hold workplace gynecological and prostate exams for those that request them. environment improvement promotion committee meetings, We have also established a medical checkup re-examination and by dealing with the variety of issues that arise in the subsidy system and a complete spousal medical checkup workplace, strive to create an environment in which each subsidy system to provide support for the health care of of our employees can truly thrive and lead a fulfilling life. employees’ families.

ITO EN CSR Report 2012 ITO EN CSR Report 2012 22 The Environment Environmental Management Sustained by its “Environmental Policy” and “Environmental Strategy 2011,” the ITO EN Group operates an environmental management system based on ISO 14001 to continuously promote environmental activities. Moreover, the introduction of Fundamental Concepts ISO 14001 to Group companies has progressively advanced, as we aim to expand environmental management to the entire The ITO EN Group is intensely aware of the importance of ITO EN Group. its responsibility for ensuring environmental protection and sustainability for the next generation. We have established Environmental Management Promotion System environmental targets and pursued activities based on our “Environmental Policy,” and in fiscal 2011, under our medium- ITO EN has appointed an Environmental Committee under the term management plan, we formulated “Environmental Executive Board to promote environmental management by Strategy 2011,” aiming to reinforce our efforts in this area. overseeing areas such as environmental policy, environmental Based on the dual pillars of our “Environmental Policy” and targets, and progress status of activities. ISO 14001 “Environmental Strategy 2011,” we devised an environmental certification status of the ITO EN Group to date is as follows: management system in line with ISO 14001, and conducted activities according to PDCA cycle methodology. We continue The ITO EN Group ISO 14001 Certification Achievement to pursue our activities to contribute to environmental preservation and coexistence with nature through such steps Certified Business Location Date of Certification as prevention of global warming throughout the supply chain, ITO EN, LTD. All production departments November 2003 resource conservation, and waste reduction. (excluding the Okinawa Nago Factory) Headquarters Department April 2007 Okinawa Nago Factory January 2009 The ITO EN Group Environmental Policy Sales Bases Department March 2009 Group companies Basic Environmental Principles ITO EN SANGYO, LTD. December 2007 Based on the principle of “Always Putting the Customer First,” the GREEN VALUE CO., LTD. March 2010 ITO EN Group is deeply aware of the important issue of protecting OKINAWA ITO EN, LTD. March 2012 the asset we share with all of our customers—the global environment—and passing it on to the next generation. In all of our various business activities, we will observe the law, engage in independent and continuous environmental preservation, and Compliance with Laws Related to the Environment contribute to gastronomic culture that harmonizes with nature. At ITO EN, all offices confirm their observance of the law Environmental Action Agenda with the regulatory control directory every year, and the Legal 1. Promote resource conservation and energy conservation; Department, Internal Auditing Department, and the ISO 2. Promote waste control, proper disposal, and recycling; Secretariat conduct oversight and on-site inspection. 3. ‌Observe laws and agreements related to our activities, products, In fiscal 2011, there were no violations of environmental laws and services; promote the prevention of environmental with regard to air pollution, water pollution, or waste disposal. pollution; and continuously aim to improve our environmental management system; 4. Endeavor to prevent global warming and air pollution; Green Purchasing Initiative 5. ‌Endeavor to research product development and product manufacturing that are eco-friendly; To promote the purchase of more eco-friendly materials, 6. Promote eco-friendly purchasing and mechanism development; ITO EN follows its “Basic Green Purchasing Policy” and 7. ‌Increase awareness of the global environment in daily life; “Green Purchasing Guidelines” that encourage eco-friendly promote communication within and outside the Company; and purchasing in raw materials, office supplies, automatic individually act with environmental preservation activities in mind. vending machines, vehicles, and so on. In fiscal 2011, the green purchasing rate was 71%.

ITO EN Group Environmental Strategy 2011 VOICE New Priority Measures Expert Opinion 1. Counteract global warming at all levels of the supply chain; 2. ‌Reinforce environmental management at all levels of the supply Tetsushige Nishio, Professor, School of Law, chain; Meiji University 3. ‌Implement water resource protection and biodiversity measures that are appropriate to ITO EN’s activities; I believe that ITO EN is firmly engaged in environmental 4. ‌Conduct and further reinforce environmental business that actively management, having set clearly defined goals. Going forward, it leverages our environment-related technologies and materials; will be desirable for the Company to realize a three-way mutually 5. ‌Strengthen communication with the customer regarding beneficial relationship between the economy, society, and the environmental activities; environment, building on its firm base to engage environmental 6. ‌Raise employee environmental awareness and improve issues in its quest to become a “Global Tea Company.” employee motivation.

23 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Environmental Impact of Business Activities

ITO EN keeps track of the total resource and energy consumption and negative environmental impact across its entire supply chain, and continuously promotes a variety of efforts to reduce these negative impacts on the environment. Here, we will report on the input/output ratios incurred in the conducting of business in fiscal 2011. Organizational Governance INPUT OUTPUT

Raw Materials Production Atmospheric Emissions

Used in internal production activity as well as Emissions produced by internal production that of our outsourced production partners Internal factories

Raw tea (raw material for green tea) CO2 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 8,460t Shizuoka Sagara Factory ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 26,653t ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 21,258t ∙ Tea leaf product, raw material tea leaves, and NOx ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4.8t Human Rights Other raw materials ∙∙∙∙∙∙∙∙∙∙ 73,565t coffee raw material SOx ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9.7t (oolong tea, black tea, fruit juice raw materials, etc.) Fukushima Factory ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1,615t ∙ Tea leaf product Waste Hamaoka Factory ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 137t Materials ∙ Tea leaves Waste produced by internal production Used in internal production activity as well as Okinawa Nago Factory ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 17,722t ∙ Beverage product that of our outsourced production partners Waste ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1,858t Labor Practices PET bottles ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 84,032t Steel cans ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 16,939t Aluminum cans ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1,893t Tea leaf product Raw material and production process of beverage product Other beverage containers ∙∙∙∙ 3,961t Corrugated cardboard ∙∙∙∙∙ 66,749t Tea leaf packaging materials ∙∙∙∙ 4,613t Outsourced Production Partners Atmospheric Emissions Outsourced production partners for Emissions produced by Energy beverage products outsourced production partners

ITO EN conducts product development The Environment Used in internal production activity and raw materials procurement, while CO2 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 172,745t products accounting for 90% of its Electric power ∙∙∙∙ 8.88 million kWh sales are manufactured by outsourcing partners. Fuel (crude oil equivalent) ∙∙∙∙∙ 1,146kl Rainwater ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 259,762m3 Light oil ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 15kl Gasoline ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 19kl Distribution and Sales

Atmospheric Emissions Fair Operating

Rainwater Practices

Used by our outsourced CO2 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 27,555t

production partners NOx ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 147.0t

SOx ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1.7t 16,890,392m3 Headquarters Sales vehicles

Specialty stores Sales bases Energy

Used at sales bases, headquarters, and research facilities, and in vehicles Consumer Shipment Issues Electric power ∙∙∙∙ 1,181 million kWh Beverage products sold in PET bottles Fuel (crude oil equivalent) ∙∙∙∙∙∙∙∙ 139kl ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 2 billion 571 million units Light oil ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7,225kl Beverage products sold in cans ∙∙∙∙∙∙∙ 480 million units Gasoline ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1,559kl Beverage products sold in paper containers LPG (vehicle fuel) ∙∙∙∙∙∙∙∙∙∙ 34,643m3 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 387 million units 3

Natural gas ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 12,037m Community Involvement Beverage products sold in jars ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 22 million units Rainwater ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 64,430m 3 Tea leaf product ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 121 million units and Development

Notes: 1. Numerical values that are difficult to quantify precisely, such as energy consumed in Group-owned stores, etc., are not recorded. 2. ‌Atmospheric emission conversion coefficientsare based on the latest coefficients announced by each power utility, and other forms of energy are calculated based on Article 3 of the enforcement order for the Act on Promotion of Global Warming Countermeasures.

ITO EN CSR Report 2012 ITO EN CSR Report 2012 24 The Environment

Environmental Targets

At ITO EN, we are proceeding with reduction of negative environmental impact through PDCA cycle methodology based on our three-year medium-term targets and yearly short-term targets, in order to contribute to environmental preservation and coexistence with nature. In fiscal 2011, the first year of our medium-term targets for fiscal 2013, all departments were engaged in meeting the targets based on ISO 14001 initiatives. In addition to environmental targets, we have positioned water resource protection and biodiversity conservation and more in our medium-term management plan formulated in fiscal 2011, and we continue examining these as part of our environmental strategy. Priority Issues Medium-Term Targets for Fiscal 2013 Targets for Fiscal 2011 Fiscal 2011 Results Evaluation Fiscal 2012 Environmental Targets

1. ‌Expansion of OKINAWA ITO EN, LTD. certification (acquired) Certification acquired in March 2012 Internal environmental audits conducted for 50 bases environmental Expansion of ISO 14001 certification to include Group companies After move of Headquarters, start of discussion (because of the management system ITO EN KANSAI CHAGYO, LTD. certification (acquired) Preparation for certification of ITO EN KANSAI CHAGYO, LTD. change in situation precipitated by the Headquarters’ move) Increase in green purchasing rate to 85% and promotion of green 80% green purchasing rate 71% 80% procurement

2. Promotion‌ of green Supplier evaluation standards review for production-related enterprises 146 supplier evaluations for production-related enterprises 149 cases 148 cases procurement and green 100% green material usage rate for advertising and purchasing 100% green material usage rate for advertising and promotional materials 100% 100%, along with greater completeness in content of materials used promotional materials Greater than 60% operating ratio of vending machines to be heat pump- Installation of 15,000 heat pump-type vending machines 20,468 units installed Operation ratio 56% (16,000 units installed) type (*1) Companywide reduction of electric power usage by 15% compared with Companywide electric power usage reduction by 5% -18% [unit requirement] -20% [unit requirement] compared with fiscal 2009 fiscal 2009 [unit requirement] (*2) compared with fiscal 2009 [unit requirement] 3. Promotion‌ of resource Reduction of electric power usage and Class A crude oil in conservation and Efficient use of water resources and reduction of energy usage by Okinawa Nago Factory Electric power and A crude petroleum volume reduction at Okinawa Nago Factory energy conservation Electric power: -30.6%, Class A crude oil: +0.3% (per case) Okinawa Nago Factory [unit requirement] (*3) Reduction of 2% compared with forecast for fiscal 2011 (for Reduction of 2% compared with forecast for fiscal 2012 (for each case) (reduction of power each case) consumption) Promotion of transition to power-saving installations and equipment Transition to LED warehouse lighting for 10 bases 8 bases 19 bases transitioned to energy-saving air conditioners

Aggressive adoption of an operation ratio for energy-saving vehicles Performance verification of the latest hybrid trucks Performance verification completed Introduction of 20 hybrid trucks: low fuel consumption vehicle operation ratio 80% comprising 85% (*4)

+4% vehicle fuel cost improvement compared with fiscal 2009 2% vehicle fuel cost improvement compared with fiscal 2009 +2.6% +3% compared with fiscal 2009

Expanded railway use for raw material transportation Conducted in the four prefectures of Hiroshima, Yamaguchi, Continued railway use in four prefectures for raw material transportation: Hiroshima, Promotion of green distribution [Hiroshima, Yamaguchi, and Miyazaki] + Kochi Miyazaki, and Kochi Yamaguchi, Miyazaki, and Kochi Promotion of modal shifts and loading efficiency improvement Loading efficiency promotion by pallet use for beverage raw Loading efficiency promotion (per 7.6 tons/each vehicle) Loading efficiency promotion (per 8.1 tons/each vehicle) material transportation 4. Control‌ of carbon Reduce distance moving beverage products between dioxide emissions -4.8% compared with fiscal 2010 Beverage product distribution efficiency improvement (block production warehouses to fiscal 2010 levels or lower Distribution efficiency improvement of beverage product (block production ratio of 70% or more) ratio of 70% or greater) Increase in average loading weight to fiscal 2010 levels or 3.7% increase [per vehicle] compared with fiscal 2010 higher [per vehicle]

Companywide reduction of 8% in CO2 emissions compared with fiscal Companywide reduction in CO2 emissions of 5% compared -13.6% [unit requirement] compared with fiscal 2009 -5% [unit requirement] compared with fiscal 2009 2009 [unit requirement] with fiscal 2009 [unit requirement]

3% reduction in CO2 emissions compared with fiscal 2010 in production 1% reduction in CO2 emissions compared with fiscal 2010 +5.5% [unit requirement] (because of a rapid production -1% [unit requirement] compared with fiscal 2010 department [unit requirement] in production sector [unit requirement] increase at Okinawa Nago Factory [beverage manufacturing]) Reinforce management by converting all waste management Everything completed by suppliers converting to electronic systems On-site inspection of outsourcing companies: 50 Reinforced waste management and increased recycling rate suppliers to electronic manifest Increase of food recycling rate 80% food recycling rate 84.2% 85%

Maintain 100% recycling rate in tea leaf manufacturing process Maintain 100% recycling rate in tea leaf manufacturing process 100% maintained 100% maintained 5. Promotion‌ of waste and by-product Cost reduction by expansion of effective use of organic residue Expansion of reclamation and resale of organic (vegetable Reclamation ratio: +1% compared with fiscal 2011; Disposal costs: -0.2 yen/kg compared Reclamation ratio: +9.7% compared with fiscal 2010 control and resources (vegetable and animal) and animal) residue (compared with fiscal 2010) with fiscal 2011 recycling 83% reclamation and resale rate for paper waste from 87.6% 87% production 88% reclamation and resale of paper waste from production (*5) Reclamation and resale of stretch film and corrugated Reclamation and sale contracts concluded with 63 bases Reclamation and sale promotion of stretch film and corrugated cardboard cardboard

Reduction of product disposal loss compared with the previous year 5% reduction of product disposal loss compared with fiscal 2010 +22.5% (due to product design change, etc.) -5% compared with fiscal 2010

Reduction of PET bottle resin volume [per bottle compared 6. Weight‌ reduction and Promotion of reduced weight for containers, packaging, and materials with fiscal 2009] 500ml: -5.6%; 2 liter: -16% [per bottle] Reduction of PET bottle resin 500ml: -6%; 2 liter: -16% (per unit, compared with fiscal 2009) recycling promotion of (covered: 500ml: -3%; 2 liter: -4%) container packaging Eco-friendly materials: commercialization of two items (leaf/ Discuss changing existing leaf product to vapor deposition material (examined continuously Development of easily recyclable containers Three articles (2 leaf and 1 beverage) beverage) four times a year, for 18 months [first six months of fiscal 2013]) Expansion of raw tea production in new tea plantation business Expansion of raw tea production in new tea plantation business Annual production volume: 561 tons (Reference: Tea plantation Expansion of new raw tea production in new tea plantation business Annual production volume: 995 tons (reference: tea plantation area: 560 Annual production volume: 584 tons (reference: tea area is 296 hectares) Annual production volume: 675 tons (Reference: Tea plantation area is 321 hectares) hectares) plantation area: 310 hectares) Continuing three cultivation examinations toward efficient 3 instances Two cultivation examinations toward efficient fertilizing Promotion of environmentally protective tea cultivation (efficient fertilizing fertilizer management, pest control management with reduced negative environmental impact) Continued operation of eco-friendly pest control systems Operation to be continued Operation to be continued 7. ‌Development of eco- Increased content for “Eco-product Net” green purchasing product friendly products — — — “Eco-product Net” displayed item increase website (*6)

Items made from used tea leaves: over 70 in total Commercialization of items employing used tea leaves: 5 or more 7 instances 6 instances Expansion of used tea leaf recycling Volume of used tea leaves recycled: 1,500 tons or more Amount of used tea leaves recycled: 800 tons or more 802 tons 900 tons business Expansion of corrugated cardboard employing Recycled corrugated cardboard employing used tea leaves: 25.77 million cases 26 million cases recycled used tea leaves: 27.5 million cases 25 million cases

25 ITO EN CSR Report 2012 ITO EN CSR Report 2012 [unit requirement]: production-related is for production volume, others are for sales (*1) ‌After upward correction in May 2012, the target for heat pump-type vending machines is corrected from a numerical target to an operation ratio target. (*2) ‌Companywide electric power usage reduction by 15% [unit requirement] is compared with fiscal 2009, corrected upward in May 2012 from an 8% reduction target. (*3) The plan was developed for the efficient use of water resources in fiscal 2011. (*4) ‌The aggressive operation ratio target for adoption of energy-saving vehicles comprising 85% was revised Evaluation Standards upward from 80% in May 2012. (*5) The 88% reclamation and resale of paper waste from production was revised upward from 85% in May 2012. = Target achieved (*6) ‌Increased content for “Eco-product Net” green purchasing product website was added to medium-term = Target nearly achieved

targets in May 2012. Organizational Note: ‌The medium-term target from fiscal 2013 “8. Social Contribution Activity Promotion” was integrated into = Target not yet achieved Governance the CSR target.

Priority Issues Medium-Term Targets for Fiscal 2013 Targets for Fiscal 2011 Fiscal 2011 Results Evaluation Fiscal 2012 Environmental Targets

1. ‌Expansion of OKINAWA ITO EN, LTD. certification (acquired) Certification acquired in March 2012 Internal environmental audits conducted for 50 bases environmental Expansion of ISO 14001 certification to include Group companies After move of Headquarters, start of discussion (because of the management system ITO EN KANSAI CHAGYO, LTD. certification (acquired) Preparation for certification of ITO EN KANSAI CHAGYO, LTD. change in situation precipitated by the Headquarters’ move) Increase in green purchasing rate to 85% and promotion of green 80% green purchasing rate 71% 80%

procurement Human Rights

2. ‌Promotion of green Supplier evaluation standards review for production-related enterprises 146 supplier evaluations for production-related enterprises 149 cases 148 cases procurement and green 100% green material usage rate for advertising and purchasing 100% green material usage rate for advertising and promotional materials 100% 100%, along with greater completeness in content of materials used promotional materials Greater than 60% operating ratio of vending machines to be heat pump- Installation of 15,000 heat pump-type vending machines 20,468 units installed Operation ratio 56% (16,000 units installed) type (*1) Companywide reduction of electric power usage by 15% compared with Companywide electric power usage reduction by 5% -18% [unit requirement] -20% [unit requirement] compared with fiscal 2009 fiscal 2009 [unit requirement] (*2) compared with fiscal 2009 [unit requirement] 3. ‌Promotion of resource Reduction of electric power usage and Class A crude oil in conservation and Efficient use of water resources and reduction of energy usage by Okinawa Nago Factory Electric power and A crude petroleum volume reduction at Okinawa Nago Factory energy conservation Electric power: -30.6%, Class A crude oil: +0.3% (per case) Labor Practices Okinawa Nago Factory [unit requirement] (*3) Reduction of 2% compared with forecast for fiscal 2011 (for Reduction of 2% compared with forecast for fiscal 2012 (for each case) (reduction of power each case) consumption) Promotion of transition to power-saving installations and equipment Transition to LED warehouse lighting for 10 bases 8 bases 19 bases transitioned to energy-saving air conditioners

Aggressive adoption of an operation ratio for energy-saving vehicles Performance verification of the latest hybrid trucks Performance verification completed Introduction of 20 hybrid trucks: low fuel consumption vehicle operation ratio 80% comprising 85% (*4)

+4% vehicle fuel cost improvement compared with fiscal 2009 2% vehicle fuel cost improvement compared with fiscal 2009 +2.6% +3% compared with fiscal 2009

Expanded railway use for raw material transportation Conducted in the four prefectures of Hiroshima, Yamaguchi, Continued railway use in four prefectures for raw material transportation: Hiroshima, Promotion of green distribution [Hiroshima, Yamaguchi, and Miyazaki] + Kochi Miyazaki, and Kochi Yamaguchi, Miyazaki, and Kochi Promotion of modal shifts and loading efficiency improvement Loading efficiency promotion by pallet use for beverage raw The Environment Loading efficiency promotion (per 7.6 tons/each vehicle) Loading efficiency promotion (per 8.1 tons/each vehicle) material transportation 4. ‌Control of carbon Reduce distance moving beverage products between dioxide emissions -4.8% compared with fiscal 2010 Beverage product distribution efficiency improvement (block production warehouses to fiscal 2010 levels or lower Distribution efficiency improvement of beverage product (block production ratio of 70% or more) ratio of 70% or greater) Increase in average loading weight to fiscal 2010 levels or 3.7% increase [per vehicle] compared with fiscal 2010 higher [per vehicle]

Companywide reduction of 8% in CO2 emissions compared with fiscal Companywide reduction in CO2 emissions of 5% compared -13.6% [unit requirement] compared with fiscal 2009 -5% [unit requirement] compared with fiscal 2009 2009 [unit requirement] with fiscal 2009 [unit requirement]

3% reduction in CO2 emissions compared with fiscal 2010 in production 1% reduction in CO2 emissions compared with fiscal 2010 +5.5% [unit requirement] (because of a rapid production -1% [unit requirement] compared with fiscal 2010 department [unit requirement] in production sector [unit requirement] increase at Okinawa Nago Factory [beverage manufacturing])

Reinforce management by converting all waste management Fair Operating Everything completed by suppliers converting to electronic systems On-site inspection of outsourcing companies: 50 Reinforced waste management and increased recycling rate suppliers to electronic manifest Practices Increase of food recycling rate 80% food recycling rate 84.2% 85%

Maintain 100% recycling rate in tea leaf manufacturing process Maintain 100% recycling rate in tea leaf manufacturing process 100% maintained 100% maintained 5. ‌Promotion of waste and by-product Cost reduction by expansion of effective use of organic residue Expansion of reclamation and resale of organic (vegetable Reclamation ratio: +1% compared with fiscal 2011; Disposal costs: -0.2 yen/kg compared Reclamation ratio: +9.7% compared with fiscal 2010 control and resources (vegetable and animal) and animal) residue (compared with fiscal 2010) with fiscal 2011 recycling 83% reclamation and resale rate for paper waste from 87.6% 87% production 88% reclamation and resale of paper waste from production (*5) Reclamation and resale of stretch film and corrugated Reclamation and sale contracts concluded with 63 bases Reclamation and sale promotion of stretch film and corrugated cardboard cardboard Consumer

Reduction of product disposal loss compared with the previous year 5% reduction of product disposal loss compared with fiscal 2010 +22.5% (due to product design change, etc.) -5% compared with fiscal 2010 Issues

Reduction of PET bottle resin volume [per bottle compared 6. ‌Weight reduction and Promotion of reduced weight for containers, packaging, and materials with fiscal 2009] 500ml: -5.6%; 2 liter: -16% [per bottle] Reduction of PET bottle resin 500ml: -6%; 2 liter: -16% (per unit, compared with fiscal 2009) recycling promotion of (covered: 500ml: -3%; 2 liter: -4%) container packaging Eco-friendly materials: commercialization of two items (leaf/ Discuss changing existing leaf product to vapor deposition material (examined continuously Development of easily recyclable containers Three articles (2 leaf and 1 beverage) beverage) four times a year, for 18 months [first six months of fiscal 2013]) Expansion of raw tea production in new tea plantation business Expansion of raw tea production in new tea plantation business Annual production volume: 561 tons (Reference: Tea plantation Expansion of new raw tea production in new tea plantation business Community Involvement Annual production volume: 995 tons (reference: tea plantation area: 560 Annual production volume: 584 tons (reference: tea area is 296 hectares) Annual production volume: 675 tons (Reference: Tea plantation area is 321 hectares) hectares) plantation area: 310 hectares) and Development Continuing three cultivation examinations toward efficient 3 instances Two cultivation examinations toward efficient fertilizing Promotion of environmentally protective tea cultivation (efficient fertilizing fertilizer management, pest control management with reduced negative environmental impact) Continued operation of eco-friendly pest control systems Operation to be continued Operation to be continued 7. ‌Development of eco- Increased content for “Eco-product Net” green purchasing product friendly products — — — “Eco-product Net” displayed item increase website (*6)

Items made from used tea leaves: over 70 in total Commercialization of items employing used tea leaves: 5 or more 7 instances 6 instances Expansion of used tea leaf recycling Volume of used tea leaves recycled: 1,500 tons or more Amount of used tea leaves recycled: 800 tons or more 802 tons 900 tons business Expansion of corrugated cardboard employing Recycled corrugated cardboard employing used tea leaves: 25.77 million cases 26 million cases recycled used tea leaves: 27.5 million cases 25 million cases

ITO EN CSR Report 2012 ITO EN CSR Report 2012 26 The Environment

Global Warming Prevention Initiatives Distribution and Sales Initiatives Our sales staff assigned to business bases at 200 locations We recognize that problems concerning climate change nationwide use 3,577 business vehicles to deliver products brought on by global warming are important issues faced by us to our customers. In response to an increase in the number and shared by society at large. of vehicles with the growth of our business, we recognize energy reduction in each vehicle and the control of air polluting Companywide Base Results emissions to be key issues. At ITO EN, we engage in greenhouse gas emission reductions Moreover, we divide our outsourced beverage product across all departments through PDCA cycle methodology of manufacturing into five ISO 14001. Our bases across the Company have reduced blocks across the country, controlling transport CO2 emissions (unit requirement) by 4.4% compared with fiscal 2010, and electric power consumed (unit requirement) in the energy consumption. In same period by 14.8%. beverage transport as well, we are expanding 4.4% reduction our modal shift initiative Change in carbon dioxide emissions Companywide area in transitioning from compared with fiscal automobiles to trains to (t-CO2) ■ Production department ● Sales [unit requirement] (all companies) 2010 50,000 ■ Sales, administration, and promote green distribution. research departments (unit requirement) 40,030 (t-CO2/Millions of yen) Block distribution areas 38,895 39,013 40,000 37,402 36,015 0.15 7,308 8,020 7,836 7,611 8,460 30,000 0.126 0.128 0.125 0.113 0.108 0.10 Introduction of eco-drive and eco-friendly vehicles

20,000 We promote eco-drive practices at all of our bases, actively 31,587 32,010 31,177 29,791 27,555 0.05 implementing eco-friendly vehicles and reducing fuel 10,000 consumption through optimization of sales routes and so on. As a result, we have reduced both the total fuel consumption of 0 0 ’07 ’08 ’09 ’10 ’11 (Fiscal year) vehicles Companywide and individual fuel consumption. With newly introduced vehicles that meet national standards Change in electric power consumption for low-emission vehicles and eco-friendly vehicles such as

■ Production department ● Sales [unit requirement] (Companywide) hybrids, the percentage of eco-friendly vehicles now stands at (10,000 kWh) ■ Sales, administration, and research departments (kWh/Millions of yen) 77.1%. 2,500 2,411 100 2,342 2,376 2,242 14.8% 2,069 reduction 2,000 Companywide 751 821 867 876 888 compared Change in vehicle fuel consumption with fiscal 1,500 2010 (kl) ■ Gasoline consumption ● Gasoline consumption per vehicle (Liter/vehicle) 80 9,000 4,000 1,491 1,521 1,509 1,535 (unit requirement) ■ Light oil consumption ▲ Light oil consumption per vehicle 1,000 1,181 76.0 74.9 72.6 2,859 2,777 2,805 3,000 73.1 2,687 500 6,000 62.3 2,627 2,378 2,399 2,306 2,143 0 60 ’07 ’08 ’09 ’10 ’11 (Fiscal year) 2,018 7,992 7,986 7,857 7,467 7,240 2,000 3,000

1,522 1,646 1,637 1,614 1,578

0 Initiatives at Factories and Offices 0 ’07 ’08 ’09 ’10 ’11 (Fiscal year) At our factories (Production Department), we aimed at greater efficiency in energy usage, but because of the rapid increase Change in eco-friendly vehicle implementation

in production volume at Okinawa Nago Factory (beverage (Vehicles) ■ Ordinary low-emission vehicles ● Ratio of eco-friendly (%) 3,000 ■ Hybrid vehicles vehicles 100 manufacturing), CO2 emissions by production volume increased 2,758 ■ LPG vehicles 5.5%. 2,477 2,500 ■ Natural gas vehicles 80 However, at ITO EN SANGYO factories, we are engaged 2,156 77.1 in utilizing renewable energies through measures such as 2,000 1,925 69.3 60 installation of solar panels. 1,583 60.4 1,500 On the other hand, electric power consumption in our offices 53.2 (Sales, Administration, and Research departments) has been 45.3 40 1,000 reduced by 23.1% compared with fiscal 2010, as a result 20 of various initiatives such as switching to LED lighting in our 500 headquarters building and to low power consumption air- 0 0 conditioning at our regional bases. ’07 ’08 ’09 ’10 ’11 (Fiscal year)

27 ITO EN CSR Report 2012 ITO EN CSR Report 2012 manufacturing in cooperation with our outsourcing partners. Electric Power Conservation As a result of our reduction efforts at each of ITO EN’s tea leaf TOPICS Initiatives for Fiscal 2011 production factories, the total volume of water used and the water volume used according to production volume have both been Changing Work Starting Time decreased. After being processed in water purification tanks, the water Implementation of daylight saving time system: The use used in our factories is drained off. The water purification tanks

of air-conditioning and the lighting was decreased by Organizational are regularly inspected, and no water that violates any inspection Governance moving the work starting time forward by one hour for four months, from June to September 2011. Subsequently, criteria is released into the environment. the starting time was moved forward by 30 minutes from ‌Change in amount of rainwater use in ITO EN manufacturing October, which initiated a change in working regulations. facilities (excluding Okinawa Nago Factory) Moving up start of Cool Biz: To control the use of air- Rainwater use amount Production unit requirement conditioning, we moved up the start of the Cool Biz dress (㎥) ■ ● (㎥/t) 15,000 code by two weeks, from June 1 each year. 0.6 Companywide planned vacation implemented: As a way 10,000 0.58 0.51 0.51 Human Rights of controlling the use of Company facilities, the entire 0.4 0.44 0.44 Company took vacation at the same time. 5,000 12,409 12,309 15,823 15,015 12,435 0 0.2 ‌Aggressive Adoption of Vending Machines with ’07 ’08 ’09 ’10 ’11 (Fiscal year)

Low Power Consumption * ‌In the Okinawa Nago Factory, which is a beverage manufacturing facility, the increase Heat pump-type vending machines featuring low power in beverage manufacturing production volume resulted in about 30% more water consumption have been actively adopted since February 2007. consumed compared with fiscal 2010, or 247,327m3 (including raw material for Since February 2012 we have been implementing a hybrid heat products, equipment for washing and cooling, etc.).

pump machine with even less power consumption. 47% of Labor Practices installed vending machines operating at the end of April 2012 were of the heat pump-type variety. Response to Stakeholders Our target for the end of fiscal 2013 is to have an operation ratio of over 60% heat pump-type vending machines. Social Contribution Activities Regarding the Environment What is a heat pump vending machine? These vending machines are designed to reuse heat generated With the aim of preserving biodiversity, ITO EN actively engages by refrigeration of chilled products to heat warm products rather in environmental preservation encompassing Lake Biwa and than discharging the heat into the atmosphere. In addition, watershed conservation activities through such efforts as its

the hybrid method enables heat inducted from the outside air “Making Japan Beautiful Through Tea” campaign, as well as forest The Environment to be used in the warming of products. About 40% of power consumption can be suppressed compared with conventional maintenance and preservation of local woodlands and mountains. heat pump-type vending machines (model ratio in fiscal 2011). In fiscal 2011, we conducted a variety of environmental activities in cooperation with stakeholders from various regions, Vending Machine Power Conservation Initiatives as follows: LED lighting/auto activation and reduction/eco-vendor feature · “Making Lake Biwa Beautiful Through Tea” campaign (peak cutting function for refrigeration)/partial (Lake Biwa environmental preservation activities; Cooperation: cooling and warming systems/adoption Shiga Prefecture)* of vacuum heat insulator/promotion of

· “Aichi Kaisho no Mori Corporate Cooperation Project” Fair Operating switching off used lights, etc. (Conclusion of a forest maintenance agreement, etc., related Practices * The peak reduction function avoids peak power usage periods on summer afternoons to “2011 International Year of the Forest”) (July 1–September 30, 1 p.m.–4 p.m.) by fully refrigerating · “‌Mt. Hiko Volunteer Activities” (maintenance of local forests products in the morning and then automatically switching off refrigeration in the afternoon. and mountains in Fukuoka Prefecture) * ‌For details on Lake Biwa environmental preservation activities and activities related to “2011 International Year of the Forest,” please see the Community Involvement and Development section (page 41).

Water Resource and Biodiversity Initiatives Environmental Communication Initiatives Consumer Water is recognized as a very important resource for the We believe communication with our stakeholders is vital, and Issues business of the ITO EN Group. We engage in water resource we participate in Japan’s large-scale environmental exhibition conservation, greater efficiency of water use, prevention of “Eco-products Exhibition” and “Lake Biwa Environmental water pollution, and conservation of biodiversity. Business Exhibition.”

Initiatives Toward the Efficient Use of Water Resources VOICE Community Involvement Expert Opinion and Development Because ITO EN production factories (with the exception of the Okinawa Nago Factory) are tea leaf processing plants, they are Mami Oku, Professor, Tokyo Metropolitan University characterized by lower water consumption than beverage factories, We now are in an age that we consider not only the local and we strive in our own factories to achieve efficient water use. environment but also the global environment as a whole. Initiatives Beverage products are mostly manufactured through to tackle biodiversity issues as well are urgently required. outsourcing, so we endeavor to reduce water used in beverage

ITO EN CSR Report 2012 ITO EN CSR Report 2012 28 The Environment

Resource Conservation and Waste Recycling Initiatives Reduction Initiatives At ITO EN we press forward in the recycling, as much as Based on the 3R principle (Reduce, Reuse, Recycle), ITO possible, of food wastes generated such as used tea leaves, EN aims to use limited resources for as long as possible by discarded products, etc. engaging in waste generation control and the thorough use of all that is generated. Food Recycling Initiatives We strive to recycle food residue generated in the Manufacturing Initiatives manufacturing process and products that are past the best- Waste generation at ITO EN factories and recycling rate before date, in principle, outsourcing to recycling partners who information are as shown in the following charts and graphs. can process them according to food recycling laws. The food We promote detailed separation of waste materials, and are recycling rate in fiscal 2011 was 84.2%. making strides in reclamation and resale as resources of tea residue, coffee husks, and the like. Recycling of Containers on Company Routes

‌Changes in waste generation and recycling rates at ITO EN factories ITO EN conducts empty container collection through its sales (excluding Okinawa Nago Factory) staff. The collected empty containers are all recycled by qualified recycling professionals. (t) ■ Waste material generation volume ● Recycling rate 1,200 (%) 100 Recycling Initiatives for Container Packaging 1,000 99.2 98.5 99.1 96.2 98.0 800 Regarding empty containers discarded by households and so 600 1,057 1,174 1,158 1,175 1,111 on, we pay a recommercialization outsourcing fee to The Japan 400 Containers and Packaging Recycling Association, functioning 200 in a business capacity. 0 50 ’07 ’08 ’09 ’10 ’11 (Fiscal year) Moreover, we work as a member of the Japan Soft Drink Association to participate with The Beverage Industry Environment Breakdown of waste materials from ITO EN factories (fiscal 2011) Beautification Association and The Council for PET Bottle Waste textile 2.2% Waste metal 4.7% Recycling to bring environmental beautification and collection and Garbage 0.4% Waste plastics recycling promotion development activities to consumers. (including wastepaper) Other 6.0% 6.4% Used paper At ITO EN, products manufactured from recycled PET bottles Vegetable residue (corrugated cardboard, (reef product) wrapping paper, etc.) such as uniforms and empty container bins are actively adopted. 1.4% 35.0% Vegetable residue 1,858t (used tea leaves and coffee husks) 1.0% Aluminum deposition VOICE Vegetable residue wrapping material Expert Opinion (tea powder and tea oil) 6.6% 36.3% Akikuni Ushikubo, President, Tokyo University of Information Sciences Beverage Residue Waste Volume and Processing The concept of the Food Recycling Law is based on the 3R principle In fiscal 2011, the waste volume from beverage residue (used (Reduce, Reuse, Recycle). Efforts to reduce product disposal through tea leaves, coffee husks, etc.) was 50,243 tons (of which sales bases across the nation are truly in accord with this 3R principle. used tea leaves comprised 47,444 tons), a decrease of 3% Further, the fact that empty cans and empty PET bottles are compared with fiscal 2010. The processing situation for these collected from collection boxes next to vending machines to be residues is as shown in the graph below: used as a container packaging resource is fully appreciated.

Conversion to fuel Beverage residue waste (thermal recycling) Land ll 1.3% volume and processing 15.7% Issues and Targets Construction Compost 77.6% (fiscal 2011) materials, etc. 1.6% Fodder 3.8% Demands from society regarding environmental and 50,243t energy issues are growing ever greater. As we plan to achieve our medium-term objectives based on the pillars of our “Environmental Policy” and “Environmental Strategy 2011,” we will take into account Sales Department Initiatives social and economic factors along with risk management in issues such as developing eco-friendly products and We have declared the reduction of product disposal loss as using renewable energy, preservation of biodiversity, an environmental target for all of our sales bases. We aim and waste management—as we pursue our business to reduce the overall volume of such loss, and continuously activities with ingenuity and innovation and continue to tackle this goal based on the PDCA cycle methodology at strive for yet greater improvements going forward. each of our sales bases.

29 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Container Initiatives TOPICS Container packaging plays an important role in the maintenance of content quality. ITO EN is working to reduce the weight of container packaging and on the development of filling technology that reduces negative impact on the environment in cooperation with related companies. Organizational

Adoption of Eco-Friendly Oi Ocha Lightweight PET Bottle—Lighter Bottle Developed by NS System Governance

NS System Development and Technical Features Effect of Creating a More Lightweight Bottle In the past, normal tea beverage filling methods included “the For each 500ml PET bottle the raw material weight reduction warm water filling method,” in which beverages were heated amounts to 7g. and then filled, and the “aseptic filling method,” where filling is conducted at room temperature. Because the warm water -7g filling method required bottles to be consistently heatproof, Lightweight it was difficult to achieve significant weight reduction of bottle Human Rights the bottle itself. On the other hand, with the aseptic filling Conventional method conducted at room temperature, which is used bottle in dairy beverages, among others, the sterilizers used to disinfect the entire bottle must be flushed away, requiring large quantities of water in addition to wastewater treatment. Here, ITO EN developed the concept of “a filling system

best suited to green tea beverages,” with three features: Labor Practices 1) safe and secure; 2) delicious with consistent quality and Based on a yearly comparison, the reduced raw material 1 improvements; and 3) eco-friendly. We developed the NS* works out to approximately 1,909 tons.* This equates to System filling method jointly with container manufacturer around 3,000kl when converted to crude oil by the amount 2 Toyo Seikan Kaisha, Ltd., and beginning in 2010 we began of energy consumed.* This is equivalent to the amount of systematically implementing the system in cooperation with gasoline necessary for a car with gas mileage of 10km/liter our various beverage filling factories. to drive approximately 180 times around the globe. The NS System does not use “aseptic filling at room *1 Based on filling amount in fiscal 2011 *2 Source: ‌“LCI Data Investigation Report Book (updated version) of temperature,” so there is no need for large volumes of The Environment Petrochemicals” water to flush out sterilizers. Also, the bottles are exposed (Plastic Waste Management Institute, March 2009) to high temperatures only when they are sterilized at high temperatures, so bottle heat resistance can be kept low. Moreover, the introduction of this system has made the manufacture of lighter bottles possible. Raw material * NS = Non-Sterilant (non-use of sterilizers) annual reduction: 180 times around the globe 1,909t Fair Operating Practices

Lightweight PET Bottle Product Adoption and Expansion Areas Beginning with some parts of the Kanto region, adoption of the lightweight PET bottle was introduced in Oi Ocha and Oi Ocha Koi Aji (strong taste) 500ml PET bottles in June 2010, Conventional Lightweight bottle bottle and in fiscal 2011 adoption was introduced in 2-liter PET Cap Six panels Ten panels also bottle products. The development area has been expanded improve ease of Consumer

to include all of Kanto, Kansai, Chugoku, and part of the Issues holding 13% lighter Chubu region. In the future, the adopted products and areas compared with conventional bottles of development are set to expand successively. Weight: 2.6g Bottle About 30% lighter than conventional Label Community Involvement bottles and Development Thinner film is 500ml PET bottle about 40–50% of Weight: 19g that of conventional bottles Thickness: 20 micrometers

ITO EN CSR Report 2012 ITO EN CSR Report 2012 30 The Environment

TOPICS active ingredients are used in the new application depending ITO EN Recycles upon the product. As a result, we believe that society and the environment Even Used Tea Leaves benefit in any number of ways.

Three Environmental 1. Resource conservation ‌A system that is eco-friendly and offers Considerations By mixing with a great many raw materials, the quantity of regular great possibilities raw materials used can be reduced.

2. CO2 reduction Resource conservation ITO EN proprietary recycling technology Because recycling is possible with the water content included, there ‌New product development through multi- is no need to consume energy industry cooperation Three environmental when drying the used leaves and, as a result, unnecessary CO2 is considerations not emitted. Development of Used Tea Leaves 3. Recycling The used tea leaves can be CO2 Recycling System Recycling reduction recycled into a variety of everyday products, including construction As a beverage producer whose main products are green materials, paper products, plastic tea beverages, ITO EN engages in all types of technical resin, and so on. challenges with respect to tea, from the plantation all the way through to used tea leaves, owing to the Company’s ingenuity Three Benefits and technological expertise. With respect to used tea leaves as well, ITO EN developed a proprietary Used Tea Leaves Recycling System in 2000 that Antibacterial properties recycles the used tea leaves into paper products, boarding, resin, construction materials, and other everyday products. Useful elements remaining in used tea leaves such as green tea polyphenols create a pleasant tea Why the System Was Developed Three benefits aroma

In the tea beverage manufacturing process, about 47,000 Deodorizer Aroma tons of used leaves per year is generated, and nearly the entire quantity is recycled. Most of it is used for fertilizer and fodder, but it occurred to us that some of the used tea could be developed into high-value-added products that take advantage of the polyphenols and other active ingredients— Social Significance of the Used Tea and this was the reason for developing the system. Leaves Recycling System By considering used tea leaves as a resource rather than Key Point a waste material, new value can be created not just for ITO EN but for manufacturing enterprises, society, and the Used tea contains a great deal of moisture, making it easy to environment. We continue to cooperate with concerned generate mold and creating problems with long-term storage, parties to further enhance this value. but to dry the leaves for storage would require consumption of a

great deal of petroleum resources and generate CO2 emissions. Used Tea Leaves Recycling System ITO EN solved the problem by recycling the used tea leaves with

water content included and not drying them out. Value to manufacturing enterprises Value to society and the environment To date a wide variety of products containing used tea · ‌Sales of value-added product leaves have been developed using a portion of our used tea with used tea leaves · Control‌ of amount of CO2 emissions leaves, but in order to do so requires cooperation with other · ‌Decreased quantity of regular · ‌Value-added product used to raw materials used because of promote recycling industries. Innovative ideas are combined through cooperation inclusion of used tea leaves · ‌New value of new product among various industries, and new products are developed. · ‌Cooperation of companies from · ‌Development into new lifestyles other industries

Feature of Used Tea Leaves Recycling System Value to ITO EN

Three Environmental Considerations and Three Benefits · ‌Control of CO2 generation in processing used tea leaves · ‌Reduction of manufacturing costs by lowering processing costs of used tea leaves The Used Tea Leaves Recycling System takes the · ‌Promotion of recycling of used tea leaves environment into account in processing and product terms, · ‌Enhancement of corporate value by eco-friendly product development and the main aspect of the program is how the features of the

31 ITO EN CSR Report 2012 ITO EN CSR Report 2012 What Kind of Products Are Developed? The History of Awards for the Used Tea By combining with existing product raw materials, a wide Leaves Recycling System variety of products can be created. The three environmental considerations along with the three beneficial features of the Used Tea Tea Leaves Recycling System have earned the system recognition for their merit, and for this ® Organizational Manufacturing beverage Governance Cultivation Used tea sales reason the system has won a host of awards. recycling logo

Used tea History of Awards leaves December 2005 Minister’s Prize, the Ministry of Agriculture, Forestry and Fisheries 2nd Eco-Products Awards (Eco-

Services Category) Human Rights Paper Construction August 2006 WASTEC Grand Prize 2006 Minister of the Environment Prize Boarding Resin November 2006 36th Food Industry Technological Service Prize (Materials, products materials Equipment, Systems Division) December 2006 2006 Environment Minister’s Award for Activities to Fight Global Warming (Technological Development and Commercialization Division) Main Products Made from Recycled Used Tea Leaves October 2007 2007 Resource Recycling Technology System Commendation METI Industrial Technology Environment Chief’s Prize Paper products Resin October 2007 2007 Recycling Society Formation Promotion Person of Labor Practices Merit Commendation Minister of the Environment Prize November 2007 Selected as “New Japanese Style” Top 100: “Tea Cardboard” October 2010 The 12th Green Purchasing Prize, Special Judge’s Prize February 2011 Minister of the Environment Prize at the 20th Grand Prize for the Global Environment Award

Business cards Envelopes Benches Empty container collection bins The Environment VOICE Views of Concerned Parties and Experts Toward Future Development Soichiro Sugimura Corrugated Oil-absorbing Vending Ballpoint pens cardboard blotting paper machines President, Art Factory Gen Corp. Our company deals with the collection bins that

you find beside vending machines for recovering Fair Operating

PET bottles and cans. Practices Recently, we have developed new collection bins made from used tea leaves, which have the unique property of suppressing odors. This was achieved in cooperation with ITO EN and has Paper napkins Origami folding Film Shoe inserts since gained a good reputation among communities. paper/Paper with colored figures For ITO EN as well, I believe this kind of approach can be an important part of the business as well as a profitable initiative. Boarding Kazuya Kojitani Consumer

Managing Director and Secretary-General, Issues Tatami straw mats Green Purchasing Network (traditional By conducting a marketing strategy coordinated with the Oi Ocha Japanese Pillows Sandals floor covering) brand, the impact and value of the used tea leaves recycled products will be further enhanced. In the future, a systematic undertaking of PR activities is anticipated. Community Involvement

Building materials Mariko Kawaguchi and Development Chief Researcher, Research Division, Daiwa Institute of Research Ltd. I think it’s wonderful that you have engaged with so many companies over the past decade. I look forward to future marketing activities that Functional building highlight the added value of used tea leaves as actual ingredients in the Plasterboard Interior wall design materials product itself.

Used Tea Leaves Recycling System home page: http://www.itoen.co.jp/csr/recycle/

ITO EN CSR Report 2012 ITO EN CSR Report 2012 32 The ITO EN Group Code of Conduct is set forth in nine points as a synthesis of laws, basic codes, and internal Fair Operating Practices regulations. Moreover, we have established standards of behavior that concretely codify in greater detail the points that should be observed by each director and employee. Additionally, we have established “Conduct Checkpoints” Fundamental Concepts based on “five viewpoints” crystallized from our corporate credo to provide guideposts for all of our employees to exercise At the ITO EN Group, every member of our management care in their daily activities, and these are promulgated through and staff works to ensure enthusiastic compliance with regular training sessions. domestic and international laws and our own internal regulations, managing and conducting business in Conduct Checkpoints complete accordance with the law and standards of 1. ‌Does your conduct uphold the codes specified by the law and the ITO EN appropriateness. Moreover, the ITO EN Group places Group? great importance on the trust and expectations of our 2. ‌Does your conduct clearly distinguish between public and private matters? stakeholders—from consumers to investors, business 3. ‌Is your conduct appropriate from a common sense perspective within customers, and regional communities—and we will honor society? this relationship by responding with our utmost sincerity. 4. Is your conduct in accord with “Always Putting the Customer First”? 5. ‌Is your conduct contributing to a sense of trust in “The ITO EN Brand”? The ITO EN Group Code of Behavior: Maintaining Fair Business Relationships Compliance

Establishment of a Compliance System

ITO EN, in order to ensure thorough compliance, has appointed a corporate ethics director responsible for Companywide compliance management, focusing on “legal compliance” as our basic management policy, and declaring our intention to The ITO EN Group Code of Conduct, Code of Behavior, aim for “the ITO EN Group: a model of corporate compliance.” and Conduct Checkpoints In fiscal 2004, we established the “Compliance Committee” and “Compliance Department,” creating a system whereby At the ITO EN Group, in addition to strict adherence to all laws, responses to any major compliance issues could swiftly be basic codes, internal regulations, and ethical standards, to evaluated and acted upon. In fiscal 2011, the Compliance promote fair and earnest competition in business activities, we Committee convened on six occasions. conduct our enterprise with great emphasis on the perspective Furthermore, all departments working together aim to and standpoint of the populace. reinforce compliance, evaluating in detail how to prevent the In order to implement this policy, we have formalized the occurrence and recurrence of breaches in compliance. principle of “Always Putting the Customer First” in The ITO EN Group Code of Conduct and Code of Behavior, and view their ITO EN Group Compliance System stringent implementation as the foundation of compliance as we work to ensure that they permeate our corporate culture. Board of Directors The Board of Directors’ investigation findings are utilized to prevent recurrence.

Compliance Committee Inspections are conducted The ITO EN Group Code of Conduct fairly. Director responsible for corporate ethics 1. ‌We will provide all customers with “natural,” “healthy,” “safe,” “well- Stage 2: designed,” and “delicious” products based on our outstanding skills Investigations and technologies. Legal Compliance Department (Department responsible for Outside legal counsel 2. ‌‌We will conduct all transactions fairly, demonstrating impartiality corporate ethics) and sincerity. 3. ‌We will provide information in a timely and appropriate manner Stage 3: in order to earn the understanding and appreciation of our Department responsible Liaison,

for investigations reporting Reports are accepted by interview, Reporting stakeholders. phone, mail, fax, or e-mail.

4. ‌We will strive continuously to increase corporate value and aim to Group Company Liaison whistle-blowing be an appealing enterprise. Committee Internal 5. ‌We will strive to maintain a positive workplace environment that ITO EN Group divisions, Whistle-blowers displays mutual respect for basic human rights. departments are protected, and The ITO EN Group confidentiality is External source External 6. We will actively engage in environmental initiatives. strictly observed.

7. ‌We will establish and maintain healthy, proper relationships as Compliance officers corporate citizens that observe laws and corporate ethics. Presidents, division heads (Department or division head) 8. ‌We, as ITO EN Group employees, will act from an international Stage 1: Whistle-blowing perspective with regard to contribution, as well as contributing to the development of regional communities. All ITO EN Group employees, part-time employees and temporary staff, and customers 9. ‌Working together, we will do our utmost to gain the security, satisfaction, and trust of our customers. Use of the system is not limited to regular employees.

33 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Reinforcing Group Compliance Ensuring Fair Competition and Business The ITO EN Group positions “Compliance Promotion Dealings Specialists” in its domestic Group enterprises as an initiative for liaising and the sharing of information and viewpoints Ensuring Wholesome Procurement Transactions related to compliance, and these specialists hold regular In order to establish wholesome partnerships with “Domestic Group Enterprise Compliance Coordination

procurement suppliers, the ITO EN Group must observe Organizational Governance Meetings.” compliance requirements with procurement suppliers of raw ingredients and materials. At the ITO EN Group, we educate employees involved in procurement in order to Internal Reporting System ensure wholesome procurement transactions, and through In the ITO EN Group, the Legal Compliance Department, transaction status inspections (internal auditing) we strive to responsible for corporate ethics, operates a “corporate prevent the occurrence of compliance violations. ethics hotline” as a contact point handling matters related to Human Rights whistle-blowing, consultation, inquiries, and contacts. The Fair Business Dealings with Manufacturing management of the internal reporting system is based on the Outsourcing Partners Whistle-blower Protection Act and observes the basic rules of the manager in charge of the internal reporting desk, aiming to In subcontracting, including outsourced manufacturing to protect whistle-blowers and ensure the prevention of leaks and beverage factories, we are engaged in reinforcing mechanisms the like. such as educating employees with regard to the Subcontract In cases involving internal whistle-blowing, they report to Act to eliminate irrational demands and practices, in order to ao rcie The Environment Labor Practices the Compliance Committee, and the situation is dealt with in forge equitable and fair relationships in business dealings. coordination with corporate counsel.

Free and Fair Competition in Sales and Marketing Promotion of Compliance Education The ITO EN Group strives to achieve free and fair competition At the ITO EN Group, we seek to establish Companywide through thorough implementation of sales and marketing compliance transparency, conducting systematic compliance activities that reflect wholesome commercial practices and education and training for all directors and employees to raise socially accepted norms, to say nothing of conscientious compliance awareness. In fiscal 2011, we conducted a review observance of the law. of compliance-related subjects, including the background to Moreover, information acquired from third parties through and recent developments in legal reforms. sales activities is managed through proper methods, including In addition, we have placed “Compliance Leaders” and due consideration to privacy of personal information. “Promotion Officers” at our main sales bases and in regions nationwide. We encourage compliance-related certification testing, and currently about 70% of our employees who are Protection of Intellectual Property Rights Fair Operating

tested pass the examinations. Practices The ITO EN Group respects intellectual property rights and actively leverages its own such rights. In specific cases, we Strict Handling of Compliance Violations respond in consultation with our research and intellectual property departments. In the event of a compliance violation, we endeavor to ascertain the relevant facts and get to the truth, and, after seriously recognizing the facts, dealing with them strictly in implementing

a rigorous recurrence prevention plan and properly punishing Consumer

Issues and Targets Issues the offending personnel. To ensure the execution of fair and dependable business activities, still greater observance and firm establishment of compliance is an issue. VOICE In fiscal 2012, we are striving to reinforce the bonds

Expert Opinion Community Involvement of trust with our customers by enhancing compliance and Development Hiroji Tanaka, President, Tokyo College of Transport Studies education, improving the success rate for our compliance Compliance is the fundamental basis of the ISO 26000 approach. exams, and convening six annual compliance committees Your company has devised a promotion system by establishing to increase compliance awareness in all of our employees a compliance committee and so on. I encourage you to redouble and promote responsible corporate activities based on your efforts in emphasizing compliance going forward. legal statutes and social norms.

ITO EN CSR Report 2012 ITO EN CSR Report 2012 34 aim to achieve ever higher standards of safety and security in Consumer Issues product manufacturing. Moreover, by conducting inspections and monitoring of all beverage products using equipment for measuring radiation doses, we have established a system for detecting contamination by radioactive substances. Fundamental Concepts ITO EN Quality Control (Main inspections)

The ITO EN Group emphasizes focusing on product Raw ingredients Sensory inspection (shape, luster, fragrance, and water color inspection) development and contact with our customers in our Raw ingredients Microorganism inspection for beverages Physicochemical inspection (component analysis, etc.) medium-term and long-term management plans. Every Pesticide residue inspection Radioactive substance inspection stage from raw product ingredients through to delivery of the finished product to the customer is based on our Water Water quality inspection Radioactive substance inspection strict quality control system, providing definitive ITO EN Product products and services in accordance with our five basic Inspection by ITO Sensory inspection (shape, luster, fragrance, and water color inspection) Microorganism inspection EN and outsourced development concepts of “natural,” “healthy,” “safe,” “well- Physicochemical inspection (component analysis, etc.) manufacturing facility designed,” and “delicious.” Radioactive substance inspection “Still Now” expresses ITO EN’s commitment to the principle of “Always Putting the Customer First” by tirelessly seeking to identify and address the opinions and expectations of Radioactive Substance TOPICS consumers through our products and services. Inspection

The ITO EN Group Code of Behavior: Consumer Issues From raw materials through to production and distribution, ITO EN has established a rigorous quality control system in its endeavor to ensure product safety. Moreover, since the accident at the Fukushima Daiichi nuclear power plant in 2011, we formulated a product inspection system for radioactive substances, working tirelessly to deliver safe, secure products to our customers. In order to meet the standards applied in April 2012 for radioactive substances in food products, we installed new detection devices and restructured our quality control system as initiatives to ensure safe products in our efforts to deliver the same safety and security to our customers as previously.

1. Product Safety To ensure standard levels, we employ a system that effectively deploys germanium semiconductor detectors and NaI scintillation-type automatic gamma counters to conduct inspections of our products. 2. Water Used in the Manufacturing of Our Beverages Quality Control Initiatives The water we use in beverage products (purified water and natural water) is inspected at each factory on the day of manufacture to As a company dealing with foodstuffs, the ITO EN Group ensure safety. considers its commitment to quality control the key essential 3. Safety of Raw Ingredients factor for customers. From product design through to raw Inspections are conducted on all lots of domestic tea leaves used materials, packaging materials, production, and distribution, as raw ingredients in our tea products and tea beverage products. we have established a rigorous quality control system to meet Moreover, all raw ingredients other than tea leaves processed from domestic growers are also subject to our own inspections conducted product safety assurance requirements. in addition to those of our outsourcing partners.

Comprehensive Quality Control Systems

In 2002, ITO EN received certification in the international product quality control and assurance standard ISO 9001, and the Company engages in quality control initiatives based on a Inspection scenario with germanium semiconductor detector solid quality management system. The standard value used for inspection is less than 10Bq*/kg or 50Bq/kg for At the raw material stage, our Quality Control Department general foodstuffs and mainly beverage products, tea for drinking (extracted liquid), water used, milk, and dairy beverages. conducts inspections to detect agricultural chemical residue, and at the production stage, both our Quality Control Department and our outsourced production partners conduct flavor and equipment analysis, along with inspections to detect microorganisms. ITO EN products are manufactured at factories that meet Inspection scenario with NaI scintillation-type automatic gamma counter our quality control standards (beverage production and tea leaf The standard value used for inspection is less than 100Bq/kg for general production guidelines), and by sharing information on a daily foodstuffs and tea leaves (raw and processed tea). basis at quality assurance meetings with factory personnel, we * Bq = becquerel

35 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Ensuring Traceability VOICE Expert Opinion In our traceability system for domestic tea leaves used as raw ingredients, we check tea producer cultivation control records Masami Kojima, Member of Editorial Board, Lifestyle with particular emphasis on the section dealing with pesticides. Information Department, Mainichi Newspapers Through the establishment of this system, it is possible to determine, by tracing the lot number printed on the finished I believe the product traceability system has been very well devised. However, traceability is not in and of itself sufficient to guarantee safety tea beverage product that reaches the customer, details Organizational Governance regarding the production facility, production date, and time, raw to consumers, but rather should be thought of as a crisis management ingredients, and cultivation particulars. measure to be used in the event of a problem or incident. Moreover, we also safeguard traceability of products using some raw vegetable ingredients produced overseas.

ITO EN Traceability System (Basic approach for green tea beverages) Customer Satisfaction Enhancement Initiatives ‌Written pledge clarifying appropriate use of

Tea Human Rights pesticides Producer In fiscal 2009, ITO EN declared itself compliant with ISO ‌Recording of plantation and cultivation data 10002 (the international standard of complaint management ‌Written pledge and certification covering safety of systems). Under its guidelines, customer satisfaction must Raw Tea raw tea leaves be achieved by continually aiming for improvement in a wide Leaf List of pesticides used at each factory ‌Recording of raw tea leaf manufacturing and variety of activities, creating and operating a framework to Factory management data respond to complaints using the PDCA cycle. At ITO EN, our Producer information commitment to the principle of “Always Putting the Customer

Tea ‌Contract covering safety of tea to be sold First” is expressed by actively seeking to reflect the opinions The Environment Labor Practices Wholesaler Raw tea leaf factory data (Intermediary) and expectations of the customer as our basic policy of customer satisfaction. ITO EN To successfully follow the principle of “Always Putting the Shizuoka ‌Documentation of processes encompassing raw tea Sagara leaves to beverage ingredients Customer First,” we conduct dissemination of accurate safety Factory and security information regarding our products and services at every stage of marketing including market research, product Beverage ‌Documentation of processes encompassing development planning, sales, marketing, promotion and Factory beverage ingredients to green tea beverages advertising, establishing standards of behavior for achieving customer satisfaction. Retailer In particular, we recognize the views and suggestions we receive from customers via telephone, letters, e-mail, and so on as valuable information for us. Our reply to these opinions Customer received from customers places importance on primary response, making it a principle to answer customer feedback sincerely, politely, and promptly.

ITO EN has created a “Customer Inquiries Office” at our Fair Operating

Quality Control of Raw Materials Headquarters to manage the above-mentioned response Practices TOPICS effort. Moreover, in the daily course of business our sales Produced Overseas for Vegetable personnel make it a point to respond with politeness and Beverages sincerity to customer feedback, and we aim to ensure that At ITO EN we ensure the safety of raw materials in accordance with this input can be shared with all directors, departments, and the law, by examining “Quality Assurance Certificates” received employees. from our raw material procurement suppliers around the world, and confirming cultivation conditions, and processing and management procedures at the source. The stocking person in charge proceeds Response Process for Customer Feedback and Suggestions Consumer

to the production location to inspect all relevant details, including the Issues quality control system in place and the actual pesticides used in the cultivation of the raw materials. Customer Suggestion Opinion Suggestion Opinion Reply Reply

VOICE

Expert Opinion Community Involvement

Customer Inquiries and Development Kazuhiko Noguchi, Research Fellow, Employee Related departments

Report Office Report

Mitsubishi Research Institute, Inc. Report

The highest degree of safety is achieved when the safety and quality control systems result in customers feeling confident in drinking your Improvement Guidance instruction beverages simply because of the ITO EN name on the package. All directors This is the type of safety system structure I think the Company ought to be aiming for. Sharing of information

ITO EN CSR Report 2012 ITO EN CSR Report 2012 36 Consumer Issues

Providing Product Information on Packaging and Home Page Communication with Our Customers ITO EN displays information Jujitsu Yasai (Vegetables Galore): 100% Domestic Shun no Yasai (Seasonal Vegetables) In aiming for the achievement of a healthy and cultured lifestyle and on raw ingredients and Raw Material (Vegetable) Region an active society that is rich in abundance, we conduct initiatives Japan (Miyazaki, Kagoshima, nutritional components Carrot Kumamoto, Nagasaki) such as “dietary education,” focusing on tea or vegetables, in our on the packaging of the Tomato Japan (Nagano, Yamanashi) efforts to engage in communication with our customers. beverage products we Celery Japan (Nagano, Aichi, Shizuoka) Colored sweet potato Japan (Miyazaki, Kagoshima) sell. Moreover, in the case Asparagus Japan (Nagano, Akita, Nagasaki) Promotion and Development of Tea Culture Through of beverages such as Lettuce Japan (Nagano, Gunma) Japan (Shizuoka, Fukuoka, Parsley green tea, barley tea, and Nagano, Chiba, Ibaraki, Oita) Employee Tea Tasters Japan (Nagano, Ibaraki, Tochigi, vegetable juices, as well as Watercress Yamanashi) Graduates of our internal “Tea Taster (tea qualification) System” in our tea leaf products, we Cabbage Japan (Aichi, Nagano, Gunma) actively engage as “tea experts” in promoting tea culture in areas display the region where the Radish Japan (Nagano) Spinach Japan (Nagano, Oita) such as the knowledge of tea, its delicious flavor, and its health Japanese wild beverage is produced on Japan (Ibaraki, Nagano) parsley (Mitsuba) benefits, along with internally directed dissemination of information. product packaging and on Raw Material (Fruit) Region In October 2011, they brought together the Matsue Castle our home page. Plum Japan (Wakayama) Great Tea Party and the Kanazawa Castle Kenrokuen Great Tea Information on raw materials and regions of production displayed on ITO EN home page Party, two of the “Three Great Japanese Tea Parties” (Matsue, Kanazawa, and Kyoto), and at Hamarikyu Gardens for a “Tokyo Great Tea Party” event, featuring explanations and demonstrations Oi Ocha Green Tea Receives 2011 on “the way of making delicious tea.” Additionally, about 150 TOPICS Good Design–Long Life Design Award events per year are held nationwide. As a tea company, ITO EN Sponsored by the Japan Institute of Design Promotion (JDP) will continue to actively engage in tea development activities going Oi Ocha Green Tea, a beverage that has been well received forward. Moreover, the Shizuoka Sagara Factory engages not over the years, was recognized with the Good Design– only in promoting the knowledge of tea, but also introduces our Long Life Design Award for having been produced and sold quality control measures in manufacturing through plant tours for consecutively for 10 years or more, and for contributing to schoolchildren and business customers. enhanced marketability through successful design presence.

Consideration for a Wide Variety of Customers

ITO EN continually works to improve its products with ease of use for its customers in mind. Moreover, we are engaged in initiatives as Factory tour booklet a participating member of the Sukoyaka Dietary Life Association, Matsue Castle Great Tea Party which provides dietary information and improvement of dietary habits for people with special needs such as the handicapped and Shui: The Carrot That Made ITO EN Proud senior citizens. Improvement of Container Wrapping Shui, a carrot specially selected by ITO EN as a raw ingredient for its vegetable beverages, received 1st Prize in the Steamed We have proceeded with research into easily removable bottle labels by adjusting the hole size and Category of the Japan Vegetable Sommelier Association’s spacing of the perforation 5th Vegetable Sommelier Summit in the Raw Food/Steamed line. “Easy-to-remove labels” Category, and in June 2011 we invited Vegetable Sommelier are achieved by improving members to a workshop held by ITO EN employees. the initial point of removability and adapting the hole size and intervals between the perforations (see and of figure on the right). Universal Vending Machines These vending machines are arranged with the product selection buttons positioned lower for easier accessibility for senior citizens and children, and employ a design that makes it easy for the handicapped to insert money. These Shui carrot At workshop machines are installed mainly in hospitals, communal facilities, and the like. Participation in the 6th National Convention for the Promotion of Dietary Education VOICE Expert Opinion ITO EN participated in the 6th Eiichi Sato, President, Sukoyaka Dietary Life Public National Convention for the Interest Foundation Promotion of Dietary Education ITO EN product packaging takes consumers well into account, but held in Mishima, Shizuoka I would look to make further improvements in four areas, making Prefecture in June 2011, packaging: 1) easy to read; 2) easy to open; 3) easy to hold; and 4) introducing the health benefits of whose labels are easy to remove. green tea from the viewpoint of

37 ITO EN CSR Report 2012 ITO EN CSR Report 2012 dietary habits, the Shui carrot, and products made from recycled Aging/Lifestyle-related Diseases—Expectations of Green Tea’s used tea leaves. Moreover, we received the input of dietary Anti-oxidative Properties,” and “Green Tea Efficacy and the education experts who visited the ITO EN booth at the convention. Kakegawa Study—Initiatives of Health and Longevity in the City and Green Tea Area of Kakegawa.” VOICE Expert Opinions Speakers: Kazuo Kondo, MD, Professor, Graduate School of Humanities and Sciences,

Sachiko Ichiba, Chairperson, School Dietitian Ochanomizu University Organizational Governance Conference of Japan Institute of Environmental Science for Human Life, Ochanomizu University Tea is part of gastronomic culture, and gastronomic culture Yoichi Samejima, MD, Kakegawa Municipal General Hospital invigorates human energy and aids in helping children to grow up Director, Health Sciences Research Center, Kakegawa Municipal Institute of healthily, so I’d like to see a focused, targeted Green Tea and Preventative Medicine approach to dietary education. Hiroko Sagesaka, Director, Central Research Institute, ITO EN The recycling of used tea leaves in the spirit of “too good to waste” is a wonderful approach. The fact that not just beverages but tea Protection of Personal Information itself is such a broad field will be attractive to Human Rights consumers. I don’t think there is any other tea ITO EN obtains personal information of customers through company that is so comprehensively engaged. proper means, observing statutes such as the Act on the Protection of Personal Information and conducting proper Professor Shaw Watanabe, President, Life Science protection, maintenance, and management of information. Promoting Association Our “Personal Information Protection Policy,” “Privacy Policy,” Former President, National Institute of Health and and “Points to be Made Public under Personal Information Nutrition Protection Laws” are posted on our home page. Moreover,

information acquired through our home page is managed in The Environment Labor Practices I’m promoting the “I-shoku Dogen Project,” strict adherence to the “ITO EN Home Page Privacy Policy.” which means “food and medicine have the same origin.” In this regard, consumers should know the broad function of food in terms of VOICE Expert Opinions how it relates to health. The Japanese diet and green tea are contributing to the active lives Katsuyuki Minami, Vice President, Kitasato University and longevity of Japanese. I think that the integration of agriculture and health (a balanced diet for a healthy body) will be necessary in the future. I believe that the health benefits of green tea need to be promoted more. Research into Health Benefits of Green Tea Ayako Ehara, Professor Emeritus, Tokyo Kasei Gakuin Health Benefits of Tea and Development of Food for University Specified Health Uses Oi Ocha is known by everyone in Japan. Perhaps it would be a good thing to present the product from a total perspective, The ITO EN Central Research Institute conducts research into including its packaging in PET bottles, the fact that it is a tea leaf a broad range of subjects related to tea, and continues to product and a product of tea culture, its history, its culinary and confectionery aspects, its nutritional benefits, and how to enjoy tea. contribute to the development of a broad range of products Fair Operating and the refinement of their manufacturing processes. In Practices Yoriko Tobe, Senior Researcher, Consumer Research fiscal 2011, ITO EN launched the “double function” green Institute, NACS tea beverage Futatsu no Hataraki Catechin Green Tea, the first green tea beverage that has two indications of Food for Because ITO EN has the “Tea Taster System,” an internal Specified Health Uses, aimed at people who are concerned qualification system to educate tea professionals, I would like about body fat and cholesterol. Moreover, we introduced as to see this mechanism leveraged to gain the understanding of consumers and profitably provide information. serial products Catechin Oolong Tea and Catechin Jasmine Tea to the market, Consumer

taking advantage of the results of long Issues years of research to support daily dietary Issues and Targets lifestyle improvement and healthy living Consumer issues are among the top priorities for ITO EN as through tea. a handler of food products, and appropriate measures are required to deal with the conditions pertaining to food. Going Green Tea and Health Forum (Held in November 2011) forward, we will continue to disclose information regarding Community Involvement quality control and raw materials on our home page and QR and Development ITO EN invited around 600 codes, while further reinforcing our quality control system in consumers and held a lecture coordination with our suppliers and manufacturing outsourcing and panel discussion by experts partners. Moreover, it is our aim to achieve even higher dealing in green tea research. customer satisfaction by further strengthening our principle of The lectures dealt with three “Always Putting the Customer First,” developing products with topics: “Green Tea and Health— universal design and enhancing our “Tea Taster System” to Understanding the Effect of ensure the continuity and development of tea culture. Catechins,” “Free Radicals and Green Tea and Health Forum

ITO EN CSR Report 2012 ITO EN CSR Report 2012 38 Community Involvement and Development

Promotion of the Tea-Producing Region Development Fundamental Concepts Project (New Plantation) The ITO EN Group, in order to achieve regional revitalization, makes every effort to participate in community activities and ITO EN cooperates with regional government agencies, unions, engage in community development. Since the Great East Japan and producers to offer expertise in utilizing abandoned cultivated Earthquake, we have seen the importance of regional ties and land to develop new plantations, cultivation technology, and the need for even greater regional revitalization. expertise, including mechanization and IT, while purchasing entire The ITO EN Group promotes activities through its main crops of tea leaves to increase tea leaf quality and reduce costs. business at every step from production through to sales toward For tea farmers, contracting transactions with ITO EN measures to deal with regional issues such as the environment, enables them to conduct stable farming management and diet, culture, an aging population with fewer children, and regional revitalization. promote environmental preservation through proper use of Moreover, in our quest to become a “Global Tea Company,” fertilizers and pesticides. we are working in cooperation with our North American and In addition, the establishment of agricultural production Australian Group enterprises. corporations in the region achieves job creation. In December 2008, the “Tea-Producing Region Development The ITO EN Group Code of Behavior: Contributing to Project (New Plantation Business)—A Vibrant Region Through Regional Society Planting Tea Trees,” received the 5th Eco-Products Awards (Eco-Services Category) Minister’s Prize sponsored by the Ministry of Agriculture, Forestry and Fisheries and the Eco- Products Awards Steering Committee. The ITO EN Group Priority Points ‌Promotion of activities that relate to regional agriculture, New Plantation Status food, and gastronomic culture ‌Promotion of activities that relate to the environment and In four prefectures and five districts of Kyushu, Miyazaki, Oita, local forests and mountains, etc. Kagoshima, and Nagasaki, we are creating large-scale plantations ‌Promotion of activities that relate to Japanese culture and to grow high-quality raw material tea leaves for Oi Ocha. heritage As of April 2012, the new plantation area comprised 296 ‌Disaster support (please refer to our Special Feature on hectares, and the combined area of these hectares and other pages 9 and 10). contract cultivation tea plantations is slated to expand to a scale of 2,000 hectares in the future. The Tea-Producing Region Development ‌Tea-Producing Region Development ‌New Plantation Project (Contract Cultivation/New Plantations) Project Status Development Areas

(Hectares) (Tons) The delicious flavor of tea is created by the quality of the tea leaves. 1,000 3,000 ITO EN employees travel directly to tea-producing regions or tea Saikai, Usuki and 845 2,800 Nagasaki Kitsuki, Oita markets and engage in “direct purchasing” only after discerning 788 809 800 Prefecture Prefecture the quality of the leaf tea. A portion of leaf tea raw materials is the 688 2,593 2,600 result of our Tea-Producing Region Development Project aimed at raising flavor from the tea plantation stage (contract cultivation 600 2,364 2,400 549 plantations where employees work directly with growers to improve 538 538 2,200 tea leaf quality; and new production center business in which 400 abandoned agricultural land is utilized and tea growing is resumed 478 2,121 2,000 from redeveloping the fields through cultivation). Taken together, 200 1,905 271 296 1,800 these two approaches resulted in tea plantation expansion of 845 250 Soo, Miyakonojo, 210 Kagoshima Miyazaki hectares as of April 2012. 0 1,600 Prefecture ’08 ’09 ’10 ’11 (Fiscal year) Prefecture Background of the Tea-Producing Region Development Project (New Plantation)

ITO EN handles roughly 25% of Japan’s raw tea production, but the stable procurement of high-quality raw leaf tea materials was an issue. After assessing local production issues such as 1) the creation of large-scale tea plantations using abandoned agricultural land, etc.; 2) the stable production of high-quality tea leaves; 3) stable farm management; and 4) job creation, ITO EN decided from 2001 to engage in the new tea plantation business in addition to contract cultivation with individual tea farmers. Tea-Producing Region Development Project, tea fields in Usuki, Oita Prefecture

39 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Social Significance of the Tea-Producing VOICE Feedback from Region Development Project a Concerned Party As shown below, the Tea-Producing Region Development Katsusada Hirose, Governor, Oita Prefecture Project pursues good relations between ITO EN and regional In Oita Prefecture, we are actively encouraging society and producers. corporate participation in agriculture to help Organizational

carry farming forward into the next generation. Governance Tea-Producing Region Development Project This initiative and ITO EN’s desire to procure Regional Society Benefits Producer Benefits a steady supply of raw material tea leaves came together, and in September 2006 ITO ∙ ‌Agricultural promotion and an increase · ‌Stable farm management through in food volume toward self-sufficiency contract cultivation EN and the cities of Usuki and Kitsuki in ∙ ‌Reduction of abandoned cultivated land · ‌Reduced production costs by switching Oita Prefecture concluded a Tea-Producing ∙ ‌Regional revitalization through job to large-scale farming, mechanization, Region Development agreement. Producers receive tea production etc. creation technology advice from ITO EN, which helps to build bonds of ∙ ‌Efficiency through technological ∙ ‌Succession of agricultural technology improvements and achievements in (including transition to IT). mutual trust. Moreover, there is a sense of security since the eco-friendly agriculture ∙ ‌Resolution for lack of viable successors entire crop is purchased, helping to promote agriculture and Human Rights create employment in the region. ITO EN’s spirit of “hospitality” in ITO EN Benefits tea production resonates with the sense of “hospitality” that Oita Prefecture is working to instill in its tourism sector. Going forward, it · Stable‌ procurement of raw materials and improvement in raw material quality · ‌Ensures traceability and maintains a consistent quality control system is my hope that we can work to create a producing region together · Lower unit costs though reduced production costs with producers characterized by safety and security.

VOICE The Environment Labor Practices VOICE Feedback from Expert Opinion Concerned Parties Kaori Kuroda, Managing Director, CSO Network Japan Sugio Kono, Vice-President and Director, The Tea-Producing Region Development Project is a good way to make a significant contribution to the local community through ITO Kayano Nosan Agricultural Union EN’s main business, and I think it is a remarkable project thanks to (Kitsuki, Oita Prefecture) its concrete contributions to continued agricultural development. I Tea cultivation has now become mechanized, and the Tea-Producing believe that the securing of stable, high-quality materials by utilizing Region Development Project proposed by ITO EN created an abandoned cultivated land while creating employment is exactly opportunity to begin large-scale farming. Tea plant management is the kind of community participation intended by the guidelines of easy because second and subsequent tea pickings can be purchased ISO 26000. without being subject to fluctuating market prices, and production planning can be done more efficiently. The education system is robust with corporate style management, and we can employ new people VOICE Shunji Hashimoto, Vice President every year that will one day become our successors. Moreover, since we can keep fertilizer and agricultural chemical amounts to a and Director in Charge of Production Headquarters minimum by means of proprietary technologies and innovations, the Tea-Producing Region Development Project saves labor and greatly Our tea plantations are expanding, centering on Kyushu, as we aim to contributes to both the region and the environment, in my view. improve raw material tea leaf quality and productivity for Oi Ocha. We Fair Operating

utilize abandoned cultivated land in the development of tea plantations. Practices Since business cannot exist without profit, we promote the project with Employees and young producers, Kayano Nosan profitability for farmers and the people of the region in mind. Agricultural Union The Tea-Producing Region Development Project is wonderful. It leads to steady employment and helps us very much. When we see Oi Ocha, we realize that the tea leaves we produced are being Tea Cultivation in Victoria, used. (Employee) TOPICS Growing tea is a very tough occupation, but when the tea leaves Australia

we’ve grown with such effort become Oi Ocha, I really feel it has Consumer been worthwhile. I want to keep honing my knowledge about tea ITO EN is engaged in creating tea plantations in the state of Issues as I continue to engage in my work. (Young producer) Victoria, Australia, in the southern hemisphere, where the seasons are opposite to those of Japan. Since climate and cultivation conditions are opposite to those of Japan, we conduct tea cultivation technological innovations in cooperation with tea producers and our Group enterprise ITO

EN AUSTRALIA PTY. Community Involvement

LIMITED. In addition, we and Development work to ensure traceability for all raw tea, and our employees visit the region on a regular basis to further strengthen relationships with the producers. Mr. Kono (far left) and employees

ITO EN CSR Report 2012 ITO EN CSR Report 2012 40 Community Involvement and Development

Relations Between Shizuoka Sagara Lake Biwa Environmental Preservation Activities: “Making Factory and the Region Lake Biwa Beautiful Through Tea” We have participated in the “Mother Lake 21 Plan” event At the ITO EN Shizuoka Sagara Factory (established 1974) promoted by Shiga Prefecture since fiscal 2008, conducting in Makinohara, Shizuoka Prefecture, one of Japan’s main tea reed cutting and other environmental preservation activities regions, we engaged in the promotion of dietary education at Lake Biwa. In December 2011, we had a great many together with the city of Makinohara (with employees local residents participate as well, and for the purpose of participating in the city’s dietary education promotion water quality control we cut approximately 1.2 tons of reeds. committee, factory tours, tea picking courses at elementary Moreover, in the Kansai region between November 2011 and schools, among other activities) and regional cleaning, January 2012 we donated a portion of Oi Ocha sales to help establishing a firm foundation in the community through our with environmental engagement in these activities. Moreover, a factory festival preservation efforts is held annually, and in fiscal 2011 we hosted the 20th for Lake Biwa. Commemorative Stakeholder Dialogue, and held a bazaar Yukiko Kada, with the proceeds donated to the victims of the Great East Governor of Shiga Prefecture, also Japan Earthquake and regional welfare institutions through participated, sharing the Japanese Red Cross Society. In addition to our domestic the view that “It efforts, we invited people from Shanghai, China to tour our would be greatly factory, sent ITO EN employees to visit China, and engaged in appreciated if Lake Governor Kada participating in reed cutting international exchanges focusing on tea. Biwa environmental (in foreground, at right) The mayor of Makinohara, Shigeki Nishihara, and the city’s preservation efforts could be conducted continuously in the future.” superintendent of education, Yoshikazu Yagi, attended the Stakeholder Dialogue, expressing views such as “I’d like to 2011 International Year of the Forest Activities continue cooperating to engage in various regional activities and promoting Japanese green Aichi Kaisho no Mori Corporate Cooperation Project* tea in China” (Mayor Nishihara) For the first time as a beverage manufacturer, and “It appears that the factory ITO EN concluded a “memorandum concerning tours for the children of the city corporate cooperation for Kaisho no Mori” with respect to “Kaisho no Mori” forest (managed by and lecturers on environmental Aichi Kaisho no Mori Center). A wide range of education are playing a activities such as forest maintenance (thinning) role in the city’s education” is scheduled for the next three years with (Superintendent Yagi). Factory festival participation from employees, business customers, and consumers, among others. * ‌As the point of origin for the 2005 Aichi Expo, “Kaisho no Mori” became heir to the principles and results of the Expo, with corporations cooperating with Aichi Relations Between Sales Bases and the Region Kaisho no Mori Center in a project aimed at preserving the Aichi Expo forest for the ITO EN features community-based marketing and sales future by conducting forest maintenance and preservation of local forests. with 200 nationwide bases in its Route Sales network and Memorandum signing ceremony 157 directly owned stores (specialty stores) throughout the The Cedar Avenue of Nikko Cleanup Operation* country. For this reason, employees in the various regions can swiftly identify issues and information, and through business ITO EN and ITO EN SANGYO are registered companies of the cedar activities provide various support activities that reflect the tree owner system on the Cedar Avenue of Nikko (one tree owned by each company). In July 2011, about 60 employees and family members environment and cuisine of the region. participated in the cleanup activities of the Cedar Avenue of Nikko Cleanup Operation held by the Cedar Avenue of Nikko Protection Initiatives Supporting Regional Environment Institute (in the Tochigi Prefecture Board of Education Offices). Throughout Japan forests and mountains are situated * ‌This cleanup activity has a history of 380 years, and this beautiful avenue of cedar between wilderness and municipalities, surrounding living trees has the unique distinction of being both spaces of residents in various regions. These areas are a special historic site and a natural treasure. important in providing pleasant scenery as well as for Its history and grandeur were enjoyed by all involved in the cleanup. supplying natural resources and habitats for wildlife. The ITO EN employees participating in United Nations designated the year 2011 as the International the Cleanup Operation Year of the Forest, and we responded by engaging in regional forest initiatives. Moreover, beginning in fiscal 2010 we have carried out the Initiatives to Support Regional Gastronomic Culture “Making Japan Beautiful Through Tea” campaign, donating a portion of our sales for regional nature and environmental ITO EN participates in FOOD ACTION NIPPON, a national resource protection, and conducted employee volunteer movement to increase the food self-sufficiency rate of Japan. activities (only volunteer activities were conducted in fiscal In Japan’s many regions, there are unique gastronomic cultures 2011). such as diverse ingredients and preparation methods. In recent

41 ITO EN CSR Report 2012 ITO EN CSR Report 2012 years, local specialties and Chiba where the event is held, regional gourmets have been and all of the proceeds from the focus of efforts to revitalize entry fees are donated to regions through gastronomic social welfare projects in the culture. region. In the future we will As a manufacturer of tea, a staple beverage accompanying hold golf tournaments that are meals, ITO EN participates in regional gourmet events in Atsugi also meaningful from a social Organizational

in Kanagawa Prefecture, Toyokawa in Aichi Prefecture, Himeji standpoint, making efforts Disaster preparedness storage facility Governance donated to a social welfare organization in Hyogo Prefecture, Imabari in Ehime Prefecture, and so on, toward “regional promotion” supporting regional revitalization through food. At the same and “social contributions.” time, collaborative sales* of box lunches at “roadside stations,” featuring local ingredients of each region and green tea beverages, were conducted, as initiatives were implemented to introduce local production for local VOICE Expert Opinions consumption. Human Rights * Co-sponsored with the Michi Club Kazumi Oguro, Editor-in-Chief, Gekkan Sotokoto In an event held in Toyokawa, Aichi Monthly Magazine Prefecture, we interviewed Prefectural I think ITO EN could better publicize the CSR and environmental Governor Hideaki Omura, and he initiatives it is advancing. As tea is a symbol of Asian culture, shared the following viewpoint: I’d like to see you consider community from a broader, more “Green tea and your other beverages international viewpoint that encompasses all of Asia. go perfectly with Aichi Prefecture’s Governor Omura ao rcie The Environment Labor Practices regional specialties and local production/local consumption Makoya Kageyama, Center Chief, CSR Center LLP, efforts, and we’d love to see this support continue.” Yokohama City University Moreover, ITO EN attempts to spread true tea culture such as enjoying the practice of tea preparation, and the selling The basis of CSR is to take an approach that understands the of teas of the world through its Chajuttoku and ITOEN TEA needs of stakeholders. I think an approach that supports the GARDEN specialty tea shops. “regional environment” and “regional cuisine” of ITO EN well reflects people’s needs and their social significance. Moreover, it is important to communicate those approaches to stakeholders in the region. Initiatives in Support of Japanese Culture Masami Kojima, Member of Editorial Board, In Japan there is a wonderful culture that appreciates such aesthetic pursuits as tea, Japanese food, unique regional Lifestyle Information Department, Mainichi Newspapers cuisines, haiku poetry and art, historic sites, cultural assets, The activities of ITO EN are more focused on individual and the natural environment during the four seasons. communication rather than on a large-scale perspective, as ITO EN regularly holds the Oi Ocha New Haiku Contest (see well as also taking into account people at the regional level. The same environmental initiative can also deepen the connection page 43) and engages in many other support initiatives. Fair Operating with people in the region, and this is the ITO EN approach; if this Practices attitude is spread throughout the Company and is adopted by all Jakuchu Ito Exhibition of its employees, I believe that we will see even greater benefits In Support of “Colorful Realm: Japanese Bird-and- from its activities. Flower Paintings by Jakuchu Ito (1716–1800)”

Jakuchu Ito was a painter active in the mid-Edo Period who was known for his paintings depicting flora and fauna. The Issues and Targets Jakuchu Ito Exhibition was held in commemoration of the 100th Consumer

anniversary of the presentation of cherry blossoms by Japan to Ongoing reconstruction support for the regions affected Issues the United States as a gift to the nation’s capital, Washington, by the Great East Japan Earthquake is an issue, along D.C. with responding to regional issues through our region- ITO EN worked in cooperation with Group enterprise ITO intensive activities such as raw material tea cultivation, EN (North America) INC. and supported the event from the production bases, sales and marketing bases, and so perspective of introducing tea culture to the world. on. Therefore, while reinforcing our grasp of community needs and our dialogues with all parties concerned, Community Involvement ITO EN Ladies Golf Tournament we will also reinforce areas where we can leverage our and Development core Group strengths such as “agriculture,” “food,” ITO EN has been holding the Ladies Professional Golf “the environment,” and “culture.” Furthermore, whether Tournament since 1985 as part of its corporate stance of domestically or overseas, we aim to respond to the supporting a healthy lifestyle. Top domestic players gather and needs of each region in our quest to become a “Global compete for the prize that greatly impacts the championship Tea Company.” for the year. The event is operated by volunteers, mostly from

ITO EN CSR Report 2012 ITO EN CSR Report 2012 42 Community Involvement and Development

23 Years in Step with Oi Ocha: Number of applications for Oi Ocha New Haiku Contest TOPICS The 1st 41,373 Japan’s Largest Creative Public The 2nd 47,523 Cumulative total: 22,855,242 The 3rd 63,745 The 4th 109,750 Contest The 5th 256,484 The 6th 398,191 The 7th 489,407 The 8th 535,894 Oi Ocha New Haiku Contest The 9th 686,271 The 10th 956,174 The 11th 1,050,802 The Oi Ocha New Haiku Contest has been held as a public contest The 12th 1,022,341 The 13th 1,234,792 since 1989. The contest is characterized by enjoyment of a free The 14th 1,277,946 The 15th 1,401,095 sensibility that isn’t confined by the traditional 5–7–5 haiku format, and The 16th 1,523,876 by the displaying of the winning entries on Oi Ocha series packaging. The 17th 1,667,903 The 18th 1,699,489 The Oi Ocha New Haiku Contest is used in school education, The 19th 1,635,460 The 20th 1,649,082 and develops children’s powers of expression and can be used as The 21st 1,657,098 material for aesthetic cultivation, enabling anyone of whatever gender The 22nd 1,712,928 The 23rd 1,737,618 or age group to apply. Moreover, in addition to Japanese, we also 0 500,000 1,000,000 1,500,000 2,000,000 (Poems) receive English haiku from dozens of countries around the world each year. The 23rd Minister of Education, Culture, Sports, Science and Along with the holding of the contest, the use of the poems on Oi Technology Prize Work Ocha packaging continues to provide opportunities as a venue for “tea” and “haiku” as Japanese traditional cultural assets to be seen “A Cloud of Spring for the Hippopotamus, together and be familiarized by people around the world. Camel, and Us” Tomiro Hihata, Aichi Prefecture 23rd total number of applications Since hippos and camels spend their days 1,737,618 poems without any inhibitions, people want to Number of prize-winning poems feel less like lords of all creation and rather 2,000 poems (package more big-hearted. This was what I felt publishing) when writing this poem. Cumulative application total It is a work that aims to brighten the 22 million poems or sinking feeling brought on by events such more as the Great East Japan Earthquake.

Oi Ocha New Haiku Contest: Background on How It Was Started

In 1985, ITO EN succeeded in making a green tea beverage for the first freely to an approximate 5–7–5 rhythm, making for “new haiku” rather time in the world, and launched Kaniri Sencha (Green Tea) on the market. than traditional haiku. Winning entries are published on Oi Ocha product Then, with its renaming to Oi Ocha in 1989, the Oi Ocha New Haiku packaging, making this a unique cultural activity. Contest was also launched. Since then, the Oi Ocha New Haiku Contest has excelled along with Oi Ocha. Pertinent to the background of the Organizer: ITO EN New Haiku Contest Executive Committee contest launch was the 300th anniversary in 1989 of Matsuo Basho’s Oku Support: Ministry of Education, Culture, Sports, Science and Technology no Hosomichi (“Narrow Road to the Deep North”) travel account; and Gendai Haiku Association Japanese Student Haiku Association in the previous year, poet Machi Tawara had released her popular Salad Haiku International Association Anniversary, creating great interest in abbreviated forms of traditional NHK Gakuen NHK Culture Center Asahi Culture Center Sankei Gakuen Mainichi Bunka Center Yomiuri Culture Japanese poetry. Haiku and tanka courses were popular in cultural Japan Educational Exchanges and Services Japan Educational Press Co., Ltd. centers and the like, but there were few opportunities for people to Judges: Syllabaric order/Honorific title omitted display their works, although many people wanted to find a venue for this Japanese haiku divisions: ‌Sawako Agawa (writer), Shimpei Asai (photographer), purpose. Here we hit upon the idea of using Oi Ocha product packaging Tota Kaneko (haiku poet) as a medium for publishing these poems. Rather than creating a system Yoson Kurahashi (haiku poet), Momoko Kuroda (haiku poet), Souun Takeda (Japanese calligrapher), Kazuko Yoshiyuki with strict creative limitations on haiku such as kigo, or “season words,” (actress) and forgiving minor excesses and deficiencies in the number of traditional English haiku divisions: ‌Philip D. Zitowitz (professor, Meiji University), Tsunehiko characters, a feature of the contest was being able to express oneself Hoshino (haiku poet)

Oi Ocha New Haiku Contest: Social Significance VOICE As set forth below, we pursue good mutual relations with Expert Opinion society, applicants, and ITO EN with respect to the Oi Ocha Tota Kaneko, Haiku Poet (Judge) New Haiku Contest. Oi Ocha New Haiku Contest The haiku of ITO EN are special, and are a little different from conventional haiku. They Social Benefits Applicant Benefits have a fresh feeling that could represent • Promotion of haiku as traditional culture • Opportunity to publish own work the new haiku. At first, some were said to of Japan (extending to the world) • ‌Opportunity to become familiar be too “new” or too eccentric, but they with haiku culture • Use in school education have gradually become more familiar. ITO EN Benefits Before long it might come to be said with confidence that ITO EN haiku are the haiku • Value-added feature for Oi Ocha products of the present day. • Attracts fans of ITO EN and Oi Ocha

43 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Main Initiatives of Group Companies

Fundamental Concepts OKINAWA ITO EN, LTD. Organizational Governance The ITO EN Group is developing business both The PET-bottled beverage Umi to Daichi no Yushosui (a fountain domestically and overseas. Each Group company from the depths of the sea and the great earth) and Kenko Mineral strives in their business development to implement the Mugicha (healthy mineral barley tea), sold in Okinawa, are blended management principle “Always Putting the Customer with deep-sea water drawn from the deep, off the Manza coast. First,” actively engaging in the ISO 26000 core subjects As an enterprise selling beverages and tea leaves containing “the environment,” “consumer issues,” and “community elements of the beautiful ocean and natural splendor in Okinawa, involvement and development.” the company has since 2009 contributed assistance payments

Moreover, in conformity with the ITO EN Group when purchasing the deep-sea water to the Onna village fishery Human Rights Basic CSR Promotion Policy, CSR measures are being cooperative to help with coral sea cultivation activities. Moreover, promoted with ever greater planning, with the aim of a portion of the proceeds of sales of Mabuya Drink Products is making ITO EN a “Global Tea Company.” used to help support nature preservation in Okinawa Prefecture and youth development Tully’s Coffee Japan Co., Ltd. projects.

At Tully’s Coffee Japan (headquarters in Tokyo), events rooted The Environment Labor Practices in the local community are held in each location, such as “coffee school” as a form of “community café,” and “picture book readings.” The coffee school uses decaffeinated coffee so that participants who have small children are also able to ITO EN SANGYO, LTD. participate. Furthermore, from June 2011, the ninth picture book At ITO EN SANGYO (headquarters in Shizuoka Prefecture), creation contest was held, the “Tully’s Picture Book Award.” which engages in tea production, sales, and freight shipping, Based on the theme of “picture books that will cheer environmental consideration in the production plant is emphasized. everyone up,” entries were solicited in the “Picture Book and The company is engaged in improvements including the installation Story Category,” as well as from the “Kids Section” aimed of solar panels on the factory rooftops, the transition to LED at small children who were invited to draw “what makes me lighting in the offices and warehouse facilities, and the use of heat happy.” The winning entries are donated to hospitals and exchanging paints on the outside walls and rooftops of its factory other institutions, and a part of the proceeds from the sales is facilities to lower the temperature in the buildings. donated to Save the Children Japan. Efforts contributing to the region also include annual In the area of environmental consideration, energy extracurricular school activities such as factory tours and hands-

conservation targets are established at all Tully’s locations, on facility field trips for students. Fair Operating and all directly operated stores have switched to LED lighting. Through these field trips students Practices Additionally, the entire company practices energy conservation are given hands-on education in a wide variety of ways, including switching off sign lighting about hygiene and box packing, and adjusting air-conditioning temperature levels, among gaining valuable experience in the other efforts. joy of work and in the responsibilities of being a member of society. Solar panels installed on facility rooftop

ITO EN KANSAI CHAGYO, LTD. Consumer Issues ITO EN KANSAI CHAGYO, LTD. (headquarters in Hyogo Prefecture), which engages in the production and sales of green tea, barley tea, and gift products, works in cooperation with the ITO EN Kobe Branch and Kansai sales staff to participate twice

Picture book reading program Tully’s Picture Book Award per month in the city of Kobe’s “Kobe Citizens Beautification Community Involvement

Movement,” cleaning up their route to work from nearby and Development stations to the headquarters. Note: ‌This type of beautification program, “Adapt Program,” is promoted by the ITO EN Group. Participating offices: Headquarters Building, Nishi-Shinjuku Building (shared by ITO EN and GREEN VALUE), Taito Asakusa Building, sales offices, Kagurazaka Building (Tully’s Coffee Japan) Regional clean-up activities

ITO EN CSR Report 2012 ITO EN CSR Report 2012 44 Main Initiatives of Group Companies

Chichiyasu Company ITO EN (North America) INC.

At Chichiyasu (headquarters in Hiroshima Prefecture), which At ITO EN (North America) INC. (headquarters in New York), engages in the manufacture and sales of dairy products we introduce a Japanese gastronomic culture of green tea such as yogurt and milk, communication with the regional by way of our TEAS’ TEA series products. Capitalizing on the community mainly takes place in the form of factory tours for overseas trend of healthy living and the increased backdrop local children. On these factory tours, children can visit the of the expansion of sugar-free beverages in North America, production lines, and also have a chance to interact directly we participated in events such as “Japan Week” in March with live calves at Chichiyasu Farm. Moreover, “Chichiyasu 2012 at New York’s Grand Central Station, introducing the Ranch Factory Visit Notebooks” are distributed to local safe and high quality of the Japanese gastronomic culture. children who visit, and factory scenes are clarified through At the Los Angeles Tea Festival where teas from around illustrations. the world were featured, the company exhibited green tea These plant tours possess a long history, having been beverages and introduced the delicious tastes and pleasures held since 1926. Visitors are numerous, with about 5,000 of the Japanese tea participants in fiscal 2011. The company will continue to host culture. these factory tours, inviting many people to deepen their understanding of processed dairy products and as a place to enjoy communication with local residents.

Exhibition booth at Japan Week

Chichiyasu Farm Chichiyasu Ranch Factory Visit Notebook Introducing Other Major ITO EN Group Companies (As of April 2012)

Domestic GREEN VALUE CO., LTD. ITOEN.ITOCHU MINERAL WATERS At GREEN VALUE (headquarters in Tokyo), which engages CO., LTD. in vending machine maintenance and serves as a sales Import and sales of mineral water intermediary for vending machines, the focus is on engaging in building a recycling-based society, by separating component materials from vending machines that will no longer be used domestically, rather than simply disposing of them. Overseas At present, recycled products are transformed and put to good use in a great many ways, but in the future the company USA aims to achieve complete recycling of all products for reuse Mason Distributors, Inc. Manufacture and sales of supplements in vending machine bodies or parts for installing vending machines, and so on.

ITO EN (USA) INC. Australia ITO EN AUSTRALIA PTY. LIMITED ITO EN (USA) INC. (headquarters in Hawaii) engages in the Tea leaf production and sales production and sales of beverages mainly in Hawaii. In Hawaii, the word for “family” is Ohana. When people help each other economically or give advice, or share in some way, as such an act is considered important, it is called the spirit of Ohana. China Embracing the spirit of Ohana, the company recognizes the Ningbo Shunyi Tea Products Co., Ltd. approach of food bank organizations that work to help needy Tea leaf production, export, and sales families living in Hawaii, and provides assistance in the way Fujian New Oolong Drink Co., Ltd. of contributing beverage products, foodstuffs, and monetary Manufacture, export, and sales of beverages donations.

45 ITO EN CSR Report 2012 ITO EN CSR Report 2012 Third-Party Opinions

Tsuneo Matsumoto The Great East Japan Earthquake and Fukushima Daiichi nuclear accident of March 11, 2011 had a tremendous impact Professor, Graduate School of on Japanese society. Supporting regional bonds through Law, “Ochakko-kai” events was a response characteristic of ITO EN. Hitotsubashi University ISO 26000 is a guidance standard and not intended for third- Regarding CSR, served as Chair of party certification, unlike the widely implemented ISO 9000 the Japanese National Committee family (Quality management systems) and ISO 14000 family for ISO Working Group on Social (Environmental management systems) standards. Therefore, it Responsibility (October 2004–March 2011), and as Chair of the ISO 26000 is impossible to determine for an outsider whether the claims JIS Integration Committee (April 2011– by a given enterprise of following the guidance provided by ISO March 2012), etc. 26000 in its activities are credible or not. Many methods have been suggested for enhancing credibility of reporting for ISO 26000 by enterprises, but that which is most emphasized is ISO 26000, Guidance on social responsibility for organizations, evaluation by stakeholders through stakeholder engagement. was enacted in March of this year as Japanese Industrial ITO EN has conducted four stakeholder dialogue sessions in Standards designation JIS Z 26000, making it familiar to the past year, and in this report stakeholder comments are Japanese enterprises. I want to express my great appreciation included for each of the core subjects. to ITO EN, which aims to become a “Global Tea Company,” One feature of ISO 26000 is the emphasis placed on the for its prompt self-evaluation of internal activities from practice of social responsibility throughout the supply chain. the perspective of ISO 26000, including dialogues with Since ITO EN relies mostly on the so-called “fabless” method, stakeholders and the Company’s publication of this information whereby raw material procurement and product planning as a CSR report. are conducted in-house but manufacturing is outsourced to In this report, the seven core subjects mentioned in ISO consignment factories, it may be suitable for ITO EN to extend 26000 are reported upon, but three of these are particularly its environmental engagement, for example, to its outsourcing emphasized, namely “consumer issues,” “the environment,” partners, and include this information in its reported findings. and “community involvement and development.” This is a very Finally, I would like to add that the green tones seen in the natural development for a company that manufactures and photographs of tea plantations on the cover of this report bring sells tea beverages from tea leaves grown in domestic regions. to mind not only ITO EN’s core business in tea beverages, but In addition, I look forward to reading the report from ITO EN, also this year’s “Rio +20 Global Summit” with its main theme of especially with regard to the Company’s plans to adapt the a “green economy.” remaining four core subjects to its activities in the future.

Response to Third-Party Opinions Hidemitsu Sasaya Director Manager of CSR Promotion Department Vice Chairman, CSR Promotion Committee Chairman, Environmental Committee Member, Compliance Committee

Thank you indeed for your multifaceted views on the ITO EN Group’s CSR activities and the substance of ISO 26000. Encouraged by your evaluations, we hope to evolve our activities yet further with regard to the criteria set forth in ISO 26000, such as stakeholder engagement methodologies, activities related to core subjects such as consumer issues, the environment, community involvement and development, and so on, including our end-to-end approach “from tea plantation to used tea leaves” (such as the employment of paper mixed with used tea leaves for the cover of this report). Moreover, we will redouble our efforts to include our outsourcing partners in a concerted attempt to coordinate ongoing

quality control, traceability, and CO2 emissions control, in order to ensure social responsibility through the supply chain. Going forward, we aim to deepen our stakeholder dialogues to obtain objective evaluation of our CSR activities, promoting CSR management under the guidance of ISO 26000, in order to contribute to a “green economy” of sustainability in society and the environment, so as to not only meet but exceed the expectations of our stakeholders.

ITO EN CSR Report 2012 ITO EN CSR Report 2012 46 For further information on our CSR activities, please contact the CSR Promotion Department. ITO EN, LTD.

47-10, Honmachi 3-chome, Shibuya-ku, Tokyo, Japan, 151-8550 Tel: +81-3-5371-7213 Fax: +81-3-5371-7196 E-mail: [email protected] http://www.itoen.co.jp Published: September 2012