[Foreign language] It is time for us to start LIXIL ESG Briefing. The theme for ESG Briefing this year is "Navigating the Impact Journey: LIXIL's Commitment to People and the Planet." The company will be sharing with you design state-in-global HR strategy in the global HR strategy, and also we will be sharing the progress in environmental strategy released last year. There would be a presentation on the corporate value improvement as well as the generation of impact through solving societal issues. The presenters are as follows in the order of appearance: Director, Representative Executive Officer, President and CEO Kinya Seto. Senior Vice President, Chief Environmental Impact Officer Uchu Mukai. Director, Representative Executive Officer, and Chief People Officer Jin Montesano. In the Q&A session that will follow the presentation, will include Independent Outside Director, Chairperson of BoD Masatoshi Matsuzaki. Independent Outside Director, Chairperson of Nomination Committee Yuji Nishiura.
I will be serving as your facilitator. My name is Kawai from IR Office. I would like to explain to you how the event will proceed. The agenda is on the screen. It is on the fourth page of the presentation materials. Three presenters will present one by one. After the presentation, we have Q&A session. You would be able to input the questions anytime during the briefing. Please use the Q&A box at the bottom of the screen. We expect to conclude the briefing at 5:00 P.M. Japan Standard Time. Thank you for being here today. Mr. Seto, the floor is yours.
Hello everyone. I am Seto from LIXIL. Thank you so much for attending our ESG Briefing today. To realize LIXIL's purpose, we have been driving initiatives focused on priority issues outlined in the LIXIL Playbook, which represents our management direction as shown in the slide.
The priority issues, the strategic initiatives. It says the focus: transform, grow, and innovate. These are the efforts for differentiation. We have products, business models, and services. We need to differentiate everything. If not, it would be commoditized and we would not be profitable. One of the policies to materialize this is to focus on our employees, people who are working at LIXIL. They are our human resources or assets, and through them we would like to realize innovation. One of the important directionality is, as you can see here, impact strategy. For example, environment, diversity. We have various products and services, and we are always mindful of the directions that we have. Through strengthening our human resources, we would like to differentiate ourselves. More specifically, what kind of image do we have on mind?
We are building an organization where innovation is autonomously generated. As a direction, we are trying to provide something that's good for the society. As Kawai-san has mentioned, people, planet. We want to be impactful to them. For example, there's PremiAL. This utilizes scrap aluminum. We are able to reduce the carbon usage by 97%. Also, the foamed shower KINUAMI U. This was used for beauty purposes, but people who have disabilities in their hands, it would be more useful. And also it's useful for the caregivers to the elderly. Another is LIXIL Toilet Cloud. The cleaning of public toilets is becoming more efficient through our service and products. We are able to create these kinds of products and services because of the diversity of our employees. We are always thinking about giving a positive impact to the planet.
In the case of Japan, diversity is about empowerment of women, and LIXIL is also focusing in that area, and also people with disabilities. When we think broadly about people with disabilities, 15% of the overall population have some kind of disabilities. So providing good products for them is to recognize something that is from a different perspective of what we used to have. By having diverse human resources, we would be able to accommodate for a better life for the people around the world.
Now, another new news in regards to maximizing the impact. We talked about innovation before, and this could really change the world. This is such a technology. This is the Generation 2 Reinvented Toilet. Now, from around 2011, with the Bill & Melinda Gates Foundation, with their support, we have developed a toilet called SATO. We have been selling this toilet called SATO to solve sanitation issues around the world. There was one issue associated with this. The toilet SATO itself is meaningful in creating toilets to address the sanitation problem. If you go to a suburban area or the country area, then it was possible to treat the waste in a hygienic way. In urban areas, there are times when you cannot process the waste.
Sometimes you have to create sewers anew, and then you need to come up with the purification tanks and so on. It is costly, and it is difficult based on the current infrastructure. For the densities to create a sanitary toilet, you need to be able to treat waste in a way that is meeting the sanitation requirements. There was Bill Gates' support, and there is a development team led by the Georgia Institute of Technology. There was a development program that was going on, and we were asked to participate in this in 2011 as a commercial partner. There aren't too many people, too many companies around the world who are interested in doing this and trying to do this on a commercial basis. As a top runner, we were kind of asked to join.
So we have been working on this new type of toilet. At this point in time, it is still somewhat expensive, but it is something that can be lowered in terms of pricing that would enable the diffusion. It will change the door to the toilet. Even without the sewage system, we can still enable toilets to be used in a sanitary way. I did actually kind of focus on one particular topic when we talked about impact. But as to what we're going to cover today, like with last year, we'll talk about the environment strategy, and we are doing updates about the conservation of biodiversity. Mukai-san will talk about this. Then after that, Mr. Jin Montesano will talk about employees, the human resource investment that is a foundation to whatever we do. So Montesano will talk about the global people strategy.
Afterwards, Masatoshi Matsuzaki-san and Nishiura-san, the outside directors, will also participate and will talk about the role of the board of directors regarding human capital as well as in regards to governance. So without further ado, I'd like to pass on to the others. Thank you for your participation today.
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Thank you very much. There would be a presentation by Chief Environmental Impact Officer Mukai to give a presentation on the environmental strategy update, but we will be showing the video of the progress of the impact strategy. Please enjoy the video.
Inadequate access to sanitation and hygiene has ripple effects in the community, in health, economic advantage, and dignity. We provide access to safe sanitation and hand hygiene for everyone.
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We believe that fostering an inclusive culture and ensuring gender equity are not only the right things to do, but also absolutely critical to our business.
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I would like to start the presentation on environmental initiatives. We have Environmental Vision 2050, and we are conducting various initiatives. On the right, you see three pillars: climate change mitigation and adaptation, water sustainability, and circular economy. These are the three focus areas to achieve our vision. In the ESG Briefing last year, we talked about embedding the environmental strategy into the business strategy. We are now seeing acceleration of our initiatives due to that. Last year in CDP, we have been able to earn the Climate Change A-list for the first time. We are now seeing progress for our initiatives. Today, we would like to talk about the topics of progress in the area of environment. First is biodiversity. As a manufacturer, LIXIL manufactures various products. This is making us emit gases as well as usage of water, and we are impacting the environment.
On the other hand, in order to manufacture, we use various raw materials: metals, wood, or rocks and soil that are used as raw materials, ceramics. We are depending on those naturally derived materials, considering that in pursuing business sustainability, we need to conserve biodiversity. We have been focusing on biodiversity in our activities, but last year we decided to further pursue conservation of biodiversity, and we have added that to our materiality. Through this, our business activities and the capital and biodiversity relationship are more clear, and we would be able to take more concrete initiatives. We joined the TNFD forum last year, and we have registered as early adopters of TNFD. Starting from June this year, we will be disclosing the TNFD report starting from June of this year. I would like to brief you on the progress related to TNFD.
Response to biodiversity has been conducted in the past as well. So in the first year of complying to TNFD, what kind of things are still lacking, and what have we already fulfilled have been checked? So our operation in the direct operation, as well as upstream areas where we use a lot of raw materials, and the relationship of that with the environment had been checked. First is upstream. We use various raw materials, and to procure those raw materials, we depend on the environment, and also we impact the environment. So we looked from these two perspectives. And what we have found through that is, in terms of the dependency to the environment, wood has the biggest impact. And in terms of the impact to the environment, the metal has the biggest impact on nature. We use various metals, but aluminum is what we use the most.
So we started initiatives there. We have looked into opportunities and risk and what countermeasures that we should be taking. We would be deep diving into this starting from this fiscal year on. Next is direct operations. In over 80 sites around the world, we are looking at water, atmosphere, as well as resources. Just like we are doing in the upstream, we are looking at the opportunities and risk and considering what we should be doing. Putting 2030 on the top of mind, from the perspective of biodiversity, what kind of things could happen was considered as a scenario. And within that scenario, we have picked up what would be most impactful for us and what is most likely to happen, and we listed up. The priority that we have identified in the list has been covered by biodiversity initiatives that we have already been conducting.
We would be able to give you the details in the report to be disclosed in June. This time around, we have been looking at these issues from a high level in the big picture. We will be further analyzing the situation, and we would be conducting more specific initiatives. Next is related to climate change. One announcement I would like to make is on the screen. We have achieved the first-ever SBTi Net-Zero certification in Japan's building products industry. So the fact that we have been certified by SBTi is that the activities that we are conducting towards 2050 are considered appropriate and that it's science-based. SBTi Net-Zero. So this is a long-term view towards 2050. And in addition to that, the short-term target is also placed importance on. So I would like to talk a little bit about what we are doing.
So on here, this shows what we should be doing by 2030. This is a list of goals. Utilizing this, we are checking our progress, and if needed, we conduct additional activities. This is the overview.
So this is Scope 1 and 2. And in 2050, we are in 2030, we are hoping to get to a 50% reduction, and we are now at 30%. And we have been able to bring forward the target that we had, but we still have 20% to go. Rationalization of manufacturing process and also the energy efficiency will be worked on, and we will be transitioning to higher energy efficiency sources. And also we will utilize renewable energy for electricity. Through this, we would like to achieve 2030 goals. Net-Zero is for 2050, zero carbon. So we need innovation and technological breakthroughs. For example, utilization of hydrogen or CCU, carbon capture and utilization . And we have already started the verification of this, and also we are conducting researches. And towards 2050, we would be conducting seamless activities.
Next is Scope 3. When we think about Net-Zero, then we cannot escape our Scope 3 emissions. Particularly, what we consider to be important in Scope 3 is, as you can see here, our upstream relationship with the suppliers. When we say suppliers, within our Scope 3, the suppliers or upstream, the CO2 generated, that account for 40%. So reduction here is necessary. Of course, this is not something that we can do by ourselves alone, and we need to work together with suppliers. As the first step to doing so, we have started to communicate with our suppliers. Why are we working on reducing CO2 emission? That's where we started. How are we going to do it? How are we going to calculate? So we've engaged in a lot of discussions.
What has become apparent in doing so is that there are suppliers already engaged in great activities in reducing Scope 1, 2, and 3. But there are also suppliers who know it is important to reduce CO2 emission, but they don't know how to reduce the emission. They don't know how to calculate. So for those companies who are quite advanced, we've gone a step further. And how are we going to reduce CO2, the reduction going forward, and how are we going to reflect that into our Scope 3? We will start to take that into consideration.
But for those companies that have still a long way to go, and then the suppression of CO2 emission, the know-how technology that we have accumulated in that regard, and also how to calculate CO2 emission, all these will be deployed to those suppliers so that we can work together to reduce CO2 emission reduction as well as to work on reducing Scope 3. And I'm only talking about what we are doing in Japan at this point in time, in Japan, but we will also engage in similar activities with suppliers overseas as well. So from here, I'd like to talk about efforts in regards to our product. And I have been saying that we're going to embed a robust environmental strategy in our business strategy, but where is that reflected? And I'd like to talk about this from the perspective of products.
Some products have already been introduced through the video, but starting with the PremiAL, we are using recycled aluminum. Normally the mining of bauxite or the refining of aluminum. There's a lot of energy used, but we are able to reduce such the energy utilization, and that will lead to a reduction of CO2. We've been saying this for a while. But from the perspective of biodiversity, there are also elements other than CO2. And we can say that this material is very friendly to the environment. At this point in time, we have been approached by many companies, both in and outside Japan, Taisei Corporation or the 7-Eleven, for example. And they have already decided to employ a PremiAL, and also industries from both inside and outside Japan, other than the construction material business, have already approached us. Next is regarding GREEN WINDOW .
Here, how can we optimize the reduction of CO2 for the entire life cycle of windows? We try to deploy this in our customers. Operational carbon and embodied carbon, the two types of carbon. Depending on customers, where should we focus on? What type of product should we emphasize so that they are able to adopt that? We make proposals in that regard. What is described at the bottom of that slide is revia. This uses waste plastic and the waste wood. Normally, these waste plastic or waste wood have no other use, often just burned as fuel, and that would lead to increased emissions of CO2. But whether it be waste plastic or waste wood, we have decided to utilize those so that we are able to regenerate them as a valuable product.
By doing so, not just reducing the CO2 emission, but can also suppress the increase in the marine plastic. Last example is GROHE Everstream. This was also introduced in the opening video. This technology is going to be rolled out mainly in Europe starting the summer this year. This is a system to recycle water. In other words, we're able to conserve water resource, but it also leads to energy, the consumption reduction, which means that this is a technology that will lead to reducing CO2 emission. Lastly, I'd like to talk about the progress of our midterm targets. This is also something that I've talked about last year. In the middle is the actual record from 2022, and on far right are the new numbers. As evident from this slide, you can see progress in all the categories.
There are also numbers where quite a significant acceleration has been achieved. We will continue to work towards embedding a robust environmental strategy. That completes my explanation about the environment. Thank you for your attention.
Thank you very much. We would like to now invite Chief People Officer Montesano to talk about Global People Strategy Update. Jin-san, please.
Thank you very much. Hello, everyone. Thank you so much for attending today's briefing. What is at the core of LIXIL is our employees. In order to achieve our vision as well as goals, our employees are indispensable, and they are the drivers of achieving our goal.
With you, an update of our Global People Strategy. I want to begin with a story. When Kinya asked me to lead HR in 2019, he said he would like to change the title from CHRO to CPO. I was surprised because Chief People Officer is not a common title. I asked him why, and he said, "Our employees are not simply resources to be utilized by the company. Behind every human resource is a person who has unique preferences and dreams, constraints, and capability to achieve. We don't manage human resources, we manage people." That notion has really been at the core of how we've built the Global People Strategy, starting with aligning people and purpose. My colleagues at LIXIL are steadfast in their dedication to our purpose as a company to make better homes a reality for everyone everywhere.
That's why, since the inception in 2021 of our People Strategy, it's really been the catalyst for transforming LIXIL, precisely because the People Strategy is designed to enable our people to deliver on the strategies we've outlined in our LIXIL Playbook. If employees are truly our most important asset and the engine of our value creation, then investing behind growth and development of people is critical to LIXIL's success. It's really as simple as that. The pillars of our People Strategy are three: enhance employee experience, embed inclusion into our DNA, and elevate talent across the enterprise. All strategic pillars are geared toward enriching our human capital. Please allow me to share the progress we've made across the board.
In light of the pandemic, seismic shifts have been taking place with regard to workplace dynamics, and it's imperative that every individual in the company feels represented and valued within this LIXIL community. Employee expectations have shifted, and they're continuing to shift. This is urging all companies, including LIXIL, to adapt to new paradigms. In response to this changing landscape, we examine closely the needs of our own workforce, particularly in Japan, which is our largest market, both in sales and employee presence. We revamped our people policies to foster a much richer employee experience by prioritizing engagement, well-being, and a sense of belonging. After careful consideration, we embraced a hybrid model as the optimal solution for our globally dispersed teams. By offering greater flexibility, we accommodate our employees' lifestyles and life stages and empower employees to maintain their contributions to the company while juggling personal responsibilities like caregiving.
Crucially, though, this shift is not about compromising on productivity or performance. It's really about ensuring that our workforce remains engaged and motivated so they can actually perform at their best. Now, employee feedback suggests we're on the right track. A survey which we conducted in Japan last year showed that 80% of our desk-based employees are coming to the office less than once per week. Roughly nine out of 10 of our female employees in their 30s and 40s, as you know, these are the years where childcare and senior caregiving duties are really the most prevalent for women, they said they'd like to continue working remotely. We also see a clear uptick in the inclusion score of that same population through LIXIL Voice, our employee survey, with the inclusion score for our female talent in their 30s increasing by three percentage points in Japan over the last two years.
By championing people-centric policies, we've positioned LIXIL as a progressive, forward-thinking workplace, setting us apart as a unique employer of choice. While remote work does offer these undeniable benefits, we do recognize very well that the importance of in-person interaction to build those precious relationships and networks is really actually critical. To address this point, we've implemented targeted initiatives to facilitate more people-to-people networking and connection-building opportunities, particularly for important cohorts like new hires and recent graduates who need to build those relationships. To foster true inclusion at LIXIL, our D&I journey entered a new phase in fiscal year 2024, transitioning the lead accountability from HR to the broader business and to business leaders. Central to this shift was the introduction of our own Leaders Guide to Advancing Diversity and Inclusion, and it was complemented by a series of targeted workshops led by managers for managers.
Why do we focus on managers? It's very simple. Managers shape organizational culture, and only an inclusive manager can enhance inclusive culture within his or her team. All 125 sessions were led by managers who served as facilitators supported by HR teams. Over the last eight months, we've now trained 6,000 managers across LIXIL utilizing real-life case studies from LIXIL, and the response has been overwhelming. Recognizing the significant impact that managers have on team dynamics, we're also implementing a manager development program across the company with particular focus on Japan, and we call it GROW, Great Managers at LIXIL. This long-term, self-paced program aims to broaden managers, turning them into coaches and people developers, really equipping them with the essential skills needed to foster inclusion and drive team success.
Creating an inclusive culture is foundational, but what separates truly sustainable companies from others is a deep bench of talent ready to take on critical leadership roles. Nothing is more critical than ensuring that our top talent is placed in roles where they can thrive, supported by the right structures for their success. Managers, as custodians of their teams, play that pivotal role in recognizing and nurturing talent within their ranks. At LIXIL, we employ a rigorous process known as POD, People and Organization Development, which involves collaboration with executive officers and leaders worldwide. This talent mapping initiative is paramount for organizational resilience. Kinya and I spend a considerable amount of time, function by function, business by business, to deep dive into these talent reviews and engage in robust discussions with our leaders to align around our people strategy with ever-changing organizational needs being considered.
Through this POD exercise, we gain valuable insights into the distribution of talent across all facets of our business and identify areas where talent gaps exist. This process enables us to establish succession pipelines for these critical roles. We pay particular attention to identifying female high-potential talent as well, with 36% of female successors identified during the FYE 2023 review. We've also been able to grow year-on-year our talent pool of ready now and ready in three-year talents in these critical positions. I'm pleased to report one of the outcomes of having such a thorough talent review. Women represented 28.6% of all promotions in fiscal year 2023, while they only represented 17.5% of promotions in FYE 2022. The insights gained through POD help us inform our learning and development efforts.
A culture of learning is integral to building a stronger base of talent, fostering organizational growth, and cultivating innovation. The learning culture at LIXIL embraces continuous improvement and enables us to navigate and adapt to change with agility. We aim to cultivate a workforce that's eager to learn, eager to evolve, and develop themselves by providing each and every one of our employees with the flexibility and tools necessary for learning and development. From innovation-related programs with the Tuck School of Business at Dartmouth to GROW, our manager-focused training plan, and a wide access to LinkedIn Learning for a growing proportion of our employees, we offer a range of options, including self-paced learning modules and collaborative cohort-based sessions, which cover everything from foundational skills to advanced career accelerator programs. Our employees, they actually recognize this.
75% globally tell us they have been provided with the opportunity for learning and development, which is a high result compared to external global benchmarks. Year-over-year, we see learning hours steadily grow at LIXIL, particularly outside of Japan. This targeted approach to learning not only enhances our resilience, but it also strengthens our competitive edge. We firmly believe that true innovation flourishes when every voice is heard and valued. This is why inclusion serves as the bedrock of our talent management practices and enhancements to the employee experience. We are creating an environment where people are empowered to drive forward their projects and ideas, thereby delivering new value to the company. A decade ago, roughly when I joined the company, such progress would have been inconceivable due to a lack of the necessary cultural and mindset shifts.
However, through our intentional efforts to cultivate inclusion, we have paved the way for more innovative thinking and meaningful contributions to be heard and embraced. Let's look at some examples. So Hydrific here is the result of an intentional effort to generate innovation at LIXIL. Working with Tuck, we developed a program tailored exclusively for senior executives and high-potential leaders to create a common language around strategy and innovation at LIXIL, something we didn't have before. The program led to new ways of thinking, and Hydrific is one such incubation venture that is coming to fruition. Led by Julia Deister, who joined the company 10 years ago, Hydrific's mission is actually to chart a new course for water sustainability by empowering people with the information and tools they need to make water conservation easy and enjoyable.
Their first product, which is called Droplet, is a cutting-edge ultrasonic sensor that monitors your home's water usage from a single point. It was just launched on March 20th and reached its Kickstarter crowdfunding goal in a remarkable 11 minutes. But the Tuck program did not stop at just that senior level. The Three-Box Solution, which is a key component of our program, was also rolled out much deeper into the organization. In fact, over 500 people from executive officers on down have now graduated from this program. Fujiwara-san here joined LIXIL as an engineer, fresh out of university. A few years later, her interest was piqued when she heard about the Three-Box Solution, and she submitted her project to build a customizable Cat Wall.
In another company, her idea may not have gotten very far, but at LIXIL, not only did she have a path to pitching this idea, she was empowered to run with it, coming up with a whole new category of products for our LIXIL housing business. Fujiwara-san reached her crowdfunding goals within 24 hours. Today, she's running the business end to end from new product development (we just launched a new cat hammock made out of recycled fibers we're sourcing from a B Corporation) to marketing and sales development. Now, innovation is not just about new products and new ways of reaching consumers. It's also about transforming how we work, simplifying work processes, reducing inefficiencies, for example. Imagine the challenge of predicting when to replenish the inks for decorating tiles, a task that was once quite manual and very time-consuming. Yosuke Yamada from our tile division envisioned a much smarter approach.
By connecting tile production schedules with ink levels, he developed an app to streamline stock management without any formal coding experience. The rollout of the digital team's low-code/no-code initiative was part of a very conscious effort to democratize problem-solving using coding solutions, empowering employees with vital tools that they need to realize these ideas. Our citizen developers are solving time-consuming business challenges by developing apps that simplify everyday life. More than 2,600 apps have been developed as of February 2024, and really just highlights how an agile and entrepreneurial culture is taking root at LIXIL. However, I think there's no better way to know whether the strategy is paying off than to hear from our employees. Let's have a brief look.
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Hi, I'm Tom Stafford. We are looking at streamlining IT operations for all employees in LIXIL.
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I think that when you have transparency, it builds trust, which is important to build strong relationships.
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Our people are at the center of everything we do. Literally, we cannot achieve and be LIXIL without our people. They are the driving force behind innovation and growth, the force behind creating long-term corporate value. Our global people strategy aims to empower our people to deliver against our strategic objectives. As we embed inclusion into our DNA, elevate talent across the board, and enhance the employee experience, we are confident these initiatives will drive further business success for today and tomorrow at LIXIL. Thank you very much.
[Foreign language]. Thank you very much, Jin-san. That concludes the presentation from LIXIL. We will now move on to the Q&A session. While we are preparing the venue for Q&A, we would like to explain to you the flow of Q&A. First, we will receive questions from the investors. That would be followed by taking questions from the media. Due to constraint in time, in the case that the questions overlap, we may skip those questions which overlap. We will be responding to the question confined to what was presented today. You will be able to enter your questions from the Q&A box at the bottom of the screen. Please put your name as well as your company name and put in your questions. We are preparing the venue for Q&A. Please wait for a moment. We are now ready for the Q&A session. We would like to start.
The questions that you have put will be responded to by the five people. While you are asking questions, I would like to ask the two independent directors who are here.
First, I would like to ask Chairperson Matsuzaki.
Today's main theme, one of the main themes for today, is HR strategy. Currently, the importance of human capital management is drawing attention, and various companies are working on strengthening that. The stakeholders require the companies to systematically explain about how that strategy would be utilized for corporate value improvement. So what kind of discussions are you having at the board of directors meeting to provide supervising functions?
I would like to respond. So in terms of how we supervise, as part of the basic policy of the management, we have the impact strategy, which is the sustainability strategy. The board of directors meeting has already approved it.
With regards to the progress of it, twice a year we check it, twice a year during the board of directors meeting, and independent directors will provide feedback. Montesano-san will provide twice a year the report on the HR. We will be getting the report about the human resources strategy, and we ask various questions. There are three things that we do that I would like to talk about. One is the employee experience. So when I heard about this, what impressed me was the D&I promotion initiatives and also creation of the environment which is conducive for the employees to be able to balance work and private life. So LIXIL is doing that hand in hand, and that is impressive.
So, in the securities report, the ratio of the female managers as well as the acquisition rate of the male employees getting childcare leave. Various companies are working to improve those numbers. Maybe the management is happy to see that ratio go up, but there is a possibility that there cannot be a balance between the private life and work life, and the employees may not be happy, but LIXIL is trying to accomplish that, and that's great. Second is promotion of D&I. The female directors of LIXIL are supervising this very strictly. From my perspective, it seems that LIXIL is implementing the plan according to the strategy, but the female directors put pressure on the company to accelerate that initiative. I think that we are having a healthy supervision.
The third is that in the February board meeting, Montesano-san had reviewed the initiatives related to the human resources. I asked the question at the end. So as a CPO, in the coming year, what would be the biggest priority for you as CPO? She said the retention of key persons, especially the Japanese employees who would be able to work globally. That's where Jin-san wants to focus on. This means that LIXIL must be selected by exceptional talent. I was impressed by her response. So I mentioned good aspects, and I would like to talk about the areas where it could be further improved. Sustainability assessment is good at LIXIL. It was introduced during the presentation today. For example, Dow Jones Sustainability Index. LIXIL has been included in the global index, and also for CDP, it is A-list.
On the other hand, in the Integrated Report Award, where institutional investors are the judges, or the Japan IR Council, where the judges are also investors, LIXIL had received a special award but not the Exceptional Company Award. I think LIXIL has been able to get to a certain level for individual activities. However, it is probably not so clear how that would add value to the long-term narrative of growth for LIXIL. So I think that there is some room for improvement. I think in the briefing today, the management was very mindful of that point, and I think that they were able to improve that aspect compared to the past. But I think that there is room for improvement. That's all from me. Thank you.
Thank you very much. Next question is to Mr. Nishiura, Chairperson of the Nomination Committee.
Nomination Committee has been focusing on building the foundation towards the transformation of the management team to next generation to enable LIXIL to transition to the sustainable growth phase from the governance rebuilding phase that you have been working on thus far. Selection of CEO, directors, and executive officers as well as associated processes are important aspects of Nomination Committee activities. But please tell us about the committee's approach or thinking or challenges it faces concerning how to understand potential candidates for future management and next-generation talents regarding how to monitor development plans. Thank you.
In order to develop and realize what has been explained, it will require a certain time. Within a certain time, then the thinking of the management team must not derail. So in that regard, it's a very important theme at the Nomination Committee.
So when we consider about the management structure for the next fiscal year, we try to think from a longer-term perspective. We make a conscious effort of doing so. For example, the same applies for outside directors too. Also, we have plans for changing the outside directors, and we have plans that cover several years, and we try to discuss that. Also, how do we try to identify the candidates for the next generation? In this regard, internally, we try to pick up on various opinions quite broadly. To give you one example, in autumn every year, regarding all of the executive officers, we do individual meeting sessions. At that point in time, as I not just asking about the question of who the potential CEO for the future, but also ask about their thoughts about each of the executive officers.
By doing this type of interviews, we come up with a candidate list. As a Nomination Committee, we try to deepen understanding by then meeting with each of the candidates. Of course, there is no special thinking or way of doing things, but it's important that we continue to work on these types of activities. By doing so, we are able to realize and further develop the type of things that Mr. Seto has explained, and that will also enable LIXIL to achieve sustainable growth. That completes my response.
Thank you very much. There are questions from the participants. We would like to introduce to you those questions. From SMBC Nikko Securities, there are two questions from Mr. Kawashima.
The first question, I assume the second-generation reinvented toilet is an on-site toilet that does not require a sewage treatment network.
But what is the required heat source, treatment capacity, and operating time? Is it self-sustaining enough to be used in a disaster relief shelter? On this point, using solar power, utilizing solar power, we would be able to operate this. The second-generation reinvented toilet's biggest challenge is that it's a bit big. So by making it smaller, we would be able to solve various issues such as the power source. So during the day, it is fine by using the solar power, but during the nighttime, would the battery storage be enough? That's a challenge. So we need to make the size smaller. Another challenge is cost. It is several millions of JPY currently. But if you have a purification device, it would also cost several millions of JPY. So the cost is similar to that already, but we would like to reduce another digit from the cost.
Also, the storage battery issue must be solved. We are able to utilize the power with the solar power that we have, and also, it can be used in the shelters for disaster victims. And I think one directionality is to utilize this in such disaster relief shelters. Thank you. We have a second question from Mr. Kawashima. You mentioned that environmental and human resource strategies are making progress. How do you think this is contributing to your business strategy and performance? Of course, we should not evaluate them from a short-term perspective, and we have high expectations for long-term results, but it appears that the business side of the company has been struggling for some time now. Outside Director Masatoshi Matsuzaki is scheduled to retire at this time, so I would like to hear his candid comment at the end of this interview.
Well, let me respond.
The last thing that I've mentioned previously, I said there are still rooms for improvement. I was exactly kind of responding to what Takashi Masanao has asked, whether it be the environment strategy that we have explained today. We are engaged in good initiatives, and the roadmap has been established well. So how can we link that to long-term value creation? We have been able to paint the picture, but how are we going to, I suppose, express that is what we need to work on. That is where we have high expectations for the management people. That's all from me. Allow me to also add, and this is also related to business, so I'd like to add a comment too. We've talked about various things like premium.
So it is a product that bridges from aluminum scrap or the revia plastic recycling product or Everstream shower. So we talked about various products, but the timeline differs from product to product. On the other hand, when are we expected to see our performance specifically change? And I've explained this to investors on several occasions, but Europe and U.S., and when the available material the market recovers, then for that, we need to have the interest rate come down. And so that's a completely separate issue to these business strategies than that environment issue. And the premium product is already realizing results for LHT business for us. The aluminum business is about JPY 300 billion in size.
If we go to a PremiAL R 70, then when you look at it based on the raw materials basis, the 20%-30% improvement in profitability can be expected. But something like revia, and we are targeting JPY 100 billion by, say, 2030, or GROHE Everstream shower or KINUAMI U, and they will sell us product gradually. And so how much for this and how much for that, it's difficult to paint pictures in a specific way at this point in time. But there are, of course, those products that may not succeed as well, frankly speaking. But what is important is to continue with this type of effort so that we are a company with a differentiated product, and that will lead to enhancing our profitability over long term. I think that is one key point.
By continuing with these initiatives, then people will start to think that it is better to purchase from LIXIL if they're going to purchase something for the benefits of the earth. I think that is also something that we are expecting as an outcome. And that kind of outcome probably will take at least three-five years to realize.
Thank you very much. We would like to move on. From Nomura Securities, Mr. Fukushima, he has posed two questions.
The first question, you talked about integrating environmental and business strategies, and you mentioned commercializing the second-generation reinvented toilet, but it sounds like there are still some challenges in terms of cost. Please tell us any challenge to if there is any challenge to launch, the timing of the launch, target sales volume, etc.
Frankly speaking, we are able to commercialize in limited markets, for example, in resorts or the locations where the sewage cannot be treated, and also in disaster-stricken areas. The area where we could use this the most is the slums where the infrastructure is not put in place for treatment of water. We need to reduce the cost in order to do that. We have to think about how many years it would take. We have engineering experiences, so we would like to capitalize on that in the coming several years. The volume target for sales, we cannot really say that now. The $5 toilet, so this toilet can be used by five people with one toilet, and the processing amount will be about the same for the reinvented toilet.
We think that when we get close to Seto, I think we would be able to sell a lot with large volume. Thank you.
Thank you. Second question from Fukushima. I think it is wonderful that you are developing so many talented people along with diverse work styles, but I would like to know about personal evaluation and other aspects of your company. I would like to know about your salary structure, fairness of personal evaluation, etc., and if there is anything unique to your company, please let me know.
So thank you for the question. LIXIL has been promoting meritocracy and performance management now for quite some time since Kinya arrived. So obviously, our personnel evaluations and our performance management strategy overall is really fitting this performance management approach. So personnel evaluations are taking place once a year. We have an annual personnel evaluation process to look at the overall year's performance. But we also have a mid-year check-in. It's not anything special. I think most companies are doing what we are doing. What we're doing differently, perhaps, is in changing that career conversation where it's not about checking the tasks and making sure that the tasks were done and therefore the evaluation is complete, but really looking to build those soft skills using coaching and promoting the development of those specific individuals that managers are overseeing and looking after.
Those career conversations, we encourage to happen all throughout the year. That's something that we are working to promote. Of course, that's especially important because LIXIL is working remotely. We have this hybrid model. Having that ability to check in and continue to build that relationship and really understand what's happening at the team level and individual level becomes that much more important. I think we are able to continue with this performance management approach to our personnel evaluation simply because we have instituted this more inclusive approach where we're able to build that relationship that goes beyond just sharing information and really driving performance management. What will you get done this year? That's why our ability to say it's not where you work or when you work, but it's you getting the work done. That is the underlying foundation of performance management at LIXIL.
I would say that that is just following what global best practices in terms of managing performance. In terms of salary structures and fairness, I think we're using the same bell curve notion as everyone else. You've got your top 10%, and then you've got everyone else, and then maybe some people at the very end that need to get pulled up towards the middle and moving everyone step by step towards a higher ladder. That's really the focus. Salary structure-wise, I think we're probably, again, nothing special, pretty much like all other companies, although if we can become more differentiated, that is the focus going forward. One of the key steps to performance management going forward is to create more acceleration and differentiation in the salary structure, especially for those global talents.
Japanese talent in particular, I think, are not as well paid, especially the ones that are quite competitive. As Matsuzaki-san was saying earlier, that's a big focus for me is talent retention, especially our global Japanese talent.
When you ask about fairness, and it does relate to that to an extent as well, in the case of LIXIL, we were formerly some way towards the INAX, and these three companies had a typical Japanese type of seniority type of scheme. Now, the seniority system is easier to ensure fairness, but we have implemented performance-based work, and we want people to work on a global basis, and we take people from outside the company as well. If we start to do that, then in terms of fairness, there are more challenges in comparison to the previous seniority system. So in order to secure fairness, what are we doing? We have started to reflect the perspective of market. So what type of salary if one is employed in a market?
So that is one type of fairness, but we need to be more, I suppose, equal in one sense. I think that is quite an important perspective. Now, personal evaluation is very difficult, but dialogue. Now, the seniority system is a scheme where the wage level is decided. So the conversation between superior and a boss was not all that important in securing the salary level, but we wanted to introduce dialogue there, the leaders understand their subordinates, and what are the elements of that that needs to be improved. Having that type of conversation, and when we introduce meritocracy, and then it leads to being more equal. Fairness, we're making all the efforts to ensure fairness, but it may not be completely unique.
But in our case, where we have a history of many companies coming together to form one company, we have acquired a company from abroad that we want to be equal in securing fairness as well. From Sumitomo Mitsui Trust Asset Management, we have two questions from Mr. Takegawa. The first question, please let us know if there is anything you are doing to resolve issues from a human capital strategy for GROHE, which has many challenges in terms of performance. So in terms of the challenges from the performance perspective, rather than just focusing on GROHE, the European market itself is struggling. That's what I would like to emphasize because this is a good opportunity. I think we should be reviewing what we should be doing in Europe. Labor Union is very strong. And because we are in this era, we are able to frankly speak with them.
So restructuring and improvement of productivity, from those perspectives, we are conducting various initiatives. And also through dialogue, we are checking on what we need to do. And we have reviewed the management structure and also the manufacturing systems.
I mean, we have very talented people in our European business, a lot of them from the legacy GROHE organization, which we acquired. The key is really helping that organization become much more bottom-up, just like a lot of other parts of LIXIL. So the human capital strategy is focused on maximizing the talent we have there, creating more of an open and speak-up culture where people can raise their voice and raise their ideas. We have an incredible talent base there. And I'm confident that the direction we're going from a human capital strategy perspective is the right one when it comes to really unlocking the performance of the European business going forward.
What I'm appreciative of, Jin -san, is that in Europe, there was a mindset of Europe is Europe, United States is United States. And there were many independent thinkers out, and they did not think so much about Japan. So the top person of manufacturing or the product development, we dispatched Japanese personnel, and now we are able to have exchange of the personnel. So under a difficult environment, everyone is acceptable to the idea of exchange of talent. So I think that we are in a situation where it's conducive to synergy, and that would be coming back to Japan. So it's a virtuous cycle. The competitors have been creating synergy through the independent growth of each region. And LIXIL had not been able to do that before, but we are able to have various exchanges for synergy.
Good point, Kinya. I mean, I think when we had COVID and Kinya introduced the special allowance for everyone to get ready, work remotely, the GROHE organization in EMEA was really surprised that LIXIL would do something like that. And it really was the start of everyone in Europe thinking, "Oh, okay, so being part of the LIXIL family actually means something, and we should think about that." And that really set us on the right course for establishing a human capital strategy that welcomes our EMEA talent into the fold, helps them to understand a little bit more in a nuanced way who is LIXIL because GROHE for so long was part of private equity, and it's a different culture and a different world.
So I think we are starting to see really good progress in bringing our colleagues, and a lot of them are expressing interest not just solving Europe's problems in Europe, but tapping into expertise in Tokyo and in other parts of the world and wanting to learn how to create that cross-regional, cross-geographic collaboration to improve their own performance in the region. I'm actually really encouraged by the culture shift that we're seeing there.
Thank you. Takegawa-san.
So second question from Takegawa-san. I think it is wonderful that you are promoting various social contribution projects, including the ESG project. On the other hand, how about showing KPIs for what you can gain from this, such as revenue growth and market development strategies? At this point, the P/B ratio is still below 1 time, and I think it will help the company to recover.
Thank you for raising that point. And why we are short of 1 x for the P/B ratio is profit level is still insufficient. And so given that backdrop, why are we developing product focusing on ESG, particularly focusing on environment? Well, it is a differentiated product, and differentiated product leads to higher margin. That's related to previous question, but all products. And our revenue is about JPY 1.6 trillion, and it will take time for all products to be differentiated.
In the end, the business, the profit ratio and ROI, we are targeting 10%. Because when all these products are linked to sales, then we should be able to achieve those levels. That was a part of the strategy playbook.
Thank you very much. Questions from the media. The first question from Nikkan Industry Newspaper , Mr. Matsuoka's question.
You mentioned reducing the environmental impact related to metal materials in the biodiversity preservation. Are you thinking of joining Aluminum Stewardship Initiative, ASI, an international initiative on sustainability in the aluminum industry, and obtaining ASI certification for your aluminum extrusion plants in Japan and overseas? So we don't have that plan at this moment in time. We are not thinking about that currently. Related to certification, there are a lot of discussions going on, and we decided to go one by one where it has the biggest impact, but we are not thinking about ASI certification at this moment.
Thank you. From Yamaguchi-san, from Nikkei Shimbun, there are two questions from Yamaguchi-san, and the question is to Seto-san.
I understand that you have received inquiries about PremiAL R70, which uses recycled aluminum material, mainly from European and U.S. companies. To the extent possible, please tell us what industry sizes and attributes you receive many inquiries from. Also, what are your impressions on the current trends in environmental regulations in Europe and the U.S., which are behind the increase in demand, such as a growing demand for decarbonization right now in Europe and the U.S.?
So we're not talking about sending PremiAL to the market itself, but what we see is that European and the U.S. companies, when they're conducting business in Southeast Asia or India, then they want to use decarbonized aluminum. That's one point. And the second is the government-related project. There is a need to work towards decarbonization, and so R70 or R100 are receiving inquiries.
Fortunately for us, R70 and R100, we are able to produce this product in our plant in Thailand and Vietnam. And so whether it be Southeast Asia or India, we feel that we will be able to accommodate the demand for those markets. And in your question, you talk about other. Well, not just in the construction material industry, but also in the automotive industry, we have received inquiries. The automotive industry too. And they have always been working on this, but they need to reduce weight. So they're changing steel to aluminum and, from the recycling perspective, changing plastic. So we are seeing those. And so for aluminum, by reducing the weight, the gasoline usage could be reduced. But embodied carbon is also an issue. And so reducing embodied carbon is also a thinking adopted by the automotive industry.
And so we are seeing inquiries from the automotive industry increase in that regard. Now, our product is we don't have product which is sold at the storefront. And there is inquiry to use recycled aluminum versus pure aluminum as, I suppose, the frontal display of the product at the storefront. Scale, it's difficult to talk about. The plants that we have, and the scrap ratio was 30% in the past. Now, we're 70% average. And by 2030, we want to raise this up to 100% for when we take that into consideration and to have everything 100%. And that would be the market size, and we should be able to secure premium on that. And that is what we are aiming for. And the most realistic revenue to generate profitability is this product.
The second question from Yamaguchi-san.
In Japan, the government has increased its subsidies for thermal insulation remodeling windows, and I believe that in addition to windows, doors will also be covered. How would you be preparing for an increase in the demand?
So last year, when this happened, we had expected that there would be triple or quadruple the amount, but actually, it was 8 x, 10 x more. And the delivery timing had been delayed. So we increased our production capacity, and we are able to respond to the orders. And we have been able to respond to the customers' orders without delay. So the increase in the capacity has been done sufficiently, and we are able to withstand the increase in the subsidies by the government, and there's no delay in the delivery.
Thank you very much. Because of the time constraints, this will be the last question.
The question is from Sakai-san from Nikkei ESG. The question is for Jin.
Would you please explain on global talent, what capabilities and potentiality do you expect them for long-term growth?
Well, specifically, I was referring to Japanese talent or employees in Japan who are able to and interested in working overseas, globally, with this global enterprise mindset. We actually have lots of talent as engineers or in specific product development areas within Japan that are in desperate need overseas. In fact, we are seconding many people, whether it's to help fix a supply chain issue or to help with an acceleration of a product development issue somewhere in the LIXIL world. Many of these talented Japanese engineers and product development specialists or whomever are what I would regard as global talent.
They understand deeply the know-how and technology, have a willingness to work abroad and actually contribute to the specific business agenda we're driving, and are also interested in accelerating their careers by taking on such assignments, learning, and then returning to Japan to then further contribute in senior roles. I would consider that to be global talent. But of course, global talent is any kind of talent, any talented individual, leader, manager who can think from an enterprise perspective. When they're faced with a challenge, they're not just trying to solve that problem from their own access of resources in their local environment. They're thinking more broadly. They're also asking big questions when it comes to risk or issues facing them directly.
They're thinking, "Well, if I were Kinya, if I were the CEO, what would I do about that?" So this enterprise mindset is really important, and the ability to lean in on learning and stretching and taking some calculated risks with your career to gain an advantage around how to grow and accelerate yourself, I think that's what really constitutes global talent. And we actually have, in total numbers, quite a decent pool, I would say. I'm very, very proud of the global talent we have, not just talent overseas. So they are not just the global talent. To me, we have a nice base of talent in Japan. And it's important because of LIXIL's unique legacy, where we came together as mergers and acquisitions. So people working in LWT, LHT, in corporate functions, in Honsha, they really understand LIXIL and the history of LIXIL.
Having that group really globalizing and accelerating and challenging themselves to take on roles outside of LIXIL, return, and contribute in more and more senior roles, that group I really want to cherish and cultivate more as we go forward. That's the group I care a lot about. Even though I care a lot about all of our talent, this is a very important group for the future longevity and value creation for LIXIL. That's what I firmly believe. I don't know, Kinya, did you want to contribute to that?
No. I'm fine. But I just want to add one point.
Just one point. And it may be just a closing comment that may not be necessary, but as was asked, we have not been able to respond to the expectations in terms of the business performance. And I need to be certainly mindful of that. But the impact strategy or ESG, the contribution towards corporate value, people may not fully believe in this. So we are making an effort to make sure that that type of thinking is incorrect. And as I said before, for all of our product, for the environment, for the Earth, we're trying to change our products to have a positive impact on the environment for the Earth. But this will take several years. But when we are able to achieve that, that will be a greater differentiator for us to generate profit for us and will enable us to grow.
The world is looking at ESG and impact. This may not have large impact towards the corporate value. It could be negative to the corporate value. We have people like that around the world, but we want to certainly challenge that type of thinking. What we want to do is that. If you can understand it for that, that would be very appreciated. Thank you very much.
Thank you very much. We thank you for asking a lot of questions. This completes today's briefing. We will be sending a questionnaire regarding ESG briefing for today. I hope to have your cooperation. We would like to conclude LIXIL's ESG briefing. Thank you very much for your attendance.