Integrated

Report

2017
Year Ended December 31, 2016
 Management Philosophy

The Nippon Paint Group is committed to

contributing to the welfare of society
as a whole through its business activities,
working together for the mutual prosperity
and benefit of everyone.

Group Vision
We will deliver satisfaction and deep impression to our customers
by providing excellent specialty chemicals products and services,
centering coatings technology
We will grow globally based on respect
for the cultures and values of entire world
We will pursue corporate culture that accumulates
people with challenging spirits and enthusiasm

01 Nippon Paint Holdings Integrated Report 2017

Editorial Policy
We started issuing the “Integrated Report” in FY2016.
Our report shows initiatives to improve corporate value, management policy, business strategy, as well as directions
to become a “Global Paint Major.”
The Nippon Paint Group comprises Nippon Paint Holdings Co., Ltd., and Group companies in Japan and overseas.

The period covered and scope of the report

This report covers the fiscal year ending December 31, 2016 (April 1 to December 31, 2016). However, some
information from before and after December 31 is also included in the report as necessary. In addition, as FY2016
marks a change in the accounting period, many of the FY2016 figures have been adjusted to cover the period from
January 1 to December 31, 2016, in order to facilitate comparison with earlier financial results. If no special
mention is made, the scope for compiling data is the same as scope of consolidation.

Corporate Profile
Name: Nippon Paint Holdings Co., Ltd. Number of Employees : 224 (Consolidated: 16,872)
(as of December 31, 2016)
Head Office: 2-1-2 Oyodo Kita, Kita-ku,
Osaka 531-8511 Japan Representative: Tetsushi Tado, President & CEO
Tel: (+81) 6-6458-1111 Our Businesses: Establishment of group strategies,
management of group companies
Founded: March 14, 1881 (Nippon Paint Holdings)
Capital: 78,862 million yen Manufacturing and selling paints
and fine chemicals
(Each operating company)

CONTENTS
03 Business and Markets 18 Initiatives to Support Our Corporate Values
05 Business Strategy and Strengths Global Environment and Safety
Promoting Responsible Care/Preventing Climate Change/
07 Business Plan and Expansion Waste Reduction and Zero Emissions/
Measures for FY2017 Comprehensive Management of Chemical Substances/
Air and Water Conservation/Occupational Health and Safety
09 Message from CEO Living with Society
Maintaining and Improving Product Quality/
13 Eco-Friendly Products and Technologies
Supply Chain Management/Employee Engagement/
– Changing the World through the Power of Paints –
Contributions to Local Communities and International Society
15 Financial Highlights for FY2016 Corporate Governance

Nippon Paint Holdings Integrated Report 2017 02

 Business and Markets

Nippon Paint Group operates a paints business and

a fine chemicals business.
Nippon Paint Group is a comprehensive paint
manufacturer that offers a broad variety of products
and services, ranging from high quality and high- Paint Fine Chemicals
functionality paints, surface treatment agents that Business Business
provide functionality in materials in the pre-painting
process, eco-friendly products, and systems proposals
to improve paint process efficiency.

Paint Business
Trade-use paints and house paints Major sales regions

We provide paints used at a

wide variety of construction
Sales sites, including for detached
Composition
ratio* houses, buildings and bridges.
Of course, eco-friendly paints
46 % are part of our product
line-up, as are paints that
increase functionality,
including paints that protect
structures from corrosion.

Automotive coatings Major sales regions

We provide paints with high

quality and performance to
Sales global automakers for all
Composition
ratio* paint processes, ranging from
electrodeposition paint to
27 % paint for middle-coating and
top-coating.

Industrial coatings Major sales regions

We provide highly functional

paints for a broad range of
Sales industries, such as construction
Composition
ratio* machinery, agricultural
machinery, exterior building
13 % materials, office equipment and
home electronic products with
pre-coat and post-coat paints,
as well as powder paints that
do not include solvents. We
continue to expand the market
photo credit: East Japan Railway Company regions we target in Asia.

03 Nippon Paint Holdings Integrated Report 2017

 * From FY2016, the end of the fiscal year was changed
from March to December. To facilitate comparison
with earlier financial results, this report uses the
actual results for the twelve-month period from
January 1 to December 31, 2016.

Marine coatings Major sales regions

Developing and launching

paints that are both
eco-friendly and economical,
including ultra fuel-saving
antifouling paint offering
superior fuel economy and
compliance with global
environmental regulations in
the shipbuilding and marine
industry.
Sales
Composition
ratio*

10 %
Auto refinish paint Major sales regions

Using cutting-edge
technologies cultivated for
new automotive OEM
coatings, we developed
proprietary automotive
refinish paints appropriate
for refinishing. These paints
help reduce the burden on
the environment and lead to
a more efficient refinishing
process.

Fine Chemicals Business

Surface treatments Major sales regions

Surface treatments are

required for a broad range
of industrial applications. We
develop advanced products,
such as surface treatments
with an affinity to paints and
functional thin-film paints that
serve the needs of various
customers.

Sales
Composition
ratio*

4 %
Fine products Major sales regions

We develop paint products

that contribute to society’s
needs and helps solve certain
problems from a global
perspective. We offer solutions
such as UV-curable coating
materials and ultrafine organic
particles utilizing advanced
technologies.

Nippon Paint Holdings Integrated Report 2017 04

 Business Strategy and Strengths

Expanding
Nippon Paint Group has outlined objectives that seek Growth
to realize a medium- to long-term vision for Laying the
continuous growth as a global company.
We have taken up the challenge of becoming a groundwork
“Global Paint Major” that stands shoulder-to-shoulder
with the world’s leading manufacturers.
We are particularly focused on China, where we
2017
expect growth thanks to strong brand recognition and
a nationwide sales network.
2014 (Medium-term)
Will have established
We will be working to expand our business in China a foothold to acquire
Started
even further. a leading position
strategic alliance
in strategic businesses
with NIPSEA*
and regions
* NIPSEA
Abbreviation for Nippon Paint South East Asia,
which operates businesses in Asia

To be a Global
We have positioned China as the most important market and will continue
working to expand market share for our trade-use paint products.

Reasons for positioning China as the most Concentrate on trade-use paint business
important market (mainly decorative paints)
Asia accounts for roughly 45% by value of the global paint market. Trade-use paint products occupy roughly 41% of the global paint
We believe the market has opportunities for further growth. In Asia, market in terms of sales. They are highly profitable and the scale
and particularly in China, while economic growth is said to be of the market in China—our most important market—is significant.
slowing, the paint market continues to experience strong growth. It is also expected to expand further. Nippon Paint China has a
We established a local Chinese subsidiary, Nippon Paint China large market share, particularly for trade-use paint products (31%
in 1992, and it has been posting remarkable results. We expect share of DIY interior paints for consumers in 2016) and should
this business to expand further and have positioned China as our continue to grow going forward.
most important market.

Sales composition plan by region (consolidated) Sales composition plan by business (consolidated)
Japan China Automotive coatings Trade-use paints
Other Asian countries Europe and Americas Industrial coatings Others

13% 7% 00%
00% 19% 22%
00% 00%
11%
9% 14%
33% 27%
21%
11% 20% Future 24% 13% Future
5%
2017 38% 2017
12% 2014 2014
19%
72%
38 % 47 % 19% 46 % 60 %

05 Nippon Paint Holdings Integrated Report 2017

 Aim to be
the global
market leader
Global
Paint
From 2020
(Long-term)
Major
Will have attained a leading Our coating and related businesses
position in strategic businesses will have attained a leading position
and regions, and built in each global region, and
a foundation for growth built a foundation for growth

Management philosophy and vision

Paint Major
Strengths in trade-use paints in China multi-brand stores throughout China. We already have a high degree of
One of our strengths in China and other Asian markets is our partnership penetration in metropolitan areas and will be aiming to enhance our sales
with Singapore’s Wuthelam Group (hereafter “Wuthelam”). Since 1962 we network further, chiefly in China’s interior. Using our sales network, we will
have worked together to expand business operations throughout Asia, be striving to develop the repainting market and capture demand in that
relying on the Nippon Paint Group’s prowess in technical development market. We are steadily expanding our repainting service to new areas
and production, and Wuthelam’s prowess in local management, sales, and were in 90 cities as of 2016 (compared to 61 in 2015).
and marketing.
The Nippon Paint Group relies first and foremost on its brand strength. Major initiatives—Investment and M&A
We began business in China in 1992, at a time when interior paints had To further solidify our position in the Chinese market, we will continue to
yet to become common. By providing quality products and conducting aggressively pursue capital investment in China. Of the \50 billion we have
aggressive advertising activities, we built strong brand recognition and an slated for capital investment under the current medium-term management
extremely high level of trust in “LiBang”, our brand in China. In a brand plan (FY2015-FY2017), we expect to invest roughly \30 billion in China.
reputation survey conducted annually by a British marketing company, This investment is primarily intended to increase production capacity and
LiBang has been the only brand selected five years in a row as a Big Six respond to environmental regulations. Specifically, we will establish nine
brand in the Super Brands China survey. It is also the only paint new production sites for construction paints, starting with two large-scale
manufacturer to have been selected at all. Furthermore, according to a plants. The purpose of these new plants is to respond to stricter
survey of our own, LiBang’s Net Promoter Score (the ratio of buyers who environmental controls and increased demand for eco-friendly products.
recommend LiBang’s service to a third party minus buyers who do not) Our M&A strategy is to study geographical and operational segments
improved from 65% in 2014 to 99% in 2016. to locate companies that will complement and generate synergy with our
As the majority of sales in China are B2C (business to consumer), existing businesses. We are prioritizing M&A opportunities in Asia, especially
strong brand value is extremely important for expanding sales. To maintain in China, and will consider any “complementary M&A” involving fields in
and enhance brand value going forward, we will strive to improve our which the Nippon Paint Group is not yet involved and coordination with
reputation for reliability even further by enhancing our range of eco-friendly manufacturers possessing notable strengths in certain fields.
products, which are of interest to consumers, aggressively conducting At the same time, in order to avoid overemphasis on China and Asia
advertising activities, and deploying a variety of CSR activities. in general, and with the aim of establishing second and third pillars in the
Following brand value, our second strength is our sales network. We Americas and Europe, we will actively evaluate M&A opportunities that
have been working to develop robust sales channels since we began can help us realize inorganic growth while giving consideration to a balance
doing business in China and now have more than 40,000 exclusive and between regions and businesses.

Nippon Paint Holdings Integrated Report 2017 06

 Business Plan and Expansion Measures for FY2017

We started medium-term management plan “Survival Challenge” Medium-Term Management Plan Progress
to tackle fundamental structural reforms after the global financial and FY2017 Targets
crisis in 2008. Following six years of “Survival Challenge” (Stages
I and II), during which profit was steadily expanded, we positioned
2015 to 2017 as the first part of Stage III, targeting sales of ¥700 In FY2017, we will
billion and operating income margin of 15% in FY2017. FY2016 sales were work to further
fairly favorable, and improve our capital
“Future Pull” is one of the keys behind our efforts to achieve the target of an efficiency and
the targets in the management plan. First, we set an ambitious operating income achieve our sales
goal of becoming a Global Paint Major, then we implemented the margin of 15% was target.
achieved a year early.
course of action in reverse from our ideal state in a few years to
what we must do today. Focusing on our business based on this
approach resulted in higher net sales and operating income in Sales (FY2017 revised plan)

¥676.0
FY2016 than in FY2015. ¥606.0 billion
From FY2017, we will focus on expanding our existing ¥550.3 billion
businesses to maintain growth, particularly in Japan and Asia,
and will aggressively invest in M&A and strategic partnerships to billion
accelerate our growth in the global market.

* All calculations use the exchange rate

in effect at the time the medium-term
management plan was formulated
(USD: ¥119.17; RMB: ¥18.99)
FY2015 FY2016 FY2017
(April to March) (January to December) (revised plan)

Growth Strategy: Establishing a Business Structure

with a Competitive Advantage

Growth Strategy FY2017 Project Themes

1. Integrated management Steering committee for reformulating

of the Nippon Paint Group management philosophy
Establish a management philosophy that can be shared among
2. Establish strong operating companies group companies worldwide.
Strike a balance between the delegation of
authority and group governance.

Steering committee for establishing

3. Formulate and implement
group governance
a Future Pull plan
Establish a model and goals for future group governance
Thoroughly discuss the “why” and “how” for achieving goals.
under a matrix structure based on operational and
geographical segments.
4. Deepen and expand strategic alliances
Share the vision with NIPSEA and implement
a new alliance strategy.
Project to reorganize domestic
5. Promote diversity management production
Change the mindset and create a corporate culture Formulate a plan to handle issues with domestic production
that recognizes and accepts “difference.” and verify its effectiveness.

07 Nippon Paint Holdings Integrated Report 2017

Ongoing growth led by expanded Sustaining Growth, particularly in
operations for automotive coatings Japan and Asia
and trade-use paint businesses (unit: ¥bn) (unit: ¥bn)
FY2016 *1 FY2017 FY2016 *1 FY2017
(January to December) (revised plan) (January to December) (revised plan)
Automotive
coatings 139.38 149.1 Net sales 171.61 181.0
Japan
Trade-use Operating income *2 32.16 32.8
paints 236.88 285.1
Paint Industrial Net sales 297.75 311.1
Business coatings 68.29 69.5 Asia
Operating income 43.34 45.6
Others 51.49 54.1
Net sales 32.17 71.4
Total 496.04 557.8 Americas
Operating income 5.15 5.9
Fine Chemicals Business 18.04 19.2 Net sales 12.55 13.5
Others
Total 514.08 577.0 Operating income -0.37 0.2
*1 From FY2016, the end of the fiscal year was changed from March to December. To facilitate comparison with earlier financial results,
this report uses the actual results for the twelve-month period from January 1 to December 31, 2016.
*2 Excluding dividends from overseas group companies

Tasks and Measures Going Forward

Optimization of global governance Balanced business development
Tasks Establish a more effective global corporate governance framework Tasks Eliminate dependence on specific areas and review our portfolio
as the Nippon Paint Group, encompassing the eight joint venture companies
Measures In order to build a second pillar, we are considering the possibility
in Asia made consolidated subsidiaries in 2014.
of M&A and strategic partnerships, while keeping under consideration a balance
Measures In addition to geographical segment governance systems, we must between regions and businesses. In March 2017, we acquired the US paint
conduct global business management for operational segments. In light of the manufacturer Dunn-Edwards Corporation. We will continue to explore other
increasing complexity of the situation, we have begun studying new definitions potential M&A.
pertaining to governance and management for the various geographical and
operational segments.

Nippon Paint Holdings Integrated Report 2017 08

 Message from CEO

Completing current
medium-term management
plan in FY2017 and
continuing growth
to become a
“Global Paint Major”

Tetsushi Tado
President & CEO
Nippon Paint Holdings Co., Ltd.

The aim to become a Global Paint Major Even beyond the current medium-term management
Recently in the global paint industry, there have been an plan, we will continue to aim higher, in the longer term targeting
increasing number of acquisitions and alliances. In 2016, major well over ¥1 trillion in sales to become a Global Paint Major
U.S. paint manufacturer Sherwin-Williams agreed to acquire that stands shoulder-to-shoulder with the industry’s top
Valspar, also a U.S. manufacturer, and the transaction was manufacturers.
completed in June 2017, resulting in the world’s largest paint The Nippon Paint Group was founded 136 years ago.
manufacturer. In March 2017, PPG Industries, the world’s There are several thousand companies in Japan that were
second largest paint manufacturer, proposed the acquisition founded more than 100 years ago, but we wonder how many
of the world’s third largest, AkzoNobel, but the offer was of these time-honored companies have made the commitment
eventually withdrawn. In this manner, the industry is clearly in to expand globally. There is no guarantee they will be able to
a period of active reorganization. continue hereafter. To survive, they must maintain their
In order to survive in the paint industry, we at Nippon Paint competitive edge, increase their corporate value, and maximize
Group believe it is imperative we cultivate an environment that their potential. In our own case, we believe our best option is
gives us a competitive edge in terms of management efficiency, to continue our expansion on the global stage.
management strategy, corporate culture, organizational In any case, the next step to becoming a Global Paint
structure, and guidelines for employee conduct. Once that Major is to complete the current medium-term management
has been done, we must strive to achieve the targets of the plan in FY2017.
medium-term management plan that is already under way.

09 Nippon Paint Holdings Integrated Report 2017

Business expansion strategy

Promotion of expansion measures in China, Establishing second and third pillars to

the world’s largest market become a Global Paint Major
From a global perspective, business development in various In India, we deepened our cooperation with major paint
regions is steadily beginning to bear fruit. manufacturer Berger Paints and integrated our respective
In China, the world’s largest market, the B2C trade-use automotive coatings businesses as a joint venture. In 2017,
paint (business to consumer for housing interior paint) business the joint venture company started shipping products to the
is responsible for the bulk of sales. We are proceeding with new plant of a Japanese manufacturer, so the results of our
business expansion measures suited to conditions in both cooperation are already becoming evident. Furthermore,
major metropolitan areas and regional urban areas. In the big working together with Berger Paints, we are also strengthening
cities primarily along the cost, repair-related demand is our approaches to Indian manufacturers.
increasing. In order to capture as much of this demand as In the Southwestern U.S. we acquired Dunn-Edwards
possible, we are steadily increasing the number of cities in Corporation, a manufacturer with a leading position in
which we offer our repainting service, going from 61 in 2015 to professional-use decorative paint. The population of the
90 cities in 2016. The one-stop service involves not just the American Southwest is growing at a faster rate than any other
selling of paint, but spatial design, paint selection assistance, region of the U.S., so it is likely that demand for decorative paint
painting, and follow-up service. will show stable growth. Previously, business in the Americas
On the other hand, for the smaller regional cities in the centered on the automotive coatings business, but this
interior, we seek to capture share from the competition by acquisition gives us a foothold in the decorative paint business
expanding our sales network and focusing on the low- to in North America. By deploying Nippon Paint Group’s
mid-price zone. cost-reduction methods, we expect to improve profitability
In the area of B2C housing interior paints, brand strength even further.
is extremely important for expanding sales. To increase our In order to realize a strong business foundation, we want
competitiveness, we have conducted significant advertising to secure business worth ¥100 billion in the Americas and
and have actively involved ourselves in philanthropic projects. Europe and will therefore continue searching for partners who
As a result, LiBang, our brand in China, has been selected five can help us realize synergies through collaboration.
years in a row as a Big Six brand in the Super Brands China In FY2016*, on a consolidated basis we had sales of
brand perception survey, indicating that LiBang is a recognized ¥514.1 billion and operating income of ¥80.0 billion. We were
and trusted brand. unable to absorb the negative impact of foreign exchange
In addition, in terms of complementary M&A, since there fluctuations, so sales were down year-on-year, but most regions
has been a rapid shift from B2C to B2B (business to business) had higher sales and income on a local currency basis. In
accompanying a change in lifestyles, we acquired paint addition, we were able to achieve an operating income margin
manufacturer Huizhou CRF, which is strong in factory-use of 15%, one of the targets of the current medium-term
paints, especially wood coatings for furniture. business plan, a year early. We will strive to maintain this income
Of course, a business structure heavily oriented to China level in FY2017.
poses certain risks. To achieve a strong business foundation, For several years starting in FY2018, we plan to reorganize
we are also interested in expanding our businesses in our domestic production sites to create an environment in
international monetary blocks that are not sensitive to which, even in mature markets, we can maintain superior
fluctuations in the Renminbi. competitiveness and secure stable income.
* From FY2016, the end of the fiscal year was changed from March to December. To
facilitate comparison with earlier financial results, this report uses the actual results for the
twelve-month period from January 1 to December 31, 2016.

Nippon Paint Holdings Integrated Report 2017 10

 Message from CEO

Management with an awareness of ESG

Optimizing the global governance system system for the conventional geographical segments (Japan,
In the two years since I assumed the presidency, we have Asia, the Americas, and Others) overlap with the governance
been working toward becoming the sort of company we system for automotive coatings, trade-use paints, industrial
want to be in the long run, and I believe our persistent efforts coatings, and other operational segments, making governance
have produced a certain degree of results. FY2017 is the final very complicated.
year of our current medium-term management plan, and we will In light of the circumstances, we have begun studying
be planning carefully in order to achieve the goals of the plan. new definitions pertaining to governance and management
We are beginning to see the effects of the division into authorities and responsibilities for the various geographical
operating companies and the consolidation of joint ventures and operational segments. We will propose plans regarding
in Asia. Discussion between the operating companies and the prompt and accurate tracking of growth opportunities and
overseas group companies has helped to deepen understanding risks by region, accelerated decision making, and selection of
on both sides, and this has had a positive impact on business. regions for concentration of resources with a view to optimization.
At the same time, we are beginning to see issues in the various Our aim is to create a matrix structure with implementable
regions more clearly. geographical segment governance as the warp and global
The biggest issue is the need for further improvement to oversight of operational segments as the weave.
management and governance. In January 2016, the Business We will be working to create a system that facilitates
Management Control Policy was revised to clarify the authorities reliable global management as a cross-function between
and responsibilities of each company, and business management geographical and operational segments. By ensuring that this
has proceeded based on that policy. However, the governance system functions as it should and by working together as a
group to expand operations, we believe we can move closer
to our goal of becoming a Global Paint Major.

Promoting eco-consciousness and diversity

We at Nippon Paint Group believe that promotion of
eco-consciousness and diversity are indispensable to becoming
a Global Paint Major. We are therefore working to promote both
aspect in order to strengthen our corporate culture, establish
a superior competitive position, and achieve sustainable growth.
In terms of eco-consciousness, China, the world’s largest
market, has recently been strengthening its environmental
regulation in the face of social issues such as environmental
pollution and the management of hazardous materials.
We have been pouring effort into the development and
deployment of eco-friendly products in order to accelerate
the shift from solvent-based paints to water-based paints and
powder paints. For example, we have been diligently working
to develop products that provide a thermal insulation function
or fuel-saving function for marine use. Such products can lead
to a reduced environmental burden. We believe the development

11 Nippon Paint Holdings Integrated Report 2017

and deployment of such eco-friendly products can provide people are almost natural introverts and do not easily interact
opportunities for business growth. with different cultures. Nevertheless, we believe it is critical to
In addition, as we restructure our production sites, we are break out of the prototypical group-think mindset, and to that
working to improve the eco-consciousness of our production end we are conducting study meetings, lectures, and training
facilities. In China, our integrated, local, and specialized plants for each employee level. Although we have seen some results
are all part of our overall production supply chain, and we from initiatives undertaken in 2016, it is essential that we continue
plan to increase our integrated plants from five to seven and with reforms to improve diversity, which is the source of our
specialized plants from 17 to 25 by 2018. Our aim is to have all competitiveness on the world stage. It is our desire that
production sites be both optimally functional and eco-conscious. employees take responsibility for their own growth and
In terms of promoting diversity, in April 2016 we established independently select the work style that best suits them, that
a Diversity Promotion Unit to help us become a company our corporate culture, systems, and arrangements allow them
where all employees can achieve their full potential. We promote to execute their duties appropriately, and that we have a cycle
both intellectual diversity and the creation of an environment in which employee growth is reflected in company growth and
in which employees can experience job satisfaction. Specifically, vice versa.
we will be addressing four areas: changing mindsets and We are working as a unified group in striving to foster new
engendering an appropriate corporate culture, training diverse growth and further enhance corporate value, and we hope to
human resources and helping them flourish, reforming work be able to meet the expectations of shareholders, investors,
style, and ensuring a system for leveraging diversity. and all of our stakeholders.
It is no easy feat to transform the disposition of Japanese We therefore ask for your continued consideration and
people to make them more globally oriented, as Japanese support.

Promoting diversity
2020
2017
2014
Diverse multinational companies
Diverse nationalities, races, and religions Global Paint Major

Diverse sexes, ages, and values Asia, Europe,

• Accelerate our global
expansion
and the Americas
Further strengthen and
• Pursue inorganic growth
Japan
deepen our collaborations
Strengthen foundation
for diversity

Create diversity that is not observable (intellectual diversity) using diversity that is observable,
such as age, sex and nationality.

Nippon Paint Holdings Integrated Report 2017 12

 Eco-friendly Products and Technology
– Changing the World with the Power of Paints –

Mitigating the heat island phenomenon through the power of high-reflectance paint
Controlling rises in temperature with improved reflectance
Rises in temperature during the summer due to the heat island Comparison between high-reflectance paint
phenomenon are a serious social issue, especially in metropolitan and standard roof paint
areas, and recently a variety of countermeasures have been studied.
Sunlight, especially infrared radiation, contains thermal energy.
Reflects a larger
Thermal energy is transferred to objects when they are exposed Conventional paint High-reflectance paint percentage of
to infrared radiation, and this raises their temperature. This is one sunlight and retards
the transfer of
of the biggest factors behind the heat island phenomenon. Thermal Thermal thermal energy
energy energy
Nippon Paint Group has developed high reflectance paints
that reflect sunlight extremely well. In 1999, the Nippon Paint Group Pre-application Post-application
was the first to sell what are now commonly called high-reflectance Temperature trends by paint type
paints for use on the roofs of factories and warehouses.
(℃) Roof Standard roof paint High reflectance paint
Since that time, we have launched a number of other products 65
for use on road surfaces, marine vessels, and railway cars. In 2008, 60
55
we repainted the entirety of the Takahama plant operated by what 50
45
is now Nippon Paint Automotive Coatings Co., Ltd. (NPAU) with 40
the first eco-friendly paint using high reflectance technology. Our 35
30
strategy was to use the plant in presentations, and indeed it has
(Time) 9：25 10：25 11：25 12：25 13：25 14：25 15：25 16：25 17：25 18：25
contributed to raising awareness of high-reflectance paints and
(℃) Standard roof paint High reflectance paint
relieving the heat island phenomenon. 45
Interior

In recent years, we have included high-reflectance paints in

40
our lineup for private residences and now produce a broad range
of weather-resistant and stain-resistant high-reflectance paints. 35

30
(Time) 9：25 10：25 11：25 12：25 13：25 14：25 15：25 16：25 17：25 18：25
* Measurement environment: Prefab house at Takahama plant of NPAU (current name),
using high-reflectance paint from Nippon Paint Group (July 18, 2009 / High of 31.7℃ /
Low of 23.9℃)

Launch of the world’s first Promoting high-reflectance paint for roadway

high-reflectance paint for automobiles use in time for the Tokyo Olympic Games
Displaying design sense, thermal barrier properties, Reducing the rise in road surface temperatures
weather resistance, and stain resistance and lightening the burden on athletes
Using the high reflectance paint technology cultivated within the Leading up to the 2020 Tokyo Olympics, we are promoting the
group since 1999, we have developed an auto body coating use of high-reflectance paint on the roadways to be used for the
displaying design sense, thermal barrier properties, weather marathon. The road surface in summer can reach 50℃, so using
resistance, and stain resistance. The use of Nippon Paint Group the paint to keep the temperature down would lighten the burden
high-reflectance paint on automobiles is the world first. on participating athletes.

Toyota Prius “Thermo-Tect Lime Green”

09
13 Nippon Paint Holdings Integrated Report 2017
2016
Improving the fuel efficiency of marine vessels through the power of biomimetic coatings
Reducing friction drag on the hull improves fuel efficiency
According to an announcement by the International Maritime
Organization (IMO), international shipping emits some 800 million
tonnes of CO2, or about 3% of total global emissions. This is roughly
equivalent to all the emissions produced by Germany in one year.
Reducing CO2 emissions is a global issue, and the IMO is
requiring all vessels of 5,000 tonnes or more that travel internationally
to report operational data including fuel consumption, traveled
distance, and traveling time from 2019 onward.
The hulls of marine vessels tend to accumulate barnacles,
algae, and other marine life that increase drag on the hull, causing
the vessels’ fuel efficiency to deteriorate.
Nippon Paint Group has been putting its energy into the
development of hydrolysis-type marine vessel antifouling paint, which
The Queen Elizabeth coated with A-LF-Sea
prevents marine life from adhering to the hull by hydrolyzing the
coating film, and in particular has been proceeding with a shift to reduce drag on vessel hulls. In 2013, we developed “A-LF-Sea,”
antifouling agents with less environmental impact. In 1990, we which is even better at improving fuel efficiency.
developed the world’s first tin-free hydrolysis-type antifouling paint. By developing antifouling paints for marine vessels with an eye
In 2008, in addition to the antifouling function, taking hints from the skin on both reducing environmental impact and improving fuel efficiency,
of tuna and dolphins, we developed “LF-Sea,” a low-fuel-consumption Nippon Paint Group contributes to the reduction of global CO2
antifouling paint that which uses biomimetic technology to further emissions.

World first! Biocide-free self-polishing antifouling paint AQUATERRAS

Contributing to long-term antifouling and improved fuel efficiency for marine vessels
Leveraging hydrolyzing resin technology and R&D results hydrolysis reaction on the surface of the coating film.
accumulated within the group, we developed the world’s first In addition, thanks to the complete absence of antifouling
hydrolysis-type biocide-free antifouling paint for marine vessels. agents, the paint has a much smoother finish than conventional
Using a hydrophilic and hydrophobic microdomain structure products, reducing friction and improving fuel efficiency. The further
suggested by the function of antithrombotic polymer. It prevents development of biocide-free antifouling paint AQUATERRAS, with
marine life from adhering to the hulls of marine vessels and has its decreased burden on the marine environment, will also help to
long-term stain resistance due to the self-polishing effect of the reduce CO2 emissions.

Hydrophilic and hydrophobic microdomain structure of

antithrombotic polymer (illustration)

Since the coating film

has a hydrophilic and
hydrophobic
microdomain structure,
Adhering cells it is difficult for marine
life to adhere

-
+ -
+
- - - +
+ + + +
+ + + + + +
- - - - - -

+ + + + + + + + - + - + - +

Standard material Antithrombotic polymer Yugemaru, training vessel of the National Institute of Technology’s Yuge College,
after being painted with AQUATERRAS

Nippon Paint Holdings Integrated Report 2017 14

 Financial Highlights for FY2016
(as of December 31, 2016)

From FY2016, the end of the accounting period was changed from March 31 to December 31.
The period for disclosure of consolidated results in FY2016 is the nine-month period from April 1 to December 31, 2016, for the parent
company and subsidiaries whose accounting period heretofore ended with March, but the twelve-month period from January 1 to December
31, 2016, for subsidiaries which already had an accounting period ending in December.
However, in regard to FY2016 earnings, in order to allow readers to better understand the earnings status and to facilitate comparison with
earlier financial results, this report in most cases uses the actual results for the twelve-month period from January 1 to December 31, 2016.
The displayed figures have been rounded off.

Net sales Operating profit Ordinary income

¥514.1
(¥bn)
bn ¥80.0
(¥bn)
bn ¥82.8
(¥bn)
bn
600 80 80.00 90
535.75 71.35 82.78
500
514.08 74.61
60
400 60

300 40 46.83 49.27

260.58 260.59 33.39 33.75
233.38 32.96
200 25.86 30
20
100

0 0 0
(FY) 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016
(Jan-Dec) (Jan-Dec) (Jan-Dec)

*1
Net income ROE Net income per share

¥36.0 7.4 ¥112.3

*4

bn %
(¥bn) (%) (¥)
200 60 800
*2 *3
181.48 53.8
50 *2
650.0
150 600
40

100 30 400

20 18.1
50 13.5 200
32.16 30.02 36.01 10
7.4
*4 122.5
93.6 112.3
20.02 6.3 75.6
0 0 0
(FY) 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016
(Jan-Dec) (Jan-Dec)

Consolidated financial results for the past five years

2016 (Jan-Dec) 2015 2014 2013 2012

Net sales (Billions of yen) 514.08 535.75 260.59 260.58 233.38
Operating profit (Billions of yen) 80.00 71.35 33.75 33.39 25.86
Ordinary income (Billions of yen) 82.78 74.61 49.27 46.83 32.96
*1 *2
Net income (Billions of yen) 36.01 30.02 181.48 32.16 20.02
*4
ROE (%) 7.4 6.3 53.8 *3 18.1 13.5
*1 Profit attributable to owners of parent
*2 Due to the booking of an extraordinary profit of ¥148.8 billion (gain on step acquisitions) in the third quarter of fiscal 2014 because of the consolidation of equity method affiliates in the Asian region.
*3 ROE is 9.7% when the extraordinary profit mentioned above is subtracted from net income. *4 Disclosed results (relevant period: Apr-Dec for Japan; Jan-Dec for overseas)

15 Nippon Paint Holdings Integrated Report 2017

 Consolidated net sales by region
(Billions of yen)
Others
Americas 2016 (Jan-Dec) 2015 2014 2013 2012
6% 2%
Japan
Net sales 171.61 174.28 187.20 187.48 174.52
Japan Operating profit 32.16 29.16 26.41 27.02 22.44
FY2016
(Jan-Dec) 34% Net sales 297.75 317.40 43.87 45.71 37.07
Asia
Sales ratio Operating profit 43.34 37.75 4.53 4.26 2.45

Asia 58% ¥514.1 billion

Americas
Net sales
Operating profit

Net sales
32.17
5.15

12.55
33.16
5.18

10.91
25.79
2.69

3.72
23.55
1.98

3.84
19.14
0.92

2.65
Others
Operating profit –0.37 –0.90 0.07 0.08 –0.08
* Excluding dividends from overseas group companies

Consolidated sales by business segment

Sub-total (Billions of yen)

Others 4% Automotive 2016 (Jan-Dec) 2015 2014 2013 2012

10% coatings Automotive
coatings 139.38 138.76 93.35 92.51 81. 29
27%
Trade-use
Industrial FY2016 paints 236.88 253.35 45.79 50.06 43.77
coatings 13% (Jan-Dec)
Paint Industrial
Sales ratio 68.29 68.28 46.45 47.56 43.64
Business coatings

¥514.1 billion
Others

Sub-total
51.49

496.04
57.97

518.36
59.50

245.09
55.81

245.94
51.69

220.39

Fine Chemicals 18.04 17.38 15.50 14.64 12.99

46% Total 514.08 535.75 260.59 260.58 233.38
Trade-use paints

Investments and other expenses Consolidated cash flow

(Billions of yen) (Billions of yen)

2016* 2015 2014 2013 2012 2016* 2015 2014 2013 2012
Cash flow from
Capex 21.02 19.03 5.13 5.98 5.11 operating activities 77.92 63.10 34.42 26.92 31.85

Cash flow from

Depreciation 13.55 16.18 5.90 6.11 6.42 investing activities –42.70 –5.31 –86.97 –7.17 –6.92

Cash flow from

R&D expenses 12.04 15.18 5.99 5.92 6.02 financing activities –8.58 –24.70 85.30 –21.03 –18.74

* Disclosed results (relevant period: Apr-Dec for Japan; Jan-Dec for overseas) * Disclosed results (relevant period: Apr-Dec for Japan; Jan-Dec for overseas)

Nippon Paint Holdings Integrated Report 2017 16

 FY2016 Highlights

Regarding FY2016 results and change of

factors such as construction delays owing to weather, we conducted
accounting period
sales promotion activities to expand sales of new products. On
Starting with FY2016, the end of the accounting period was the other hand, other coatings were heavily impacted by a downturn
changed from March 31 to December 31. The period for disclosure in market conditions for marine coatings. Due to these factors,
of consolidated results in FY2016 is the nine months from April 1 consolidated net sales in the Japan segment were ¥171.6 billion,
to December 31, 2016, for the parent company and subsidiaries slightly down from the previous year. Operating income was ¥32.2
whose accounting period previously ended with March, but the billion, exceeding the previous year’s level when dividend income
twelve months from January 1 to December 31, 2016, for from overseas group companies is excluded.
subsidiaries which already had an accounting period ending in In Asia, we worked to expand our share of the automotive
December. However, in regard to FY2016 earnings, in order to coatings market in China through a partnership with local companies,
better explain the earnings status and to facilitate comparison even as automobile production numbers increased. In trade-use
with earlier financial results, this report uses the actual results for paints, we worked to energize paint resellers and the remodeling
the twelve-month period from January 1 to December 31, 2016. market within the paints for housing interiors sector in China. In
The sales for each segment are compared against FY2015 (April other Asian countries as well, as a result of efforts to expand
1, 2015, to March 31, 2016). market share, net sales were strong on a local currency basis.
FY2016 consolidated net sales were ¥514.1 billion. In terms On a yen basis after currency translation, consolidated net sales
of income, the impact of foreign exchange fluctuations were in the Asia segment were \297.8 billion, down from the previous
absorbed thanks to ongoing sales promotions and activities to year, but consolidated operating income was \43.3 billion due to
reduce costs, so consolidated operating income was ¥80.0 billion ongoing activities to reduce costs. Profitability significantly improved.
(margin of 15.6%), consolidated ordinary income was ¥82.8 billion In the Americas, a favorable trend in the number of automobiles
(margin of 16.1%), and net income attributable to owners of parent manufactured in North America was seen, in addition to a higher
was ¥36.0 billion (margin of 7.0%). Profitability has steadily ratio of large vehicles produced and a ramping up of operations
increased. in Latin America. Meanwhile, foreign exchange rates had a negative
impact. Additionally, ongoing activities to reduce costs led to a
significant improvement in profitability. As a result, consolidated
Regarding business trends and performance
net sales for the Americas segment were ¥32.2 billion, down
by region
from the previous year. Consolidated operating income was ¥5.2
In Japan, we worked to expand our share in the area of automotive billion. On a local currency basis, both sales and income were up.
coatings as automobile production numbers recovered from the In other regions, consolidated net sales were ¥12.6 billion,
impact of the 2016 Kumamoto earthquakes. In industrial coatings, up from the previous year due to the consolidation of a German
we focused on capturing customers with differentiated products automotive coating manufacturer. Consolidated operating loss
as the number of new housing starts remained favorable. In was ¥400 million due in part to amortization of goodwill.
trade-use paints, while market conditions were sluggish due to

17 Nippon Paint Holdings Integrated Report 2017

Initiatives to Support Our
Corporate Values
Environmental
Global Environment and Safety
19 Promoting Responsible Care
21 Preventing Climate Change
Waste Reduction and Zero Emissions
22 Comprehensive Management of
Chemical Substances
23 Air and Water Conservation
24 Occupational Health and Safety

Social
Living with Society
25 Maintaining and Improving Product Quality
Supply Chain Management
26 Employee Engagement
29 Contributions to Local Communities
and International Society

Governance
31 Corporate Governance

Nippon Paint Holdings Integrated Report 2017 18

 Environmental
Global Environment and Safety

Promoting Responsible Care Activities*

Guided by a Responsible Care management system that is based on our
Basic Policy for Responsible Care, we perform a plan-do-check-act cycle (PDCA),
which leads to continuous improvements.
* Responsible Care Policy
Companies that handle chemicals conduct Responsible Care activities at all stages, from product development to disposal. Throughout a
product’s lifecycle, these companies implement self-management activities to enact and improve environment-, safety-, and health-related
measures (environmental protection, anti-disaster safety measures, occupational health and safety, and chemical safety).
Nippon Paint Group has continuously practiced Responsible Care activities since becoming a member of the Japan Responsible Care
Council in 1995, and has also participated in Coatings Care activities, which are coatings-oriented Responsible Care activities. Responsible Care Coatings Care

Basic Policy for Responsible Care

Nippon Paint Group is committed to the Responsible Care 1) Endeavor to preserve the global environment and protect
initiative* and contributes to a sound, safe environment the ecosystem, while striving to conserve energy and other
through our business activities of creating attractive colors resources in the course of all business activities.
and spaces while conserving materials and resources. The 2) Promote the development of products that lessen the
employees of all group organizations recognize this as our impact on the environment and technologies that help
responsibility and cooperate to build relationships of trust these products reduce this impact. Also pay adequate
with our customers and everyone in the global community. attention to the environment, safety, and health impacts of
our products at all stages of the product lifecycle, from
development to disposal.
The commitment requires the Group to implement the
following measures throughout all of its businesses activities: 3) Work to ensure safety and prevent disasters and reduce the
impact of our operations on the environment, and to ensure
the safety and health of local residents and employees.

Responsible Care Organization

Based on understanding the influence chemical substances have and product safety, and have undertaken Responsible Care (RC)
on the environment and safety, controlling those substances is initiatives.
one of our main responsibilities as a paint manufacturer. As such, We promote the autonomy and independence of our
we developed a management system that expanded the scope employees through activities centered on their primary duties,
of the areas where we can have an impact in 2010 from only the and by conducting effective and efficient operations and an
environment to include occupational health and safety, chemical ongoing PDCA cycle, continue to constantly improve the system.

▼ RC Organizational Structure (2016)

CHECK ACTION
PLAN DO Testing and
Management review
Define RC objectives/targets Establish and implement RC management program corrective/preventive action
CSR Committee
Committee chair: President

Nippon Paint Group (domestic)

• NPHD: Nippon Paint Holdings
• NPAU: Nippon Paint Automotive Coatings External reviews
Responsible Care • NPIU: Nippon Paint Industrial Coatings Responsible Care
Committee Committee
• NPTU: Nippon Paint Internal RC audits
• NPSU: Nippon Paint Surf Chemicals
• External reviews:
• NPMC: Nippon Paint Marine Coatings SGS (management system certification body
• NTJ: Nippe Trading accredited by JB)
• Internal RC audits:
In-house assessments by internal RC auditors

19 Nippon Paint Holdings Integrated Report 2017

Responsible Care Plan
The seven companies under the RC organizational structure set desires of stakeholders. The targets are then included in the
RC-focused targets at the beginning of each fiscal year. These management system. The following table shows the results on
targets are based on each company’s internal and external RC-focused targets in FY2016.
issues and risks and opportunities selected from the needs and

▼ Results on RC-focused targets (FY2016)

Important themes Overall group results

The various companies organized documentation, provided education, and developed

Self-regulation of RC activities
internal information, achieving targets.

Except for the following, the companies achieved targets related to energy-saving activities
Environmental conservation and reduction in industrial waste.
(CO2 reduction, resource protection) In some instances, targets were not achieved because of increased inventory due to early
errors when introducing products to market and failure to obtain orders.

Reduction of RC risks Within the group, there was one occupational accident resulting in time off and ten not
(elimination of repeated occupational resulting in time off (total of 12 accidents in FY2015).
accidents, property-related accidents, Serious incidents and close calls were categorized by severity and information was shared
fire or smoke incidents, and distribu- throughout the group to prevent recurrences.
tion-related accidents)

The development of eco-conscious products went according to plan, so development-re-

lated targets were achieved.
Sales volume of such products did not achieve targets due to deterioration in market
Product development and
conditions.
promotion of use to reduce the RC load
Targets have been set for discontinuation of paints with the highest lead content.
The target for reduction in nickel was not achieved (development completed, but slow
uptake by customers).

The companies conducted risk assessments for chemical substances and achieved the
Statutory compliance targets.

Environment and Work Safety Management

ISO 14001 certification assessments or support for improvements in the case of
Nippon Paint Group (domestic) received ISO 14001 self-assessments. We also provide training to improve
multi-certification for the seven companies in the RC environmental and safety-related awareness, but plan to provide
organizational structure and their subsidiaries. Since ISO 14001 additional support for improvement at the various overseas
was revised in 2015, in November 2016 we underwent a renewal group companies, since not only regulations but also corporate
inspection by an outside inspection body. No non-compliance culture differs country to country. In China, the department in
was identified, and we have received the renewed certification. charge of occupational health and safety and environmental
matters, which is part of head office functions at subsidiaries,
Overseas management conducts environmental and safety-related management, internal
We provide active, ongoing support to overseas group assessments for all sites, and follow-up assessments to confirm
companies for their environmental and safety activities. In Asia, that improvements have been made. Sites in Europe and the
the regional supervision company and companies in key Asian Americas cooperate with the managing operating company in
countries (China, Thailand, Malaysia, the Philippines, India, Japan on environment-related audits and the operating company
Singapore, Vietnam, Taiwan) work together on environmental and provides timely support to correct issues.
safety issues, with the various companies providing mutual

Nippon Paint Holdings Integrated Report 2017 20

 Environmental
Global Environment and Safety

Preventing Climate Change

Reducing CO2 Emissions ▼ Fuel total

Nippon Paint Group (domestic) initiatives to prevent climate (tonnes of CO2)
change involve activities primarily aimed at reducing energy 15,000
13,267
usage. 11,677 11,629 11,653 10,778
10,000
Energy conservation activities involve meticulous everyday
supervision to instill certain daily habits at our businesses and 5,000
factories, including changing the operating conditions for
0
compressors and boilers, strict supervision, upgrading to
2012 2013 2014 2015 2016 (FY)
energy-saving equipment and fixtures, strict control of air
conditioning temperature, monitoring demand, and turning off ▼ Electricity total
computers and lights. (tonnes of CO2)
In FY2016 as well, the various group companies 30,000 28,757
26,290 27,117 27,020
independently set CO2 reduction targets and promoted ongoing 22,995
20,000
energy conservation activities. For example, reduction targets
were set for major plants that cause a comparatively large 10,000
environmental burden. Day-to-day operational management and
patrols to check implementation status were conducted. 0

As a result, fuel and electricity usage volume for FY2016 2012 2013 2014 2015 2016 (FY)

(revised data collection period) was as shown at right. * Scope of data: In FY2014 and earlier, data is for the pre-division Nippon Paint Co., Ltd.
From FY2015 onward, data is for NPHD, NPAU, NPIU, NPTU, NPSU, and NPMC.
* Data collection period: April to December (nine months) only for FY2016
(Applies to both Fuel total and Electricity total)

Waste Reduction and Zero Emissions

Initiatives in FY2016
Using an electronic manifest system since FY2015, Nippon Paint In FY2016, in order to reduce industrial waste, we
Group (domestic) has worked to reduce and properly dispose of reinforced recycling and reuse practices and worked to control
waste or to create activities that can effectively utilize waste dead stock. In regard to non-industrial waste as well, we
materials. continued efforts to reduce the volume of copy paper and paper
In order to further strengthen our legal compliance trash.
mechanisms, we started introducing and operating a group-wide As a result, waste volume for FY2016 (revised data
waste management system. collection period and scope), was as shown below.

▼ Breakdown of waste (FY2016) ▼ Volume of waste generated, recycled volume,

(tonnes)
final disposal volume
Other
Incinerator ash, dust (tonnes of CO2) ■■ Final disposal volume　■■ Recycled volume
393.1
9.0 10,000
Waste coatings 8,645.5
Waste metal Total 621.8 8,000 7,940.3 7,412.5 7,781.9
1,260.9
5,804.9 Waste solvent
1,796.7
6,000

4,000 8,645.1
5,804.9
Waste acid and alkali tonnes 7,940.1 7,412.4 7,781.9
290.2 2,000 5,804.8
Waste plastic Sludge 0 0.4 0.2 0.1 0.0 0.1
669.5 763.8
2012 2013 2014 2015 2016 (FY)

* Scope of data: In FY2014 and earlier, data is for the Nippon Paint before split-up.
In FY2015 data is for NPHD, NPAU, NPIU, NPTU, and NPSU.
In FY2016 data is for NPHD, NPAU, NPIU, NPTU, NPSU, and NPMC.
* Data collection period: April to December (nine months) only for FY2016

21 Nippon Paint Holdings Integrated Report 2017

Comprehensive Management of Chemical Substances

Basic Policy appropriately to revisions to regulations around the world and

Various chemical substances originating from the raw materials has started to improve its business processes.
are found in our paints and in some instances those substances We recognize that while chemical substances offer many
can be harmful to the environment. functional benefits, some substances present environmental
Regulations concerning chemical substances have become risks. To assess these risks, Nippon Paint Group conducted and
increasingly stringent globally in recent years, and amid such reported the results of a survey on 462 substances designated
regulatory changes our Group will actively take appropriate by the amended PRTR Law*1 and 417 substances specified by
measures to control chemical substances and reduce harmful the Japan Chemical Industry Association (JCIA). It started
agents. releasing data on newly specified substances from fiscal 2010.
In fiscal 2015, the number of PRTR*2 designated
substances handled by Nippon Paint Group (domestic) increased
Measures to Comply with Regulations to 59 from 55 in the previous fiscal year, while the overall
Following 2009 amendments to the Chemical Substances Control number*3 of JCIA-specified substances was 79.
Law, Nippon Paint Group started to submit notifications as Since fiscal 2008, we have been using a new, proprietary
appropriate regarding manufacturing and import volumes to facilitate automatic PRTR system that performs more realistic calculations.
the assessment of risk posed by general chemical substances. As for color PRTR surveys for color-mixing service stations, a
On June 1, 2016, the revised Industrial Safety and Health PRTR survey support system was introduced from fiscal 2002 to
Act and its enforcement ordinance and regulations took effect, assist in efficiently tallying substance usage data.
expanding the scope of substances requiring labeling, but also *1 PRTR Law: Act on Confirmation, etc. of Release Amounts of Specific Chemical Substances
dropping obligations regarding the labeling of ingredients. In in the Environment and Promotion of Improvements to the Management Thereof
*2 PRTR (Pollutant Release and Transfer Register) system requires entities that handle
addition, the threshold concentrations were changed for chemicals to confirm and calculate the volume of those chemicals released to the
environment and report the data to the government.
substances requiring labeling and substances requiring reporting *3 Overall Number: Substances targeted by both the PRTR Law and the JCIA.
by safety data sheets (SDS). Nippon Paint Group (domestic)
conducted a bulk update for existing labels and SDSs to ▼ Lead compound volume
conform to the revised laws. In regard to chemical substance risk (kg)
200,000
assessments also required by the Industrial Safety and Health
158,397
Act, preparation was started several months ahead of time, and 150,000
125,236
business offices and plants are conducting response. 100,000
77,398 72,320
50,000
39,480
Initiatives in FY2016 0
Nippon Paint Group has created several information 2012 2013 2014 2015 2016 (FY)

channels to enable it to obtain information to respond * Data collection period: April to December (nine months) only for FY2016

▼ PRTR Survey (Nippon Paint Group domestic totals)

Atmospheric Decontamination
emissions processing
36.2t 156.8t
0.06％ 0.28％

Handling total Synthetic resin Products

56,899t coatings production 54,957t
100％ 96.6％

Release into
water bodies Sewage Waste Recycling
0.0t 0.0t 296.4t 1,452.6t
0.00％ 0.00％ 0.52％ 2.55％

Nippon Paint Holdings Integrated Report 2017 22

 Environmental
Global Environment and Safety

Air and Water Conservation

Air Pollution Prevention Effective Use of Water Resources

Nippon Paint Group (domestic) sets voluntary reference values Nippon Paint Group (domestic) strives to use water resources
and complies with regulations pertaining to air pollution. In effectively.
FY2016 as well, none of our plants exceeded statutory limits.

▼ NOx and SOx emissions ▼ Volume of water used

(tonnes) NOx emissions SOx emissions (1000m3) ■■ Tap water　■■ Groundwater　■■ Water for industrial use
15.0 500

410.42
400
10.67 368.80
352.24 351.10
10.0 9.68
8.87 300 179.93 143.90 129.19 130.81 275.96
7.90
5.42 0.60 0.70 0.50 0.10
200 113.20
5.0
0.07
2.19 100 229.89 224.10 222.50 220.19
1.62 1.30 1.29 162.69
0.76
0 0
2012 2013 2014 2015 2016 (FY) 2012 2013 2014 2015 2016 (FY)

* Scope of data: In FY2014 and earlier, data is for the pre-division Nippon Paint Co., Ltd. * Scope of data: In FY2014 and earlier, data is for the pre-division Nippon Paint Co., Ltd.
In FY2015 data is for NPAU, NPIU, NPTU, and NPSU. In FY2015 data is for NPAU, NPIU, NPTU, and NPSU.
In FY2016 data is for NPAU, NPIU, NPTU, NPSU, and NPMC. In FY2016 data is for NPAU, NPIU, NPTU, NPSU, and NPMC.
* Data collection period: April to December (nine months) only for FY2016 * Data collection period: April to December (nine months) only for FY2016

Water Pollution Prevention

Nippon Paint Group (domestic) sets voluntary reference values
and complies with regulations pertaining to water pollution. In
FY2016 as well, none of our plants exceeded statutory limits.

▼ Wastewater volume / COD, total phosphorus, total nitrogen

(1000m3) ■■ Wastewater volume COD-related emissions (tonnes)
150 Total phosphorus emissions Total nitrogen emissions 6.00

120.50 124.17 120.49 122.31

106.48
100 4.00

3.25
2.95
2.34 2.39
2.04
50 2.00
1.38 1.31 1.61
0.31
0.02 0.73
0.06 0.04 0.08
0 0.03 0
2012 2013 2014 2015 2016 (FY)

* Scope of data: In FY2014 and earlier, data is for the pre-division Nippon Paint Co., Ltd.
In FY2015 data is for NPAU, NPIU, NPTU, and NPSU.
In FY2016 data is for NPAU, NPIU, NPTU, NPSU, and NPMC.
* Data collection period: April to December (nine months) only for FY2016

23 Nippon Paint Holdings Integrated Report 2017

Occupational Health and Safety

Initiatives in FY2016 In Europe and the Americas, we are conducting audits and
In FY2016, the various companies of Nippon Paint Group support for remedial efforts at key sites in cooperation with the
(domestic) conducted health and safety activities through their domestic operating companies in charge of those sites.
participation in the Responsible Care (RC) Committee and Safety
and Disaster Prevention Meetings. For instance, they shared
information about accidents that occurred within the group and
together discussed measures to prevent recurrence.
The entire group conducts health and safety activities
through the RC Committee and Health and Safety Committees
at each business site. Unfortunately, in FY2016 there was one
accident resulting in time off and ten accidents not resulting in
time off. Many of the latter were the sort of accidents that had
occurred previously, such as employees cutting themselves with
box cutters or getting solvent in their eyes.
We will continue to conduct health and safety activities,
including risk assessments, in an effort to eliminate accidents.

▼ Frequency of accidents resulting in time off

(%)
0.4
0.35
0.3

0.2 0.19

0.1

0 0.00 0.00 0.00

2012 2013 2014 2015 2016 (FY)

Safety Measures for Overseas Group Companies

We provide overseas group companies with active and ongoing
support for activities to ensure safe working environments.
In FY2016, we provided training for activity leaders in the
various regions through the NIPSEA Safety Council (NSC),
initiated in FY2015 to focus on safe environment activities within
the NIPSEA Group.
In addition, we conducted safety assessments using
assessment lists at key sites in Thailand, Malaysia, Singapore,
Vietnam, India, the Philippines, and Taiwan together with NSC
members, with the aim of identifying and rectifying serious risks
such as fire or explosions that might result in plant shutdowns.
We also began expanding these safety assessments to other
NIPSEA sites. In China as well, we worked closely with the local
safe environment management department and continued to
participate in “safety first” diagnostic efforts. Health and safety activity conducted in cooperation with NIPSEA

Nippon Paint Holdings Integrated Report 2017 24

 Social
Living with Society

Maintaining and Improving Product Quality

Initiatives in FY2016
In November 2016, we held a Global Quality Conference (GQC)
to provide a forum for reporting on team activities targeting
improved quality assurance and productivity at production plants.
This was the 11th conference since the scope of participation
was expanded to a global scale and the 45th conference since it
was initiated, originally as a forum for reporting on domestic
activities.
About 40 interested parties gathered at the company’s
head office the day of the conference, and the meeting was
transmitted to all domestic business sites via a Presentation at GQC
videoconferencing system.
Seven qualifying teams from Japan and another seven from
Asia, Europe, and the Americas participated and shared with
each other descriptions of their activities, but this was not merely
a competition. The aim was to share improvement methods and
deepen relations between group companies. We hope that,
despite differences between regions and business areas, the
stories about the drive to improve and the improvement activities
by and for those actually involved in production will lead to big
results at the various production sites.
GQC participants

Supply Chain Management

Nippon Paint Group is able to conduct business precisely because of the services and the raw materials,
equipment, and other commodities supplied by our business partners.
We strive to conduct fair and reliable procurement activities based on mutual trust with those business partners.

Our Thinking and Initiatives Regarding and child labor associated with the raw materials we are procuring.
Procurement of Raw Materials When selecting suppliers, we confirm not only that they can
We have conducted a number of initiatives in terms of business provide us with stable quality and competitive prices, but also
continuity planning (BCP), including the integration of raw that they respect human rights, comply with statutes and social
materials, securing of multiple suppliers, and assessment of norms, conduct BCP initiatives, conduct environmental
substitutes. protection and safety initiatives, and have sound management
We have also requested that our suppliers conduct BCP processes.
activities, and we are building a system to make simultaneous Nippon Paint Group (domestic) conducts initiatives to
inquiries to suppliers to determine impact as a first response in ascertain compliance with the Act against Delay in Payment of
the event a disaster or accident does occur. Subcontract Proceeds, Etc. to Subcontractors (“Subcontracting
In terms of complying with statutes and social norms, of Act”). We assign an individual to each operating company to be
course we comply with the laws and regulations of each country in charge of matters related to the Subcontracting Act. These
in which we operate, but we are also working to exclude any individuals naturally confirm that there are no issues with
antisocial forces, and we prohibit the procurement of raw payments, but also monitor the content of orders issued by
materials suspected of containing conflict minerals. plants. In addition, we conduct annual training for all employees
We investigate upstream in the supply chain to ensure there involved with subcontractors to improve their understanding of
is no suspicion of human rights violations such as conflict minerals the Subcontracting Act.

25 Nippon Paint Holdings Integrated Report 2017

Employee Engagement
We at Nippon Paint Group strive to create a lively work environment for all of our employees as we become
a Global Paint Major.

Basic views on employees

• Cultivate an active corporate culture, stressing mutual trust • Stress self-responsibility in personnel education, since
between management and employees. individuals cannot develop without motivation to grow and
• Achieve rewarding work and improve corporate performance personal effort.
through teamwork.
• Conduct manpower management that allows employees to
demonstrate their individual capabilities to the fullest.

Promoting Diversity
We would like to develop a corporate culture in which our In April 2016, with the commitment of top management, we
employees view diversity as a strength, and will create an inaugurated a Diversity Promotion Unit and a Diversity Promotion
atmosphere that rewards individual experience, ability, vision, and Committee. The latter will deliberate and make decisions on
diverse forms of knowledge, irrespective of sex, age, or measures to promote the creation of a corporate culture and
nationality. We are committed to becoming a company where organization that leverages diversity throughout the group.
every employee can perform to the best of their ability.
In order to make diversity the norm as a source of the Change management mindset
group’s competitiveness, we are advancing four pillars of –Diversity management workshop–
diversity promotion. We conducted workshops for department heads in FY2016 and
from FY2017 are conducting them for all managers to convey the
goals of and necessity for diversity promotion and to promote
The company’s thinking as to what should constitute specific diversity management practices to leverage individuality
“the norm” within the company’s various organizational structures.
Appointment of diverse human resources should be the By accepting the differences among diverse employees and
norm leveraging those differences, we can improve the performance of
This will allow us to clarify positions and missions and get the right
employee in the right place.
organizations and teams, leading to the cultivation of a corporate
culture that thrives on diversity.
Independent human resources should be the norm
Independent actions by employees around the globe based on a
shared vision are producing results.
Innovation should be the norm
It is important to accept differences that can be leveraged as strengths
in developing organizational abilities.

▼ Promoting diversity Diversity

management
workshop
(for department
Changing the mindset heads)
and cultivating corporate
culture

Utilizing and Globalization

Reforming
fostering diverse ＆
human resources work styles
Diversity
Diversity
management
Creating systems workshop
(for persons in key
leveraging diversity positions)

Nippon Paint Holdings Integrated Report 2017 26

 Social
Living with Society

Instruction in diversity for all employees ▼ Ratio of women in key positions

–Forum on the future of work–
（％）
Nippon Paint Group (domestic) holds lectures four times a year 10
10
to enlighten all employees about diversity.
8
The theme of each lecture is different, but the lectures
always provide opportunities to think about the work they do
6
with their teams, their work style, their motivation, and their
careers going forward. The aim of the initiative is to fill the 4
3.3
company to overflowing with independent employees.
2.5
2 1.6

0
2015 2016 2017 2025 (FY)

Training by level
Conventional training focused on skilled suited to employees’
years of service and the teaching of logical thinking, but after
clarifying the sort of competencies needed for human resources
with a global perspective, we are now working to revise our
training system to suit specific growth levels.
Specifically, we aim to nurture human resources in terms of
Forum on the future of work leadership and global perspective and select individuals who can
strengthen our pool of management candidates.

Human Resource Development Global joint training

Promoting the success of women in the workplace We conduct leadership training each year by level with
Since FY2015, we have conducted leadership training for employees in the Asian region as one of our initiatives for
women who are candidates for managerial positions. The fostering human resources who will be responsible for global
program is intended to cultivate leadership and the desire for growth in the future.
further improvement, encouraging participants to paint a picture Although this initiative is only conducted for employees in
of how they want to progress and build their careers. the Asian region at present, hereafter we plan to select
Other initiatives include an issue resolution project led by a employees from group companies around the world and create
women’s team and efforts to get more women into sales and opportunities for them to improve their basic abilities in “global
leadership roles. At the same time, we are working to ensure the leadership” and help each other grow. During training,
company has an environment promoting career service for both participants even eat and sleep together, helping them to better
women and men. understand each other’s cultures and develop relationships of
mutual trust. In order to become a Global Paint Major, we will
strive to produce human resources who can confront the world
together in a unified group.

Training for women leaders

Participants in global joint training

27 Nippon Paint Holdings Integrated Report 2017

Overseas posting of young employees Hiring
We select young employees with a strong desire to see action on In regard to hiring new graduates, we are strengthening activities
the global stage and post them overseas for training. We have from the perspective of producing the next generation of human
continued such postings since FY2014 as we continually aim to resources for management positions.
cultivate the next generation of globally minded human We seek to hire human resources who have set goals for
resources. themselves and worked independently toward those goals, even
if they have experienced failures and setbacks along the way, but
Accepting long-term interns from overseas we are also working to secure diverse human resources,
We accept employees from overseas Group companies as including Japanese with experience studying abroad and
long-term interns and provide them with training. The aim of this foreigners who have studied in Japan.
program is not just to foster human resources, but to support In addition, we actively conduct mid-career hiring, seeking
globalization within Japan and strengthen relationships with the human resources with relevant outside experience to support our
interns’ home companies. The program is helping us cultivate a global expansion efforts as we strive to become a Global Paint
globally minded corporate culture and increase acceptance of Major.
diversity.

Creating a Rewarding Workplace

Aiming for an organization of diverse human resources who
respond well to change, we actively seek to provide a workplace
environment that is comfortable to employees from a wide variety
of backgrounds.
It is not only the employees that benefit when we provide
stable employment and a workplace where they can work with
peace of mind. We believe it also contributes to society in a
broader sense.
The frequency with which employees make use of our
childcare and nursing care leave systems is increasing. We also
have a One Week Holiday system by which employees may take
five consecutive days of holiday, with team members covering
Reception for interns at Tochigi plant
the work that the person on holiday would normally be doing.
This makes it easier for each employee to plan and take holidays.
Human Resources Forum We also take workplace harassment very seriously,
The Human Resources Forum is held once a year to bring providing training for all employees and instruction for superiors
together members of the Human Resources Department and to prevent its occurrence. In addition, we conduct stress checks
persons in charge of human resources at group companies to track workplace status and try to prevent psychological or
(overseas). emotional issues, and we monitor employees’ satisfaction levels
Participants share human resources issues encountered at to improve their motivation so they can perform to the best of
the various companies, develop resolution plans, and discuss their ability.
follow-up actions. They also share information on achievement We are working to create new systems to counter issues
status, which can lead to best practice. The forum provides an discovered during diversity promotion activities. Work style
important opportunity for resolving human resources issues on a reform is indispensable if we are to make diversity a source of
local, regional, and global level. Nippon Paint Group’s competitiveness.
We will continue striving to create a corporate culture and
systems that allow all employees to be responsible for their own
growth, to select their own work style, and to carry out their
duties effectively. We will also promote a virtuous circle in which
the growth of our employees leads to growth of the company
and vice versa.

Human Resources Forum

Nippon Paint Holdings Integrated Report 2017 28

 Social
Living with Society

Contributions to Local Communities and International Society

Rooted in our management principles of working for the “mutual prosperity and benefit” of society, we engage
in activities that focus on our ties with the community, and both domestically and overseas strive to conduct
community activities that build closer relationships with regions.

Domestic activities

Investing in the Society of the Future Recovery Support after Kumamoto Earthquakes
–Children’s Chemical Experiment Show– –Paint event at temporary housing–
Nippon Paint Group participates in the Children’s Chemical On November 27, 2016, we joined Mitsubishi Jisho Residence
Experiment Show sponsored by the Dream Chemistry 21 Co., Ltd., in an interindustry collaboration to hold a painting
Committee (Chemical Society of Japan, Japan Chemical Industry event at temporary housing located by Iino Elementary School in
Association, and others). The Experiment Show is held annually Mashiki, Kumamoto. Residents of the temporary housing and
in Tokyo and Osaka, and Nippon Paint Group has included a children who attend Iino Elementary and their parents used
display and experiment six years in a row in Tokyo (from 2011) Nippon Paint Group product ROOMBLOOM to paint the interior
and two years in a row in Osaka (from 2015). walls at “Minna no Ie,” the common room at the temporary
The aims of the Experiment Show are to: housing. Participants drew a large tree, made handprints, and
1) Increase elementary school children’s interest in chemistry generally enjoyed painting images that were meaningful to them.
through experiments and show them the critical role that They also used Igusa Paint, a newly developed type of paint that
chemical technology has in society and in their lives. uses as an ingredient igusa rushes grown in Kumamoto.
2) Make elementary school children and their parents aware of Nippon Paint Group proposed this support activity for three
the potential and promise chemistry holds for the future in reasons:
order to foster promising young human resources for the 1) We wanted to encourage a new form of support for recovery
chemical industry. through corporate collaboration.
We at Nippon Paint Group also support these aims and 2) We wanted to contribute to recovery in Kumamoto by creating
plan to continue our participation in this event. In 2016, Nippon value through a new paint using igusa rushes.
Paint Group employees and prospective employees (at the time 3) We wanted to enliven a community through paint.
of the show) participated as volunteers (30 volunteers in Tokyo We believe that we did indeed contribute to enlivening the
and 50 in Osaka). Mashiki community, connecting people with paint as a
In 2016, we supplied a simple experiment to demonstrate communication tool and creating new value by uniting
the electrodeposition coating method used widely in automotive Kumamoto-grown igusa and paint.
and industrial applications. Participants used electrodeposition to Nippon Paint Group will continue working to contribute to
apply paint to metal rulers. The average person imagines paints communities through the medium of paint.
being applied with a roller or brush, so the participating children
and their parents were quite intrigued by this special process and
asked a lot of questions. The experiment was quite a success, in
both Tokyo and Osaka.
We plan to continue with such activities in the future in the
hope that we can encourage the next generation of human
resources for the industry.

Putting handprints on the wall Adults and children enjoying painting

Booth where participants experienced a special paint application method

29 Nippon Paint Holdings Integrated Report 2017

 Initiatives in Asia

Supporting Children’s Dreams in Malaysia Supporting Lifestyle Improvement and

From 2014 to 2028, Nippon Paint (Malaysia) is supporting the Community Recovery in China
long-term project Art by Children for Children. Nippon Paint China held a charity walking event, in which more
The aim of this project is to establish a trust fund in than 600 employees participated. The event raised funds of
cooperation with Malaysian NGO Yayasan Generasi Gemilang, CNY15 million (about \247 million), which will contribute to
using funds collected via art exhibitions. Money from the trust improving the lifestyles of millions of children via a
fund is then used to provide education to children who have nongovernmental organization that supports children.
displayed outstanding aptitude to help them fulfill their dreams. The company also produced art at thirteen schools and five
In the Art by Children for Children project, 181 children aged towns, contributing to community promotion as more and more
4 to 16 who are living in child welfare institutions display their tourists visit to view the art. In producing the artworks, eighteen
works of art. The children who have submitted works participate international artists created works using the company’s paints.
in a program to help them learn skills they will need to enter This effort is also expected to help the company develop new
society, including IT, financial, English, and decision-making skills. markets.
In addition, in order to help them become independent when
they leave the welfare institutions at the age of 18, they interact Building a Strong Relationship with the
with businesspeople at the exhibitions, creating opportunities for Community through Tree-Planting
their future endeavors. in the Philippines
Nippon Paint Philippines provides regional support in the form of
a tree-planting campaign.
A total of about 250 local employees have participated in
the planting of soursops, a tree native to the Philippines that
produces fruit relatively early, in just three to five years after
planting. It is hoped that harvesting the fruit will prove helpful in
building a livelihood for a community of about 7,000, including
some 200 children.
Through this activity, Nippon Paint Philippines is not only
building a good reputation in the community, but also realizing
good relations with the Philippines Department of Education and
school authorities.

Children who participated in Art by Children for Children

Topics
Promotion of CSR Activities
Together with the Community
In Tokyo office, regularly repaints playground equipment at
the ward’s elementary schools.
The ward’s administrative policy is to “create ‘our town
with cooperation between the ward and the ward’s
(corporate) residents.” This policy is promoted by the ward’s
CSR Promotion Council. Nippon Paint Group joined this
council in 2009 because it seeks a symbiosis with the
community, and now regularly conducts repainting activities
as a member of the community.

Nippon Paint Holdings Integrated Report 2017 30

 Governance
Corporate Governance

Basic Views of Corporate Governance Policies deliberating and decision-making body to evaluate matters
Nippon Paint Holdings recognizes that effective corporate stipulated by the Company Act and important matters relevant to
governance is an all-important management issue. Through the management. The Chairman of the Board, who is a
implementation of our “Management Philosophy” and the non-executive director, presides over the meetings.
“Nippon Paint Group Vision,” we strive to develop a With regard to the business execution of important matters
comprehensive and robust corporate governance system that and agenda items raised at Board of Directors meetings, to
will realize a management structure highly transparent and enable thoughtful decisions by examining issues from multiple
capable of responding quickly and appropriately to changes in perspectives, we have also established the Senior Executive
the operating environment, enhancing mid- to long-term Management Committee and the Executive Management
corporate value and sustaining growth. We have organized our Committee, which are mainly managed by an executive director.
basic thinking, framework, and management guidelines regarding In addition, our directors, corporate officers, or other
corporate governance into the Corporate Governance Policy, individuals qualified to serve as directors are dispatched as
which we have disclosed at the following webpage. needed to important affiliate companies to ensure that our
http://www.nipponpaint-holdings.com/en/company/cg/ management policies are properly implemented.

Corporate Governance System Policy and Procedures for

Nippon Paint Holdings has adopted a company with an Audit & Designating Directors and Auditors
Supervisory Board system and introduced a corporate officer In designating candidates for director and auditor positions, it is
system. The corporate governance system is as shown in the the policy of the Board of Directors to designate those individuals
following “Organization Chart of Corporate Governance.” from inside and outside Japan and inside and outside the
company who will contribute to the sustainable growth of Nippon
Regarding Board of Directors Paint Group and facilitate the improvement of its corporate value,
According to the Articles of Association, our Board of Directors is and who possess diverse experience, good judgment, and
to have no more than ten members and is composed of significant expertise that make them particularly suited to serve
executive directors, independent outside directors, and as directors or auditors.
non-executive directors designated from inside and outside In addition, in order to strengthen the Board’s supervisory
Japan and inside and outside the group. The Board currently functions and enhance the specialized, multifaceted perspectives
comprises seven directors, two of whom are outside directors to of its deliberations, the Board designates as independent outside
ensure that the Board considers various points of view when directors and auditors several individuals who fulfill the
making decisions and to further strengthen supervisory functions. Independence Criteria for Outside Directors/Corporate Auditors
In addition to supervising directors in the execution of their established by the Board.
duties, the Board in principle convenes once a month as a Based on these policies, at a Board of Directors meeting

▼ Organization Chart of Corporate Governance

General Meeting of Shareholders

Appoint / Dismiss Appoint / Dismiss Appoint / Dismiss

Audit & Audit

Supervisory Board of Directors Consult Designation and
Board President & CEO
Compensation
Advisory
Coordinate Advise Committee

Audit Report Approve /

Accounting Propose / Report Report
Supervise
Auditors
Coordinate
Coordinate
Corporate
Audit Executive Committee CSR Committee
Instruct / Propose /
Communicate Report
Compliance Committee
Operating Committee Responsible Care
Committee

Instruct /
Internal Audit Propose / Report Propose / Report
Communicate

Functional Divisions / Affiliated Companies

31 Nippon Paint Holdings Integrated Report 2017

attended by independent outside directors and auditors, classification, with consideration for the specific duties of the
individuals are deliberated and designated based on reports from position, and does not include performance-linked remuneration
the Designation and Compensation Advisory Committee. or long-term incentive remuneration.
In January 2017, the structure of the Designation and
Compensation Advisory Committee was modified to make the Status of Corporate Auditor’s Audit and
committee chair and at least half the members independent Accounting Audit
outside directors. This was done in order to ensure the Auditors shall attend Board of Directors meetings and other
appropriateness of the policy for determining remuneration and important meetings to perform auditory functions to confirm the
of remuneration levels and to make the process of designating legality of duties executed by directors, the effectiveness of
director and auditor candidates more impartial and transparent. internal control systems established by the Company, and the
(The Independence Criteria for Outside Directors/Corporate integrity of the financial information creating process. Auditors
Auditors are published in the Notice of Annual General Meeting shall also hold regular meetings with the Representative of the
of Shareholders and the Corporate Governance Policy on our Board of Directors, to confirm management policies and
website.) exchange views on major issues facing the company, business
risks, and important auditing issues.
Notice of Annual General Meeting of Shareholders
The Audit & Supervisory Board presently comprises five
http://www.nipponpaint-holdings.com/en/ir/news_release/
auditors. Of the five, three are outside auditors who are qualified
Corporate Governance Policy as certified public accountants and lawyers with no special
http://www.nipponpaint-holdings.com/en/company/cg/ conflicts of interest with the company and who can fulfill
supervisory roles from an expert perspective.
(The structure of the Designation and Compensation Advisory Committee
is as follows.) Outside auditors shall attend Board of Directors meetings to
perform auditory functions to confirm the legality of duties
executed by directors, obtain reports as needed for business
▼ Structure of Designation and Compensation
audits and audit meetings, and express their views regarding the
Advisory Committee
(Number of persons) status of auditory operations at various departments and
All members 4 affiliated companies. Several personnel have been specifically
assigned to ensure that auditors are able to conduct their work
Directors 4 smoothly.

Of which, outside directors 2 Role of an Internal Auditing Department

Chairperson Outside director We have established a Corporate Auditing Unit under the direct
control of the President that is responsible for performing internal
audits from 2016. The unit is made up of 14 personnel who also
serve other roles. The Corporate Auditing Unit performs internal
Method of Determining Remuneration for audits to strengthen and improve the internal governance system
Directors and Auditors of Nippon Paint Holdings as well as group companies. Audit
Remuneration of company directors (excluding outside directors) results are reported to the President, management officers, head
includes job-based remuneration, performance-linked of the audited department and auditors. In the event of a
remuneration, and long-term incentive remuneration. Job-based problem with the findings of the Internal Audit Unit, the problem
remuneration is a fixed amount determined in line with the roles shall be resolved through discussions with the head of the
and responsibilities of individual directors. Performance-linked relevant department by following up with the unit.
remuneration is different for each director position and as a rule
is 45% to 50% of total compensation. The base amount changes Whistleblowing
within a zero to 200% range every year depending on We have established whistleblower contact points both inside
consolidated, department, and business company results. and outside the company (the latter is a law office) and maintain
Long-term incentive remuneration is granted as stock a system that allows reporting directly to corporate auditors. If an
option-based compensation based on amounts determined by individual discovers that an executive or employee of Nippon
position. Paint Group has or may have done something that constitutes a
Directors’ and corporate officers’ remuneration composition compliance violation, that individual may report the matter
and standard annual remuneration amounts are determined by without suffering any disadvantage as a result.
the Board of Directors based on conclusions stemming from In addition, a compliance committee with authority from the
deliberations at the Designation and Compensation Advisory Board of Directors confirms the operational status of the
Committee, taking into account social conditions, industry peers, whistleblower system and reports regularly to the Board.
and the market standard.
Remuneration for outside directors and auditors, including
that for outside auditors, is limited to pay based on job

Nippon Paint Holdings Integrated Report 2017 32

 Governance
Corporate Governance

Promotion of Global Governance ▼ Global Governance Going Forward

In 2014, we acquired a majority share of the joint ventures we
developed in cooperation with Singapore’s Wuthelam Group in a Nippon Paint Holdings
partnership that has extended more than 50 years. We used the
consolidation as an opportunity to reorganize our global
governance system. Japan Asia / China The Americas Europe
In January 2016, after discussion and coordination with the
NIPSEA* companies, we established the Business Management
Control Policy to clarify each company’s authorities and NPAU
responsibilities. This policy includes topics such as “submitting
important matters to Nippon Paint Holdings’ Board of Directors
and providing thorough and transparent information regarding NPIU
reporting channels” and “involvement of domestic operating
companies in proposals by NIPSEA companies.” The
establishment of the new system also took into consideration the NPTU
need for quick decision-making.
Since we became a holding company in October 2014 and
reorganized our domestic businesses in April 2015, the NPSU
governance system for the conventional geographical segments
(Japan, Asia, the Americas, and Others) overlaps with the Global
Business Management for operational segments. In NPMC
consideration of the complexity of this situation, we have begun
studying new definitions pertaining to governance and ■ Regional supervision company　■ Operating companies
management authorities and responsibilities for the various NPAU: Nippon Paint Automotive Coatings Co., Ltd.
NPIU: Nippon Paint Industrial Coatings Co., Ltd.
geographical and operational segments.
NPTU: Nippon Paint Co., Ltd.
We will be looking to expand the functions and authorities NPSU: Nippon Paint Surf Chemicals Co., Ltd.
of the regional supervision company and operating companies in NPMC: Nippon Paint Marine Coatings Co., Ltd.
Japan, Asia/China, the Americas, and Europe and strengthen
compliance suited to local ordinance and business practices.

▼ Global Governance System Overview

Nippon Paint Holdings (NPHD)

Board of Directors

Asia Japan Europe *2 The Americas

NIPSEA Management NPHD functional departments Nippon Paint Nippon Paint

Company and operating companies (Europe) (USA)

Involvement in
decision-making and
planning through
NIPSEA companies EXCO*1 Europe segment companies Americas segment companies

■ Organized according to the Business Management Control Policy　　■ Reports and reporting routes have been reorganized
*1 EXCO: Executive Committee. NIPSEA’s decision-making body
*2 Disclosed segments are included in “Others”

33 Nippon Paint Holdings Integrated Report 2017

We have begun studying new definitions pertaining to Group companies. The company’s internal audit functions are
governance and management authorities and responsibilities for handled by the Corporate Auditing Unit, but cooperation with the
the various geographical and operational segments. We will regional supervision company and domestic operating
propose plans regarding the prompt and accurate tracking of companies is indispensable for global audits, and we have
growth opportunities and risks by region, accelerated decision established an audit system based on the global governance
making, and selection of regions for concentration of resources system.
with a view to optimization. Our aim is to create a matrix structure In Asia, the Corporate Auditing Unit supports audits
with implementable geographical segment governance as the conducted by the regional supervision company, but for
warp and global oversight of operational segments as the weave. important sites the Corporate Auditing Unit conducts audits
As we organize global governance, we will be working to directly.
improve management transparency and improve our strength as In the Americas and Europe, the Corporate Auditing Unit
a group, creating a foundation for sustainable global growth. supports audits conducted by the domestic operating
* NIPSEA: Nippon Paint South East Asia, which does business in the Asian region companies, but for important sites conducts audits directly, the
same as in Asia.
The results of audits conducted by the Corporate Auditing
Promotion of Global Audits Unit are shared with the regional supervision company and
The consolidation of Asian joint ventures into Nippon Paint Group domestic operating companies in the hopes of achieving further
has resulted in an enterprise with a large number of overseas improvement at the subject sites.

▼ Global Audit System Overview

Regional supervision company Corporate Auditing Unit

Asia Audit Support
Safety and environment
Audit and support

Quality
Domestic operating companies
The Americas / Europe Audit Support
Production
Audit and support

Topics
Measures to Prevent Bribery and Corruption Overseas
Nippon Paint Group has conducted a number of initiatives to prevent bribery and corruption in light of the worldwide trend toward the
strengthening of preventive regulations. In August 2016, we conducted training for parent company executives and officers of group
companies and, in April 2017, we widened the scope of training to include employees involved in overseas business and those stationed
overseas. We hold seminars with outside specialists.
In addition, we have conducted training using an e-learning course related to overseas bribery and corruption with the aims of
reducing the global risk of bribery and corruption and improving compliance awareness. We are also working toward establishing a
policy and rules on overseas bribery and corruption for Nippon Paint Group as a whole.

Nippon Paint Holdings Integrated Report 2017 34

http://www.nipponpaint-holdings.com
2-1-2 Oyodo Kita, Kita-ku, Osaka 531-8511, Japan