LIXIL : Corporate Responsibility

Corporate Responsibility Chairperson MessageCorporate Responsibility Strategy

LIXIL is committed to improving the quality of people's lives around the world and to pursuing the growth of its businesses through responsible and sustainable innovations.

JIN SONG MONTESANO

Executive Officer and Senior Managing Director, Public Affairs, Investor Relations, External Affairs, and Corporate ResponsibilityEvery person on the planet dreams of a better home, and LIXIL's higher purpose is to help them achieve that dream - whether it is by renovating their kitchen in Tokyo or by installing their first toilet in Nairobi. Our Corporate Respon-sibility (CR) agenda is core to LIXIL's greater purpose as a company, and in FYE2018 we reached new heights, both in terms of progress against our commitments as well as global recognition from customers, business partners, government stakeholders, and employees about the positive contributions we are making to society.

On the topic of Diversity & Inclusion, a cross-functional group of experts within LIXIL from R&D, product engineering, product design, marketing, and sales finalized LIXIL's new "Universal Design" strategy. To ensure good governance, a senior-level committee was formed to ensure proper and timely implemen-tation of this initiative and its commitments.

Significant progress was made with regard to our three strategic pillars. As part of our efforts to improve Global Sanitation & Hygiene, we further bolstered resources and expertise with the integration of the fast-growing SATO social business and the Social Sanitation Initiatives organization. The new integrated unit is now led by Junichi Goto, who has established strong business processes and a clear operating rhythm that encourages faster decision-making, improved communication flows, and better collaboration. This new organization will not only enable SATO Toilet Systems to flourish as it expands into new markets such as Kenya and Rwanda but will also support acceleration of new product development such as the Portable Toilet System, a toilet specifically designed for households in urban informal settlements.

In addition to expanding our social business, we continue to advocate for greater dialogue on tackling the challenges of sanitation and hygiene, too. President & CEO Kinya Seto provided key remarks at a Toilet Board Coalition-hosted round table about the "Sanitation Economy" at the sidelines of the World Economic Forum in January 2018.

Since the new CR strategy was implemented in FYE2016, LIXIL's activities have begun to receive external recognition, and even win some global awards. For the first time, LIXIL was included in the Dow Jones Sustainability Asia/Pacific Index, FTSE4Good, and MSCI Japan Empowering Women listings in FYE2018. LIXIL joins the ranks of global firms operating with strong sustainability agendas. LIXIL also won a number of top prizes for its work to elevate awareness and the dialogue around the global challenges of sanitation and hygiene: the SABRE Award for Best Global Campaign, the GOLD STANDARD Award from Public Affairs Asia, and a Japan Bronze Award from the Public Relations Society of Japan. While this recognition is indeed rewarding, the fuel that drives our efforts is the growing pride among employees who realize that, for LIXIL, it's not just what we do, but how we do it that matters. And this growing pride was confirmed in our lat-est employee engagement survey, or Heartbeat, which found that employees felt very positively about our CR activities.

GovernanceFair Business PracticesHuman RightsLabor PracticesQuality and SatisfactionSupply ChainStakeholder Engagement

Collaborating with Partners Key to Tackling Global Issues

LIXIL, in collaboration with a wide range of partner organizations, is working on finding solutions to global issues by leveraging its relevant resources and expertise.

Regarding Water Conservation & Environmen-tal Sustainability, the Science Based Targets initiative validated our greenhouse gas reduc-tion targets in FYE2018. Additionally, one of our Japanese window products, RE-PLUS, was recognized by the Minister of Environment for its energy-saving benefits as well as how simple it is to add onto an existing window, making it easy for our customers to be environmentally friendly.

FYE2018 is focused on driving scale through strategic partnerships. To contribute to the United Nations Sustainable Development Goals (SDGs), such as effectively reaching the key populations lacking access to safe sanitation, we must scale our efforts, and partnerships designed around shared goals become a critical enabler to achieving them. We look forward to sharing more details about these partnerships in the coming months, as well as our broader efforts to deliver on our CR commitments.

Since LIXIL first began collaborating with the United Nations Children's Fund (UNICEF) on sanitation issues in 2013, they have continued to build on their work together in various areas. For example, when SATO Toilet Systems expanded to West Africa, UNICEF facilitated LIXIL in carrying out the first SATO product trials in the region in terms of logistics and in working with local governments and communities.

LIXIL is also a founding member of the Toilet Board Coalition (TBC), which works to help solve the world's sanitation problems by developing the Sanitation Economy and supporting new and innovative scalable business solutions at the start-up stage. LIXIL has collaborated with the TBC on sanitation start-up mentorship programs, through the TBC "Toilet Accelerator" as well as advo-cacy initiatives, such as hosting a side event at the World Eco-nomic Forum's annual meeting in Davos in January 2018. Addi-tionally, the TBC and the Pune Municipal Government in India have started working together on a pilot project, one of which is with LIXIL, aimed at developing Pune as a smart sanitation city.

LIXIL also works with a wide range of other organizations. For example, LIXIL today is developing the activities of its SATO social business with financial support from the Bill & Melinda Gates Foundation and Grand Challenges Canada, a governmen-tal investment funding organization of Canada. LIXIL's Green Toilet System has received financial support from the Japan International Cooperation Agency (JICA). In addition to those organizations, LIXIL has been working with a number of NGOs to conduct joint projects, such as with Population Services Inter-national (PSI) and WaterAid, mainly in Africa, and BRAC in Asia. All of these leading partner organizations possess local networks and a wealth of knowledge on important social issues, and play a very important role in the implementation of LIXIL's initiatives.

In the future, LIXIL will continue to build partnerships with governments, NGOs, and other types of organizations to gener-ate synergies and make a positive contribution to solving global issues.

Our strategy stands upon a foundational commitment to ethical business practices

Connection to UN Sustainable Development Goals

Global Sanitation & Hygiene

Critical Social Issues

An estimated 2.3 billion people around the world still live without access to adequate san-itation, while every day 800 children under the age of five are estimated to die from diarrheal diseases caused by a lack of clean water and sanitary living conditions. The lack of toilets in schools can be an obstacle to girls continuing with their schooling after they reach puber-ty, and women who have to defecate outsideare at risk of being assaulted. Aiming to solve these problems, the second target of Goal 6 of the United Nations Sustainable Development Goals (SDGs) is: "By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations."

Highlights

LIXIL's "Toilets for All Project"

LIXIL's Response

LIXIL has pledged to provide better sanitation to 100 million people by 2020. To address the world's complex, multifaceted sanitary prob-lems, LIXIL is providing multiple solutions tai-lored to the unique circumstances and market needs of individual regions. This includes its SATO Toilet Systems, which have already been commercialized; its Micro Flush Toilet System and Portable Toilet System, which are currentlyundergoing field tests; and its Green Toilet System, which has already been installed in refugee camps. Through these activities,

In 2017, LIXIL implemented its "Toilets for All" initiative in collaboration with UN organizations and international NGOs. For every LIXIL shower toilet sold in Japan between April to September 2017, it will donate one SATO toilet primarily to developing countries in Asia and Africa. The aim of this initiative is not only to donate SATO products to regions where there is an urgent need for them but also raise awareness of glob-al sanitation issues within Japan.

LIXIL is building sustainable businesses rooted in local communities, helping to solve social problems, all while contributing to the long-term growth of the Company.

Residents of the village of Wagholi in India, who received a donated SATO unit

Total number of SATO units to be donated: 208,805

Looking Back Over FYE2018

LIXIL established new production systems and sales networks in multiple countries for SATO Toilet Systems. Its strategy is to develop a social business that is rooted in the local community, thereby helping to create jobs in the regions and ensure the business is more sustainable. In Sep-tember 2017, SATO was selected by Grand Chal-lenges Canada to receive financial support, while the business has also been developing new pro-duction systems in six countries: Bangladesh, India, Uganda, Kenya, Tanzania, and Nigeria.

In addition, LIXIL signed an agreement with the United Nations Human Settlements Programme (UN-Habitat), leading to the installation of its Green Toilet System in refugee camps in Kenya, which will enable the local community to safely treat human waste and recycle it as fertilizer. LIXIL's Portable Toilet System, which was de-veloped for indoor use in urban informal settle-ments, was also tested in the Philippines, and now feedback from people who used the system is being reflected in product development.

LIXIL launches the SATO V-Trap Connection System, a new product specially developed to meet the needs of the Indian market

Cumulative total of SATO units shipped: 1.8 million Number of people whose sanitary environment has been improved*: Approximately 9 million

In November 2017, LIXIL's new SATO V-Trap Connection System (SATO V-Trap) was launched in India. The Indian government's Swachh Bharat Mission policy aims to eliminate open defecation in India by 2019, and approximately 80,000 toilets are being constructed across the country every day to reach this goal. Particularly in areas that lack underground sewage systems, the Indian government is promoting the adoption of Twin-Pit Pour-Flush (TPPF) latrine systems.

The SATO V-Trap is designed to reduce the risk of pipes becoming clogged with excrement. In addition, whereas older systems required extensive work (including concrete removal, etc.) in order to install the junction box that allowed switching between pits, with the SATO V-Trap switching between pits can be accomplished easily using just a wooden stick.

However, traditional systems can be prone to clogging, and masonry work is required in order to switch the direction of human waste between the two pits. LIXIL's new SATO V-Trap has been specially developed to meet the needs of the Indian market. While retaining the original SATO design with a self-sealing trap-door, which helps to conserve water, reduce odor, as well as help keep out disease-carrying insects, the SATO V-Trap is designed so users can switch the flow of human waste between pits easily. In April 2018, because of its superior design function-ality, the SATO V-Trap was awarded an Honor-able Mention at the Red Dot Design Awards in Germany.

* This is calculated by assuming that there is an average of five users for every SATO unit shipped as of March 2018.

Connection to UN Sustainable Development Goals

Water Conservation & Environmental Sustainability

Critical Social Issues

With the impact of climate change, intense and extreme weather conditions have increased incidents such as water and food shortages. The international community has come together in an attempt to address these problems and ratified the Paris Agreement, which aims to achieve a balance between anthropogenic emissions and absorption of greenhouse gases,including carbon dioxide, in the second half of this century, and thereby keep the increase in global average temperature to well below 2°C above pre-industrial levels. Contributing to SDGs Goal 13 ("Take urgent action to combat climate change and its impacts") is not only important for government agencies but corpo-rations also.

LIXIL's Response

Approximately 32% of all energy consumed in the world is used by buildings (with residential buildings accounting for 24% and commercial buildings for 8%), which is an important busi-ness area for LIXIL. It is forecast that, if appro-priate measures are not taken, the amount of energy that is consumed by buildings worldwide will more than double by 2050.

LIXIL has identified the opportunities and risks related to climate change and is promoting an environmental strategy that is consistent with its overall business strategy. LIXIL's Environmental Vision 2030, which was announced in FYE2016, aims to ensure that, by 2030, the positive envi-ronmental contribution through its products and services will surpass the environmental footprint from its entire business process, thus achieving a Net Zero environmental footprint and helping to realize a sustainable society.

services that combine both comfort and supe-rior environmental performance, which make a positive contribution to energy and water con-servation in buildings and homes. In addition, to reduce its carbon emissions related to a wide range of processes that extend from procure-ment through to production and distribution, LIXIL is working to ensure efficient use of water, energy, and other natural resources.

GROHE's new manufacturing facility plant in Thailand

Of the various measures that LIXIL implement-ed related to its products and services, its new RE-PLUS window replacement product received the Minister of the Environment's Award in the Cool Choice Leaders Awards, which is organized by the Ministry of the Environment of Japan. With RE-PLUS, an existing window can be replaced with a new window without damaging the wall in as little as 60 minutes. This new product is changing standard practices in the house renovation market, contributing to energy-savings by encouraging more people to have their windows replaced in order to improve insulation.

lives. For example, through its "ECO for All" Program in Japan, LIXIL aims to spread aware-ness of simple ways in which people can con-tribute to water savings and CO2 reduction.

LIXIL provides opportunities to tackle envi-ronmental issues together with its consumers through a wide range of products and services that are closely related to people's everyday

Other measures implemented through busi-ness activities include the GROHE factory in the Klaeng district in eastern Thailand adding a new, environmentally-friendly building, which was awarded the DGNB Silver Certification of Sus-tainable Building by the German Sustainable Building Council. Besides having solar panels installed on the roof, thereby helping to reduce carbon dioxide emissions by around 700 tons per year, the new factory building realizes environmentally-friendly production by using a wastewater recycling system and through an overall more efficient manufacturing process.

CO2 Emissions

Water Intake / Water Discharge

(Thousand t-CO2)

(Million m3)

1,400.0

1,198.7

LIXIL develops and provides products and

0.0

6.0

16

17

18

16

17

18

Scope 1

Scope 2

Water IntakeWater Discharge

Opportunities and Risks for the LIXIL Group

Scope: Covers production and non-production bases in Japan and a majority of overseas production bases. The scope of the data differs from the scope of the consolidated financial data, and a portion of the data on the website has received the independent practitioner's assurance. For details, please refer to the website. URL:www.lixil.com/en/sustainability/environment/ev_performance.html

Highlights

LIXIL's Targets Were Certified by the Science Based Targets initiative

and the contribution it can make.

The key issues that LIXIL is addressing

LIXIL received validation from the Science Based Targets (SBT*1) initiative for its greenhouse gas emissions reduction target, and continues to pro-mote efforts to reduce its environmental footprint.

To help realize the Paris Agreement's long-term targets, LIXIL is fully aware of its responsibilities

In November 2017, LIXIL received validation from the SBT initiative since the Company's tar-gets are scientifically compatible with the Paris Agreement's targets. LIXIL has become the 14th company in Japan and the first company in the building products sector globally to secure SBT initiative certification.

By 2030 (FYE2031), reducing 30% of Scope 1 and 2 emissions*2 compared to FYE2016

By 2030 (FYE2031), reducing 15% of Scope 3 emissions*3 compared to FYE2016

1. The SBT initiative is a joint collaboration between

CDP, the World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact (UNGC). It was established in 2015 to encourage companies tomeet science-based targets for cutting green-house gases, in order to hold the increase in the global average temperature to below 2°C above pre-industrial levels.

• 2. Scope 1 and 2: Greenhouse gas emissions from fuel and electricity used by an organization.

• 3. Scope 3: Greenhouse gas emissions from an or-ganization's supply chain, such as procurement and use of products.

Reducing greenhouse gas emissions

Water conservationSustainable resource use

Maximizing Opportunities	Minimizing Risks
- Increased demand for improvements in the energy-saving performance of homes and other buildings, and for the widespread adoption of Net Zero Energy Houses (ZEH)	- Heightened risk of natural disasters and increasingly stringent regulation, and increased energy costs
- Rising demand for water-saving products in the global market as a whole	- Strong likelihood that areas affected by water stress will increase, resulting in higher operational risk in these regions
- Technology innovation that makes effective use of recycled materials and new forms of energy, etc.	- Rising cost of raw materials, and heightened risk of more stringent regulation affecting the supply chain, with a consequent increase in reputational risk
Increase positive contribution to the environ-ment through our products and services	Reduce the environmental footprint of our business activities

Looking Back Over FYE2018

Connection to UN Sustainable Development Goals

Diversity & Inclusion

Critical Social Issues

The number of societies with an aging pop-ulation is increasing throughout the world. By 2050, more than one in every five people around the world is projected to be over the age of 60, with many living either alone or with their spouse only. Approximately 15% of the world's population today has some sort of disability, and this rate is increasing every year. Under these circumstances, there is a greater needfor companies to enhance the quality of life and well-being for the elderly and those with phys-ical disabilities through products and services. Additionally, with the shrinking workforce in Japan, providing all people with the opportunity to maximize their potential, including increas-ing efforts to foster women's empowerment in line with SDGs Goal 5, is especially crucial for businesses in Japan.

Target ally coverage rate: At least two "allies" at all 86 LIXIL branches in Japan with over 50 employees by 2020; achieved 77% as of March 31, 2018 Participants to the "Universal Design" program: 1,290 students at 21 schools Participants to the "Universal Run" program: 6,030 students in 80 schools

Highlights

LIXIL Diversity & Inclusion Declaration

LIXIL's Response

LIXIL has made Diversity & Inclusion a key pillar of its Corporate Responsibility (CR) strategy. By embracing diversity in gender, age, race, nationality, values, and backgrounds in society and within the Company, LIXIL strives for open and honest communication and usesthe dynamic energy of its diversity as an engine for growth and innovation. LIXIL is undertaking R&D aimed at the development of new prod-ucts and services that embody ideas generated from different perspectives, and uses this to help improve people's comfort and lifestyles.

LIXIL previously issued a Diversity Declaration and has been implementing a wide range of activities to promote diversity. However, since these activities were implemented mainly in Japan and tended to focus on fostering wom-en's empowerment, LIXIL issued an updated Diversity & Inclusion Declaration in March 2018 to promote a wider range of activities on a global scale.

LIXIL has set four focus areas to uphold its Diversity & Inclusion Declaration, not only for recognizing diversity but also for leveraging its differences to improve engagement. LIXIL will promote initiatives to address and improve the four focus areas that are the most relevant for each country and region.

Looking Back Over FYE2018

To create a comfortable and friendly corporate environment for all, LIXIL has been holding workshops in Japan aimed at deepening employees' understanding towards sexual minorities. It has also implemented e-learning activities for all employees.

As a part of these activities, LIXIL has been supporting employees who want to voluntarily register as an "ally" of sexual minority employ-ees, who can offer a friendly ear, discuss con-cerns, and spread awareness and understand-ing among other employees. Additionally, LIXIL has set a goal of having at least two "allies" in all 86 LIXIL branches in Japan that have more than 50 employees by 2020. As of March 2018, LIXIL has already achieved 77% of its target.

program in South Africa for young employees from ethnic groups that have historically been discriminated against, and providing reason-able accommodation to support employees with disabilities at LIXIL Americas. As a part of its efforts to help educate the next generation, LIXIL has been conducting school visit pro-grams such as "Universal Design: Good for One, Good for All" and "Universal Run: Sports Prosthesis Experience Class", mainly at elemen-tary schools throughout Japan.

LIXIL Diversity & Inclusion - Four Focus AreasGender & Age

Family & Life

We will drive business performance by em-bracing diversity and ensuring that all employ-ees have equal opportunities to be recruited, developed, advanced, and retained globally, regardless of gender or age.

We will support employees through various life stages and events, thereby allowing them to contribute to business success while also fulfilling personal and family priorities and obligations.

Disability

Culture & Identity

By helping children to understand what user-friendly design means, including for people with disabilities and the elderly, it provides them with the opportunity to learn about the impor-tance of respecting one another.

We will raise awareness, provide education and resources, and proactively create a culture that embraces, enables, values, and maximizes the contributions of persons with disabilities.

We will foster mutual understanding, respect, and communications in order to fully embrace the diversity in race, religion, culture, gender identity, and sexual orientation of everyone at LIXIL.

LIXIL is also working actively to address a wide range of Diversity & Inclusion issues at its overseas Group companies, such as implementing a special leadership training

Launching the Universal Design Project

Percentage of Female Managers

(%)

16.0

13.9%

12.0

8.0

6.0%

4.0

0.0

16

17

18

LIXIL is developing measures to foster Universal Design (UD), which aims to make living as convenient and easy as possible for everyone. To enhance LIXIL's UD project, LIXIL established a new com-mittee in 2017, the member-ship of which comprises senior managers. The committee held UD workshops withparticipants from a wide variety of functions across LIXIL, including marketing, sales, R&D, and PR, establishing the foundation of the Company's UD promotion structure and framework.

Working within this new framework, LIXIL will continue to develop new products and services that meet the needs of a wide range of users, pursuing user-friendly functions, meeting needs relating to usability and accessibility, as well as creating designs that appeal to consumer tastes and preferences.

Global (Includes Japan)Japan

Scope: Covers the entire Group. The scope of the data differs from the scope of the consolidated financial data, and a portion of the data on the website has received the independent practitioner's assurance. For details, please refer to the website. For details, please refer to the website.

An employee teaching the "Universal Design" school visit program at a primary school in Japan

URL:www.lixil.com/en/sustainability/people/performance.html

Well Life is a kitchen system that embodies Universal Design in every aspect, including size and functionality, and it can be used safely by wheelchair users, senior citizens, and people with weakness of the back and legs.

List of LIXIL's Material Issues, Targets, and KPIs

LIXIL identified the following material issues under its Corporate Responsibility (CR) strategy and framework.

The Group has formulated its Medium-Term Plan and started implementing activities accordingly during FYE2017 and made notable progress towards achieving the targets for FYE2018.

Target for FYE2018

FYE2018 Review

- Set clear rules and procedures for governing bodies - Ensure 100% coverage of improved governance rules and procedures

• - Reviewed executive meeting formats to facilitate swift decision-making, and evaluated efficacy of the Board

• - Scope of Group companies in which revised rules will apply: 100%

• - Group-wide basic training and commitment to the Group Code of Conduct: 100%

  • - Group-wide basic training and commitment to the Group Code of Conduct: 98.9% in Japan, 97.3% overseas

• - Placement of compliance committees and officers in each business unit: 100%

  • - Established compliance committees or alternative meeting formats in all international business units and distributed guides including fundamental stipulations

• - Combine Japan and overseas internal concern-raising systems

• - Integrated Japan and overseas internal concern-raising systems to "Speak Up!"

- Coverage of the risk management system across Group companies: 100%

- Coverage of the risk management system across Group companies: 100% - Developed a comprehensive insurance program and established a centralized control system for liability insurance for all the Group companies worldwide

- Group-wide adoption of global policy: 100% - Group-wide compliance-related education and training ratio: 100%

• - Group-wide compliance policy coverage:100%

• - Group-wide compliance-related training ratio: 45% ～ 100% (varies by region)

• - Compliance violations across the Group: 0%

- Implementation of training at primary LIXIL Corporation overseas subsidiaries: 100%

- Implementation of training at primary LIXIL Corporation overseas subsidiaries:

Over 3,700 employees (June 30, 2018)

- Group-wide operational scope of occupational health and safety covered by the EHS management system: 98%

• - HQ EHS Department conducted internal audit of EHS managers of all business systems

• - Implemented the EHS performance data collection and management system

• - EHS performance data acquisition rate (based on employee numbers): 100％

- Implementation of action plans derived from the global employee awareness survey across the Group: 100%

- At least one department in all major Group companies created an action plan - Implementation of action plans: 100%

- Hold 5 Talent Acceleration Program classes for 116 em-ployees (LIXIL Corporation, Japan only)

- Number of employees participating in the Talent Acceleration Program for next-generation leaders: 116 employees, 5 classes

- Number of serious product accidents across the Group: 0 cases

• - Critical product-related accidents: 3 (single gas stove: 2; stove top ventilation cover:1)

• - Critical product-related accidents were reported in product-related crisis management meetings, and potential corrective actions were discussed

• - Information on critical product-related accidents were filed in a database and reviewed to determine if any corrective actions were necessary. Product corrections and awareness-raising on precautions regarding product use were carried out as necessary

• - Group-wide benefits from CO2 emissions reduction achieved from products and services increased by 1.16 times (compared to FYE2016)

  • - Group-wide CO2 emissions reduction attributable to products and services: 58.674t

  • - Implemented policy to replace all lights used in LIXIL products with LED by 2020 (LIXIL Corporation, Japan only)

• - Group-wide levels of CO2 emissions across all operational processes reduced by 3.2% (compared to FYE2016)

• - Group-wide CO2 emissions reduction attributable to products and services: up 4.7% from FYE2016 level (down 1.1% in terms of carbon intensity)

- Achieve supplier monitoring coverage ratio (based on purchased amount) of 90% in Japan and 60% outside Japan, 90% conformity rate, and 100% improvement rate

- Coverage of supplier CR survey rates are 90％ in Japan and 90% overseas*. Conformity rates

(minimal levels of compliance with the evaluation criteria) are 95％ in Japan and 85% overseas*.

* Excludes GROHE Group S.a r.l., American Standard Brands, and the Permasteelisa Group during FYE2015-2018

For further details regarding the Group's material issues, and CR activities and outcomes, please refer to the Sustainability section of our corporate website. URL:http://www.lixil.com/en/sustainability/