Fuji Seal International : INTEGRATED REPORT 2020

INTEGRATED

REPORT

2023

Our Credo / Our Slogan

[Our Credo]

EACH DAY

WITH RENEWED COMMITMENT

WE CREATE NEW VALUE

THROUGH PACKAGING

[Our Slogan]

We call creation a "dream"

We call challenges to creation "courage"

We call a heated discussion on creation "trust"

Editorial Policy

[Our Vision -ToBe-]

Sustainable and profitable growth

in the packaging industry

Our Value to People and the Planet

Our proactive impact to realize	Generate "Waku-Waku"
the Regenerative Society	- No growth without "Waku-Waku" -

[Guideline for Action]

Changing along with changes

[Our Mission]

Fuji Seal will impact to realize

the Circular Society that brings peace and happiness to all through packaging

C O N T E N T S

As the COVID-19 pandemic is coming to an end, economic and social activities are showing signs of recovery. However, since the COVID-19 pandemic, people's values and behavioral patterns have changed signicantly. Moreover, IT technology such as DX is advancing at an astonishing pace. In response to these major changes in society, the Fuji Seal Group (hereinafter, "FSG") has embodied its Guidelines for Action, "Change along with changes," over the past three years. Even amid the COVID-19 pandemic, though several points of contact, we were able to deepen our communication with our company's various stakeholders.

This is the fourth issue of the Integrated Report, through which we have been searching for communication solutions unique to FSG. In this issue, we look to convey our approach to diversity and sustainability, which we have valued for over 50 years, and the expansion of our business.

We would like to ask all of our stakeholders for their honest feedback and encouragement so that FSG will become an organization with greater strength and exibility.

	Financial Information			Non-Financial Information
	Annual Reports				Corporate Governance Reports
	Various Accounting Materials				ESG DATA BOOK		Environment
					Reports
	IR Information Website				Sustainability Information Website

Integrated Report (Booklet / PDF)

• Scope of Reporting
  Fuji Seal International, Inc. and its consolidated subsidiaries
• Period Covered
  Mainly FY2022 (April 1, 2022 to March 31, 2023), with some events and activities before and after the period mentioned as necessary
• Previous Integrated Report Issued in August 2022
• Reporting Cycle
  One year (the next Integrated Report scheduled to be issued in August 2024)
• Inquiries about This Report
  Fuji Seal International, Inc. Osaka Head Office Tel.: [phone] (main line) https://www.fujiseal.com/en/contact/
• Referenced Guidelines
  GRI Sustainability Reporting Standards
  IIRC International Integrated Reporting Framework
  SASB (Sustainability Accounting Standards Board) Standards (Containers & Packaging)
• Information Modications Due to M&A None
• Changes to Important Items None
• Positioning of the Integrated Report
  Please also refer to our websites listed below for further understanding of our Group.
  https://www.fujiseal.com/en/ir/ https://www.fujiseal.com/en/csr/

01 Our Credo / Our Slogan

03 CEO Message

07 CFO Message

11 Performance Highlights

13 The Fuji Seal Group's History of Value Creation

15 Thoughts Connecting the Past to the Future

17 Segments

19 Activities of the Group Sustainability Committee

21 Materiality for the Fuji Seal Group

23 Development of People-friendly Packaging Materials The Idea Bank Program/Intellectual Property Strategy

27 Development of Environmentally Friendly Products

Environmental vision and Initiatives to

Build a Circular Economy

31 Sustainable Growth

Interview with the Executive Officer in Charge of

Human Resources (HR)

35 Speedy Launch of Newly Developed Products

37

39

40

41

42

43

43

44

45

47

48

49

50

51

57

Creation of Next-generation Businesses Fair and Transparent Transactions Promotion of Information Security Measures Open Dialogue with Stakeholders

Stable Supply (including BCP)

Governance

Corporate Governance

Effective Governance

Management

Skill Chart

Messages from Outside Directors

Risk Management

Compliance

Financial Information

Corporate Prole

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CEO Message

Manufacturing and human resource development leading to the next 100 years

Director, Representative Executive Ofcer, President and CEO

Shigeko Okazaki

"Improvement of the working environment" and "speedy response to changes" are key for FY2023

In FY2023, we would like to focus particularly on improving the working environment, including the renovation of aging factories. The new factory in North Carolina, U.S., which started operations in April 2023, will serve as a model to meet these efforts. The concept of new factory is automation, efficient logistics and reduced solvent use during printing, truly in line with FSG's vision, "Our Value to People and the Planet" as friendly to the people and the environment. Currently, we are proceeding with construction plans for new factories with the same concept in Yamagata Prefecture and Thailand.

FY2023 is the final year of our Medium-Term Management Plan (2021-2023) centered on three growth strategies: "Accelerating the overseas expansion of our label business and profitability enhancement," "Expanding primary packaging," and "Creating new businesses." In terms of primary packaging, which is growing steadily, we have come up with several proposals for the next pillar of our business. In India, where we expanded with the goal of "Plus One" along our existing four businesses, four regions, and four categories set in our previous Medium-Term Management Plan, the machinery business is on track, and we are looking to expand into surrounding regions such as the Middle East. In addition, we are making steady progress toward our goals of promoting business expansion in the categories of home personal care, dairy products, pharmaceutical products, and joint development of counterfeit protection technology, which will lead to next-generation businesses. However, in the past two years, we have not been able to meet our numerical targets.

I believe that our future challenges will come down to "the speed with which we respond to changes." FSG's members demonstrate excellent breakthrough ability when taking actions. However, each department, carefully discusses and verifies based its own sense of responsibility and mission, which means that it takes time before they act. Although it may be unavoidable to spend time generating "an answer as

Rapid acceleration of measures for human capital

Developing strong leaders who learn from failure

As our company slogan indicates:, "We call creation a 'dream.' We call taking on the challenge to create 'courage.' We call a heated discussion on creation 'trust,'" we value creativity and challenges and we always want to bring passion and excitement to our work, or "Waku-Waku" To create a framework for this purpose and to achieve sustainable growth, our "Human Resource Strategy" focuses on various measures centered on "respect for diversity," "sharing values," and "expansion of human capital."

Of the approximately 6,000 employees in our group, two-thirds, or about 4,000, are foreign nationals. In order to recruit and develop our human capital from a more global perspective, in June 2022, we appointed a female Dutch national as our Executive Officer in charge of human resources. I believe that this is the most significant change under the new management system.

After assuming her position, she immediately began holding "Value Seminars." The seminars aim to spread the "Fuji Seal Way," which FSG has nurtured over our long 126-year history, and of sharing our values, during which managers serve as lecturers, sharing their experiences and insights, while participants take part in group discussions based on their understanding of the lectures. We plan to hold more sessions in various regions in the future.

She also developed a program incorporating FSG's culture while collaborating with a Belgian business school. Directors and selected members from each region participated in the program, where they exchanged proposals and discussions about solutions to management issues.

In December, a new Diversity, Equity & Inclusion (DE&I) policy was established to ensure respect for diversity, and I feel that our human resource-related measures have been greatly enhanced. Of course, there are challenges, and we must immediately promote the development of human capital

Responsible manufacturing is an important value as a leading company

Looking back on FY2022, I feel that we were able to properly fulfill our supply responsibilities in response to customers' needs in each business and region. However, because we were so focused on this, it took us too long to have our customers accept the passing on of rising material, utility, and logistics costs to them, resulting in lower profits despite obtaining higher sales numbers.

Regarding the passing on of costs, I think it is important not only to respond in a timely manner, but also to change our awareness. As a leading company, the Fuji Seal Group is committed to responsibly pursuing manufacturing practices that contribute to society and the environment. I believe that this is reflected in the acquisition of the gold medal awarded

by EcoVadis, one of the world's largest organizations that evaluates sustainability performance, and in the fact that we were highly rated in the "climate change" and "supplier management" categories scored by the CDP, an international environmental non-profit organization. Although these manufacturing efforts tend to be seen as free services, they involve development costs and other expenses, and above all, they enhance the value of our brand power.

In order to answer to the factory members who have been actively responding to difficult situations such as the Covid-19 pandemic, our prices must also reflect these efforts. I feel that management also needs to raise awareness of the value of these efforts in the future.

a company," what we should really spend time on is communicating with our customers and business partners. Accordingly, since the second half of FY2022, we have worked to speed up our response in various situations, including reducing the time to reach consensus within the company as much as possible and shortening the process for resale products. We expect to see the results of these efforts in FY2023.

It is very difficult to find a balance between developing strong "individuals" who can make their own decisions and creating an infallible "organization" while maintaining an effective governance. However, there is no need to feel excessive pressure to take responsibility, and since our company has a culture that encourages trial and error, I always tell employees that failure should not be seen as a loss but as an investment in making creative changes.

who will become next-generation leaders. We must first identify the issues within the current situation and make the appropriate proposals. We must create an environment where suggestions are heard and implemented.

The key point is how many high potentials*¹ we can develop within our employees who can make decisions with an eye on the next five to ten years.

I believe that a high potential is someone that has the ability to continue learning though failure during difficult assignments. I often wonder, "Am I the one who is making the most mistakes in the company? (laughs)" For instance, you cannot run a business just because you have an MBA*². Although theory is certainly necessary, I believe the important thing is to acquire the perseverance to continue no matter how many times you fail.

*1 High potentials: Next-generation executive candidates *2 MBA: Master of Business Administration

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Organizing and systematizing has dramatically improved the accuracy of judgements on intellectual property rights

Along with the human resource strategy, the intellectual property strategy is also one of our initiatives for sustainable growth, and has undergone dramatic changes over the past few years. What triggered these changes was the classification of patents. Until now, we had mainly managed patents by numbers, and although we had provided incentives, we had not made any special efforts to increase the motivation of those who apply for patents. As a new attempt, we began to classify the most important patents as S, and the complementary patents as A, B, and C. Those classified as "S" are divided into those that will be filed overseas and those that will not. Thus, we have made it possible to have a bird's-eye view of patents as a whole, including those of our competitors and our customers. We have also adopted a timestamp system for know-how that is not disclosed to the public, and we have positioned our Idea Bank Program under it. The Idea Bank Program is an initiative encouraging all employees to create ideas. Since its start in 1986, it has become an important foundation for FSG's growth.

By organizing and systematizing patent management that had until then been dispersed, the accuracy of judgments on intellectual property rights has improved, and it has become easier to pass them on to the next generation. As was the case with the human resource strategy, the person leading the intellectual property strategy is also a female employee. Like with them, FSG has fostered corporate culture in which women are naturally active in the frontlines of business.

Our employees' sincere pursuit of value for our customers is our greatest strength

Our business is always centered on our customers, and I feel once again that we are a company that gives shape to customer requests with the help of our business partners.

FSG's R&D and technical members do not wear white coats. This is because we ask our business partners to conduct the basic and technical research performed in white lab coats. So, why do customers choose us? This is because we work sincerely to face customer requests for "creation (development department), manufacturing (production department), and selling (sales department)," and deliver solutions from the standpoint of those involved. We deliver machines with good operating rates that satisfy our customers' factory managers, and we provide proper maintenance. We propose how to make products stand out when they are lined up in a store. I believe that our employees' sincere attitude to think first about what is valuable to our customers, is FSG's greatest strength. The other day, I heard that one of our sales representatives was told by a major U.S. customer, "I thought Fuji Seal was a U.S. company." That made me feel really happy. These words are proof that our business is centered on our customers, and I feel they encapsulate the reason for our strength.

A corporate culture that considers human capital as an important asset "Work-life balance" has been a priority for 40 years

This time, when looking through past materials, I realized that Masaaki Fujio, our founder and my own father, already had the vision of a company, individuals, and a family approximately 40 years ago, and mine aligned with his. He kept saying, "Work is fulfilling only when individual employees are happy, and their family understands the company." In today's terms, this refers to the work-life balance.

This idea is embodied in the Family Festival. Although it had been temporarily suspended due to the COVID-19 pandemic, it is an annual event held at each business location in Japan and abroad on May 12, the anniversary of FSG's establishment. Starting by introducing the sentence, "Can you explain that judgment (action) of yours to your family (loved ones)?" written on our compliance cards, we present excellent employees, introduce the company, and teach children how shrink labels are made. In addition to this Family Festival, we have continued with employee-oriented initiatives for decades, such as sending birthday cards with handwritten messages to employees and their families. Our corporate culture considers human resources as the most important asset is the source of FSG's growth.

In 1993, our founder also wrote the following phrases under the title "The Desirable Person"

A: "Someone the Company Absolutely Desires"

A person who consciously defines the remaining challenges and tackles them

B: "Someone the Company Moderately Desires"

A person who proactively detects latent problems and solves them

C: "Someone the Company Can Do Without"

A person who solves only the obvious and visible problems

D: "Someone the Company is Better Without"

A person who sees but does not solve the obvious and visible problems

E: "Someone Who Should Leave the Company"

A person who is complacent with the current situation, and does not see any obvious and visible problems although they exist (they are unquestionably everywhere)

Although the content is very strict what is intended here is that employees are expected to work with the attitude of consciously finding and revealing issues and challenges, and considers and implements solutions for them. To ensure that there are no misunderstandings, I communicate this message during morning assemblies and share it with our overseas members by translating it into English. I keep saying over and over again what is important and what I want to pass on to the next generation. Although this is a steady way, it isn't a magic wand. I have also been sharing information about the Idea Bank Program whenever possible. Compared to last year, the number of applications increased an additional 655 in Japan and 3,700 overseas.

Carefully conveying our efforts and thoughts to gain a deeper understanding

FSG, as a company which has worked ahead of society's efforts to reduce container loss and recycle packaging, aims to realize a circular and sustainable society 100 years into the future.

Regarding our daily activities, we promote the clarification of responsibilities from both "an offensive" and "a defensive" perspectives. In terms of offensive activities, the Executive Officer in each business is responsible for offering technical proposals to customers and creating systems for recycling plastics. Meanwhile, in terms of defensive activities, the Executive Officer in each region takes responsibility for factory management and energy issues.

In addition to environment-related matters, we would like to further focus on corporate governance. Fuji Seal International works on governance and compliance with increased

sensitivity while receiving checks from external parties such as Outside Directors and investors. However, Group companies closer to the forefront have not yet reached their full potential. Accordingly, from FY2023, we plan to create a governance and compliance structure, including the establishment of the Internal Audit Office. As the statement on the Compliance Card mentioned earlier goes, I believe that if each and every one of us raises our awareness, we will not make the wrong decision.

FSG has put into practice many ideas that are ahead of the times, as can be seen in our environmental initiatives and our corporate culture that values people. We will continue to carefully communicate these matters to all of our stakeholders. I believe that this is the first step to gaining a deeper understanding of FSG. In particular, I sincerely hope that our employees will be exposed to new aspects of our company that they may not have known before, and that this will encourage them to approach their work with a more joyful and upbeat mindset.

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CFO Message

Further improving corporate value through active investment and dialogue

Director,

Executive Ofcer in Charge of Finance, CFO

Akikazu Yada

were able to respond to these changes and proceed with selection and focus, which should lead to growth from FY2023 onward. At one point, President Okazaki and other members of the management team and I jokingly remarked that "too much change makes us insensitive to change." This is actually a very important perspective. I believe that it is essential to remain sensitive to changes and issues in order to survive in this era.

Performance of each business with different results

The spouted pouch business performed extremely well. Although previously the main demand was for refill pouches, there was increasing demand for pouches that can be used as containers. One of the reasons is that these pouches use less plastic than conventional containers and can contribute to the realization of a circular society. In addition, the fact that they became available in various sizes from small to large helped expand their range of applications, which led to increased sales. In the future, we would like to solve the profitability issues by building a business model that helps customers invest in filling machines.

On the other hand, the shrink sleeve label business and the pressure sensitive label business, which are our primary businesses, continued to struggle. Their profitability declined due to soaring material costs and other factors. Although we made great internal efforts and with their understanding passed on costs to customers, it is undeniable that our response time was slow compared to our foreign-affiliated competitors. However, considering that we are currently at a low point, we are positive about the future. Environmental solutions are in great demand. Our RecShrinkTM labels, developed in the U.S., which can be recycled together with PET bottles into PET bottles, have been well received by many customers and have been increasingly adopted. These efforts of ours have led to high evaluation from external organizations such as EcoVadis and the CDP, and we have received comments from customers saying that they appreciate our efforts because it makes it easier for them to choose us as their suppliers.

time for materials and other items was extended under the difficult environment, and that the introduction of machines was postponed due to changes in the timing of customers' investments. We believe that we will be able to continue sales at favorable levels once the situation returns to normal. We are currently working on discovering new projects while taking advantage of our strength of "system sales," in which labels and machines are sold together.

Taking the next steps in Europe and the ASEAN regions

In terms of performance in each region, Europe and ASEAN showed challenging results. First, as countermeasures for Europe, we implemented structural reforms aimed at recovering profitability, and reviewed our fixed costs. Furthermore, we must focus on delivering solutions that match the market needs to achieve growth and succeed over the competition. The U.S. is a large lot market with 330 million people and one language. Europe, on the other hand, has more than 400 million people and is larger in scale, but there are 13 major countries alone, with a wide variety of languages and consumer tastes, resulting in smaller lot sizes. How can we increase profitability in such a difficult market? We are working on promoting discussions and initiatives from various angles, including machinery and equipment.

As for the ASEAN region, I think we are still at the stage of steadily increasing sales. However, compared to other regions, its population and GDP are consistently increasing, and there is no doubt that its growth potential is high. In the future, we would like to aim for movement that can secure profitability as well as sales.

A year of selection and focus in response to changes

From a financial perspective, various factors changed significantly in FY2022, including increasing material costs, geopolitical risks, rapid economic recovery after the

	FY2022 Results	FY2023 Target
Net sales	180.4 billion yen	191 billion yen
Operating	8.1 billion yen	10.6 billion yen
profit

In the machinery business, although orders were strong, sales were almost flat. The reasons for this were that the lead

Net sales and targets by business segment	Net sales and targets by region
(¥ billion)	(¥ billion)
2,500	2,500

COVID-19 pandemic, progressive inflation, and rising interest rates. Not only for the Fuji Seal Group, but also for many companies around the world, FY2022 was probably the most difficult year to steer a business. However, in a situation where we had to take action in many ways, it was also a year in which FSG as a whole was able to take new unprecedented actions. One example is the expansion of our relationships with our business partners. By creating new relationships, we were able to ensure a secure supply. I believe that this will lead to more effective purchasing activities in the future.

Our products are resistant to economic slowdown due to their steady demand, but in FY2022, progressive inflation caused changes in customer demand, including a shift to

Net sales			Operating income
(¥ billion)		1,910	(¥ billion)
2,000		1,840	250
1,600				200
1,200				150
800		81	106	100
400			50
0				0
		2022	2023	(FY)
		Results	Target

2,000	1,840	1,910
	142	141
	215
	199
1,500
288	302
1,000	167	176
500	1,130	1,166
0
	2022	2023
	Results	Target

2,000

1,500

1,000

500

0

(FY)

1,840	1,910
174	202
281	286
501	527
971	985
2022	2023	(FY)
Results	Target

private brands, which affected our profitability. However, we

Net sales

Operating income

Shrink PSL Pouch Machinery PS / Others New businesses Eliminations

Japan Americas Europe ASEAN New businesses Eliminations

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