Sustainability Report - FUJIFILM

Sustainability R

eport 2006

Sustainability Report2006

Toward a Sustainable Society —

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Fuji

Xer

ox S

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06

This report is printed using 100% vegetable oil-based ink, which contains no volatile organic compounds (VOCs). Printed in Japan

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Mr. Saito is an attorney at law since 1978 and currently works as an auditor for Neturen Co., Ltd. He is also a member of the Operation Committee at the Japan Federation of Bar Associations’ Center for Promotion of Legal Practice. Additionally, he is the vice-chair of the same organization’s Project Team for Human Rights and Corporate Responsibility Evaluation and Assistance. He was born in 1946, and is a graduate of the Faculty of Law of Tokyo Metropolitan University.

Makoto Saito

1. Judging from the commitment of President Toshio Arima and Chief Corporate Advisor Yotaro Kobayashi, as expressed in their own words, the foremost characteristic of CSR activities at Fuji Xerox is an extremely clear intent at the top of the organization regarding the essence of CSR as related to the business activities of the company.

As a result, the various topics in the Highlight sections of this report were all positively evaluated as initiatives to realize CSR. Valuable CSR-related efforts within Fuji Xerox include directing the company’s core document business toward the realization of CSR by constructing internal control systems for corporate customers; support for employee diversity, including women’s activities; consistent implementation both domestically and overseas with respect to issues such as compliance and employee issues in China; promotion of sustainability in paper procurement, a fundamental part of the company’s document business; and the establishment of the comprehensive Integrated Recycling System.

2. On the other hand, the report is incomplete in that it does not provide readily understandable explanations of future companywide goals or present the degree of achievement from a comprehensive CSR perspective, and time-based and companywide degrees of achievements with respect to the various issues discussed. In addition, although Fuji Xerox earns high marks for information disclosure, and has admitted that scores measuring employees’ core morale have declined for two consecutive years, it is somewhat problematic that no countermeasures are proposed. Also, the report cannot be positively evaluated in terms of the information included regarding the relation between Fuji Xerox and its stakeholders.

3. Based on the commitment of top management, Fuji Xerox’s core document business is directed toward CSR realization, and the company is positioning global CSR activities in a manner that is consistent both in Japan and overseas. Environmental issues are also being viewed from an far-reaching perspective, from upstream planning stages to downstream reuse and recycling. Virtually all of the important components of CSR are addressed. Nevertheless, it would appear that gaps are still present, in the sense that internal structures are not necessarily responding to this.

The report states that the CSR Committee is the “highest decision-making body with respect to the environment,” and if the CSR Committee is literally the “highest comprehensive decision-making body for CSR,” it would be desirable to place a CSR representative as a focal point in each department of the company. Through companywide functioning of CSR management, Fuji Xerox should expand its CSR efforts from a line to a plane, further deploying these both spatially and organically. This will likely be an important element in the further development of Fuji Xerox as a company dedicated to providing corporate customers with quality CSR.

It is to be hoped that Fuji Xerox will thereby arrive at a new business model featuring total implementation of CSR. In so doing, there is also a need for greatly expanded frank and honest dialogue with the various stakeholders involved.

The foregoing represents my opinion on the present report.

Editorial Policy

Fuji Xerox and its affi liates are carrying out business with global environmental and social issues in

mind. We are also taking on the challenge of solving these issues to become “good companies” for our

various stakeholders.

This report introduces efforts to solve issues concerning business operations and the current

status of the activities being carried out in relation to these efforts. It also attaches importance to the

presentation of policies and attitudes regarding issues, so that it is more than just a simple report of

activities and statistical data. In terms of activities, we particularly wish to report that the information

was gathered from a third-party perspective from those responsible for or concerned with these

activities, which is then summarized as “Highlights.”

Reference guidelines• 2002 Sustainability Reporting Guidelines of the GRI*• Environmental Reporting Guidelines (FY2003) of the Ministry of the Environment• Corporate evaluation standards in the 15th Corporate White Paper issued by the Japan Association of Corporate

Executives

Visit our Web site for a table comparing the guidelines of GRI and the Ministry of the Environment.* GRI: Abbreviation for the Global Reporting Initiative, an international organization established in 1997 to develop globally applicable guidelines for

corporate sustainability reports.

Scope of coverageThe data on environmental impact for Fuji Xerox and its affi liates covers all the domestic sites and overseas production sites that are subject to environmental accounting. As a rule, this report covers data from April 1, 2005 to March 31, 2006, which is Fuji Xerox’s fi scal year, but certain parts of the report provide data for the period starting from April 2006.

Third party opinionsFor a third party perspective on Fuji Xerox activities, we have received opinions from Hitotsubashi University Graduate School Professor Kanji Tanimoto and a lawyer, Makoto Saito.

Release schedule for the next reportSeptember 2007

The Sustainability Report 2006 is provided in a print version and an online version.

(1) Print version (56 pages)

The print version focuses on Top Management’s Commitment and Highlights, and presents Management & Performance in an abbreviated form.

(2) Online version (comprises 100 sections with information equivalent to 250 A4-size sheets of paper)

In the online version, the Management & Performance section provides in-depth reports on a wider range of activities than before. The online version also offers various navigation tools, such as report maps and guideline comparison tables (GRI/Ministry of the Environment), so that readers can easily access the information they are interested in. For

details, please see page 33.

We would be pleased to hear your opinions regarding our activities, and we hope that you will take a moment to fi ll out our survey.

For more information, see the online version at: http://www.fujixerox.co.jp/eng/sr/

Fuji Xerox Sustainability Report 2006 2 Fuji Xerox Sustainability Report 2006 55

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Our Vision

Aiming for a Sustainable Society Through Communication and Utilization of Knowledge············· 4

Top Management’s Commitment

Striving to be a Partner That Raises the Quality of Corporate Management Through Documents·············· 6

··············································· 9

Highlight 1

Documents for Enhancing Management···················· 10

Highlight 2

Compliance Is More Than Just Formal Measures········ 14

Highlight 3

Becoming a Company Where Employees Can Work With Enthusiasm············································ 18

Highlight 4

Becoming a Company That Is Truly Rooted inChinese Society························································ 22

Highlight 5

Toward a Sustainable Model for Paper Procurement ··· 26

Highlight 6

The Long Road to a Recycling-Based Production System···················································· 28

“Togetherness” at Fuji Xerox ·································· 30

Learning CSR From Other Companies····················· 32

········································· 33

Management and Organization······························· 34

Social Performance Report······································ 38

Environmental Performance Report························ 44

Corporate Profi le···················································· 52

Third Party Opinions······················································· 54

Fuji Xerox Sustainability Report 2006 3

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A strong company—providing outstanding services and creating value

A kind company—toward both the local community and international community, through its environmental initiatives, ethics, and contribution to society

Build an environment for the creation and effective utilization

of knowledge

An interesting company—where employees can enjoy their personal and professional lives

We,

the

Fuj

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roup

, will

str

ive

to;

Contribute to the advancement of the global community by

continuously fostering mutual trust and enriching diverse

cultures

Achieve growth and fulfillment in Both

our professional and personal lives



Documents for Enhancing Management P10

Compliance Is More Than Just Formal Measures P14

Becoming a Company Where Employees Can Work With Enthusiasm

P18

Becoming a Company That Is Truly Rooted inChinese Society

P22

Toward a Sustainable Model for Paper Procurement

P26

The Long Road to a Recycling-Based Production System

P28



Striving to be a Partner That Raises the Quality of Corporate Management Through Documents



A legacy for the futureWhen I joined Fuji Xerox in 1967, it was a small

venture startup that had been in business for just f ive

years, providing copy services through equipment rentals.

I remember the attraction I felt to this future-oriented

company, inspired by the possibilities opened up by

revolutionary xerography technology to provide value to

society, the strong sense of social commitment on the part

of the management of such a small f irm, and the sheer

intensity of the highly individualistic employees who

think creatively.

Many things have changed with the passing decades

since I joined the Company, including business f ields,

products, technology, and sales and support structures,

and will continue to change. In fact, we have to change

as we move forward. However, there are some things

that have been handed down from the beginning that

our employees should never lose sight of. Our business

mission to “build an environment for the creation and

effective utilization of knowledge” for people throughout

the world; the concept at the very core of our business of

“providing added value to our customers, and not merely

equipment;” and the point of departure for realizing these

approaches, which is for our employees to perceive their

jobs as being interesting. These elements of the corporate

philosophy are part of a legacy that is essential to Fuji

Xerox of the future.

Three challenges for Fuji Xerox in seeking to realize sustainability

In an increasingly competitive environment, f irms

must produce short-term economic results even as they

are required to meet the wide-ranging expectations

of society in the longer term. We are in an era where

sustainability cannot be assured for f irms that fail to

achieve this balance. On the other hand, as more f irms

actually do achieve this, they help safeguard and enrich

the global environment and society, serving as a key to

realizing sustainability, which is a common concern for all

mankind.

Against this background, how can we, Fuji Xerox,

which promotes the “creation and effective utilization of

knowledge” contribute? Discovering and offering better

answers to this question is Fuji Xerox’s “role in society.”

In other words, we see this as being at the center of our

contributions to sustainability of the environment and

society.

There are three challenges that we face in this context:

“creating added value document services that meet the

expectations of society”, “developing a global business

that responds to social awareness,” and “maintaining a

corporate environment in which our employees feel work

is “interesting” and are “engaged.”

We support our customers to improve t hei r cor porate qua l it y t h rough document services

We constantly work toward creating new services

that will allow us to continue to provide added value to

our customers, and the hottest topic at the moment is

“solutions for internal controls.”

Currently, documents hold the key to the business

process controls that companies require. Firms need to

be able to tie their core management data to “dynamic”

information, and to deliver explanations characterized by

transparency. With integrated and secure management

of documents in paper, electronic, and other forms,

enterprises can be managed in a more justif iable and

transparent manner. Fuji Xerox provides an infrastructure

that actively encourages compatibility and fusion between

mission-critical systems and paper documents. We are

conf ident that utilization of this infrastructure allows

not only the construction of systems for better internal

controls, but also the establishment of more eff icient

business processes toward higher corporate quality.

Establishing business processes with our partners to ref lect social and environmental requirements

Fuji Xerox is energetically promoting the globalization

of our business, and an important challenge for us is to

respond to greater environmental and social awareness in

our business processes.

In 2002, Fuji Xerox signed the global compact proposed

by UN Secretary General Kofi Annan, and, using this to

gauge our corporate behavior, we are working to eliminate



Using employees sense of interest in their jobs as an engine of growth

“People” are naturally the prime movers in creating new

services and globally implementing efforts that provide

value to society. At Fuji Xerox, each successive generation

of top management has shared the perception that when

employees’ feel that their own jobs are “interesting,” their

engagement serves as the starting point in the cycle of

value creation. If our employees can nurture their own

individuality and sensitivity within their family and

social relationships, as they enthusiastically apply that

individuality and sensitivity in their work, they will be

able to deliver new value to society and achieve corporate

quality that they can take pride in. As president, I see

two distinct perspectives from which this concept of Fuji

Xerox “people” should be considered anew.

The f irst perspective concerns “working styles.” Fuji

Xerox has a progressive history, demonstrated by various

undertak ings, such as the 1970 release of a socia l

statement titled “From Moretsu (Hustle) to Beautiful,”

calling for a change in values, the “New Work Way” of

the 1980s, which welcomed diversity, the development

of information equipment that supports advanced work

styles, and the early introduction of f lexible personnel

systems. Now, as companies are increasingly expected

to shift their work-related values to encompass diversity

and a balance between work and personal life, we need

to re-evaluate whether our activities are desirable in this

respect.

The second perspective is “work that is rewarding,”

i.e., whether the jobs are “interesting” for our employees.

I want Fuji Xerox to be a place where employees are so

eager that they cannot wait to achieve the company’s

objectives and their own goals, a place where people feel

like they are constantly growing.

As president of the Company, I want to continue

dialogue with our employees, and to establish goals that

people can set themselves with enthusiasm.

the difference in standards between our actions at home in

Japan and those in other countries.

FY2006 represents a milestone in this regard, with

the goal of realizing ethical sourcing (CSR procurement)

both at home and abroad. In addition to Fuji Xerox sites

and aff iliates, we investigate social and environmental

conditions together with our suppliers and transaction

partners. Through the exchange of opinions on issues and

sharing expertise beyond corporate barriers, we aim to

build an effective structure to pursue ethical sourcing.

Integrating dialogue with our stakeholders into Fuji Xerox’s management

October 2006 wil l see the launch of FUJIFILM

Holdings Corporation, a holding company that wil l

include both Fuji Photo Film and Fuji Xerox. Fuji Xerox

will fully assume its role and responsibility as a member of

this new organization, while also maintaining its unique

philosophy and approach, as communicated in this report.

The voices expressed in dialogue with our customers

and other stakeholders will serve as a springboard for

higher corporate quality, and I look forward to receiving

frank opinions as we work together to consider and

address social and environmental issues.

Toshio ArimaPresident and Representative DirectorFuji Xerox Co., Ltd.



What is the essence of Fuji Xerox?

What type of value can Fuji Xerox provide society?

Fuji Xerox is asking itself these questions, and to provide

clear answers to stakeholders we have summarized our

activities into a series of “Highlights.”

This section describes the challenges we are taking on to

help create a sustainable society and global environment.

P10Highlight 1

Becoming a Company That Is Truly Rooted in Chinese Society

Documents for Enhancing Management

Compliance Is More Than Just Formal Measures

Becoming a Company Where Employees Can Work With Enthusiasm



P14Highlight 2

P18Highlight 3

P22Highlight 4

P26Highlight 5

P28Highlight 6

Values Fuji Xerox Can Provide to SocietyThrough Its Core Business 1Responses to Global Environmental Impact 2, 3, 4A System That Supportsthe Unique Characteristics of Fuji Xerox 5, 6



Documents for Enhancing Management

With the enforcement of Japan’s version of the Sarbanes-Oxley Act just around the corner, corporations are scrambling

to put internal controls in place. Fuji Xerox, by offering an e-RM (electronic Records Management) platform, which

advances the creation and effective utilization of knowledge, is at the forefront of providing support toward establishing

internal controls. Here is what it involves.


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Internal controls

CSR

e-RMTM

Components

Platform

Themes

Objectives

Integration of work processes and “evidence” management; Merging of analog and digital records

Security Workflow Repository Web sites Backbone

Business continuationin emergencies

Privacy protection/Information leakage prevention

Reliability of financialreporting Legal compliance Environment/Quality

Business effectiveness and efficiency

Accountability Disclosure Transparency

e-RM concept

Dilemma of establishing internal controls

Corporate reform legislation (Sarbanes-Oxley Act, or

SOX Act) aimed at strengthening internal controls and the

independence of auditors with regard to fi nancial reporting

and imposing stricter codes of conduct, was enacted in

the United States in response to accounting scandals such

as those involving Enron and WorldCom. Now the term

“internal controls” appears widely in newspapers and other

media due to the impending enforcement in Japan of the

Financial Instruments and Exchanges Law ( Japanese

version of the Sarbanes-Oxley Act) in April 2008.

The law will require representatives of listed companies

to report evaluations of the effectiveness of internal controls

related to financial reporting, and auditors to state whether

the representative’s reports are valid. In order to fulfill these

obligations, companies will have to document all processes

related to fi nancial reporting and demonstrate that systems are

in place within the organization to prevent fraud and errors.

As a result, companies are crying out for help as they

realize procedures relating to fi nancial reporting encompass

nearly all the processes a company undertakes and that

documentation, which is central to establishing internal

controls, is an enormous task. While it is paramount that

internal controls be established, at the same time it is also

true that the workload and cost are overwhelming.

Internal controls as viewed by Fuji XeroxIn December 2005, Fuji Xerox set up a Project of

Internal Control Process for Financial Reporting under

Haruhiko Yoshida, executive vice president and director.

“Setting up internal controls is not an easy task,”

“You’re missing the point if you set up internal controls just to comply with a law that will be passed,” Kenjiro Takahashi says.

explains Kenjiro Takahashi, staff manager, Accounting

Department, who is responsible for the practical aspects of

the project. “But you’re missing the point if you are do it

just to comply with a law that will be passed. We set up this

project to position the establishment of internal controls as a

companywide activity aimed at enhancing corporate value,

and at the same time, to build a business model for services

centered on internal controls.”

The main feature of Fuji Xerox’s internal controls is to

establish it as an initiative aimed at enhancing the quality of

management to boost corporate value, while designating it

as a path to a new business model.

The e-RM concept for information management put forth

by Fuji Xerox last year holds the key. The e-RM platform is

the amalgamation of hardware, software and services that link

information based on analog technology (paper) and digital

technology (electronic), enabling unified management and

synergistic use of documents in various forms.

The plat form a l lows , for e xample , integ rated

management of basic documentation in-house and “evidence”



Doc

umen

tatio

n

Bas

ic p

olic

y

Eva

luat

ion/

Imp

rove

men

t

Op

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Test

ing

Process description Process fl ow diagramDivision of duties tableRisk/control matrix

Establishment of internal controls begins with documentation to identify the status of current work processes. Processes visualized through documentation are then evaluated and improved before being put into operation and tested. The evaluation and improvement cycle is implemented on a continual basis.

“Documentation quality determines whether or not the document can be utilized as knowledge,” Naoki Kabaya explains.

Process of establishing internal controls

Insight obtained from an in-house project

The Internal Controls Project Management Off ice

(PMO) is cent ra l to advanc ing Fuji Xerox ’s ow n

establ ishment of internal controls. The department

was set up to focus entirely on smooth and consistent

implementation of the companywide project.

Establishment of internal controls, after the formulation

of an implementation plan (schedule) for the entire

Four basic documents for visualizing work processes

project, begins with documentation in order to identify

the particular status of current work processes. The

documentation step involves the creation of four basic

documents: process description, risk/control matrix, division

of duties table, and process fl ow diagram. The aim here is to

visualize work processes.

At Fuji Xerox, some 87 processes related to f inancial

reporting were documented, and extensive know-how has

been accumulated from the insight obtained through these

documentation processes.

“The task of documenting processes for each division

was carried out by a large number of people, which

meant there was a lot of variations at f irst in the quality

of the documents produced,” reca l ls Naoki Kabaya,

project manager, Internal Controls PMO. “After onsite

documentation, team specialists had to conduct a review to

standardize and ensure the quality of the documents.”

“It struck us that we would need a dedicated system if

we were going to implement and manage the actual internal

documents from other sources. Until recently, information on

company computers had been stored separately from quotes,

receipts for goods or payment, invoices, and other documents

received from external sources, and establishing a link among

the various pieces of data was an extremely daunting task.

e-RM overcomes the operational limitations brought about by

these technical obstacles. Fuji Xerox is basing its service, which

assists in establishing, maintaining and operating internal

controls, on this e-RM platform.



Apeos PEMasterA software product that provides assistance for al l aspects in establ ishing and operating i n t e r n a l c o n t r o l s . I t i s u s e d f o r u n i f i e d management on a consol idated basis of a l l related documents.

ApeosPortA mul t i funct ion dev ice used to conver t paper documents eas i ly in to e lect ron ic f o r m . I t o f f e r s p o w e r f u l s u p p o r t f o r integrat ion of ev idence documents into backbone systems.

ArcSuiteAn integrated document management system contain ing funct ions, such as electronic signatures and time stamps, for preventing document falsification and certifying document originality.

e-RM products & services

Possibilities after establishing internal controls

“Complying with the Japanese SOX Act is just one

milestone,” Kabaya says, who already has his sights fixed

beyond internal controls. “Internal controls is a starting

point, although I believe it has the potential to lead to the

optimization of work processes, organizational redesign, and

consequently work style transformation through improved

productivity. Fraud does not occur in organizations where

workers are highly productive and motivated. Put simply, we

have set high goals for our internal controls project––we want

an organization that can simultaneously achieve stronger

controls and create knowledge and new work styles.”

Fuji Xerox’s challenge to “build an environment for the

creation and effective utilization of knowledge,” as declared

in its Mission Statement, never ends.

Fuji Xerox developed Apeos PEMaster internal controls

assistance software by integrating the experience built up

through the implementation of this in-house project as well

as document-related technology and knowledge management

know-how developed over the years. This tool not only allows

easy creation of the four basic documents just by filling in

the details, but it can also be used to gain an overview of

managerial resources at a consolidated level, to manage project

progress, and to centrally manage related documentation, such

as evidence directly associated with fi gures for fi nancial reports.

“By applying the document structuring technology we

have acquired so far and the attributes of XML (Extensible

Markup Language), we have simplified the creation of the

four basic documents,” Kabaya says. “Users, as long as they are

aware of the work processes within their division, are able to

operate the system without any complex technical expertise or

prior training. The objective is to assist in the promotion and

thorough establishment of internal controls by minimizing

the burden on frontline staff. This is accomplished through

an interface and automatic documentation functions that are

easy for anyone to understand and use.”

Fuji Xerox services for assisting internal controls

In addition to the newly developed Apeos PEMaster, the

e-RM platform, which assists with knowledge management,

comprises ApeosPort (a multifunction device the company

has developed to link mission-critical systems and paper

“evidence”) and the lineup of products and services based on

ArcSuite (a document management system in compliance

with the e-Document Law). The plan is to extend the

application of e-RM as a platform beyond fi nancial reporting

to include other aspects of internal controls such as legal

compliance, environmental and product safety, protection of

privacy, and response to emergencies.

controls project eff iciently,” Kabaya says. “Therefore, we

decided to forge ahead with the development of software for

unifi ed management on a consolidated basis of work process

documentation and evidence documents—a system that

could be used by anyone.”



Compliance Is More Than Just Formal MeasuresCompliance is commonly interpreted to mean observing the law. Fuji Xerox, however, views compliance differently. Fuji

Xerox espouses that compliance represents corporate quality. The Compliance Action Meeting, a gathering of compliance

offi cers from overseas subsidiaries, refl ects Fuji Xerox’s stance on compliance.



Enterprising legal personnel travel from afar to meet

Fourteen Fuji Xerox in-house attorneys and legal affairs

managers from 11 countries and territories in the Asia-Pacifi c

region gathered in April 2006 in Tokyo. They came to attend

the Legal Managers Meeting and the Compliance Action

Meeting held sequentially. In 2005, the International Business

Group launched these meetings as international conferences in

which both Fuji Xerox and its affi liates participate. The main

topics of this year’s Compliance Action Meeting were reviews of

each company’s compliance management systems and exchanges

of ideas and opinions on current circumstances and issues.

Underlying the creation of the Compliance Action Meeting

was the interest in how to make internal control systems for

compliance more visible on a consolidated basis.

“Saying that we were unaware of conditions simply because

they took place overseas was no longer an option,” says Koichi

Tsukamoto, general manager, Legal Department. “In order to

respond in a timely manner to the needs of the international

community, it is necessary for headquarters to seriously consider

the extent of monitoring required as well as to develop clear

policies for both domestic and overseas entities.”

Fuji Xerox’s compliance activitiesFuji Xerox first implemented activities to reinforce employee

compliance by issuing the “Employee Action Guidelines” in 1988.

The Company had experienced some violations of societal rules,

including excessive entertainment of public servants and unauthorized

use of intellectual property. In response, senior management handed

down rigorous directives, and the Guidelines were presented to all

Fuji Xerox employees as the Company’s fi rst Code of Ethics. At the

time, the term “corporate ethics” had yet to come into wide use.

During the post-bubble economic downturn of the late 1990s,

numerous scandals involving major corporations came to light,

resulting in increased calls for stricter regulations governing

corporate activities. In the meantime, Fuji Xerox embarked on

companywide development of systems designed to establish

compliance within the Company, including the creation of the

Corporate Ethics Committee (currently the Risk & Ethics

Committee), comprehensive reform of the Code of Conduct, and

the establishment of the Corporate Ethics Consultation Desk

(currently the Corporate Ethics Helpline). It also issued a Business

Ethics Guidebook for subsidiaries in the Asia-Pacif ic region

in 2000. As a result of these activities, Fuji Xerox has received

numerous commendations, including the 2002 Corporate Ethics

Award sponsored by Asahi Shimbun Foundation.

Fuji Xerox’s compliance system

Dom

estic business sites

Overseas b

usiness sites

Ethics and ComplianceManagement Guidelines

Ethics and Compliance Conference

Objective, role and responsibilities

Auditing and correction

Managementtools

Disseminationof informationand education

Monitoring

Crisis management andinformation disclosures

Raising issues andinternal reporting

• Businessprocess rules

• Guidelines

• Regulatory training• Prevention of

improper conduct

• Employment system• Specialized

departments

Something is still lackingThese activities seemed to make way for smooth sailing, but

compliance offi cers still felt a sense of uneasiness. They believed

that simply creating systems and formulating regulations would

not be suff icient to respond to the demands of consolidated

internal controls that were expected to come into effect in the near

future. They proposed to management that the Company proceed

to the next stage of developing a management system.

“We fi rst set a goal of developing a system that could fulfi ll

our responsibilities to disclose information,” says Yujiro Sasamoto,

compliance off icer, at the time (currently assigned to the

Corporate Social Responsibility Department). “It is meaningless,

however, to simply develop policies and procedures designed

to comply with the law. I believe that it is necessary to develop

systems that enable executives and employees to focus on their

work with a sense of security as well as support corporate quality.”

As a result, Fuji Xerox began activities to incorporate

legal compliance assurance policies into internal organizations

and operations in 2002. Fuji Xerox implemented a number of

comprehensive measures that also covered subsidiaries in Japan,

including the formation of an Ethics and Compliance Conference

with the presidents of subsidiaries as members, formulation of

Ethics and Compliance Guidelines, implementation of guidelines

addressing individual issues, incorporation of compliance matters

into internal audit checklists, and comprehensive employee

training on applicable laws.



Meeting Dates Location Agenda

First April 21-22, 2005 SingaporeDiscussion of objectives, goals, and procedures

Second April 20-21, 2006 TokyoProgress reports and sharing of issues

Third2007 (dates and location are undecided)

Monitoring reports and sharing of issues

Prior actions and future plans of the Compliance Action Meeting

Shareholders and society entrust corporations to executives and employees

Among these measures, the disc losure of the Ethics

and Compliance Management Guidelines, which provides a

conceptual diagram of compliance systems, on Fuji Xerox’s

offi cial Web site draws one’s attention.

“A corporation does not belong solely to its executives and

employees,” Sasamoto explains. “We had the belief that our

responsibility was to explain the key elements of our policies and

procedures through which we manage and operate the company

that has been entrusted to us by the shareholders and society.

Some within the Company resisted the public disclosure

of internal regulations. However, Sasamoto convinced them

with the argument that unless efforts are also made to gain the

understanding and acceptance of society, implementing internal

controls would be meaningless. It goes without saying that legal

violations by a company and its employees during the course of

their work cannot be tolerated. At the same time, Fuji Xerox’s

policy is to operate openly and fairly without concealing its actions.

Expanding compliance measures to overseas sites

of information on best practices. The ultimate aim is to prepare

policies and procedures shared throughout the region, which

are acceptable and convincing to employees in all countries and

regions. In conjunction with this, the meeting has promoted

the standardization of communication rules, including risk

information, on a consolidated basis for the entire group.

Experts who are in daily contact with the front line are the ones

most familiar with the true risks. Experienced experts from each

company can gain a solid appreciation of issues common to all group

companies by understanding the differences in circumstances among the

various companies, while at the same time respecting those differences.

“Although laws are the same throughout society, how those

laws are observed may differ depending on each company’s

values. The fi rst objective of the Compliance Action Meeting is

to share such values among all group companies,” says Kazuhiro

Abe, general manager, Legal Department International Business

Group, the organization that hosts the meeting.

From opposition to empathy

The or ig ina l objec t ive was to c reate a consol idated

management system, and from the very outset the plan was to

expand it to Fuji Xerox’s subsidiaries in 11 countries and regions.

Contents of laws and the status of their enforcement, however,

vary tremendously from country to country. There are countries

where legal systems are comprehensive and paramount, but there

are also countries where non-legal rules, such as cultural norms

and practices, carry significant weight. Headquarters could not

simply issue the same policies and procedures for all subsidiaries

to implement. Because of this, the Company decided in 2005 to

create the Compliance Action Meeting.

The Meeting has three objectives. First is sharing controls

and monitoring topics related to compliance. Second is conducting

internal inspections of the management system of each company

and reconstructing those systems. Third covers the exchange

The target of actions in FY2005 and FY2006 is to complete

the fi rst round of the PDCA (Plan, Do, Check and Action) cycle.

To accomplish this, Fuji Xerox’s Legal Department conducted

research on the corporate, environmental, human resources,

and labor laws and import-export regulations of each country,

thus ascertaining issues concerning the current status of each

company’s compliance systems. This resulted in the proposal and

implementation of management reinforcement measures as well as

the creation of links to consolidated auditing structures.

Fuji Xerox’s overseas affi liates are all joint ventures established

with leading local companies or entities transferred from Xerox

Corporation of the United States, with the exception of the

production sites in southern China. Each company implements

appropriate compliance measures based on its unique social

conditions and management principles. Given this, expectations

“The objective of the Meeting is to develop shared Fuji Xerox values,” Kazuhiro Abe says.



were that some might view the implementation of these measures

as an unwelcome burden.

Even today, the opinions of members of the meeting are by

no means unanimous. Members have repeatedly expressed doubts

whether this huge, burdensome process would generate valuable

results. With repeated meetings, however, the mood has shifted

from opposition to empathy.

“Some members have said that by thoroughly implementing

basic work processes, issues that were initially not apparent became

visible,” Abe says. “Clashing with management teams and sales

divisions is a diffi cult and isolating job, and members have acquired

considerable psychological support by creating a network of experts

across companies’ boundaries. I have repeatedly explained the

importance of the Compliance Action Meeting to the presidents of

affi liates, and as a result, I have gained understanding on their part.

Senior management has shown an extremely cooperative stance,

and the members are now able to operate in an effi cient manner.”

Compliance refl ects the quality of a corporation

It is often said that proper compliance is a matter of course.

However, compliance is easier said than done.

Compliance is extremely important for Fuji Xerox to

implement good governance and to be a “strong,

kind, and interesting” company. Participating in

these meetings, which are focused on governance

and legal issues, has been extremely meaningful in

helping me to share information and fi nd clues for

solving problems. In addition, I've become familiar

with the legal affairs managers of other group

companies, and I'm able to consult with them

on new legal issues that come up after returning

to my home country by simply making a phone

call, which has also been extremely beneficial.

To give an example, discussions with another

member were extremely useful in determining how

to deal with the situation when an applicant for

recruitment has a criminal record.

By participating in these meetings, I learned

about the different circumstances in various

countries. Also, newly established companies

face a number of legal issues, but my company

has been operating for 40 years and has

experience in resolving similar issues. I was

very happy to be able to share know-how

and the like. Laws are frequently revised in

Malaysia, and responding to the Japanese

version of the Sarbanes-Oxley Act will also be

a diffi cult issue. I hope to fi nd hints concerning

those responses through these meetings.

In the past year, Fuji Xerox Korea has worked

with the International Business Group to create

an internal control system for legal compliance

on a pilot basis. The result has been the

discovery of a range of different issues. One

particularly important issue for the company

is investigating methods for providing services

that incorporate adequate information security.

Several months ago, the International Business

Group installed legal affairs groupware for use

by the legal affairs personnel of each country. I

hope that through this installation the method

of sharing information relevant to information

security will become more concrete at my

company.

Fuji Xerox Australia Pty Ltd.

Ramsay Moodie

Fuji Xerox Asia Pacifi c Pte Ltd(Malaysia)

Pakkia L. Palaniappan

Fuji Xerox Korea Co., Ltd.

Jung, Jaeouk

Comments from Compliance Action Meeting participants

Since people manage compan ie s and do t he work ,

occasionally carelessness creeps into their activities and emotions

such as greed and fear could inf luence their conduct. Not all

employees will necessarily comply immediately even after the

rules and penalties are adopted. This is a perpetual issue for all

organizations.

There is a plaque with the following inscription hanging in

a Fuji Xerox employee training classroom: “Regulations within

freedom, freedom within regulations.”

“What hinders compliance comes down to the awareness of

every offi cer and employee,” Abe says passionately. “Obligation

and responsibility are not enough to arouse people’s emotions.

We would rather create companies in which their off icers and

employees can feel pride in the enterprise through compliance.

This is my request for operations in all countries.”

Fuji Xerox has taken the lead in introducing var ious

compliance measures. Because of this, the enhancement and

improvement of its measures have at tracted considerable

at tention. The true object ive, however, is to incorporate

compliance into awareness and work, and then link it to corporate

quality. This is a never-ending challenge.



Becoming a Company Where Employees Can Work With EnthusiasmFuji Xerox has proactively hired female employees since its foundation and has long sought to create an environment that facilitates the employment of women, including the introduction of childcare-related systems in advance of other companies. Today, however, participation in the workforce by women has become a matter of course. In a time when increasing numbers of women continue to work following marriage and childbirth, we wanted to fi nd out if Fuji Xerox is a company where women can use their skills to the fullest and perform meaningful work. We held a stakeholder’s dialogue with outside experts and Fuji Xerox female employees to consider the employment of women and the optimal form of management that respects diversity.



Kimiko HoriiPresident, Global Enhancement of Women’s Executive Leadership (GEWEL)After working at Japan Airlines and as an executive secretary for a foreign-affiliated company, Ms. Horii joined Avon Products, where she led a staff of 700 as head of its sales division. She is one of the founders of GEWEL, a nonprofit organization that highlights women’s issues and diversity.

Does “kindness” hinder women’s growth?Moderator: The topic of today’s discussion is “women in the

workplace.” First, I would like to ask Fuji Xerox employees what

they believe are the signifi cant issues at this time.

Kumagai: I think Fuji Xerox is a company where male and

female employees can work without discrimination. Fuji Xerox

provides special measures for female employees. Some people

take these measures to be unjustly preferential treatment, or, on

the other hand, to be discriminatory. Some employees who have

taken childcare leave say that although they feel systems that

allow women with children to continue working are adequate,

they are not yet satisfi ed with systems concerning evaluations

and promotions.

Mizutani: There are many talented women who are at the

regional sales front lines. The fact that there are few opportunities,

even for highly skilled women who are passionate about their work,

to advance to a management position or take on new jobs leads me

to believe that the awareness of male managers has not changed.

I feel that the failure to make full use of the strengths of female

employees is extremely unproductive and shortsighted.

Milestones in Fuji Xerox’s personnel-related policies

(red text indicates international developments)

Honma: There is no differentiation between men and women

in the systems in terms of the environment that facilitates work

and vitality. There are, however, differences in the way men and

women are treated. When newly hired women fresh from college

are assigned to their positions, for example, most of the managers

are men and there are often signif icant age differences, and in

some cases managers treat these women with excessive kindness

as if they were very delicate. I also think that some women take

advantage of this situation.

Looking back at my own experience of working while holding

back tears of anger during my days in sales was entirely to my

own benefit. I feel that there is a lack of awareness among both

female employees and those who work with them concerning the

importance of growing within the rigors of work.

Hiromori: There is a tendency for women to express their

thoughts in a straightforward manner, so they regard the efforts

toward consensus-building prior to decision making as a waste of

time. It may be important to take the time to make these types

of adjustments, but I think it is also necessary for companies to

evaluate results achieved toward a specifi c goal.

Kanai: My own experience was that when I moved into a

management position, I became keenly aware that until then I had

not been viewing my own job from a management perspective. The

way we work varies depending on whether we have an awareness

that in the future we may be working in a managerial position

and whether we are mentally prepared for it. I think there is a

difference between the awareness of men and women on this point.

Accepting dif ferent cu lt ures can determine a company’s futureModerator: Fuji Xerox has worked to create systems and an

environment that encourages women to continue working after

marriage and childbirth. But a number of issues have been

pointed out. For example, when evaluating their subordinates for

promotions, male managers subconsciously treat male and female

subordinates differently. Excessively kind treatment toward women

is also included in this perspective. On the other hand, there are

FY Event

1962 Fuji Xerox Co., Ltd. established

1963 Hiring of women graduates of four-year colleges begins

1985 Disparate pay scales for men and women eliminated

1986 Equal Employment Opportunity Law comes into effect

1988

New Work Way introducedChildcare leave system introducedSystem for re-employment of employees who leave work for childcare introducedHalf-day paid vacation time system introducedFlextime system introducedFemale employees sent on overseas trainingTalknade (open forum) held

1989 Ladies Personnel Committee held

1990Second Ladies Personnel Committee heldFamily healthcare leave system introducedRefreshment leave introduced

1993System of shortened working hours for family healthcare introducedOne-day healthcare leave system introduced

1995 Quota for male and female employees when hiring eliminated

1997Sexual Harassment Prevention Hotline createdFuji Xerox wins Minister of International Trade and Industry Corporate Comfort Prize (second time since 1996)

1998Average length of employment of female employees exceeds 10 years

1999Revised Equal Employment Opportunity Law comes into effectNew personnel system introduced

2001 Fuji Xerox wins Corporate Social Contribution Grand Prize

2002Fuji Xerox wins Health, Labour and Welfare Minister’s Prize for Excellence in the Family Friendly Corporation Awards

2003 Childcare-related systems revised



Kazuyo KatsumaVice President and Senior Analyst, Japanese Equity Research, JP Morgan SecuritiesMs. Katsuma has presided over Field of Mugi, an Internet community for working mothers, since 1997. She was selected as one of “50 Women to Watch” by the Wall Street Journal. Ms. Katsuma is the mother of three.

Yumiko NagaiExecutive Director and General Manager in charge of Personnel and General Affairs, Hermès JaponMs. Nagai began working for Fuji Xerox in 1981, where she held sales and personnel positions. After leaving the company in 2000 to work as the head of the human resources division at a foreign-affiliated company, she assumed her current position at Hermès Japon.

situations where women take advantage of such treatment, leading

to differences in personal growth. Now I would like to hear the

perspectives of the outside experts regarding these issues.

Katsuma: From the company’s perspective, the key is to

uncover the benefi ts of employing women. For example, if women

comprise 30 percent or more of the company’s workforce, women’s

perspectives are more likely to be adopted. Business cannot be

performed if women are ignored; therefore, listening to their

opinions is of vital important to management. In Fuji Xerox’s case,

where women comprise about 10 percent of the workforce, if in an

extreme case, business was performed even while ignoring women,

the situation would not change unless management put forth clear

policies on why female employees are necessary.

Nagai: From a statistical point of view, it seems that there are

differences between men and women in work styles and ways of

thinking. For example, women have a tendency to do things in a

straightforward manner and prefer fl at organizations. In a company

where men make up 90 percent of the workforce, there is tendency

to think that since women’s work styles are different from those of

men they are unacceptable. Rather than focusing on whether values

and styles are the same or different, I believe that it is necessary to

defi ne clearly the employee skills that Fuji Xerox requires.

Horii: Differences between the styles of men and women have

been mentioned, and recently diversity has become a keyword

among many foreign-affiliated companies. They feel a sense of

urgency because they are concerned that if they do not recognize

the potential of each person and create an environment where

everyone can work with enthusiasm, they will not be able to attract

the highly skilled human resources that they need. Considering

this, is there an atmosphere within Fuji Xerox today of a willingness

to listen to opinions that are extremely different from the previous

corporate culture and internal conventional wisdom?

Hiromori: I think that in my division and throughout the company

there are people with a broad range of different ways of thinking,

but I also believe that their sensibilities and ideas are not being

fully leveraged. Currently, safe ways of performing work that will

produce short-term results are emphasized, but I think we need to

place much more importance on working hard to achieve originality

and ingenuity in addressing issues from a long-term perspective.

Ohta: I think that there is a strong tendency to avoid risks rather

than just taking steps forward proactively. For example, in order

to implement a plan, meeting after meeting is held and matters

in one’s own area of expertise are examined in extreme detail.

There are more than a few nonconformists, but given this type of

environment there seems to be cases where employees hesitate and

hold back their ideas.

Kanai: If we’re talking about the perspective of others and of the

company, rather than just one’s own perspective, I believe that

this is a company that listens to one’s opinions. In this sense, to a

certain extent the situation depends on each person.

Horii: In the future, Fuji Xerox will shift even further toward

services and will continue to globalize. To promote these types

of changes in business, we need new ideas that are different from

those of the past. At that time, the company’s future development

will depend on whether Fuji Xerox will be able to reinvigorate its

organization by making full use of the opinions of individuals with

values and cultures that are different from those of the people who

have supported the corporate culture until now, including not only

women but also younger employees and foreign employees.

Putting a hidden agenda on the tableModerator: With respect to the extreme importance for the

survival of Fuji Xerox of making full use of employees with

different perspectives, such as women and younger employees,

what measures do you think the company should take?

Katsuma: The fi rst thing that needs to be done is to make the

issue visible. One manager said to me, “Problems are usually

hidden, but we need to bring them out into the open. Once this

is done, those who want to solve them will step forward, and you

can leave it to them.” I think it would be benefi cial to have more

discussions like the one today. It doesn’t have to be an off icial

forum––Fuji Xerox could create a chat site for female employees

on the intranet or hold an event or some other venue to exchange

information and facilitate networking among women.



Nagai: Earlier, there was some discussion of overly kind managers,

and in that regard, some managers treat female subordinates in

what they think is a kind way, trying to protect them because they

have families or whatnot, but in the end, this can lead to fewer

opportunities to perform the kind of work that leads to personal

growth. Instead of making judgments based on their own values,

managers need to change their own way of thinking to eliminate fi xed

preconceptions, such as confirming with the employee whether she

can do a particular job and encouraging her to take on new challenges.

Also, the issue of numbers is critical. This is not something that

can be resolved in the short term, but as the baby-boomer generation

reaches retirement age, the personnel makeup wil l change

drastically, and Fuji Xerox will have a chance to make changes to its

organization. I think the company needs to create a 10-year plan.

Horii: The most important thing is for top management to express

its commitment to how the capabilities of female employees will

be used. Without specific declarations to the effect that women

will be used to achieve certain goals and that women will comprise

a certain percentage of the workforce including management

positions, it will be diff icult to effect any real change in the

organization as a whole. It is precisely for this reason that I would

like to see management express a clear vision for the future and to

make specific commitments. I would encourage management to

meet once every year to discuss this issue.

Katsuma: In order to truly consider how women can be used in

the workplace, it is not enough to throw out vague notions like

“using women in the workplace.” It is important to set specif ic

targets to measure progress and then create a system of certain

rewards and penalties based on individual progress so that

employees who perform well are commended and those who do not

are in some way subject to some penalty.

Horii: As a f inal comment, I would like to say that women

should not expect everything from the company. They need to

demonstrate what kind of a person they want to be and what they

can do, and then consider what they can do for the company.

I would like women to create win-win relationships with the

company that results in the growth of both parties.

Moderator: Our topic today has been women in the workplace.

I think we can conclude that mutual respect for different values and

cultures, the ability to express one’s opinions freely, the expectation

from fellow workers and managers that each employee can develop

and grow, and the ability to engage in meaningful work are what

make a “good company,” not just for women but for all employees.

I think that I speak on behalf of all of today’s participants when I

say that it is our hope that this stakeholder dialogue will serve to

bring Fuji Xerox closer to becoming such a “good company,” even

if only in a small way. Thank you very much.

Prologue to the stakeholder’s dialogue

Kyoko KanaiIntegrated Services Sales 1, Major Accounts

Since its foundation, Fuji Xerox has been committed to employing women in

meaningful positions and has held itself out as adopting progressive personnel systems

and work styles. Business environments are changing rapidly, and Fuji Xerox is aware

that as a societal presence, respecting and ensuring diversity is once again a crucial

issue for maintaining growth while raising global competitiveness.

As the company works to develop its environment in a new era, I would like all

female employees to polish their skills. I would be very pleased if the result is enhanced

employability and personal growth, and the employees feel that their work is “interesting.”Takeshi Hibiya

Corporate Vice President and General Manager, Corporate Human Resources

Fuji Xerox Co., Ltd.

Diversity and opportunity Equal employment opportunitiesFor details, see our Web site.

Keiko MizutaniFuji Xerox Osaka

Kaori OhtaMarketing, Office Product Business Group

Nakako HonmaCorporate Human Resources

Junko HiromoriSales Planning, Sales & Marketing

Naoko KumagaiService Solutions, System Engineering Department



Becoming a Company That Is Truly Rooted in Chinese Society

Whether you happen to be in Japan or in China, it is the people inside a corporation who change it. However, cultures differ

from country to country, and the challenges working people face also differ. To make itself “strong,” “kind” and “interesting,”

Fuji Xerox continues to push ahead with business activities around the world, while constantly concerning itself with what is

really required to establish roots in each region as a “good company.”



A “strong” and “kind” plantIn 1995, Fuji Xerox set up a production site in Shenzhen,

signaling the start of the Company’s production shift to China.

Later, in FY2005, the Ebina Plant, which had been the company’s

fl agship production site in Japan, withdrew from production and

in FY2006 began transferring many related functions to Shenzhen

and Shanghai. As a result, nearly 80 percent of the products

sold by Fuji Xerox and its affiliates are now produced in China.

“We started out producing black-and-white machines

fo r e x p or t , but s i nce 2 0 0 4 we have cove red t he f u l l

l ineup, inc lud ing color mach ines , med ium- and h igh-

speed machines, and we make a l l the new products here,

too,” says Masaak i Inagak i, genera l manager,* who has

spearheaded production at the Shenzhen Plant since 2001.

The Shenzhen Plant has already grown into the largest

production site in Fuji Xerox; but size is not every thing,

and the plant must now focus on becoming a “s t rong”

production center. Here are Inagaki’s ideas for achieving this.

“All copy machine manufacturers have f locked to southern

China, so their suppliers have gathered there as well,” Inagaki

says. “We want to achieve the best in the world in terms of

quality, cost and delivery (QCD) and our capability is actually

improving. I feel our plant is almost on a par with those in

Japan in that respect. The market expects high QCD, so

other attributes are required in order to differentiate ourselves.

When I f irst came to Shenzhen, I immediately thought that

one such attribute is our environmental response, and I eagerly

set about implementing environmental related activ it ies.”

“It is important that employees feel a sense of satisfaction from working at the company,” Masaaki Inagaki says.

Profi le: Fuji Xerox Shenzhen Plant

The benefi ts of such environmental management efforts began

to surface, and in May 2005, the Chinese government certified

the Shenzhen Plant as an environment friendly corporation.

“ We w o u l d l i k e t o l i v e u p t h a t t i t l e , s o w e a r e

cooperating with the Shenzhen city government, not just

on env i ronmenta l mat ter s , but a l so for the e x pansion

of our socia l contr ibution act iv it ies,” Inagak i continues.

The Shenzhen Plant has seen its public reputation as a

friend of the community improve based on its spirited social

contribution activities, but what is the view from within?

“Recently I have come to believe that it all comes down to

people,” Inagaki responds in a straightforward manner. “Employees

have to be able to feel a sense of satisfaction from working at the

Company. Therefore, we are making even greater efforts in areas

concerning personnel, such as occupational health and safety.”

*General Manager: a position equivalent to a president

Name Fuji Xerox of Shenzhen Limited

Established June 1995

Capital US$38 million (Fuji Xerox: 90%;

Fuji Xerox China: 10%)

Total investment US$59 million

Development, design, production,

sales and post-sales service

for printers, copy machines,

multifunction devices (printers,

fax machines, scanners, copy

machines), consumable units

and related parts

Employees 3,945 workers, including 414

administrative personnel and 39

Japanese expatriates

(as of March 31, 2006)

Scope of operations



Questionnaire: Communication Training Program at Shenzhen Plant

What are employees’ expectations?

“We look at whether employees feel that their jobs are

rewarding,” says Wang Yan, in charge of occupational safety

in the Environmental Safety Department. “How can we get

them to enjoy their jobs even more? I have even discussed

initiatives regarding this with an NGO dedicated to this

kind of activity.”

The NGO, the Institute of Contemporary Observation

(ICO), based in Shenzhen, conducted a trial training

program on communication and human relations for 220

of the nearly 4,000 workers at the plant. The program

uncovered some unexpected results.

“Shenzhen Plant offers good labor conditions, we

thought, and has a relatively good working environment,”

said ICO’s Chen Jianhua, who ran the program. “However,

we did find that many employees who participated in the

program had emotional or psychological stress, which is by

no means unique to Fuji Xerox’s Shenzhen Plant. The same

tendency can be seen at any company in plants where young

people work.”

This is not all that surprising. These are all young

teenagers just out of school, who have made the journey to

the big city from their small provincial towns and villages.

Despite belonging to the same generation, they all come

from different areas. It would be even more surprising if

they did not feel out of place. Some are appointed group

leaders in charge of 20 workers after just a few years, just

as they are going on 20 years of age, even though they fi nd

themselves at a loss of what to do. How should they go

about directing others? Besides, they never learned at school

or at work about how to communicate effectively or how to

facilitate human relations.

“The training program was very benef icial,” says

an excited 19 year-old employee from Hunan Province.

“I learned that I can’t convey my ideas to other people

without making the effort to talk to them. I realized how

self-centered I had been, getting upset about people not

understanding me when I hadn’t even made the effort to

talk. I have more friends now that I can communicate

smoothly. Since the program, I have also tried hard to listen

to what others have to say. Now I can truly say that I have

made the transformation from a student to a working adult.”

The trial training program received high marks from all

participants, and the workers’ greater understanding about

communication has had real benefi ts for supervisors as well,

such as facilitating the communication of instructions and

encouraging discussions about non-work matters.

ICO’s Chen Jianhua says young employees have emotional stress.

Shenzhen Plant employees who attended the course on communication.

Communicationobstacles

Unable to speak when there are many people aroundFeel a sense of inferiorityFeel a lack of language skills

74respondents

37%

Emotionalproblems

Would like a friend to talk to or someone to provide encouragementInteracting with friends of the opposite sexFeel loneliness from being separated from home and friends

38respondents

19%

Relationshipswith colleagues

Relationship with one's supervisor Supervisor is not fair

Problem between new and old employeesRelationships with colleagues from different areas

27respondents

14%

Other problemsNo distinct problems, but feel psychologically unstable. Sometimes need guidance. Strongly wish for more courses of a similar kind.

61respondents

30%

Total 200respondents

Are you experiencing any problems psychologicallyin day-to-day life or at work?



Aiming to be a “strong,” “kind” and “interesting” company in China

China’s labor capability is currently going through enormous

change at a time when the children born under that nation’s

“one-child policy,” which began in 1979, are starting to enter the

workforce. Among the young migrant workers who have never

known hunger or experienced the physical labor of agricultural

communities, and who are now starting to work at plants in the

cities, a new type of employee is steadily developing who, rather

than a higher salary, desires a workplace that offers job satisfaction.

“Of course salaries are important,” asserts Lu Jianguo, leader

of the employee volunteer organization, Smile Service Team. “But

having the company you work for be accepted by society is also

important. There is a strong individual awareness of one’s own

growth, which naturally means there are more people who want

the company to provide good educational opportunities.”

The “sense of satisfaction from working at the Company” that

Inagaki, general manager, talks about will perhaps be attained by

meeting these kinds of employee needs.

Fuji Xerox aims to be a “good company” by combining the

three attributes of being “strong,” “kind” and “interesting.” Applied

to Shenzhen Plant, “strong” refers to its corporate competitiveness;

the Company’s local reputation as a “kind” company is growing

as it actively contributes to environmental and social activities

advanced by Shenzhen City; and in order for employees to view

their jobs as “interesting,” the plant is venturing beyond technical

training to provide education for the development of essential

skills, such as communication.

The hope is that these kinds of in-house and external

initiatives will in the future spread to suppliers, as well as to society

as a whole in southern China. Fuji Xerox will have truly rooted

itself in the region once the Company’s ideas and actions have

touched the immediate vicinity and beyond.

The training program was so well received that 99 percent

of the participants had a posit ive v iew of its results, and

Shenzhen Plant made the decision to join ICO in implementing

communication training for the roughly 4,000 workers at the plant

during 2006.

“This training will be provided not only to the roughly

2,500 regular employees, but also to all of the 1,500 temporary

employees,” Keitaro Sonoguchi, CSR Promotion Off icer (of

the CSR Promotion Off ice established in April 2006) said

enthusiastically. “The general belief is that people should be

treated the same for doing the same work, and all employees

require communication skills. A lot of people have also been saying

that group leaders need this kind of education the most since they

band employees on the line together. Therefore, next I would like

to provide group leaders with management training.”

Japanese corporations naturally began expanding into China

in the 1990s because of the attractiveness of low-cost labor. But

Wang Yan explaining the signifi cance of employee training.

Serving with a smile––the Smile Service Team

The Smile Service Team was formed in

February 2006 to carry out organized volunteer

activities. Many employees have shown interest

in participating, but the number has been limited

to 50 to begin with since it aims to expand

after a sound foundation has been put in place.

Activities include joining Shenzhen City in caring

for children with disabilities at welfare centers

and participating in the city’s tree-planting

activities, as well as pursuing independent

activities, such as making donations to the

university’s drama festival and campaigning for

water conservation at department stores. Activities

are reported to all employees via a newsletter.

“ In the future, I would l ike to go out to

economically less fortunate regions and provide

the assistance they really need,” says Zhu Min,

chief secretary of the Smile Service Team, as she

shares her dream.

Zhu MinSmile Service Team Chief Secretary




Paper has become a daily essential. Unfortunately, to supply paper inexpensively, areas of natural tropical rainforest are

being illegally felled, continuing the destruction of vast tracts of our precious natural environment. The paper we so

routinely use without much thought could very well have been made at the sacrifi ce of natural forestland. What can we do to

both protect our natural environment and allow the use of paper to continue?

Enforcing paper procurement requirements

Fuji Xerox has been carrying out initiatives targeting

sustainable paper supply for some time. In Japan, the company

embarked on its Eco-Conscious Pulp Plan together with Fuji

Xerox Offi ce Supply in 2002. The objective is to use only “eco-

conscious pulp” (used paper pulp or virgin pulp from properly

managed sustainable forests) as raw material for copy paper.

This goal should be attained by 2008.

The paper issue, however, is a global environmental issue.

Solutions must be found not only in Japan, but also throughout

the world for them to have any signifi cance. With that in mind,

Fuji Xerox established the Environmental, Health and Safety

Requirements for Paper Procurement in December 2004.*1

Based on these requirements, which govern paper procured

by Fuji Xerox and its affi liates in Japan and overseas, suppliers

must comply with applicable laws and codes of practice; use

pulp from properly managed sustainable forests; clarify the

source of used paper that is utilized as recycled pulp raw

materials, and so forth. The rules clearly state Fuji Xerox’s

intention to completely reject paper originating from illegally

felled natural forests.

Negotiat ions with domestic and overseas suppl iers

commenced in FY2005 in preparation for paper procurement

that conforms to these rules.

To begin with, Fuji Xerox asked its suppliers (paper

manufacturing companies) to conduct a survey for each type of

paper they handle. The objective of the survey is to determine

the ratio between virgin pulp and used paper, the type and place

of origin of virgin pulp, whether it is plantation pulp or certifi ed

eco-pulp, and whether non-chlorine bleaching. At the end of the

survey, the suppliers were required to submit a written declaration

guaranteeing the content of the survey. In cases where paper

didn’t conform to the regulations, the company requested changes.

If changes were not possible, Fuji Xerox changed suppliers. Fuji

Xerox Offi ce Supply was responsible for negotiating with the fi ve

paper manufacturers in Japan, and had no trouble confirming

that the requirements had been met. Although sales companies

engaging in mail-order sales of offi ce supplies were found to be

stocking some non-compliant copy paper, sales of those products

were terminated immediately, and the plan went smoothly with

no major changes to domestic suppliers.

Overseas, however, sales companies had been selecting

Initiatives of paper-related stakeholders for a sustainable paper supply

Company/Organization FY2005 Progress

World Wide Fund for Nature Japan (WWF Japan)

Activities promoting responsible paper procurement (seminars, etc.) Activities to prevent forest destruction in Sumatra, Indonesia due to paper production Formulation of the WWF Japan Policy/Action Plan on Procurement of Forest Products

Green Purchasing Network (GPN)

Revised guidelines for print/copy paper––modifi ed to allow purchase of products that use eco-conscious virgin pulp as raw material for paper; removing the guideline “to not seek products with a very high level of whiteness when purchasing.” Revised product database based on the above guideline revisions

Oji Paper Increased the volume of imported wood chips from timber grown in plantations or certifi ed forests Expanded the area of company-owned overseas plantations Creation of raw materials traceability report

Fuji Xerox Offi ce Supply

Achieved a eco-conscious pulp content ratio of 90.8 percent for copy and other types of paper Commenced sales of a classifi ed document collection system Increased FSC-certifi ed products

Fuji Xerox

Achieved global compliance with paper procurement requirements Commenced trial of a recycling system for reuse within the company of paper it used previously Commenced trial of a recycling system for reuse within the company of paper it used previously



suppliers individually; therefore, the reasons for the surveys had

to be explained before an understanding could be reached.

On close examination, many of the overseas sales companies

were found to be procuring paper from paper manufacturers that

potentially could have been utilizing raw materials from illegal

harvests. This is because paper originating from illegal harvests

is inexpensive. Excluding these suppliers inevitably pushes

up the procurement cost of paper, thus impacting operational

competitiveness. Despite such losses, spreading awareness of

the importance of environmental-friendly paper procurement

to frontline sales staff has become a crucial task at the sales

companies and Fuji Xerox’s International Business Group, which

coordinated the promotion of the procurement plan overseas.

Surveys of paper manufacturing companies did not

progress very far through undertakings in individual countries,

so Fuji Xerox’s International Business Group became the

focal point for such efforts, and it set about communicating

with the various paper manufacturers. The job of selecting

suppliers to replace the roughly 25 percent that did not comply

with the requirements was not an easy one. Nevertheless,

with information put forward by Fuji Xerox Off ice Supply

and NGOs such as WWF, Fuji Xerox continued to look for

replacement suppliers who could meet the price required by the

market, and by the end of FY2005 the company succeeded in

establishing a procurement framework that was nearly in line

with the requirements. *2

Toward an era in which everyone uses environmental-friendly paper

However, the initiatives did not stop there. Conformance to the

requirements needs to be maintained, and Fuji Xerox will request

that suppliers fill out a survey and submit a written declaration

each fiscal year. Another issue that remains from FY2006 is

conformance to the requirements for paper used in catalogs and

paper items used in offi ces, such as invoices and envelopes.

Yet there is enormous signifi cance in having initiated a paper

procurement system that focuses on the legality and sustainability

and excludes paper originating from illegally felled forests.

Nowadays, more and more companies are demanding legal

compliance and products that originate from managed forests for

their paper procurement. The Green Purchasing Network (GPN)

has revised its green purchasing guidelines to recommend that

consumers use paper that is made from certified or plantation

timber. Confirmation of legal compliance has also been added

to paper purchasing standards within Japan’s Law on Promoting

Green Purchasing.

In this way, there is a growing movement in Japan toward

the elimination of illegal felling. One day, that movement will

spread to the rest of the Asia-Pacifi c region and it will become a

matter of course that everyone uses environmental-friendly paper.

Natural forests will no longer vanish due to paper production

and the abundance of nature will be preserved forever. Fuji

Xerox, working toward this day, will continue initiatives aimed

at ensuring sustainable paper procurement. *1 See “Environmental, Health and Safety Requirements for Paper Procurement” on page 50.

*2 Excluding one overseas company whose long-term purchasing agreement has yet to expire.

Praising Fuji Xerox’s approach in stemming the destruction of forests

You would naturally think that by now “compliance with laws and

codes of practice” and “identifying the source of raw materials” would

be commonplace, but these ideas are still not fully applied in industries

that consume forest products. In light of this, I think Fuji Xerox, through

its clarifi cation and steady implementation of measures that it can take

as a responsible corporate purchaser, is contributing enormously to

fi nding resolutions to environmental issues. I believe there is still plenty

of room for your company to protect biodiversity and help put the

brakes on natural forest depletion. I believe that Fuji Xerox’s efforts will

assist in the creation of an environmental-friendly society.

Yuka OzakiForest CampaignerGreenpeace Japan

Feeling proud of our advanced initiatives

I was in charge of coordinating the implementation of the paper

procurement regulations by sales companies in the Asia-Pacific

region. Getting the staff at each sales company to understand the

purpose of the surveys and then promote thorough implementation

was a tough job, to say the least. It was also quite an effort to fi nd

suppliers to replace those who had not complied, especially when

the paper in question was a special type.

These initiatives take into consideration our future by assisting in

the realization of a sustainable society. I feel extremely proud that

Fuji Xerox is leading the world in such activities.

Yvonne ZhangInternational Business GroupFuji Xerox




Fuji Xerox has been proactively implementing initiatives both in Japan and overseas to minimize new resource input when

manufacturing products as well as to achieve “zero landfi ll.” The main objective is to lower the environmental impact of a

product after it has reached the end of its useful life. Issues surfaced in FY2005 as initiatives progressed, but a bright future

is in store thanks to an onsite commitment and joint efforts with partners. Fuji Xerox’s resource recycling enters a new phase.

Looking back over resource recycling initiatives

To lessen its environmental impact, Fuji Xerox, since 1995,

has been manufacturing products in Japan that use parts from

copying machines and multifunction devices collected from

customers. Those parts, although reused, boast exactly the same

quality as new parts. In August 2000, a framework for realizing

“zero landfi ll” of end-of-life products was set up nationwide, and

since FY2003 product recycling operations have continued to

achieve profi tability, thereby striking a balance between economic

and ecological factors.

In December 2004, to raise the level of initiatives overseas to

reduce environmental impact from landfi ll to the same level as in

Japan, Fuji Xerox launched its International Resource Recycling

System, through which end-of-life products are collected from nine

countries and regions in the Asia-Pacific region and transported

to Fuji Xerox Eco-Manufacturing Co., Ltd. (FXEM) in Thailand

for disassembly and sorting. Recycling partners then participate in

transforming those products back into resources.

“We are aiming to further increase the recycling rate,” Junichi Takahashi says.

The International Resource Recycling System––one year on

The following four principles were created when the

International Resource Recycling System was established:

1) Prevent illegal disposal; 2) Do not impact the environment of

the importing country; 3) Do not import waste; and 4) Create

benefi ts for the importing country.

“Although we attained only a 99.2 percent end-of-life product

recycling rate for FY2005 compared to our original 99.6 percent

target, we did manage to operate the system based on the four

basic principles,” explains Junichi Takahashi, president, FXEM.

To prevent illegal disposal, collected end-of-life products are sent

from sales sites, together with a list indicating their weight, and

disassembled at the plant and sorted into 68 categories. Sorted

parts/materials are recycled as resources, with the aim of always

striving toward “zero landfi ll.” In addition, the weight is checked

as one step of every process to prevent illegal disposal en route. In

FY2005, nearly 20,000 end-of-life products were collected and

99.2 percent of those were recycled. In other words, more than 900

tons of landfi ll was avoided.

FXEM also obtained ISO 14001-2004 certif ication in

September 2005 for its environmental management system.

Environmental management has progressed thanks to the

certif ication, and the benef its are beginning to emerge. For

example, the company was chosen by Thailand’s Ministry of

Energy as one of the top fi ve companies in the region in terms of

energy conservation, and employee awareness has been elevated

through discussions among themselves about appropriate work

environments.

Concerted efforts based on a strong link between the nine

countries and regions, including Thailand, are crucial for the

International Resource Recycling System to operate smoothly.

With that purpose in mind, the First International Recycling

System Workshop was held in Bangkok in May 2006. Personnel

involved from sales companies in those countries and regions

gathered at the Workshop to gain an understanding of the



Technology to pave a future for reuseFuji Xerox is confronting those diff iculties to the best of

its ability through the use of technology. The company plans

to introduce an automated diagnostics system sometime during

FY2006, which will enable the details of a part’s history to be read

and an automatically evaluated as to whether the part can be reused.

Suzuka Fuji Xerox is carrying out its own independent

activities and has developed the Repelle System, a technology that

enables 100 percent recycling of plastic materials.

“If the ‘Repelle’ idea can be incorporated into actual processes,

it will enable an advanced level of plastics recycling and we will

be able to convert used food trays, for example, into copy machine

parts,” says Tsukamoto, who has pinned high hopes on the system

and has his sights on a recycling-oriented society.

Onsite endeavors and technological development lead to the

conservation of natural resources. Fuji Xerox’s efforts in this area

are continuous and unrelenting.

Patient endeavors at production sitesFuji Xerox has pushed ahead with an overhaul of its production

sites over the past several years. With the transfer of production

sites for new products to China and the reorganization of domestic

production sites that is underway in Japan, the Integrated

Recycling System was moved to Suzuka Fuji Xerox, because it is

expected to play a vital role within the production system.

Suzuka Fuji Xerox, now the largest production site in

Japan for Fuji Xerox and its affi liates, is attempting to increase

production effi ciency.

“We have adopted TPS, or the Toyota Production System,

and our production reforms are making steady progress,” says

Takuzo Tsukamoto, president, Suzuka Fuji Xerox. Each day,

70 end-of-life machines are brought from the Logistics Center,

then they are disassembled, cleaned, sorted or repaired, and

inspected over one and a half days before reappearing as products

containing reused parts that are of exactly the same quality as

new ones. Thanks to the consolidation of logistics bases, the

lead-time from collecting and sending end-of-life products

to recycling line is now shorter and production is progressing

“It doesn’t matter where you are, our approach toward reuse doesn’t change,” Takuzo Tsukamoto says.

steadily. The current issue is raising the rate of reuse further.

“I would like to raise the reuse rate by introducing TPS

mechanisms to reused part operations as well,” Tsukamoto continues.

A crucial point for improving the rate of reuse is to increase

the accuracy in the appraisal of parts. Even with set appraisal

standards, the conditions of rust, scratches, and abrasions are not

uniform. Furthermore, appraisal by humans entails the tendency

toward “excessive quality” causing a drop in the reuse rate. When

the time came to transfer the reused part line from Ebina, six of

the employees scheduled to work on the new line underwent up

to two months of training at the Ebina Center, after which they

thoroughly communicated everything they had learned to other

employees. However, achieving a dramatic increase in the reuse

rate through such patient efforts has its diffi culties.

circumstances faced in each location and to discuss methods to

resolve various issues. Equipped with these methods, FXEM

employees have made visits to overseas sales companies after the

Workshop to investigate how they can resolve issues together.

One issue that has been clearly defi ned concerns the recycling

rate target that the company was unable to meet in FY2005.

“We made the most of the technology we cultivated in

Japan to build a recycling system with the aim of achieving ‘zero

landfi ll,’ but we haven’t met our target yet,” Takahashi says with

strong commitment. “The current issue is how to accomplish the

remaining 0.4 percent of the target. I would like to work jointly

with Fuji Xerox’s Asset Recovery Management (ARM) Unit to

pursue activities that further raise the recycling rate.”

FXEM is strengthening its technology development and

support framework by hiring new engineers as well as other

methods to improve the recycling rate.

Given this situation, initiatives aimed at lessening the impact

Fuji Xerox places on the environment are now underway in all

regions in which the company operates, with the exception of

China. The company is currently looking into ways to lower the

environmental impact of end-of-life products in China as well, which

is currently an important hub for production and sales. The effort to

build the International Resource Recycling System continues.



Running a “good” or “sustainable” society

requires subtle steering. The cost of short-term

expansion can be environmental destruction and

resource depletion, thereby ruining the possibilities

for future generations. Meanwhile, an overly cautious

and reserved approach can eliminate opportunities

for those living in the present. Balanced judgment,

avoiding extremes, is thus required. Given this

context, it is especially important for both enterprises

and other elements of society to deepen their

understanding of how enterprises should be, i.e.,

corporate societal responsibility or CSR. To do

so, we need greater opportunities to directly and

indirectly consider the issue of sustainability for our

planet and society, healthy societal and economic

Sustainability and society growth, and the ideal stance of enterprises within

these relations. I believe that an essential key to

fostering the development of a good society, which

is to say a sustainable society, is for society as a

whole to adopt a more wide-ranging and committed

approach to the encouragement of quality enterprises

implementing CSR.

I recently came across some very interesting

material presented from this perspective, a special

feature on the “commons” philosophy contained in

Vol.144 (2006) of the Fuji Xerox publicity magazine

Graphication. This included a dialogue between

“Togetherness” at Fuji Xerox

Yotaro KobayashiChief Corporate AdvisorFuji Xerox Co., Ltd.

Sustainability supported by the spirit of “togetherness”



For a private fi rm seeking to maintain a suitable

level of tension between economic responsibility and

“togetherness” as the requirements of the day continue

to change, the most important thing is a strong

internal commitment to the realization of ideals

and values. Stated in opposite terms, real meaning

fi rst comes about when the people who make up an

organization view the ideals and values as their own,

feeling a strong sense of resonance and commonality.

I think that at the core of an “interesting” f irm is

a situation where employees have this attitude. In

order to keep our philosophy and values “interesting,”

I would urge everyone at our Company to consider

the “togetherness” of Fuji Xerox, to take on a sense

of ownership in this respect, and have their actions

ref lect this. The bulk of the efforts animated

by the spirit of “togetherness” presented in this

Sustainability Report were autonomously initiated

by employees who have a clear sense of ownership

and a wealth of interaction with society, and this is

precisely the stance that I have sought to encourage

in the management of the Company.

I sincerely hope that all the people who interact

with Fuji Xerox in whatever capacity will offer

their frank opinions on the extent to which the

actions of our employees are in line with our ideals.

These voices are what help us build Fuji Xerox

“togetherness,” and it would be most gratifying if

this Sustainability Report were perused and utilized

from that perspective.

economists Takeshi Murota and Masahiro Tabeta

titled “Considering the Possibilities of Commons,”

which I found extremely thought provoking and

stimulating. Tabeta referred to the 20th century as

an era of “systems for all-out struggle” that operate

through the interaction of scientif ic technology

and bureaucratic structures, due to unrestrained

market (private) expansionism and state (public)

expansionism. He also noted that this stemmed from

the breakdown of “togetherness” during the process of

modernization, which had previously served to limit

excess. As a result of this change, “private” and “public”

sectors seem to be a bit out of control. My own, rather

broad interpretation of the concept of “togetherness”

is the mindset of emphasizing those things that

everyone shares, which exists in various forms, and the

collective spirit of striving to be of use to everyone. I

think that future sustainability will be determined by

the extent that we enlarge the aspect of “togetherness.”

In reading the dialogue, I was deeply impressed

by how, instead of speaking in two-dimensional

terms of markets (private sector) and government

(public sector), “togetherness” played a pivotal role in

maintaining a balance among the three aspects.

The management of Fuji Xerox has been based

on the ideal of being a “good company” that is

simultaneously “strong,” “kind,” and “interesting.”

Our management philosophy has stressed the

consciousness of striving to benefit society (a sense

of togetherness) as something that safeguards “what

is everybody’s.” Competition across national borders

is becoming increasingly intense, and enterprises

that cannot respond to this environment will not

be able to survive. Despite this, however, I feel that

“Good company” concept and “togetherness”

Feeling “togetherness,” building “togetherness”

Fuji Xerox must never lose the spirit of being an

entity that is useful to society, and I believe that the

management of the future will continue forward

with this spirit of “togetherness.”



Yukio SakamotoDirectorJoban Kosan Co., Ltd.

Hiroaki YoshizawaGeneral Manager of Corporate

Social Responsibility DepartmentFuji Xerox Co., Ltd.

Yoshizawa: Please tell me about the background of establishing Joban Kosan in 1966.Sakamoto: In the early 1960s, the source of energy began to shift from coal to oil. Yutaka Nakamura, president of the company at the time, had a favorite saying––“maintain harmony with the local community”––and he was among the very fi rst to wholeheartedly adopt a policy of protecting the local economy and the lifestyles of employees and their families. The former Joban Hawaiian Center was created through his ideas and hard work. Employees and their families worked diligently on the shared belief that “if this project does not succeed, there will be no tomorrow for Joban.”Yoshizawa: Was the understanding and cooperation of local residents obtained with respect to the construction of this large-scale facility and hotel right from the outset?Sakamoto: At f irst, there was tremendous opposition from the ryokans—Japanese style inns in the Iwaki Yumoto region. The former president, Yutaka Nakamura, went to each ryokan to convince them that they could all work together to attract large numbers of visitors to the area and fi nd a path that would be mutually benefi cial to the entire region. One specif ic proposal was that we would not offer national brand foods and goods in the facilities, but instead purchase everything from local producers. By collaborating with local companies, we were also able to produce many original products.Yoshizawa: Please describe some the events that will shed light on Nakamura’s management stance of emphasizing harmony with the local

community.Sakamoto: From the very f irst year, more guests than initially anticipated came, and the hotel operated at full capacity for days on end. For some time a situation continued where overbooked guests stayed at one of the local ryokans and we simply provided the use of our leisure facilities. The sales division repeatedly requested that

the hotel be expanded or a new hotel be constructed, but Nakamura persistently refused. Only after many of the local ryokans expanded their facilities or constructed new buildings did he approve the construction of a new hotel. However, he rejected a proposal for a 600-room hotel and decided instead to construct a 300-room hotel. Nakamura reminded us that “we must keep our promise to the local ryokans until the very end.”Yoshizawa: Everyone in the company worked together for the foundation of the new company, but what served as the motivating force?Sakamoto: There was an expression in the coal mines, “one mountain, one family,” which provided psychological support to the miners’ families. In the mines, if anyone performs their work carelessly, this puts the lives of everyone at risk, and this tension gave rise to a Joban culture that places particular importance on unity that goes beyond the family, local ties, and simple honesty. For this reason, we thought of everything and did things by ourselves. When the new company was established, for example, instead of using professional hula dancers at the resort, we created a dance school and invited an instructor from Tokyo, and girls who had just graduated from middle school practiced intensely. They had never seen an actual hula dance before, but we were moved and encouraged to see them dance with such determination. Because we value straightforward originality and honest effort that cannot be imitated, we all remember our work with fondness, and I’m confi dent that our customers were pleased, too.Yoshizawa: I think that the two fundamental factors behind your company’s success were that you didn’t focus solely on your own interests and you placed an emphasis on the local community. It is truly splendid when the usua l and natural conduct of the company is in harmony with the loca l community, without the need to talk about CSR. I think that this provides us with an idea of the fundamentals of management.

Part 1: Joban Kosan Co., Ltd.

Business cannot succeed without a harmonious relationship with the local community

Hiroaki Yoshizawa, general manager of the Corporate Social Responsibility Department, visited Joban Kosan Co., Ltd. The company changed its business from coal mining to tourism at the height of the energy revolution in the late 1960s and maintained employment as well as the lifestyles of its employee’s families.

Learning CSR From Other Companies

Spa Resort HawaiiansThe origins of Spa Resort Hawaiians can be traced back to the Joban Hawaiian Center established in 1966. This region, which extends from Iwaki-shi in Fukushima to Kitaibaraki-shi in Ibaraki, prospered since the Meiji Era as the greatest coal region in Honshu, but in the 1960s the source of energy rapidly shif ted from coal to oil, and Joban Tanko, the predecessor of Joban Kosan, wagered its future and the development of the local economy on a shift to tourism. Supported by a new era in which people demand more leisure, the move was a tremendous success. In 1990, the name was changed to Spa Resort Hawaiians.

For details, see our Web site.


'06_FXSR_P32_P54_en.indd 032'06_FXSR_P32_P54_en.indd 032 06.10.12 6:18:09 PM06.10.12 6:18:09 PM

Environm

entalP

erformance R

eport

Corp

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Social P

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Rep

ortM

anagem

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rganization

How are we going to bring out

the unique characteristics of Fuji Xerox?

What approach are we taking

toward society and the environment?

In this section, we summarize our policies

for social and environmental issues and

the present state of our efforts to solve these issues.

Please consult the Report Map.

Choose a page number in the

print version, and a list of links to

Web sites that relate to that page

will appear.

For further details, visit our Web site.

Access “For details, see our Web site” to search for the sections of the report that you would like to read on the Web site.

To fi nd information that corresponds to articles in the print version…

Corporate Profi le

Social Performance Report

Environmental Performance Report

P34

P38

P44

P52

Management and Organization

Waste measureFor details, see our Web site.



Corporate governance

Management and Organization

This section reports on Fuji Xerox’s management and organization. The foundation of our CSR activities is to translate Fuji Xerox’s ideas and philosophy, which are statements of why we exist and what values we want to bring to society, into more specifi c visions and strategies.

Ideas and Philosophy

This section introduces the ideas and philosophy that have been handed down since the establishment of Fuji Xerox. All of our business activities are based on these ideas and philosophy. Fuji Xerox believes that continuing to pursue these ideas and philosophy will lead to an increase in our value within society.

Mission Statement

Shared Values

Global Compact

Visions and Strategies

Based on our ideas and philosophy, Fuji Xerox develops a corporate vision stating the kind of company we wish to be and a business vision that states the kind of businesses through which we are contributing to society. Furthermore, we formulate strategies to realize these visions within the surrounding business environment and given society’s trends.

Our corporate vision

Our business vision

Our strategies

Organizations and Systems

Based on the management and business visions and strategies, we have developed optimal systems. Organizations are flexibly formed to maximize the value that we provide to customers in accordance with current strategies. Committees and systems are also in place to ensure effi cient decision-making processes for the activities of the organizations.

Management organization

Risk management

Ethics and compliance

Information disclosure andinformation security




For more information, see our Web site at http://www.fujixerox.co.jp/eng/sr/E

nvironmental

Perform

ance Rep

ortC

orporate P

rofi leS

ocial Perform

anceR

eport

Manag

ement and

Org

anization

The Mission Statement represents what Fuji Xerox and its affiliates, as well as all of the employees who work for us, are aiming for.

The idea to “build an environment for the creation and effective utilization of knowledge” expresses the business domain of Fuji Xerox. The raison d’être of the company is expressed by “contribute to the advancement of the global community by continuously fostering mutual trust and enriching diverse cultures” in this business domain and “achieve growth and fulf il lment in both our professional and personal lives” of employees who work to attain the goals.

Our Shared Values express the 10 values that characterize Fuji Xerox employees as they engage in business. All of these values symbolize the characteristics of our employees. With these values in mind, we are striving to apply our Mission Statement in our daily operations.

Shared Values

In 1992, Fuji Xerox announced the “Good Company Concept” on which our management is based. According to this concept, a good company should aim to be “strong,” “kind” and “interesting.” A “strong” company can deliver excellent products and services that satisfy customers and also reward its shareholders on an ongoing basis. A company is “kind” in terms of its attitude to the local and global community, which includes the environment, ethics, and social contribution. An “interesting” company allows its employees to find their life and work interesting. Fuji Xerox aims to become a company that has a good balance of these three attributes.

Our corporate vision

Build an environment for the creationand effective utilization of knowledge,

Contribute to the advancement of theglobal community by continuously fostering

mutual trust and enriching diverse cultures, and

Achieve growth and fulfillment in both our professional and personal lives.

Mission StatementWe, the Fuji Xerox Group, will strive to;

Interesting

Strong

Kind

Good Company Concept

We have announced “Open Office Frontier” (OOF) as our business vision. OOF aims to create offices as open places that connect people working at different companies in the era of ubiquitous computing and explore a better way of working there

Our business vision

Ideas and Philosophy

together with customers.In order to realize this vision, Fuji Xerox is working to create

new value.

Visions and Strategies

, see our Web site.Global Compact

Shared Values

EnvironmentalConsciousness

CustomerSatisfaction

High ethicalStandards

Professionalism

CulturalDiversity

Joy andFulfillment

Adventurous/Pioneer Spirit

Trust andConsideration

Team Spirit

ScientificThinking

Mission Statement

For information on the



Cor

pora

te g

over

nanc

e

In order to allow us to continue to be a company that is useful to society, Fuji Xerox is currently implementing the V06 management reform program. The goal of V06 is to build strong

Our strategies

Organizational structure

Function-based groups

Corporate Research Group

Business groups

Office Services Business Group

Production Services Business Group

Office Products Business Group

Technology Development Group

Development Management Group

Services Technology Group

Production Technology Group

Quality Assurance Group

Manufacturing Group

Sales

Customer Service & Support

International Business

Headquarters

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In the performance of our business, Fuji Xerox’s management organization comprises “business groups” whose objectives are to accelerate the growth of key businesses and “function-based groups” intended to integrate functions. The Corporate Executive Committee, the highest decision-making body of the

Management organization

corporate capabilities and achieve business growth. By advancing the V06 program, the company aims to solidify its foundation for making itself stronger, kinder and more interesting.

Fuji Xerox has established a system to clarify the responsibilities and powers of each organizational unit, and a committee structure to ensure swift decision-making. Based on this, we are managing our overall business activities on a consolidated basis.

Organizations and Systems

company, makes important decisions on matters related to Fuji Xerox and the relationship between Fuji Xerox and its affiliates. Eight function-based committees, each of which serves as a decision-making body for a single function, address individual subjects related to each particular function.

Structure of function-based committees

Function-based committees

Executive Strategy ReviewInformation Exchange MeetingBusiness Performance ReviewsPresidential Review

Corporate Executive CommitteeCommittee to make decisions on

overall management

CSR CommitteeCSR in general, as well as

customer satisfaction, social contribution and the

environment

New Xerox Frontier Committee

Basic policies and measures for strengthening

and reforming corporate structure

Supply Demand Committee

Policies and measures concerning minimization of lost sales opportunities, inventory reductions, and improvements

in supply chain costs

Quality Review Committee

Policies and measures related to product quality

and safety

Technology Committee

Technological strategies, consistency, and policies

Marketing CommitteeCorporate-level marketing

issues, strategies, and policies

Information & Process Committee

Projects for promoting use of information technology

in corporate business process reforms

Risk & Ethics Committee

Risk management and corporate ethics in general




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Risk management is the key to internal controls, and Fuji Xerox considers it extremely important to its management and organization. Establishing and maintaining an internal control system is the responsibility of managers. As long as businesses are social entities, managers must be responsible for not only shareholders but also society as a whole, including many stakeholders. We have adopted JISQ2001 to realize the plan, do,

Risk management

check and action (PDCA) cycle for risk management and have established basic risk management rules and implementation rules based on this framework. The basic rules clearly define the fundamental risk management policies, which consist of basic objectives and action guidelines, while the implementation rules clarify the duties of organizations and the authority of their managers.

One of the fundamental shared values at Fuji Xerox is to act sensibly as a corporate citizen in order to maintain the trust of customers, employees, local communities, and other stakeholders. Since the foundation of the company, our top executives have emphasized the importance of fair corporate conduct and have implemented this principle.

Since there has been the continual occurrence of scandals at large corporations worldwide, however, businesses have been urged even more strongly than before to put companywide risk control in place and ensure fair information disclosure. Since

Ethics and compliance

Since our establishment, Fuji Xerox has used an outside director system, and in 1999 we introduced a corporate officer system. We reduced the term of office for directors and corporate off icers in June 2002 from two years to one, with the aim of establishing a system that would enable us to respond more quickly to changes in the business environment.

An “agreement on audits by Corporate Auditors” was concluded between the Corporate Auditors and the President and Representative Director to ensure the independence of the latter’s position and authority.


In 1999, Fuji Xerox formulated the Rules for the Handling of Corporate Information to ensure appropriate communication and sharing of information within its organization, proper external information disclosure, and thorough protection of its own confidential information as well as that of its customers and business partners. The rules aim to strike a balance between the protection of information assets and their effective utilization. In FY2005, Fuji Xerox established the Information Security Department, which formulates information security policies and implements information management measures

Information disclosure and information security

throughout the company. In this way, we are aiming to raise the level of maturity for information security governance and increase the performance of information security (reducing related incidents). Meanwhile, all our domestic sales divisions and sales companies*1 obtained certif ication based on “BS7799-2: 2002”*2 international information security management system standards and “ISMS Version 2.0”*3 domestic information security management system standards.*1: One of the sales companies acquired certifi cation in 2004.*2: Certifi cation standards established by the United Kingdom Accreditation Service (UKAS)*3: Those set by the Japan Information Processing Development Corporation

Textbook on basics of laws and ordinances and comprehension test Web page

Please also see Highlight 2 “Compliance Is More than Just Formal Measures” (p 14-17).

General Meeting of Shareholders

President

FinanceCommittee

ExecutiveNomination &Compensation

Committee

Board ofCorporateAuditors

AccountsAuditors

Board of Directors

Internal Audit &Analysis Department

Corporate Executive Committee

Chart of the corporate governance system

2003, Fuji Xerox and its aff iliates have worked to restructure their corporate ethics and compliance systems in order to be socially accountable for risk control and information disclosure.



Social performance

Social Performance Report

In this section, we report on Fuji Xerox’s relationships with various stakeholders, including employees, customers, local communities, and society at large. The status of specifi c activities is discussed along with the results and evaluations of these activities.

Employee morale survey

Employment and workingenvironment

Diversity and opportunity

Human Resources

Labor-management relations/human rights

Occupational health and safety

Employee welfare

Relationships With Employees

Contributing to society as a member of society

Social contribution through Fuji Xerox’s core business

System for support of social contribution

P41

Employees

Governments

Shareholders

P39

P42 P42

Fuji Xerox

Localcommunities

Businesspartners

CustomersRelationships With Societyand Local Communities

Relationships WithBusiness Partners

Relationships with suppliersRelationships With

Customers

Product safety

Communication with customers

Fair competition and fair trade




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Roles

CompensationCompetency

Competency-basedappointment

Compensation inline with role grades

and performance

Each year, Fuji Xerox conducts a companywide survey to determine employee awareness and values concerning the company and their own jobs, with the aim of having the survey results ref lected within management’s goals and policies. In 2005, a total of 13,774 people were surveyed, with a response rate of 88.8 percent. Results showed that there was a decline in the scores for five items, called “core morale” (see graph on the right). The scores for certain questions about management reform programs, meanwhile, improved compared to the previous year, but the increase in scores was insignificant. Therefore, we believe that continued efforts are needed in this area.

Yearly changes in core morale scores (Fuji Xerox only)

Employee morale survey

The basic principle of Fuji Xerox is to respect human rights and manage the company from a long-term perspective. We are taking measures to respond to globalization while paying attention to employment security.

Employment and working environment

One of our Shared Values is respect for Cultural Diversity. Fuji Xerox believes that recruiting employees with versatile personalities leads to the creation of a lively workplace. In FY2005, Fuji Xerox introduced the Second Life Program to support the diverse lifestyles of senior employees. In the future, we aim to provide greater opportunities to make the most of people with disabilities and also create workplaces that enable employees to work with a sense of fulfillment irrespective of age or gender.

Diversity and opportunity

Sat

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Job satisfaction Workplace satisfactionSupport for personnel systems and operationsSupport for supervisor’s management

Support for management and organizational operations

2.60

2.80

3.20

3.00

3.40

3.60

2001 2002 2003 2004 2005 (FY)

Among the 20 items regarding “jobs,” “workplaces,” “supervisors,” “personnel administration” and the “company,” five core morale items are designed in particular to gauge the morale of employees and they concern “job satisfaction,” “workplace satisfaction,” “support for supervisor’ s management,” “support for personnel systems and operations,” and “support for management and organizational operations.”

Average

Number of employees (Fuji Xerox only)

Regular employees Non-regular employees Temporary workers

16,731 16,953 16,578 16,10916,590

2001 2002 2003 2004 2005(FY)

(persons)

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

0

“Roles” are pivotal to the Human Resources. The three main pillars of Fuji Xerox’s personnel system are “roles” def ined in accordance with its strategies, appointment to roles based on “competencies,” and “compensation” in line with role grades and performance. In FY2005, we worked to formulate plans to develop new personnel and compensation systems in order to solve the problems of the existing personnel system. We plan to introduce this new personnel and compensation system in October 2006 after holding consultations with the labor union.

Human Resources

Fuji Xerox is supported by people. We believe that it is important for each of our employees, with their diverse individual characteristics and backgrounds, to be independent and self-reliant, improve themselves, and continuously take on challenges. Fuji Xerox as a company provides the opportunities and places to foster employees who have the desire and stance of continually learning.

Relationships With Employees

Roles defi ned in accordance with strategies

(As of March 31, 2006) Work schedule Overtime work Employee turnover Length of employmentFor details, see our Web site.

Virtual HollywoodFor details, see our Web site.

Competency development program Internal recruitment systemFor details, see our Web site.

Number of employees by country/region

Country/territory Total(persons)

United States 58

Australia 1,497

Singapore 741

Thailand 1,119

New Zealand 464


The Philippines 294

Vietnam 38

Malaysia 444

China 6,889

Japan 24,969


Korea 1,047

Taiwan 1

Netherlands 4

Grand total 37,565



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We protect the rights of workers, with management and labor working together for the sake of mutual growth based on a relationship of trust and equal responsibility. In FY2005, Fuji Xerox implemented a system for transferring employees to affiliates and sales companies as part of measures for the optimal allocation of personnel to group companies. Prior to the implementation of this system, management and labor held many discussions and concluded necessary agreements and revised existing ones (basic transfer agreements, temporary transfer agreements, and conditions for transfer based on new sales strategies). In addition, Fuji Xerox strove to establish sound labor-management relations in each of its group companies and form a communication-oriented employee committee in each of its 34 sales companies to improve labor-management relations in the group as a whole.

Labor-management relations/human rights

Fuji Xerox has put in place systems to assist employees in striking a balance between career and family, and for getting involved in social contribution, so that each of them can be a good company employee, a good family-oriented person, and a good member of society.

In FY2005, we formulated action plans in response to the Law for Measures to Support the Development of the Next Generation and implemented measures to increase the effectiveness of various childcare-related systems that have already been introduced. Under these systems, 96.6 percent of employees who gave birth to children took childcare leave, and the number of men who took childcare leave rose to five employees. In the future, Fuji Xerox will communicate management messages to strike a balance between career and family, and will also introduce a discretionary work system to make a wider range of ways of working possible.

Employee welfareChanges in number of employees who took

nursing care or childcare leave (Fuji Xerox only)

Childcare leave Nursing care leave

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005

(Persons)

(FY)

5350

52

57

43

5 5

96

2

Since the “management principles for employee health” were adopted at the Corporate Executive Committee in 1996, management and employees have worked together to ensure safety and maintain good health, primarily through the activities of the Employee Health and Safety Committee and companywide consultations following medical examinations. In FY2005, bolstering group management became the top priority issue because Fuji Xerox had made sales companies in Japan into wholly-owned subsidiaries. In order to raise the overall occupational health and safety at all of its 34 sales companies to a certain level or higher, Fuji Xerox explained basic ideas and policies concerning health and safety to the employees and shared priority implementation items with them to step up their efforts.

Occupational health and safety

Basic spirit of labor-management relationsSharing a “respect for individuals” and “promoting the company’s development”

Establishment of a labor-management communication organization (employee committee)(1) To develop a consensus among employees on management policies by promoting mutual

understanding between employee committee and management(2) To promote communication between management and employees by presenting opinions

and proposals to the company(3) To maintain employee independence play an important role by improving employee morale

Future labor-management relations at affiliates and sales companiesDeveloping sound labor-management relations based on the employee committee(1) The manager of each affiliate or sales company needs to establish amicable and responsible labor-management relations with its employee committee • Foster harmony and a sense of unity among transferred/seconded employees and regular employees • Build trust between labor and management(2) Fuji Xerox provides support and guidance so that each affiliate and sales company can develop amicable labor-management relations

Fundamental concepts for developing group-wide labor-management relations

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005

Number of accidents

(FY)

Number of suspensions

63

43

39 39

31

21

15

8

1613

(Accidents)

Number of work-related accidents (Fuji Xerox only)

Percentage of employees who belong to the union Corporate Ethics HelplineFor details, see our Web site.

Asbestos measuresFor details, see our Web site.

Social service system Accumulated paid leave (under the expiration of the system for accumulation of unused paid leave)For details, see our Web site.




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Based on a strong belief that product safety takes priority over everything else, Fuji Xerox makes the utmost effort to supply the market only with products that customers can use with conf idence. In FY2005, Fuji Xerox set the goal of eliminating design changes after mass-production plans were issued because such changes could easily lead to mistakes, and

Product safety

The basic policy is to carry out product safety reforms so that the company can continue to provide customers with safe products. We maintain continuous, bidirectional communication with customers and are engaged in fair competition and trade so that the interests of society at large, including customers, are not impaired.

Relationships With Customers

we established rules and processes to design safe products during the development stage. As a result, we were able to reduce the number of design changes for products developed during this fiscal year to about one-hundredth the previous level. In addition, based on the assumption that human errors cannot be reduced to zero, we worked hard to promote “accident prevention designs.”

Fuji Xerox has established the Voice of the Customer (VOC) system to share information concerning requests and comments elicited from customers through day-to-day operations, make rapid responses, and use the information acquired for the medium- to long-term development of products and services. Based on the Response Guidelines for Complaints and Claims, established in 2004, we set a unif ied companywide deadline for responding to complaints and claims in order to put in place a system for checking the process from the occurrence of

Communication with customers

complaints and claims to their solution through the VOC system. In addition, we focused our energy on collaboration. This is a program in which personnel in a given department introduce initiatives directly to customers that will lead to solution of the customers’ business problems. The objective is not to carry out direct sales promotions but to introduce Fuji Xerox’s business solutions to customers and increase their conf idence in Fuji Xerox, thus establishing solid relationships with customers as long-term business partners.

One of Fuji Xerox’s guiding principles of conduct is to carry out sales activities that are easy for customers to understand and to compete fairly with other companies. Management and divisions responsible for frontline operations have joined forces

Fair competition and fair trade

to prevent inappropriate acts and eliminate problems, mainly by appropriately interacting with government and municipal offices, correctly charging fees, and ensuring fair trade with business partners.

Customer communication structure

(1) Comparison to competitors’ CS surveys

(2) User CS surveys

Customer Information

Center(general contact)

Phone/email MailingInternal research

division/research firms

Person in charge(sales/CE/SE)

General

Telephone Centermachine

maintenance

Maintenance

Costomer ServiceCenter

(consumables)

Delivery

Costomer Administration

Centerinvoices,

payment, etc.

Billing CS surveys Various marketresearches VOC

Voice of CustomerComprehensive systemfor collecting information

from customers

Macroeconomic market

trend surveys

Customers

( )( )

Escalation systemFor details, see our Web site.

Customer Information CenterFor details, see our Web site.



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Cooperation with parts suppliers is essential for delivery of high-quality products to the market at reasonable prices. Fuji Xerox works with suppliers to address issues such as global development of production sites and cost reductions, while also striving to establish favorable collaborative relations with parts suppliers as business partners that understand and share Fuji Xerox’s ideas and management policies for the environment and society.

In order to meet EU’s RoHS directive, which came into effect in July 2006, Fuji Xerox worked with its suppliers to determine whether parts contained hazardous chemical substances as well as to use parts that do not contain such substances. In FY2005, we established a system that complied with the RoHS directive. In FY2006, we are promoting CSR procurement that takes into consideration social and environmental requirements.

Relationships with suppliers

To realize a better society, Fuji Xerox is actively engaging in social contribution activities. We believe that carrying out nonprofit activities with a focus on society will help us fulfill our corporate social responsibility (CSR). Furthermore, we think it will enable employees engaged in such activities to achieve personal fulfillment and enhance their ability to take the initiative, thus contributing further to the vitality of Fuji Xerox.

Fuji Xerox’s social contribution activities are characterized by a focus on the Asian region, and support of activities and the education

Contributing to society as a member of society

A study meeting by the Fuji Xerox Co-Prosperity Society

Roppongi Green Road SIX, an activity based on businesses’ joint plans to clean up the Roppongi area

Funding of social contribution activities (Fuji Xerox consolidated)

(¥ Million)

0

100

200

300

400

500

600

700

800

900

2001 2002 2003 20052004 (FY)

606

719757

635661

Fuji Xerox only Sales companies and affiliates*1

*1 Including overseas subsidiaries from FY2005

of youth, who will lead the next generation.In FY2005, among the initiatives it has advanced since early on,

Fuji Xerox placed particular priority on academic and educational projects as well as corporate support of artistic activities. In the future, we will further step up efforts to communicate information on its social contribution activities inside and outside the organization and also focus energy on promoting exchange among about 1,000 graduates who received subsidies from the Setsutaro Kobayashi Memorial Fund.

As a member of society, Fuji Xerox is contributing to society in a wide range of areas that go beyond its corporate framework. Today, with the increased emphasis on the fulfillment of a company’s social responsibilities, we want to play an active role in realizing a better society.

Relationships With Society and Local Communities

Fuji Xerox is working to establish favorable relationships with business partners that share its corporate philosophy and policies. The company, which positions ensuring the fairness and integrity of procurement as one of our most fundamental and important ethical standards, is promoting clean procurement based on this standard.

Relationships With Business Partners

Aspen Institute Japan Junior AchievementFor details, see our Web site.




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In an effort to use much of the technology and expertise acquired through our businesses to meet a wide range of social needs, Fuji Xerox is implementing social contribution activities that make the best use of our core business. One activity involves the use of color copy machines to produce textbooks for the visually impaired. Another is holding the JOHO-JUKU for junior high school students to learn about the basic concepts of information in specific and practical terms. We also implement ART BY XEROX, a project aimed at assisting artists in producing works by providing them with workshops equipped with copy machines and printers.

Social contribution through Fuji Xerox’s core business

We believe that fulfilling individual social responsibilities in forums outside the company is essential for achieving a better society and that this contributes to the personal growth and happiness of each employee. Moreover, the personal growth of employees promotes the vitalization of Fuji Xerox.

In FY2005, Fuji Xerox introduced nationwide activities that employees could easily participate in. One example was Volunteer Collection of Miswritten Postcards. We also asked our affiliates and sales companies in Japan and abroad, who had not done so yet, to introduce and develop HASU Club, an employee-run volunteer organization. In the future, Fuji Xerox plans to carry out HASU Club activities among an even greater number of affiliates and also upgrade public relations activities to encourage more employees to participate in volunteer activities.

Systems for support of social contributions

Artist book “DROP IN” by Rie Matsuba whose production was assisted by Fuji Xerox (published in May 2005)

One example of HASU Club activities: Painting class using materials and tools provided by Fuji Xerox employees (Cambodia)

YouthFocus on Asia Unique to Fuji Xerox Local roots

Support for Kids’ ISO 14000

Support for rural areas: Thailand

FX Hope Elementary School: Shanghai

FX Hope Elementary School: Gansu Province

Support for Perlman concerts

Support for Special Olympics

Woodblock print collection

Support for Art by Xerox

Aspen Institute Japane-Nakama support

Supporting InternationalUniversity of Japan

Support for production of Japanese textbooks

Support for Junior Achievement

Art contest (supported by Fuji Xerox Office Supply

Okinawa PARK (supported by Okinawa Xerox)

Acorn Square (Suzuka Fuji Xerox)

Creation of natural woodlands near populated areas

Association for Protecting Thickly Wooded Area in Tsukahara

Workshop for nature guides

Support for large-font textbooks

JOHO-JUKU

e-Nakama support

Asia Youth Orchestra

Setsutaro Kobayashi Memorial Fund

Xerox Education Foundation (Taiwan) Fuji Xerox Philippines FoundationYAYASAN FXAP-ASTRA GRAPHIA (Indonesia)FXAP Korean Foundation Thai Fuji Xerox FoundationA

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The features of Fuji Xerox’s social contribution activities and our major social contribution programs

Universal designFor details, see our Web site.

See our Web site for information on Recognition by Society

Leave for volunteer activities Social service systemFor details, see our Web site.



Environmental performan

Environmental Performance Report

This section explains our initiatives for dealing with issues related to the global environment from three perspectives. It begins by covering our environmental management for the promotion of such endeavors, and then reports on our environmental efforts related to products and business activities.

Environmental Management

BusinessActivities

Products

P45

Initiatives for Products P48

P51Initiatives Within Business Activities

Review Process

Policy

Promotion system

Plan


Environmental policy

Medium-term environmental plans

Overview of environmental impact

Goals and results

Environmental management promotion system Acquisition of ISO 14001 certifi cation

Environmental accounting

Environmental education

Environmental communication

Global warming Resource depletion Chemical management

Priority areas for initiatives

Initiatives to prevent global warming Development of energy-saving products

Initiatives to conserve natural resources Initiatives for planning/design/

procurement Initiatives for collection/production Initiatives for separation/recycling/disposal Offering of environmental-friendly paper

Initiatives to reduce chemical risks to the environment Product-related initiatives

Initiatives to reduce environmental impact at customers’ offi ces

Initiatives to prevent global warming Efforts at development/production sites Efforts for logistics Efforts at offi ces Other efforts

Initiatives to conserve natural resources Waste reduction at production site Reduction of water consumption at production site

Initiatives to reduce chemical risks to the environment Efforts within the manufacturing process Impact on global environment (air/soil/water)




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The Fuji Photo Film Group has established the Fuji Photo Film Group Green Policy to aim for a higher level of environmental quality and is promoting environmental management on a group-wide scale in accordance with the policy.

One of All Fuji Xerox’s Shared Values is the environment. Based on this value and the Fuji Photo Film Group’s Green Policy, Fuji Xerox has developed the Ecology and Safety Vision, a vision of a sustainable society. With specific measures for realizing the vision announced in the Ecology and Safety Basic Policy, the Company is striving to attain the world’s top-level of environment management.

Environmental policy

In 2001, as a step toward realizing our Ecology & Safety Vision, we adopted eco-efficiency as an indicator of environmental management. We set the companywide environmental goal of doubling eco-efficiency by FY2010 compared to FY2000, and have been striving to achieve this goal.

Fuji Xerox views “prevention of global warming”, “conservation of natural resources” and “reduction of chemical risks” as its three priority areas. Based on this, we have developed six individual plans which respectively address “environmental technology”, “green products”, “recycling of resources”, “service solutions”, “logistics” and “business activities,” in a bid to reduce environmental impact.

Fuji Xerox has formulated medium-term (three-year) plans and annual plans for the each of the three years covered. We review the medium-term plans every year in order to put in place systems that enable us to f lexibly respond to changes.

Medium-term environmental plans

Fuji Xerox and its affiliates (All Fuji Xerox) respect harmony with the environment to the maximum extent in all of their business activities. In contributing to the sustainability of customers and society, the aim is to be the world’s leading companies by providing safe and environmental-conscious products and services.


Fuji Photo Film Group

Green PolicyHigh level of

environmental quality

All Fuji Xerox

Shared Values<Environment>

All Fuji XeroxEcology & Safety Vision

All Fuji Xerox will introduce and develop into all aspects of its business world-class ecology-conscious activities that emphasize respect for the environment. Companies in the group will strive to offer customers products, services, and related information that are safe and kind to the environment, and thereby contribute to the environmental conservation ef for ts of individuals and society.

All Fuji XeroxEcology & Safety Basic Policy

Based on the recognition that environmental conservation and safety preservation are the basis of corporate existence, All Fuji Xerox will, through its entire workforce, strive to ensure that its business practices progressively reduce environmental impact. We will work to protect the lives and assets of our customers and society, which will be maintained and improved.

This policy shall apply to the entire operations of All Fuji Xerox.

Idea

Actualization

><

Outline of the environmental plans

(1) Prevention of global warming

(3) Reduction of chemical risks

(2) Conservation of natural resourcesPriority areasfor initiatives

[Individual plans]

(1) Environmental technology

(2) Green products

(3) Resource recycling

(4) Services solutions

(5) Logistics

(6) Business activities

Infrastructure for implementing environmental management



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In order to ensure proper environmental management, Fuji Xerox has set goals for environment management in three areas: “reduction of CO2 emissions (eco-eff iciency A)”, “new resource input (eco-eff iciency B)” and “reduction of chemical risks.” In FY2005, the company set the goal of increasing eco-efficiency A and B by 1.01 times and 0.98 times, respectively, and made an effort to achieve the goals, although the results fell short. Due to falling product prices, sales growth failed to catch up with increases in environmental impact, and this also affected the non-achievement of the goals. In the future, in order to improve eco-eff iciency, Fuji Xerox will focus energy on expanding on the services business with the aim of outgrowing our heavy dependence on materials.

Goals and resultsMain environmental impact and objectives

CO2 emissions (global warming)

Eco-efficiency (A) = ··· 1.01 times (compared to the

FY2000 level)

··· 0.98 times (compared to the

FY2000 level)

New resource input (resource depletion)

Eco-efficiency (B) =

Reduction of chemical risks

CO2 emissionsSales

New resource inputSales

A 40% reduction in PRTR substances discharged into the air (compared to the FY2000 level)

Making all new products RoHS-compliant

Fuji Xerox is working to achieve its goal of doubling eco-efficiency by FY2010 by curbing the input of new resources and reducing CO2 emissions as priority issues.

Flow of materials

Fuji Xerox and its aff iliates use the plan, do, check and action (PDCA) cycle to promote environmental management effectively on a group-wide basis. The CSR Committee, chaired by the president, is the supreme decision-making body for environmental issues. Decisions by the CSR Committee are put into practice throughout the company with related divisions responsible for execution. The results of each division’s activities are stored in environmental performance databases for evaluation, forming the basis for future review of strategies and plans.

Environmental management promotion system

Environmental management promotion system

Executive divisions

Corporate Executive Committee

In principle, convenes monthlyOverall decision-making on CSR activities in general

Development of environmental technology

Review of the results of implementation (once every six months)

TechnologyCommittee

CSRCommittee

DisposalAirAirWaste waterAir

RecyclingEnd-of-life products 34,000t

Sales/maintenance

OfficeLogisticsResearch/development/production

INPUT

OUTPUT

RecyclingPaper recyclingAirAir

Collection/separationEnd-of-life products 37,000t

Customer use

Materialsprocurement

ResourcesParts/materials 83,000tComposite materials/other materials

5,000tTotal 88,000t

EnergyElectricity (estimated)236 million kWh

EnergyFossil fuels(converted to crude oil) 51,900kl

Packaging 18,600t

EnergyGasoline 9,460klElectricity72.6 million kWh

Resource recycling Recycled plastic 410t

Resource recycling (reuse)Reused parts 1,500tReused drum cartridges 1,800t

EnergyElectricity197 million kWhFossil fuels (converted to crude oil)

11,500kl

Water 3,700kt

Chemicalsubstances(PRTR) 2,640t

EmissionsCO2 137,000t

EmissionsCO2

59,400t

EmissionsCO2 (Electricity) 84,000t

Water 3,500kt

RecyclingWaste 19,200t

RecyclingUsed packaging materials

Used paper

Chemicalsubstances(PRTR) 13t

DisposalWaste 5,310t

EmissionsCO2 111,000tNOx 148tSOx 9t

Overview of environmental impact




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Fuji Xerox and its aff iliates view acquisition of ISO 14001 certif ication as an important foundation for environmental management. We promote acquisition of ISO 14001 certif ication at both our production and non-production divisions (sales, service, headquarters staff divisions) in Japan and abroad in order to apply environmental management that incorporates each division’s

Environmental accounting

operations. In FY2005, Fuji Xerox Eco-Manufacturing Co., Ltd. (Thailand) and Yamanashi Xerox* obtained ISO 14001 certification. Starting FY2005, Fuji Xerox incorporated ISO 14001 standards into its corporate management strategy to promote environmental management as an integral part of its business.* The company was renamed Fuji Xerox Yamanashi Co., Ltd. in April 2006.

Environmental education

Raising the environmental awareness of each person is important for the achievement of a sustainable society. In order to develop employees with a high level of environmental awareness and also support efforts to create an environment in which environmental conservation activities are carried out spontaneously on a society-wide scale, Fuji Xerox is focusing energy not only on educational programs centered on lectures but also fieldwork-type programs that encourage employees to participate in actual environmental conservation activities. Fieldwork-type programs consist mainly of activities closely connected to local communities, including “energy-saving campaigns,” which target families, and “Kids’ ISO program,” an environmental education program for children who will lead the next generation. We will strive to raise the environmental awareness of our employees so that more of them take environmental issues into consideration and display the initiative to make improvements by participating in these programs.

Environmental communication

Fuji Xerox makes available to stakeholders information concerning environmental impact generated by our business activities, our initiatives to reduce this impact, environmental data on products, and other aspects of our environmental endeavors, through a variety of mediums, including the Internet and exhibitions as well as advertising. Fuji Xerox’s environmental communication activities are not limited to the disclosure of information. We also strive to make our environmental activities a forum of active, two-way communication in which the wisdom of customers and various other stakeholders is combined. As in 2004, Fuji Xerox exhibited in the Eco-Products 2005. Under the theme “Protecting the Earth in the Office,” we presented our environmental initiatives, through products and services, global warming prevention we can do in the office, paper procurement with an eye on raw materials, and a perpetual paper recycling system that treasures resources. At Eco-Products 2005 site

Environmental accounting is used to quantitatively analyze Fuji Xerox's environmental activities as a whole, expressing changes in revenue/expenses and environmental impact. In FY2005, Fuji Xerox produced economic benefits from initiatives for Integrated Recycling

System, keeping the environmental balance in the black as in FY2004.A future task is to clarify the relationship between investments

and reductions in environmental impact and use the results of this clarification for more effective environmental investments.

Certifi cation ceremony for a school that implemented the Kid’s ISO program (Minamiashigara-shi, Kanagawa)

Creating Satoyama [natural woodlands near populated areas] with close regional ties (Narita-shi, Chiba)

Acquisition of ISO 14001 certifi cation

Environmental accountingFor details, see our Web site.

Environmental education systemsFor details, see our Web site.



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Fuji Xerox recognizes power consumed when customers use its products as a type of environmental impact we must alleviate. Based on this recognition, we are striving to reduce environmental impact in both the hardware and software aspects of products by curbing power consumption for our entire product lineup. In FY2005, we set the goal of reducing total power consumption for our products by 6 percent compared to the previous year, but this goal was not obtained. Despite this, we won the Energy Conservation Prize for the seventh consecutive year for our high level of technology and the overall energy-saving performance of our products.

Initiatives to prevent global warming

One key area of our environmental conservation efforts is our Integrated Recycling System. This system is based on a closed-loop system designed for the effective use of resources, and treats end-of-life products as valuable resources instead of waste. Two approaches are used for each process in the product lifecycle from upstream (planning) to downstream (recycling). One is “inverse manufacturing,” intended to create products with low environmental impact based on the assumption that parts will be reused. The other is “zero emissions,” which refers to the full use of the resources contained in parts that cannot be reused in their entirety, through separation and recycling. This Integrated Recycling System has been applied on a global scale. The Integrated Recycling System, which began operation in the Asia Pacif ic region in December 2004, is steadily bringing satisfactory results.

Models that have won the Energy Conservation Prize and new technologies that support environmental-friendly products

Please also see Highlight 6 “The Long Road to a Recycling-Based Production System” (p 28-29).

Fuji Xerox tackles issues involving global warming, resource depletion, and chemical management throughout the life cycle of products. We also support initiatives to reduce environmental impact, such as reducing paper and power consumption in customers’ offices, by proposing and selling environmental-friendly products.

Initiatives for Products

Total power consumption*

Integrated Recycling SystemInitiatives to conserve natural resources

1997 1998 1999 2000 2001 2002 2003 2004 2005

(%)

(FY)

40

50

60

70

80

90

100

*Power consumption per product used in the market

100

9490

8782

78

72

6660

50(Goal)

Inversemanufacturing Lifecycle planning

Reuse/recycling design

Environmental impact assessments

Closed-loop system

Reuse of parts

Reuse of materials

Separation of hazardous substances

Materials recycling

Thermal recycling

Closed-loop

system

Zero landfillNo pollution

No illegal disposal

Zero emissions

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Mon

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DocuColor1250CP

Awardedthe 1999Energy

Conserva-tion Prize

Two-roll fuser technology Linkage between hardware and software High-speed free belt nip fuser technology

Vertical-cavity surface-emitting laser technology

DocuPrint181/211

Quick fuser technology

DocuPrintC2220


Conserva-tion Prize

DocuPrintC2425/2426


Conserva-tion Prize

Awardedthe 2004 Energy

ConservationPrize


ConservationPrize

ApeosPort/DocuCnetre

C7550 I series

Free belt nip fuser technology

DocuCentre Colora450/f450 andCentre WareFlow Service

DocuCentre507/607/707


ConservationPrize


ConservationPrize

Roll-in-roll technology

Latest




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Starting from the product planning/design phase, Fuji Xerox assumes that parts will be reused for many generations, and the percentage of parts used for two or three generations is steadily increasing. In FY2005, with the rapid shift of the copy machine market to color devices over the past several years, the market for monochrome machines in which parts were used for

Initiatives for planning/design/procurement

Fuji Xerox takes responsibility for the collection of end-of-life products. The company made an all-out effort to collect end-of-life products so as to bring the collection rate as close to 100 percent as possible. In FY2005, the introduction of a Companywide Information System enabled Fuji Xerox to directly grasp the volume of end-of-life products collected from customers. This allowed the company to understand the volume more accurately than before, boosting the

Initiatives for collection/production

Collection rate of end-of-life products

three generations shrank, lowering relatively the percentage of parts used for three generations. To ensure more effective reuse of parts, we are promoting unit designs that enable the reuse of modules and the replacement and recycling of units. Plans call for these designs to be applied to a wider range of models in the future.

1996 1999 2002 2003 2004

(%) 1st generation

2005 (FY)

2nd generation 3rd generation

0

20

40

60

80

100

98

72

47

29

60

18

63

23

14

2

36

31

3328 24

22

20052004200320022001200019991998

(Model)

(FY)0

2

4

6

8

10

12

14 13

65

2

556

4

Ratio of product's generations utilizing reused parts in next new generation products

collection rate. Fuji Xerox also reuses parts from end-of-life products collected to curtail new resource input. In FY2005, with the rapid shift of the copy machine market to color devices, differences in technical mechanisms made it impossible to reuse parts from monochrome machines, which comprised the bulk of the end-of-life products collected, for color devices. For this reason, the number of units produced fell, which held back reductions in new resource inputs.

2004 20052003200220012000199919981997

(%) Direct sales

(FY)

Sales companies

0

20

40

60

80

100 97

81

97

78

97

70

60

96 96

55

9792

98 988989

96

82

Reduction in new resource input (For main units only, weight of reused parts)

200320022001 2004 2005199819971996 1999 2000

1,800

1,200

1,400

1,700

800

400

2,0002,200

2,400

1,500

(t)

(FY)0

500

1,000

1,500

2,000

2,500

Parts that cannot be reused are disassembled and separated into as many as 44 parts categories so that they are recycled by recycling partners into materials. If they cannot be recovered as materials, they are used for thermal recycling for general heat sources. Part of materials recycling involves the reuse of materials, that is, materials are used to produce parts for Fuji Xerox products. Through this recycling system with a network of recycling partners, Fuji Xerox has achieved “zero landfill,”meaning that no waste goes into landfills.

Initiatives for separation/recycling/disposal Landfi ll rate

* There was a slight loss (0.01%) in the recycling process, however.

0

5

10

20

15

200320022001 2004 (FY)2005199819971996 1999 20000* 0* 0*0.090.4

1.2

14.9 14.9 14.9

11.7

(%)

Number of models to which reuse/recycling designs are applied



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To ensure sustainable paper supply, it is essential to pay attention to forests and ecosystems that surround them and to the nearby local communities. Fuji Xerox has established Environmental, Health and Safety Requirements for Paper Procurement and makes it a pol icy to only use and sel l environmental-friendly paper in all of the countries where it operates. In Japan, meanwhile, we are implementing the Plan for

Offering of environmental-friendly paper

To respond to the RoHS Directive, and in light of trends for other international environmental regulations, Fuji Xerox in February 2003 revised our 1999 Green Procurement Guidelines to create our Green Procurement Standards. We are collaborating with parts manufacturers and suppliers to prohibit or control the inclusion of certain hazardous substances in products and parts and prevent their use in manufacturing processes.

Initiatives to reduce chemical risks to the environment

Shifting to Eco-Conscious Pulp, an initiative for discontinuing the use of virgin pulp from natural forests (excluding forests certif ied by third parties) by FY2008, and instead exclusively using pulp from used paper, plantations, and certified forests. Fuji Xerox is also trying to spread a system for recycling document paper, copy paper, toilet tissue, and other kinds of paper used in offices so that recycled paper can be reused in offices.

(%)

0

10

20

30

40

50

60

70

80

90

100

2005200420032001 2002 (FY)

76.8

18.4

7.361.8

51.154.5

58.4

82.8

24.5

58.3

90.8

27.8

63.0

Eco-conscious pulp Used paper pulp

Eco-conscious pulp(plantation +

certified forests)+

used paper pulp

Fuji Xerox and all of its affiliates in Japan, Southeast Asia, China and Oceania have created “Environmental, Health and Safety Requirements for Paper Procurement.” Designed to prevent resource depletion caused by forest felling and to prevent major impact on the ecology and lives of indigenous people, these requirements apply to the paper the companies sell or use, and are based on the six principles listed below. The same set of requirements is applied throughout the world, in combination with the requirements of the Xerox Corporation (based in the US). These requirements were put into effect on December 1, 2004.

(1) Comply with all applicable laws and codes of practice(2) Practice sustainable forest management

· Forests must be certified by third-party organizations,· or forests must be managed.

(3) State the source of reused pulp for used paper(4) Ensure the safety of chemical substances used(5) Eliminate chlorine bleaching process in paper production(6) Maintain an environmental management system at factory

Use of used paper pulp and eco-conscious pulp

Please also see Highlight 5 “Toward a Sustainable Model for Paper Procurement” (p 26-27).

Number of eliminated hazardous substances usage

2005200420032002200120001999

(Instances)

(FY)0

1

2

3

4

5

6

1

2

33

6

3

1

Initiatives to reduce environmental impact at customers’ offi ces

In the area of service solutions as well, Fuji Xerox provides a system that enables customers to reduce total environmental impact in their offices through the use of our products. We are also focusing our energy on not only developing software but also grasping in quantitative terms environmental impact reduction benefits from implementing such software and making such effects known to customers.

In FY2005, Fuji Xerox launched three software package products, which express in specific figures the environmental impact reduction benefits achieved when they are implemented. Predicted environmental impact reductions indicated in numerical terms can be used for environmental management based on ISO 14001 standards. Note: For each of the output requirements, such as single- or double-sided

printing, and each type of paper or printer used, environmental impact levels are displayed as “eco-levels” using leaf icons. This enables output that uses settings with less environmental impact.

Environmental, Health and Safety Requirements for Paper Procurement

Selection display on new ArcEPS eco-printer

Eco-Conscious Pulp Plan FSC-certifi ed paperFor details, see our Web site.




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Viewing global warming as one of the priority issues we must address, Fuji Xerox and its affiliates are working to reduce greenhouse gases, including carbon dioxide (CO2) and hydrofluorocarbon (HFC), which are emitted from business activities. Emissions of these substances are managed using eco-efficiency (sales divided by CO2 emissions) as an indicator. In FY2005, Fuji Xerox and its affiliates set the goal of increasing eco-efficiency in business activities (including logistics) to 1.2 and made an effort to achieve this goal, but the result remained at 1.15 because CO2 emissions from overseas production sites were larger than anticipated.

Fuji Xerox has set 106-point energy-saving checklist to examine energy-saving activities in a comprehensive and concrete manner. In FY2005, we carried out 106-point energy-saving inspections at all overseas sites. In addition, we revised the checklist and divided it into one for production sites and one for offices in order to make it easier to use.

Initiatives to prevent global warming

Fuji Xerox uses natural energy and checks energy-saving levels. In addition, we operate our waste management systems and reduce water consumption, while striving to attain the goal of reducing as close to zero as possible the risks from volatile organic chemicals (VOCs), PCBs, and other chemicals.

Initiatives Within Business Activities

Fuji Xerox only Japan Japan and abroad

Note: The results of calculations shown above are limited to production sites.

50

71

98

43.9

66.5

95.7

42.4

67.2

99.9

200520042003 (FY)0

(kt-CO2)

20

40

60

80

100

Changes in CO2 emissions from development and production sites in Japan and abroad

Fuji Xerox positioned the establishment of an Integrated Resources System as one of its central environmental conservation activities. We are promoting initiatives to deal with resource depletion issues at our sites in Japan and overseas, and are also actively working to achieve zero emissions. In FY2005, at six of our sites in Japan, we attained the goal of reducing the total weight of waste generated per unit by 7 percent compared to a year earlier. Zero emissions were attained at all production sites in Japan and at three of the four production sites overseas, and this was maintained in FY2005 as well. Up to now, water resources have been chief ly managed at production sites, but Fuji Xerox will work hard to reduce water consumption and recycle used water on a companywide basis.

Initiatives to conserve natural resources (Unit: 1,000t)

0

100

200

300

500

1,000

1,500

2,000

2,500

2001 2005 (FY)

Takematsu Center

Ebina CenterSuzuka Fuji Xerox

Fuji Xerox Imaging MaterialsFuji Xerox of Shenzhen

Fuji Xerox of Shanghai Niigata Fuji Xerox Manufacturing

Fuji Xerox Korea (Incheon)Iwatsuki Center

Taiwan Fuji Xerox (Taoyuan)

Water consumption

Fuji Xerox has responded to the trends in the regulation of hazardous chemical substances in Japan and overseas, and we have also independently decided on measures to control and reduce the environmental pollution risks from our business activities and are working to implement these measures. Through the “Detailed Rules for Chemical Risk Management,” formulated in April 2005 to carry out integrated chemical risk management measures, we are striving to prevent disasters and environmental pollution caused by chemical substances. In FY2005, we worked to reduce emissions into the air of substances designated by the PRTR law from production sites through measures that included the introduction of VOC emission incineration facilities at our Takematsu Center. As a result, we successfully achieved the goal of reducing such substances by 40 percent compared to FY2004.

Initiatives to reduce chemical risks to the environmentHandled Discharged Transferred

20012000 2002 2003 2004 2005 (FY)

2,8002,6002,4002,2002,0001,8001,6001,4001,2001,000

800600400200

0

(t)

1,924

16 96

2,637

4713187 122 17

309

555

819

18 20127

21128 76

Volume of PRTR substances handled, discharged and transferred (Production sites in Japan)

Percentage of fuels used Introduction of low-emission vehicles NAS batteries Ice thermal storageFor details, see our Web site.

Waste measurement systemFor details, see our Web site.

Chemical risk reduction activities Volume of PCB stored by itemFor details, see our Web site.

For , see our Web site.Site Data



Corporate profile

Corporate Profi leFuji Xerox defi nes “documents” not only as information inscribed on paper but also as knowledge in a multimedia format, including electronic data, images and audio.In supporting business, the company believes that the vital point is how we can share “documents,” which are very important managerial resources, and utilize them in a creative and effective way.Based on this way of thinking, we provide customers with document services to increase the productivity of their offi ce work through process reforms, and as a partner we carry out activities to enhance the quality of their management.

Headquarters Akasaka Twin Tower East 17-22 Akasaka 2-chome, Minato-ku, Tokyo, Japan 107-0052Telephone +81-3-3585-3211 Established February 20, 1962 President Toshio Arima Capital 20.0 billion yen Shareholders Fuji Photo Film Co., Ltd.: 75%

Xerox Limited: 25%

Main domestic operations

Headquarters’ operations Tokyo Development/manufacture

Ebina, Iwatsuki, Takematsu, Kawasaki, Suzuka, Namerikawa, Shanghai, Shenzhen, etc.

Research sites Nakai, Palo Alto (California, United States)

Sales and service sites Located in all major cities throughout Japan

Fuji Xerox Co., Ltd.

Performance in FY2005 (April 1, 2005 to March 31, 2006)

633.5 653.1

1,002.2 1,029.2

690.1

1,113.1

0

200

400

600

800

1,000

2003 2004 2005 (FY)

(¥ Billion) Fuji Xerox only Consolidated1,200

(FY)

Fuji Xerox only Consolidated

12.2

19.3

51.854.5

10.7

54.2

2003 2004 20050

10

20

30

40

50

60(¥ Billion)

2003 2004 2005 (FY)

13,158 12,956

34,01736,221

10,346

37,478

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000(Persons) Fuji Xerox only Consolidated

Revenue Ordinary profi ts Number of employees

Office products: 54%

Production services: 10%

Office printers: 17%

Office services: 6%

¥1,113.1 Billion

Other: 13%

Asia, Oceania:17%

Americas: 11%

¥1,113.1 Billion

Other regions: 5%

Japan: 67%

Revenue by business area (consolidated) Revenue by region (consolidated)

Business segments Key products

Document services

Offi ce multifunction devices, workstations, personal computers, facsimiles, CAD systems, plotters, printers, paper, electronic parts, others

Other Educational services

As shown in the map on the right, our sales and service territory covers Japan, China, and other Asia-Pacific countries and regions. Other areas are covered by Xerox Corporation, and Xerox Limited.

Japan China

Taiwan

Thailand

Cambodia The Philippines

Laos

Myanmar

Vietnam

Malaysia

Singapore

Indonesia

Australia

New Zealand

Hong Kong

South Korea

Sales and service areas of Fuji Xerox and its affi liates




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Affiliates

Affiliates in Japan

Business companies

Fuji Xerox Printing Systems Co., Ltd.

FXPS Sales Co., Ltd.

Fuji Xerox System Service Co., Ltd.

Fuji Xerox Learning Institute Inc.

Xworks Co., Ltd.

Affi liates by function

[Development]

Fuji Xerox Information Systems Co., Ltd.

Fuji Xerox Engineering Co., Ltd.

[Production]

Suzuka Fuji Xerox Co., Ltd.

Niigata Fuji Xerox Manufacturing Co., Ltd.

Fuji Xerox Imaging Materials Co., Ltd.

[Personnel and general affairs services]

Fuji Xerox General Business Co., Ltd.

Fuji Xerox Career Net Co., Ltd.

[Services and operation]

CrossForce Co., Ltd.

[Sales]

Fuji Xerox Hokkaido Co., Ltd.

Fuji Xerox Iwate Co., Ltd.

Fuji Xerox Miyagi Co., Ltd.

Fuji Xerox Fukushima Co., Ltd.

Fuji Xerox Ibaraki Co., Ltd.

Fuji Xerox Tochigi Co., Ltd.

Fuji Xerox Gunma Co., Ltd.

Fuji Xerox Saitama Co., Ltd.

Fuji Xerox Chiba Co., Ltd.

Fuji Xerox Tokyo Co., Ltd.

Fuji Xerox Tama Co., Ltd.

Fuji Xerox Kanagawa Co., Ltd.

Fuji Xerox Yamanashi Co., Ltd.

Fuji Xerox Niigata Co., Ltd.

Fuji Xerox Hokuriku Co., Ltd.

Fuji Xerox Nagano Co., Ltd.

Fuji Xerox Gifu Co., Ltd.

Fuji Xerox Offi ce Supply Co., Ltd.

Fuji Xerox Shizuoka Co., Ltd.

Fuji Xerox Aichi Co., Ltd.

Fuji Xerox Aichi-Higashi Co., Ltd.

Fuji Xerox Mie Co., Ltd.

Fuji Xerox Kyoto Co., Ltd.

Fuji Xerox Osaka Co., Ltd.

Fuji Xerox Hyogo Co., Ltd.

Fuji Xerox Nara Co., Ltd.

Fuji Xerox Okayama Co., Ltd.

Fuji Xerox Hiroshima Co., Ltd.

Fuji Xerox Yamaguchi Co., Ltd.

Fuji Xerox Shikoku Co., Ltd.

Fuji Xerox Fukuoka Co., Ltd.

Fuji Xerox Kitakyushu Co., Ltd.

Fuji Xerox Nagasaki Co., Ltd.

Fuji Xerox Kumamoto Co., Ltd.

Fuji Xerox Kagoshima Co., Ltd.

Overseas aff iliates

Asia-Pacifi c (countries/regions)

[Sales]

Fuji Xerox Asia Pacifi c Pte Ltd··················Singapore

Fuji Xerox Singapore Pte Ltd···················· Singapore

Fuji Xerox Asia Pacifi c Pte Ltd

(Malaysia Operations)································Malaysia

Fuji Xerox Asia Pacifi c Pte Ltd

(Indo-China Operations)···························· Vietnam

Fuji Xerox Korea Co., Ltd.························· South Korea

Taiwan Fuji Xerox Corporation·················· Taiwan

Thai Fuji Xerox Co., Ltd.···························· Thailand

Fuji Xerox Philippines, Inc.························ The Philippines

Fuji Xerox Australia Pty Limited················ Australia

Fuji Xerox New Zealand Limited··············· New Zealand

PT Astra Graphia Tbk(general agency for Fuji Xerox)··················· Indonesia

Fuji Xerox (China) Limited························· China

Fuji Xerox Industry Development

(Shanghai) Co., Ltd.··································· China

Fuji Xerox (Hong Kong) Limited················ China

United States

FX Global, Inc.

Xerox International Partners

FX Palo Alto Laboratory, Inc.

Fuji Xerox Global Supply Solutions, Inc.

[Procurement and production]

Fuji Xerox of Shanghai Limited·················China

Fuji Xerox of Shenzhen Ltd.······················China

Fuji Xerox Far East Ltd.·····························China

Fuji Xerox Eco-Manufacturing Co., Ltd.··· Thailand



Kanji Tanimoto

Third Party Opinions

This year’s Sustainability Report from Fuji Xerox (print and online versions) presents the company’s basic stance and current situation, looking closely at what should be done in core businesses and what efforts are to be made with respect to social and environmental issues, so as to build sustainable socio-economic systems.

Before CSR has boomed, Fuji Xerox has progressively approached to the issues of such as the environment, compliance, and support for employees. For example, the company has been taking efforts to incorporate the compliance structure in its daily operations, resulting from an intensive and ongoing approach, and Fuji Xerox has been highly evaluated for understanding the importance of this process for the implementation of effective corporate governance. As a group, the company and its affiliates recognize that a shared sense of basic values and the incorporation of these values in core businesses are essential issues for the promotion of CSR. However, it is also necessary to observe the extent to which these values actually permeate the company.

Since FY2004, Fuji Xerox’s environmental and social reporting has been characterized by a mixed-media approach, involving a combination of print and online information. About half of the print editions have been devoted to emphasizing the company’s stance in terms of CSR and summarizing major efforts in that regard as “Highlight” sections. Accordingly, only the basics are presented in terms of fundamental CSR philosophy and policies, as well as social and environmental data. The format is easy to read and understand, but since it is an annual publication it would be preferable to include a straightforward review of social and environmental activities over the preceding year, together with related objectives and results. While the online version provides greater detail in the same format as the

print version, the various issues, future actions, and the like on the social front are not necessarily indicated. Many questions are left unanswered, such as why numerical values declined in the Core Morale Survey of employees, what were the social and corporate results of philanthropy activities, and what efforts are planned for the coming fiscal year to promote employment of the people with disabilities.

Fuji Xerox understands that CSR should be effectively incorporated into its management based on stakeholder perspectives, and the company is trying to have its management principles translate into visions and strategies, as well as organizations and systems. On the environmental front, a medium-term business plan has been formulated based on environmental policy, and the plan, do, check and action (PDCA) cycle is in place to for management planning, execution, and review. Establishment of this type of cycle is needed on the social front (management, personnel, social contributions, etc.) as well.

A specif ic and important issue for the future is the promotion of concrete CSR initiatives that include the supply chain on a global level, centered on China. Fuji Xerox has already constructed a solid system for green procurement, and another urgent task is the establishment and deepening of CSR procurement structures based on this system.

Finally, another important point in the formulation of this type of report in the future will be the elucidation of the social and financial effects of the various initiatives ref lected in non-financial information that is being disclosed in environmental, social, governance-related, and other areas. It is to be hoped that CSR reporting will be linked to financial statements and other reports, with a pioneering approach to information disclosure and the evaluation of total corporate value (i.e., corporate quality).

Fuji Xerox Co., Ltd.Akasaka Twin Tower East17-22 Akasaka 2-chome, Minato-ku, Tokyo, Japan 107-0052Telephone: +81-3-3585-3211

For more information: Corporate Social Responsibility DepartmentTelephone: +81-3-5573-2882 Facsimile: +81-3-5573-2883

• The entire content of this report is available on the Internethttp://www.fujixerox.co.jp/eng/sr/Published: October 2006 201-231 (06-10)

Dr. Tanimoto, who holds a PhD in Business Administration, is a professor at Hitotsubashi University’s Graduate School of Commerce and Management. He is also the Representative Director of Social Innovation Japan. His areas of research include corporate systems and the relation between enterprises and society. His publications include the book CSR (NTT Publishing).

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This report is printed using 100% vegetable oil-based ink, which contains no volatile organic compounds (VOCs). Printed in Japan

印刷サービスのグリーン購入に取り組んでいます

Mr. Saito is an attorney at law since 1978 and currently works as an auditor for Neturen Co., Ltd. He is also a member of the Operation Committee at the Japan Federation of Bar Associations’ Center for Promotion of Legal Practice. Additionally, he is the vice-chair of the same organization’s Project Team for Human Rights and Corporate Responsibility Evaluation and Assistance. He was born in 1946, and is a graduate of the Faculty of Law of Tokyo Metropolitan University.

Makoto Saito

1. Judging from the commitment of President Toshio Arima and Chief Corporate Advisor Yotaro Kobayashi, as expressed in their own words, the foremost characteristic of CSR activities at Fuji Xerox is an extremely clear intent at the top of the organization regarding the essence of CSR as related to the business activities of the company.

As a result, the various topics in the Highlight sections of this report were all positively evaluated as initiatives to realize CSR. Valuable CSR-related efforts within Fuji Xerox include directing the company’s core document business toward the realization of CSR by constructing internal control systems for corporate customers; support for employee diversity, including women’s activities; consistent implementation both domestically and overseas with respect to issues such as compliance and employee issues in China; promotion of sustainability in paper procurement, a fundamental part of the company’s document business; and the establishment of the comprehensive Integrated Recycling System.

2. On the other hand, the report is incomplete in that it does not provide readily understandable explanations of future companywide goals or present the degree of achievement from a comprehensive CSR perspective, and time-based and companywide degrees of achievements with respect to the various issues discussed. In addition, although Fuji Xerox earns high marks for information disclosure, and has admitted that scores measuring employees’ core morale have declined for two consecutive years, it is somewhat problematic that no countermeasures are proposed. Also, the report cannot be positively evaluated in terms of the information included regarding the relation between Fuji Xerox and its stakeholders.

3. Based on the commitment of top management, Fuji Xerox’s core document business is directed toward CSR realization, and the company is positioning global CSR activities in a manner that is consistent both in Japan and overseas. Environmental issues are also being viewed from an far-reaching perspective, from upstream planning stages to downstream reuse and recycling. Virtually all of the important components of CSR are addressed. Nevertheless, it would appear that gaps are still present, in the sense that internal structures are not necessarily responding to this.

The report states that the CSR Committee is the “highest decision-making body with respect to the environment,” and if the CSR Committee is literally the “highest comprehensive decision-making body for CSR,” it would be desirable to place a CSR representative as a focal point in each department of the company. Through companywide functioning of CSR management, Fuji Xerox should expand its CSR efforts from a line to a plane, further deploying these both spatially and organically. This will likely be an important element in the further development of Fuji Xerox as a company dedicated to providing corporate customers with quality CSR.

It is to be hoped that Fuji Xerox will thereby arrive at a new business model featuring total implementation of CSR. In so doing, there is also a need for greatly expanded frank and honest dialogue with the various stakeholders involved.

The foregoing represents my opinion on the present report.

Editorial Policy

Fuji Xerox and its affi liates are carrying out business with global environmental and social issues in

mind. We are also taking on the challenge of solving these issues to become “good companies” for our

various stakeholders.

This report introduces efforts to solve issues concerning business operations and the current

status of the activities being carried out in relation to these efforts. It also attaches importance to the

presentation of policies and attitudes regarding issues, so that it is more than just a simple report of

activities and statistical data. In terms of activities, we particularly wish to report that the information

was gathered from a third-party perspective from those responsible for or concerned with these

activities, which is then summarized as “Highlights.”

Reference guidelines• 2002 Sustainability Reporting Guidelines of the GRI*• Environmental Reporting Guidelines (FY2003) of the Ministry of the Environment• Corporate evaluation standards in the 15th Corporate White Paper issued by the Japan Association of Corporate

Executives

Visit our Web site for a table comparing the guidelines of GRI and the Ministry of the Environment.* GRI: Abbreviation for the Global Reporting Initiative, an international organization established in 1997 to develop globally applicable guidelines for

corporate sustainability reports.

Scope of coverageThe data on environmental impact for Fuji Xerox and its affi liates covers all the domestic sites and overseas production sites that are subject to environmental accounting. As a rule, this report covers data from April 1, 2005 to March 31, 2006, which is Fuji Xerox’s fi scal year, but certain parts of the report provide data for the period starting from April 2006.

Third party opinionsFor a third party perspective on Fuji Xerox activities, we have received opinions from Hitotsubashi University Graduate School Professor Kanji Tanimoto and a lawyer, Makoto Saito.

Release schedule for the next reportSeptember 2007

The Sustainability Report 2006 is provided in a print version and an online version.

(1) Print version (56 pages)

The print version focuses on Top Management’s Commitment and Highlights, and presents Management & Performance in an abbreviated form.

(2) Online version (comprises 100 sections with information equivalent to 250 A4-size sheets of paper)

In the online version, the Management & Performance section provides in-depth reports on a wider range of activities than before. The online version also offers various navigation tools, such as report maps and guideline comparison tables (GRI/Ministry of the Environment), so that readers can easily access the information they are interested in. For

details, please see page 33.

We would be pleased to hear your opinions regarding our activities, and we hope that you will take a moment to fi ll out our survey.

For more information, see the online version at: http://www.fujixerox.co.jp/eng/sr/

Fuji Xerox Sustainability Report 2006 2 Fuji Xerox Sustainability Report 2006 55

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