Page Link

Social Report

Engagement with Stakeholders

Date: December 9, 2016
Attendee : Ken Ito Executive Director, SROI Network Japan (Project Assistant Professor,
Graduate School of Media and Governance, Keio University)
George OlcottOutside Director
Toshihiko Miyauchi Executive Officer,
General Manager, Corporate Business Strategy Headquarters
Hiroshi Yoshida Executive Officer,
Deputy General Manager,
Corporate Business Strategy Headquarters,
General Manager, Finance and Accounting Center

Stakeholders' Dialogue

Based on such trends as the spread of the concept of Creating Shared Value (CSV) and the expansion of investment that focuses on Environmental, Social and Governance (ESG) factors, the Hitachi Chemical Group is currently undertaking a review of its existing “Social Contribution Policy.” We brought together an external expert, an Outside Director and two Executive Officers for a discussion focusing on ways to entrench social contribution activities across the entire Group that leverage Hitachi Chemical’s strengths to an extent even greater than achieved to date, while providing value to each community in which the Group operates.

Ken Ito Executive Director, SROI Network Japan (Project Assistant Professor, Graduate School of Media and Governance, Keio University)

George Olcott Outside Director

Toshihiko Miyauchi Executive Officer, General Manager, Corporate Business Strategy Headquarters

Hiroshi Yoshida	Executive Officer, Deputy General Manager, Corporate Business Strategy Headquarters, General Manager, Finance and Accounting Center

Striving for a Shared Understanding of the Role of Social Contribution Activities

Miyauchi

As part of Hitachi Chemical’s social contribution program, we run several projects in the fields of environmental sustainability and education. These include the Green Curtain Project, Environmental Restoration near Kasumigaura, and Science Workshops for Kids. These projects began not as strategic top-down programs but as bottom up initiatives driven by the ideas of frontline employees and underpinned by ties with local communities. They have continued thanks to the voluntary participation of Hitachi Chemical employees. For example, the Science Workshops for Kids, which are conducted by employees for children attending local daycare centers and kindergartens, are seen as a way to nurture an interest amongst the children in science and manufacturing. We hope that the children taking part will go onto become members of the next generation of scientists and engineers. The program has been extremely well received in the community. However, only a limited number of employees have participated in such programs to date, and it seems to me that many employees have yet to grasp the significance of taking part in the Group’s social contribution activities.

Olcott

I was appointed as an Outside Director some two-and-a-half years ago. Looking at the Corporate Social Responsibility (CSR) information published on the Company’s web site and through other media, I believe that Hitachi Chemical has advanced further in this field than its competitors. My impression is that these activities have been very successful.

However, for a corporate group, whose overseas sales and workforce accounts for more than 50% of the respective totals, the current level of CSR activities still seems insufficient. It is imperative that the Group as a whole thinks globally, and in my view there needs to be an improvement in the current situation in which some information is biased toward activities in Japan. This information should also be shared on a Group-wide basis. Considering the effort that goes into social contribution activities, I believe that it would make sense to conduct such activities under a unified theme adopted across the entire Hitachi Chemical Group. This information should also be shared on a Group-wide basis.

Yoshida

During my assignment working in the United States, I saw that local staff members frequently participated in volunteer activities. However, this applies not only to the United States. In each of the communities around the world in which the Hitachi Chemical Group operates, a diverse array of activities are being undertaken to ensure the Group develops strong local roots. However, I believe that there is a problem of lack of awareness at the Group headquarters level of social contribution activities carried out overseas. This probably reflects such factors as distance and the small scale of the funds involved.

Ito

Ken iToolsIn order to carry out social contribution activities globally, I believe it is important that the direction of these activities is consistent with the Hitachi Chemical Group Identity and business strategy. Furthermore, it is also crucial that as a basic policy such activities are made visible throughout the Group and to other stakeholders.

What I would like to propose here is that the Group adopts a theme of pursuing social contribution activities that leverage Hitachi Chemical’s core competencies in its main business. This could then become a common focal point for global activities. For example, one well-known Japanese automobile company provides support to enhance efficiency in the United States by applying its unique production system to such areas as community welfare and disaster relief. This is a good example of a company leveraging expertise from its core business in its social contribution activities. For example, Hitachi Chemical has set itself the goal of becoming a company that provides innovative solutions beyond the boundaries of chemistry. This is where we want to be in 10 years’ time. Therefore, I think it would be a good idea for you to also think about the ideal future shape of your social contribution activities as an innovation provider.

Olcott

Fundamental policies are shared globally and should be determined by head office. However, I do not think that this translates into simply creating something in Japan and then transferring that overseas. I want to see the Group engage in internal dialogue and debate, which should be developed over time. The debate should be aimed at promoting social contribution activities globally that are consistent with common Group themes. I believe that there are things that we should adopt from overseas.

Developing Increased Understanding of Social Contribution Activities by Employees and Encouraging Them to Take the Initiative

Ito

Although fundamental policies are formulated by head office, I think that when it comes to specific activities it is important to respect local initiatives. For example, in the area of environmental sustainability, there needs to be a flexible system that adapts to the conditions in each country.

Olcott

George OlcottIn addition to Hitachi Chemical, I am also an outside director in several Japanese companies. Among these, there are examples of companies in which social contribution activities at overseas business sites are proactively led by local managers. It is probably fair to say that Hitachi Chemical needs to adopt a policy of more actively promoting the initiatives of local staff and managers.

Miyauchi

In recent years the number of employees participating in these programs has been flat including in Japan. We are concerned that understanding to the social contribution activities among employees has been slow to spread. My feeling is that we need to take measures to stimulate awareness.

Ito

From the perspective of seeking ways to increase the number of participants, I think one approach that can be adopted is to provide incentives for participation in programs. For example, I have observed one particular company where an employee’s compatibility with company values is assessed as part of the personnel performance rating system. This encourages employees to participate in the social contribution program. Managers also actively promote participation by their subordinates in the company’s volunteer programs.

Yoshida

Volunteer activities are by definition unpaid work undertaken by one’s own initiative. There is a concern that employees might choose to participate only because they think their personnel performance rating will rise. Such motivation would not be in keeping with the original purpose of such programs. Have these kinds of issues not arisen?

Ito

Of course, some employees might only participate initially because they were encouraged to do so by their supervisor. For example, in a volunteer program an employee might visit a children’s orphanage and may be asked by the children what kind of company he or she works for. After explaining, the children might react by saying, “Wow! That’s amazing!” The employees who are participating might become excited by the reaction of the children and talk to each other about what a great company they work for. This will serve to create connections among employees that cross over divisional lines. Hence, it will also help to develop a sense of unity among employees.

Miyauchi

I personally have participated three times in the Science Workshops for Kids program. Based on those experiences, I believe the program is a great opportunity to introduce science to young children. I feel that it is playing a role in helping to nurture future scientists and engineers. I suppose I should try to be more proactive in communicating my own experiences and feelings regarding the program.

Yoshida

Certainly there are people who begin to understand the significance of social contribution through their own participation. Hence, top-down encouragement to participate can be seen as one valid approach.

Miyauchi

By giving employees the opportunity to steadily develop an interest in social contribution, programs will become more invigorated. Simultaneously, I believe that it is also important to create connections with our core business activities, such as providing products that will contribute to solutions to issues faced by society.

For example, driven by the advance of information and communication technology, by 2018 it is estimated that electricity consumption by data centers will account for 3% of total electricity consumption. Consequently, the environmental efficiency of data centers is an urgent issue. Against this backdrop, if Hitachi Chemical can bring to market products that will dramatically reduce the amount of thermal consumption of connectors for electronic devices, this will contribute to society’s needs. As a result, the Company will grow and employees will feel a sense of pride in the Company. In this way, by tying social contribution to our core business, even when participating in community volunteer programs we will feel a greater sense of achievement with regard to our social contribution. I think that this is the type of positive cycle we should be aiming for. Ideally, we should try to use both of these approaches.

Ito

Yes, that’s right. As you say, the Group should aim to develop a more integrated system that encompasses solutions to society’s problems based on its core business operations along with social contributions in local communities.

Measuring Return on Investment and Promoting Continuous Improvement

Ito

Since social contribution activities are an investment, it is necessary to measure the return on the budget and time spent. However, this is different from investment in a business. Consequently, it is insufficient to rely on conventional economic return as the basis for evaluating the performance of investment in social contribution activities. For this reason, in addition to economic return, we also use Social Return on Investment (SROI) as a method of evaluation. There are still many issues to solve, but SROI is attracting considerable attention.

Miyauchi

Toshihiko MiyauchiI believe that it is essential to measure the return on investment. We are accountable to internal and external stakeholders, and activities for which the return is unclear do not last very long. I think that we need to establish a system suited to Hitachi Chemical while taking on board the opinions of external experts.

Ito

Japanese companies tend to become preoccupied with the budget and time invested (inputs). However, in the evaluation of social contribution activities, it is important to focus on social value (outcomes).

Yoshida

The setting of outcome goals is similar to the formulation process for management strategies. We have developed a picture of where we want to be in 10 years’ time. To achieve this, Hitachi Chemical formulated its 10-year Strategy.

Miyauchi

So rather than focusing on such inputs as budgets and the number of participating volunteers, it is more important to evaluate the results of these activities.

Ito

For example, in the Science Workshop for Kids program, this would translate into looking at how many children gained an interest in science though their participation in the program. We focus on such factors as the changes in people resulting from social contribution activities, and changes brought about in society driven by changes among people. These changes are then expressed as numerical measures. By measuring results in this way, we are able to improve social contribution programs by using the PDCA (plan-do-check-act) cycle in a similar way to business activities. We are aware that we need to make progress by setting higher targets.

Yoshida

Hiroshi YoshidaI understand your thinking, but as someone who has become accustomed to measuring performance through the profit shown on an income statement—a measure that can be readily comprehended—when trying to measure such things as changes in people’s thinking and changes in society, I think it is very difficult to express these things in convincing numerical terms.

Ito

Enterprises not only have an economic value but also a social value. Globally, there is a trend toward measuring both of these values. Social value indicators are seen as leading indicators. This shows that many corporate executives already recognize the importance of measuring social value. In the future, how an enterprise’s value is perceived will likely be greatly influenced by the messages about its social value communicated by the company.

Miyauchi

If we can decide on appropriate indicators for evaluating return on investment in social contribution activities, I think it will then be possible to identify some correlation with economic value. If the relationship becomes clear, for example, if we can show that investment in social contribution activities and other CSR programs leads to an increase in economic value, it will be easier to convince stakeholders of the importance and value of such activities.

Olcott

In the world of investment, ESG investment—which takes into account non-financial information—is seeing rapid growth. At present, it is said that around 30% of assets under management globally have some sort of ESG factored into the investment criteria. In investment decisions, the weight given to a company’s CSR activities is steadily increasing. Consequently, from the perspective of information disclosure vis-à-vis shareholders and investors, it is important to think about return on Investment from a number of different perspectives.

Sharing Society's Awareness and Promoting Vigorous Debate among Senior Management

Olcott

Corporate executives must understand correctly what stakeholders—including shareholders—are seeking. It is vital that executives then reflect these stakeholder needs in their management. With regard to social contribution activities too, based on a shared awareness with society, I believe that it is crucial that Boards of Directors engage in robust debate.

Yoshida

So we must thoroughly debate whether or not each of our activities fits with our corporate slogan of “Working on Wonders.” One of our key tasks from here on is to synchronize our social contribution activities with our business.

Miyauchi

If we only think about the future as an extension of what we are currently doing, the Company will not progress into anything greater than it is today. Hitachi Chemical is already addressing social trends in its core business through its Open Innovation program. However, in a similar way, I would like to see us engage in dialogue with stakeholders regarding social contribution activities. Though such dialogue, I believe we can further enhance our enterprise value.

  • Page Top