Third-party Opinion

The Sekisui Chemical Group CSR ReportCSR in SHIFT 2019

Mitsuo Ogawa

Mitsuo Ogawa President Craig Consulting Co., Ltd.

Mr. Ogawa graduated from Waseda University and gained experience at a major manufacturer of automotive-related products before earning a Master of Business Administration at the University of Pittsburgh. He then worked at Sanwa Research Institute and PwC Consulting before striking out on his own in 2004. Engaged in the field of consulting through to the present day, Mr. Ogawa’s fields of expertise include organizational theory and the revitalization of human resources. Among a host of publications, he has authored such articles as “How ISO 26000 Will Change Management” and “How to Raise CSR Corporate Value” both issued by Nihon Keizai Shimbun, Inc. Mr. Ogawa is a visiting professor of the Commerce and Business Graduate School of Management at Nagoya University.

More than just a regular report, the integrated report is a narrative about the future vision of a company, a story about how it improves corporate value, one that organically ties together financial and non-financial information. An increasing number of companies are publishing integrated reports, but many of these reports merely tack on some CSR articles to the financial information section, missing the point of publishing an integrated report. Companies that are genuinely trying to link CSR to their corporate value will describe in detail how CSR measures impact corporate value in their medium-term management plans, for example. The Sekisui Chemical Group’s CSR report is well worth reading in this regard. In 2017, the Sekisui Chemical Group unveiled a new Medium-term Management Plan called “SHIFT 2019 -Fusion-”. This management plan clearly outlines how ESG (environment, society and governance) will lead to improvements in corporate value. In the truest sense, this signifies the beginnings of an ambitious and innovative drive to take on challenges and tell an “integrated” story with financial and non-financial information to all, both inside and outside the Company. I give high marks to management’s forward-looking stance on these disclosures.

To be more specific, I hope everyone has read President Teiji Koge’s concisely conveyed opening remarks in the Top Message of this CSR report. On page four, he explains the Company’s two-pronged growth strategy based on“prominences” (competitive advantages) and “living and environmental contribution” (business opportunities), and plans to increase product lines that enhance both aspects of this strategy as growth engines. The strength of his determination is evident from the establishment of the CSR Management Office in the Business Strategy Department to facilitate collaboration between business planning, investor relations and public relations, as well as a commitment to making ¥12 billion in “environmental contribution” investments over the next three years as investments in growth. This year also marked the start of a new management strategy for the Sekisui Chemical Group. I hope other companies imitate the information disclosure practices of the Sekisui Chemical Group, as it leads the pack by clearly embedding ESG in its management plans. However, there are a few issues that I would like to point out. Firstly, I would like to see a stronger correlation between the key performance indicators (KPIs) of the new CSR Medium-term Plan and the Medium-term Management Plan. Page 10 of the CSR Report presents the Company’s new targets. Instead of just listing targets for the three prominences as KPIs for CSR, I think an explanation about how they tie in with the management targets of SHIFT 2019 and their impact would be useful. While a challenge to do, I believe this would help readers’ understanding of how the new CSR targets fit in the story about improving corporate value.

The second issue is personnel-related targets. Human resources are positioned as a key element in the management foundation of SHIFT 2019. As a company engaged in globalization, it is satisfying to see Sekisui Chemical aim for more diversity in its management strategy, but the main focus is on empowering women and hiring people with disabilities, which seems somewhat lacking as a KPI. I think the Sekisui Chemical Group should set more ambitious targets, like increasing the ratio of local hires in management positions for its global workforce.

A third issue is internal dissemination. Pages 14-17 of the CSR Report feature a dialogue between the R&D division and external development partners. Last year, I wrote in a third-party opinion that Sekisui Chemical should engage in dialogue with stakeholders, and I am impressed with how fast management responded. Employees that read this will be able to readily understand the social issues and topics that the R&D Center is tackling. In addition to this dialogue, I would like to see management emphasize sustainability in-house internally through its new Medium-term Management Plan. For example, when President Koge explains to employees the new Medium-term Management Plan, perhaps he could spare some time to talk about CSR leadership as a part of employee training programs. It would be like Sekisui Chemical to have the overseas supervision section, which was newly created in the Business Strategy Department, plan leadership training courses in global sustainability with the Human Resources Department.

In Response to the Third-party Opinion

Yoshiyuki Hirai

Yoshiyuki Hirai
Director, Managing Executive
Officer Responsible for
Corporate Finance &
Accounting Department,
Head of Business Strategy
Sekisui Chemical Co., Ltd.

I would like to thank Mr. Ogawa for his valuable input. At the Sekisui Chemical Group, we strongly believe that in fulfilling our corporate social responsibility we are better placed to enhance our corporate value. This is in turn the very essence of our efforts to help ensure a sustainable society.

We will take his advice about increasing the correlation between management targets and CSR targets, such as personnel-related targets, and focus on clarifying our “integration” story for improving corporate value. We aim to promote deeper understanding among both internal and external stakeholders about the CSR initiatives of the Sekisui Chemical Group.

Moving forward, we will work diligently to ensure that the sustainable elements incorporated into the Group’s new Medium-term Management Plan SHIFT2019-Fusion- and our thoughts toward the new CSR conceptual scheme that takes into consideration the integration of business and CSR become deeply entrenched through Vision Caravans held in Japan and overseas as well as the planning and implementation of CSR training.

With our sights set firmly to the future, we will endeavor to achieve SDGs and other key targets. Both management and all employees will think long and hard, and work in unison to strengthen a structure that is capable of enhancing corporate value.