Please provide your views on the effective “Supervisory” function of the Board of Directors in corporate governance.

As a corporate purpose of how to provide value to society, we are committed to our Vision Statement, “To realize sustainable society, we support the basis of LIFE and will continue to create ‘peace of mind for generation to come’.” I believe that the function of the Board is supervising and providing the necessary support to ensure that the executive side is able to pursue this story toward this purpose most effectively in a way that is in line with social norms and with the trust of all stakeholders, including shareholders, employees, and the community.

In general, the Board of Directors is said to have a supervisory function, but in the SEKISUI CHEMICAL Group, the Divisional Company Presidents perform both executive and supervisory duties as Directors. Please tell us your thoughts about this arrangement.

In order to achieve the purpose of a company, it is a prerequisite for the executive side and the Board of Directors to deepen constructive dialogue and manage effectively, and I think that the way of governance to achieve that purpose may vary from company to company. In addition, our goal is to promote management while balancing the growth of the company and the resolution of social issues through Products to Enhance Sustainability. While the Headquarters plays a role in commercializing new businesses and new technologies due to their characteristics, strategic planning and budget management are carried out for each business under each company for individual technologies and products in existing businesses. This means that, in order to effectively supervise the portfolio of all businesses at the company-wide level, it is indispensable to conduct deliberations based on an understanding of important elemental technologies, product development, market trends, and competitiveness. Based on these considerations, I believe that it is very important from the perspective of governance that each company director is a member of the Board of Directors.

What is your evaluation of the effectiveness of the Group’s Board of Directors and the manner in which they are remunerated?

It has been one year since I became an Outside Director. I think that the information necessary for deliberation is provided in advance, briefings are held, and discussions on issues are held at the appropriate time. In addition, the discussions at board meetings are vigorously expressed from various perspectives. In particular, while some board meetings tend to become Q&A sessions in which the executive side answers questions from outside directors, I appreciate that the Board of Directors at the SEKISUI CHEMICAL Group discusses issues down to the level of “what do we need to do more to get to the next stage,” which ensures extremely high effectiveness.

As for remuneration, it is discussed at the voluntary Nomination and Remuneration Advisory Committee composed of the majority of people from outside the company, and a resolution is adopted at the Board of Directors, so transparency is ensured. On the other hand, I believe that the remuneration level itself and the remuneration system should be continuously reviewed and flexible changes should be considered. The background is that in addition to the capability to manage a company with such a competitive global technology, considering the company-wide risks caused by operating globally, I think that we should consider a more global level of remuneration.

Changing the remuneration of senior management, centered on the President, to a level that is more conscious of global competition will naturally link to changes in employee remuneration levels, the remuneration system, and KPIs. As a result, I believe that it will be easier to recruit the human resources necessary for our growth, and the review of the remuneration system will lead to the evolution of the company’s overall capability to be truly competitive globally.

The target year of the SEKISUI CHEMICAL Group’s long-term vision “Vision 2030” is only six years away. What do you think we should be aware of now to achieve it?
Please also tell us your thoughts on M&A that has not been implemented since the previous Medium-term Management Plan.

When we hear about medium-term goals, we tend to be conscious of numerical goals. However, what I attach importance to is what we want to provide to society, that is, how far has the social implementation of technology, products, and mechanisms advanced to achieve the wonderful idea of “To realize sustainable society, we support the basis of LIFE and will continue to create ‘peace of mind for generation to come’.” If this is going well, the numerical results will follow.

Regarding the strategic investment framework, while focusing on investment priorities, investment scale, and organizational capacity improvement for organic growth, when it is necessary to acquire and solve time and capacity gaps at once, I believe that it will be necessary to flexibly incorporate M&A without hesitation. Headquarters and each company are preparing for this, but it is important to always update the long list and short list and continue our investigations.

In addition, in my experience, M&A does not simply end at the closing of the transaction. Although it is easy to be blinded by only the idea of M&A that is in front of you, problems are not solved in one go, and it is necessary to consider further growth strategies that begin from the M&A, such as “what kind of investment is necessary next?” and “what kind of capabilities should be incorporated through additional M&A?” I also try to discuss from this perspective during M&A deliberations at board meetings.

In the financial market, there is a need for management that is aware of capital costs such as improving PBR and ROIC, and improves corporate value.
Please share your views from the perspective of management on what should be considered on the finance side in response to market demands.

I am aware of the perspective of capital efficiency. I believe that it is important to continue to carry out self-inspection on whether we are conducting management to maximize the value of “peace of mind for generations to come” that we provide to society, including investment in human capital.

Regarding PBR, ROIC, etc., our company management is fully aware of various perspectives, but at the same time, I believe that it is important to further increase risk tolerance based on growth potential and free cash flow. As free cash flow continues to increase as we grow, we will have scope to invest, so I am always aware of this virtuous cycle.

I have heard that investors often ask, “What are the most important management indicators?” and in order to make our company easy to understand, I think that the best answer is to say, “If you can see how much our Products to Enhance Sustainability are being implemented in society, you can see that our company’s value is improving.”

In recent years, there is a need to build businesses based on sustainability, and to address potential risks such as climate change and human rights.
Please share your thoughts on the potential internal and external impacts and the challenges for us, as we position Products to Enhance Sustainability as the most important KPI that account for 75% of sales.

In order to grasp and manage our efforts related to environmental issues in a holistic and quantitative manner, we use methods such as LIME2 and impact-weighted accounting to visualize the load and contribution of corporate activities on natural and social capital and the impact on management. LIME2 is one type of environmental impact assessment method, and if it becomes the standard method, it will be a great advantage for us. However, at present, various ideas and methods are still being proposed, so I think that it is effective to disseminate information, appeal to other companies, and provide support externally so that the LIME2 method would be recognized and become the standard method.

To that end, I think it is important that we first communicate the impacts of our Products to Enhance Sustainability that I mentioned earlier to stakeholders in a broad and easy-to-understand manner while quantitatively and firmly showing the parts that can be presented.

How do you see the importance of innovation for us?
Also, what do you think is necessary to ensure our competitive advantage?

In-house research is significant, so it is important to strengthen cooperation between Headquarters and the divisional companies more than ever, but we should avoid losing opportunities by focusing too much on our company and our own department. In order to realize our Vision Statement “Innovation for the Earth,” I believe that it is most necessary to further strengthen access to technology seeds around the world, and multiply the social implementation capabilities of the seeds and our company to increase the number of candidates for the next product developed with overwhelming speed, competitiveness, and technical level. We are still actively promoting open innovation, and it is important to collaborate and cooperate with the outside world to promote research more widely.

On the other hand, I believe that for products and businesses that have become commoditized and have competitors that are more competitive than us, we need to be aware of the appropriate timing, consider business transfers, and constantly strengthen a business portfolio that has growth potential and competitiveness.

AI is also increasing its influence as a partner in manufacturing.
Please tell us your thoughts on what is required for human capital.

Generative AI, VR, AR, and the Metaverse have already transitioned from their early stages to widespread adoption, and they are commonplace in our daily lives. I think we are at a stage where we should actively utilize these technologies in various situations in each business and each job, evolve them under certain rules, and turn each technological evolution into a competitive advantage for our company. However, because these technologies are evolving at an extremely fast pace, there is an urgent need to build the organizational capacity that will allow us to deploy a certain number of expert personnel internally and respond flexibly to user needs.

In addition, in order to develop technologies related to the essence of our competitiveness and use AI in areas such as production technology and quality, it is necessary to deploy human resources with advanced business knowledge and capabilities in application of AI. Since it is necessary to look at a wide range of talent pools, including internal and external personnel, I believe we must respond flexibly in terms of employment forms and remuneration.

Expanding overseas sales is the key to achieving the Long-term Vision.
Along with the importance of diversity, what kind of corporate culture and common understanding do you think is effective for global business development?

Our company has a purpose of “creating peace of mind for generations to come” and has the value of “3S spirit,” so we should keep repeating them Now, I think it’s important to repeat and share what we want to do most.

Although I myself have been involved in the management of a merged company, at that time, I continued to simply tell people what our company wants to do and what it values, and these common understandings permeated no matter where in the world I went. If you keep telling them, they will eventually be convinced. When you are convinced, I think that each person will use the values of the company as their judgment standard every day, and this will also become the basis for action. In addition, I believe that the more opportunities there are for discussing “what the SEKISUI CHEMICAL Group wants to do now” using internal training, exchanges with overseas bases, and exchanges between companies, the more it will be possible to form a unified culture.

We are currently working to foster a “Culture that Embraces Challenge,” but I think it is easy to understand when we link why we want employees to take on challenges and the reasons for the challenges, to our Purpose. In addition, it is important to specifically demonstrate how the results of taking on challenges will be evaluated when they are not successful, especially when we say “do not fear failure,” because this will contribute to individual careers and the growth of the organization.

Finally, please tell me your thoughts on what you want the stock market to expect from the SEKISUI CHEMICAL Group.

When I assumed the position of Outside Director myself, I repeatedly asked myself how I could contribute to the improvement of corporate value as a Director of a company with multiple businesses and diverse technologies, along with the first impression that it is a company rich in contribution to society with great technology. From the perspective of the stock market, there is a similar aspect, and I think that it is difficult for investors to understand the relationship between the value of the individual businesses and individual technologies and the overall corporate value.

What we want to do is to contribute to society through Products to Enhance Sustainability in order to achieve the Purpose of “creating peace of mind for generations to come.” I believe that it is important to continue to expand our Products to Enhance Sustainability using our technology and promote the value we provide to society by solving issues that are at the root of life. I think that if people come to appreciate our story of value creation more, it is actually a very easy-to-understand company, and I believe it is essential for our company to communicate our ability to create social value and shareholder value in a simpler and more understandable manner.