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Sustainability

Stakeholder Dialogues

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In March 2017, experts in various fields of corporate social responsibility (CSR) were invited to the Chiyoda Corporation and a Stakeholder Dialogues, which included employees, was held.
The Chiyoda Corporation formulated five CSR Visions in 2006. A decade has passed since then, and now as the external environment undergoes major change, we have begun a review of the CSR initiatives we undertake by means of our business. The dialogue here involved exchanges of view on a variety of topics, including society's corporate vision of an engineering company, recent movements in CSR, measures for building understanding among executives and employees, and expectations of the Chiyoda Corporation.

Outside Participants
Mr. Masao Seki Senior Advisor on CSR Sompo Japan Nipponkoa Insurance, Inc.
Mr. Masao Seki Senior Advisor on CSR
Sompo Japan Nipponkoa Insurance, Inc.
Ms. Mariko Kawaguchi Chief Researcher, Research Division Daiwa Institute of Research Ltd.
Ms. Mariko Kawaguchi Chief Researcher, Research Division
Daiwa Institute of Research Ltd.
Mr. Kenichi Takayasu Department of Economics Dokkyo University
Mr. Kenichi Takayasu Professor
Department of Economics
Dokkyo University
Mr. Katsuhiro Harada Meiji Gakuin University
Mr. Katsuhiro Harada Professor
Meiji Gakuin University
Chiyoda Corporation
Wada Maeda Nakamura
Mr. Shuichi Wada Senior Vice President & Division Director,
Corporate Planning & Management Division
Mr. Yasuyuki Maeda Associate Director, Corporate Risk Management Division
Ms. Kaoru Nakamura GM, PLC Planning & Administration Unit

The Image of the Engineering Business and of the Chiyoda Corporation

First of all, please tell us what your image is of the engineering industry and of the Chiyoda Corporation.

Kawaguchi

It may be because corporations in the engineering industry engage so consistently in global expansion, but they have the image of being very open and flat out on the surface. Maybe this is to say that they are not completely taken with the rigid formality found in organizations with a Japanese-style hierarchy. At industry organization events, for example, the way that everyone involves themselves in the work on equal terms, regardless of their years or experience, is actually rather moving, in a way.
Another thing is that I think that engineering companies are producing many personnel who are capable of performing in the global arena. The other side of this is that since their attention is turned to other countries, their appeal is not felt very much inside Japan, and that is too bad, I think.

Seki

It is definitely the case that this is not a business that people obtain goods and services from directly, so ordinary consumers in Japan may have difficulty picturing this business in some respects. On the other hand, from a perspective of knowledge about the engineering industry, the Chiyoda Corporation has an image of being very strong in the global business. My first impression was of a corporation that used its advanced technological capabilities to contribute to society, so that it was a corporation capable of making an impact that would change society.

A state of the Stakeholder Dialogues
Takayasu

I was deeply impressed by the Corporate Philosophy of “harmony between energy and the environment” that the Chiyoda Corporation has declared. These two elements appear to be incompatible at first glance, so how can they be made consistent and harmonized? I think that even just stating the meaning explicitly so people would gain a better understanding of it would be significant for society.
I also think that achieving “harmony between energy and the environment” is the core of the sustainable development goals (SDGs). The Chiyoda Corporation is equipped with the technology and the human resources to turn it into reality. That means there are higher expectations of its CSR than of other corporations' CSR, or, to rephrase, it means this corporation's responsibility is greater. That is exactly why I think that the corporate philosophy and other CSR statements should come right out and make the corporation the subject of the statements. Perhaps the corporation should say that “The Chiyoda Corporation does this,” and “We the employees do this,” and highlight this as part of the Chiyoda appeal. For example, the 2014 CSR report refers to the construction of an LNG plant in New Guinea. It says that as many as 2,500 people were hired and trained locally. In my specialty of development economics, this is an amazing achievement to do without ODA or any other government-level cooperation. I think that the corporation should understand this and actively broadcast it.

Harada

Just as Professor Takayasu says, engineering is an industry that bears a heavy responsibility to society. Going back to England in the 19th century, engineering was a crucial industry in the first place. That was why it was placed as one of the four pillars of industry, together with agriculture, manufacturing, and commerce. Even today, engineering covers a wide range of business areas. Engineering provides centralized management from planning to procurement and construction in civil works, construction, machines, equipment, and electrical fields. As such, the greater the societal responsibility of engineering is, the greater also are the functions it is called on to fulfill, and the expectations placed on it. I would like this to be understood.
The formulation of SDGs made it possible for governments, businesses, and NGOs to have that as a common language to use in advancing toward the same goal. The role taken on by the business sector with regard to economical and societal problems is extremely large. Chiyoda Corporation in particular has an extremely large value chain, so the business fields included in it probably fit under all seventeen of the SDG headings. The way these goals are addressed still leaves something to be examined, but we can say that the Chiyoda Corporation's businesses are very closely related to CSR.

Mr. Harada, Mr. Takayasu
Maeda

As all of you have been indicating, CSR is definitely not something to be implemented as an obligation or with any sense of being forced to do it. Instead, it's probably more important to match CSR activity with expectations. Just as the word responsibility sounds like response and ability, this gave me a renewed sense that having the capabilities to respond means that there are various possibilities of things that can be responded to.
My position is Head of Corporate Risk Management, and I think that thinking about risk also has many things in common with CSR. Risks are not simply bad things, or things that should be avoided. They are the inseparable other side of opportunities. I would like to think of managing risks as equivalent to making the most of opportunities, and deal with risk issues in an active, forward-looking way.

Risks and Opportunities that Arise When Responding to a Continually Changing External Environment

Recently I have been hearing more talk on the topic of SDGs, too, and I wonder about the external environment facing CSR and corporations today. What kinds of things are the latent risks in that environment?

Seki

The SDGs and the Paris Agreement adopted in 2015 constitute an extremely significant juncture. These are anticipated to provide bases and occasions for change in society within a long-term perspective, looking ahead to 2030 and 2050.
Speaking in terms of risk, climate-related information is coming to be taken as financial information, not as non-financial information. At the world level, there are also calls for making the transition to a low carbon society or a carbon-free society. The question then is what the risks and opportunities are for corporate activity under these circumstances. The thing to do first of all is to ascertain the risks and opportunities, draw up a scenario for forward movement by the corporation, and disclose it. As the change from past-oriented thinking to future-oriented thinking takes place, scenarios for responding to society's expectations and heightening corporate value are bound to take on an increasing importance.

Mr. Seki, Ms. Kawaguchi
Kawaguchi

It's certainly the case that initiatives aiming toward a carbon-free society have become something that is just naturally expected in the world today. For example, there is the phenomenon called divestment, in which investors withdraw their investments from corporations with coal or fossil fuel businesses. Or look at India, which is presently dependent on coal-fired thermal power generation, and the five-year plan starting in 2018 is for zero construction of new thermal power. Japan is a closed country with regard to these kinds of carbon-free movements. The government and government offices have reached their limit working on carbon reduction by saving energy, so they have fallen far behind and their focus is off. I feel that this situation also poses extremely large risks for business.
The same thing applies to ESG investment. Japan has been about a decade or more behind the trend in the rest of the world. Pension funds in Europe and America have been actively engaging in ESG investment for long-term management of their funds. This is investment that does not look just at the obvious financial information, but also places importance on the non-financial information relating to environmental, social, and governance (ESG) matters as a way of judging medium- and long-term growth. Principles for Responsible Investment, or PRI, was launched in 2006 to serves as a worldwide platform and encourage institutional investors in Europe and America to move in this direction.
In Japan, however, the situation is turned the other way around. Environmental measures are seen as contribution to society, and the notion that this is the same thing as going on strike is difficult to wipe out. As a result, a major gap developed between Japan's awareness and the world's awareness.
It was finally in 2014, however, that a stewardship code was adopted, and in 2015 that a corporate governance code was formulated. A platform was finally prepared upon which investors and corporations could engage in dialogue about long-term value. At present the Government Pension Investment Fund (GPIF) has begun to show an actively favorable stance toward ESG investment, and the situation is also taking on a different appearance, not just regarding CSR but IR as well. Can these changes be grasped and caught up with? Current movements can be either risks or opportunities for corporations, depending on the corporation's ability to respond.

Wada

Two of you have mentioned the 'carbon-free society' keyword, and we certainly do get the strong impression that Japanese corporations do not have their attention on carbon costs. Corporations in other countries are looking beyond the future burden and keeping their eyes on them as investments. It seems to me that this difference could sooner or later become a major risk. Perhaps worldwide movements are also undergoing changes in energy use and related areas.

Seki

I think that is the case. For example, at the COP21 business dialogues, Saudi Arabia issued a government statement that it would change over from an oil producing country to an energy producing country, and that it had already begun changing its direction. As society starts to undergo major changes, the attention paid to solutions provided by corporations is becoming much greater. Corporations also have to give careful thought to what kind of risks they may face in those transitions. For the Chiyoda Corporation, which can proclaim “harmony between energy and the environment” on the one hand while making contributions to energy saving and carbon reduction on the other, this seems likely to present major opportunities.

Wada

It seems that it is going to be important after all to maintain a strong awareness of the 17 SDG headings, even in regular business operations, and to take autonomous measures to address them. If we take these seriously, and think about them deeply, I expect that ideas for how to deal with them next are bound to emerge.

Harada

As I see it, we have come to a time when corporations have to shift the direction of their thinking. The time of the inside-out approach, when businesses responded to society's demands by legitimizing their own business and their own initiatives in a way that satisfies themselves, has come to its end. Instead, it is the time of the outside-in approach, when a corporation turns its eyes out upon the world to determine what kind of issues are being faced in society, and devises solutions to issues it can address using its own technology and know-how. Right now, I don't think that technology can even be used effectively unless this kind of shift in thinking takes place.
The things that Mr. Seki and Ms. Kawaguchi are talking about are global standards, but the present fact is that Japan hasn't yet been able to catch up with those movements.

Kawaguchi

Yes, I see. Certainly there are more than a few corporations that think they include ideas about CSR and SDGs in their core business, so with that they are achieving a sufficient contribution to society. In that case, however, why are social issues piling up a high as mountains this way? The reason is that even if the corporation has undertaken some initiative in that particular field, the scale of it is extremely small, or the initiative never advances beyond a one-sided perspective. For example, energy-saving products reduce our CO2 emissions, but if environmental destruction or human rights violations occur in developing countries during the course of manufacturing those products, this can't be termed a solution to a social issue. With all measures that are taken, it is absolutely necessary to trace back up the supply chain with a multifaceted view in order to take into account the impact on any negative factors that may be involved.

Maeda

The view you just expressed was very painfully on the mark. This company is in an industry that is based on receiving orders, so our culture and our stance are deeply rooted in an attitude of meeting the customer's demands with sincerity. On the other hand, no matter what, we tend to overlook aspects that the customer's demands don't touch on. Because we are a business that runs by receiving orders, I thought that deliberately incorporating the thinking that goes with a business that operates on creating orders would make us able to take a multifaceted perspective. Keeping a good balance of these approaches in combination may develop the kind of awareness that sees the opportunities in risks.

Chiyoda Group Participants
Seki

Another thing is that respect for human rights has recently been taking on new importance as a baseline for business. The Japanese government announced in November 2016 that would be formulating a national action plan (NAP) relating to business and human rights. For corporations, it is crucial not just to declare that the responsibility to respect human rights will be fulfilled, but also to engage in management to prevent the violation of human rights. In other words, implementing due diligence is important. I think that respect for human rights is going to be taking on increasing importance as a cross-connecting concept that runs in common through all the SDG objectives.

Deeper Understanding by Management and Diffusion are Both Critical Keys Within the Company Where Actions are Implemented

Your discussion has ranged broadly over world trends, external environment, and related matters. From this point, we will ask you to go down to a deeper level and tell us what will be necessary to link together the corporation's activities, CSR, and SDGs.

Takayasu

Having been in regular contact with students at the university, I have the sense that the younger generation is very much aware of CSR and contributions to society, and I feel that they might also have the ability to take action. For implementation of CSR in a corporation, the mind and inclinations of every individual employee is essential. The corporation, for its part, has to understand the importance of this, and take measures to develop it. Otherwise, I think the corporation might find itself left behind by external changes and unable to catch up with reforms that take place.

Seki

Just as Professor Takayasu says, it is extremely important to take measures to disseminate understanding among employees. The seventeen headings for SDGs will probably apply to any corporation's business. It is in the process of examining the specifics of the 169 targets that new business opportunities will almost certainly emerge. Naturally it is the top management that will direct this effort, and unfortunately, the top management of Japanese corporations has an extremely low level of SDGs understanding when compared to Europe and America. I think that the first step for top management will be to realize that the understanding that CSR and SDGs is directly linked to business opportunities.
After that, the key will be middle management. That is what links together top management and the employees who are on site. If efforts are made to achieve a diffusion of understanding of CSR and SDGs among those middle managers, then I think that effects can be anticipated for the company as a whole.

Nakamura

This phenomenon that was just mentioned of differences in awareness by generation, and the understanding of top management, is a point of great importance when it comes to CSR activities in a corporation. This made me realize very vividly that it is important, after all, to go from top management's understanding and toss out individual measures top-down. Also, in order to have individual employees feel satisfied that they understand what is involved and connect operations with SDGs, it may also be necessary to use key performance indicators (KPIs).

Kawaguchi

When we say CSR, there is a tendency to think that means activities carried out with the department or unit in charge as the main player. I think it is important to develop a solid company-wide understanding. Of course, the department or unit in charge will take a leading role in the activity, but it will also be necessary to take steps to involve the whole company. For instance, it can be effective to use in-house newsletters and other such means as tools to disseminate understanding. In projects that generate many local hires, such as the Papua New Guinea project, we find very fine examples that should be disseminated more widely. Move continuously to monitor local on-site circumstances, then perform studies, provide the results as feedback, and this will contribute to heightened motivation.

Harada

I think it can also be effective to use mass media to take up the matter. Up to now, there has not been very much information available relating to corporate CSR in Japan, in particular, and the degree of attention paid to it has not been particularly high. For that very reason, I think that actively disseminating a variety of information from the corporation side could highlight the appeal of these activities, while also involve mass media.

Takayasu

As something to be done within the company, it will probably also be necessary to have an arrangement for bidirectional sharing and coordination of information between sites and headquarters. This is because, unless each side can grasp what kind of information the other side has, and what they are thinking about it, it won't be possible to consider CSR and business matters from a company-wide perspective.

Kawaguchi

Yes, it's certainly the case that just because you are on-site does not necessarily mean that you have a deep understanding. For example, there are many problems, such as water shortages, disrespect for human rights, refugee problems, and so on, that are rather difficult to perceive with a solid sense of reality when looking at Japan. The same thing is also true for someone who is on-site, for instance, if he or she is working with thoughts given only to Japan headquarters, and not looking at the local society. It is necessary to take a stance of gazing directly upon the phenomena occurring in the world, without looking at it through the filter of Japan. For that, I think it is going to become important to develop human resources with the ability to collect information about the local situation and disseminate it to headquarters, or to the whole company.

Outside Participants
Nakamura

CSR is a matter for the company as a whole, what we might call an issue for all members of the company. It may be that having interest in this matter become rigidly fixed to a certain group could pose the greatest risk of all. Since the world at large is shifting to a climate in which a corporation's measures and its value have to be well and thoroughly communicated, I think it will be necessary for corporations to reform their awareness, to shift from CSR to creating shared value, or CSV, and to heighten their corporate value while highlighting the appeal of what they are doing.
What kind of driving force, do you think, would provide the shortest route to the greatest effect when promoting measures of this kind?

千代田グループ参加者
Kawaguchi

Perhaps, after all, the first step will be to shake loose from the notion that CSR is something to be implemented by just some parts of the company. If that mindset can be changed, then there are certain to be many opportunities to put CSR into practice in day-to-day business scenarios, and to highlight its appeal for others. For example, when negotiating the construction of a plant, involve your company's and the other company's CSR managers and suggest an index to mark the achievement of energy saving. In other words, the capability to propose the kind of added value that the Chiyoda Corporation business can provide from the sustainability perspective transcends the walls between company departments and corporations, and can also contribute to the resolution of issues for both sides.

Aggressive CSR that Tells a Compelling Story Will Lead to the Contribution of a Future Society

Our Company is slated to review our CSR and undergo a process of putting it into practice. Please tell us what you expect or anticipate from the Chiyoda Corporation.

Takayasu

CSR is something that should change with the external environment so that what is demanded of a company and what measures it takes are also made to evolve. I think that the attitude trying to rethink CSR in a new way is very much to the point. Since apparently this is something that measures are going to be taken for, it may be good to define its target year to coincide with the SDGs in 2030, and proceed with rebuilding. Then what will be important for encouraging all of the individual employees to transform their actions is a compelling, quality story. This is not simply a matter of highlighting the appeal of company activities. Please develop an approach with a compelling, concrete story line that tells how society is going to change by means of the Chiyoda Corporation's activities, and what kind of influence this will have on their own lives. Human beings are able to throw themselves actively into things that are enjoyable because they are interesting. I would like to see you put into practice CSR measures that are so attractive that you can become absorbed in them, and communicate their appeal to people.

Seki

At this time, the Chiyoda Corporation is properly doing all the things for CSR that it should be doing. However, although the company is engaging in measures seriously and sincerely, at the same time it gives an undeniable impression of being somewhat in a defensive mode. This is exactly why I think you should take advantage of the timing of this review and switch over to a more aggressive CSR. As Professor Takayasu also pointed out, the company should engage in unfolding a compelling story and using that to communicate its appeal.

Harada

A corporation is an organizational entity that can exist precisely because it is useful to society. This is something that the concepts of both CSR and CSV have in common. Business is essentially something that is good for society, and it seems to me that the conceptual approach regarding CSR has returned to its origin, where it asks what can be accomplished by means of the core business. What true value this will produce is going to depend on the results of measures that are taken from this point forward. As has already come up in this discussion, what is important is to frame a clear statement that will allow all the employees individually to understand the significance of CSR, as well as the future that the corporation is aiming to achieve by means of its activities. There is a kind of thinking that says when a social issue is resolved and the result yields a profit, that is business. I think this way of thinking should be shared throughout the entire organization.
In the future, the use of renewable energy sources will grow ever more active, and beyond that, the aim will be to realize a hydrogen society and so on. The Chiyoda Corporation's technology and know-how should be able to make a considerable contribution in this. Society's expectations of the company will also no doubt grow larger accordingly. What will you be able to do for the society of the future? What useful function will you provide for stakeholders? When you do your best to think through these questions, I think you are also bound to find that your business opportunities are growing greater and greater in breadth.

Wada

I want to thank you all for sharing your great range of views and opinions with us today. We will use what you have said as a reference in our review of this company's CSR, and I hope we will conceive new steps forward that we can take. There is little point to CSR if it is only really understood by people sitting in conference rooms. I hope that we can involve the whole company in this, and that we can initiate actions that will cause every one of our employees to obtain a correct and deeper understanding, and which will allow us to increase the number of friends and colleagues who launch real actions themselves.

Thank you very much.