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CSR Report 2014

Doing Business Involves Consuming the Earth’s Resources; We Aspire to Become a Company that Does Business in the Best Way Imaginable

JSR Roppongi Club

Developing the foundation that enables the Group to create environmental value in all of its business processes

Dr. Adachi: I’d like to hear about how much the progress has been made on the issues raised during the last year’s dialogue.
Kubo: With regard to an alternative method to procure butadiene from biomass, that doesn’t rely on the traditional by-product, this issue is in the study stage.
Hirano: We are investing in and ardently conducting this study. We may need to search for a breakthrough, but when it is found, we may be able to change the world.
Kubo: We recently created a chart illustrating how we can enrich society through materials (see page 5). We are also considering clarifying what is being done and what is not being done yet in terms of environmental consideration for each business process, and systematically prioritizing what we need to do. One issue for the future that has been raised is how to gain an understanding of suppliers’ environmental impact.
Mr. Motoki: You are addressing the issues directly. It’s wonderful. You are looking at the entire value chain while addressing these issues, which I think is an important stance. In my view, contributing to energy conservation and low fuel consumption with S-SBR for fuel-efficient tires is particularly important when taking into account that car sales are likely to increase rapidly mainly in developing and emerging markets.
Dr. Suzue: You are trying to visualize and share what you need to do within the Group. I think this is very good. Companies cannot work on all issues simultaneously due to budget limitations, so they inevitably must choose which issues they will focus on. JSR has been addressing GHG emissions and water consumption throughout its value chain. Not many companies in Japan are doing this. Your estimations of GHG emissions and water used by each tier of your suppliers should be fully utilized to reduce them to a minimum.
Dr. Adachi: As more and more organizations begin to control Scope 3 (indirect GHG emissions throughout the supply chain) as well, the JSR Group’s stance to pursue total optimization throughout its supply chain, from the highest upstream point to the lowest downstream point, will become a great strength for the Group. The most important question is how to quantify the effects of your efforts. The Group needs to find an easy-to-understand way of communicating the effects within and outside of the Group.
Kawasaki: To publicize and symbolize our environmental efforts, we have been thinking about attaching a label to our products like the one used for fuel-efficient tires. But because we are not sure whether such a label will really lead to differentiation of our products, we still cannot decide on it.
Shimizu: When developing the E2 Initiative, we considered making a self-declaration conforming to high standards of environmental management such as by using a third-party certification. But because of the difficulty of assuring reliability and objectivity of the declaration, we gave up this plan.
Dr. Suzue: If there is a label that can be recognized by everyone, it would be ideal. But I think your Group’s own label will still work effectively. At this stage, even if the stated standards are the Group’s own standards and the figures published are based on such standards, I think you still can effectively differentiate yourself from others in the area of the environment.
Mr. Motoki: When you create your own standards, I recommend you let several NGOs and academic experts take part in the process and listen to their opinions to avoid being inclined toward complacency. By doing so, you can also expect possible positive side effects, such as the possibility that members of participating NGOs may become your fans or supporters and introduce your activities to others.
Dr. Adachi: Since the JSR Group engages in business-to-business sales, you probably often discuss the details of technical specifications with your customers. Similarly, in terms of environmental performance, you can simply present figures and logic to your customers, and they should understand what those indexes mean. The same can be said with communication with investors with an interest in ESG (environmental, social and governance) issues. As long as you can present the necessary indexes, such as those that indicate how your environmental performance is superior to your competitors, you can show your competitive advantage to a sufficient degree.
Mr. Motoki:

Mr. Motoki

I attended the Shared Value Summit held in New York in May. I saw many people from NGOs, government agencies, educational institutions, and various other organizations participating in the summit. There were also responsible investment representatives from the International Finance Corporation (IFC), BlackRock, the world’s largest asset management company, and other financial institutions at the venue, which demonstrated the high level of investor interest in shared value initiative. Seeing these people, I felt that we are now at a time where companies can proudly publish that their social and environmental efforts increase their revenue and that this is accepted by the public. As a matter of fact, globally responsible investment under management assets currently amount to 13.6 trillion dollars, accounting for approximately 22% of total assets, including developing countries' assets, managed around the world. When it comes to ESG assets, the investment volume is estimated at 6.2 trillion dollars, of which Europe and the United States account for 49% and 11%, respectively, while the percentage for Japan is as low as 0.2%. Since investors with a longer-term perspective, such as pension funds, are more interested in ESG investments than short-term investors, companies that are good at CSR publicity may be able to acquire long-term, stable investors.
Shimizu: I have one question. I have a feeling that decisions to make socially responsible investments (SRI) and ESG investments are currently made based on negative screening. It appears on the surface that these decisions are based on positive screening—in other words, investing in companies that are most considerate to the environment. However, it seems to me that the decisions are actually made based essentially on negative screening—in other words, investing in companies with minimal risk of environmental management problems or litigation risk. If this is the case, we perhaps cannot say that investors truly understand the importance of protecting the environment.
Dr. Adachi:


SRI originally started from the idea of screening out companies whose values do not agree with those of investors, and in this sense, as you have pointed out, SRI decisions are based primarily on negative screening. ESG investing, which is advancing mainly in Europe, is also based primarily on negative screening. Investors avoid companies with high risk that do not meet the minimum expected ESG standards. However, one thing that we need to pay attention to is the fact that their “minimum expected standards” are gradually being raised. For example, what companies were expected to do before was to take measures against global warming by simply reducing CO2 emissions, but companies are now expected to take measures to adapt to climate change. Companies should be aware that they are now expected to have very proactive attitudes toward protecting the environment.
Hirano: We never take SRI or ESG lightly. The ratio of shareholding by foreign investors at JSR has increased by 10 points over the past five years. If these investors attach importance to SRI and ESG as well as financial factors, this increase in the ratio shows that JSR’s social and environmental efforts meet their expected standards. At the same time, however, I also think that corporate activities are not just for the benefit of investors.
Kubo: JSR promotes CSR for the benefit of society at large, and I believe that the expansion of our business will naturally lead to the welfare of the world and will therefore be rated highly by investors as well. In last year’s dialogue, Dr. Itaru Yasui said, “While doing business inevitably involves consuming the Earth’s resources, I want the JSR Group to become a company that can assure us that it is doing business in the best way imaginable.” Although it is challenging in reality for us alone to lead society at large, we need to become a company that does business in the best way imaginable and communicate this commitment to society.

Integrating CSR and business management and assisting in coming up with solutions for social issues through materials

Dr. Adachi: Finally, I’d like each of us to express our impressions of today’s dialogue and our expectations toward the JSR Group.
Mr. Motoki: The JSR Group’s vision to offer solutions for various global and social issues through materials carries a great competitive advantage. I think this is one of the most attractive strengths of the Group. There are many roles that companies can play for society, and the top management of the Group is very eager to contribute to society, making the work environment a highly environmental and social conscious one. In the future, I’d like to see the Group more clearly demonstrate its intentions to integrate CSR and sustainability activities with business management. When the Group’s CSR and sustainability efforts are introduced on the website, this should be done in such a way that the integration with business management can be recognized, rather than simply reporting efforts that were taken on CSR webpages.
Dr. Suzue:


When we as NGOs talk about biodiversity, we do so from the perspective of “protecting organisms.” But when it comes to companies, they contribute to biodiversity based on the sustainability of their business activities. In this sense, the JSR Group should see the environment, social contribution, and CSR holistically, rather than as separate entities, under the common vision of sustainability of the Group, to differentiate its environmental management from that of other companies. Another point I want to make concerns the message of “Materials Innovation” and E2 Initiative measures. Because they are already very easy to understand, it is probably better for the Group to only refine and emphasize the characteristics of the existing message and measures taken rather than excessively presenting abstract goals and plans, to ensure that they will remain straightforward for the public. I look forward to the Group’s environment-conscious management further progressing and growing to become a model for other companies.
Dr. Adachi: Employees at the JSR Group are very diligent, so my advice is to forget about being serious for a moment and freely discuss and form a vision of what kind of bright future can be created when your technologies are disseminated around the world. Another thing I want to point out is the importance of water. Although we couldn’t discuss this issue today, I’m sure that water will become an important environmental issue. While water is a precious resource, only some companies in Japan such as beverage makers are seriously taking on the issue. I think chemical companies will also need to start addressing the issue sooner or later. I hope that this issue will be discussed in next year’s dialogue.
Shimizu: I have learned much from the comments you have given, made from a broad perspective. Your comments have supported me that our basic direction is correct. On the other hand, our lack of publicity, which we ourselves had suspected was a problem, has been brought to light today, confirming our need to act. I realize that we need to think more strategically about how we can turn necessary CR costs into benefits and how we can communicate our achievements to the public.
Hirano: I had thought that the JSR Group is at least recognized as, if not synonymous with, an environment-friendly company, but you have pointed out that our publicity efforts have so far been insufficient. Thank you for pointing this out. Finally, if I may say at the risk of being misunderstood, I feel strongly that it is important for us, who are actually engaging in business activities, to have a “battle of opinions” with people from a different standpoint—i.e. experts and NGO representatives like you. I would appreciate it if you could give us this kind of opportunity for dialogue again.
Kawasaki: When the JSR Group started thinking about what we could do to support biodiversity, we had an opportunity to discuss the matter with Mr. Adachi. Through this dialogue, we realized that what we need to do is not to save polar bears but rather engage in activities more associated with our business. This is why we developed a mid-term business plan that enables us to deepen our CSR efforts in a step-by-step manner, starting from the focus on biodiversity in material procurement and land use to the Group’s interface with society and the development of environment-friendly products. From today’s dialogue, I was able to reconfirm that this direction was the correct one to take. Based on what we discussed today, we will think more deeply about the environment and safety with our colleagues and will show you the results at the next opportunity for dialogue.
Kubo: This was a very good dialogue in which we were able to frankly discuss issues based on your experiences at the Yokkaichi Plant. Thank you very much.


CSR Report 2014