Priority Issues and their Correspondence to Investor and Customer Needs

MOTOKI :

When I looked into how many JSR shareholders signed the Principles for Responsible Investment (PRI) required by the UN, principles that investors consider ESG (Environment, Society, and Governance) issues when choosing which company to invest in, I found that over two-thirds of major corporate investors had signed. As ESG efforts are already part of the six principles of PRI, this illustrates that many of your shareholders place importance on ESG; and I believe that investors, who place importance on ESG evaluate the JSR Group not only by business results but also by non-financial factors disclosed in the CSR Report and other sources.
For example, long-term investors that incorporate ESG perspectives such as pension funds do not typically change their share portfolios often. They tend to hold onto their assets for five or ten years, or even longer. It can be said that JSR Group CSR is contributing significantly to the building of a stable investor base. It would seem that the JSR Group and its investors are in alignment regarding increasing corporate value over the long term.

HIRANO :

I recognize that investors are interested in ESG. We hold around 300 meetings each year with investors both in Japan and overseas. I always ask about the investors' perspective of ESG at these meetings, and I found that ESG is basically an "initial screen" for evaluation as an investment option. Making our ESG attractive for investors is not just a matter of disclosing information on ESG efforts. We have to engage in appropriate activities as a corporate citizen while also delivering results.

AKIYAMA :

Investors expect a return on their investment. Ultimately, they want companies to create new technologies or business models that address environmental and other issues facing society, and, in doing so, grow as a company. To begin with, ESG is not intended as tool for the evaluation of activities separate from business. I completely agree that ESG is an "initial screen" because if the evaluation of the company is negative, it would not even be considered as an investment option. As the JSR Group continues to integrate CSR with management, potential investors will consider how CSR is linked with the business, and how the business will lead to solutions for issues facing society and contribute to society while also improving results.

MOTOKI :

Investors that focus on ESG have their own policies and criteria regarding such issues as climate change and water conservation that they use to evaluate companies. In this sense, only companies that conform to those policies and criteria survive the "initial screen." Of course, expectations regarding ESG will also continually increase. Investors have ever-increasing access to information on companies. Even if a company makes it through the "initial screen," it may not continue to merit consideration if it does not continue to improve its CSR and results.

AKIYAMA :

I think it is very good for the JSR Group to take foreign stakeholder opinion into consideration when selecting priority issues. I do not think there are many Japanese companies that do this. I expect CSR to play an increasingly important role both in Japan and overseas, and so it is important for companies to incorporate this perspective into their business.
As providing an effective, high-quality, and stable supply of products is the most critical priority issue, how is CSR related to product R&D and manufacturing technologies?

KAWAHASHI :

We conduct several design reviews^* over the course of initial research and development through final release to the market, and environmental impact checks are always included in these reviews. These repeated design reviews also help increase awareness and employee commitment to CSR.

* Design review: Reviews conducted at each stage of development to ensure that materials, production processes, product performance, functionality, and quality satisfy predetermined criteria before the product can advance to the next development stage. The review items include energy-saving, resource conservation, improved recyclability, and reduction of hazardous materials.

NODA :

As I'm involved in promoting the implementation of the international CSR reporting guidelines, or "GRI Sustainability Reporting Guidelines," I feel that Japanese companies tend to become too focused on filling in the details. The purpose of the guidelines is not to show the status of achievement by filling in the details. The real purpose is to communicate transparently with stakeholders about the processes of initiatives aimed at solving issues facing society. There is a risk of allowing the focus on format to interfere with our ability to communicate the actual initiatives.

KAWAHASHI :

In the case of our Life Sciences Business, we chose the direction of our research and development considering issues facing society by deciding to focus on a cutting-edge diagnostic system using our own materials. This was in response to the shift in healthcare from treatment to prevention. On the other hand, most research and development is conducted on the basis of customer need. While it may appear that there is no connection with issues facing society, this is not actually the case. When I was working in the LCD (Liquid Crystal Display) Materials Department, we had a request to make screens look brighter. My first thought was that the request was based on the simple desire to make the screens look better. As I thought deeper, however, I realized screens that look brighter help reduce power consumption, which in turn leads to energy-saving. In other words, there are many cases in which focusing on customer needs produces the same social benefit as focusing specifically on how to address individual issues. I think the way we look at CSR will change when we get into the habit of thinking that understanding customer needs may lead to a response to social needs.

Engagement is Essential in Promoting the Integration of Management and CSR

NODA :

I felt that the way in which we seek mutual understanding with stakeholders, or in other words, how we engage with stakeholders, was unclear. Mono-directional communication through the website and CSR reports is not sufficient. Opinions on all sides can be incorporated into CSR through active engagement with stakeholders. As values and cultures overseas are different, there is a risk if engagement is not handled properly. I think that how we engage and how we build trusting relationships with stakeholders are both important issues that need to be considered going forward. There is a need to know the range of stakeholders that are interested in the company's business activities and also to always be aware of the trends.

NEJIGAKI :

It is not easy to engage with stakeholders even in Japan. What should we be thinking about?

NODA :

There was mention of identifying issues when expanding overseas. One method is to advance engagement by creating opportunities for dialogue with a wider range of stakeholders. It may also be effective to hear from NGOs and experts in various fields. As JSR already holds 300 meetings with investors annually, simply organizing and communicating meeting details should make a change. Furthermore, the importance of priority issues changes depending on the person you are listening to. For this reason, balance must be maintained.

NEJIGAKI :

I heard opinions from overseas for the first time during the process of identifying our current priority issues. In 2015, we organized a CSR Caravan to the US and Europe to discuss CSR initiatives, philosophies, and the Corporate Mission. In 2016, we plan to have CSR Caravans to China and South Korea. We intend to strengthen this initiative in the future to increase awareness of CSR.

NODA :

I learned that the JSR Group is a leading company in establishing and increasing awareness of CSR. One example of this is the inclusion of CSR from the research and development stage. "Communication" is an initiative that I hope JSR would focus more on in the future. In doing so, it is important to think about the various stakeholders and consider how to communicate in way that is easy to understand. Using SDGs or similar global indicators, for example, can help you to communicate more effectively.

MOTOKI :

I feel it would be better to express the concept that the JSR Group anticipates the needs of society as we look ahead to meet customer needs. The JSR Group can better emphasize the direction in which it is moving by connecting each environmentally friendly product with SDGs and other concepts shared by international society. I think sharing scenarios and social vision for business development 10 to 20 years in the future and their realization in the context of current business and CSR will enable better JSR Group CSR communication.
Specifically, I think adding initiatives that "adapt" and prepare for the impact of global warming to current climate change "mitigation" will further improve our effectiveness in communicating initiatives. As this is a global issue, I believe it would lead to greater attention.

AKIYAMA :

I completely agree with what both of you have said. Allow me to add that I think communicating the greatness of the corporate culture, something I felt strongly during dialogue with young employees, in CSR Report 2015 would be a nice idea. Furthermore, I feel that these great concepts and activities have not been effectively highlighted as a result of the modesty with which the Japanese tend to communicate. This is unfortunate. I hope the JSR Group will communicate its goodness more actively with the "glocal" concept in mind when engaging overseas. In doing so, I think it is important to communicate with focused story-telling.

KAWAHASHI :

"Glocal" is the term that stands out for me the most in today's discussion. As disseminating the concept in Japan as well as overseas is related to core issues such as human rights, I would like to handle it carefully.

NAKAYAMA :

While JSR certainly excels in technology and numbers, the Group's software may be weak. There is also a culture of not communicating thoroughly. This approach will not lead to success on the global level. As I reaffirmed that we must be more active in achieving mutual understanding, I hope to overcome this challenge as we move forward.

HIRANO :

I was able to reaffirm the importance of communication, the method of communicating and mutual understanding through dialogue. I also recognized anew the importance in both global and local situations of conveying our way of thinking after having heard voices from other locations. For both CSR and ESG, there is no need to rush into disseminating the philosophy. I hope to take sure steps even if it may take time. The reason for this is that the Corporate Mission is something like a set of unwritten family rules, a way of thinking I feel may take 10 to 20 years to become a part of everyone's consciousness.
I believe we are doing what we should with regard to CSR, and I would like to continue integrating CSR with management while analyzing and reviewing the issues.

NEJIGAKI :

I feel that the challenge of promoting CSR while trying to grasp social trends has become clearer during today's discussion. I look forward to incorporating everyone's advice and opinions into future activities.
Thank you for your time today.