Materiality and Sustainability ManagementJSR Group’s Materiality (Priority Issues)
1. JSR Group’s Materiality
Under our Corporate Mission of “Materials Innovation - We create value through materials to enrich society, people and the environment,” we aim to help bring about a sustainable environment and society by creating value through corporate activity. In 2015, we identified priority issues (in other words, our “materiality”) based on this mission by organizing them with a matrix comprised of two axes; namely, “Importance for the JSR Group (Internal Factors)” and “Importance for Stakeholders (External Factors).” Looking to advance sustainability management through “integrated thinking,”* we plan to reassess the materiality that we specified back then in conjunction with our preparation of a set of new medium-term management policies.
* Integrated thinking: A way of thinking that sees corporate activity in its entirety by integrating financial and non-financial information
We originally planned to implement the new medium-term management policies in FY2020. However, with the global COVID-19 pandemic and uncertainties in the petrochemical market, we decided to postpone its announcement to focus on responding to the crises at hand. Nonetheless, we have been reassessing our materiality through the "JSR Sustainability Challenge," an effort to reorganize our materiality from two aspects―"Business Activity" and "Management Foundation"―based on points raised in a dialogue with experts we held in 2019. We completed our reassessment of the Business Activity component in 2019, and last year we did the same for the Management Foundation component. We are applying the results of these efforts in formulating medium-term management policies that will be presented in the “JSR Report.”
• JSR Group’s Materiality
We believe that these areas of materiality will evolve amid continuing changes in what society demands of us as well as in our various stakeholders' views and needs. We will therefore continue to review and identify materiality through the following operations.
- 1) Each year, we will confirm validity by conducting checks through engagement with experts, employees, responsible care activities, and the like.
- 2) Whenever we formulate new medium-term management policies, we will ensure (and periodically review) the transparency and acceptability of the processes that we apply when specifying materiality by exchanging views with experts.
In addition, we asked Mr. Keisuke Takegahara of the Development Bank of Japan, Inc. who enlightened us with his views during the 2019 dialogue with experts and through the “JSR Sustainability Challenge,” to comment on our freshly reorganized materiality following our reassessment of the recent Management Foundation component.
We will continue promoting sustainability management across the entire JSR Group by taking Mr. Takegahara's insights into account.
Looking back at the process of developing the “new materiality” from the 2019 dialogue
Executive Fellow and General Manager of the Research Institute of Capital Formation, Head of the Research Center on Financial Economics, Development Bank of Japan, Inc.
Member of METI’s “The Study Group on Environmental Innovation Finance”
Member of the “TCFD Consortium Steering Committee”
First of all, I wish to express my respect for your efforts over the past two years, as you have endeavored to specify materiality that reflects the characteristics of your company in terms of both its business activities and management foundation. The process of reassessing the creation of value from many sides with the help of many employees is, in itself, extremely meaningful. However, I believe that the essence of your undertaking is found in your new system’s “flexibility,” which was revealed through the process of addressing materiality from the dual aspects of value creation and supporting organizational sustainability.
In your work to specify materiality with respect to your business activities, which you carried out previously in 2019, there was a strong focus on measuring the impacts that your businesses have. The stance of quantifying the value to be created and then reflecting it in business plans is extremely pioneering and in step with cutting-edge discussions on non-financial information disclosure. Visualizing the impacts of business activity by specifying materiality will undoubtedly lead to smoother discussions on strategic planning and portfolio changes in each business. And more importantly, I believe it provided a good opportunity for the employees who participated in the process to recognize impacts and brought about a higher level of integrated thinking.
In the next phase, your reassessment of the Management Foundation component, your main emphasis was on thorough in-house discussions conducted through joint workshops. You applied several inventive approaches, including (1) pursuing depth that leads to strategy rather than exhaustiveness, and (2) setting an approach that involves regularly checking validity and making reassessments in order to respond to constantly changing external expectations. From this, it is clear that this undertaking was not a superficial one intended for a report, but was instead one aimed at creating practical tools that support business (value creation).
At first glance, I was surprised to see “environmental conservation and impact reduction” at the top of your pared-down “materiality” list. In the case of your company, where many business activities are directly linked to the solving of social issues, much can be said about the environment within the context of value creation. However, you stressed the diversity of environmental aspects that are outside of CO2, and you even went so far as to position it as a material element in your management foundation. To some extent, this may be because the successes of your Responsible Care® activities―which, like health and safety, have taken root as a foundation for your business―received renewed recognition as a result of broad employee involvement. At the same time, it can be taken as a statement that monetized environmental measures are mentioned within the Business Activity component and themes, which are expected to move toward the realm of value creation in the future, are recognized as materiality relating to organizational sustainability. In other words, it can be seen as an indication that your company is oriented toward dynamic materiality analysis that can flexibly respond to changes in the external environment. As with impact analysis, your approach here promises to improve engagement among participating employees and enhance their literacy with respect to your company's non-financial strengths (intangible assets).
I would like to make the following two requests in the interest of bringing even more clarity to the uniqueness of your approach. First, I hope you will present the kind of long-term vision that should be behind such efforts to specify materiality. Given that achieving “net zero emissions” by 2050 has become a de facto common goal, the presentation of a long-term vision and a transition strategy for achieving it is more important than ever before. It is also desirable in the sense of reinforcing the outcomes of materiality specification. Secondly, I hope you will strengthen the connection between the “business” materiality and the “foundation” materiality that you specified over the past two years. You are currently conducting a bold review of your business portfolio. One focus of this review is the sale of your elastomers business, which is JSR’s original business. In light of this, I am concerned that time gaps between the “business” materiality evaluations and the “foundation” materiality evaluations may weaken your management strategy message. Now that both aspects of your materiality are in place, I hope that you will move forward with an integrated review and place greater emphasis on the dynamic nature of your materiality awareness.
2. JSR Sustainability Challenge (Business Activity)
Discussing materiality means considering the impacts that our business activities have on society―both the positive and the negative―and then striving to help bring about a sustainable global environment and society while also addressing the highly uncertain environmental changes of the modern world. As was detailed above, during FY2019 we held interviews with each of our business units and then made numerical calculations of the negative and positive impacts of our activities to the greatest extent possible. And prior to this, we reexamined outcomes for society (i.e., the value we provide to society) and reorganized the materiality of our “Business Activity.” For details, please refer to the FY2020 Sustainability Report or JSR Report (Integrated Report).
• Outline of the JSR Sustainability Challenge (Business Activity)
3. JSR Sustainability Challenge (Management Foundation)
In the Business Activity component, which we reassessed first, we addressed the challenges of improving literacy in the sense of gaining a firm understanding of business, social and technological environments―which was an issue raised in our 2019 dialogue with experts―and of quantifying impacts based on that understanding. We aggregated impacts of the outcomes that JSR Group can provide through its “business activity” into three areas: “contribution to quality of life and happiness,“ “contribution to a healthy and long-living society,” and “contribution to preservation of the global environment.” Then we positioned these impacts as materiality in “Business Activity.” For the Management Foundation component, which we reassessed next in 2020, we proceeded with the aim of having in-depth discussions focused on what will be important for 2030 (2050 for the environment) with respect to our previously exhaustive view of materiality.
Work on the JSR Sustainability Challenge (Management Foundation) done entirely through remote workshops
First, several workshops were held by young employees from various departments who are destined to lead the company’s next generation with a diversity-oriented perspective. The workshops studied priorities under the theme of "reorganizing priority issues from a long-term perspective” and ultimately selected “the environment,” and “employees (DE&I, ways of working),” “health and safety,” and “respect for human rights.” They were followed by another workshop that brought in specialized departments. It held discussions that went even deeper into topics that demand particular attention―namely, “employees” and “safety and health”―and set provisional targets with a view to “life with COVID-19” and “life after COVID-19.”
For “the environment,” a topic that continues to gain momentum both internationally and domestically, the workshop conducted a joint interview survey with the general managers of seven departments whose positions afford a bird’s eye view of our value chain. The survey brought an exchange of views that included references to preceding TCFD scenario analyses. The results led to an affirmation that JSR Group will work as one to tackle the long-term goal of "environmental conservation and impact reduction” by bearing in mind that “the environment” is a multifaceted issue encompassing water, waste, and energy in addition to CO2.
In its final redefinition of materiality, the workshop affirmed the need to address “environmental conservation and impact reduction" and "respect for human rights” within the supply chain. It then assembled its conclusions as “JSR Group’s Materiality.” The workshop sent the redefined materiality to the Sustainability Planning Committee for deliberation before reporting it to the Sustainability Promotion Meeting chaired by the President.
Through our endeavor to formulate the “JSR Sustainability Challenge (Management Foundation),” we have constructed the “materiality” for a management foundation that supports business activities geared towards providing value to society. In steadfastly putting this materiality into practice, we believe we have created an environment for building a positive cycle in all aspects of our operations, one allowing us to enjoy robust growth while meeting society’s demands in an era of great change.