This post has been translated from Japanese — read the original interview here.
With a goal to help realize a sustainable society and management, SEKISUI CHEMICAL CO., LTD. has been promoting CSR management that has evolved from its environmental management efforts. In April 2017, SEKISUI CHEMICAL integrated its CSR Promotion Department into its Business Strategy Department. Masahiko Kawamura, Director and Chief Researcher at Alterna Research Institute, spoke with Yoshiyuki Hirai — Managing Executive Officer and Head of Business Strategy Department at SEKISUI CHEMICAL — about the purpose of this reorganization and its result.
Focusing on “3 Prominences”: Human Resources, CS & Quality and Environment
Kawamura: Please tell us why SEKISUI CHEMICAL strategically tackles environmental issues and more broadly defines CSR.
Hirai: We started our environmental initiatives with conservation. Then in 2003, we shifted our focus to environmental management; and in 2006, we elevated this to CSR management. I am going to tell you about the background behind this large shift. Our consolidated sales reached record highs in FY 1996. After the collapse of the bubble economy, the housing business led the company and while other areas of the business were sluggish, the sudden surge in demand for housing after the Great Hanshin-Awaji Earthquake in 1995 overlapped with the rush of property purchases before the consumption tax increase in 1997. Unfortunately, the housing bubble also burst soon after that and we suffered a deficit for four consecutive years, from FY 1998.
So, in the course of sorting out and centralizing the operation, we asked ourselves: "What are the strengths and prominences of our company?" We decided to work on environmental management and aimed to be a prominent and highly profitable corporation. We have a housing business under the SEKISUI HEIM brand, and a final products and materials business using our plastics processing technology. As a manufacturer, we came up with the idea of contributing to the environment through our products and establishing the balance between ecology and economy.
Kawamura: Am I right in thinking that SEKISUI didn't simply start a new business, but reviewed the foundation of your management, organization and intentions?
Transforming real estate portfolios with regenerative principles
Join Google, stok and the Int'l Living Future Institute as they discuss the evolution of the Living Building Challenge — at SB'19 Detroit, June 3-6.
Hirai: Correct. Our business is founded on human resources. In addition, with the aim of improving what we call 'CS & Quality' by integrated customer satisfaction and quality, and as a manufacturer, we focused on developing and expanding sales of environment-friendly products.
We began to emphasize these three elements as our business foundation. We also began to provide environment-friendly materials such as plastic parts that contribute to the reduction of weight and fuel consumption for automobiles, for the middle of the supply chain towards end users. In the housing business, we proposed a concept of 'the zero-utility cost house'. Through these businesses we embarked on balancing ecology and economy.
Establishing an organization based on integrated thinking
For this, the important thing is corporate philosophy. In 2017, we formulated a new conceptual scheme of CSR. We have our 3S principles: Service, Speed and Superiority. Then, there is our group vision, devised from this philosophy, which states that we will contribute to improving the lives of the people of the world, and the Earth’s environment. This is the basis of our management and our approach to environmental issues. This philosophy also leads to the current SDGs.
In the past, we had no opportunity to explain to our employees about the company's philosophy system (on the left side of the figure) and CSR concept (on the right side of the figure) simultaneously, but these concepts should be combined. Then we became aware of the idea of 'integrated thinking'.
The resolution of social issues through business according to our strategy will be achieved with our “3 Prominences”: Environment, CS & Quality, and Human Resources. Businesses are not only responsible for their products, but also for their business operations. This responsibility is fulfilled by maintaining a safe and compliant workplace; at the core of this foundation sits Governance.
Previously, the Business Strategy Department and the CSR Department were separate entities; but in 2017 we restructured this, based on integrated thinking, and incorporated CSR management and environmental management into the Business Strategy Department.
Kawamura: It's been almost a year since the organizational restructuring. Do you feel the effects of the integration?
Hirai: One example is our Environment-Contributing Products. As our business is expanding, the range of issues that can be solved by our Environment-Contributing Products is also clearly widening.
To expand contributions not only to the natural environment but also to social issues, we applied SDGs to the environment-contributing products and redefined them. In addition, we set up a framework for a ¥12 billion energy-saving investments, running for 3 years, from 2017 to 2019. With this, we are introducing new equipment and renewing existing equipment, which contribute to CO2 reduction throughout the company. This amount exceeds 0.3 percent of the anticipated sales scale in these 3 years, larger in comparison to the past. This is the result of integrating the management strategy and CSR promotion.
Kawamura: I've heard that SEKISUI is working on environmental education, as well.
Hirai: Regarding environmental education, we run enlightenment events both inside and outside the company. One example is the Children’s Eco Summit. We ask our group companies throughout the world to encourage their employees’ children to participate. We run field studies with them, and show them our factories and environment-contributing products to promote environmental awareness through our group companies’ operations.
Last year, we ran the Global Children's Eco Summit 2017, held in commemoration of the company's 70th anniversary. The children who participated noticed that there is a difference in the degree of comprehension about environmental issues and the amount of information available in different regions such as America, Europe and Southeast Asia. The children suggested that this should be addressed, and now we are discussing how to reflect this inside our company.
Digitizing and indexing the environmental impact
Kawamura: Can you please tell us about how you define Natural Capital?
Hirai: We use natural capital as a resource for our products. The consumption of natural capital is an impact on the Earth. First, using the LIME 2* from LCA (Life Cycle Assessment) method, we calculate the monetary value of the natural capital that we are using. We then evaluate how we use the natural capital for each product and how much of it is returned to the capital.
If we set the default of environmental burden to 100 percent, we must return 100 percent or more. Currently, we have achieved a return rate of 76.9 percent. We are aiming for 90 percent in 2019 and over 100 percent in 2030. We recognize the importance of encouraging our supply chains by showing them the figures, and we reaffirmed the magnitude of our contribution to natural capital from our products. We have a prospect of reflecting this in our 2050 vision.
Implement global governance by inter-linking organizations
Kawamura: Please tell us about your business strategies for foreign markets, at present and in the future.
Hirai: The situation is different for each Divisional Company. In the High-Performance Plastics Company, which is undergoing the most expansion outside Japan, the ratio of overseas sales is close to 70 percent. The world's demand for solutions to environmental issues is getting stronger, and employee awareness is getting higher.
The Urban Infrastructure & Environmental Products Company is now looking to make overseas markets the basis of its business. Like our synthetic lumber used for railway track sleepers, our sales of our environmentally contributing products are expanding. In Europe, this product was highlighted when wood preservatives became regulated and wooden sleepers became unusable.
In 2016, 24 percent of the SEKISUI CHEMICAL Group's sales were made overseas. We hope to increase this to 30 percent in 2019. Accordingly, our overseas procurement rate will also rise.
With the organizational change in 2017 we created a new Overseas Management Group within the Business Strategy Department. We have headquarters in each region — in Europe (the Netherlands), the United States, China and Southeast Asia (Thailand) — and are strengthening our corporate governance. With regard to accounting, finance, human resource and legal affairs, we will unify rules globally and will oversee the Overseas Management Group. We use this structure to inter-link the Business Strategy Department.
* LIME 2: Damage-based impact assessment method in Japan. A method of measuring and evaluating the environmental impact of business which reflects domestic environmental conditions and the latest methods of environmental science.