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ESG Management - A Requirement for Global Company

Suntory Group has been engaging in various CSR activities to realize the corporate philosophy of “In Harmony with People and Nature” with the stakeholders. Amidst the rapid globalization of business, we are required to further improve our corporate value as a global multi-faceted food and beverage company. In this dialogue, we invited Mr. Takejiro Sueyoshi, Special Advisor of UNEP-FI (United Nations Environment Programme Finance Initiatives) and received valuable opinions on the future environmental and social activities from an investor’s perspective.
On the day of the dialogue, we first explained about the initiatives we have engaged in and current issues we face. Then, Mr. Sueyoshi gave a lecture on Environmental, Social and Governance (ESG) Management that are required for a global company and exchanged opinions on the role Suntory should play from now on.

Date: May 12, 2015
Location: Suntory World Headquarters (Daiba, Minato-ku, Tokyo)

Expert

国連環境計画・金融イニシアティブ(UNEP-FI)特別顧問 末吉竹二郎氏
Takejiro Sueyoshi
Special Advisor, United Nations Environment Programme Finance Initiatives

Suntory

Satoshi Hamaoka
Executive Officer, Chief Operating Officer, Corporate Communication Division, Suntory Holdings Ltd.
Tomomi Fukumoto
Executive Officer, Deputy Chief Operating Officer, Corporate Communication Division, Suntory Holdings Ltd.
Kenji Naiki
Manager, Business Planning Department, Corporate Communications Division and Senior General Manager, Environmental Sustainability Strategy Department, Suntory Holdings Ltd.
Takeji Kitamasu
Senior General Manager, CSR Department, Corporate Communications Division, Suntory Holdings Ltd.

Part 1: In response to the lecture on latest trend of ESG management

Suntory
We have always considered what kind of management attitude is required to gain the trust of various stakeholders when advancing the globalization of our business. We have reaffirmed that initiatives on Environmental, Social and Governance (ESG) are becoming increasingly becoming important aspect in evaluating corporations today.
Sueyoshi
The concept of “ESG management” arose around 2004 and is currently a major factor of share price in the Europe and U.S. There is even a trend to avoid investing in companies that make large load on the environment.
Suntory
So those trend of “sustainable investment” is a driving force for companies to promote environmental measures.
Sueyoshi
Exactly. These trend of investors has raise an awareness that “conventional economic model in far from sustainable,” is being recognized in the management level of companies and leading to creation of new initiative and are of high interest.
Suntory
We learned of a company that publicize patent technologies that contribute in reducing environmental impact, company that announced to procure agricultural products from 100% sustainable agriculture and other examples of leading initiatives. We believe that there are lot to learn from these regardless of business field or company scale.
Sueyoshi
These trends show the investors do not only make decisions based on profitability in financial aspect, but also take in account sustainability of corporate management. I believe that in fulfilling social responsibility as a global company, it is crucial to recognize that we are entering an age which companies that do not consider ESG will not be selected by investors and customers.

Part 2: Looking ahead at issues faced by a global company

Sueyoshi
I was able to learn about the history of CSR activities and initiatives on ESG that Suntory has been engaging in. My honest opinion is that those initiatives are of high standards.
Suntory
We do feel that we can be satisfied with the sustainable corporate management we have been implementing in Japan. On the other hand, for overseas, we are currently at the stage of trying to understand the situation of the each region.
Sueyoshi
The earlier explanation also listed “reducing CO2 emission in the value chain,” “water sustainability” and “sustainable procurement of raw materials” as three issues to engage in the future. All of them have difficulties due to being a global company?
Suntory
Exactly. We believe that with COP21 scheduled in end of 2015, the demand for reducing CO2 in all aspects of corporate activities will rise. In Japan, we have not only been reducing CO2 in the manufacturing departments but also in product development, sales, logistics, vending machines, offices and in the entire value chain. For overseas, there are many companies that have newly joined the Group through M&A and other means so we first need to understand the actual situation in the value chain of each company.
Sueyoshi
It is important to grasp the actual situation of those new Group companies while also disseminating the Suntory’s attitude and policy toward the environment.
Suntory
As for water resources, some regions are rich in water resources like Japan but some regions is difficult to even secure a safe water. The awareness and issues regarding water is different by region and it is even more important that CO2 to understand the current situation of each region.
Sueyoshi
The interest towards issue of water resources are rising globally, and in the hearing for companies on climate change risk from CO2 by CDP (formally Carbon Disclosure Project), an international NGO, the theme of water was added in 2010 and forest, which can be said to be the source of the two, in 2012. I think that perspective of Suntory to preserve forests to protect water is in line with the international trend.
Suntory
Through communicating with overseas companies, we frequently find that there are great difference in awareness regarding water compared to Japan. Issues in each company and factory must be addressed differently and we place importance of initiatives that are rooted in the community such as Mizuiku - Education Program for Nature and Water which consider education materials by region when expanding the program overseas to.
Sueyoshi
That is a great initiative, but I would like to point out that water is used not only in alcoholic and non-alcoholic beverages, but also a necessary resource in agriculture. I think focus on agriculture is also required.
Suntory
This precisely an issue that links to the third issue “sustainable procurement of raw materials.” With the recent change in climate and growth of population, the importance of securing sustainable source of agricultural products, that are the raw materials is on the rise. In Japan, many rely on trade companies for procuring raw materials but to expand business globally, we believe that we ourselves as the manufacturer using those raw materials should deepen understanding on “sustainable procurement of raw materials.”
Sueyoshi
Common to all the issues, the difficult in expanding ESG activities to overseas is that activities that were successful in Japan does not always have the same effect overseas. It does not mean that the activities in Japan is ineffective but often times the sense of value in Japan are different overseas and does not have same impact to the people working there or local communities.
Suntory
We completely agree. For example, Suntory Beverage & Food Limited, a listed company, which receives survey of CDP is astonished by the depth the disclosure required from the stand point of a Japanese Corporation. It shows how much of difference is there between overseas. We believe that responding to these surveys are chances to learn about overseas perspective that are different from Japanese.
Sueyoshi
It is my interpretation but, important aspect for a Japanese company to expand as a global company is to recognize global issues as part of its own issue and actively engage in their solution instead of looking at the as someone else’s problem.

Part 3: Engaging in solving social issues with NGOs, customers and various other stakeholders

Suntory
We believe that to think about global issue as our own issue, communicating with countries around world is very important. What kind of approach is effective in stimulating communication of the overseas?
Sueyoshi
I think cooperating with NGO is a good method to promote activities around the world. I believe that a society that has strong NGO is a happy one. NGO has become an entity that are highly trustable as a representative of voices of the society.
Suntory

We too are often supported by NGOs in activities we do in Japan. Japanese corporate culture tends to do everything on its own, which could be said they are earnest but that approach takes time. Is there any things to pay attention to when communicating with NGOs around the world?

Sueyoshi
Although expectations on NGOs are rising, it is pointed out that NGOs cannot solely solve social issues on their own. The importance for companies which possess talented human resources, organization and technology to engage in solving social issues through business will continue to increase.
Suntory
So things that NGOs cannot solve is something companies must take on the responsibility.
Sueyoshi
Yes, expectation for companies that have management resources to be a provider of solutions for social issues are rising. The concept of Creating Share Value (CSV) which is recently becoming popular is based on those cognition.
Suntory
CSV is an idea to strike a balance of economic activities and creation of a social value by a company. We constantly consider CSV management but some part of it are difficult to actually put it into action. From a Japanese sense, social contribution activity tends to have an image of doing good deed secretly but case study of leading overseas companies tend to be tied to business. How should business and social contribution be connected?
Sueyoshi
CSV is not a required “responsibility” like CSR, but a concept which that growth of business directly contributes to solving social issues. For example, when you think of Base of the Economic Pyramid (BOP) business as not only a method to create profit but also a method to solve social issue, it would be easy to put it into action.
Suntory
So determining what kind of issues there are in the society and thinking about what we can offer in solving them through business will lead to CSV management.
Sueyoshi
To elaborate, doing business that contribute to solving issues is not the only way of social contribution, encouraging customers to make better choices through business is another way. For example, customers that choose products that have lesser impact is called “Green Consumer” and disseminating this style of purchase is dependent on company’s stance. To begin with, action of customers are created by companies. If the choice of customers are wrong, companies, especially companies that offer products globally have great responsibility in making them so. Taking that in mind and nurturing customer that make better choices as one of the role a global company must take. I would like a company like Suntory that have great influence to take leadership and appeal to the society and make change in future.
Suntory
So it is important not only develop products that have lower impact on the environment but to widely provide information so more customers will choose those products.
Sueyoshi
I think that “inclusive” (all encompassing, comprehensive) will be the keyword in future. In solving social issues such as global environment, it is crucial for not only a certain company to take action but to involve various stakeholders including NGOs and customers. I would like to see a stance for protecting water that encompass protecting water required by the society as public resource together with various stakeholder along with resource need for business activity.
Suntory
Thank you for the valuable opinions you have given today. We would like to use them in our future CSR and ESG management and in practicing CSV management.
We welcome your feedback

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