"Materiality" refers to topics for important CSR initiatives that have been selected through a specific process. Incorporating materiality into business strategy is an essential management issue if companies are to help solve social problems and grow by continuously increasing corporate value.
The Hitachi High-Tech Group has defined Materiality to clarify how the Group can be of use in the world and what kind of social issues it can solve leveraging its business characteristics, business models, and so forth, in response to societal demands.
Under the 2021 Mid-term Management Strategy, Hitachi High-Tech Group sets specific action plans and targets to achieve these Materiality topics at each five areas of Materiality that we have identified, and we will develop business activities.
Global-level risks and social issues such as climate change, diminishing resources, as well as economic inequality, poverty and human rights problems, are having a significant impact on the stability of peoples' everyday lives, the economy and markets. At the same time, the effect of corporate activities on society has grown, and a company's environmental, social and governance (ESG) efforts have become the focus of attention in evaluating corporate behavior.
Given these circumstances, there is now a shared, global awareness that companies should take the initiative in working to solve social problems. The Hitachi High-Tech Group has developed its business to date based on the philosophy of contributing to social progress through our business activities.
In engaging in its ESG initiatives, the Hitachi High-Tech Group needed to have a solid understanding of current social changes and demands, and to clarify what we need to do as a company continually chosen by customers worldwide and needed by society. We thus began work to identify materiality, based on Sustainable Development Goals (SDGs*), a set of common international rules positioned as targets to be achieved.
| STEP1 | Identifying Social Issues Prepare a list of social issues taking into account the SDGs, ISO 26000*1 and results of in-house surveys, etc. |
|---|---|
| STEP2 | Evaluating the Importance of Social Issues Prioritize social issues identified in Step 1 from the perspective of societal demands and their importance to business. |
| STEP3 | Preparing the Draft Materiality Collate and prioritize the social issues and prepare a draft of materiality that the Hitachi High-Tech Group should address, incorporating a social issue orientation and a view to what is optimal for the Group. |
| STEP4 | Assessing the Validity of the Draft Materiality To ensure objectivity of draft materiality, conduct an exchange of opinions with outside experts in assessing its validity. |
| STEP5 | Identifying Materiality Submit the draft materiality to the CSR Promotion Committee*2, in which management participates, and identify Materiality. |
Discussion sessions were held to validate both risks and opportunities related to the list of social issues drawn up in Step 1 from the perspective of societal demands and their importance to business. A "Materiality Evaluation Map" was then created.
The heads of each business group, planning and development divisions, and the general managers and managers of other relevant corporate divisions
Discussion session
Examples of materiality evaluation maps organizing social issues made by groups in terms of opportunities and risks
Each of the social issues prioritized in Step 2 were reevaluated and discussed from the viewpoint of the Hitachi High-Tech Group as a whole, and the draft materiality prepared based on the materiality evaluation maps.
The general managers and managers of the strategy divisions of each business group and relevant corporate divisions
The materiality evaluation maps created in Step 2 were discussed again, with social issues identified as particularly important in terms of opportunities and risks serving as the base for preparing the draft materiality.
Outside experts were invited to join a discussion session with the CEO, the director in charge of CSR and others regarding the draft materiality created in Step 3. The discussions focused on adjustments to the relative importance of the social issues from the perspective of our stakeholders and on checking for any excesses or deficiencies. These were then reflected in the materiality evaluation maps as work proceeded on identifying and finalizing Materiality.
Materiality was identified following approval of management at a meeting of the Hitachi High-Tech Group's CSR Promotion Committee.
Materiality identified over multiple discussion sessions clarify important areas in which utilizing the Hitachi High-Tech Group's strengths can contribute to achieving maximum value for our customers and to solving social issues, as we grow alongside society and our customers and continually increase our corporate value.
"Contributing to a sustainable global environment" was chosen in light of the growing seriousness of environmental problems, including climate change, dwindling resources, biodiversity and other issues. We believe that only by protecting the global environment can society and sound markets function, making our business and our daily lives possible. "Contributing to healthy, safe, secure lives" and "Contributing to the sustained development of science and industry" both have a particularly strong focus on ties to our business. As the world works to form a sustainable society, there is a shared global awareness that international society should collaborate in that effort, and companies are also expected to take advantage of their particular business characteristics and strengths in making their own contributions. The Hitachi High-Tech Group's strength is its technological capabilities, which are indispensable across a wide range of fields, from biotechnology and medical, to telecommunications and the environment. We believe that further advancing those capabilities will not only contribute to society and our customers, but will lead to significant growth for the Group itself. This is why these two themes were selected.
Finally, "Establishing a sound management foundation" and "Developing and utilizing diverse human resources" were identified as key priorities because both efforts are indispensable to our sustained growth.
Kaori Kuroda,
Executive Director,
CSO Network Japan
Kaori Kuroda, the executive director of CSO Network Japan, participated in the validity evaluation meetings. We asked her to assess Materiality identified in that process and her expectations going forward.
Because Materiality was identified through a careful approach that also involved key people both in and outside Japan, they reflect the company's strategies and business characteristics and are thus very convincing. The activity goals the Group has established are neither excessive nor deficient, and provide balanced coverage of the required items. The effort to offer goals that contribute directly to the SDGs is also commendable.
In terms of future expectations, cooperation with stakeholders, as noted in the Goal 17 of the SDGs, is one. There is a limit to what individual companies can do to achieve the SDGs on their own, and I think collaboration with a variety of stakeholders is crucial. From what I've seen, the Group's collaborations with its customers and partners are functioning effectively, but I hope to see the Group cooperate with other stakeholders going forward.
Profile: Worked at the Center on Japanese Economy and Business at the Columbia University School of Business and at the Asia Foundation, a US-based NGO, before joining CSO Network Japan, which promotes the creation of a global network of civil organizations in the areas of international cooperation and development, in 2003. She also serves as the Japan NGO expert in drafting ISO 26000.
To build a society in which the dignity of every individual, even the impoverished, is assured, CSO Network Japan participates in global campaigns to eradicate poverty, working in collaboration with civil society organizations (CSOs) in Japan and a diverse range of other stakeholders. In addition to conducting surveys and research into civil society, the organization works to promote corporate social responsibility (CSR), study private-sector development support, and encourage collaboration between divergent sectors including companies, NPOs and NGOs.
In formulating the 2021 Mid-term Management Strategy that started in FY2019, we aim to create new markets and acquire business opportunities by solving social issues, based on the identified Materiality.
In addition, in order to promote specific activities through businesses by formulating basic ideas, visions, action plans, and targets for each Materiality, we established targets for FY2019 and FY2021 with respect to business value (revenues, profits, corporate image) and social/environmental value (addressing social issues).
Going forward, we will apply a PDCA cycle to achieve the targets set in the action plan. Thereafter, we will consider establishing quantitative KPI in order to more precisely understand the effects of business value and social/environmental value.
Furthermore, by instilling the philosophy within the Hitachi High-Tech Group that providing products and solutions with an outside-in (originating from social issues) approach through the PDCA cycle, we aim to create new businesses and markets that will help solve social issues.
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