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Putting Materiality at the Center of Business Management in Order to Truly Be a Company Needed by the World
Hitachi High-Tech Group has identified Materiality in order 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. We welcomed Ms. Kaori Kuroda and Mr. Setsu Mori, both CSR experts, held a dialogue and exchanged opinions about evaluation and forthcoming on Materiality with Mr. Miyazaki, President and Chief Executive Officer of Hitachi High-Tech in July 2018.
From the left
Mr. Setsu Mori, CEO, Alterna Co., Ltd., and Editor-in-Chief, Alterna magazine : Facilitator
Mr. Masahiro Miyazaki, President and Chief Executive Officer of Hitachi High-Tech Corporation
Ms. Kaori Kuroda, Executive Director, CSO Network Japan
Mori: To start, Mr. Miyazaki, please tell us the background for identifying Materiality and its significance.
Miyazaki: We have been thinking for a while that our company needs to address CSR and also ESG and SDGs. Contribution to society based on the SDGs, through the Hitachi Group’s Social Innovation Business, is one of the concepts of the Group’s business operations. When we think about the role our company should play in that regard within the Hitachi Group, we believe that identification of Materiality is an important factor. In our next mid-term management strategy, which starts in fiscal 2019, we need indicators for business operations, just to set out a company vision. So, this time we identified Materiality and eight goals for related the SDGs.
Kuroda: There are still not many Japanese companies that have released their long-term company vision. I wonder how strongly they are committed to meeting their goals and how deliberately they intend to pursue them.
Miyazaki: We update our mid-term management strategy every three years, and we must view our business from the long-term perspective of our company vision.
Mori: What were you especially aware of during the process of identifying Materiality?
Miyazaki: We were conscious about reflecting the opinions of more Hitachi High-Tech members. We had general managers, managers, and other members of each business group and corporate department hold a series of discussions to think about the opportunities and risks in our business operations as well as what our company can contribute to society for the future. We also ensured an objective point of view by including Ms. Kuroda and other outside experts. We chose as materiality those items that showed high materiality in terms of two aspects: “societal demands and their importance to business.” In thinking about products and solutions, the concept of outside-in - in other words, starting with a social issue - is important. We see the resolution of social issues as leading to new markets and businesses.
Kuroda: My frank impression when I saw your Materiality was that as your company’s key persons in and outside Japan had participated in and identified it with a careful approach, it expressed your company’s strategy and business characteristics well. The ESG items were selected independently as Materiality. Necessary items are included and well-balanced.
Mori: The term materiality is used with the nuance of identifying the most important issues for a company to address. Among all the choices, you chose the goal of the 13“Climate action” in the SDGs as your top priority.
Miyazaki: We made “Contributing to a sustainable global environment” our No. 1 materiality with goal 13 about the “Climate action” in the SDGs. In other words, we believe that the feasibility of sound society and a company’s sound business depend on having a sustainable environment and that sustaining business enables a company to contribute to society.
Kuroda: It is really great that the environment is your No.1 priority. I often see the 17 SDGs icons lined up in a row, but recently a wedding cake version has come out, and in that arrangement the environment is in the base. The positional relationship places society and the economy above that. The thinking that, first of all, the environment is the base of society and the economy has started to become widespread.
Mori: Why did you choose “Realize a recycling-oriented society” as your second activity goal of “Contributing to a sustainable global environment”?
Miyazaki: For preservation of the environment, we believe that products of our Group must be reused. For that reason, we need to have the idea of making things reusable right from the design stage. We hope to promote initiatives to make products reusable by setting the goal of “Realize a recycling-oriented society” and instilling the idea throughout the Group.
Mori: You have also specified “Contributing to healthy, safe, secure lives” and “Contributing to the sustained development of science and industry” as Materiality.
Miyazaki: Hitachi High-Tech’s core technologies are for “observing, measuring, and analyzing.” We conduct manufacturing based on these technologies. For example, we contribute to society by providing to customers products and services with high reliability and added value such as blood and immune system analysis in the field of medical. In other words, it is a business of using science and technology to contribute to healthy, safe, secure lives. This is part of our company vision.
Kuroda:As social issues become more serious or widespread, I think it is noteworthy to use your business power to solve those issues.
Miyazaki: As society goes through significant change, companies need to have the flexibility to respond to those changes. Business also needs to fit society’s changes and issues. Therefore, our Group uses ability to respond to society, works to understand solidly and manage the impact of its business on society in order to grow continually, while aiming to maximize our value provided to society. We think that through those activities our Group also contributes to achieving goals of the SDGs.
Mori: With “Contributing to the sustained development of science and industry” you intend to contribute to goal 4 of the SDGs: “Quality education.” Specifically, what kinds of initiatives will you take?
Miyazaki: Hitachi High-Tech manufactures high-resolution electron microscopes. Around the world we use these electron microscopes in activities that contribute to science education. Members of the Hitachi High-Tech Group go to places that have borrowed a microscope and teach instructors how to use it or even give special lessons on their own. Personnel with a background in the sciences are essential in manufacturing, and the recent social issue of young people moving away from the sciences is a long-term issue for our Group as well. Our main objective for this activity is to help put the brakes on children’s move away from science, but it also translates into promotion of the Hitachi brand through products and the strengthening of relationships with educational institutions. We would also be glad if the children who participate in these activities become customers or members of our Group in the future.
Mori: So this activity has two sides: solving a social issue and developing future customers.
Kuroda: Providing education, especially science education, to the next generation with a view 30 to 50 years into the future is of tremendous significance. In its “Expanded SDGs Action Plan 2018,” the Japanese government has also specified education for the next generation as an issue. I think that your company has much to contribute not only to current science and technology innovation but also in terms of investment in the future. It is also wonderful that you have set out an activity goal that can contribute directly to an SDG and are implementing an initiative that draws on your company’s uniqueness.
Mori: What is your impression of the materiality of “Establishing a sound management foundation” and “Developing and utilizing diverse human resources?”
Kuroda: Both are meaningful perspectives. With respect to “diversity and inclusion,” which has started to spread especially in Japan, I think that it is important to firmly include in business strategy not just the greater participation of women but also how diverse human resources can become a benefit for the company.
Miyazaki: You’re quite right, Ms. Kuroda. Everyone has different values, and that is fine. Diverse values are invaluable in conducting business. I also think that we need many options in accordance with various kinds of workstyles, in order to get talented personnel to work here for a long time.
Mori: So, to retain talented personnel for a long time, you have to promote diversity management as an organization. How about “Establishing a sound management foundation?”
Miyazaki: Stick to the truth, as it is. In other words, it’s an emphasis on transparency.
Kuroda: Recently, transparency, especially in the supply chain, as well as governance, has become an issue. Each country’s government has reached the stage of preparing country-specific action plans regarding human rights, which is a theme that is growing in importance not only in supply chains that have extended into developing countries but also right here in Japan.
Miyazaki: Many manufacturers ask suppliers who make parts for them to also manage a huge number of dies, and in some cases they would ask the suppliers to store the dies even after mass production was finished. However, the standards of application of Japan’s subcontracting law have specified that asking a supplier to store dies free of charge after mass production has finished is an example of a violation. So, manufacturers have been required to implement countermeasures from the perspective of compliance. In response to this supply chain problem, one of our group companies manages dies appropriately on behalf of manufacturers, thereby supporting our customers’ compliance through our business and contributing to the solution to this supply chain problem.
Mori: What challenges do you face in working on your Materiality?
Miyazaki: The challenge is to incorporate the identified Materiality into our business base. Initiatives to “Realize a low-carbon society,” for example, entail a certain cost. But we think of these as investments, not costs, because we believe they will lead to future growth. I hope to plot out a growth strategy by incorporating the identified materiality into our business base and blending them with our next Mid-Term Management Strategy.
Mori: Do you mean to say that you will formulate your next Mid-term Management Strategy based on the Materiality?
Miyazaki: There is awareness of CSR and ESG in our current Mid-Term Management Strategy, but they are not pillars of the strategy. Under our next Mid-Term Management Strategy, we will make investments for future growth centered on the Materiality and aim to become a company that is needed even more by society.
Kuroda: I think that it is really wonderful to spell out your Mid-Term Management Strategy in light of SDGs and ESG and to thoroughly communicate in and outside the company a commitment to drive business forward on the dual platforms of sustainability and business strategy.
Miyazaki: I always say that we must try to be a “company that is needed by the world,” a company about which people say, “Hitachi High-Tech is indispensable.” To achieve that, we must always think how we ought to be and respond as a company to changes in society. That is the ability to respond to society. It is important to instill this idea throughout the company. Effort is not something the company president does alone; everyone makes the effort together. Everyone in the Group will unite and raise our ability to respond to society.
Kuroda: I can really feel your passion, Mr. Miyazaki. I also realized anew just how big the sustainability expectations are for companies. Thank you for today.
Mori: It was very useful for me as well. Thank you.