"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 2024 Mid-term Management Plan, in order to solve social issues, Hitachi High-Tech Group sets specific action plans driven by social issues based on materiality and we develop business activities.
Context for Identifying Materiality
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.
* SDGs (Sustainable Development Goals): Adopted by a September 2015 summit of the United Nations, the SDGs comprise 17 goals in different areas and 169 targets, global objectives for solving social issues to be achieved by 2030.
Process of Identifying Materiality
|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.
Submit the draft materiality to the CSR Promotion Committee*2, in which management participates, and identify Materiality.
*1 ISO 26000: An international standard regarding the social responsibilities of organizations, published by the International Standards Organization (ISO) in 2010.
*2 CSR Promotion Committee: The committee responsible for discussing the Hitachi High-Tech Group's CSR activities in general and deliberating CSR measures.
Step 2: Evaluating the Importance of Social Issues
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.
◆Participants in the discussion sessions
The heads of each business group, planning and development divisions, and the general managers and managers of other relevant corporate divisions
Step 3: Preparing the Draft Materiality
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.
◆Participants in the discussion sessions
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.
Step 4: Assessing the Validity of 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.
Key opinions from the validity evaluation meeting with experts (excerpted)
- The process of identifying Materiality was based on discussions with key people across a wide range of divisions, a careful and commendable approach.
- Tying the Hitachi High-Tech Group's business fields with the SDGs will further deepen stakeholder understanding of the Group's corporate identity and its medium to long-term growth potential.
Step 5: Identifying Materiality
Materiality was identified following approval of management at a meeting of the Hitachi High-Tech Group's CSR Promotion Committee.
Hitachi High-Tech's Materiality
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.
Relationship Between Materiality, Activity Goals and SDGs
Outside Expert Comments
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.
■ Kaori Kuroda
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.
■ CSO Network Japan
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.
Based upon our “Sustainability 2030” declaration *3 and Materiality formulating the 2024 Mid-Term Management Plan (FY2021)
In line with changes in our social environment and expansion in business opportunities, holding up our “Sustainability 2030” declaration we at Hitachi High-Tech formulated the 2024 Mid-Term Management Plan by backcasting from our Stated Aims for 2030 in order to clarify our future stated aims and to demonstrate our stance of creating value driven by social issues.
Formulating Stated Aims in Each Business Segment
Based on the “Sustainability 2030” declaration we formulated Stated Aims for 2030*4 in each business segment then upon the stated aims we formulated plans of each business and operations.
Designing a chain of business/operational indicators that lead to contribution to society and creating value driven by social issues
In developing the 2024 Mid-Term Management Plan, we designed a “chain of indicators”*5 in order to consider how our actual business and operations are connected to Environmental and Social Value. The idea is to think about the chain from the indicators required by the business to the indicators that will ultimately contribute to society.
Based on the idea, we recognized how each business and operation creates value and leads ultimately to a contribution to society. We also have known its linkage to materiality and made concrete plans driven by social issues.
*3 For details, please refer to our Materiality Book or website “Mid-Term Management Plan”
*4 *5 For details, please refer to our Materiality Book.