Third-Party Opinion

Third-Party Opinion (Fiscal 2022)

  • Hideto Kawakita

Hideto Kawakita
CEO, International Institute for Human,
Organization, and the Earth (IIHOE),*
Editor and Publisher of Socio Management Review

* Founded in 1994 for "Democratic and Balanced Development for All the Lives on Earth," IIHOE has served as a management consultant for NPOs and social entrepreneurs while supporting CSR engagement of major Japanese companies. (Japanese only)

Third-Party Opinion on the DENSO Group’s Initiatives toward Sustainability and CSR (Fiscal 2022)

This third-party opinion has been written based on the content of the sustainability/CSR-related pages on the DENSO Group’s website as well as on interviews with DENSO staff in charge of environmental policies, procurement, quality and customer satisfaction, human resources, health promotion, the creation of ideal workplaces for safety and health, social contribution, and sustainability management, as well as on discussions with staff in charge of the Daian Plant and the Food Value Chain Business Development Division.

DENSO has set numerical targets for its wide-ranging sustainability/CSR initiatives based on the DENSO Group Sustainability Policy, which is the updated version of the Declaration of Corporate Behavior established in fiscal 2007. In Japan and overseas, the Company has developed a management cycle to quantitatively manage progress and issues in an appropriate manner. In doing so, I believe DENSO is maintaining standards that should serve as the benchmark for other companies around the world. Moving forward, I fully expect that DENSO will continue to further enhance its dialogue and communication with society while moving forward with efforts toward its three key fields of “green,” “peace of mind,” and “inspiring.”

Items that deserve high praise

  • In terms of sustainability and CSR management, DENSO made several declarations under its Long-term Policy 2030. These include reducing the Company’s environmental burden, creating a sustainable society through highly efficient mobility, and realizing a society with no traffic accidents and in which everyone can move conveniently and freely and live with peace of mind. DENSO proclaimed that these ambitions will be achieved through the new value it will create from earning the recognition of society. DENSO has established KPIs for important items related to achieving these aspirations and, guided by these aspirations, each section and relevant manager of DENSO has been moving forward with efforts to fulfill the Company’s diverse and practical social responsibility. These efforts have been managed comprehensively and quantitatively from the perspectives of risk management and stakeholder satisfaction. I give DENSO high praise in this regard. Meanwhile, I hope that dialogue and engagement with external stakeholders, particularly members of local communities, will take place at an earlier stage and in more extensive and greater depth regarding matters such as the formulation of these policies and the evaluation of their progress.

  • For sustainable procurement, DENSO deserves high praise for disclosing its Supplier Sustainability Guidelines and Supplier Self-check Sheet, which help DENSO’s suppliers establish a foundation for sustainability and CSR management, on its corporate website. These guidelines and self-check sheet cover the following nine items: Safety and quality of products and services, human rights/labor, the environment, legal compliance, disclosure of information to stakeholders, risk management, responsible material procurement, corporate citizenship, and developing and deploying policies and guidelines for suppliers. DENSO also should be applauded for working with Group suppliers in Japan and overseas to make improvements on issues that need to be addressed by providing guidance on adhering to the Supplier Sustainability Guidelines and offering feedback through self-checks that make use of self-diagnostic sheets. In particular, by independently formulating tools to confirm environmental management systems of small-scale suppliers, DENSO has incorporated CSR themes in the daily on-site management of not only the Group but also the Group’s primary business partners. These are examples of initiatives that I believe should serve as a global benchmark and accordingly deserve high praise. I also give DENSO a high evaluation for promoting efforts toward ascertaining such matters as issues facing non-Japanese technical interns working at its 296 domestic Group companies. Going forward, I hope that DENSO creates tools for improving communication in its frontline operations, which are becoming more diverse, pertaining to its efforts to reduce safety-related risks and its environmental footprint and to protect human rights. I hope that the Company implements these tools across the entire supply chain as well. In addition, I hope that the Company will work to make specific and effective improvements in the necessary areas identified through risk evaluation.

  • For environmental management, DENSO deserves praise for declaring its ambition to achieve complete carbon neutrality within its Monozukuri (manufacturing) activities by the target year of 2035. The Company also should be commended for establishing internal carbon pricing (ICP) and using ICP as the basis for its business portfolio and investment decision-making. Furthermore, I was pleased to see DENSO commence a verification test for a CO2 circulation plant within the Anjo Plant. I was also happy to see DENSO gradually introduce renewable energy at its plants both in Japan and overseas. In the future, I strongly hope that DENSO will continue to work with end-product manufacturers to reduce the environmental impact at the end-user stage. From the perspective of practical implementation, DENSO has established quantitative targets and promotion plans for each section and relevant manager in regard to a detailed list of items in order to further pursue environmental efficiency in terms of both products and manufacturing, which the Company already maintains at a world-class level, and resource productivity. To realize these targets, initiatives are being carried out and verified companywide. I evaluate DENSO highly in this regard. DENSO’s “organizational culture that encourages a bottom-up approach and follow-through on decisions” provides a backbone for the Company’s environmental management initiatives, an area in which DENSO excels on a global basis. This organizational culture can also be viewed as the lifeblood for DENSO’s contribution to sustainability and for the advancement of efforts toward fulfilling the Company’s social responsibility. One prime example of this organizational culture in action is the reformation of manufacturing processes at the Daian Plant based on a suggestion by an employee in the employee’s second year. These reformed manufacturing processes have eliminated the need to use furnaces, which consume a large volume of energy. Additionally, through the global rollout of “Perfect Energy Factory (PEF) Activities” and the promotion of “Just-in-Time (JIT) Energy Activities,” in which production sections and facility management sections share demand-related information on all types of resources—including electricity, gas, compressed air, steam, water, and lighting—in advance using “electric signboards” and work to minimize and optimize supply, DENSO has established a framework for having those working on the front lines recognize issues that need to be improved upon on their own—and I give this framework a high evaluation. These efforts represent best practices that should act as a benchmark for the global manufacturing industry. Furthermore, I commend DENSO for constantly working to evolve such efforts. I also believe DENSO should be commended for clarifying and steadily promoting its three targets (Target 3) of “Energy 1/2, Clean × 2, and Green × 2” as well as 10 specific actions (Action 10) for realizing these targets under DENSO Eco Vision 2025, which was announced in fiscal 2017. Moreover, regarding energy management, I hold DENSO in high regard for establishing optimized systems for companywide energy management and energy management within its production and supply activities. DENSO should also be highly evaluated for implementing risk management from the perspective of the Company’s impact on water-related issues and the impact of water-related issues on the Company, in addition to opportunities where the Company can help resolve such issues. Taking into account its global value chain, including its service stations, I remain hopeful that DENSO will make more extensive and significant accomplishments toward Target 3 in such ways as understanding and improving the conditions regarding the use and recycling of plastics, which are known to have an impact on marine ecosystems and biodiversity. Additionally, I would like to see DENSO promote the use of remanufactured products and work in collaboration with various aspects of social infrastructure, such as traffic light systems and EV charging stations, to reduce fuel consumption. I also have high expectations for the development of functional resins and other materials to accelerate weight reduction and increase efficiency.

  • For promoting employee health and creating a safe workplace, I give DENSO a high evaluation for the following items: Appointing managers to act as “healthcare leaders” in the workplace and requesting that all offices create and implement annual health plans; introducing lifestyle scores, which evaluate the conditions of individual lifestyle habits based on individual actions and data from medical examinations, as a companywide target; and, especially, undertaking efforts to quantitatively understand individual lifestyle habits of employees by analyzing their behavior—including from the perspectives of diet, exercise, alcohol consumption, sleeping patterns, and smoking—and medical examination results such as BMI, and subsequently promoting concrete improvements, both on an individual and workplace basis. For creating a safe workplace, in addition to its conventional efforts, I applaud DENSO for using the accident that occurred at a subsidiary as an opportunity to reexamine and promote improvements to its groupwide safety management structure. Going forward, as the aging of personnel and facilities continues to progress at DENSO’s partner companies, I hope that the Company can provide assistance for developing human resources, including the utilization of certification programs. I also hope that DENSO can develop and promote the widespread use of support tools, such as apps, for management systems that provide the foundation for safety and health-related initiatives.

Areas in which DENSO should make further efforts while evaluating the progress of its initiatives

  • In regard to corporate governance, DENSO deserves high praise for establishing and implementing a structure based on Japan’s Corporate Governance Code, including modifications to its internal executive system, as well as for promoting information disclosure. In addition, high marks should be given to DENSO for clarifying methods for “appropriate cooperation with stakeholders other than shareholders” within its “Basic Policies on Corporate Governance,” established in June 2015, and making efforts to put these methods into practice. Going forward, I hope that the management ranks of DENSO, including the Company’s directors, work to enhance diversity in terms of value systems and culture, especially in a way that gives sufficient consideration to a structure that generates synergies with employees and other directors. I also have high expectations that DENSO’s management will lead the way with its decision-making, including the formulation of materiality, and that it will increase the number of opportunities for engaging in dialogue with local communities in the Company’s core regions of operation around the world.

  • In terms of improving customer satisfaction, I commend DENSO for disclosing the rate of CO2 reductions resulting from repairs to its products. Going forward, positioning the customer as its most important partner, I strongly hope that DENSO establishes frameworks to support efforts from the perspectives of both reducing environmental burden and eliminating fatalities from traffic accidents, and that it builds platforms that can be shared with other companies.

  • As for DENSO’s social contribution activities for international and local communities, I give DENSO high marks for the diverse and trailblazing initiatives that it is undertaking. These initiatives include the DENSO Group HEARTFUL Fund, which places priority on the environment, safety and peace of mind, and Hitozukuri (human resource development), and in which nearly 8,000 employees participate; support for persons with disabilities and adaptive sports through the Wheelchairs and Friendship Center of Asia (WAFCA) and other means; the holding of Science Schools; the provision of support and development of systems for recovery efforts in disaster-stricken areas while making use of DENSO’s core business; and the promotion of traffic safety awareness. At the same time, as an example of how DENSO can resolve social issues while simultaneously implementing its business activities, I hope that employees of the Group worldwide take action in their respective communities to act as traffic safety instructors. I also sincerely hope that DENSO leverages its services and strengths to their full potential in such ways as creating regional traffic safety maps and a curriculum for the development of human resources. In addition, I continue to strongly encourage DENSO to promote efforts aimed at creating a society with zero traffic accidents.

  • With regard to initiatives by the Food Value Chain Business Development Division, DENSO deserves credit for the division’s efforts promoting large-scale verification tests to help improve productivity and reduce environmental burden in the fields of agriculture and food supply. At the same time, I hope that DENSO can develop business models that help contribute to areas surrounding major cities in Southeast Asia and other regions, which are dealing with issues related to agriculture and food supply, including in terms of cultivating human resources.

Expectations for the advancement of DENSO’s initiatives as a global company

  • As for the value creation process that helps realize the Company’s Long-term Policy, DENSO needs to take the state of social infrastructure and automobiles into account by considering forecasts for population demographics and social and economic conditions, such as the response to climate change, in the 2030s both in and outside Japan, if it wishes to reach its goal of becoming “a company that continuously generates value to enrich mobility that achieves sustainability, happiness, and peace of mind for everyone,” which it adopted under its Long-term Policy. These considerations are also crucial for realizing the sustainable growth of both the Company and society as a whole. In particular, I would like to see DENSO actively make proposals for addressing the issue of the rapid increase in aging populations and their overall lack of mobility, limited to moving shorter distances and at lower speeds, in other words, guaranteeing accessibility for the elderly, a trend that is occurring in Japan and worldwide, as well as for realizing mobility without the use of fossil fuels.

  • In terms of efforts toward human rights, I give high marks to DENSO’s procurement sections for properly ascertaining the structures and human rights-related initiatives of the Company’s suppliers and encouraging them to make improvements. I also commend DENSO for the establishment of the DENSO Group Human Rights Policy. Furthermore, DENSO deserves praise for creating a human rights promotion structure in fiscal 2022, led by the chief human resources officer, and for commencing assessments of human rights-related risks. At the same time, in order to promote improvements to groupwide efforts in the downstream processes (particularly the recycling process) of the value chain, I would like DENSO to establish a human rights management structure throughout the entire value chain (specifically, concrete commitments by upper management, the implementation of due diligence, and the establishment of a system for remedy measures).

  • Regarding respect for employees and diversity of human resources, I commend DENSO for promoting efforts to increase the percentage of female employees in management positions in Japan. These efforts involve actively recruiting women, promoting a work–life balance, and ensuring fairness in promotion opportunities. With that said, disparity in length of employment for men and women exists, but I therefore remain hopeful that DENSO will continue its efforts to establish an environment and systems that help employees continue to work while supporting their families through childcare, caregiving, and nursing care, and move ahead with quantitative reviews of relevant decision-making, such as at meetings, and business conditions. Also, with a view to 2030 and beyond, I hope that DENSO can establish opportunities to hone its ability to harness the strengths of both internal and external talent, which will serve as a base for enhancing its ability to realize new businesses and mass production. At the same time, I sincerely hope that DENSO continues to promote the multilingualization of exchanges with, and messages and notices to, candidates for upper management so that even more employees in DENSO’s regions of operation can understand the Company’s philosophy, values, and practices in their own native languages.

  • In terms of the depth and timing of the introduction of initiatives, an information disclosure policy has been established. However, I sincerely hope that DENSO will continue to create more and deeper opportunities for dialogue with local community members. Such dialogue will enable the Company to introduce its initiatives toward a wide range of issues, such as those relating to the environment and greater society, in a deeper and more timely manner. In addition, it will help DENSO determine the functions that will help lead the Company into the future and the value it should create for society.

    • Hideto Kawakita

      Hideto Kawakita
      CEO, International Institute for Human,
      Organization, and the Earth (IIHOE)