Third Party Opinion

Third Party Opinion on Sustainability Activities in Fiscal 2019

  • Third Party Opinion on Sustainability Activities in Fiscal 2019

CEO, International Institute for Human,
Organization, and the Earth (IIHOE*),
editor and publisher of Socio Management
Hideto Kawakita

* 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.
http://blog.canpan.info/iihoe/(in Japanese)

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 management of creating environmental value, facilities, procurement, quality and customer satisfaction, human resources, health promotion, creating ideal working place of safety and health, social contribution, and sustainability.

DENSO has set numerical targets for all of its wide-ranging sustainability/CSR initiatives based on the DENSO GROUP Sustainability Policy, which is the updated version of Declaration of Corporate Behavior established in fiscal 2006. In Japan and overseas, the Company has developed and established a management cycle to quantitatively manage the achievements 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 expect a further enhancement of dialogue and communication with society.

Items that deserve high praise

  • In terms of sustainability/CSR management, DENSO made several declarations under its Long-term Policy 2030. These include reducing its 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. Guided by these aspirations, each section and relevant managers of DENSO has been moving forward with efforts to fulfill the Company’s diverse and practical social responsibility, and these efforts have been managed comprehensively and quantitatively from the perspectives of risk management and stakeholder satisfaction. I believe that in these terms, DENSO is performing at a world-leading level. At the same time, I hope that dialogue and communication with external stakeholders will take place at an earlier stage and in greater depth.

  • For sustainable procurement, DENSO deserves high praise for disclosing its Supplier Sustainability Guidelines, which help DENSO’s suppliers establish a foundation for sustainability/CSR management, on its corporate website as well as for providing guidance to primary Group Suppliers in Japan and overseas on introducing these guidelines and, after offering these suppliers feedback through self-checks that use self-diagnostic sheets, working with them to make improvements by determining key issues that need to be addressed, including those pertaining to human rights, labor, the environment, and information security. At the same time, DENSO has added an environmental management system and efforts for compliance as a standard for selecting new suppliers. In these ways, DENSO has incorporated sustainability/CSR themes into the daily 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. Going forward, I hope that DENSO creates tools for improving communication in its front-line operations, which are becoming more diverse. I also hope that the Company implements these tools across the entire supply chain. 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 has established quantitative targets and promotion plans for each section and relevant managers 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 source for deepening the Company’s initiatives toward sustainable growth and social responsibility. In particular, through 115 items, “Perfect Energy Factory (PEF) Activities,” as well as “Just-in-Time (JIT) Energy Activities,” where production sections and facilities management sections share necessary information on all types of resources—including not only electricity and gas but also compressed air, air, steam, water, and lighting—in advance using “electric signboards” and work to minimize and optimize supply, DENSO has established and repeatedly evolved a framework for having those working on the front line 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. In addition, I 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 2016. In addition, for energy management, I commend DENSO for establishing optimized systems for Companywide, production, and supply systems. Taking into account its global value chain, including its service stations, I remain hopeful that DENSO will make 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. I also have high expectations for the development of functional resins and other materials to accelerate weight reduction and higher efficiency.

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 in the 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 human diversity, especially in a way that enough consideration is given 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 opening independent service sites in Southeast Asian countries and for promoting business operations that respond to local market characteristics and the development of human resources. At the same time, I maintain expectations that DENSO will move forward with improvements in fuel efficiency during car use, primarily by leveraging service centers in emerging countries, as well as with reductions to its environmental footprint, such as through fluorocarbon recovery, and improvements in safety. Domestically, I expect DENSO to continue to analyze trends in customer inquiries and move forward with efforts to disclose information more effectively and provide customer support. Furthermore, I strongly hope that the human diversity, including the active participation of women and the persons with disabilities, will improve.

  • For promoting employee health and creating a safe workplace, I give DENSO a high evaluation for the following items: appointing managers to act as “health care 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; especially, I commend DENSO for its undertaking efforts to quantitatively understand individual lifestyle habits of employees by analyzing their behavior and medical examination results, and the concrete promotion of improvements. In addition, I give DENSO Group a high praise for its efforts to establish a system to promote workplace safety that goes even further than in the past, including the formulation of principles, lessons learned, and rules to be observed in the form of the "Core Action 10" and the clarification of concrete actions in common from the top management's declaration and guidance of the highest priority on safety to be implemented in the workplace. At the same time, as the aging of personnel and facilities continues to progress at DENSO’s partner companies, I hope that the Company can provide assistance in terms of developing human resources. I also expect DENSO to develop and promote tools that will support the management structure for safety and health-related initiatives at these 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 Compassionate Point System, in which nearly 8000 employees participate, support for persons with disabilities and adaptive sports through the Wheelchairs and Friendship Center of Asia (WAFCA), Parasports Festival, and other means, holding Science Schools, providing support and developing system for recovery efforts in disaseter-striken areas while making use of DENSO’s core business, as well as the promotion of traffic safety awareness. At the same time, 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 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.

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 compositions and social and economic conditions in the near future in and out of Japan if it wishes to fulfill the ideas of “offering the freedom and joy of movement to all people” and “being eco-friendly and providing people with comfort,” 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 to guarantee the rapidly increasing short-distance and low speed mobility of aging populations, in other words, guaranteeing accessibility for aging populations, 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. At the same time, I hope that DENSO establishes personnel within the Group responsible for promoting and improving Groupwide efforts in the downstream processes (particularly the recycling process) of the value chain. I also hope that DENSO establishes a human rights management structure throughout the entire value chain.

  • Regarding respect for employees and diversity of human resources, DENSO has begun to institute a set of common evaluation criteria for personnel on a global basis to serve as a foundation for fostering versatile personnel management. The percentage of local employees who take positions as managers of Group companies overseas is upwards of 30%, and the ratio of persons with disabilities has exceeded 2% thanks to the establishment of the special-purpose subsidiary DENSO Blossom Co., Ltd., which employs primarily people with mental and intellectual disabilities. DENSO is actively working to promote employee health, but the percentage of DENSO CORPORATION employees taking advantage of leave and reduced working hours for childcare, caregiving, and nursing care is still only 3.5%. Disparity in length of employment for men and women also remains. Moving forward, I remain hopeful that DENSO will continue its efforts to establish an environment and systems that help employees balance work and life with supporting their families through childcare, caregiving, and nursing care, and move ahead with quantitative reviews of decision making, such as at meetings, and business conditions. 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 each and every region in which DENSO operates can understand its philosophy, values, and practices in their own native languages.

  • In terms of depth and timing of the introduction of initiatives, the policy on information disclosure has been established. However, in order to introduce our initiatives to a wide range of issues, such as the environment and society in a deeper and more timely manner, I strongly hope that DENSO will step up its efforts to promote dialogue and communication more than ever.

    • 川北秀人