Stakeholder Dialogue Fiscal 2009 in Hungary

Date: July 3, 2008

Place: DENSO Manufacturing Hungary, Ltd. (DMHU)

Dialogue themes

To become a truly global company that meets the expectations of society

Participants

Peter Hardi Professor, CEU Business School Director, The Center for Business and Society

Jean-Philippe Denruyter Coordinator, Global Bioenergy Section of WWF

Facilitator

Kazunori Kobayashi Manager, Japan for Sustainability

DENSO

Shigehiro Nishimura President, DENSO Europe B.V.
Hisanori Kato Vice President, DENSO Europe B.V.
Yukimasa Ooka President, DENSO Manufacturing Hungary, Ltd.
Yasushi Mukai Vice President, DENSO Manufacturing Hungary, Ltd.
Antal Vizy Manager, Safety, Health & Environment Section
Istvan Latos Senior Manager, Human Resource Section

Main opinions, proposals, etc.

Taking the lead to meet the needs of society, instead of merely responding to environmental regulations

Kobayashi: What are the recent developments in Europe, where environmental regulations are strict?

Denruyter: There is one regulation that places a cap on the emissions of certain greenhouse gases by companies, and the regulation is expected to be tightened. There is also a review under way on introducing a regulation that would require vehicles’ emissions (fuel economy) to be reduced to 130 g- CO₂/km by 2012. EU’s Renewable Energy Directive sets the goals of increasing the percentage of renewable energy to 20% of the total energy consumption, and increasing the percentage of renewable fuels to 10% of the total consumption of transport fuel by 2020. These goals are likely to accelerate the “electrification of transport.” At WWF, we do not consider the new fuel economy regulation to be sufficient to prevent global warming. Advanced countries should include “electrification of transport” in their mid-term policies.

Hardi: The EU Directive 2003/30/EC of the Council of 8 May 2003 on promoting the use of biofuels or other renewable fuels for transport sets the goal of adding a certain amount of biofuels to gasoline. In Hungary, the percentage is 4.4% at present, and the figure is expected to increase in the future. Companies will increasingly invest in biodiesel development. Regarding the raw material for biofuels, the European Commission recommends sunflower oil, while experts in Hungary recommend rape seed oil.

Denruyter: One of the recent characteristic developments in the automobile industry is that companies with battery technologies have entered the electric vehicle market from other industries. Automakers envision switching from fossil fuels to biofuels, and further to electrification and hydrogen. How will DENSO solidify its position or make contributions in response to this change?

Nishimura: For DENSO, the environment is the top priority in technology development. Each year, we invest more than 8% of sales in R&D. It is important to strive to develop products ahead of social needs, instead of merely responding to laws. Given that we supply products to many leading companies in Japan, Europe, and North America, we need to promote R&D more quickly than ever to meet the needs for plug-in hybrid vehicles and electric vehicles that can be charged at home.

Kato: In addition to developing components technologies, DENSO has been working to help reduce CO₂emissions through the entire social infrastructure. Specifically, we have been developing technologies to forecast and avoid traffic congestion by utilizing ITS technologies.

DENSO is expected to utilize green energy as the next step after energy conservation.

Denruyter: I was impressed by the success of DMHU’s plant energy conservation activities. The next step is the purchase of green energy (renewable energy). There must be measures that DENSO can take as an electricity user.

Vizy: Recently, DMHU introduced a solar power generation system and confirmed its effectiveness. However, we have not been able to win approval for wind power generation due to strict laws and regulations, so we are now facing difficulties.

Hardi: In Hungary, research on geothermal generation is advanced. The use of high-temperature steam for air conditioning helps reduce energy consumption. DENSO should review the possibility of introducing geothermal generation.

Denruyter: There is a system called Renewable Energy Certificates (RECs), in which a purchaser of certificates is deemed to have used electricity derived from renewable energy even if the purchaser is far from the power plant. This system helps DENSO contribute to the greater use of green energy in Europe. It is essential to carefully check the credibility of these certificates.

Ooka: We never thought of using green energy as electricity at our plants. We will review this issue and its cost.

The management should deepen their understanding of CSR, and improve activities by linking environmental issues with social issues.

Kobayashi:What is the most important point in promoting CSR?

Hardi: CSR is a global issue and its importance is constantly increasing. It is important to see whether CSR programs are integrated into the core of the corporate strategy, rather than whether CSR programs are in place. Commitment depends on the level of understanding of CSR by top management, executive officers, and managers. DENSO is good at “visualization,” so I suggest that you create an index to measure the CSR performance of management.

Denruyter: Many companies have started to enter the agricultural business to grow plants as raw materials for biofuels, but it’s important to check whether cultivation methods are sustainable. For example, greenhouse gas emissions must not be increased throughout the life cycle; forest conservation and appropriate water use must be ensured, and the working conditions must be monitored. Issues involving both environmental and social aspects will increase, and will emerge as important themes in CSR.

Hardi: Regarding employees, frustration arising from cultural differences between the host and home countries is a major issue for multinational companies. DENSO runs a program for the mental health of employees. Why not introduce a similar program in Europe? It would increase employees’ sense of loyalty and help reduce staff turnover.

Mukai: In daily operations, staff members from both host and home countries may feel frustration due to differences in cultures and customs. It is essential to expand the scope of middle management undertaken by local people. Middle management who understand DENSO’s philosophy play a crucial role in connecting top management with respective workplaces. I believe that most problems can be solved by continuing interactive, two-way communication.

Kobayashi: What about the development of human resources?

Denruyter: During the plant tour at DMHU, I was highly impressed by the sophisticated training center and well-organized education programs. Employees should be encouraged to understand external developments, and deepen their understanding and interest in the automobile industry in the near future. To this end, DENSO should improve its training programs where employees can learn about environmental and social issues, commend employees for their social activities, and organize programs to dispatch them to NGOs, etc. These programs would help increase employees’ awareness of CSR and upgrade CSR.

CSR activities will be upgraded based on new awareness and ideas.

The dialogue with experts gave us much information, including the electrification of vehicles from the viewpoint of preventing climate change, and contribution to popularizing renewable energy by purchasing green power. The high evaluation of some aspects of our activities has increased our motivation and confidence toward the future. Meanwhile, we learned that we still need to broaden our perspective, and that there are many more issues to be addressed. We had incorrectly thought that our hard work was in the right direction. We will utilize the feedback to create a team (i.e. company) that can demonstrate leadership in Europe.

Shigehiro Nishimura (President, DENSO Europe)