Outside Evaluation of Our CSR

Third Party Opinion on CSR Activities in Fiscal 2017

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 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 after-sales services, human resources, health promotion, creating ideal working place of safty and health, social contribution, IR, and CSR.

DENSO has set numerical targets for all of its wide-ranging CSR initiatives based on the DENSO Group Declaration of Corporate Behavior, which was established in fiscal 2007. In Japan and overseas, the Company has developed and established a structure to quantitatively manage the achievements and issues related to its CSR initiatives and is promoting a global management cycle in an appropriate manner. In doing so, I believe DENSO is setting standards that should serve as the benchmark for other companies around the world.

Items that deserve high praise

  • DENSO deserves high praise for its world-class level of CSR management. Under the DENSO Group Long-term Policy 2020, DENSO has placed “preserving the planet” and “safety and security” as the key objectives for its initiatives in CSR management. For these objectives, a diverse range of social contribution initiatives are being managed and promoted by each division and relevant personnel in a comprehensive and quantitative manner from the perspective of risk management and stakeholder satisfaction. These initiatives are being pursued with the aim of accomplishing the Company’s future vision, which includes “realizing a society without traffic accidents” and “creating a society that helps conserve the global environment the more people travel.”
  • In regard to corporate governance, DENSO deserves high praise for establishing and implementing a structure based on Japan’s Corporate Governance Code 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 Corporate Governance Policy,” 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. I also have high expectations that DENSO will increase the number of opportunities for engaging in dialogue with the local communities in the Company’s core regions of operation around the world.
  • For environmental management, DENSO has established quantitative targets and promotion plans for each department 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 source for deepening the Company’s initiatives toward sustainable growth and social contribution. In particular, through item 115, “Perfect Energy Factory (PEF) Activities,” as well as “Just-In-Time (JIT) Energy Activities,” where the Production and Facilities Management departments 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 a framework for having those working on the frontline recognize issues that need to be improved upon on their own. 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 of “ENERGY 1/2; CLEAN × 2; and GREEN × 2” (Target 3), as well as 10 specific actions (Action 10) for realizing these targets, within DENSO Eco Vision 2025, which was announced in fiscal 2017. I give a high evaluation of the items and processes within the report, which were compiled in detail. I also give a high evaluation to the prompt expansion of initiatives in water management that take into account regional characteristics as well as the development of methods to calculate the environmental footprint during car use by automotive part. In addition, I am impressed with the fact that DENSO has clarified areas where auto parts can be used to improve energy efficiency and reduce the burden in terms of mass, electricity, and power consumption, in addition to the fact that the Company has set an industry standard in this regard via the Japan Auto Parts Industries Association. Going forward, I remain hopeful that DENSO will expand, deepen, and achieve Target 3 in such ways as leveraging micro-hydro power generation that makes use of drainage water, while giving consideration to its entire global value chain, including its service stations.
  • For sustainable procurement, DENSO deserves high praise for disclosing its Supplier CSR Guidelines, which help DENSO’s suppliers establish a foundation for 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. For issues such as conflict minerals that are difficult to resolve through initiatives by only DENSO, I commend DENSO for actively spearheading initiatives as an industrial group. DENSO deserves extremely high praise for incorporating CSR themes into the daily management of not only the Group but also the Group's primary business partners. This is an example of another initiative that I believe should serve as a global benchmark. I sincerely hope that DENSO will introduce an award system and provide the opportunity for past cases to be presented in order to share the best practices of its business partners going forward. I also anticipate that DENSO will collect and provide behavioral tools that help enhance communication in the workplace, which is becoming more and more diverse. In addition, I hope that the Company will work to make specific and effective improvements in the necessary areas identified through risk evaluation.

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

  • In terms of improving customer satisfaction, I commend DENSO for gradually 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 will maintain my expectations that DENSO moves 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.
  • For promoting employee health and creating a safe workplace, in addition to continuing the Open Consultation Hotline, which allows employees to voice their concerns and discuss issues that are troubling them, I give DENSO a high evaluation for the following items: continuously reducing the number of employees who smoke since fiscal 2012, formulating the Health Declaration in September 2016, appointing managers to act as “health care leaders” in the workplace, and devising and implementing health care action plans catered to each workplace. In regard to ensuring the safety and security of contract construction workers, I give the Company praise for the initiatives it has pursued through the Occupational Health and Safety Council as well as the efforts it has made to establish shared standards with each company belonging to the Toyota Group. I also commend DENSO for carrying out training at overseas locations for personnel in charge of safety. Going forward, I hope the Company continues to enhance multilingual support at its domestic offices and actively introduces health and safety-related initiatives overseas.
  • 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 half of the Company's directors and employees participate, support for persons with disabilities through the Wheelchairs and Friendship Center of Asia and other means, 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 curriculums for the development of human resources. In addition, I continue to strongly encourage DENSO to move forward with efforts aimed at creating a society with zero traffic accidents.

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

  • Regarding respect for employees and personal diversity, 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 long-term, local employees at 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 1.5%. 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, systems, and applications that help employees balance work 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 in order to raise productivity. 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 it operates can understand DENSO's philosophy, values, and practices in their own native languages.
  • As for the value creation process that helps realize the Company’s long-term policy, DENSO needs to consider the state of social infrastructure and automobiles by taking into account forecasts for population compositions and social and economic conditions in the near future 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 for 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.

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Editor's comments

We are very thankful for Mr. Kawakita engaging in dialogue with representatives from each department in order to offer his third-party opinion. We will take his comments as an indication of expectations for DENSO from society at large, and will make reference to them in our activities going forward.

During the dialogue with each department, he once again offered a variety of opinions on topics from business activities to environmental management and social contribution, and I can feel that the expectations put upon DENSO are increasing year by year.

For instance, Mr. Kawakita shared with us his belief that we should remain proactive in making proposals within our business activities for the creation of sustainable mobility for society. He also stated that we should create a platform that allows all people to participate in our social contribution activities, not just our employees. I understand that the common message within these opinions is the need for DENSO to become a leader in the resolution of social issues. I also fully comprehend Mr. Kawakita’s expectations that we promote more effective activities while soliciting the participation of society at large in these activities. While a small section of the Company has been carrying out these kinds of activities that involve the industry and society as a whole, we will work to expand such activities while keeping in mind the idea of collaborating with society to bring about positive change.

Within his dialogue with each Company division, Mr. Kawakita offered us opinions and advice that will help us enhance our information disclosure practices from the perspective of ESG, a recent trend. We will use these opinions and advice to make improvements moving forward.

In October 2017, we announced the DENSO Group Long-term Policy 2030. The environmental changes in the automotive industry are occurring at a faster pace and to a greater extent than initially expected. In light of these changes, DENSO has embarked upon a new journey that we position as our “second founding.” We have reached an age where it is essential to pursue corporate management that fully comprehends both business and social issues, such as the SDGs and ESG, in an integrated manner. To realize the sustainable growth of both DENSO and society at large, we will place even more importance on dialogue and cooperation with our stakeholders as we work to enhance and expand our business and social contribution activities going forward.

Corporate Communications Div, DENSO CORPORATION