Dialogue 2016

Key themes to be tackled by the Asahi Group to improve social value

At the Asahi Group, in order to engage in more management-based strategic CSR activities to respond to changes in social conditions, we have reviewed CSR activity regions and key themes. In order to incorporate stakeholder-viewpoint evaluation as part of this process, we welcomed two experts and engaged in dialogue with executives. A wide range of opinions was received including Asahi Group CSR activity regions and key themes that need to be emphasized, and hopes for future initiatives.
(Date held: January 2016)

Key themes to be tackled by the Asahi Group to improve societal values

Participants

Experts (in no particular order)

  • Dr.Naoki AdachiDr. Naoki Adachi
    President
    Response Ability, Inc.
  • Mariko Kawaguchi Mariko Kawaguchi
    Senior Analyst of the Management Strategy
    Research Department,
    Daiwa Institute of Research Ltd.

Asahi Group Holdings (positions at time of dialogue)

  • Naoki Izumiya Naoki Izumiya
    President and Representative Director,
    CEO of Asahi Group Holdings, Ltd.
  • Katsuyuki Kawatsura Katsuyuki Kawatsura
    Executive Vice President and
    Representative
    Director of Asahi Group Holdings, Ltd.
  • Katsutoshi Takahashi Katsutoshi Takahashi
    Managing Director and
    Managing Corporate Officer of
    Asahi Group Holdings, Ltd.
  • Shiro Ikeda Shiro Ikeda
    Managing Director and Managing
    Corporate Officer
    of Asahi Group Holdings, Ltd.
  • Yoshihide Okuda Yoshihide Okuda
    Managing Director and Managing Corporate Officer (CFO)
    of Asahi Group Holdings, Ltd.

Changes within and outside of Japan in the Asahi Group management environment

Izumiya: Today, there are five executives present from our group including myself. I believe that the work of the top managers is to increase corporate value through the two aspects of financial value and social value. To do this, I consider it highly significant to gather together with experts from outside the company to discuss the validity and objectivity of what issues we need to focus on and how we can tackle such issues. Thank you very much for your attendance and I look forward to a meaningful discussion today.

Adachi: Thank you. I also look forward to a meaningful discussion. As we can see from the review by the Asahi Group of its CSR areas of activity and key themes, the environment surrounding business has recently been undergoing great change. In fall 2015, Sustainable Development Goals (SDGs) were adopted as international objectives. At COP21, the Paris Agreement, a universal initiative in which all countries around the world will tackle the problem of climate change and ultimately eliminate greenhouse gases, was adopted. From 2016 onward, we have entered the execution stage of these plans. However, there is still little overall sense of ownership of these issues in Japanese corporations and I feel that our country is somewhat lagging behind globally.

Kawaguchi: There definitely is a difference in the degree of interest between Japan and the rest of the world. For example, looking at ESG investment, the global market scale in 2014 was 2,600 trillion yen, whereas Japan's ESG investment didn't even reach 1 trillion yen. However, from 2014 onward, changes have been observed, with the Stewardship Code and the Corporate Governance Code being published in Japan and the GPIF signing the Principles for Responsible Investment. As the stances of institutional investors are changing, companies are also starting to respond to this.

Ikeda: Until last year, I was an executive in charge of CSR. I feel that with regards to the environment, perceptions have changed even within Japan amongst consumers over the past few years. Product elements such as energy conservation, resource conservation and the reduction of waste are affecting customer decision-making. As a new value proposal, I would like to enhance initiatives at the Asahi Group such as the communication of products taking society and the environment into consideration.

Takahashi:One thing I have noticed is the fact that in Japan, although initiatives related to “being kind to the environment” may become temporarily popular in Japan, this popularity tends to be short-lived. Although this is also the responsibility of corporations, I believe that such initiatives need to be firmly established by working to enable customers, our greatest stakeholders, to truly understand their significance.

Takahashi

Kawaguchi: It is extremely important that consumers feel a sense of social responsibility in their own purchasing behavior, and it is anticipated that corporations will fulfil the role of fostering such consumer demographics. Recently, as sensitivity to ethical consumption is increasing especially amongst the younger generations, I think that understanding could be gained more easily now by reliably promoting initiatives.

Kawatsura: While consumption styles such as ethical consumption are garnering attention, there has been no decline in price-focused consumption behavior. Although it appears unlikely that the gap between these two extremes in consumption styles will be filled, I do think that opportunities for consumers to focus not only on price are increasing. For example, with recent problems related to food safety becoming apparent, consumers are starting to wonder how the products that they normally buy are made. We need to further reinforce these opportunities.

Kawatsura

Understanding and responding to social and environmental issues in the supply chain overall

Takahashi: We have asked Dr. Adachi to investigate our group's water risk since 2015. This is a key theme for our company, as the importance of sustainable water resources is every increasing. However, even if our company alone attempts to effectively utilize water, it remains a fact that a far greater amount of water is used on fields to grow the crops that form the ingredients for our products than the amount of water used in actual product manufacturing. We must observe and take into account the entire supply chain, including procurement sources.

Adachi: That is exactly correct. It is likely that malt, oranges and coffee in particular will not be able to be procured at the same price and quantity from current producing sites in the future due to water-related issues. If this happens, society will not trust the Asahi Group if it proceeds based on the idea of simply “moving to another producing site with a lower water risk.” Companies need to be seen to attempt to create systems for the most efficient production with the least amount of water based on the water risks of each producing site.

Kawaguchi: Some US food manufacturers have even disclosed in advance the risks of their procurement sources associated with climate change.

Adachi: That's true. The financial effects on corporations of water risks can be anticipated to some extent by external parties, and European investors are currently making investment decisions based on these facts. If a company makes a disclosure such as “Our company is aware of the water resource issue and is working to implement appropriate management,” this could lead to positive evaluation.

Kawaguchi

Okuda: From 5 to 6 years previously, our company has committed to activities related to shareholder relations. During dialogue with shareholders, we receive many questions related to governance. While business results can be discerned from financial data, I believe that governance is being focused on as a means of guaranteeing future business results, which are more difficult to predict. We have also received questions from many companies regarding the supply chain. I believe that these questions are regarding risks including not only companies in our group, but environmental issues related to procurement sources when the entire picture is viewed back to the supply chain.

Okuda

Kawaguchi: Looking at the supply chain, animal welfare has recently been garnering attention. In Western countries, major companies such as McDonald's and Subway have banned cage eggs, and the amount of antibiotics being injected into cows is also being more strictly questioned. In Japan, while the level of awareness remains low, attention needs to be paid to develops such as the Modern Slavery Act*, which was enacted in the United Kingdom in 2015.

Okuda: Currently, our Asahi Breweries, Ltd. Europe Branch is subject to the Modern Slavery Act, and we are starting to consider how to respond. Human rights violations such as forced labor and human trafficking in the supply chain form significant risks for corporations.

Adachi: The Modern Slavery Act is a law that should really have also been established in Japan by the government. While progress is made internationally with regards to human rights initiatives, Japan's response is lagging behind, forcing corporations to stretch out their antennae and create their own initiatives in order to compete on the global market.

* Modern Slavery Act 2015: A law established in the United Kingdom that requires corporations to publish annual reports of initiatives for the prevention of forced labor in supply chains.

Contributing to business regions essential to achieve global growth

Ikeda: In overseas business regions, I believe that response needs to take into consideration the individual characteristics of each country. I am in charge of business in Indonesia, and I feel that it will still take some time before products focusing on CSV are demanded locally. For example, as the environmental conservation concept itself has not yet become widely recognized, I believe that it is premature to promote environmentally-friendly products in regions where people habitually dispose of trash by throwing it in rivers.

Ikeda

Adachi: Of course, developing regions have different needs, and approaches that have been used in Japan might not work well in other areas. However, investigating approaches for solving various problems faced by countries and regions in which business is being developed can form opportunities for business innovation. Furthermore, in the long-term, the establishment of such social foundations could also make it easier to conduct your company's business into the future.

Kawaguchi: Previously, many Japanese companies tended to expand business based on the idea of “We have made a good product, so let's try selling it in more markets overseas.” However, the idea of first gaining trust at the site of business and expanding products after becoming a popular corporation is also important. To do this, social contribution taking the local situation into account is essential. From an environmental viewpoint, as Japan also has a history of overcoming environmental pollution, I believe that contributions unique to our country can be made with proposals based on experience, with ideas such as “We could solve this problem by using methods such as this.”

Izumiya: From a long-term viewpoint, I believe that creating future customers by proactively cooperating in initiatives related to health, education and infrastructure is effective for business. As economic power increases and society matures, markets for our products are cultivated. On slightly different note, after the Great East Japan Earthquake, we have started a project involving planting barley in Higashimatsushima, Miyagi prefecture, damaged heavily by earthquake, and having small-scale local beer manufacture actually produce and sell the beer. This initiative, which is part of our disaster reconstruction support, have strong local roots, and I believe that a global version of a business initiative such as this could also be possible.

Adachi

Strategic CSR deployment from the viewpoint of value creation

Kawatsura: Globally, there are difficult themes such as eliminating the North-South problem. In developing markets, it might appear that developed countries have gone ahead and gained all of the profits. As developed countries, we must yield what we can to developing countries and establish frameworks so as to engage in initiatives to contribute to the social and environmental recovery and development of developing countries.

Kawatsura

Izumiya: With the increase in the world population and associated shortages in food and energy, the problems of the future are not confined to national borders. While 19 million tons of food is wasted in Japan each year, many countries are suffering from famines. Furthermore, various resources will be used up in the future, with problems such as water issues expanding in scale throughout the world. Corporations must continuously engage in extensive social coordination to determine what issues need to be tackled and how to tackle them. This cannot involve an attitude of working to fix problems when business results are good and stopping such measures if business results deteriorate. Such ideas have been fully incorporated into the new Medium-Term Management Policy from 2016 with “management to enhance corporate value in order to achieve sustained growth.”

Kawaguchi: That is wonderful to hear. Now that global boundaries have truly expanded as far as possible, the entire human race must co-exist using limited resources. Corporations can certainly create large value by aiming to evolve by taking co-existence into account rather than engaging in tough competition to knock down competitors, and developing quality rather than increasing quantity.

Kawaguchi

Adachi: As areas of activity for CSR and key themes of your company have thoroughly covered the necessary areas, I don't believe that there are any problems with regard to directionality. Therefore, I would ask that concrete plans are developed into the future to lead to the accomplishment of goals. While there remain many issues associated with society and the environment, I believe that a whole new world could be seen by considering these not as limitations, but as chances to generate new products and services. I believe that the Asahi Group is an advanced corporation in which the concept of sustainability is already firmly engrained in all of its executives. Therefore, it is important that members of top level management come to the forefront and directly communicate such ideas to society.

Izumiya: I feel that initiatives that go one step further than previous endeavors are required now. Rather than simply responding based on the “theory of corporate responsibility,” a standpoint of “creating value” needs to be taken. We hope to push firmly forward by engaging in response to social and environmental problems as part of management strategy and making our corporate management sustainable. Thank you very much for this valuable discussion today.