Stakeholder Dialogue 2022

Respect for Human Rights as the Foundation of Business Activities

The Asahi Group positions human rights as a materiality issue and considers respect for human rights to be their foundation of all business activities, which is why top management has such a strong commitment, and we are promoting human rights measures. This has been made possible in large part thanks to advice received by board of directors through dialogue with outside experts; the following is a summary of what kind of dialogue this entailed, and what was gained through said dialogue.
(The following discussion took place in July 2022.)

Participants

Experts (Listed in No Particular Order)

  • Hidemi Tomita

    Managing Director, LRQA Sustainability KK

  • Hideaki Umetsu

    Lawyer, Mori Hamada & Matsumoto

Asahi Group Holdings, Ltd.

  • Atsushi Katsuki

    President and CEO, Representative Director

  • Taemin Park

    Director and Executive Officer, CAO

  • Keizo Tanimura

    Director and Executive Officer, CHRO

  • Kaoru Sakita

    Director and Executive Officer, CFO

  • Yutaka Hemmi

    Managing Executive Officer, CSCO

  • Job titles are current as of July 2022

Business Risk and Human Rights Risk

KatsukiRegarding the relationship between business operations and human rights, in 2011 the United Nations officially endorsed the UN Guiding Principles on Business and Human Right, or UNGPs. This has driven efforts toward the establishment of soft laws, while also accelerating progress in the area of hard law establishment, with one example being the 2015 UK Modern Slavery Act.
At the Asahi Group, we established the Asahi Group Human Rights Principles in 2019 and have been moving forward with related activities, but we feel these efforts are not sufficient. That's why we would like to engage today in frank and open dialogue about issues that ought to be addressed at the Asahi Group, as well as the ideal future state of our group.

UmetsuAs you have mentioned, we have seen stronger trends toward hard law creation, which I think will continue. However, I personally believe that a time is coming in which the focus will shift back in the direction of soft law. Although hard law has been effective in encouraging corporate measures aimed at greater respect for human rights, this type of approach is concerned specifically with legal compliance, which creates the risk of encouraging companies to only do what is necessary to fulfill their legal obligations and nothing more. Instead of focusing on just meeting the requirements of hard laws, it is important that corporations do not lose sight of the end goal, which is to solve human rights issues.
In regard to the link between business and human rights, I would also like to point out that human rights risk is not something to be addressed because it would be a business risk; rather, we must set the precedent that human rights risk itself should be resolved. It is a type of risk that affects rights holders, so it must be treated as a discrete issue not defined by its impacts on corporate business activities.

KatsukiIn that regard, one thing we find to be challenging is determining which standards and approaches on which we should base our responses when we identify human rights risks within the supply chain.
Take coffee beans, for example: If we determine that there is a risk of child labor at one of the coffee-growing plantations, we may decide to stop doing business with that grower as an expedient means of addressing business risk. However, that response has the potential to exacerbate human rights risks. Determining the best ways to assess human rights risks is a major challenge for companies like ours.

TomitaI agree fully. The approach you've mentioned—of ceasing business dealings with a supplier upon discovery of child labor issues—may actually lead to worse human rights violations. From a business-risk perspective, ceasing dealings may be the quickest solution, but I think the best possible approach is facing the human rights risk head-on, even if it incurs costs.

TanimuraFrom a corporate perspective, it's common to approach issues like this by first tackling the easiest issues for one's company to handle. However, this approach tends to encourage a focus on business risk first, rather than a focus on human rights risk. That's why I think it's so important for us to consciously take a human-rights-risk focused stance rather than basing things on business risk.

Assessing Risks with Consideration for the Entire Value Chain and Working Together with Stakeholders

TomitaIf you don't mind me being completely honest, I got the impression during our dialogue with your company three years ago that you were making moves to address these risks primarily for purposes of improving evaluations of your ESG [environmental, social and governance] ratings. It seems that you may have lost sight of the true purpose behind human rights measures. However, more recent activities have shown me that your company has successfully done away that approach and is now serving as a leader among Japanese corporations in the field of human rights efforts.
But there are still some problem areas which need to be addressed, with the most prominent from my perspective being your fragmented view of human rights issues that fails to take full consideration of the bigger picture. Although you have focused a lot on risk related to suppliers and base product ingredients, there seem to be a number of human rights issues related to alcohol consumption, the environment and community which still need to be fully addressed.
It's common practice to examine the value chain as a whole, identify risks therein, and then proceed with addressing the most severe issues first. Supplier questionnaires and similar have their limitations as means of identifying such risks, which is why it's necessary to pursue more in-depth investigations following questionnaires, including onsite visits to truly assess and understand the issues. Ideally, one should employ a two-tiered approach: carrying out questionnaires and follow-up investigations repeatedly in order to get a big picture, while simultaneously moves on to more in-depth into the pressing issues uncovered therein through risk identification and monitoring.

HemmiOur group sends out questionnaires to suppliers as a way of better understanding not just levels of respect for human rights, but conditions in relation to labor, environmental measures, quality and many other areas as well. However, even with a consistent set of questions, suppliers tend to interpret and answer them in differing ways, which has taught us the importance of striving to understand individual supplier background factors when examining their responses. To this end, we are currently in the planning stages for measures to increase investigative personnel numbers and otherwise pursue more effective onsite follow-up investigations after questionnaires.

UmetsuI think that such proactive, self-motivated efforts by companies to pursue onsite visits and investigations will become increasingly important in the coming years. I am fully aware of just how challenging task this is from a company's perspective, but pursuing such measures is sure to provide insights not obtainable through questionnaires alone. And, as a lawyer, I have seen firsthand just how valuable such insights can be when responding to crisis situations.
I have personal experience in emergency support measures for companies at which human rights problems have come to light, and it's not uncommon during onsite investigative visits to encounter major discrepancies between what the company understands through human-rights due diligence and the onsite reality.

TanimuraCurrently, we are in the preparatory stages for establishing a human-rights due diligence framework, and in that regard, I find your comment to be apt and extremely helpful. Widespread changes are taking place among consumers and civil society as a whole, so it's imperative for us to focus strongly on human rights risk in order to avoid missteps in the coming years.

UmetsuYour organization seems to be keenly aware of the issues and undertaking measures to solve human rights problems—those processes are conveyed in great detail through your information disclosures. However, in regard to the rights holders at the very end of the supply chain, who are at greatest risk for human rights violations, I have not been able to find any concrete examples of approaches that solved human rights problems among the information disclosed by your group. If you were to provide one or two specific examples, they would serve as firm evidence that you're making progress toward truly meaningful measures in this area, so your next move should be to try to reach that level of information provision.

SakitaIt goes without saying that human rights problems within the supply chain are issues that we ourselves must make sincere efforts to rectify. However, there are some human rights issues which are influenced by background factors related to the specific country or region in question, in which case it can be difficult for one company alone to accomplish changes. What would you suggest we do in order to gain a more meaningful understanding of the issues while moving forward with response measures?

TomitaI agree that, when it comes to raw material risk, issues such as poverty, weak governance law and so forth within the country or region in question may be the underlying cause, rather than the specific grower or supplier. These are difficult problems for any one company to take on alone. Therefore, it is helpful to work with other industry members, NGOs, the local government and other influential organizations in order to improve conditions. As a leader in your industry, I think you will be expected that kind of response from the Asahi Group moving forward.

SakitaIn our investigations related to coffee bean risk, we have worked in collaboration with the Rainforest Alliance and numerous other outside organizations. We cannot send people directly to growing sites for all of those investigations, which is why collaboration with outside organizations is key. Hearing what the two of you [Mr. Umetsu and Mr. Tomita] have to say has reminded me of just how important is for us to collaborate with various stakeholders and take more concrete action wherever possible.

Continued Engagement and Dialogue, and Effectiveness Improvements for Grievance Mechanisms

KatsukiOne of the major challenges of our group is the creation of grievance mechanisms. We understand the importance, but we have not come up with a finalized version yet, and are currently in the process of experimenting with various approaches and searching for ways to implement it.

SakitaWe understand that it is necessary to establish a mechanism which is truly accessible to the rights holders, who are the most greatly affected by human rights violation risk. However, when it comes to agricultural growers, for example, there is no way for them to know which manufacturer ultimately uses the produce they supply. With this in mind, we believe it is necessary to come up with means of organizing priorities as we move forward with formulation of the actual framework.

TomitaWe still see very few corporations that implement grievance mechanisms in actuality—not just in Japan, but among companies in other countries as well. However, increasing numbers of Japanese companies are taking on the challenge of piecing together such mechanisms in trial-and-error fashion, even if they don't have completed mechanisms in place quite yet. The most important thing is ensuring that the mechanisms are rooted in engagement and dialogue.

UmetsuGrievance mechanisms play a highly important role when it comes to solving human rights problems, because they serve as a pivotal means of gathering complaints. However, as Mr. Tomita has said, it's difficult to formulate a perfect mechanism right off the bat. The important thing is to start building reliable, person-to-person lines of communication—even just a little bit at a time—and do so in sustained, continual fashion.

ParkI believe that, in order to ensure that grievance mechanisms function properly as part of overall human-rights due diligence activities, corporations must establish a grievance processing cycle wherein the complaints submitted by mechanism users, which are the input, are addressed and solved by company measures, which are the output. Listening to you two [Mr. Tomita and Mr. Umetsu] speak has reminded me of just how central this input–output cycle is to the overall framework.

HemmiThe ideal approach would be to get parties throughout the entire industry involved in new-platform creation, and to involve as many stakeholders as possible in mechanism creation. But high-speed responses are also a necessity when it comes to addressing human rights problems. The most realistic approach is to start by setting up a reporting line, and then searching for the most effective and suitable systems to implement as part of that approach.

TanimuraI would like to point out that, when creating a grievance mechanism, people tend to get caught up in the means of creating the mechanism itself. As someone in charge of human resources operations, however, I believe it is also critical to improve complaint-processing capabilities.
Even if the grievance mechanism enables us to identify human rights violation cases, that won't do us any good if we're not equipped to respond accordingly. Therefore, I believe it's imperative to also take consideration of response capabilities when creating new grievance mechanisms.

Executive Management's Commitment to Human Rights Measures

ParkToday's dialogue has really brought home to me the importance of boosting the effectiveness of our human-rights-related measures. With grievance mechanisms, for example, I can see that it's vital to find ways of collecting as many complaints as possible, and also the importance of fostering capabilities which enable us to respond to said grievances.

KatsukiAnd when it comes to boosting effectiveness in these ways, we can't limit ourselves to working with individual employees in our group alone. Rather, we need to work with all of our suppliers on a company-by-company basis in order to further disseminate awareness in regard to human rights. Therefore, all of us involved in management—which includes me as the CEO—need to find ways of better communicating our strong commitment to such endeavors. Human rights are pressing issues and I am determined to commit fully to the realization of concrete and meaningful results moving forward, and fulfill our accountability requirements by the top management.

TomitaAs President and CEO Katsuki has stated, everyone involved in management at the Asahi Group has an unshakable, high-level commitment to addressing human rights issues, and today's dialogue has exemplified that in an impressive way.
Before wrapping things up, I'd like to remind everyone that human rights issues represent an immediate and urgent threat. Corporations tend to take a mid-to-long-term approach to sustainability-related issues, but when it comes to the category of human rights, the issues are more pressing than any other type.
Many companies have played a part in human rights violations through corporate activities rooted in globalization trends, and today we are likely witnessing some of the worst human rights violations in history. In fact, it is highly probable that, somewhere within the Asahi Group value chain, human rights violations are being committed right this very moment. This is the reality you need to keep in mind as you move forward with efforts to address human rights issues.

KatsukiThe Asahi Group has established the "Asahi Group Risk Appetite" for purposes of clearly identifying risks that are acceptable and risks that should be avoided in our business activities, and we utilize this as a tool for promoting suitable risk-taking in corporate endeavors.
In regard to respect for human rights throughout the supply chain, we are further strengthening our stance and clarifying our approach to risk control using every means necessary, regardless of how these may affect profit-and-loss planning. Even if a human rights issue that influences profitability comes to light, top management in our group will clearly state our intent to prevent human rights risk and fulfill our accountability.

UmetsuYour approach is an epoch-making one that goes beyond mere words.
A company's role is to generate profits, but there is a line which must not be crossed in order to attain said profits, and the company needs to determine where that line is drawn. It is the exclusive job of top management to publicly state, on behalf of the company, that profits made without respect for human rights are meaningless, and that human rights are not something which must be balanced against profitability, but instead ensured as a top priority even if additional costs are incurred.
What I've heard from all of you today has convinced me that this is how the Asahi Group operates. Moving forward, I hope you will continue to serve as exemplary leaders in human rights measures for other Japanese companies to emulate.

KatsukiI appreciate all of your meaningful ideas and contributions today. I hope that we will have many more opportunities like this in the future. Thank you for your time.

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