Yamamoto: Today we invited three outside experts for a dialogue on what society expects from corporate enterprises in the age of ISO26000. Our guests have already viewed a video introduction to ZEON CORPORATION as well as a television commercial about the company to gain an overall understanding of our business. President Furukawa will lead off the discussion by confirming his commitment to CSR as the head of the company.

Furukawa: I assumed the post of company president at the end of June 2003. In March of the same year, I was called before the European Commission to testify on an alleged anti-competitive practice in our NBR (nitrile-butadiene rubber) transactions, with a similar allegation subsequently announced in the United States. Around May, several chemical makers were found to have omitted safety inspections under the High-Pressure Gas Safety Law. Suspecting similar omissions, the Nuclear and Industrial Safety Agency of the Ministry of Economy, Trade and Industry inspected other companies and discovered that our Tokuyama and Mizushima plants also omitted these safety inspections, and in November, the ministry consequently revoked our authorization to carry out these inspections.
I believe the historical background for the anti-competitive practice was the antirecession cartel in the vinyl chloride industry from the mid-1970s to the 1980s, which may have influenced our behavior overseas. The omission of the safety inspections may have been a result of cutting back too much on spending at our plants to reduce fixed costs while suspending dividend payments for two consecutive years in 1993 and 1994 and struggling to achieve profit targets after the bursting of the economic bubble.
To break away from this kind of practice, we first worked only to ensure full compliance. Although the corrective actions were not as sophisticated as today’s CSR efforts, the executive officer at that time took the initiative and regained authorization to carry out the safety inspections. From what we have learned, I believe we can now guarantee compliance. At the time, however, I was worried if we were doing enough. I had the opportunity to hear Shigeru Nakajima, an attorney, talk about compliance and CSR, and was inspired to work on CSR and create a company that could make a greater contribution to society.
We want to advance our CSR efforts, including quality assurance, across our entire business operations, starting at the regional level, such as by organizing summer festivals at our plants for local residents. For example, we intend to apply Life Cycle Assessment (LCA) to accurately estimate the benefits provided by using our rubber products for fuel-efficient tires. Despite any challenges that may arise, we are seriously exploring this kind of direction.
We are now developing a new Mid-Term Management Plan aligned with our vision of society in 2020. The plan is geared toward making us a company that contributes to society and that works to embody the spirit of the ZEON CSR Policy. We are now polishing the final details of this plan.

Yamamoto: Let me add to what the president has said by describing the CSR activities at ZEON over the past year or so. Fiscal 2010 was a year of major changes for ZEON. We established the ZEON CSR Policy and CSR Code of Conduct in April, reviewed meetings held across the company to reconfigure our CSR promotion system in December and launched a new promotion system under the CSR Conference in January this year.
We held two CSR briefing sessions for all head office employees as well as all plants and group companies to provide an opportunity for considering CSR at each milestone of our efforts. We are encouraging everyone to be aware of, think about and act for CSR by developing a CSR Matrix. The matrix will increase the visibility of our CSR activities through a system chart, organized by category and stakeholder in each department, under the new promotion system in cooperation between the CSR Basic Policy Committee and CSR Promotion Committees at the Head Office, five operating sites and 10 group companies. We have also launched the CSR Core Project to develop activities in which all employees participate that could be regarded as ZEON’s CSR project. I think these two pursuits will form the foundation of ZEON’s CSR in the future.

Adachi: The President said he understood CSR in terms of correcting one’s own behavior and launched CSR efforts to restore balance after a one-sided pursuit of profits had resulted in harm. I think this is a typical example of how Japanese companies have begun to engage in CSR activities.
I believe this type of engagement is right in a sense. I also became keenly aware that different approaches to CSR are being used in the development of ISO26000. The definition in ISO26000 states: Any decision-making and activities of an organization inevitably have some impact. Some stakeholders may appreciate the impact, but some may speak out against it. How a company responds to this interaction between impact and feedback is CSR.
Company presidents in Japan are typically unable to immediately answer questions with a list of what their stakeholders within and outside of their company are saying. Overseas, however, I sometimes observe a distinct difference in the sense of urgency and priorities related to CSR. For example, Shell was publicly criticized in the late 90s for dumping waste into the sea from its rigs in the North Sea oil field. What I remember from an interview with the manager of that company was his comment saying “CSR for Shell at that time was not a mid- to long-term issue; we had to make urgent decisions with the possibility of seeing our gas stations burned the next day.” This is clearly a different perception of CSR.
I mentioned that the ZEON experience is a typical example of how Japanese companies begin engaging in CSR. Since the President has included globalization in the new Mid-Term Management Plan, the company’s next task may be to identify the appropriate ways of conducting business in overseas operations. I would advise you to adopt this perspective in the CSR Matrix and CSR Core Projects your company is now working on.

Akiyama: When we began surveying companies for the purpose of SRI (socially responsible investment) in 2001, the acronym was simply not present in Japan. Our surveys focused on corporate ethics and compliance. The compliance efforts of Japanese companies were triggered by a series of corporate misdeeds. Especially in 2001, we observed incidents, one after another, at large corporations. To prevent such incidents, many companies started focusing on compliance. Compliance itself was a foreign word that was unfamiliar to the general public at that time, and we were often asked, “What does the word mean? How can you operate a business with it?” As companies proceeded with compliance efforts, however, we started to think that it is not about what you shouldn’t do. Instead, we saw it as a positive effort for fulfilling our responsibilities to society and thought that it is also important to be ready to explain how we do this, which led to the current understanding of CSR. The CSR of Japanese companies started off as an area for fulfilling responsibilities. In recent years, the direction of CSR has shifted to proactively contributing to society in addition to simply fulfilling responsibilities. I think enterprises that initially started CSR efforts from a defensive stance have now shifted to a more proactive approach of using CSR as a competitive advantage.
I believe CSR is deeply rooted in a company’s corporate philosophy. Compliance is not just about maintaining legal compliance; it is about a company strictly adhering to its own philosophy. Your company’s philosophy, “ZEON will contribute to the preservation of the Earth and the prosperity of the human race,” clearly proclaims your company’s commitment to benefit society and the human race. This inevitably leads to the question: How will the company benefit society far beyond legal compliance? CSR is about defining your corporate values and corporate intentions, and then putting these into practice every day while communicating them to society. I think it is significantly noteworthy that the company last year developed the ZEON CSR Policy, which is easy to understand and remember. Also, it reviewed and improved its corporate regulations and introduced a new promotion system to establish the foundation for its CSR efforts.
There are two important points in working on CSR activities. One is to define what area, focus and initiatives are right for managerial goals and for the company. The other is to clearly communicate this information to employees so they can perform their daily tasks in alignment with this direction. These two tasks should be pursued simultaneously. Since employees are the people who put CSR activities into practice, the absence of employee awareness, in particular, would render even the best plan useless.

Fujii: I’d like to say two things. First, when considering the value of CSR efforts, it is very important to recognize the difference between what is considered good in Japan and what is considered good outside of Japan. The antirecession cartel mentioned by President Furukawa was developed in what may be referred to as “the good old age” in Japan, and it was publicly accepted as unique to Japan. There has been nothing similar in Western history. So it’s not about whether Japan was right or wrong; there is simply a difference in what is deemed acceptable.
Here’s another example. A certain Japanese company employed people with disabilities to work at a factory in which only people with disabilities worked and proclaimed this to overseas media as an example of CSR. From the Western perspective on human rights, however, setting up a work environment exclusively for people with disabilities was considered as segregation, Western philosophy dictates that people with and without disabilities should work together. Before the matter could become a major issue, it was brought back onto safe ground.
What we now consider to be right is often not considered to be right outside of Japan. This could become an Achilles heel for a company expanding its business overseas. Embracing different cultures within a company as well as differences in values could cause some troubles in the company.
My second point: The description of your CSR Policy includes the phrase, “We will contribute to sustainably developing society and protecting the global environment through our corporate activities.” Contribution through business activities may be divided into two categories. One is contributing to the sustainable development of society and the global environment through products and services. The other is contributing to society by changing the manufacturing process without changing the products themselves. The shortcomings of the former are easier to see because you receive immediate feedback from the market and lose customers. This is not so true in the latter case because issues are difficult to identify and do not cause any immediate problems. This is why it is important to stick to the philosophy Ms. Akiyama mentioned earlier. Without a clearly expressed philosophy, you may not attract much feedback, and there is always the risk that the company will deviate further and further from its fundamental direction. I think it is important to focus on things that are not usually visible to the public, such as manufacturing processes.

Yamamoto: Mr. Adachi suggested that the history of ZEON’s engagement in CSR efforts is typical for Japanese companies, and he also described his experience in the process of developing ISO26000. Although ISO26000 does not require certification, I think its status as an international standard has a major impact on corporate operations. How do you think Japanese companies should respond?

Adachi: The first point is: to what extent you can identify your impact. Japanese companies may find it somewhat embarrassing to discuss their negative impacts, much less, “An Inconvenient Truth.” For example, it may be difficult for a chemicals company to talk about running out of fossil fuels, which are its raw materials, or tripling, even quadrupling prices. Other than developing a management plan, I suspect people usually refrain from discussing these kinds of issues. It’s pretty much the same with the issue of reducing CO2 emissions. I think it is important to create an atmosphere that encourages people to recognize these issues and freely express their opinions.
This is a little off topic, but I am very curious about why the company withdrew from the vinyl chloride business. If you explained that it was simply an issue of economic efficiency or there was some consideration about social impact in 10 to 20 years, our perception toward your company could change.
Second, I think Japanese companies have no choice but to carefully listen to what stakeholders say. There are not many outspoken groups or stakeholders in Japan. The market, however, is closely monitoring what companies are doing at every moment, so you must be able to hear them as well.
After we combine social impact and stakeholders’ feedback, I think the third most important factor is the selection of business. Many in Japan may say the existence of a company or turnover of its sales activities in the market bear witness to its social value and contribution to society. They also say that the goal of CSR is to accomplish the business at hand or improve quality regardless of the specific business field or product portfolio. However, I think a little bit differently: Companies need to establish an organizational framework in which members constantly consider whether they should continue or stop their current business and production operations in the context of society and the Earth 50 years from now. It is not until such a practice works that their own sustainability as well as that of society as a whole will be guaranteed.

Yamamoto: Mr. Adachi mentioned three points: the extent to which we can identify impacts, our relative openness to what stakeholders say, and conducting our entire business with a mid- to long-term consideration of what we should deliver to the world. With respect to the second point, one of the key aspects of ISO26000 and a principal statement in the amendment to the Keidanren Charter for Good Corporate Behavior is to ensure trust through dialogue with a broad spectrum of stakeholders. We know we have not done enough in this regard, and we must intensify our efforts. Concerning the selection of business, I think Japanese companies are doing this to some extent. For example, in our new Mid-Term Management Plan, we determined our activities for the three years using the image of the company we would like to be in 2020. President Furukawa, what do you think about this?

Furukawa: I think that in addition to ISO26000, various regulations such as the RoHS Directive, REACH Regulation and IFRS have been introduced overseas, making it difficult to respond to impacts. [Laughing] I suspect we would be in big trouble if we selected our business without first looking ahead 20 or 30 years. Merely recognizing impacts, however, is not enough. We are planning to open a plant in Singapore but have yet to know the countries in which we will recruit employees or what the corporate culture will be. Since we are required to get all of these things right, corporate management will definitely be challenging.

Fujii: Concerning ISO26000, I think it is important to become aware of the parts you have not considered before. Many business scholars have observed that one of the driving forces behind the strength of Japanese enterprises is the Japanese consumer’s passion for quality, that is, Japanese companies have benefited from discerning consumers who refuse to purchase any product with even the slightest flaw. On the other hand, as Mr. Adachi suggested, Japanese consumers rarely express their concerns to companies. Although environmental issues may be an exception, in other areas of concern, such as discrimination, companies in Japan are rarely subject to boycotts with anywhere near the frequency that businesses in the West face such protests. Since Japanese consumers remain patient on social issues but strict on quality, I think Japanese companies have given extraordinary consideration to quality while not feeling pressed to give much thought to social issues. In a sense, Japanese companies, over the long term, may be handicapped compared to their Western counterparts. So I think reading ISO26000 from the perspective of cultural differences can be useful for noting content that may surprise Japanese companies, making them wonder why they should consider certain kinds of things.

Furukawa: I agree. The Charter for Good Corporate Behavior was revised because Japanese companies lack a global perspective from which to respond to issues such as human rights and poverty. ZEON’s Code of Conduct is also weak in this regard and requires improvements.

Takegami: On a second reading of ZEON’s CSR Code of Conduct, I noticed that it states: “We will not engage in child labor and forced labor nor will we purchase any product manufactured through such labor;” however, it is not significantly emphasized. I think ZEON’s code reflects a part of ISO26000 here, but I feel we need to squarely respond to such issues and act accordingly.

Yamamoto: Now, let’s leave the issue of ISO26000. Ms. Akiyama and Mr. Fujii have mentioned “contribution to society,” so let’s discuss how we should make a difference through our core businesses, which would also impact environmental concerns.
First, Director Takegami will briefly explain how ZEON is contributing to the environment through its core business.

Takegami: At the risk of sounding like a commercial for ZEON products, I truly believe that the right way to contribute to society and the environment through our core business is to consistently deliver products that meet the needs of society by taking advantage of our “original technology that does not imitate others and cannot itself be imitated.” Representative products include: (1) rubber for fuel-efficient tires; (2) latex for gloves that reduces protein allergies; (3) “Zeoglobule^®” polymerized toner that enables copiers to consume less energy; (4) “ZEONOR^®” and “ZEONEX^®” cycloolefin polymer products featuring outstanding optical characteristics for such applications as mobile phone camera lenses; (5) “ZEONOR optical film^®” produced by a solvent-free extrusion method to improve the energy efficiency of LCD TVs and make them even thinner; and (6) “Zeorora^®,” a next-generation fluorochemical cleaning agent that won the Stratospheric Ozone Protection Award in the United States and helps protect the ozone layer to prevent global warming.
We supply these environmentally sound products through eco-friendly, reliable and safe production methods established through our Responsible Care activities. In respect to contributing to society through our manufacturing processes, which was mentioned earlier, we reduced unit energy consumption in production to 67.8 in fiscal 2010. This represents a 32% reduction from 1990, significantly beating the 20% reduction goal of the voluntary environment-related action plan of the Japan Chemical Industry Association. If we converted this level of reduction into CO2 emissions, it would be equivalent to 581 thousand tons in fiscal 2010, an 8.8% reduction from fiscal 1990 (637 thousand tons), exceeding the 6% reduction target for fiscal 2008 and 2012 under the Kyoto Protocol.

Yamamoto: Earlier Mr. Fujii stated that there are two categories of contribution through business activities: the products and services themselves and the process for producing them. The polymerized toner mentioned before is not only an environmentally sound product, but it is produced using a method that is completely different from conventional pulverization. In this sense, I think we are doing fairly well in terms of process and marketability as well. Since ZEON’s products are material or semi-manufactured goods, it is not always easy to see whether they are truly contributing to society. We were wondering what we can do to increase this awareness, and one possibility is the lifecycle assessment mentioned by the President in his opening presentation.

Furukawa: The chemical industry can create a variety of materials, including those with very unique characteristics. For example, airplane tires are high in natural rubber content. You could almost say they consist solely of natural rubber, which has a well-balanced durability. As Mr. Takegami has explained, we can develop rubber with ever-increasing fuel efficiency, but taken to the extreme, a car would not stop when it should. So we create distinctive rubbers that to a certain degree compromise on fuel efficiency. The exact opposite situation is rubber used for F1 races. Since racing cars drive at high speeds without any consideration for fuel efficiency, tire makers ask us to produce rubber that will not skid at high speeds, regardless of fuel efficiency. We can create products with a variety of distinctive features. Now, in the context of wanting to genuinely contribute to society while meeting customer demands, I believe our job is to turn out products that are environmentally sound throughout their entire lifecycle, from production through consumption and ultimate disposal. We want to clearly present this analysis in concrete, quantitative measures, despite the difficulty, which is our concern.

Yamamoto: Now, let’s start exploring our third topic, how should we think about CSR in the midst of the globalization we discussed earlier. We have already expressed the fundamental concept of our new Mid-Term Management Plan, mentioned by the President in the opening of this dialogue. It is based on our Corporate Philosophy and CSR Policy. These two will not and should not change. With this in mind, all our executives and employees are committed to taking CSR to the next level. On the other hand, we will apply our CSR Code of Conduct worldwide while modifying it in response to the needs of the times. Mr. Fujii, you have already started discussing how we should think about CSR in relation to globalization. Could you please elaborate on it a little more?

Fujii: I think CSR will serve as a strong walking stick for supporting us in globalization. When one company has acquired a foreign company, especially a large foreign enterprise, it is not at all unusual to later have a hard time remembering which company acquired the other in terms of, say, corporate philosophy. Westerners are good at expressing their worldviews, while Japanese companies discuss the next half step based on a deep-seated kaizen policy. In this way, the two sides talk right past each other forever. This situation could make it particularly difficult for the head office in Japan to control decisions on overall policy. This kind of situation tests how strongly you hold to your philosophy. The other day, I read President Furukawa’s 2011 New Year message. I have never read a president’s message that was so explicit. Each word was very simple and convincing. Because Westerners value clearly articulated thoughts, I think it is ultimately essential to express your ideas about human rights, the world we hope to create, or how we can address poverty, for example, when discussing values on the global stage.
In addition, I am concerned about the use of the phrase “contribute to the realization of customer dreams and a prosperous society” to create an enterprise blueprint for 2020. Westerners may well ask, “what is the dream of our customers?” The idea comes from the Japanese notion of serving customers. I fear that losing the uniquely positive aspects of Japanese companies is tantamount to digging your own grave, which you should never do. The Japanese notion of customer service, however, is hard to understand at the global level. Western companies, such as Google, talk about their own dreams first. They say they are working to realize their own dreams and not to realize their customers’ dreams. Of course, they serve their customers, but they talk about their own dreams first. This means that when you travel overseas you will be asked, “What is ZEON’s dream?” and I think it is very important to explain this in a way that everyone can understand.

Akiyama: As you expand your business overseas, it is essential to maintain a sense of center, and I think this is the role of the corporate philosophy, as I said earlier. You must gain an understanding of how much every employee understands the philosophy. When we use the term “overseas,” it clearly does not refer to any one place. Countries in the Americas and Europe are quite different from each other, just as countries are different in Asia. When developing business overseas, you must remain aware of the differences that vary by region or nation. The main role of your corporate philosophy is to unite these differences. When communicating your philosophy, be sure not to change its core spirit, but also be sensitive to how it could be perceived by local residents. We use the term “global business development,” but I think what we are actually doing is dealing appropriately with individual areas, which together make up the global community (“glocal”). In order to disseminate the philosophy to each area, you should make sure to fully explain it in a way that every local worker can understand. At the same time, it is very important to provide opportunities for local workers to ask themselves: “What exactly does this philosophy mean in our job?” Everyone should think about how they should work, what products they should make and what manufacturing processes to apply, while examining their own jobs in light of the corporate philosophy. It is, of course, important in overseas operations to disseminate your philosophy throughout the plant. But you must also pay attention to your business partners as well as the supply chain. Otherwise, you could incur significant risks.

Furukawa: I think so too. It is important to reflect the corporate philosophy in each worker’s job. This is expressed in the third item of our CSR Policy, which states: “each and every ZEON person is aware of CSR and acts accordingly.” Regarding the CSR Matrix mentioned earlier, we will establish a framework for ZEON CORPORATION’s CSR activities through a process in which the CSR promotion committees at all 16 sites will discuss a matrix and propose it to the CSR Basic Policy Committee for further discussion and compilation.

Adachi: In this context, when you talk about ZEON’s dream, I think it is important to stick to your products and services when expressing your philosophy. The core of your business appears to be byproducts of naphtha. That is, it seems your company’s history began with producing byproducts of naphtha and has thoroughly pursued every possibility for making good use of them. We could even say that the company’s history is a history of recycling naphtha.
In a manner of speaking, the company holds seeds that have inherited its DNA and aspires to have a certain technology flourish. This information must be clearly presented to the public. If you do this, it will play a symbolic role when you talk about the company’s dream and philosophy.

Furukawa: Yes, as Mr. Adachi has said, the core of our business is byproducts of naphtha and we are trying to use the C5 fraction in every possible way. At first, our ideas were not at all lofty. We wanted to use all of the C5 fraction, simply because transporting it by ship back and forth was very costly. I think we successfully differentiated the company as a result of how we used the C5 fraction. In addition, because it is only 15% isoprene, we tried a variety of ways to exploit the remainder of the C5 fraction, and as result, discovered a perfume, for example.

Adachi: I think these stories make your CSR much more accessible.

Akiyama: Have you told this story to all the employees there? Has it been told in a manner that people in the United States can understand? Americans are just as fond of these stories as the Japanese. They like to hear about the corporate philosophy or history, what they sometimes refer to as the “back story.” If you have a story, I think you should effectively communicate it. After hearing your explanation, I feel I now fully understand the relationship between the Earth and your company’s back story. Knowing this can completely change how you view the video that introduces the company.

Furukawa: I don’t think I have shared it often enough. I will tell the story more often in the future.

Fujii: Every company says it will do business globally, but even a global company is still managed by people. So in the end, this dialogue has been nothing more than a discussion about how each one of us can become genuinely global. In order to call ourselves “global persons,” we must realize that the key to doing business globally is becoming a community of global persons. Nevertheless, we should not abandon our Japanese sensibilities. We tend to approach this issue from the extreme positions of clinging to it exclusively or completely abandoning it. For example, the way in which you express your opinion about child labor reflects your own understanding of the issue. How and what we understand is an eternal challenge for everyone, which I believe is essential for making globalization work.

Akiyama: I think both corporate management and CSR should be based on maintaining a certain essence while taking on new changes. There are things you should not change and things you should change quickly. You can never be overly strict in preserving the core tenets of your corporate philosophy, but with other matters, particularly those you deal with abroad, you have to change depending on the situation and where you are. And understanding the local situation accurately is necessary for making changes. If you are from somewhere else, you must get to know and understand the people, their cultural background and their ways of thinking. And I think it is important to appropriately communicate the story behind your philosophy including some of the stories you have mentioned, and share the necessary information.
One more thing I’d like to mention is the pride in your work. Your philosophy is one component of your pride, but you should also communicate, both inside and outside the company, stories about your products, like the one we have just heard. Those involved in making the products know this information, but others, such as administration staff members at the head office, might not completely realize how your company’s products contribute to society, which would be a waste. The information must be communicated to employees because it cultivates pride in their work and the company. In addition to sharing information about CSR efforts, I strongly advise you to share these aspects with your employees.

Adachi: A large part of my advice may overlap with what Ms. Akiyama has just said.
I advise you to maintain your corporate philosophy and speak out. I encourage you to speak out because I think it is a challenge for many Japanese companies to have the confidence and means of expression for stating their contributions to society and to proudly declare how they intend to make a difference. It might sometimes be necessary to make an objection or defend a viewpoint upon hearing opinions from outside the company. Companies in the West are superior to Japanese companies in their abilities to speak out boldly. In my experience, I see they are often staging a performance and saying that they are doing something different than what they are actually doing. As you go global, however, you must compete with them. So Japanese companies simply must speak out more often, regardless of the cost or time required. I feel CSR efforts represent an ideal and are an important arena for speaking out.

Yamamoto: Thank you for your time today. Last year, we exchanged our thoughts on CSR through a round-table discussion with young employees, which was related to the recently announced ZEON CSR Policy and CSR Code of Conduct. This year, we discussed CSR with external experts. We looked at the importance of paying close attention to what people outside the company have to say in order to meet society’s expectations and demands.
I would like to end the meeting by expressing hope that this dialogue will stimulate further discussions related to CSR throughout the company.