Hitachi

Hitachi Solutions, Ltd.

CSR as a management challenge - Incorporating CSR into management strategy -

On May 15, 2012, we held a stakeholder dialogue among senior management members from Hitachi Solutions and two invited experts on CSR,Mr. Masahiko Kawamura from NLI Research Institute and Mr. Mitsuo Ogawa from Craig Consulting. With other employees present, the meeting participants engaged in a candid and indepth conversation on the relationship between management strategy and CSR and on Hitachi Solutions's CSR from the perspective of ISO 26000. Taking the form of an open roundtable discussion, the meeting achieved significant stakeholder engagement.

Senior Vice President and Executive Officer General Manager CSR GroupMasafumi Niimi
Deputy General Manager Corporate Planning GroupMitsuo Yanagida
General Manager Global Business Development Division Corporate Planning GroupEugene Egawa
Executive Officer Deputy General Manager Personnel & General Affairs GroupHiroshi Ishikawa
Corporate Officer General Manager Government & Public Sector Solutions Sales Division Sales OperationHidetaka Demise
Executive Officer Procurement Management GroupShigeru Kono
General Manager Corporate Brand & Communications Division CSR GroupYasutaka Ando

Concept and direction of Hitachi Solutions's CSR

Niimi:

  Before explaining our concept of CSR, I would like to introduce our Group's Corporate Principle: "Hitachi Solutions will contribute to the growth of our customers and the global community by supplying dependable technologies and advanced solutions." In my view, this principle and the action of putting it into practice is the basis of our CSR here at Hitachi Solutions.
  To get into specifics, we develop an annual plan in line with the CSR Policy of the Hitachi Group. We also analyze and evaluate various measures using the Hitachi Group's CSR Assessment Tool to improve our activities in the following year.
  Among the eight policy items, we particularly focus on "commitment to corporate social responsibility," "contribution to society through our business," "disclosure of information and stakeholder engagement," and "corporate citizenship activities." We also believe that our employees, who provide important value to our shareholders, customers, partners, and other stakeholders, play a central role in embodying CSR.

Kawamura:

  Thank you for clearly outlining the basic concept. One thing I am concerned about is that the policy concerning "contribution to society through our business" is focused too much on products. Your efforts to address social issues using IT solutions are very important. At the same time, it is also quite important to be aware of CSR and put it into practice while communicating with your stakeholders as part of daily operations or business processes. Products and processes are like the two wheels of a cart.This is another approach you can take to CSR.

Management strategy and CSR

Yanagida:

  The medium-term management plan through fiscal 2015 focuses on a few key themes, such as business restructuring and global business expansion, and targets 400 billion yen in sales and operating margin of 12%. In particular, the plan aims to increase the proportion of global business from the current 5% to 15%. With regard to the relationship between our management strategy and CSR, I personally think that management strategy equals CSR. The reason we are working on business structural reform is that it is needed to achieve sustainable growth. As we achieve the structural reform, we can fulfill our economic responsibilities.
  Our corporate philosophy positions the medium-term management plan under the Corporate Principle, the Code of Employee Conduct, and the Corporate Vision, which means that the medium-term management plan is developed in line with the Corporate Principle while legal and ethical responsibilities are covered by the Code of Employee Conduct. Driving growth based on these means that the management strategy and CSR are the same thing.

Kawamura:

  The environment surrounding corporate management has been changing dramatically in recent years. In the 20th century, resource and environmental constraints as well as constraints associated with increasing population, such as poverty and food allocation, did not exist. Now, in the 21st century, world population is expected to increase to 9 billion by 2050, raising concerns about global sustainability.
  If society is not sustainable, neither can business be sustainable. When you consider corporate management strategy under such a circumstance, setting financial targets may be a necessary prerequisite, but not a sufficient condition to achieve sustainability. You cannot achieve CSR branding unless you present a specific idea about the sustainability of society. The focus of CSR has recently broadened to include KPIs for a variety of issues besides the environment. I suggest that you narrow down your non-financial targets and state them in your management plan alongside the financial ones to show your commitment to achieving them.

Ando:

  Do you mean that, for example, including a qualitative statement on initiatives to address social issues in the medium-term management plan, in addition to quantitative business forecasts and targets?

Kawamura:

  That would make it very easy to understand your commitment.

Ogawa:

  Whenever I am asked to summarize CSR in a few words, I always say, "It is the art of finding a compromise between internal priorities and external priorities." Achieving sustainable growth in terms of business is definitely an internal priority. On the other hand, the priorities of non-corporate stakeholders are largely external ones and they do not match up with internal corporate priorities. For example, a consumer organization may insist that CO2 emissions should be zero or even below zero. Accepting this would mean placing a constraint on a company's business and therefore would take an extraordinary resolve on the part of the company. So you must find a compromise between these kinds of conflicting external and internal priorities. To that end, you have to keep open the lines of communication with outside stakeholders.
  If you aim to increase the percentage of your global business to 15% in the future, your stakeholders in 2015 are highly likely to be different from your current stakeholders. Understanding the priorities of future stakeholders and finding compromises regarding your internal priorities.these are the biggest issues in terms of the relationship between the medium-term management plan and CSR.

Yanagida:

  Absolutely. When you enter an overseas market, you have different customers, and your customers have different customers. Our mission is to improve the value received by our end users. So we have no choice but to adjust to meet different environments.

Ogawa:

  To take an example, you supply your key product, StarBoard, around the world. You could try using a KPI to grasp how much the product has contributed to the academic development of end users. It will be a worthy challenge to grasp the social value of products in a quantitative way.

CSR in global business

Egawa:

  I would like to give you some additional information about our global business other than numerical targets. On a companywide basis, we are implementing a business plan that calls for the shift of our export model from the conventional hardware-centered model to a system integration and service-oriented model. In line with this move to a service-oriented business model, we will hire local management staff. We expect that this will give us a broader and deeper network of local contacts and consequently allow us to respond to increasing demands.
  Upon reading ISO 26000, I realized that many of the subjects it covers relate to laws, regulations, and standards concerning overseas operations. I used to think that CSR was more like a general principle. Now I see that the situation has progressed to the point where social demands are specifically legislated.

Ando:

  We might also work off the basis that CSR is not limited to legal compliance.

Kawamura:

  As you have pointed out, CSR has now moved from the principle stage to the practice stage. Each region has different hard laws and soft laws in various fields, and compliance with them is the first and most basic step. However, the original concept of CSR was about going "beyond compliance." Of course, you should follow regulations. Furthermore, you must seek to understand social issues and the views of the local community. Based on that understanding, you must identify, in terms of value, what you should do on a local scale and what the local community wants, then put it into practice. In other words, management must be able to address a diverse range of values including non-financial issues from the perspective of risk management.

Egawa:

  "Beyond compliance" is the key. Most of the problems we face outside Japan spring from cultural or religious values. With the language gap, we miss 10 to 20% of daily communication. We have to work in environments where we tend to misunderstand or be misunderstood, and problems do occur.

Ogawa:

  Issues in global business occur beyond the legal sphere. For example, some Asian countries are not too concerned about human rights violations or have quite permissive laws on bribery. Even in such countries, you must have your own standard of conduct. Otherwise, it's possible to start to take bribery for granted in countries with permissive attitudes.

Hitachi Solutions's CSR

(1):Human rights and labor practices

Mr. Mitsuo Ogawa

Mr. Mitsuo Ogawa

Ogawa:

  You have to understand ISO 26000 from both the defensive and the offensive perspective. The defensive perspective refers to risk management, which covers today's theme of human rights and labor practices. The offensive perspective is about considering how you are going to address social issues through business and the specific social issues that you will focus on, which can be summed up by the word "materiality."
  The Hitachi Group's CSR Policy is well balanced, comprising both defensive and offensive policy items. It is a great advantage and will help you work on ISO 26000. You will not lose direction if you implement the Policy in a steady manner.
  Back to the topic of defense, global human rights issues are different in nature to issues of sexual harassment or workplace bullying observed in Japan. On the global scale, human rights issues involve discrimination against vulnerable groups on the basis of religion, race, or membership of a minority group. There have been prominent international moves on human rights, including the publication of the Ruggie Report and the OECD Guidelines for Multinational Enterprises.

Ishikawa:

  Our company is characterized by our focus on people. As our work involves many "mission critical" areas, such as banking and railways, employees often have to work overtime. Since such workloads tend to be assigned to specific employees, there is the potential for health problems to arise. Additionally, because our system engineers (SEs) are stationed on-site at the client's premises, the management of their conditions is also a challenge. Improving working conditions in these circumstances is difficult to achieve with a single measure, so we have launched a comprehensive package of measures.
  The largest of these is a new set of systems. We enhanced our work-life balance system to ensure that we offer our employees work that is both challenging and worthwhile. Our second measure was to reduce total working hours. The third was health management and the fourth was communication. We felt that it was important to work on that last point, as we cannot promote the first two measures without good workplace communication.

Ogawa:

  One of the main features of your company is that you have improved working conditions, based on your understanding that employees are the company's biggest stakeholders. You have some very unique systems, such as subsidizing extended childcare and organizing "Dandantobi " (leapfrog) meetings where employees can talk with the boss of their immediate supervisor. You should be proud that these grassroots measures have resulted in the creation of a pleasant working environment. Being the first company in the Hitachi Group to have appointed a female officer is another asset. You should give yourself more credit for these achievements.
  As your company has set itself the goal of increasing the percentage of female managers, I would like to introduce the concept of "inclusion." While "diversity" means simply having many different elements, "inclusion" refers to developing a culture that embraces diversity. You should work on both of these in tandem.
  Your company has promoted diversity to some extent, but do you have a welcoming culture? I assume you intend to develop international leaders in the future. If so, you need to think about whether the work environment is welcoming to non-Japanese. These will be your future challenges. You will also be required to proactively disclose relevant figures.

Ando:

  Do you mean that we should disclose even negative information to stakeholders if we have future initiatives or targets in mind?

Ishikawa:

  We have conducted an annual survey on diversity awareness and found that awareness among men has remained at a very low level. That means that men are still not seriously considering utilizing the talents of women. Bucking this trend, we take various initiatives to help women achieve their full potential but our initiatives for foreign nationals and people with disabilities are somewhat lagging. At the moment, we have 100 foreign national employees and this number will increase, particularly in China. So we are about to launch interviews about their work environment and job satisfaction.
  Meanwhile, as I look at ISO 26000, I am keenly aware of global issues. In particular, human rights and labor practices are the biggest issues. Our overseas offices used to be located mainly in North America and Europe but then we incorporated our offices in China in 2011 to expand our business in the Asian market. To be honest, our personnel division in Japan has never discussed human rights with the local personnel division in China.

Ogawa:

  In that case, I would like to list three points to address in working on human rights and labor practices in the future, for your reference. The first is how to resolve the issue of long working hours. From this perspective, you must consider how to work on the issue not only at head office but also at the level of group companies, local companies, and suppliers.
  The second is which section shall be responsible for working on human rights issues. At many Japanese companies, the personnel department basically oversees domestic personnel affairs, meaning human rights issues outside of Japan are not within their purview. In that case, an overseas business section or some other section must be given ownership of the issue. Otherwise, the local companies cannot cope.
  The third is how to work on human resources development. In the case of IBM's social contribution program, called the "Corporate Service Corp," employees from different countries work together to address social issues in developing countries. Groups of about 10 members spend about three months in various local communities, launching projects like social infrastructure development. Naturally, there is a strategic business plan behind the initiative, namely, working out how to establish business in emerging countries. Meanwhile, it is also said that the program has significantly contributed to human resources development. This case may provide some hints about developing human resources as part of CSR.

(2):Customers

Demise:

  Many of our customers have tremendous social responsibilities, such as government agencies, local governments, public organizations, and leading private companies. As a point of contact with our customers, our sales force is equipped to collect feedback from our customers and forward it to management or related sections within the company so that it can be reflected in the way we do business.
  So, how do we do that? Basically, we satisfy our customers' demands through engaging in information system projects. In some cases, we need to provide additional post-development support other than in IT system areas.
  To take an example, one customer.an information processing engineer testing organization.had us build an IT system that allows applicants to take examinations on computers at the test sites. As any increase in the number of applicants will create a challenge for the customer, we will continue to provide support in areas extending beyond system establishment.
  In addition, we helped publicize this "IT Passport," targeting universities and vocational schools. The educational institutions told us that if companies consider it a prerequisite for employment, students will be willing to take the test. We will therefore publicize the test within the business community as well in order to help the organization promote the system.

Ogawa:

  I referred to StarBoard earlier, and whether sales staff or developers at the frontline feel that their company's products and services contribute to society in some ways is the key in connecting CSR with business. It helps if you develop a scenario, either at the development stage or after the product launch, explicitly describing the connection between your company's products or services and various social issues.

(3):Procurement

Kono:

  Our procurement is focused not on goods but on the outsourcing of software development. In terms of the number of people, we have a total of 10,000 registered developers, so they outnumber our employees. What our company has traditionally valued can be summed up by the word "partnership." We recognize our partners, regularly share our company policies with them, and proactively provide them with education, tools, and other necessary support. When we have a transaction with a new partner, we visit the company in order to share information, including information on our CSR.
  We also have a database for indirect partners. We visit them and register their contact person so that we have a clear route for collecting information when something happens.
  Another feature of our procurement relates to global procurement. We outsource 10 to 12% of our software development to partners overseas. As we have selectively reduced the number of partners, I think we are now sharing information with them well. But the afore-mentioned issue of long overtime is a challenge for the future. Most of our global procurement partners are in China but some are in Vietnam. Vietnam is focusing on human resources development and has launched measures to support the establishment of universities and make it easier for companies to employ new graduates.

Mr. Masahiko Kawamura

Mr. Masahiko Kawamura

Ogawa:

  You have set a policy for CSR procurement. Do you revise it on a continual basis?

Kono:

  To evaluate our partners, we check a few key vendors once a year so that over several years we can review all of our vendors.

Kawamura:

  You may wish to think about disclosing the results of your evaluations of existing partners or details of their improvements. Putting the policy into practice and sharing the outcomes is more important than simply disclosing the existence of the policy.


Ogawa:

  The most difficult thing in procurement is where to draw the line between what you should be responsible for addressing and what you should not. ISO 26000 uses the term, "sphere of influence." It means determining the scope of your responsibilities with reference to any capital tie-up, your importance to your vendor's business in terms of percentage of sales, and so on. Then you can decide on your policy as regards partners that fall within that scope.

Kawamura:

  The basic concept should be properly decided by management rather than being left to frontline employees.

Niimi:

  For our first roundtable discussion, I would say we have had a very frank discussion. I think our CSR needs a lot of improvements and I particularly appreciate your comments pointing out that we have focused too much on products and not worked on the process and that we have done little concerning the measurement and disclosure of outcomes. We will continue to discuss these issues with our stakeholders to ensure we have a clear understanding of the current situation and make improvements step by step. I hope both of you will continue to advise us.
  I also think that the fact that over 30 employees attended today proves the growing awareness of CSR. I hope we will also receive feedback from our audience.

Thoughts on the Stakeholder Dialogue

Masahiro Hayashi President and Chief Executive Officer

Our CSR seems to need some improvements in terms of global business operations. The discussion reaffirmed for me the need to fully understand the global standard of social responsibility and drive our business from a social perspective.
  I am very grateful for Mr. Kawamura and Mr. Ogawa for their comments. We will continue to have discussions with our stakeholders to further our improvement efforts. Many employees attended the roundtable discussion but I would like to provide opportunities for more employees to enhance their understanding of CSR.