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«14 CSR White Paper Economy ESG Investing as an e Unchanging Face of Japanese Antidote to Myopic Employment Management International A airs Japanese ...»

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The roots of Sompo’s CSR initiatives go back to the United Nations Conference on Environment and Development (Earth Summit), held in Rio de Janeiro from June 3 to 14, 1992. While the summit’s Declaration on Environment and Development called for “new levels of cooperation among States, key sectors of societies and people,” most participants from Japan were from the government. One of the few representatives of Japan’s corporate community—and the only chief executive— was Yasuo Goto, then president of Yasuda Fire & Marine Insurance (which later became Sompo Japan Nipponkoa).

The Earth Summit was held just before the annual general shareholder meeting season, so most business leaders chose not to attend. Goto, however, was very interested in the summit, believing that the environment and sustainability were crucial issues for both society and business.

Yasuda Fire & Marine became well-known in Japan for its purchase of Van Gogh’s Sunflowers, which was put on public display as a way of giving something back to society in a way other than through insurance payments. Later, the Nature Conservancy, a US conservation group, visited the company to meet the executive who had bought the painting, an encounter that deepened Goto’s interest in environmental issues. Believing firmly that virtue and strength are keys to success as a

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company, Goto attended the Earth Summit and oversaw the establishment of the Global Environment Office at Yasuda to deal with sustainability issues.

Yasuda was not just a company with principled leadership but also the second largest firm in the industry. In the early 1990s, the insurance sector was strictly regulated, and differentiating oneself from one’s competitors in terms of products and pricing was quite difficult. Yasuda’s focus on environmental issues, therefore, was an attempt to offer something unique, no doubt based on the conviction that customers would rather choose an insurer that valued the needs of society and its future.

A Groupwide Effort

CSR initiatives are often launched by top management, and they tend to lose steam following a leadership shuffle. This was not the case at Sompo, however, as these activities were pursued under the principles of “full-participation, steady and continuous progress, and acting with initiative,” which are still adhered to today. In 1993, the year after the Earth Summit, the company began engaging with civil society by launching a volunteer group for employees called the Chikyu (Earth) Club and organizing public seminars on the environment.

While the company’s CSR initiatives began with a focus on the environment, they later came to cover a full range of issues. They were undertaken on a groupwide basis with the participation of all employees, who discussed concrete CSR case studies. Conducting such detailed and repeated discussions within and without the company became a matter of routine, a practice that continues to this day.

There is even a section concerning CSR initiatives in employee evaluation forms, with staff and their managers being called upon to discuss this topic. The intention is to get employees thinking about these issues, however, for the substance of such discussions is not used in the actual evaluation.

Assessing Stakeholders’ Expectations

In integrating its CSR initiatives and business operations, Sompo focuses on what it calls “five material issues.” The first is “providing safety and security” to society, which refers to innovative services that meet customers’ safety and security needs by mitigating various risks. The second is “tackling global environmental issues, including climate change.” In addition to dealing with climate risks on its own through “adaptation and mitigation,” Sompo also partners with groups in other sectors to develop new solutions. The third is “providing sustainable and respon


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sible financial services” to address social issues. The company promotes responsible investment incorporating ESG (environmental, social, and governance) criteria and develops financial and insurance products and services to help resolve various issues. The fourth is partnering with NGOs to help build a sustainable society through “community involvement and development.” And the fifth is “developing human resources and promoting diversity” to build a stronger organization. By creating dynamic workplaces where diverse human resources can fully apply their skills, Sompo is encouraging the development of employees who can make valuable contributions to society through their work.

These five “material issues” may not be unique to Sompo, but what sets them apart is the process by which they were arrived. They were not unilaterally issued by the CSR or corporate planning department nor by top management. They are the result of a three-step process consisting of (1) conducting analysis and implementing a questionnaire survey based on the ISO 26000 guidelines for social responsibility; (2) holding dialogue with experts; and (3) identifying specific issues.

Figure 1. Analysis of Material Issues Based on ISO 26000 Source: NKSJ Holdings Corporate Responsibility Communication 2012.

Note: NKSJ Group refers to Sompo Japan Nipponkoa Holdings (since September 2014).

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During the first stage, social issues as outlined by ISO 26000 were mapped out, and a questionnaire survey was conducted to assess what the public expected from Sompo.

ISO 26000 was developed through discussions among a broad range of stakeholders in both developing and developed countries, including consumers, governments, private companies, organized labor, NGOs, and academic institutions. Unlike ISO 14001 for environmental management systems, ISO 26000 is not focused on certifying compliance with a set of standards but offers guidelines for the integration of corporate resources to enable companies to efficiently fulfill their responsibilities to stakeholders.

Importance is given in ISO 26000 to how organizations think about and implement strategies to deal with key issues. For human rights, for example, companies need to examine whose human rights are at stake and what the problems are, then use the guidelines to identify the most significant human rights issues for their respective organizations.

Sompo used ISO 26000 to identify possible focuses for its CSR initiatives, after which it conducted an online questionnaire (answered by 1,032 people) to discover the areas where stakeholders had high expectations of the company. It also analyzed which areas had the greatest significance for their business operations. Figure 1 is a mapping of “stakeholder expectations” and “importance to the NKSJ (now Sompo Japan Nipponkoa) Group” along the vertical and horizontal axes, respectively.

Reaching Out to Civil Society

Once this was done, Sompo moved to stage two: dialogue with outside experts. Top experts from the environmental and civic sectors were invited for discussions with not just members of the company’s CSR department but also staff at all levels, from senior management to newly hired employees.

This process has enabled the company to develop human resources who are fully aware of and are ready to meet the needs of society. The feedback received from outside experts during the process of identifying material issues is included in

the company’s 2012 CSR report: NKSJ Holdings’ Corporate Responsibility Communication 2012. Examples include the following:

In Japan after the Great East Japan Earthquake, work to address global warming slowed down, but natural disasters, like the Thai floods, are likely to become more common from now on. So climate change will be a key issue for

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insurance companies. I’d like to see the NKSJ Group maintain its broad perspective and take progressive measures while looking one step—or even slightly less than that—ahead. (Junko Edahiro, environmental journalist and chief executive, Japan for Sustainability) Regarding the “provision of security and safety,” I think there are two basic ways to deliver such value: (1) through existing services and (2) through newly created services. Sompo’s Eco & Safety Drive, for example, is a well-established service in Japan. But in developing countries, where traffic fatalities are likely to become an increasingly serious concern, there will be a growing need for such preventive services. (Hideto Kawakita, CEO, International Institute for Human, Organization, and the Earth) Dialogue with outside experts has enabled Sompo to gain fresh insights into the medium- to long-term, from both the personal and corporate points of view.

The broadening of understanding has extended not only temporally into the future but also spatially to conditions in other countries.

The process has also led the company to reaffirm the importance of three concepts: (1) ongoing dialogue with a wide range of stakeholders; (2) identification of broader and deeper emerging issues; and (3) actively working with society to create new value.

Looking Ahead

As for the third and last stage of identifying specific CSR issues, Sompo mapped the results of the first two phases using, again, the two axes of stakeholder expectations and importance to the NKSJ Group, as shown in Figure 2. Some might wonder if going through so much trouble to identify key issues is really necessary, as the same conclusions might have been reached just by reviewing the work the company performs every day.

The important point about this process, though, is not really the issues themselves; of greater significance is that it enables the company to communicate its intentions to continue its dialogue with stakeholders in reassessing its business operations. Such a stance is premised on the recognition that society’s biggest issues and their solutions are constantly changing—sometimes in unexpected ways—and involve a broad range of interdependent factors, such as the environment, public policy, economic trends and conditions, corporate behavior and business models, work styles, and household structures.

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Figure 2. Mapping of Material Issues Source: NKSJ Holdings Corporate Responsibility Communication 2012.

Note: The issues were revised in 2014 and now consist of “Six Group CSR Material Issues.” (See: http://www.nksj-hd.com/en/csr/system/) The dialogue with stakeholders and experts enables both top management and the rank and file to reflect on how flexibly they are dealing with such changes.

Applying the same approaches year after year will not be enough to address emerging issues or to meet society’s expectations. The forums for dialogue are thus an indispensable part of keeping fresh and up-to-date.

Companies have a tendency to fall into a routine, and once a pattern is established, it can be difficult to change. Sompo’s foresight is in its understanding that to actively engage with society it must always look a step—even half-a-step or 0.7 steps—ahead and continue its dialogue with its stakeholders.

Meeting Social Challenges

What does the company do to address the material issues it has identified? In the field of “tackling global environmental issues, including climate change,” for example, it sees the issue not just in terms of risk management but also as an opportunity for business creation and for growth through market leadership.

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The number of climate-related natural disasters has been on the rise since the 1980s, and this has had a large economic impact on many places around the globe.

The probability of being adversely affected by a natural disaster is far higher in a developing country than in an industrially advanced member of the Organization for Economic Cooperation and Development (19:1 versus 1,500:1), moreover, meaning that areas that already face tough economic conditions are hit hardest by environmental issues. The insurance industry, too, is affected by disasters, which results in higher payments and premiums and can make the stable provision of insurance more difficult.

On the other hand, the situation presents opportunities for the insurance industry to create and develop new markets through a process of “adaptation and mitigation.” Through adaptation, insurance can help to reduce the damage caused by climate change, lower the risks of renewable energy initiatives; and promote innovative technologies to create a low-carbon society.

As for mitigation, Sompo is helping reduce greenhouse gas emissions by, for example, encouraging the use of recycled parts in repairing cars after accidents;

reducing paper waste by promoting the shift to online contracts; introducing green procurement; and promoting the company’s Eco & Safety Drive service. The company also encourages the implementation of these measures by local insurance agents, auto repair firms, suppliers of raw materials, and other business partners and is asking its customers to take similar measures. In these ways, each department can take concrete steps in “tackling global environmental issues” in accordance with their place along the value chain.

To foster the spread of renewable energy, Sompo has developed a new type of policy to compensate for lost operating income when electricity sales from solar power generation, for instance, declines due to fire or natural disaster. This product insures against lost income and reduces the risks faced by power generating businesses, thereby supporting the spread of renewable electricity.

Helping Thai Farmers Hedge against Climate Change Risk

Another “adaptation” measure is the weather index insurance developed in 2010 to insure farmers in northeast Thailand against climate change risk. When rainfall, as measured by the Thai Meteorological Department, falls below a certain threshold, Sompo pays a fixed amount to farmers, helping to reduce the damage from drought.

Typically, local farmers borrow money before growing crops, sell their harvest to get income, and use that money to pay off their loans. When there is a drought,

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