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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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Many people around the world still die from communicable diseases for which vaccines already exist. Takeda thus aims to become a top vaccine manufacturer by 2020 by enhancing its R&D, approval, and sales efforts in key markets for vaccines considered to be public-health priorities.

In addition to investing in its own research efforts, Takeda has moved to acquire companies with promising pipeline drugs. In October 2012 Takeda purchased LigoCyte Pharmaceuticals, a company working on a vaccine for the norovirus. The biotechnology company specialized in the development of new vaccines using their proprietary virus-like particle technology. Norovirus is the primary cause of gastroenteritis and food poisoning in developed countries, making 21 million people ill each year; in developing nations it causes 200,000 deaths a year.

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In May 2013 Takeda also purchased Inviragen, a company developing vaccines for dengue fever and hand, foot, and month disease. A mosquito-borne disease, dengue fever is a serious ailment in developing countries for which no effective treatment currently exists—despite the fact that 400 million people are infected each year, with around 100 million developing symptoms. The World Health Organization identifies dengue fever as one of four diseases urgently requiring a vaccine.

Taking these social needs into account, Takeda is allocating ample resources to the development of pipeline vaccines, including through mergers and acquisitions.

By carefully considering its relationship with society Takeda has been able to more sharply define its corporate mission and enhance the value of its main business operations. This, too, is CSR that creates corporate value.

Disaster Relief and Takeda-ism

Some may unfavorably liken Takeda’s recent acquisitions to the activities of an investment bank. But a closer look reveals that they are attempts to both create and sustain corporate value through a vigilant focus on the company’s corporate mission, risk management, and its relationship with society.

Informing the decisions of both managers and staff is a long-standing corporate philosophy known as Takeda-ism that pervades the company’s operations (Figure 6).

At the heart of Takeda-ism is integrity—that is, fairness, honesty, and perseverance. Around these core values are such principles as diversity, teamwork, commitFigure 6. Takeda-ism and Values Source: Takeda Pharmaceutical 2013 annual report.

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ment, transparency, innovation, and passion, which are upheld in one’s daily activities. Takeda employees are thus called upon to strive toward integrity in all aspects of their work. Integrity means compliance with the highest ethical standards and a basic stance of fairness and honesty. It also requires a spirit of perseverance focused on constant improvement.

This philosophy of integrity was evident following the Great East Japan Earthquake of March 2011. Takeda cooperated with the recovery efforts of the Japan NPO Center in two ways: providing grants to nonprofits and other groups directly engaged in reconstruction and implementing projects either independently or with partners.

Takeda’s assistance for NPOs was aimed at supporting the day-to-day lives of survivors—particularly vulnerable members of society like children, the elderly, people with disabilities, disaster orphans, those who lost family and relatives, and people in financial difficulties—so they may live with dignity. These efforts were aimed at rebuilding people’s lives by improving health and welfare conditions and also at rebuilding livelihoods by offering places to live and work. Estimating that the recovery would take about a decade, Takeda is maintaining these support programs through 2020.

The five projects implemented by Takeda and with partners—all with an emphasis on cultivating human resources—demonstrate the company’s philosophy even more clearly. It has (1) established the Japan Civil Network for information sharing among disaster relief groups; (2) analyzed the progress and trends in private relief efforts with the Japan NPO Research Association; (3) worked with groups in three disaster-hit prefectures engaged in supporting disabled people and providing related services; (4) supported people who lost family members with Lifelink, a suicide-prevention NPO; and (5) promoted information sharing on reconstruction assistance measures and issued proposals on ways to improve those measures with the Coalition for Legislation to Support Citizens’ Organizations (C’s).

All five projects have close links to networks for the reconstruction of disaster-hit areas. They seek to assess civil-sector assistance to date and offer a prognosis for the future in an attempt to build a foundation for smoother communication among the various groups—a foundation focused not on systems or infrastructure but on people on the ground.

This person-centered approach is typical of the company’s reconstruction assistance and its CSR initiatives as a whole. Creating and sustaining corporate value is really all about people. Many companies ponder what they should achieve through CSR and how it should be integrated into their business operations. Takeda’s efforts provide one answer to such queries. (Researched by Zentaro Kamei, Tokyo Foundation)

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July 30, 2015 A Bottom-Up Approach to CSR Itochu Corporation The Tokyo Foundation O ne of Itochu Corp.’s notable CSR initiatives is the Pre Organic Cotton Program, which helps cotton farmers in India transition to organic cultivation methods. Cotton grown under this program is used to add value to products that are marketed to consumers and to help stabilize the incomes of farmers further upstream in the supply chain.

Genetically modified seeds began being used in cotton cultivation in India in the 1960s in tandem with the increased prevalence of agrochemicals and chemical fertilizers. This has led to serious environmental degradation and a deterioration in farmers’ health and livelihoods. Cotton farms account for only 5% of the world’s total farmland, but growers in India account for 25% of the insecticides used globally. The cost of seeds and agrochemicals were a heavy financial burden for them, and the repeated use of chemicals was degrading the soil.

It All Began with a Pop Concert

Itochu first learned of the plight facing Indian cotton farmers through its involvement in a concert by a popular Japanese pop rock group. One of the musicians requested that organic cotton be used for the T-shirts and other merchandise sold at the concert. A member of Itochu’s staff in charge of procuring cotton fabric flew to India to meet that request.

There, he learned of the health and environmental damage caused by highly toxic agrochemicals, which ravage the skin when touched with bare hands or feet and cause respiratory and visceral disorders when inhaled. They also kill the microorganisms in the soil, making it barren and gradually leading to smaller crop yields. Agrochemicals in the soil also seep into the groundwater, causing incalculable health damage to people and livestock that drink water from the well. Agrochemicals are costly, and the more they are used, the poorer the soil quality and lower the yields become, forcing farmers to buy yet more chemicals. Trapped in this vicious circle, they become so poor that they can no longer borrow money from

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banks. They are forced to turn to usurious money lenders and are driven further into poverty and—in some cases—to suicide.

If they could stop using agrochemicals and make the switch to organic farming, they would be able to escape this vicious circle, resulting in both health and economic benefits. But they faced a major obstacle.

Three years were required before harvests could be certified as being organic.

During that time, crop yields would decrease from insect damage and lack of nutrients in the soil. Farmers were unable to use GM seeds, moreover, and were forced to purchase non-modified seeds. Because they could not charge a higher price until certification, their income would drop by 20% to 30% for several years. Most farmers were reluctant to take such risks to transition to a type of farming in which they had no experience.

The Itochu employee had an idea. Could not a support program be instituted with the understanding of clothing makers and consumers who were aware of the benefits of organic cultivation to cover the three-year period until farmers can gain certification?

The cotton produced during the transition period would be labeled “pre-organic cotton,” and necessary support would be provided to farmers who chose to make the switch. They would be given the non-GM seeds that they needed to be certified as organic, receive instruction from experts, and gain advice from accreditation inspectors. To compensate for reduced yields, the harvests would be purchased at a higher price than the market rate. Such support during the transition period would enable farmers to gain accreditation and embark on full-scale organic farming.

Figure 1: Pre-Organic Cotton Program Source: Itochu website.

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The Program’s Impact Since the launch of the program in 2008, 3,848 farming households have taken part, and 1,179 have successfully received organic certification. In 2013, over 1,500 tons of pre-organic cotton were sold to over 40 companies and were used in related products that rang up sales of ¥500 million. The 2014 harvest is thought to have reached 2,500 tons, with the expanding pre-organic-cotton market being driven by clothing makers and natural cosmetics manufacturers. The market will likely further expand to Europe and the United States, with targets of 5,000 tons and ¥2.3 billion in sales in 2015, and 10,000 tons and ¥5 billion in 2017.

The program began from a single musician’s comment and evolved as Itochu staff traveled to India, saw the situation firsthand, learned of the plight of local farmers, and decided that something should be done about it. The program thus exemplifies how an attempt to protect the environment and human rights led to the resolution of a grave social issue and embodies the two characteristics of Itochu’s CSR: its grass-roots, bottom-up focus and its links to core business operations.

The Great East Japan Earthquake

The grass-roots nature of Itochu’s CSR was also evident in its reconstruction support after the Great East Japan Earthquake. The projects the company implemented were not on a very large scale, considering Itochu’s size, and appeared quite isolated and without much focus. Yet there was a common thread running through all of them—the fact that they were all initiated by individual employees.

The staff from Itochu who volunteered in disaster-hit areas spent time getting to know the local people, after which they were able to talk freely about their deepest concerns. Itochu’s reconstruction assistance began from the things that employees had directly seen and heard. Their trading company background meant that they were experienced in launching new ventures from the ground up and knew how to move organizations to make things happen. Many of their conversations they had with local residents may have seemed inconsequential, but these discussions produced significant results, growing into various support projects and even new businesses opportunities.

Why Bottom Up?

Itochu’s CSR initiatives begin at the individual level. Sompo Japan makes use of

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outside experts to guide its initiatives, but Itochu seeks answers from its own employees.

This focus on employees is closely linked to the nature of the work trading companies do. Each business area has its own business model, with some seeking profit through investments and loans, some through imports and exports, some through logistics services, some through retail sales, and others through licensing fees for trademarks and intellectual property. Because so many different business models exist, understanding what trading companies do can be difficult. A person on the street would probably be unable to give a clear answer to a question on what a trading company should do to address social issues. This is why Itochu has its employees do the thinking.

Pre-Modern Roots of Itochu’s CSR

Itochu was founded in 1858, when Chubei Itoh began selling linen in Nagasaki.

He took the sanpo yoshi philosophy of the Omi (now Shiga Prefecture) merchants of his birthplace and made it the foundation of his company. Sanpo yoshi (“threeway good”) teaches that the secret of success is to do business in a way that is good

for the buyer, good for the seller, and good for society. Itoh’s favorite motto was:

“Trading is a compassionate business. It is noble when it accords with the spirit of Buddha by profiting those who sell and those who buy and supplying the needs of society.” At first glance, it can be difficult to see how “trading is a compassionate business.” But as “supplying the needs of society” suggests, Itoh believed that the raison d’être for a company was to respond to society’s requests.

Based on this founding philosophy, in 1992 Itochu chose “Committed to the Global Good” as its corporate philosophy. Itochu’s then approximately 10,000 employees around the world participated in discussions over the course of a year to select this philosophy.

When the company conducted an employee survey in 2013 to help decide its CSR policy, it was surprised to receive replies from 6,505 of the 6,738 individuals to whom the questionnaires were sent—an astonishing response rate of 96.5%.

Itochu employees in Japan had a 99.5% response rate (4,818 out of 4,844), while overseas workers had a 89.1% rate (1,687 out of 1,894).

In identifying which social issues to address, the company consulted with outside experts. While these discussions were conducted by the president and senior managers, their contents were shared openly with all employees.

This process resulted in the identification of four material issues: (1) climate change, (2) sustainable use of resources, (3) respect and consideration for human

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