Kadota It is clear from our conversation thus far that failure to sufficiently reduce CO2 or use water effectively can negatively affect corporate value and pose a risk to operations. I believe the world is heading in the direction where activities to reduce environmental impact are starting to be positioned at the center of activities to enhance corporate value, and that companies have no choice but to focus on CO2 reductions and effective use of water across the entire value chain, including all plants, as well as customers and suppliers. Last fiscal year, we helped customers adopt dry methane fermentation systems and cooling water blow-down recovery systems combining water treatment chemicals and the technologies of water treatment facilities. I would like to use these unique products not simply to make proposals based solely on the benefits of reducing environmental impact but to evaluate whether the corporate activities of our customers include processes that could help reduce CO2 emissions or water usage and to spell out more clearly how much this could contribute to the enhancement of corporate value.
Professor Katsuhiko Kokubu, an expert in environmental management, interviews Kurita Water Industries president Michiya Kadota, asking how the Kurita Group, which conducts business in the field of water and the environment, views the expectations of society, amid the rapidly increasing importance of global environmental issues and major advances in international frameworks, and how the Kurita Group plans to expand business as a global corporation.
Advent of an era where "environmental contribution" is directly linked to the enhancement of corporate value
Kadota I feel there have been major advances in international frameworks relating to the environment in recent year’s. At the end of last year, the Paris Agreement, was ratified at COP21*. This was the first time all members of the United Nations, including developing countries, agreed to control global warming pollution. The Paris Agreement set a common goal of keeping the global temperature rise to less than 2℃ above pre-industrial levels. It also requires each country to take measures to achieve their voluntary carbon emissions reduction targets, which must be reviewed every five years. I wonder what impact this will have on companies.
Kokubu COP21 is a huge achievement both as an international framework accepted by all member countries of the UN and because member countries agreed to try to meet specific reduction targets through a system that relies on scientific evidence. However, I feel that Japanese companies view this agreement differently from companies in the rest of the world. In Europe, governments are trying to make reductions more effectively by incorporating reduction activities into the economic system in the form of carbon trading that monetizes carbon, environmental taxes and suchlike. Also, the goal of keeping the global temperature rise to less than 2℃ above preindustrial levels puts restrictions on the use of coal and petroleum, which contain carbon, and is a big risk for companies that already have natural resources as assets on their balance sheets. Since the establishment of such mechanisms is an advantage in some industries and a disadvantage in others, Western companies are acutely interested in the extent of the impact of CO2 reductions on their operations. In Japan on the other hand, the government is merely getting industry groups to consider efforts to reduce emissions, and I feel that interest among Japanese companies is generally weak.
Kadota Indeed, Western companies know well the significance of the incorporation of CO2 reductions into the economic system and are starting to prepare for this. We know that, with companies becoming more sensitive about CO2 issues globally, the companies that grasp the situation and are quick to respond are the ones that will survive global competition.
Kokubu The world is moving in the direction whereby spelling out more clearly the contribution a company makes to reducing CO2 emissions can help to enhance its corporate value. I believe companies will start attaching importance to specifying numerically the benefits of reductions instead of talking about abstract reduction efforts.
Kadota I see this a brilliant strategic opportunity for the Kurita Group, which conducts business in the field of water and the environment, in the sense that CO2 reductions achieved through our products and services will help enhance the corporate value of customers and enable them to show the benefits of reductions quantitatively. I believe that water-related issues also need to be kept under close scrutiny as global trends relating to the environment. What do you think?
Kokubu As the effective use of water also starts to be incorporated into the economic system in the same way as CO2 reductions, the question of whether companies are taking proper action to ensure effective use of water is becoming important. Unlike CO2, water is a local as well as a global issue. Action taken to conserve water differs according to the location in which water is used, but investors that attach importance to social responsibility scrutinize the policies of global companies on the effective use of water to see whether action is taken based on a consistent Group policy, regardless of country.
Professor, Graduate School of Business Administration,
Kokubu The data that shows contribution to enhancement of corporate value in quantitative terms is, of course, the environmental benefits for customers in your environmental report. I believe Kurita was visionary in coming up with this value from an early stage. I believe this is not just a value for shareholders and investors but also an opportunity for business expansion through the creation of a value for society, not just a value for shareholders and investors.
- *COP21:21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) held in Paris, France at the end of November 2015. COP stands for Conference of the Parties and is a conference of countries that have ratified the UNFCCC. COP3 was the 3rd session of the Conference of the Parties to the UNFCCC held at Kyoto, Japan in 1997, and it ratified the Kyoto Protocol.
Becoming a truly global company in the environmental management
Kadota At the end of January 2015, we acquired the water treatment chemicals business and other businesses of the Germanybased BK Giulini GmbH and its affiliates, strengthening our overseas business platform mainly in Europe. Last fiscal year, we launched the ultrapure water supply business for local companies in South Korea, which is the first of its kind. As a result, the Kurita Group’s overseas sales ratio rose sharply from 21% in the fiscal year ended March 31, 2015 to 30% in the fiscal year ended March 31, 2016. I feel that from the viewpoints of E (Environment), S (Society), and G (Governance), the Kurita Group also needs to become a global company in every respect.
Kokubu The international community is seeking to develop standards for linking the environment to some kind of economic value. As part of information disclosure, in their integrated reports, companies are required to consider the environment as a type of capital, understand the relationship between the environment and their products and services, and explain how this will lead to the creation of value in the long term. ISO14001 has also been revised to improve the link to business strategy, normalizing a system in which reducing the environmental impact will enhance corporate value and reduce business risk. For global companies, taking action in accordance with global environmental standards will become increasingly important in the future.
Precident, Kurita Water Industries Ltd,
To fulfil its social responsibility and meet expectations as a global company, the Kurita Group must establish systems that conform to global standards from the perspectives of E, S and G, make continuous improvements through the PDCA cycle, and disclose the results of these activities. Since the "Environment" is a universal theme that applies to everyone regardless of culture or background, I intend to set out a Group approach and policy that are as simple and easy to understand as possible. We are also a group of people with a strong desire to contribute to society through water and the environment. I want to ensure that each of our employees is able to achieve a real sense of contributing to the global environment through our business activities. To this end, it is important for employees to gain a higher vantage point until they can see the kind of frameworks that are shaping global trends in relation to the environment and understand the issues and risks they are facing.
As president, I intend to reposition our businesses and reassess where our mission as a company lies, thus clarifying the nature of the contribution Kurita should make and communicating this to the Group as whole.
Professor, Graduate School of Business Administration, Kobe University Appointed Dean of the Graduate School Earned a Ph.D. in business administration with the completion of the doctorate course at the Graduate School of Business of Osaka City University in 1990. He has served on many different committees, including chair of the Committee for Research on Promotion of Development of Environmental Business and for Environmental Accounting appointed by the Ministry of Economy, and member of the Working Group for the Revision of the Environmental Accounting Guidelines for the Ministry of the Environment. He also chairs ISO/TC207/WG8. He is a leading global expert in environmental management and accounting and in CSR management.