Interview of Top Leaders

Unno： Yokogawa makes plant control equipment and systems. What specifically are you doing to help your customers who have been affected by the earthquake?

Kaihori： Plant control systems are like the brain and nerves of the human body. So, the first step at the affected plants is to repair the machinery and other components that carry out the equivalent of the body's motor functions, after which we can attend to the control systems and other equipment that function as a facility's brain and nerves. We are doing everything we can to support our customers so that their plants can resume normal operations as soon as possible.

Unno： Yokogawa also has deep ties to the energy industry, but the recent earthquake is changing the way people think about energy. How has this tragedy affected your business?

Unno： I believe you're saying that you must strive for sustainability as you go about your business activities. The Yokogawa Group's measurement and control technologies are of direct relevance to the energy industry, which means your business can come up with energy solutions and contribute in making a more sustainable society. By taking a strategic approach in this, you will be able to enhance your corporate value.

Kaihori： We are working to become a company that basically provides value in three different ways to its customers: improving efficiency, enhancing safety, and protecting the environment. We have many target markets, but let's consider the energy market as an example. In this market, fossil fuels are still being used during the bridging period, alongside natural energy sources. In emerging markets, where energy demand is skyrocketing, fossil fuels are mainly used as these countries aim to quickly acquire wealth. So, the use of fossil fuels is actually increasing. However, their facilities are not optimal in terms of combustion efficiency and power generation efficiency, and are older and face a number of technical issues. If they adopt our control systems, they can improve combustion efficiency and their power generation efficiency will increase. Consequently, less fuel will be required and, of course, costs will drop. For example, an old thermal power plant in Mongolia introduced our control systems. Throughout the project, our engineers worked with the customer to make improvements and energy efficiency improved significantly.

Kaihori： Also, in China and Southeast Asia steel mills and petrochemical plants that consume a lot of energy are using our systems. We diagnosed problems at several of our customers' factories and proposed solutions that could allow them to operate and use energy more efficiently. Our customers, particularly those that are leading global companies, are constantly searching for ways to improve efficiency, enhance safety, and protect the environment, and they are very interested in the advanced technologies of Japan and best practices from around the world. The use of our products results in significant reductions of NOx, SOx, and other harmful chemical substances that are generated when fossil fuels are burned, making plants cleaner and safer for the environment. By introducing to our customers around the world Yokogawa technologies that have long been in wide use here in Japan, we believe that we can contribute to society.

Unno： Yokogawa expects to provide with not only sales of very high quality products to customers, but also broader solutions for business and society at large.

Kaihori： One of our strengths is the ability to provide reliable products and services that our customers can count on 365 days a year. In addition, we must continually go a step further and think ahead from now on. In other words, we must pursue a comprehensive solutions approach that helps our customers improve efficiency and employee safety and protect the environment.

Kaihori： Emerging economies and developing nations have the basic need to become prosperous, and for that purpose they use energy and resources. We provide the products needed to do that. Also, these markets are now thinking they cannot go on forever with the current formula of relying on foreign capital and engineers to manufacture products. Let me explain. Our Group is handling many projects in Saudi Arabia, Abu Dhabi, and other oil- and gas-producing countries in the Middle East, and we've realized that there is a strong need to utilize local talent. As software production, including engineering, can be done anywhere, they want us to hire people from their countries to create this software locally, not at our sites in Japan and Singapore. Even though we'd like to do this, we cannot always find enough people who have the required skills. That's why we are starting from the very beginning, such as by partnering with universities in Saudi Arabia, sending lecturers, and receiving interns. We are passing on measurement and control related engineering skills to university students and giving them opportunities to work with our employees and actually use this knowledge.

Unno： Is it like operating a school within the company?

Unno： After graduation, will these students join the Yokogawa Group?

Kaihori： Some will go to work for us in Saudi Arabia, and others will take positions at our customers. Either way, it's a good thing for us. By investing our resources and technologies in a country and providing education to locals, we can ensure the long-term viability of our business in that country. We want to apply this strategy elsewhere.

Unno： Technical development and human resource development are areas that are of great interest to emerging countries, so it would be effective to clearly and systematically demonstrate in these markets, with their different cultures, that Yokogawa is dedicated to these programs. That is a given in Japan and it doesn't need to be explained to Japanese, but in other cultures an active effort must be made to promote this aspect of your business. ISO26000 (Guidance on Social Responsibility) includes a section called "Community Involvement and Development" that stresses the importance of benefiting the local community and enabling the people there to stand on their own two feet by, for example, helping them acquire new skills and creating jobs. This, in turn, is a basic and important element for ensuring the long-term viability of local communities.

Unno： You're talking about ensuring the long-term viability of your business and local communities as well.

Kaihori： As a matter of fact, in addition to providing training in engineering, we're also starting to collaborate in R&D with one of the Saudi Arabian universities that I mentioned earlier. We've suggested research themes and proposed joint research with the university, local companies, our customers, and other parties. There are many interesting themes that can best be studied in Saudi Arabia, such as marine pollution and efficient exploration for natural resources.

Unno： In the CSR field, such involvement with the local community is regarded as "stakeholder engagement." It is based on the concept that local stakeholders are potential business partners. Personally, I believe that a business can attain sustainability more easily by adopting this premise from the beginning. Particularly in energy and infrastructure projects in emerging countries, stakeholder engagement is a must from the standpoint of managing business risks.

Unno： Human rights and labor issues were highlighted in the ISO26000 standard and the United Nations Global Compact, and global awareness of these issues has increased.

Kaihori： As I mentioned earlier, I think of the three key themes — improving efficiency, enhancing safety, and protecting the environment — all the time. Of these, labor safety is an area where our customers, especially leading companies in advanced nations that do business in the oil and materials industries, are fairly ahead. For example, these customers are requiring us to gather and submit on a regular basis various types of hard data on labor safety for work done on our premises and at customer sites. The reality is that today we won't receive orders unless we can prove the safety of our work practices. Furthermore, these leading companies in advanced nations are investing in emerging and developing nations, and are conducting business there based on a similar safety policy. Naturally, efforts to enhance safety will become more widespread around the world, especially in the energy and materials industries.

Unno： As citizen's perceptions of what is important evolve around the world, companies are asked to rethink the way they conduct business and manage their organizations. Gone is the time in which businesses only had to think about costs in order to sell products.

Kaihori： From now on, it will become more important to provide solutions, including consultation, rather than products by thinking from the customer's viewpoint. We are doing business with customers in various industries, so we can, for example, utilize our experience in the medical field to provide solutions based on best practices to our customers in the food industry. High product quality has been our strength throughout our long history, but now we're combining this with consulting and engineering services that add value, in order to provide total solutions to our customers.

Unno： I'm sure that the concept of sustainability is firmly ingrained in this.