Independent Opinion

For this assessment I made an inspection visit to the Kofu Plant, one of Yokogawa Electric Corporation’s major plants and I also interviewed the staff in charge of CSR. After carefully reading the CSR report, I formed the following opinion.

Many people still associate CSR with corporate activities relating to compliance, thoroughness in corporate ethics, or volunteer service in the community. Essentially, there is a tendency for CSR to be viewed as a series of corporate initiatives where “individual employees go back to the basics of providing sincere service to give something back to society through acts of goodwill.”

In CSR in the world at large, however, emphasis is placed on the issue of how corporations “can link CSR to resolving social issues relevant to their companies by integrating CSR into their overall business activities.” This point is clearly stated in ISO26000, the recently issued international standard for social responsibility, which views CSR as activities that should be strongly linked to sustainability (sustainable development).

CSR does not end at risk measures or services performed by a company as a good corporate citizen. Developing strategic CSR as a positive factor that will create opportunities in business and that can be linked to increasing competitiveness is important.

CSR activities at Yokogawa Electric at present are for the most part centered on risk management. Furthermore, while products and solutions at present individually contribute to reducing the impact on the environment and society, there is little indication of a view of integrating sustainability into the overall business strategy as a business opportunity, and this is unfortunate.

Measuring and control instruments, which comprise the mainstay business of the company, are a product group that contributes considerably to reducing the environmental impact on the customer-use side and efficient operations on the plant side. This business is considered an axis that contributes to sustainability in concerted efforts with customers and can therefore be considered strategic CSR. Today, as the world aims for long-term development on a global scale, one of Yokogawa Electric’s strengths is that it engages in business that is linked to resolving environmental problems. This goes beyond very early CSR initiatives in the sense that the business strategy of Yokogawa Electric can be said to be integrated as sustainability management.

I understand that Yokogawa Electric’s superior technology has been one of its notable characteristics. The challenge for the company in the future will be how it will align this technology and its products with social needs to benefit society as a whole. In this regard, I believe that it would be beneficial for the company to review its business strategy not only in terms of “meeting customer needs” but also in terms of “how it can connect meeting the needs of society as a whole to resolving issues.”

At that time it will be important to shift priority to areas where aiming for sustainability applies. Until now oil-related business including refineries have taken center stage but in an age of sustainability attention will increasingly focus on the development of clean energy as an alternative to oil and the development of water treatment systems. Attention is also shifting from energy conservation through individual devices and facilities to overall efficiency at a wide-area municipal level through integrated, regionally based “smart energy.” In this regard, there are expectations for Yokogawa Electric’s future sustainability strategy in terms of how it will become involved in this area.

From the viewpoint of integrating CSR into an overall strategy in the area of sustainability, your current activities can be described as a combination of basic CSR areas plus governance. Although there are initiatives in CSR already integrated into the internal control system in areas such as labor management, the environment, and health and safety, the aspect of “management” seems to dominate. Even when it comes to fundamental CSR activities, rather than pushing them as a framework of “activities that should be done,” I believe it would be better to aim for management that encourages the development of a self-motivated environmental and social consciousness in the course of everyday work activities.

CSR activities in overseas operations will be of particular importance in the future. ISO26000 covers a number of topics such as human rights and labor practices from the perspective of emerging and developing nations. In a globalized economy, more and more responsibility is being placed on multinational corporations. Therefore, the issues described below will need to be tackled systematically.

・ Labor Practices

Workplace health and safety, the employment environment, and human rights issues are all imperative areas. In the case of Yokogawa Electric, which has overseas group companies with employees of mixed races and nationalities, these apply not only to your own companies but also work sites at customer plants, and this can be said to be quite a difficult challenge. Consideration of a framework not only for working conditions but also work practices that encompass personnel training and skills development is essential.

・ Supply Chain

CSR expectations are not limited to within the company but extend to the activities of the supply chain and business partners. In the same way that Yokogawa Electric’s plants undergo CSR inspections from customer companies, the activities of the suppliers are also subject to scrutiny. In addition to instructions in the Supply Chain CSR Guidelines, the company is expected to ascertain in concrete terms how these guidelines are being practiced.

・ Community involvement

While Yokogawa Electric is proactive in domestic community activities, in the future it must also bring into its sights how well it is performing overseas in those areas where there are expectations. Nowadays the company is also expected not only to provide local services through CSR as it has but also to support local autonomy through activities that will raise the skills of the region and employees. As a company this will be an initiative that is considered an investment in society rather than an expense.

Yokogawa Electric is expected to engage not only in those initiatives that all corporate enterprises are familiar with but also strategic community involvement activities that combine the company’s line of business and the special features of its operations.