ESG in the SCREEN Group

ESG in the SCREEN Group
Towards Raising “SCREEN Value”
—Sustainable Value (Social Value) and Economic Value—

(Left)Shunichi Hasegawa
Department Head CSR Promotional Department SCREEN Holdings Co., Ltd.
(Middle)Toshio Hiroe
Representative Director President, Member of the Board Chief Executive Officer SCREEN Holdings Co., Ltd.
(Right)Yasuyuki Kato
Ph.D.Adjunct Professor, Graduate School of Management,Kyoto University Chair,Kyoto University ESG Study Group Professor,Tokyo Metropolitan University Graduate School

ESG (environment, social, governance) has become a key assessment criteria for corporate value. What does ESG mean to the SCREEN Group? How should we pursue it in our business? To answer these questions, Toshio Hiroe, President and CEO of SCREEN Holdings and Shunichi Hasegawa, Head of the CSR Promotional Department of SCREEN Holdings spoke with Dr. Yasuyuki Kato, an adjunct professor in the Graduate School of Management at Kyoto University and chair of the Kyoto University ESG Study Group.

This dialogue was held on March 25, 2020 at the SCREEN Holdings Head Office in Kyoto. For the sake of social distancing, Dr. Kato took part via videoconference.From left

Linking ESG to Business Raises Corporate Value

Mr. Hiroe: Amidst the changing business environment created by the COVID-19 outbreak, we have defined the SCREEN Group’s corporate value as “Sustainable Value (social value) and economic value” under our Value Up 2023 medium-term management plan. Although our past mediumterm management plans included ESG and the SDGs, I felt that there was not enough emphasis on linking these to our business activities. A sense of awareness of ESG is currently being fostered in Group companies. Under Value Up 2023, we aim to link this awareness to business activities in order to boost both Sustainable Value (social value) and economic value.

Dr. Kato: There has been a lot of research showing that the most important thing in ESG investment is the relation between a company’s ESG rating and its corporate value. In other words, companies with a high ESG rating also have a high corporate value. Governance, the “G” in ESG, is especially important, something that my research has backed up. There has also been a lot of recent research showing that environment (“E”) and social (“S”) are inextricably woven into corporate value. I believe that
these two will continue to draw increasing attention and be even more integral components of stock prices.

Mr. Hiroe: We are committed to SBTs* in the area of the environment, and we have set CO² reduction targets to achieve by the fiscal year ending March 31, 2030. In addition, we are helping our customers lower their environmental impact through our ongoing development and manufacturing activities as we carry out in-house assessment of the solutions that the SCREEN Group provides to customers. We are also reducing the amount of waste in product manufacturing processes.
Looking at governance, after adopting a holding company structure in 2014, the SCREEN Group achieved growth by having each of the business operating companies strive for optimal allocation of management resources and maximum profitability. However, this pursuit of optimization by the business operating companies led to too much centrifugal force—you could also call it autonomy—resulting in what I felt was a lack of cohesiveness inside the SCREEN Group. Our new mediumterm management plan has measures for strengthening Group governance and improving Group cohesiveness.

Risk Management a High Priority

Mr. Hasegawa: The CSR Promotional Department was launched seven years ago to concentrate on boosting compliance and corporate ethics but our tasks have recently been expanded to include aggressive CSR action; for example, participation in the UN Global Compact and the achievement of SDGs through SCREEN’s business. However, I’m afraid that we haven’t communicated these activities very well to stakeholders, nor have we incorporated these into our management plan as concrete targets.
Under our new medium-term management plan, in response to President Hiroe’s policy of being a solution creator for society and tying those successes to changing society for the better, we are focusing on ESG and planning concrete CSR measures that will lead to higher social value for the SCREEN Group.
As for strengthening governance, which President Hiroe just mentioned, it’s important to have cross-organizationally linked risk management. We are focusing on major risk factors for the entire SCREEN Group from the viewpoint of ESG, and SCREEN Holdings is monitoring these. By including environmental problems, social issues, and supply chain tasks in those risk factors, we are turning risks into opportunities.

Dr. Kato: The original concept behind ESG investment was risk management. The idea was to reduce risk and raise sustainability. Research has shown that in most cases companies with high ESG ratings tend to avoid loss of corporate value in the face of economic crises like the 2008 global financial crisis.
Such companies’ stocks are held by investors who take a long-term view, so when a crisis does arise, the stock sell-off is small compared to that of other companies. I can confidently say that ESG investment will be a major focus of attention once the current COVID-19 crisis is over.

Mr. Hiroe: Risk management is also one of the important tasks of the new medium-term management plan. As for COVID-19 countermeasures, although we have for some time had a BCP (business continuity plan) in place, which assumes things like pandemics, now that such a crisis has occurred, it has revealed problems that we never foresaw. This has reinforced the importance of narrowing the gap between risk management methods and actual business activities. Solving this issue is a high priority.

Raising Corporate Value on a Foundation of ESG and SDGs

Dr. Kato: It is my understanding that investors consider a company’s ESG rating an indicator of risk and SDGs an indicator of a company’s growth potential. ESG and SDGs have become the lingua franca in the communication between investors and companies, and between investors and their investor clients.

Mr. Hasegawa: While SDGs represent one clue to boosting corporate value, ESG is an important angle from the investor’s standpoint. Companies must deal thoroughly with both of these. Although both have the same purpose, they must be perceived in their proper context. It’s about more than just changing society through one’s business; it’s also about, for example, a company making manufacturing more eco-friendly, changing the way employees work, or using the profits and knowledge it has gained through business to give back to society in the form of tieups with government and / or academia. All of these contribute to various stakeholders in society and all lead to greater social value for a company. We hope to deal with both ESG and SDGs through these various angles.

Dr. Kato: Exactly. ESG is akin to the way of doing things; its focal points include improving governance, creating better hiring systems and work environments, and reducing industrial waste. On the other hand, I think SDGs represent a company’s direction; what it should do as a business, for example.

Mr. Hiroe: What we define as SCREEN Value—achieving growth in both social and economic value—is the reason for our existence. We want to conduct business by developing and innovating in order to provide customers with solutions through technologies, products, and services while imagining what kinds of social value we can create.
Through the cycle of business activities, we are building the mechanisms of our new medium-term management plan so that all employees can fully comprehend the model for giving back to society and our stakeholders.
I believe that ESG numerical targets and the philosophy of SDGs naturally link with this cycle of activities and in turn boost value for SCREEN Holdings. As the foundation for improving corporate value, we are refining our fundamental management philosophies.

※The titles are at the time of the event.

*Science Based Targets (SBT) represent an international initiative to prevent global warming by setting CO² reduction targets that are based on scientifically sound principles.

ESG in the SCREEN Group