Interview with the CSO
Driving ESG initiatives forward to
enhance corporate value
Tomoko Nakagawa
Executive Officer, Chief Sustainability (ESG) Officer (CSO)
Fiscal 2022 saw significant progress made, including our first TCFD (Task Force on Climate-Related Financial Disclosures) disclosure. In fiscal 2023, your second year as CSO, what were the key activities you focused on?
In my first year as CSO in fiscal 2022, we laid the groundwork for our ESG efforts by establishing an internal framework and implementing a system for Group-level environmental data collection.
In fiscal 2023, we focused on actually collecting environmental data, expanding the number of businesses covered by TCFD, calculating Scope 3 data, and preparing for the European CSRD (Corporate Sustainability Reporting Directive).
Due to the diversity of our products and services and the differing environments in which our businesses operate, our ESG challenges and priorities vary by division. To enrich ESG activities within each division, discussions were needed to identify their specific ESG issues and put in place relevant targets and effective measures. Consequently, fiscal 2023 was a year of building collaborative relationships with each division.
Additionally, to promote knowledge sharing across the HOYA Group and raise awareness of cross-divisional cooperation and Group-wide ESG activities, we launched the “ESG Awards.” These awards recognize ESG initiatives that contribute to enhancing corporate value for the entire Group. We received approximately 50 submissions showcasing various global initiatives. It was a source of immense pride to see how proactively involved our employees are in ESG activities, and it provided a wonderful opportunity for sharing best practices across the Group. It reaffirmed just how important ESG activities are to enhancing our resilience to the environmental changes affecting our businesses, and to improving the competitiveness of our Group companies. We plan to continue with these internal activities going forward.
For Scope 1 and Scope 2 CO2 emission reductions, we are steadily pursuing strategies to achieve our interim targets of 60% renewable energy use and a 60% reduction in CO2 emissions (compared to fiscal 2021) by fiscal 2030. Initiatives include installing solar panels on company buildings, reviewing our energy contracts, and procuring non-fossil certificates. As a result, our renewable energy ratio improved from 2% in fiscal 2022 to 14% in a single year. We will continue to advance our renewable energy adoption by exploring procurement methods in various countries and gathering the latest information.
On the other hand, Scope 3 remains a significant challenge. In fiscal 2023, we began calculating Scope 3 emissions company-wide, starting with the disclosure of major emission sources. Since the value chain varies by business, the trends, challenges, and countermeasures for Scope 3 emissions also differ. Moving forward, we need to address each business individually while also tackling issues common to all of them—specifically, expanding the calculation categories and engaging with suppliers to collect primary data and implement emission reduction activities, particularly for Category 1 (Purchased Goods and Services). Our goal is to advance our Scope 3 initiatives and aim for SBT (Science Based Target) certification, which targets a 1.5°C limit for global warming based on scientific evidence.
ESG covers a very broad range of areas. Among those, what particular challenges do you see at this current time?
As mentioned, understanding, disclosing, and setting reduction targets for Scope 3 emissions, along with obtaining SBT certification, is a major challenge in the Environmental agenda.
In the Social agenda, we introduced a global employee evaluation system in fiscal 2022, creating a common standard across the Group. After a year, we feel that the qualities and competencies we expect from employees are becoming well understood internally. Additionally, HR conducts ongoing employee engagement surveys, using the results to engage in dialogue with employees in each business unit and implement improvement measures to create a better workplace environment.
Diversity & Inclusion (D&I) is also crucial in enhancing corporate value. In particular, we recognize the need to increase the presence of women, including female engineers, in the Information Technology sector. We are considering initiatives such as talks by our female external directors with engineering experience to share their insights within the Company.
Promoting ESG requires considering not only this Company but the entire value chain, and that presents a major but vital challenge. Reducing Scope 3 emissions is part of that challenge, and we must also update our supply chain management to include human rights due diligence, given the global nature of our supply chain. We recently revised our Supplier Code of Conduct and must now implement initiatives to enhance its effectiveness. We need to move forward in a manner compliant with the European Corporate Sustainability Due Diligence Directive (CSDDD) as we evolve our current efforts.
Finally, could you sum up fiscal 2023 and share your outlook for the future?
Fiscal 2023 was a year where various disclosure frameworks for non-financial information were further developed and clarified. Moving forward, it will be essential to comply with international non-financial disclosure frameworks such as those from the ISSB (International Sustainability Standards Board) and the European CSRD. In preparation, we are currently reviewing and improving our internal information collection processes, controls, and IT systems. While building these processes is a significant challenge, enhancing our disclosures will provide an opportunity to increase transparency regarding our business activities, achievements, and initiatives, fostering better dialogue with our stakeholders. To underscore our Group’s commitment to implementing this effectively, our Compensation Committee has increased the weighting of ESG targets from 10% to 25% within our long-term incentive evaluation criteria for executive officers. We have also incorporated non-financial KPIs into the compensation structure for business unit leaders responsible for implementing these initiatives. This will ensure ESG activities are integrated across management and operations to enhance corporate value. We sincerely appreciate the continued support of our stakeholders throughout this process.