Innovation, sustainability and the efficient use of capital are mutually reinforcing
More and more private companies are incorporating the United Nations Sustainable Development Goals (SDGs) into their operating strategies and using them as business opportunities.
Approved by the UN General Assembly in 2015, the goals have now become a shared endeavour transcending national borders and individual sectors.
It feels as if the goals that some businesses have been pursuing independently through a process of trial and error have finally synchronised with the demands of the times and of society at large. Yet at the same time we are in the middle of a disruptive digital transformation that compels us to update traditional business models.
We need, for example, to create an entirely new model for the chemical industry – one we might term “chemistry and materials as a service”. We at Mitsubishi Chemical Holdings, which oversees Japan’s largest chemistry-oriented business group, conducting global operations spanning performance products, industrial materials and healthcare, are trying as a group to promote our own unique concept of business sustainability throughout the world.
We consider it our mission to contribute to social sustainability by providing effective solutions to environmental challenges and societal problems. We use the word kaiteki to encapsulate the idea of sustainable well-being for people, society and our planet Earth (it means well-being in Japanese). And we have articulated a vision for what we want to achieve, using our business as the driving force to make kaiteki a reality.
The fundamentals of this vision took shape by around 2008. In 2011 we initiated what we call “kaiteki management” to put it into practice. Taking major current trends as the basis for thinking about the future, this measures the value generated by our business activities by three yardsticks: capital efficiency (“management of economics”); innovation (“management of technology”); and sustainability (“management of sustainability”).
We believe that our value as an enterprise comprises the combined value of our business activities as measured against all three yardsticks at the same time. Of course, it is difficult to evaluate outcomes relating to innovation and sustainability, but we have built up a set of scientific approaches to assess them quantitatively using indices we have developed ourselves.
It has been extremely heartening to find, over eight years of implementing kaiteki management, that these three types of corporate value are by no means mutually incompatible: in fact, they facilitate each other.
We operate in exceptionally wide-ranging domains, so it is vitally important to manage our business portfolio according to a clear set of values. If we are to compete successfully with other companies in the global arena, we must concentrate on businesses that not only make a significant difference to society, but also have minimal impact on the environment, the global commons and local communities.
In 2007, therefore, we set out three criteria – sustainability, health and comfort – to determine how we invest resources. Using them, we focus investment on innovative businesses that add to the sustainability of the global environment and communities and help people to enjoy healthy, comfortable lives. These businesses encompass:
- carbon fibre, which makes cars and aircraft lighter, thus reducing their fuel consumption;
- battery materials, which enable energy conversion and the sophisticated use of renewable energy sources in transport and mobility;
- biodegradable polymers derived from plants and which can solve the plastic waste issue;
- new agribusinesses pursuing sustainable agriculture;
- regenerative medicine that makes use of “muse” stem cells;
- compound semiconductor crystals, which will play a key role in the next generation of telecommunications.
As long as shareholders continue to be the primary stakeholders in listed companies, we at Mitsubishi Chemical Holdings must further improve our ability to reason and communicate, along with our sensitivity to the zeitgeist, so that we can make a compelling case to the capital markets for kaiteki management and continue demonstrating its significance and importance through our financial results.
Last October, we declared our support for the final recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. In January, we joined the executive committee of the Alliance to End Plastic Waste. In March we became Japan’s first chemistry-oriented enterprise to join the Ellen MacArthur Foundation’s Circular Economy 100. And in April, we launched The Global Kaiteki Center in co-operation with Arizona State University.
As these actions show, we are constantly driving forward our efforts to make kaiteki a reality, always working within intensely competitive markets. A private-sector enterprise is by its very nature obliged to continue maximising profit, so we seek to use innovation to pioneer new frontiers. And by collaborating with academic and public-sector entities that differ from us fundamentally, we make it more possible for something genuinely new to emerge.
This piece was originally published for the GEF-Telegraph Partnership.