Efforts of Leading Companies to Foster an Ethical Culture

Natsuko Takei

Sony Group Corporation Executive Vice President In charge of Legal, Compliance and Privacy Senior General Manager of Legal Department

Ms. Takei is responsible for building the structure of legal, compliance, and privacy areas and monitoring with the aim of achieving the company’s business objectives, ensuring legal group management, fostering a corporate culture of conducting honest and ethical business activities, and reducing risk.

Masaru Takeyasu

Kao Corporation Executive Officer In charge of Legal and Compliance General Manager of Legal Department

Mr. Takeyasu is responsible for the Legal and Compliance Department for 3 years and is responsible for compliance, internal control, trademarks and counterfeit goods.

Yasuhiro Hayakawa

Teijin Group Senior Executive Officer, Chief Social Responsibility Officer, Responsible for Corporate Audit Department (resigned from the post at the end of March 2021)

Mr. Hayakawa is mainly in charge of risk management and ESG management after working in other departments such as the procurement and purchasing, the raw material polymerization, and the human resources and general affairs.

Yoko Kubo

Ethics Officer at Deloitte Tohmatsu Group Partner at the Risk Advisory Business Unit

Ms. Kubo is the Ethics Officer of Deloitte Japan for 2 years, aiming at embedding the Shared Values and fostering Ethical culture into the firm. Over the past 10 years, she has provided consulting service on risk management and governance. 

Nozomi Sakurai

Deloitte Tohmatsu Consulting Partner

Ms. Sakurai specializes in Global Leadership Development and Learning; currently leading Japan Leadership service.  Expert in managing large-scale transformation projects from change and leadership elements, her management experience covers more than 14 countries across Europe, Americas and Asia  Pacific.

Sakurai: How does your company defines Ethics, what made you start to focus on various ethical initiatives?

Takei: Sony has “the Founding Prospectus” which is written by the founder as the basic idea of the behavior of the company, and our company has valued the idea of “fair businesses practices” since its establishment.About 20 years ago, corporate scandals in Europe and the United States came to light and there were some companies that went bankrupt. Sony felt that the same thing could potentially happen to us. So, we established the “Sony Group Code of Conduct” in 2003, which is positioned above the internal rules that all employees are to follow. We have prescribed the basic codes pertaining to “ethical and responsible business activities”. The top management of legal compliance at that time had a desire and a strong will to proactively express to all stakeholders that “the company will act based on this code”. I think it is important to set forth a common code of conduct as a global company that develops various businesses all over the world.

Sakurai: How do you feel about the results and responses to these initiatives?

Takei: Sony was founded as an electronics company, and its founding prospectus resonates with electronics professionals. At the same time, we have some companies with a long history, such as Columbia Pictures Industries, Inc., which joined our group through M&A. We are developing various businesses all over the world, and our employees vary from producers and creators engaged in movies, music and games, factory line workers, to salespersons, etc. In the process of subsequent review of the founding prospectus, we repeatedly tried to choose words to share values and continued to make efforts in a way that they will resonate with employees. And that has made what our group’s current code of conduct is.

Takeyasu: Kao doesn’t use the word Ethics very often. We define the philosophy “Seidou wo ayumu (defined as “Integrity as the only choice”)” set forth in the Kao Way as Integrity, and we believe this includes what the compliance with laws and regulations and Ethics mean. I don’t think there was a clear catalyst for starting the efforts toward the Ethics. The founder’s last will “Good fortune is given only to those who work diligently and behave with integrity” is long-ingrained among our employees, and I think the awareness of social contribution has been originally high among our corporate culture, just as Mr. Yoshio Maruta, who has been the top management for many years, used to say that “the employees’ salaries are kind of offerings made by consumers.”

Kubo: When I talked about what Integrity means with people overseas, I was told that it was “Do the right things.” I thought the “Seidou wo ayumu” completely resonates.

Hayakawa: According to Teijin’s understanding, Integrity means “Nobility” and we believe it means that no matter what happens, keep your own thoughts and go the right way.

Takeyasu: In our code of conduct for embodying the “Kao Way”, so-called the Kao Business Conduct Guidelines, there are questions for the moment when you are uncertain about your decision, “Can you explain to anyone that it is the right thing?”, and “Are you okay if your family member encounters a similar situation?”. They cover the area that is broader than the compliance in a so-called legal sense, and I think they are closer to what Ethics and Integrity means.

Hayakawa: Teijin’s corporate philosophy is “Quality of Life”, “In Harmony with Society”, and “Empowering Our People”. We have set forth the philosophy, which is very close to ideas of SDGs, since 1993. We started Ethics-related activities in around 1998 based on this corporate philosophy, and have been developing the Ethics committee, whistleblowing system, and risk management, etc. under the direct control of the president. Currently, the corporate Ethics and compliance group is formed under the management of CSR. In 2004, a major compliance breach occurred, but the president said “Thank you” to the employee who made a whistleblower. It is one of the examples that our company sends out our corporate philosophy and messages keeping “a person” in mind, which is rare for a chemical company.Recently, in 2018, we completely revised the code of conduct and integrated the five acronyms of the words, “Together”, “Environment, Safety & Health”, “Integrity”, “Joy at work”, and “INnovation” into “TEIJIN”. We have around 20,000 employees around the world, and only 9,000 of them are Japanese. We acquired various foreign companies so there are a lot of languages spoken and they have their own WAYs. Healthcare and IT also have completely different cultures, so I have given up bringing them together. While focusing on sharing the corporate philosophy and code of conduct, I think it is good to respect the characteristics of the region and business and keep them rich in variety.

Sakurai: How do you manage diversity, penetration into a wide range of business lines, and governance and the characteristics of business?

Takei: Well, I think that Ethics is like “earth” or “soil”, and from there businesses that will provide excitement to the world will emerge. However, the values differ depending on the country, culture, business, and even each employee. So, we are trying to make how we indicate Ethics and how we present it in a way that they will be appealing, using the ideas of our employees.

Takeyasu: I think the most difficult thing from the perspective of Ethics is that the way of thinking differs depending on the timing within the society/history. In the past, it has been often said that “she did something even though she is a woman…” or “he should do something because he is a man…”, but time has changed. As the way of how we feel differs depending on the time and generation, there is always a difference in views on Ethics and moral, so I think it is difficult to get the same understanding. The basic values of the Kao Way are “Seidou wo ayumu”, “Yoki-Monozukuri (defined as a strong commitment by all members to provide products and brands of excellent value for consumer satisfaction)”, and “Innovation”. We believe that these three values are appealing and convincing, and we are conscious of them. I think the foundation of our activities is to ingrain these values in the society.

Sakurai: What challenges did you face to give top priority to Ethics in your daily lives?

Hayakawa: Currently, we have the head office of aramid fiber business in the Netherlands. Previously, it was headquartered in Japan, and we used to have difficulties in instilling the philosophy of Teijin in the Netherlands. The more we tried, the more we had pushback from the local employees. Then we came up with the idea of reversing our thinking, entrusting the Dutch office to manage the aramid business in Japan instead. Since 2016, we have transferred  them our long-term vision “To be a company that supports the society of the future” and asked them to think by themselves about how to support the future through their businesses and the value that will be engendered there. As a result, now Dutch employees are beginning to realize that they will not be able to manage their business without harmonizing themselves with the Japan side. I came to a conclusion that it might be the best to share a big goal and code of conduct at first, and then let them think about how to achieve them by themselves. Key is letting them think on their own initiatives and harmonizing their ideas rather than forcing them against their will.

Kubo: Deloitte has integrated measures within the group to some extent over the past few years, if the initiative is something that you thought of by oneself without being imposed by the management, we tend to be committed to it as “one’s own issue” and take actions for it. However, I heard some voices that “we are cooperative with the initiative against our wills, as it was ordered by the management” at the workplace. So, I think it is a good initiative to “put oneself in the other’s position”.

Hayakawa: There is an essential part that should not be changed, such as Kao’s “Kao Way”, however I think the initiative might become “one’s own issue”, if there is a room for variety in its interpretations and understandings. Teijin distributes a booklet called “Corporate Ethics Handbook” to employees working at our Group companies in order to let the Code of Conduct penetrate. We are also planning to select good practices that have been applied to the awards for the past three years, including the award that recognizes employees who are practicing the Code of Conduct, and introduce them in the above-mentioned booklet. Then, for example, if there were a winner of the award in the Netherlands, he/she would be proud of him/herself looking at the booklet, telling the people around him/her, “This practice in this page is what I have done!” I think if such opportunities are accumulated, the Code of Conduct might become “one’s own issue”.

Takei: Sony also present employees’ photos in its Code of Conduct booklet so that it will become “one’s own issue”. Half of the spread is a photograph of employees, and we asked everyone in each business and working sites around the world to appear as models for the photographs. In addition, I think it is necessary to spend time for discussing how the philosophy should be expressed when we develop it.

Sakurai: How can we penetrate without taking time?

Takei: Working groups and discussions about the philosophy among representatives developed the desire to penetrate it in their own business areas, and thus, they succeeded in making it “one’s own issue”. It was a lot of work, but I’m happy with what we did.

Takeyasu: If Kao acquires a small factory of an overseas company through M&A and just tell them, ”We have a range of regulations at Kao, so please do what are prescribed.”, it will be absolutely impossible to penetrate those regulations among them. I think it is important to send our message in that way that suits their own circumstances, such as “I would like you introduce all of them in the end, but could you begin from this essential as your effort?”In addition, at our company, the Legal Department keeps the president’s seal, and the Legal Department examines each time he stamps it. We are requesting our overseas subsidiaries to follow the same process in obtaining the president’s stamps, but “Why we need the Legal Department’s examination even when the president signs by himself?” is a never-ending question.  It is difficult to convince them for doing that. If the asks are not convincing, it ends just as a formality. I think it’s important to be convinced of what you do and make the thing “one’s own issues”.

Sakurai: What do you think is the impact to the market of continuing the efforts that you introduced to us today?

Hayakawa: Chemical manufacturers’ mission is difficult to align to the environmental issues. However, we have prescribed in our medium-term management plan that we will make the amount of avoided carbon dioxide emissions by providing lightweight materials more than the total amount of carbon dioxide emitted in our business activities. I think it is very important to show the significance of existence and purpose of the company at home and abroad in terms of clarifying the company’s existence value. SDGs will be an indicator that people will pay attention to. If you send messages in line with a common framework, people will naturally understand the significance of the company’s existence. In other words, we are entering an era in which business itself cannot be done unless SDGs are integrated with corporate management, as European automobile companies do not deal with companies that do not cope with the circular economy (resource circulation as an economic policy that creates maximum added value through efficient use of resources), and companies like some of sports apparel manufacturers are beginning to say that they will use only sustainable materials. Then it comes Ethics that will serve as the foundation for SDGs and the respect for human rights required there.

Takeyasu: As Kao focuses on B2C, reputation and compliance can have a fatal impact on our business. In that sense, I think it is important to take actions that are not embarrassing to the world and to be able to be proud of the company for which you are working. In addition, we are delivering a message “acting lawfully and ethically by conducting fair and honest business through friendship” in our new medium-term management plan that started from this fiscal year. Just as the words say, we would like to be more conscious of improving our company together with our business partners in relation to B2B as well.

Sakurai: It seems that corporate Ethics and SDGs initiatives have already become a common understanding. Let me ask you the last question. What is your companies aim in the next coming years?

Takeyasu: We announced that we will aim to “become an essential company in a sustainable world” in the above-mentioned medium-term management plan. Carbon dioxide and various wastes are generated in production activities, but we will not only cope with these problems, but also ensure providing values to the society as a company so that people would say “Kao is an indispensable company for us.”

Hayakawa: I hope all employees will understand our long-term vision “To be a company that supports the society of the future” and to be said “Dad, Mom, you are working for a great company.” by their families. That is our final goal.

Takei: Ethics to me is like “earth”. Sony wishes to create new things on the rich soil and continue our business that will “fill the world with emotion, through the power of creativity and technology” forever, which is our significance of existence. I feel that our music and movies are offering support for consciousness, mind and soul of people under the covid-19 crisis, and the direction of the management of the company as a whole, “getting closer to people”, is being put into practice in these businesses. I think we need to be an ethical company and have a “rich soil” in order to continue our business in line with our management direction.

Kubo: Thank you for your valuable stories today. Some of the individual initiatives you introduced to us have been also implemented at Deloitte in the form of awards and Code of Conduct, but I think you are implementing them in the way that connection with the meaning of the company’s existence are more emphasized. Also, I felt very strongly that you have been coping with these initiatives related to Ethics not for a year or two, but for a long time. I hope we can proceed to transform, keeping in mind that our journey has just begun. Also, just as Ms. Takei has said, I hope we could provide services that can be based on the soil that we have cultivated.