About Resonac Pride Products and Services

Q.1 Could you share your frank views regarding our initiative on “Resonac Pride Products/Services”?

The key lies in the integration of business strategy with sustainability.

“Resonac Pride Products/Services” helps us stakeholders to easily see, in concrete form, Resonac’s sustainability initiatives implemented through its business activities. The business activities of B-to-B companies, especially your company in the chemical/material industries, are difficult for outsiders to understand. So, I encourage you to continue with your challenging endeavor to make your initiatives visible.
The key point to note here is whether you have been able to explain what kind of roles the products and services play in the company’s business strategy. An increasing number of companies have both a great business strategy and a great sustainability strategy, but the two strategies are rarely consolidated into a single management strategy. However, in Resonac’s case, we can clearly see, in the integrated report, that its business strategy and sustainability initiatives are firmly linked under the purpose of “Change society through the power of chemistry.” As I also believe that it is imperative for Japanese companies to change society with their technological expertise, your purpose deeply resonates with me. I therefore have high hopes that Resonac will completely fulfill its role in this sense.

Ongoing dialogue with third parties will help enhance employee motivation.

Producing products and services that incorporate the Company’s purpose and values is not enough. I ask you to create opportunities to verify what kind of roles the company’s products and services play in this world and whether they contribute to society as you intended, and publicly disclose the results. You should also elicit feedback from customers and other stakeholders to check how your products are received and what benefits they bring, and share the findings within the Company.
In the case of B-to-B companies, a variety of stakeholders are involved before their products are delivered to end users, which makes it all the more difficult to see how the products are relevant to society, not only for people outside the company, but also for employees. If employees can listen to customers as well as other stakeholders and learn what they expect from the company, their input can serve as a benchmark for development and sales activities. In addition, hearing how the company’s products benefit society should be motivating for employees. Noticing any signs of a potentially negative impact may also lead to improvements.
From my experience as a corporate worker before I took up teaching at university, I know that the landscape you see from outside the company is quite different from the one you see when designing and producing products from within. As expressed by the term “outside-in” thinking, a bird’s eye view of your company and opinions obtained from the outside will allow you to understand how products are and will be used in the real world, opening your eyes to what steps you should take next.

Open selection process and ongoing open dialogue

The process for certifying Resonac Pride Products/Services is also important. It would be ideal if you could show the screening process for certifying the products based on preset standards, along with how your values and the purpose of “Change society through the power of chemistry” in collaboration with others, including B-to-C companies, have been reflected in product development and marketing activities. I understand that you are considering inviting third party experts onto the screening board, but perhaps it would also be desirable to publicly disclose the certification process and ongoing dialogue with stakeholders.
B-to-B companies are the infrastructure of society, constituting its backbone. If you could widely publicize how a B-to-B company like Resonac is making proactive efforts to engage with society and how its technology contributes to society by highlighting Resonac Pride Products/Services, thereby clarifying the Company’s direction forward, stakeholders would be highly appreciative.

Q2. Could you advise us on how we should promote sustainability through business?

Companies today need to communicate the “virtues” they have accumulated.
Toward a future where earning power and sustainability intersect

You changed the company name to Resonac in January 2023, but the new name has yet to gain wide recognition. I don’t think many people can associate the name with what the Company does just yet. However, the change in name is an opportunity to widely publicize what the Company aims to achieve in society through its sustainability activities. B-to-B companies are rarely spotlighted, and therefore generally difficult to understand. Up until now, it may have been acceptable for companies to secretly accumulate hidden virtues in the humble manner of a typical Japanese company. However, companies today need to communicate to the public whatever virtues they have accumulated, if they want to play their part in society.
In Japan, and around the world, there are still many companies and people who see earning power and sustainability as unrelated. However, if we have earning power on the vertical axis and sustainability on the horizontal axis, an ideal company in pursuit of its purpose should be placed somewhere along the 45-degree line where the two factors merge. In other words, a desirable roadmap is one that integrates sustainability into its business strategy.
As a member of the panel of judges for award contests, I read a great many integrated reports every year, but I rarely envision such a roadmap in any of them. In addition, in most cases, completely separate divisions oversee management strategy and sustainability initiatives, with no sign of organizational integration. If Resonac has started integrating sustainability into business management in its organization, you should highlight this endeavor as an appealing attribute

 

Resonac’s efforts around human capital management
Reskilling required for “bedrock” middle management

Resonac has tremendously competent young employees. It is vital to create opportunities for them to unleash their potential on whatever they aspire to do. In doing so, the highest priority is to prompt “bedrock” department/division leaders to change their values, as they are obstacles standing in the way of junior employees. As an instructor for top management training programs, I am often asked how young talent should be developed. I explain that it is actually the middle- and advanced-age employees—people who harbor an attachment to their success stories of the 20th century and consider that sustainability has nothing to do with, or is even unnecessary, for making profits—who need to change their values and be reskilled so that they can support and motivate their younger colleagues.

To capitalize on diversity

Resonac upholds the vision of becoming a co-creative company. To this end, partnerships with other companies are needed, and for this, interpersonal partnerships are required, for which diversity of human resources is a prerequisite. I believe that it is management’s duty to create an environment where diverse talent can maximize their potential. Let us consider what measures are needed.
First and foremost, changes are needed in the Board of Directors. The Japanese government has announced its target of increasing the proportion of female directors to 30% of the total by 2030, but achieving this target is not necessarily the only way. The important point is to allow diverse members, regardless of gender, to serve as outside directors.
Looking at the composition of directors at Resonac, I still see room for improvement. Resonac, as well as most other large companies in Japan, has been enhancing diversity of the board by appointing outside directors with top management experience. Many of these members, however, are former presidents of a single company, who tend to be attached to the values and success stories of their old company. Going forward, it will be necessary to welcome individuals who have been leaders of multiple companies across different industries, or in other fields such as NPOs and public institutions.
At the same time, existing directors need reskilling, as I mentioned earlier.
In addition to such top-down measures, you also need to create a workplace where younger employees can demonstrate their potential.

Money can’t buy morale or motivation

The term human capital management is often used today, but it is challenging to actually put this notion into practice. When I talk to top management members of various companies, they readily understand that money can buy skills but not morale or motivation, and that enhancing morale and motivation is the mission of top management. For example, Toyota defined that ‘producing happiness for all’ constitutes the mission under the Toyota Philosophy, and announced that it is the duty of the president to develop employees who can put themselves in other people’s shoes. Resonac makes efforts to develop human capital with a focus on fostering co-creative individuals with the aim of becoming a co-creative chemical company. I can therefore see that you’re on the right track.

I have high hopes that you will succeed, so good luck in your endeavors!