A tripartite discussion: SDGs in Business Management for fulfilling the SOMPO’s Purpose

Masahiro Hamada
Group CFO, Group Co-CSO
Senior Executive Vice President
and Executive Officer

Hidemitsu Sasaya
CSR/SDGs Consultant

Kayoko Sakai
Director and Executive Officer
Sompo Japan Insurance Inc.

In the Mid-Term Management Plan starting from fiscal 2021, we will work on SDGs in Business Management to fulfill the SOMPO’s Purpose.We invited Hidemitsu Sasaya, a CSR/SDGs consultant, to exchange opinions with Masahiro Hamada, Group CFO, Group Co-CSO, and Senior Executive Vice President and Executive Officer, and Kayoko Sakai, Director and Executive Officer of Sompo Japan Insurance Inc., on the theme of SDGs in Business Management toward fulfilling the SOMPO’s Purpose.

Hidemitsu Sasaya
Hidemitsu Sasaya graduated from the University of Tokyo Faculty of Law in 1976. He joined the Ministry of Agriculture and Forestry in 1977, serving as Deputy Director-General of the Minister’s Secretariat of the Ministry of the Environment, then as Deputy Director-General of the Minister’s Secretariat of the Ministry of Agriculture, Forestry and Fisheries, and finally as Director-General of the Kanto Regional Forest Office. In 2008, he joined ITO EN, LTD. and retired after serving as Director and Managing Executive Officer. He holds a PhD in Policy Studies and has been a professor of Chiba University of Commerce’s Platform for Arts and Science since April 2020.

What is the Sompo Group’s SDGs in Business Management?

Mr. Hamada Here at the Sompo Group, we have always been committed to going beyond insurance and helping solve social challenges under the Sompo Group’s vision of becoming “A Theme Park for Security, Health & Wellbeing.”
When we started preparing our Mid-Term Management Plan about a year and a half ago, we first envisioned the changes in the environment 10 years ahead and started “backcasting” from there. When we think about the megatrends of the next 10 years, they overlap with the SDGs, which are set to target the year 2030. When we combined this with business trends such as stakeholder capitalism and DX (Digital Transformation), we were once again convinced that becoming “A Theme Park for Security, Health & Wellbeing” was the right direction to move in.

In addition, the impact of the COVID-19 pandemic is bringing about a massive change in social values. When we took into consideration life during the COVID-19 pandemic and post-COVID-19 environment, all of us in the management team realized that the Theme Park concept is not a vision of the distant future, but that the timeline for realizing it has moved considerably closer. That’s when we took another look at the Sompo’s reason for existence (Purpose), which underlies the Theme Park concept, and asked ourselves what it means to be the Sompo Group, and how the Sompo Group can contribute to society.
With regard to the SOMPO’s Purpose, we deliberated on our social value creation story from the early stages of preparing our Mid-Term Management Plan, clearly defining what kind of society we aim to create and what kind of value we will provide through the Theme Park concept. We had thorough discussions not only at Sompo Holdings but also at other Sompo Group companies with real businesses and customers.
The important thing is to demonstrate the value we deliver to society, and in doing so, enhance economic value and contribute to boosting corporate value. Initially, we were thinking along the lines of how to balance social value and economic value, but through repeated discussions, we came to the conclusion that the two are not in conflict, and the only difference is in the time frame for achieving profit.

And of course, the scale of this social value story is not something that can be achieved in a three-year Mid-Term Management Plan, but it has been sublimated as part of the SOMPO’s Purpose for us.
What we focused on most when formulating the Purpose was to make it something that each and every employee at each of the operating companies would feel proud and take ownership of.
SDGs in Business Management is a framework to promote initiatives to fulfill the Purpose. It is a management approach specifically designed to materialize the Theme Park concept, and we have positioned it as a business foundation in the new Mid-Term Management Plan. Going forward, we will create a framework that uses SDGs in Business Management to clarify the social challenges that the Sompo Group faces, develop them into earning power over the medium to long term, and communicate and promote them outside the company to fulfill the SOMPO’s Purpose.

Ms. Sakai Mr. Hamada talked about the Sompo Group as a whole, including its Purpose and the new Mid-Term Management Plan, but Sompo Japan Insurance Inc., which is the core company of the Sompo Group, was founded in the early years of the Meiji Era in 1888, rooted in local fire brigade in Edo. We have carried on our mindset of protecting our customers and contributing to society for 130 years.
The President of Sompo Japan attended the Rio Earth Summit in 1992 and established the Department of Global Environment in the same year. I was also assigned to this Office in 1996. I remember many people asking at that time "why a P&C insurance company addresses environmental issues.” However, since expectations for companies have evolved from Corporate Social Responsibility (CSR) to Creating Shared Value (CSV), and then contribution to SDGs, I feel that Sompo Japan was one of the companies that realized its value quite early.
In fact, about 85% of Sompo Japan Insurance Inc’s employees think that their work is related to sustainability. The challenge is how to evolve this idea while tying it into business. I believe that if we can create a virtuous cycle of solving social challenges and creating social value through our core business, we will grow into an even better company.
We have clearly stated our focus on “SDGs in Business Management” in the new Mid-Term Management Plan, and we fully intend to establish a unique position in this field.

Mr. Sasaya Tying SDGs to management is a great idea and is extremely important. Differences in the competency of top management and employees in terms of their understanding of sustainability become apparent through management. This has been a point of focus since the publication of the “Guidance on Social Responsibility (ISO26000:2010).” The Sompo Group already has this. Your company’s legacy, including its CSR activities, is a great strength.
The impact of the Sompo Group, with its long history of CSR, turning to SDGs in Business Management is profound. The SDGs are related to all four elements of management - people, goods and services, money, and information - and there are methods for incorporating them into management, which makes them an effective compass for disseminating information worldwide. I think it is remarkable that your company has adopted this as the basis for management.

What are the features of the Sompo Group’s SDGs in Business Management?

Mr. Hamada I see the term SDGs in Business Management as a framework for management that does not simply mean “manage with SDGs in mind” but rather something that includes clarifying issues that need to be addressed to fulfill the Purpose, carrying out the PDCA (Plan-Do-Check-Act) cycle for long-term initiatives, and communicating the results. While there are many management frameworks for pursuing short and medium-term results, particularly in insurance, there have not been many frameworks for promoting long-term, non-financial initiatives.
After unpaid insurance claims developed into a major social issue, the insurance industry reaffirmed the importance of service quality. Since then, the Sompo Group has established a management framework that regularly checks quality, and both management and the field continue to place a high priority on quality. Similarly, when considering initiatives that create social value or contribute to the SDGs, but do not immediately lead to economic value, it is necessary to create a common awareness across the entire Sompo Group in order to keep these initiatives on track and sustain them, and this is exactly what the Purpose is for. And the various mechanisms and management PDCA process aimed at enhancing quality is what SDGs in Business Management is.

With regard to “incorporating the SDGs into our management system,” which is critical in promoting SDGs in Business Management, we have set the SOMPO’s Materiality which covers the key issues for fulfilling the Sompo’s Purpose. In this process, we created a matrix of the SDGs, identified the relationship between the 169 targets of the SDGs and the products and services offered by the Sompo Group as well as its future strategies, and set KPIs tied to the SDGs for initiatives aimed at achieving the SOMPO’s Materiality. These Materiality KPIs are closely linked to the value creation story for fulfilling the Purpose and the new Mid-Term Management Plan, and as a result, about 80% of the KPIs have a strong connection to our businesses and are suitable indicators to see the progress of the respective businesses
In this way, we will continue to create social and economic value, and hopefully, in one year, we will be able to take our SDGs in Business Management further to the point of setting the 18th SDG for Sompo Holdings.

Ms. Sakai By organizing the Materiality KPIs and SDGs matrix, we realized that the issues that Sompo Japan Insurance Inc. is tackling in the new Mid-Term Management Plan and the approaches to SDGs in Business Management are not far apart, but aligned. And now, there are four things that we are going to put into practice as Sompo Japan Insurance Inc.
The first is to improve society with the SDGs by developing products and services within the P&C insurance business. New technological innovations could include insurance and services to mitigate risks. In addition, Sompo Japan Insurance Inc. has a network of about 23,000 employees and 48,000 agents, which we will leverage to address issues specific to each region.
Next, we are working to go beyond providing conventional insurance to solve social challenges. Specifically, we will focus on enhancing preventive services such as disaster prevention and mitigation through the use of DX, and on supporting Mobility as a Service (MaaS).
The third point is to address the issue of climate change. In order to achieve the Japanese government’s goal of carbon neutrality by 2050, we continue replacing our power usage with renewable energy. In addition, in the field of “adaptation,” which society has high expectations for, we will work to provide new solutions, such as insurance and risk consulting, by leveraging the knowledge we have accumulated over the years.
The fourth point is engagement (constructive dialogue). As an institutional investor, we will actively engage in dialogue on ESG issues to promote the initiatives of our investees and loan customers, and also contribute to the transformation of Japanese society.

Mr. Sasaya It is extremely important to incorporate the SDGs into management, rather than simply being aware of them. For companies to achieve their SDGs, it is important to implement the competitive strategy of creating shared value (CSV), which aims to simultaneously achieve economic value and social value. However, the social issues we address should not be subjective. This is where the SDGs can be utilized, and social issues can be objectified through the SDGs. This is the key to differentiating a company and building a competitive advantage. For example, this can influence the consumer’s product preferences and help secure partners that can contribute to your competitive advantage.
In addition, employees will grow to think about SDGs, which will lead to SDG-related conversations inside and outside the company, leading to new initiatives and innovations. In this way, it is important to incorporate the SDGs into management, as it will make a big difference in terms of organizational strength.
Furthermore, the relationship between ESG and SDGs is currently confusing. To address this, I have used my experience working with companies to develop a method called the ESG/SDGs Matrix, which helps to organize the 17 goals of the SDGs in relation to ESG in an easy-to-understand manner. The benefits of using this method are firstly that it helps in the selection of materiality by organizing it in a comprehensive manner, and secondly that it prevents criticism that the company has opted for SDGs that are a convenient fit. This will greatly boost the appeal to investors and make the focus more visible to multi-stakeholders. It will also help improve employee understanding. The matrix of your company, which I’ve had the pleasure of advising this time, served as a very good start as we organized the SDGs at the target level, shared it within the Sompo Group, and set materiality for the Group as a whole.
It is also important to note that over 80% of the KPIs for implementing the SDGs are aligned with the Sompo Group’s core business. This is because creativity and innovation through the company’s core business is expected when it comes to pursuing SDGs, and by incorporating SDGs into the company’s core business, it can become a source of competitiveness and a business model that leads to high quality services.
There are still very few companies that have incorporated the SDGs into their management and are thoroughly using them, so it will be fascinating to watch.

How will the Sompo Group carry out its partnership strategy?

Mr. Hamada The Sompo Group has developed various partnerships over the years centering on the P&C insurance business, but in the nursing care business, which we started five years ago, we have gone from trying to create an eco-system to being approached by stakeholders. In this context, the Real Data Platform (RDP) concept is a major initiative that serves as a key to creating partnerships. In the previous Mid-Term Management Plan, we set out to create “A Theme Park for Security, Health & Wellbeing,” and pursued this vision for the ensuing five years. Then, in the new Mid-Term Management Plan, we positioned the RDP as a tangible representation of the Theme Park.
The key here is that it is a dynamic process that starts from a single dot which becomes lines and develops into an all-encompassing platform. It may start out with improving our productivity, but it leads to selling outside of the company, creating new revenue streams, and solving social challenges. We can’t call it RDP unless we take it this far. For example, we are starting to think about RDP in the five domains of nursing care, disaster prevention and mitigation, mobility, healthy aging, and agriculture, with the big idea of helping Japan’s social security resources. To create an eco-system as a provider of various services, we believe that we need partners for data acquisition and solution development on top of Palantir’s data analysis technology. The important thing is to build a system of data processes that will serve as our competitive advantage along with our passion for the SDGs and our desire to solve social issues, and we would like to expand our partnerships by inviting other players with a strong passion for the SDGs. This is the sort of platformer we strive to become.

Ms. Sakai I believe that Goal 17 of the SDGs (partnership) is special, and particularly important. Today’s social issues are complex and difficult for individual companies to solve on their own. Since the early 1990s, SOMPO has been actively working to address environmental challenges, and we have insisted on partnering with stakeholders from the outset. To date, we have partnered with over 300 NPOs and have concluded cooperation agreements with more than 200 local governments. For example, our “Open Lectures on the Environment,” held in collaboration with environmental NPOs, has attracted about 30,000 participants over the past 30 years. We are confident that our partnership initiatives will never be considered “SDGs wash.”
Furthermore, in recent years, the presence of social entrepreneurs has been growing and the mindset of the younger generation has been changing drastically, so we are envisioning a new platform to connect these people with local companies and local governments. In addition, Institute for Advanced Biosciences, Keio University (Tsuruoka City, Yamagata Prefecture), where employees of Sompo Japan Insurance Inc. are assigned, is taking on the challenge of new co-creation involving venture companies and NPOs. We would like to further evolve our partnership model, taking into account talent development and recurrent education for senior personnel.

Mr. Sasaya The more I hear about it, the more profound it gets. Insurance can be a hub for solving social challenges because it can close in on a wide range of social challenges. I think Sompo Holdings has the potential to become a platform for partnerships, including for the newly acquired RDP. The SDGs are like magnetic fields that strengthen partnerships and attract innovation. Cooperation based on SDGs is quicker because of the common language the SDGs provide. To visualize the impact of the SDGs on the RDP going forward, place SDG 17 (partnership) in the middle and draw the other SDGs around it. The RDP will tie into a variety of solutions that leverage the data as an outlet through B2B2C, and as a result, contribute to the many targets of the SDGs that sur-round it. For example, nursing care is Goal 3 (Good health and Well-being), resiliency is Goal 11 (Sustainable cities and communities), and so on. Seen this way, the RDP is like an all-encompassing framework governed by the SDGs.
The SDGs consist of “compulsory performances” that all companies must do and company-specific “showcase performances.” The matrix organization, which is compulsory, applies to many issues, but since Sompo Holdings has a sophisticated business model, the 17 goals alone are not enough to describe it. In particular, I don’t think it is possible to fully express the “assurance of physical, mental, and social well-being” which is clearly stated in the UN document “Transforming Our World: The 2030 Agenda for Sustainable Development” that contains the SDGs. That portion will be a showcase. I refer to this as the 18th goal of the SDGs. What your company communicates will generate reactions world-wide and invigorate the entire Sompo Group, accelerating the movement globally. I think it evokes the “moonshot” or “level of ambition” that the SDGs emphasize as part of solving difficult social challenges.
In addition, as the massive network of Sompo Japan Insurance Inc. incorporates SDGs, it will become a model within the Sompo Group and take on the role of rolling the SDGs out across the Group. Then, carrying out SDGs in Business Management by making full use of intangible assets such as history and tradition, corporate culture, network, brand credibility, group strength, and risk management know-how will lead to the redesign of the corporate brand.
The biggest thing that came about with COVID-19 was the separation of people. Our conventional values were invalidated, which led to a paradigm shift as more and more people began to reflect. In addition to carbon neutrality, which is included in the “E” portion of ESG, the Sompo Group’s SDGs in Business Management also focuses on people, which is important in the “S” portion of ESG. I believe that the world will look to the Sompo Group as a solution provider that con-tributes to “Build Back Better” in the post-COVID-19 days.