Materiality of the Daigas Group

Material Issues (Materiality) of the Daigas Group

In March 2021, the Daigas Group announced the Daigas Group Medium-Term Management Plan 2023: Creating Value for a Sustainable Future. In formulating the medium-term management plan, the Group newly identified important aspects (materiality). In identifying materiality, the Group held discussions with the relevant organizations within the Group and extracted medium- to long-term items with an impact on society and the environment, followed by items with future financial impacts on the Group, based on changes in the business environment and social trends related to sustainability. After considering the impacts of each item, material issues concerning the impact on society and the environment were identified with reference to the opinions of outside experts. Based on these processes, the Group’s medium-term management plan advocates “Co-create value for a sustainable future” as it positions the pursuit of value creation for solving social issues and achieving it together with stakeholders as one of its priority strategies.
At the same time, the Group will strive to accelerate ESG management by revising the Group Charter and Code of Conduct and conducting business management that embraces its corporate philosophy system, medium-term management plan, materiality, and key performance indicators (KPIs).

Process of Materiality Identification

We consulted the Global Reporting Initiative (GRI) Standards for the procedure for identifying our material issues. Referring to material topics (economic, environmental, and social topics) in topic-specific GRI Standards (the 200, 300, and 400 series), we assessed the social and environmental impacts of various issues and their financial impacts on the Daigas Group’s future. Based on the assessment results, we positioned those issues according to their importance as shown by the impact assessment chart below. Finally, we identified issues positioned at [1] in the chart as our material issues. The identified material issues were discussed by the ESG Committee and the ESG Council and then approved together with the Medium-Term Management Plan by the Board of Directors. From now on, we will strive to achieve the KPI targets for our material issues while making the PDCA (plan-do-check-act) cycle function well and will report the progress every year.

■ Process of Materiality Identification

Process of Materiality Identification

■ Impact Evaluation Chart

Impact evaluation chart

Changes from the Previous Materiality

In the Medium-Term Management Plan 2023, we positioned the period of the plan as a period for creating “value for a sustainable future” with our stakeholders and to achieve further growth as a group that can help solve social issues in building a sustainable society, and re-selected “materiality” for enhancing and accelerating the practice of ESG management based on the concept of “Creating Value for a Sustainable Future.”

■ Changes from the Previous Materiality

Previous (FY2019.3 - FY2021.3) New (from FY2022.3 onward)
Charter Materiality Indicators Charter Materiality Indicators Changes
I Customer health and safety Percentage of city gas supplied by Osaka Gas that undergoes health and safety assessment I Maintain and expand customer base Maintain and expand customer base Number of customer accounts Newly established
Improvement of customer satisfaction and quality of services Enhance customer relationship management Customer satisfaction rate Changed boundary from previous CSR indicator
Customer health and safety Maintain safety and quality levels Number of serious accidents Changed indicator to include power generation, in addition to previous city gas supply
Stable supply of services
(Energy resilience)
Strengthen resilience of energy supply Build a resilient energy supply facilities Newly established
Energy/emissions Contribution to reduction in CO2 emissions Climate change Implement carbon-neutral measures CO2 emissions of Daigas Group Newly established
Provide clean energy and expand renewable energy value chain Percentage of renewables in our power generation portfolio in Japan Newly established
Contribution to developing renewables capacity on a global basis
Promote advanced utilization of natural gas and environmental products Avoided emissions
(Baseline: 2017.3)
Changed boundary of previous indicator
Local communities Percentage of operations with implemented local community engagement, impact assessments and development programs Coexistence with local community Promote communication with local communities Number of our participations in local governments’ activities (i.e. community development planning) Changed boundary of previous indicator
Number of joint efforts with local communities
IV Supply chain management Build a responsible supply chain Appropriate new supplier ratio Maintain previous indicator shared across the Charter as an indicator based on the new Charter
IV Customer privacy Number of substantiated complaints related to breaches of customer privacy V Compliance Promote the Group's compliance Number of serious violations of laws and regulations Indicators now include matters other than customer privacy
V Training and education Average hours of training per year per employee VI Employee engagement Create a workplace where employees can feel a sense of fulfillment Employee attitude survey Continue previous indicator
Development of employee skills Annual average hours of training per employee Continue previous CSR indicator
Diversity and equal opportunity Percentage breakdown of employees and executives by gender and age Diversity and Inclusion Promote of diversity and inclusion Percentage of women in
1. executives/
2. members newly promoted to middle management positions; and
3. new recruits for career-track positions
Changed boundary of previous indicator
Common themes Supplier assessment (Impact on the environment and society, human rights and labor practices) Percentage of new suppliers of materials that have been selected using criteria regarding the impact on the environment and society, human rights and labor practices Moved to Charter IV
Economic performance Financial impacts, risks and opportunities due to climate change Abolish indicators but continue to disclose information through CDP questionnaires and this website as a means to respond to TCFD recommendations

■ Why the Issue Is Material

Materiality Reason
Maintain and expand customer base The Daigas Group’s business began more than a hundred years ago with gas lamps. Since then, the Group has continued to meet the various needs of its customers by developing uses for gas in cooking, hot water, heating, power generation, and more. We also use our strong relationship with customers as a basis for expanding into new territories such as industrial gas, real estate, information communication, new materials, and home services. The Daigas Group considers its meaning for society to be in striving to improve the livelihoods and businesses of its numerous customers, based on its aim to become a corporate group that helps customers both on the livelihood and business fronts for their “further evolution”.
Improvement of customer satisfaction and quality of services We believe it is important to strive to improve our security and service quality as well as appropriately provide customers with information regarding the safety aspects of our products and services so that they can use them in a safer and more convenient manner.
Customer health and safety The Daigas Group announced the Long-Term Management Vision 2030 in March 2017 and the Medium-Term Management Plan 2023: Creating Value for a Sustainable Future in March 2021. Ensuring the safety of city gas as well as gas and power generation facilities is of the utmost priority for the Daigas Group, which maintains a target of zero serious accidents and more than 10 million customer accounts, and aims to enhance the resilience of customers and society. To that end, we consider it important to work towards enhancing safety and improving preparedness for accidents and disasters.
Stable supply of services For the Daigas Group, which aims to enhance the resilience of customers and society, we believe that it is important to systematically upgrade our processing facilities, build gas pipeline networks, and take disaster prevention measures in accordance with meticulously devised plans to ensure a stable city gas supply, thereby strengthening our ability to secure greater stability in the gas supply.
Climate change Tackling climate change is seen as one of the Sustainable Development Goals (SDGs) adopted by the United Nations. For the Daigas Group, climate change represents an important management challenge, and initiatives to reduce CO2 emissions are a crucial mission.
Coexistence with local community The Daigas Group operates a business that is rooted in and supported by local communities. We believe that our various contributions to local communities will lead to a virtuous cycle leading to the development of both the Group and society.
Supply chain management Our broad-based city gas value chain is built on the cooperation of various business partners. Fulfilling our social responsibility by working with our suppliers in the value chain builds relationships of trust with our stakeholders and furthers the development of the entire value chain.
Compliance The Daigas Group's view on compliance is that it entails sensible corporate activities based on sound ethics with a particular focus on observing laws and regulations. To maintain the trust of stakeholders, it is vital to ensure that our directors, officers, and employees uphold compliance.
Employee engagement In the Daigas Group Corporate Principles, the Group declares its aim to create “value for society,” “value for shareholders,” and “value for employees,” as well as “value for customers,” its top priority. We believe that developing human and intellectual capital is a source of value creation. Based on the belief that developing human and intellectual capital is a source of value creation, the Daigas Group considers it important to implement better measures to promote a workplace culture where employees can take on challenging work.
Development of employee skills In the Daigas Group Corporate Principles, the Group declares its aim to create “value for society,” “value for shareholders,” and “value for employees,” as well as “value for customers,” its top priority. We believe that developing human and intellectual capital is a source of value creation. The Daigas Group's Long-Term Management Vision 2030 lists the promotion of work style reform and development of human resources as important goals to be attained by that year. We consider it vital to develop personnel who are capable of working actively in a rapidly changing business environment, and to that end we offer a range of training and educational programs aimed at developing individual capabilities.
Diversity and Inclusion In order to expand into new fields of business, it is vital to build a corporate infrastructure that promotes diversity and allows everyone to participate. The Daigas Group recognizes the need for the Group to foster a corporate culture that encourages the free expression of opinions and a transformation into a corporate entity that promotes diversity in its ranks and corporate structure in a way that encourages employees to maximize their potential, irrespective of gender, age, physical ability, or nationality. This intention is spelled out in the Daigas Group Diversity Promotion Policy.

Comment by Outside Expert (FY2022)
The Daigas Group’s Identification of Materiality

Lloyd's Register Japan K.K. (present LRQA Sustainability Co., Ltd.) President Hidemi Tomita

Lloyd's Register Japan K.K.
(present LRQA Sustainability K. K.)
Representative Director
Hidemi Tomita

The Daigas Group has been identifying materiality and setting KPIs by incorporating the views of external experts, managing progress through the PDCA cycle, and reporting details of this process. Throughout this process, the Group refers to the GRI Standards, a set of global guidelines for corporate sustainability reporting. The methods that the Group adopted to identify materiality and tie it to management policies could be described as “straightforward,” and the Group can be considered to have steadily generated results through this process.

The Group's new materiality has been identified in the same process as above, but has made considerable progress in the following areas.

1. Introduction of the double materiality concept

In addition to the GRI Standards, which the Daigas Group has used for some time, various standards related to the disclosure of sustainability information have been created from different perspectives in recent years. While these circumstances have contributed to a deeper understanding among stakeholders of the relationship between business and sustainability, they have caused significant confusion for companies actually disclosing information, because the definitions of materiality differ between different sets of standards. In such a context, the Daigas Group has become an early adopter of the double materiality approach that is expected to be adopted in European laws and regulations on sustainability reporting. The concept of the double materiality is to consider both the financial impact that sustainability has on companies (financial materiality) and the impact that companies have on social and environmental sustainability (social and environmental materiality). Financial materiality is of particular interest to investors, but social and environmental materiality is closely tied to social impact, including contribution to the SDGs. Accordingly, this perspective is essential for the Daigas Group as a company that manages social infrastructure, and we can thus say that it is the proper way for the Company to think about information disclosure.

2. Assessment per business domain

The Daigas Group operates a wide variety of businesses apart from the gas business, but it is particularly notable that when assessing materiality, each business unit proactively participated in discussions and identified risks and issues after considering changes in the external environment in their respective businesses, with those risks and issues being subsequently reflected in the determination of materiality from a medium- to long-term perspective.

Through this process for identifying materiality, it is likely that each business unit feels a clearer connection to materiality in their respective business activities. Additionally, the Group’s materiality identification used to be based only on the GRI Standards for each of its themes, so, for example, there was no clear theme related to the “stable supply of service,” an extremely important theme for the gas business. With the new process, the Group has overcome this issue, and as such, it can identify issues that are more closely related to its diverse range of businesses.

3. Link with Medium-Term Management Plan

Furthermore, I should note that the newly identified materiality will contribute to realizing the Daigas Group Charter of Business Conduct, the Group’s basic principles, and the Group has also linked the concept of materiality to its Medium-Term Management Plan and its assessment of business performance for each business unit. As a result, it is clear that the materiality identified by the Daigas Group represents the issues it should prioritize in its businesses. Additionally, the fact that these measures were approved following discussion by the Board of Directors indicates that the process is correct in terms of conforming to Japan’s Corporate Governance Code, which was revised this year.

From this perspective, the Daigas Group’s newly identified materiality can be considered more appropriate for dialogue with stakeholders. In addition, I hope that the Daigas Group as a whole will accelerate its sustainability efforts by taking steady steps toward the KPIs including those set based on identified materiality, which will lead to significant results, such as contributions to the SDGs and greater recognition from investors.

Materiality Review Cycle

Materiality and the Daigas Group Charter of Business Conduct

Activity Report on KPIs

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