Advice on Effective Function of Materiality (FY2019)

Under the GRI, compiling an economic report is close to the concept of value-added accounting. The value's distribution will be meaningless, however, unless a company clarifies what it aims to do through its corporate activities as well as disclosing information. Undertaking business activities that lead to the creation of social value will be eventually followed by economic benefits for the company engaging in the activities. Osaka Gas should clarify what kind of value it can present to society through its business activities. One example would be pledging to enhance the value of the Kansai region, the main service area for Osaka Gas, by making its local communities comfortable places for medium- and long-term living and worker-friendly places.

At a time when the situation of its customers has been changing, as seen by their aging and an increase in single-person households, Osaka Gas should seriously study what the Company can do to ensure their safety continuously. In compiling a plan to protect their safety, Osaka Gas should reflect not only its own views but also stakeholders' views. As one example, the Company can work with local authorities (municipalities). Incorporating consumers' viewpoints or the Company's existing services aimed at protecting elderly customers into existing regional administrative networks for local people is a possibility that Osaka Gas might pursue. This is an idea that can be concretized by companies none other than Osaka Gas.

Working on reducing CO2 emissions is one of the most important challenges facing energy service providers like Osaka Gas. In continuing its business activities, Osaka Gas must fulfill its accountability regarding what the Company would do with its coal-based power generation business. While pursuing efforts in line with the central government's energy policy, Osaka Gas should respond to social needs on this point sincerely and consider various policy options. In addition, the Company should recognize the status quo concerning the environment preservation measures being taken on the side of material suppliers and the measures being taken to protect the human rights of workers engaging in the process of drilling and processing the materials used for its business.

Osaka Gas is likely to resort to mergers and acquisitions (M&As) as an important tool in many cases of overseas projects. What is important for the company in M&As is exercising due diligence not only on the financial front but also on the nonfinancial front, including the environment and social impacts. If Osaka Gas is to launch business projects overseas, it should ensure risk management and find a way to coexist with local communities — a task the Company might achieve by referring to the information owned by foreign government agencies and to the international code of conduct. Engagement in certain regions of the world is very difficult for a Japanese company because the regional situations there are very complex. Under these circumstances, Osaka Gas should first recognize the status quo surrounding the targeted region. Having understood the situation, the Company should identify the priority parties with which it should engage, including affected people in the region.

Any business activity will involve human rights, making human rights assessment at the Daigas Group and its value chain important. Based on this idea, the Group should work out an action plan to protect human rights and an information disclosure plan in line with the results of the assessment. In view of an expected increase in material supply from overseas companies, I hope that the Group's supply chain will actively exercise due diligence on human rights. Such due diligence should aim to protect the human rights of stakeholders by taking into account the viewpoint of suppliers in drawing up improvement plans. For example, the Group should kindly explain, to suppliers being covered by its survey on human rights assessment, how to answer each question. It is also important for the Group to share good practices with the suppliers.

In Japan, labor-related accident risks have been rising against the backdrops of the dwindling working population and an increase in the number of elderly workers and unskilled workers. In light of these trends, I believe it is necessary for gas and power companies in Japan to strongly support the development of human resources at engineering subcontractors and other partner companies. Labor practices should be also changed at these companies. For example, it is necessary to establish a work environment friendly to elderly people and foreigners. Moreover, a strategy for promoting the diversity of employees should be crafted from the viewpoint of ensuring the employment of various people. I hope that Osaka Gas will draw up a strategy aimed at expediting the employment of female workers and foreigners for front-line operations by analyzing the data it has collected in the past and grasping the actual state of its workplaces.