Material issues identified

21 Material Issues (key issues) being targeted by Nihon Chouzai Group

In order to contribute to a sustainable society and continuously increase corporate value, Nihon Chouzai Group identifies material issues and promotes highly effective activities that link management strategies with sustainability. Based on these material issues, which are separated into six main groups, we will promote activities from the perspectives of both contributing through business activities and strengthening the management foundations.

Key Issue Groups (goals)	No.	Material issues	Explanation
A. Healthcare quality and accessibility	1	Increase the effectiveness of drug treatments for patients by strengthening pharmacy functions (accommodate advanced healthcare and regional healthcare)	Collaborate with specialized medical institutions to accommodate advanced healthcare, support home healthcare and regional healthcare through collaborations with regional medical institutions, and strengthen pharmacy functions. Contribute to maximizing treatment efficacy and preventing exacerbation of illnesses by providing patients with high quality healthcare services.
	2	Expand the functions of pharmacies to support the health of the community (e.g., illness prevention and pre-symptomatic illness)	Support regional residents in maintaining good health by promoting the early discovery and prevention of lifestyle-related diseases and by promoting health in general. Do this by enhancing Health Check-Up Stations and other facilities that support health, hosting events and seminars, and providing nutritional guidance.
	3	Contribute to social security by ensuring appropriate use of pharmaceuticals at pharmacies	Reduce the burden on patients and prevent increased healthcare costs through various activities, including: preventing duplicate medications, promoting the use of generic drugs, analyzing healthcare big data, and providing information on pharmaceuticals from a neutral position, based on scientific evidence.
	4	Ensure the continuous operation of pharmacies as a regional healthcare/welfare infrastructure, and respond effectively to disasters, pandemics, and other crises	Support pharmacies in serving as a healthcare/welfare infrastructure, by rolling out pharmacies where residents living anywhere in Japan can receive high-quality healthcare services, and by putting in place structures that enable pharmacies to provide these healthcare services continuously, even in the case of emergencies such as natural disasters or pandemics.
	5	Ensure the medical safety at pharmacies	Undertake activities aimed at ensuring medical safety, by establishing and implementing a flow of in-store operations, regularly analyzing these operations, and enabling systematic dispensation of drugs, including the use of automation.
	6	Leverage DX to promote online healthcare and create new business	Actively invest in ICT to accommodate the digitalization of healthcare and increase efficiency and patient convenience, while at the same time creating new business that offers advantages for patients.
	7	Publish surveys and research that contribute to the development of healthcare	Contribute to increasing the quality of healthcare throughout society as a whole by sharing evidence-based pharmaceutical information. Do this by holding in-house science events, undertaking joint research with outside institutions, and presenting R&D and survey findings through academic societies.
B. Quality and stable supply of pharmaceuticals	8	Undertake R&D and manufacturing of safe, high quality pharmaceuticals	Provide economical, high-quality pharmaceuticals by developing new products in keeping with needs on the front lines of healthcare, and by manufacturing these products based on a strict quality control structure in compliance with good manufacturing practices (GMP).
B. Quality and stable supply of pharmaceuticals	9	Ensure a stable supply of pharmaceuticals	Continuously improve supply structures, including manufacturing processes and abundant distribution centers, to put in place a structure which ensures that the pharmaceuticals needed are delivered smoothly to all parts of Japan.
C. Resolving human issues at healthcare institutions	10	Provide “human” support in providing high-quality healthcare services	Contribute to improving the quality of healthcare services and to resolving shortages of healthcare workers and regional disparities, by supporting the growth of healthcare workers and by introducing and dispatching these workers to the appropriate locations in accordance with their unique abilities.
C. Resolving human issues at healthcare institutions	11	Support occupational health and general health, including mental health, by introducing industrial physicians	Support health management at companies by promoting the nationwide rollout of the industrial physician business, and by supporting labor hygiene management with a particular focus on health management, including mental health.
D. Contributing to a carbon-neutral, circular economy	12	Reduce waste materials and increase the efficiency of resource usage, especially at pharmacies and plants	Contribute to the realization of a circular economy by minimizing waste materials generated and promoting the use of environment-friendly resources at all bases undertaking business activities.
	13	Reduce CO2 emissions by increasing energy usage efficiency and promoting the use of renewable energy	Contribute to the realization of a carbon neutral society and to reducing environmental impact; e.g., by promoting energy conservation while at the same time promoting the use of renewable energy.
	14	Build environment-friendly and society-friendly supply chains with outstanding transparency	Undertake procurement operations in compliance with both legal regulations and social norms, and which take environmental impact into account. At the same time, build safe, secure, and responsible supply chain structures by disclosing information on supplier nations and manufacturing subcontractors.
E. Fostering and utilizing diverse manpower	15	Secure manpower that supports the company’s growth, and put in place HR systems that promote the growth of employees	Recognizing manpower as an important management resource, pursue the continuous growth of the company by putting in place evaluation and training systems that promote the growth of those employees.
	16	Promote diversity, respect for human rights, and the participation of women in the workplace	To respect diversity and achieve competitive superiority, cultivate a corporate culture that accepts diverse approaches, in order to build an environment where all employees can demonstrate their true value, and where employees recognize that value in one another.
	17	Establish a workplace e’nvironment that enhances employee health and motivation	Put in place a flexible work environment in which employees can enjoy good health, safety, and a sense of satisfaction and motivation in their work.
F. Strengthening governance to fulfill social responsibilities	18	Support the healthcare and welfare fields (e.g., persons with intractable diseases or disabilities)	Undertake support activities as expected of a company working in the healthcare field; e.g., by supporting healthcare workers and collaborating with NPOs.
	19	Continuously strengthen corporate governance, and disclose information with a high level of transparency	To achieve continuous growth and increase corporate value, continuously strengthen corporate governance, while at the same time actively conducting PR and disclosure activities.
	20	Continuously strengthen compliance, and prevent corruption	To fulfill the company’s social responsibilities, continue strengthening compliance and taking all available measures to prevent corruption, for example by maintaining in-house structures and providing employee training.
	21	Create opportunities by appropriately evaluating and responding to risks	Achieve reliable business continuity and growth by controlling anticipated risks and recognizing these opportunities as a driving force for growth.

Please click below to see Materiality Framework and KPIs.

Materiality Framework and KPIs

Nihon Chouzai Group Materiality

*Nihon Chouzai’s chart of key material issues was created using the “ESG/SDGs Matrix” method, under Mr. Sasaya’s supervision.

Click here to view the PDF.

Opinions on material issues from third-party experts at the time of our first identification（The Month of First identification：December 2021）

Hidemitsu Sasaya　CSR/SDGs Consultant

Professor, Platform for Arts and Science, Chiba University of Commerce; Director, Sustainability Forum Japan; Director, Japan Society for Business Ethics; Director, Society of Global Business. Affiliate Consultant, Nikkei BP Consulting, Inc.
Graduated from the University of Tokyo, Faculty of Law. Joined the Japanese Ministry of Agriculture and Forestry (currently Ministry of Agriculture, Forestry and Fisheries, MAFF) in 1977. Served as Deputy Director-General for the Ministry of the Environment, Deputy Director-General for MAFF, and Bureau Chief of the Kanto Regional Forest Office, before retiring from public service in 2008. Joined Ito En, Ltd. in the same year and worked as a Member of the Board, Managing Executive Officer, and Manager of the CSR Promotion Department until April 2019. Serving as Professor, Platform for Arts and Science, at Chiba University of Commerce since April 2020. Holds a Ph.D. in Policy Research. He has been involved in supporting ESG/SDG management (including the creation of an “ESG/SDGs Matrix”) at numerous companies. Main publications include "Q&A SDGs Management" (Nihon Keizai Shimbun Publishing).

I think that you have effectively summarized the material issues, touching on all of the key points that need to be addressed. You have expressed the “SDGs Matrix” in a form that clearly demonstrates all 17 goals, which shows that you have gone through a process of thorough and detailed discussions. This will no doubt make it easier to gain a positive response from investors.

Expressing priorities for materiality on a map with two axes, there is always a tendency for issues to be concentrated in the upper right segment (“very high priority” for both the management and stakeholders’ perspective), but I felt that it would be preferable to distribute these issues a little more, to better demonstrate the unique characteristics of your company’s approach.

Just to confirm, there are several cutting-edge issues that are of substantial interest to society as a whole and that you also should deem essential. One is “carbon neutrality,” and the other is “digital transformation (DX).” Carbon neutrality in particular is a critical item that must be undertaken by all members. This is unavoidable for any company that wishes to survive in the top-tier Prime market. The level of actual CO2 emissions notwithstanding, you need to calculate these levels carefully, and disclose these figures, even in stages. There is a tendency to think that these disclosures are not so important in non-manufacturing industries, but this should be handled properly. I also believe that you should take this opportunity to think about how waste materials are handled.

DX is already a strength for your company, and an area in which you have undertaken activities as a leader in the industry, so I think that you should continue with these activities thoroughly. You have positioned DX in the upper right segment of the materiality map, but the important thing is to ensure that you are clearly differentiated from the competition, so be meticulous about laying out these policies.

Nihon Chouzai’s main business is directly related to SDG 3—Good health and well-being—so you will be able to effectively emphasize your contributions in terms of both “supporting rich and healthy lifestyles” and “bearing responsibility for reducing medical costs.” I also think it would be a good idea to present a story of contributing to a combination of Goal 3 and Goal 9—Industry, innovation and infrastructure—as well as Goal 11, Sustainable cities and communities. You want people to think, “We’re glad we have Nihon Chouzai in our town.”

In the resent situation, responding to the coronavirus pandemic is an important issue of high social concern. I believe that your role is to continue to firmly respond to issues in the community; for example, by introducing doctors to vaccination centers, or offering the cooperation of pharmacists.

As a company that undertakes business directly related to health and life, you must clearly express your commitment to material issues in areas related to legal compliance, strengthening good manufacturing practices (GMP), and risk management. One other important point is promoting active participation by women. As a company with a large ratio of female employees, you can use “materiality” as a medium for communicating information on your activities targeting specific policies for women’s participation.

Having identified key material issues, the next thing to do is to link these various issues directly to divisions and employees. Promoting activities in each division is an extremely effective way of increasing motivation. Employees find themselves energized when they can link SDGs and materiality at the level of 169 specific targets, and incorporate SDGs as a core element of their own work. Recently, SDGs have been incorporated into education, so these issues resonate with young people in particular, and new ideas are generated one after another.

I confirmed that after communicating the items above, you made further efforts to prioritize material issues within the company, and to refine your wording in this regard. The unique characteristics of your approach have become even clearer, and this has made it easier to communicate those priorities to stakeholders as well.

SDGs must be applied to management in terms of both opportunities and risk management through your core business. The process of organizing and disclosing material issues means “clearly presenting issues that are important to management,” and this is an effective way of promoting acceptance by employees and earning the trust of stakeholders. I encourage you to use SDGs as a means of improving your market capitalization and increasing your corporate value.

Processes for identifying materiality (key issues)

Materiality is identified based on discussions cutting across the organization over approximately 6 months, and is checked against Nihon Chouzai Group’s business activities, 17 SDGs, and 169 targets tied into those goals. We studied the depth of relationships and relevancy and conducted extensive discussions with project teams, and incorporated an outside perspective in the final evaluations.

STEP 1: Analyze current status and isolate issues

To identify issues in the first year, we studied a broad range of global societal issues that Nihon Chouzai should resolve in the medium and long term, using international frameworks and guidelines such as SDGs and ISO26000 as a reference. After isolating these issues using SDGs as a starting point, we conducted discussions and created a list of issues.

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STEP 2: Evaluate issues and set priorities

The project teams conducted extensive discussions regarding the candidate issues on the list, and evaluated and narrowed down those issues based on interviews with stakeholders. Issues are evaluated using two indexes: Priority from a management perspective, and priority from the stakeholders’ perspective. “Priority from a management perspective” is set based on contributions to the continued growth of the Nihon Chouzai Group, while “priority from the stakeholders’ perspective” takes into account the needs of customers, business partners, employees, the environment, regional society and the community, shareholders, and investors, as well as expectations placed on the company. The results of these evaluations were plotted on a materiality map as the basis for studies of priorities. (Refer to the Materiality Map below)

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STEP 3: Incorporate opinions of third-party experts

Once these issues had been evaluated and narrowed down, we arranged venues for exchanges of opinions among Nihon Chouzai management and outside experts, to incorporate a more objective perspective.

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STEP 4: Obtain approvals from the Sustainability Committee and the Board of Directors

Based on the opinions of third-party experts, the Nihon Chouzai Group has established six categories of key issues to be targeted through business activities, and has identified 21 material issues related to each of these categories. These items were confirmed by the Sustainability Committee, and final decisions were made with the approval of the Board of Directors.Going forward, we will revise material issues identified in response to changes in our external and internal environment.