Dialogue: Crafting Materiality with Social Value at the Core

Materiality is an indication of where your company can contribute through its business to changing the world in a sustainable manner. In general, materiality tends to become a cut-and-dried exercise, but that will not motivate people or organizations to act. Under firm goals built on your corporate philosophy, address society’s major issues and enhance your ability to transform yourselves. Demonstrate your pioneering spirit and set out together on a journey to innovation. I look forward to seeing you establish strong taglines (words that easily convey your corporate concepts, philosophy and identity) that communicate the excitement of being a company at the forefront of creating a new age, and tying those taglines to Value Creation and materiality. A resilient organization is one that can overcome whatever it encounters—a company that is anchored (has firm goals based on its philosophy and reputation), adaptive, and aligned with the expectations of society and its stakeholders, the “three A’s.”
While I can empathize with your description of EX and DX as addressing materiality through business, the draft, at least, seems to still have a strong CSR focus. I would like to see you present TDK’s business strategy itself, clarifying the kind of society TDK hopes to achieve beyond EX and DX while pursuing not contributions, but innovation that leads to a competitive advantage. With regards to EX, I also hope you will set out more ambitious targets based on the fact that the world is already moving beyond “low-carbon” to “decarbonization,” and that both decarbonization and circularity are being emphasized.

You have included many items in “Materiality as the foundation for value creation,” and I feel these need to be somewhat better organized.
You touch on EX and DX here as well, but the impression is that it will be difficult to convey outside the company the difference between this and the EX and DX you describe in “Addressing materiality through business.”

Meanwhile, addressing supply chain management and human rights are of high importance on a global level as well. As vulnerable populations are being hit hard by the Covid-19 pandemic, your stance regarding what you do to ensure society’s resilience is being called into question.

As priorities in materiality are called into question, I get the impression that your draft for materiality as the foundation for value creation is too all-encompassing, and includes too many items. For example, while boosting R&D is essential in terms of long-term corporate growth, in the short term it will increase costs, which is incompatible with improving asset efficiency. It is important to clarify how you will allocate limited management resources, including where to focus and what to prioritize in the event of a conflict.

Under addressing materiality through business, you mention contributing to EX and DX. While both of these are important, I get the sense that this makes it difficult to see what makes TDK unique, and lacks individuality. Compared to Value Creation 2020, your Medium-Term Plan for fiscal 2018-2020, which was both specific and convincing in clearly specifying your goals, your draft materiality this time seems to be somewhat generalized. While there is a tendency to fall into the abstract when trying to describe an uncertain future, you still need to indicate in your materiality which areas TDK will focus on going forward, and what core technologies you intend to hold on to. I also get the impression that under the current draft, Value Creation and materiality are being considered independent of one another. I believe the two should be treated as a single whole, and I would like to see you communicate your vision for TDK while emphasizing the connection between the two.

It is also important to consider TDK’s position and its reason for being from a broader perspective, keeping the global spread of supply chains in mind. With today’s emphasis on stakeholder capitalism, which takes into consideration fairness to a variety of stakeholders, I recommend that TDK deepen its discussion of basic principles, including how you will address the relationship between government policies and human rights issues in the countries from which you procure materials.

TDK has a wonderful history: a university-originated venture company that has grown into a global enterprise through a philosophy of “contributing to culture and industry through creativity.” Under the current draft, I get the impression that the focus is on explaining the “what” and the “how”, but the “why” behind TDK’s efforts to address social issues is less clear. External motivation—such as trends in SDGs and ESG—alone will not allow those efforts to take root within the company. You need to turn your history into future stories, providing the entire Group—including companies you have acquired—with an in-depth description of your intrinsic motivation: the fact that TDK is primarily a company whose core business is contributing to society. In addition, materiality is not a one-and-done proposition; it is important that people who share the same ideals and values come together to discuss and continually improve it.

Another important point, I think, is that Value Creation is an upgraded version of the Kotozukuri (integrated solutions) you have worked on to date. As uncertainty about the future increases, we may not be able to see “things” in terms of what kinds of products will be needed going forward, but we can imagine them in terms of what kind of future we wish to create. In general, manufacturing companies tend to fall into product-centric thinking, but TDK is a company that creates solutions to achieve dreams, making the impossible possible through its business. I hope to see you contribute to society through creation based on imagination.
For risk management and opportunity management, part of materiality as the foundation for value creation, I recommend you switch the order of risk and opportunity. Japanese companies tend to be overly cautious about risk, but the role of a company is to aggressively seize opportunity. I would thus like to see a clearer description of the relationship between taking advantage of opportunities and properly addressing the risks that arise from them.