OMRON's Purpose is to Contribute to Value Creation and Sustainable Development of Society FY2022 ESG Briefing Report

The origin of the OMRON Principles dates back to 1959, when our founder, Kazuma Tateishi, established the Corporate Motto, "to improve lives and contribute to a better society." What is evident here are his aspirations that a business is worthy of existence, yielding profit, and surviving, only when it is of service to society and his determination to pioneer in changing society. This accords precisely with the very idea of sustainability, something that every business of our time is required to achieve.

OMRON Corporation held its FY2022 ESG Briefing on March 8. As Representative Director, Yoshihito Yamada (To be appointed Chairman of the Board in June 2023) stated in his address, "This Corporate Motto helped to build a sense of unity between management and employees, which led to subsequent substantial business growth. What is OMRON doing to maximize its corporate value, create social and economic value, achieve non-financial targets, and improve human creativity, and what was driving Yamada, who had announced his resignation at the end of March, to steer this electronics giant? Read this report by the Sustainable Brands Japan Editing Team to find out.

1406_02.jpgYoshihito Yamada, Representative Director ※To be appointed Chairman of the Board in June 2023

 

OMRON's Way to Maximize Corporate Value

At the outset of the session, Yamada made the point that practicing the OMRON Principles is the driving force for maximizing corporate value and is the very source of business growth. Dictated by an altruistic motive to do something useful for society, OMRON has consistently addressed social challenges and needs, giving birth to numerous products and services, including automated station ticket gates. More recently, OMRON made headlines when it became the first company to launch robotic integrated controllers in the FA (Factory Automation) field to make up for labor shortages in Japan due to a declining birthrate and aging population.

Nevertheless, Yamada continued by saying, "OMRON saw its 'animal spirit,' which has kept it avid for growth since the founding days, slowly disappearing as its growth momentum began to wane." Since the 2000s, Japanese companies have been confronted with one momentous crisis after another, including the collapse of the dot-com bubble, the global financial crisis, and the Great East Japan Earthquake of March 2011.

It was against this backdrop that Yamada assumed the presidency in 2011. Despite such an adverse operating climate, "I had my mind set on building up OMRON into a company that achieves robust earnings growth, no matter the difficulty of the situation we find ourselves in," Yamada recalled. It was with this resolve that he focused on "enhancing profit-generating capability" and "deepening understanding of the OMRON Principles."

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Yamada set gross profit (GP) margin as one of the management targets to boost OMRON's growth potential, profitability, and ability to respond effectively to change. As it turned out, comparisons between the FY2011 results and the FY2022 forecasts showed that GP margin grew from 36.8% to 45.1%, GP value expanded 1.7 times, and operating income value increased 2.4 times.

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He then revised the OMRON Principles in 2015, which consist of Our Mission, a new incarnation of the Corporate Motto, and Our Values, a code of conduct that each employee should abide by. He took one step further to include the OMRON Principles in their Articles of Incorporation last year, urged by his strong passion for "reviving the animal spirit we once had and making OMRON a company capable of creating more social value than ever." Behind the new OMRON Principles is the belief that OMRON exists to "contribute to a better society" with the purpose of creating "innovation driven by social needs."

Wondering how they could foster a true understanding of the OMRON Principles amongst employees on the front lines to "encourage and inspire resonance," Yamada launched "CEO Circles," where he visited each factory and office to hold face-to-face talks with employees for around two hours each. He makes it a rule to respond to every single e-mail message he receives from participants after each session, often with twice the enthusiasm at least.

One initiative that involves all OMRON employees the world over is the OMRON Global Awards (TOGA). Launched in 2012, TOGA is a group-wide event that has been observed for more than 10 years to commend and share employees' attempts to practice the OMRON Principles throughout the Group. The latest round of TOGA was participated in by a total of 51,736 persons. TOGA is also designed to foster a corporate culture of mutual praise, and Yamada said he is delighted to see "the spread of an organizational culture that respects personal feelings and encourages employees to challenge themselves."

 

Creating Social and Economic Value by Contributing to a Sustainable Society

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In April 2022, OMRON announced its long-term vision, "Shaping the Future 2030 (SF2030)," to make a renewed start toward 2030. In a bid to maximize corporate value by addressing social issues through business, OMRON is working on three social issues: "achieving carbon neutrality," "realizing a digital society," and "extending healthy life expectancy." By leveraging resources in the Industrial Automation (IAB), Healthcare Solutions (HCB), Social Solutions (SSB), and Device & Module Solutions (DMB) domains to solve social issues, Yamada underscored his intention to "attain the ultimate in automation."

1406_03.jpgTsutomu Igaki, Managing Executive Officer,
Senior General Manager, Global Investor & Brand Communications HQ
and Sustainability Executive

Next on the podium was Managing Executive Officer Igaki, who explained what area each domain contributes to: IAB will contribute to the advancement of manufacturing, which will support a sustainable society; HCB to "Zero Events" for cardiovascular diseases; SSB to the adoption and efficient use of renewable energy and sustainability of infrastructure to support a digital society; and DMB to the adoption of renewable energy and high-speed communications.

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For the SF 1st Stage, the first medium-term management plan of SF2030, they decided to address the above-mentioned three social issues by driving focus businesses. By FY2024, they are looking to boost the combined net sales of the focus businesses by over 45% to 149.4 billion yen (vs. FY2021).

Igaki took the opportunity to elaborate on this sales plan by focusing on carbon neutrality initiatives. Their approach to promoting carbon neutrality is two-fold: through the OMRON products and services IAB provides to customers and society and through initiatives at their own sites.

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In October 2022, OMRON became the first Japanese company in the manufacturing industry to join the international initiative EP100 (Energy Productivity 100%), declaring the goal of doubling energy productivity by 2040. Meanwhile, OMRON has set OMRON Carbon Zero with the goal of reducing greenhouse gas (GHG) emissions from their sites to zero by 2050. In FY2021, they successfully reduced their GHG emissions by 50% versus the base year of FY2016. They are looking at a 53% reduction by FY2024 and a 65% reduction by FY2030, the final year of SF2030.

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In FY2022, they are expecting to outperform the reduction target of 51% to reduce GHG emissions by 58%, which is a respectable showing given an increase in GHG emissions due to top-line growth. Meanwhile, a total of 10 locations in Japan are expected to achieve Carbon Zero (FY2022 target: nine locations), owing to the deployment of IAB Productivity Solution within the Group and the commencement of the internal transmission of electricity generated from renewable energy sources for the first time within the Group.

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Igaki went on to brief the audience on the progress of social value KPIs. With the initiatives designed to realize carbon neutrality performing briskly, he concluded his remarks by saying, "We expect FY2022 sales to grow 34% from FY2020 by leveraging these social value outcomes to boost economic value."

 

Initiatives to Achieve Non-Financial Targets

1406_04.jpgYue Liu, Senior General Manager, Sustainability Office

For SF2030, a total of eleven non-financial targets have been set: the first seven targets concern the social value OMRON seeks to create and the empowerment of human resources for creating such value. The other four targets were selected by employee votes. Senior General Manager Liu said, "This process enhances employees' sense of participation in the initiatives, which in turn helps to prompt them to act and gives us a greater competitive edge."

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Speaking on the progress of initiatives to be achieved by FY2024, she explained, "The level of progress we have achieved differs among different targets as their milestones are not the same, but we have taken every action necessary, and we are well on the way to achieving them."

The one additional target is for the top management of each region to declare and execute their commitment to contribute to their respective local communities in alignment with OMRON's Sustainability Policy. In China, for example, they worked in cooperation with a local foundation to donate about 45,000 books to elementary schools in rural areas with a shortage of books in the libraries. Liu applauded these accomplishments as "These activities help to not only increase employees' motivation but also build a partnership with host communities."

 

Improving Human Creativity

1406_05.jpgMasahiko Tomita, Senior Managing Executive Officer, CHRO & Senior General Manager,
Global Human Resources and
Administration HQ

"The key to achieving value creation as envisioned in SF2030 is diversity & inclusion (D&I)," Senior Managing Executive Officer Tomita said. OMRON defines diversity as "attracting diverse people who will take on the challenge of the creation of a better society" and inclusion as "unleashing the passion and ability of each individual, creating innovation by bringing our diverse personalities together and sharing the fruits of our labor." "We will promote value creation by accelerating D&I. Human creativity is an indicator that measures to what extent we can practice the process," he continued.

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At OMRON, human creativity is counted among key strategic targets because "if we invest well in human resources, we will create greater value than we put in." Tomita mentioned three key elements for elevating human creativity, namely, "optimal placement of human resources," "acquiring and strengthening capabilities of human resources," and "fully capitalizing on employees' talents." Despite a global upsurge in labor costs and other factors, our human creativity in FY2022 is expected to increase by 2% year-on-year, showing that they are off to a good start toward the FY2024 target.

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Next, Tomita talked about OMRON's engagement survey, VOICE, a tool for dialogue between management and employees. In FY2022, 91% of employees shared their responses, sending as many as 38,000 open comments. Having had such a large number of comments relative to approximately 20,000 eligible employees, Tomita sounded satisfied when he said, "It is a testament to their expectation that their voices will be heard, and it incentivizes management team members to improve the company."

Some of the frequent requests for improvement and suggestions from the VOICE respondents include increasing the efficiency of the healthcare business process, bettering delegation of authority, and simplifying the business process in general. Yamada and Tomita read every single comment, which Tomita admitted is rather hard work but always alerts them to new things or challenges and is fun.

Tomita commented that "Practicing D&I and enhancing human creativity is never easy, and it takes time before we get to see the fruits of investments in and policies for our people." He summed up his remarks by saying that, all the more so, it is vital that they forge ahead with each initiative consistently and assess them from a mid-term perspective.

1406_06.jpgThe Briefing in Session

Before the session came to a close, Representative Director Yamada announced that he would step down from his current position in March 2023. Throughout his 12-year-long service, he has dedicated himself to making OMRON a business equipped with growth potential, profitability, and the ability to respond effectively to change. But "That alone is not what we wish to achieve. Continuing to create social value through our business and contributing to the development of society--This is what OMRON is here for," he stressed. He then shared his wish that, OMRON still being in the process of developing, his successors would take over the stories that we envisioned in the SF2030 long-term vision. He concluded his farewell with a powerful message, "You can count on the new management team to be brimming with enthusiasm and passion."

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