C-2024-001-1W

1. Introduction

This paper summarizes the key points discussed in the CSR White Paper 2024, beginning with a review of its background and fundamental concepts.

Effective strategy execution in corporate management requires organizational revitalization, necessitating ideas such as human capital theory to give attention to organizations. Human capital theory suggests that employee skills and knowledge can directly contribute to a company's competitive advantage, making it essential for them to develop and implement organizational strategies based on this understanding. This is the fundamental principle of human capital management.

At the same time, in recent years, there has been growing recognition in both business practice and academia that integrating strategic CSR activities with core business operations is essential for addressing social issues through CSR initiatives. To enhance the strategic nature of CSR activities and ensure their effective implementation, companies must pay attention to organizations; in other words, they must focus on human capital management.

Thus, promoting human capital management can be understood as supporting strategic CSR activities aimed at addressing social issues, as well as value creation resulting from these efforts. The term "value creation" here encompasses two meanings: creating economic value that enhances corporate sustainability and creating social value that improves societal sustainability. This concept could also be expressed as the strength and kindness required in corporate management.

Against this backdrop, this white paper seeks to thoroughly examine two pivotal aspects of contemporary corporate management—CSR activities and human capital management—while sharing valuable insights with readers. The key findings from each section will now be reviewed and summarized.

2. Key Findings from Each Section

Analysis of the 11th corporate CSR survey"

• Japanese companies primarily engage in human capital management expecting economic value improvement and talent acquisition, although they currently experience limited tangible results.
• Key factors contributing to the gap between expectations and perceived results include difficulties in changing corporate culture and the workload burden on HR departments.
• Companies with advanced human capital management practices also tend to actively promote CSR activities, including SDGs and ESG initiatives, and whether a company initiates advanced human capital management practices is not influenced by its financial status.
• While CSR activities are not necessarily the direct catalyst for initiating human capital management, companies that actively promote CSR activities also tend to implement more advanced human capital management practices, whether they recognize this connection or not.

Expert Analysis

• While discussions of CSR often incorporate strategic perspectives, human capital management can be viewed as evolving from 'labor CSR' to 'strategic labor CSR.' It is crucial not to overemphasize the strategic focus on economic gains in human capital management but to also address corporate responsibility from the perspective of a social entity.
• The positioning of people and the role of HR departments are changing significantly, with a shift from viewing people as managed resources to positioning them as the leaders of value creation. Human capital management arguably determines corporate value, and amid increasing disclosure regulations, the challenge lies in whether management can maintain proactive awareness.
• As purpose-driven management gains attention, the SOMPO Group emphasizes aligning corporate purpose with employees' individual goals and establishing impact paths toward realizing both. The Group implements related training and dialogue and quantitatively evaluates the current situation to verify the legitimacy and progress of impact paths; the challenge is to simultaneously execute business model transformation and corporate culture reform.

Corporate Case Studies

Ichiyoshi Securities Co., Ltd
The company's employees consistently carry the 'Ichiyoshi Credo.' This Credo establishes a fundamental direction, fostering a workplace environment that is both comfortable and meaningful for employees while prioritizing talent development (human capital management). It serves as the foundation for initiatives addressing social issues (CSR activities) as a participant in the financial and securities markets. Employee engagement and Credo-driven practices support initiatives that extend beyond core business operations. Through this alignment, the company's Credo and corporate culture effectively integrate CSR and human capital management in its initiatives. 

Sekisui House, Ltd.
The company established its corporate philosophy centered on "love of humanity" around its 30th anniversary in 1989, and set a global vision of "making home the happiest place in the world" in 2020, its 60th anniversary. With this background, the company aims to realize happiness as added value on top of its superior technical capabilities. Currently, they also focus on measuring employee happiness and have identified high scores in factors related to gratitude and altruism. Furthermore, they emphasize human capital management through various initiatives based on their formula: "Human Capital Value Enhancement = Employee Autonomy × Alignment of Efforts." Their corporate philosophy of "love of humanity" bridges CSR activities and human capital management, ensuring the effectiveness of this formula.

3. Conclusion

With the emergence and global proliferation of Creating Shared Value (CSV), enhancing the strategic orientation of CSR activities has become standard practice. Many companies are integrating core business operations with CSR initiatives, adopting a proactive rather than a passive or compensatory approach. Amid this significant trend, the focus on human capital management has grown. Recognizing employees as capital and treating them as investment assets with substantial growth potential is increasingly viewed as a means to secure a sustainable competitive advantage.

Composed against this background, the content of this white paper taken in total reaches one significant conclusion: the importance and necessity of proactive human capital management implementation, rather than a passive response to disclosure requirements.

While many companies face challenges in implementing human capital management, promoting value creation through integrated advancement of human capital management and CSR activities requires regular reflection on "why we engage in human capital management." Corporate philosophy and management principles, represented by the corporate purpose, are often compared to the "North Star" in corporate management. Guided by this North Star, human capital management and CSR activities must be viewed as drivers of value creation for both corporate growth and social issue resolution. The cases of Ichiyoshi Securities and Sekisui House substantiate this necessity and provide valuable reference points.

While this white paper's research results reveal some aspects of the synergistic effects between human capital management and CSR activities, as well as their potential contribution to value creation, considering companies' significant role in the economy and society, there may still be room for improvement in Japanese companies' human capital management and CSR activities. Finally, we emphasize that the research findings of this white paper call for bold corporate transformation.

This transformation involves viewing CSR activities and human capital management as value creation, accompanied by organization-wide reframing. By boldly reframing both "company/market" and "company/society" relationships and achieving transformation, corporate value creation can be maximized or optimized. Forcefully implementing human capital management or more aggressively pursuing social issue resolution without addressing current conditions is more likely to cause organizational disruption and negatively impact management. Reducing corporate sustainability would be counterproductive. To enhance both corporate and social sustainability, I hope many Japanese companies will achieve proactive reframing and bold transformation, pursuing the creation of both economic and social value.