Organizing an ESG/SDGs matrix that addresses social needs

Sato: The healthcare industry faces many issues, including disparities in healthcare access and rising healthcare costs. Our strengths in addressing these issues include our leading position in the products and services within each of our businesses and our ability to quickly develop products and provide services through collaboration with various external partners. Our strength lies in the high precision and quality of our products, as well as in our commitment to constantly improving our products and services through listening the voices of customers. Furthermore, our strengths include procurement capabilities leveraged by long-term partnerships, sales outlets in over 125 countries and regions, our wealth of manufacturing excellence, and sales teams with extensive expertise in the business environment of each country.

Miyazaki: Since we have many products to support the health of patients, we focus particularly on quality. High quality is at the core of PHC Group’s strengths.

Sato: In order to leverage our strengths to solve environmental and social issues, we have identified 11 materiality topics that our group must prioritize and set respective KPIs. To identify the materiality topics, we established a cross-organizational and global team led by President Miyazaki, and supported by our CSO (Chief Strategy Officer) and myself, with all business divisions and head office functions to discuss the materiality topics. During the discussion, we emphasized embedding the concepts of SDGs in management and balancing economic and social values. The SDGs matrix was useful during this process. The matrix lists how each materiality topic is related to the SDGs. We delved not only into the 17 goals of the SDGs, but also into the more specific 169 targets. Through the process of this discussion, we discovered that many of our executives and employees have a high level of awareness of sustainability issues. We gained a great deal of confidence in our ability to develop sustainable management in the future.

Sasaya: The SDGs define a set of 17 goals and 169 targets. Now that the SDGs have become a common language for social issues, Japan’s Government Pension Investment Fund (GPIF), which holds the world’s largest fund, has indicated that it will use the SDGs as a factor in determining whether companies are reflecting the SDGs to create their shared value. The impact of this move has been huge, and ESG and SDGs have become “two sides of the same coin,” so to speak. In identifying materiality topics, PHC Group assigned numbers to the SDGs matrix to identify the relationship between every ESG item and SDG goal at the target level. Since there are only a few companies that apply the targets in such a comprehensive manner, the group can differentiate itself from competitors. As a result, a sustainability system was created as a competitive strategy.

Sustainability initiatives indicating each SDG target by number

Miyazaki: Our group announced our Value Creation Plan, which is our Mid-Term Plan, in November 2022. This plan defined Growth Areas in our businesses, clarified measures to drive future business growth, and at the same time initiated enhancement of our sustainability management. Sustainability requires continuity in activities and contribution to society through innovation in our core businesses. During the COVID-19 pandemic, we were able to quickly provide products and services needed by society, such as contract services for PCR testing and ultra-low temperature freezers used to manufacture and store mRNA vaccines. We feel that our mission, “we contribute to the health of society through our diligent efforts to create healthcare solutions that have a positive impact and improve the lives of people,” is anchored in our minds. Moving forward, it is vital that we further enhance and constantly strive for sustainability management.

Sasaya: PHC Group has a technological advantage over its competitors and offers solutions from upstream to downstream in the healthcare industry. Therefore, it was only natural for the group to contribute broadly to society through its business activities during the COVID-19 pandemic.
The SDGs matrix clearly shows what PHC Group focuses on in its sustainability management. The main focus is on solutions for “Health” (No.3) and its supporting capabilities “Innovation” (No.9) and “Partnerships” (No.17) which are among PHC Group’s strengths.
PHC Group goes into more depth by describing contributions to SDG 3.4, 3.8, and 3.9 under “Good Health nd Well-Being” (No.3). SDG 3.4 is “reduce by one third premature mortality from non-communicable diseases through prevention and treatment, and promote mental health and well-being.” By focusing on this point, PHC Group can link related products and services to SDG measures, and understand PHC Group’s specific contribution to the SDGs.
By carefully explaining these points to all parties, PHC Group will be more effectively perceived as a company that solves social issues, and its competitive advantage will be communicated. It also helps employees better understand which of the SDG targets their products and services are connected to, thus enhancing their sense of ownership. We hope that each and every member of PHC Group will become familiar with the matrix and utilize it for innovation in their core business.

Active collaboration with stakeholders in each healthcare domain

Sato: In the healthcare industry, we see a trend called Value-Based Healthcare. Widening disparities in healthcare access based on region or income and increasing medical costs are serious social issues. In response, the approach of Value-Based Healthcare is to help people maximize their own healthcare outcomes and optimize healthcare costs. Our group operates in three domains: Diabetes Management, Healthcare Solutions, and Diagnostics & Life Sciences.
Through our businesses, we communicate directly with a wide range of healthcare stakeholders, including pharmaceutical companies, universities and research institutes, hospitals, clinics, pharmacies, and patients. We collect feedback on our products and services from all stakeholders on a daily basis and make improvements based on their needs and requests. We actively engage in this process as a VOC (Voice of Customer) activity and strive to create added value.
Furthermore, we actively collaborate with external partners. For example, in March of this year, our subsidiary Epredia partnered with 3DHISTECH Ltd. to launch the Pathology Innovation Incubator in Hungary. This project aims to develop rapid and accurate methods and devices for diagnosing cancer and tumor lesions.

Sasaya: This is the perfect example of SDG No. 17, “Partnerships for the Goals.” Collaboration creates innovation. SDG No. 3 is described as “Good Health and Well-Being” in English, and it will also lead to improving the “well-being” of people in society, which is an important issue. Well-being is a concept that focuses on improving individual happiness and quality of life, so it is necessary to pay attention to the expectations of each individual consumer.

As a result, people say, “I’m thankful for what PHC Group offers,” “The group is valuable to society,” and “I hope that PHC Group will expand its businesses.” This creates a recognition that PHC Group’s business model is a strength and a source of value creation. Such evaluations become more objective and visible now that PHC Group has incorporated the SDGs into its business model.

ESG elements that give a competitive advantage over other companies

Miyazaki: Materiality is important set of topics that PHC Group must prioritize. Going forward, we will delve even deeper into related activities. In the environmental aspect, we focus on three topics on a global scale: climate change, preservation of natural resources, circularity. We have set ambitious targets for KPIs such as reductions in CO2 emissions, water intake, and packaging material usage.

Sasaya: The concept of sustainability in relation to the SDGs can be summarized as “for the world, for others, for ourselves, and for our descendants;” in other words, to leave something positive for the next generation. Among the topics introduced so far, climate change in the environmental category attracts the most attention from investors and other stakeholders. Further enhancing capability in this topic will lead to stronger trust from stakeholders.

Miyazaki: The energy-saving performance of our products is top class in the industry. For example, our VIP ECO Smart series of ultra-low temperature freezers was designed to minimize power consumption. Our Biomedical Division received the “Outstanding New Product Award” for the series at an international academic conference*1 in May 2023. In this way, we will contribute to solving problems on the research and healthcare frontlines and to evolving new treatment options by creating innovative solutions based on an accurate understanding of the diverse issues that researchers and healthcare professionals are facing.

Sato: In the category of society, we have aimed to be the first to develop products and provide services in line with healthcare policy, with a focus on our Healthcare Solutions business. I believe this has led to our current No. 1 market share in electronic medical record systems*2 in Japan. Furthermore, as digital transformation in healthcare becomes more pervasive, society will move toward more people leveraging their personal health data to help them improve their health. We have the advantage of being able to contribute to building the infrastructure of this new society. Our strengths in the Healthcare Solutions business are evidenced by our robust customer base, which can support the rapid adoption of IT technology in electronic medical records and electronic medication history systems and linked health insurance verification systems for pharmacies, as well as our 50 years of experience and trust.

Sasaya: Since PHC Group operates in the most important area of society, “people’s health,” I expect that the group will continue to work to solve challenging social issues by leveraging its technological and product development capabilities while carefully identifying the needs of customers. Promoting digital transformation in healthcare that responds to customer needs is an urgent issue. SDG No. 9, “Industry, Innovation, and Infrastructure” and No. 11, “Sustainable Cities and Communities,” both require that PHC Group can fulfill an extremely important role in collaborating with healthcare communities and local communities.

Miyazaki: We employ more than 9,000 people around the world. Diversity in human capital is one of our strengths. We place great importance on ensuring that each and every employee can work with enthusiasm and vitality. We are also working to establish a culture of diversity and inclusion through the transfer and exchange of people across businesses and countries. Furthermore, we are building a global integrated human resources platform that promotes collaboration within our group and introducing a global evaluation system. As a global healthcare company based in Japan, PHC Group aims to create an environment that encourages diversity, facilitates collaboration, and has a highly transparent and dynamic organization and culture.
We also consider diversity in governance practices as an important factor. PHC Holdings’ Board of Directors is comprised of eight members representing a mix of genders and diverse nationalities, including Japanese, American, and Spanish. Furthermore, six directors other than myself and Mr. Sato are outside directors.

Sasaya: Governance is the basis of everything, and PHC Group has formed a governance structure that leverages diversity.
We are reminded of the “5 Ps” set out in the preamble of the 2030 Agenda, the United Nations agreement that incorporates the SDGs. The 17 SDGs are organized according to the 5 Ps: People, Prosperity, Planet, Peace, and Partnership. All of these goals are synchronized with the management direction and activities that PHC Holdings is aiming for.

Continue to set challenging corporate goals to address social issues

Miyazaki: Social issues are constantly changing. While responding to these changes, we will regularly review our materiality topics and respective KPIs to increase transparency and proactively publicize our results. We seek continued growth as a group of companies that sets challenging goals and creates new value. Through sustainability, we contribute to the health of society, which can be achieved through our unique impact.

Sato: We leverage our strengths of being a collective entity. We continue to contribute to advancing Value-Based Healthcare by thoroughly integrating our diverse businesses, working together with our group employees to accomplish our ambitious goals.

Sasaya: When summarizing the ESG approach of PHC Holdings, in the aspect of the environment, your ability to respond to climate change is extremely high. In the aspect of society, you promote Value-Based Healthcare and also focus on human capital, which has recently been emphasized. In the aspect of governance, the company embraces diversity and conducts innovative management. As a result of organizing ESG priorities in relation to the SDGs, PHC Group focuses on SDG No. 3 “Good Health and Well-Being,” and accurately operates its businesses through the business model strengths of SDG No. 9 “Industry, Innovation, and Infrastructure” and No. 17 “Partnerships for the Goals.” PHC Group also focuses on the urgent issue of SDG No. 13 “Climate Action,” and is collectively deepening its sustainability management.
Going forward, it is imperative to communicate effectively to the world. In the Edo Period in Japan, the Omi Merchants operated with a philosophy of three-way satisfaction for sellers, buyers, and society. I advocate adding the concept of effective communication to this philosophy. PHC Group’s sustainability system will differentiates it from other companies, and I look forward to its proactive communication to the world.