MESSAGE FROM THE DIVISION MANAGER OF CSV

Balancing social value with economic value

Throughout its long history, KOKUYO has maintained the same stance of addressing societal needs through its business activities. Compared to its early years, KOKUYO now has a wider range of business operations, including stationery, furniture, business supply distribution, and interior retail. These business domains might seem disconnected from each other at first glance, but they all have something in common: a constant focus on adapting to a changing social landscape and addressing the latest needs among customers and society at large. This enduring principle is what has culminated in KOKUYO’s current business portfolio. In my daily interactions with employees, I get a palpable sense of how this philosophy of making a positive social impact has become part of the culture and lifeblood of KOKUYO.

Losing none of its passion for producing and delivering products and services that address societal needs, KOKUYO now takes a longer view by envisaging an ideal future scenario and back-casting from that future to today in order to determine what needs to be done to get from here to there. The ideal future scenario is a self-directed, collaborative society. Back-casting from that scenario, we have identified material tasks to accomplish over the medium term. In our last materiality analysis, we plotted a number of issues onto a graph with one axis describing their social relevance and the other describing their economic relevance. We then picked out those issues that had the highest relevance in both indices.

By incorporating the need for sustained business growth (economic relevance) into our materiality analysis, we ensured that the material issues we defined would be more authentic and compelling. Take for example, the strategy to expand business fields through the Forest-Like Management Model. This strategy involves expanding the delivery of experience value to contribute toward a self-directed, collaborative society. This social value is balanced with economic value: building more sources of earnings for KOKUYO. As such, it is a core strategic task for building KOKUYO’s value over the medium and long term.

While this materiality analysis has helped, it does not go far enough in communicating the extent to which social value is balanced with economic value in our business activities. An example is the strategy to transition to a management system that creates social value. One of the 2030 goals for this material issue is to have 100% of our net sales coming from activities that combine social and economic value. While this goal statement emphatically declares our commitment to building a self-directed, collaborative society, it falls short in presenting the business logic—it does not show how pursuing this social value will also create economic value. We have started producing a number of examples that align with this goal, but we still need to do more to create a compelling materiality narrative.

Representing impacts in a logic model

On this basis, a key priority in the 4th medium-term plan, Unite for Growth 2027, is to ensure that internal and external stakeholders have a clear idea about the future scenario we envisage and about our material issues. We have created a logic model to visually represent how KOKUYO’s business operations, sustainability initiatives, and talent development strategy are causally related to the creation of social value. We now need to refine this.

KOKUYO’s business, at its core, involves using co-creation with empathy and using our culture of experimentation to design new experience value. The driving force behind this process is the abstract concept of creativity. If we can give a compelling account of the causal relationship between our business activities and the abstract concept of social value and the casual relationship between our core competences and economic value, then we can instill greater confidence in our shareholders and many other stakeholders and inspire greater passion, belonging, and motivation in our employees.

To that end, we are developing visual representations of the social value and economic value KOKUYO is seeking to create as part of its long-term vision, CCC 2030. So far, we have clarified three examples: more people who keep pushing themselves to a higher level, more opportunities for social interaction, and more teams committed to creative solutions for societal issues. These examples represent important outcomes aligned with the impact we ultimately want to produce: a self-driven collaborative society, where one socioenvironmental issue after another is solved. We will incorporate these three categories into the logic model so that people can see at a glance what type of impact a given product or business is creating and what economic value it is producing. Having created the logic model, we are now in the phase of refining it. Eventually, we will use the logic model as a tool to monitor the economic and social value of each business unit and then incorporate the findings into business strategy in a cyclical process.

Dynamic materiality: Evaluating and adapting

As to whether our material sustainability initiatives for the goal of a self-directed, collaborative society really resonate with stakeholders, the acid test will be whether KOKUYO continues on the path of sustained business growth. We can boast about our social value as much as we like, but unless we stay relevant and essential to the public, no economic value will emerge. To ensure that our sustainability initiatives contribute to sustained business growth, we must periodically review our material issues and monitor progress using effective KPIs. We engage in dynamic materiality, meaning that we periodically update our material issues to reflect changes in the external business environment and in our business strategies.

When we specify our material issues and visually represent their impacts, we do so not just for the purpose of meeting disclosure standards and getting favorable ratings. We will keep communicating our values internally and externally and linking them with our business activities. We also keep up efforts to embed sustainability in our business operations and in the behavior of every employee.

Communicating our values and disseminating materiality

To ensure that KOKUYO’s initiatives resonate with internal and external stakeholders, we have to keep communicating the values we believe in and keep rectifying behaviors and practices that do not align with these values. We aspire to build a self-directed, collaborative society, we develop plans and initiatives to build such a world, and we use material issues (materiality) to measure the progress. These three elements are always central to our organization. As Division Manager of CSV Division, I will continue to spearhead actions for disseminating our materiality and communicating our impacts among our businesses and employees.

• Leadership’s commitment to sustainability