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METI Formulates Guidance for Integrated Corporate Disclosure Concerning Industrial and Product Safety

Promoting corporate disclosure of internal safety-related efforts to attract investors

February 27, 2019

The Ministry of Economy, Trade and Industry (METI) considers it important for companies to enhance their corporate value based on their operational and product safety by accelerating information disclosure concerning their efforts that focus on industrial and product safety to allow for appropriate evaluations by investors, banks and other financial institutions.

To this end, METI formulated the Guidance for Integrated Corporate Disclosure Concerning Industrial and Product Safety according to which companies are recommended to promote disclosure of information on their safety-related efforts.

1. Background

Recent changes in the social structure such as the aging society and labor shortage as well as changes in the industrial structure such as an increase in the ratio of overseas production have been threatening Japanese companies in terms of the safety and maintenance of their plants, workplace safety and product safety, which companies tend to take for granted in Japan.

Looking at global opinion, for example in the Sustainable Development Goals (SDGs), the international community is highlighting enhanced safety as one of the driving forces for sustainable growth. These trends have raised public awareness of safety to higher levels than ever before.

With this understanding, Japan considers it significant for Japanese companies to proactively disclose information on their safety-related efforts not only to the public that is demanding accountability, but also to investors. Many investors are interested in safety-related efforts taken by companies as they consider that accidents caused by companies may lead to reduction in the value of their investments. However, Japanese companies do not fully disclose such information in their integrated reports for investors.

To address this situation, based on the results of discussions by a study group of researchers, institutional investors and other stakeholders on methods of encouraging companies to disclose information on safety-related efforts, METI formulated the Guidance for Integrated Corporate Disclosure Concerning Industrial and Product Safety.

Based on the Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation formulated in May 2017, this guidance was formulated focusing on “safety” as a theme. It features “integrated thinking” based on a framework in which companies  create a plan for corporate value creation along with a roadmap incorporates corporate principles, business models, sustainability and growth, strategies, performance and key performance indicators (KPIs) and governance.

This guidance is expected to contribute to creating a virtuous cycle in which companies that disclose information based on integrated thinking (integrated corporate disclosure) may be appropriately assessed by investors if they share information with investors through integrated reports; and these companies’ safety-related efforts will contribute to improving corporate value.

2. Overview of the guidance

Part I aims to encourage companies to enrich their understanding of integrated thinking, an important concept in this guideline, and to this end, examines case examples, in a specific manner, of two outstanding, leading companies whose information disclosure based on integrated thinking (integrated corporate disclosure) are highly recognized, in particular.

Based on this examination, Part II focuses on safety concerning the items presented in the Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation, (i.e., value, business models, sustainability and growth, strategies, performance and KPIs and governance).

3. Future directions

The guidance shows the first steps that companies should take in: disclosing information on safety-related efforts, improving corporate value backed by investors’ appropriate assessment of companies through company-investor dialogues and contributing to improving public safety through these efforts.

Companies are expected to: make use of the guidance as a reference for disclosing information on their safety-related efforts, encourage management personnel to hold dialogues with investors to review ideal approaches to creating corporate value from a fresh perspective, and connect these efforts to new actions.

Investors are expected to: utilize the guidance to use the guidance when assessing companies for mid- to long-term performance potential; not wait for companies’ unilateral disclosure and explanations of information on safety-related efforts, but pursue dialogue with companies, while referring to the guidance, in order to fill in the gaps between investors’ preconceptions and actual information that investors receive from companies; and encourage companies to disclose information useful for making investment decisions.

METI will continue to improve the details of the guideline while monitoring how companies and investors use them, and will strive to discuss the development of a new system that promotes information disclosure by companies.

Appendix

Division in Charge

Industrial Safety Division & Product Safety Division, Industrial and Product Safety Policy Group

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