Ajinomoto: "Overseas investors, especially in Europe, place significant value on ESG initiatives"

Ajinomoto: "Overseas investors, especially in Europe, place significant value on ESG initiatives"

Ben Cooper looks at how Japan food and ingredients group Ajinomoto's approach to sustainability ties in with its broader ambitions to become a leading force on the world food stage.

A steady stream of acquisitions in recent years bears witness that Japan-based food and ingredients manufacturer Ajinomoto is a company in expansionist mode.

More specifically, the company has put on record its aspiration to become a leading player in the global food sector. However, while the acquisitions may be about expanding Ajinomoto's physical footprint, the company is also concerned about its footprint in a broader sense. Ajinomoto has a detailed sustainability strategy but has also recognised the role sustainability can play in raising its international profile. 

"Leading global company groups, which represent our competition, have promptly adopted non-financial targets that conform to the international consensus on the resolution of social issues, in addition to plans for achieving these targets," Yasunobu Hasegawa, general manager for a CSR group within Ajinomoto, tells just-food. "In doing so, these companies are developing their businesses while enhancing their social presence. Improving social value related to ESG [environmental, social, and governance] through our food and amino science businesses has become a necessary condition for realising sustainable growth."

In common with many of those leading global food companies, Ajinomoto encapsulates its approach to sustainability in its own terminology, defining its philosophy as "Ajinomoto Group Creating Shared Value" (ASV). "We believe 'ASV' communication is unique and a better way for people to understand Ajinomoto's activities toward sustainability," Hasegawa says. Comparisons with the way companies such as Unilever and Nestle articulate their approach to sustainable business are clear.

In 2009, the company's centenary year, Ajinomoto identified "global sustainability", "food resources" and "health and well-being" as areas where it believed its expertise in food and amino science could be brought to bear in helping address broader issues the world faces.

For example, Ajinomoto believes greater use of amino acids in animal feed will have positive sustainability impacts. "Animal husbandry is closely linked to various environmental impacts," Hasegawa says. "Ajinomoto aims to improve the amino acid balance of feeds for faster growth and higher productivity of animals while reducing the environmental impact of livestock production." In human health, Ajinomoto's products containing amino acids can assist muscle strengthening in the elderly, he adds.

Engagement with external stakeholders is critical in defining areas where Ajinomoto can contribute to global sustainability challenges, Hasegawa stresses. "Within the dialogue we have with our stakeholders, the demand for us to share precise ESG policies, in addition to non-financial targets, has been growing stronger by the day." 

Once again following the approach taken by prominent global corporations, Ajinomoto organises its sustainability aims according to a materiality matrix, which was initially framed in 2015 and reviewed in 2017 to incorporate new trends.

In particular, Hasegawa identifies the adoption of the UN Sustainable Development Goals (SDGs) and the Paris climate deal as being notable external events. "Since the Ajinomoto Group organised its materiality items in 2015, the world has witnessed significant progress on sustainability, including the entry into force of the Paris Agreement and the adoption of UN Sustainable Development Goals (SDGs)," Hasegawa explains, adding the company had "frequent discussion on materiality" when determining its 2017-2019 Medium-Term Management Plan (MTP). "In light of these new developments, the Ajinomoto Group felt it necessary to update its materiality items to better guide future initiatives."

Crucially, the company surveyed opinions from some 56 external experts on the SDGs and how they might affect expectations for the company. It is worth noting given Ajinomoto's aim to become a leading force in the global food sector, alignment with the SDGs has become an increasingly important focus for the major corporations it is seeking to emulate. 

Among key revisions, increased prominence is being given to sustainable procurement of agricultural raw materials, food loss and waste, water stewardship and child and forced labour. Additional emphasis is also being placed on sustainable consumption and the reduction of environmental impact from containers and packaging. Ajinomoto refined its approach to human resources by splitting this into employee capacity development and employee diversity, while also redefining what it originally termed "preventing corruption" as "transparent and fair business practice".

"Under the 2017-2019 MTP, we have clarified policies and aims at the level that meets the standards of leading global companies in terms of social value, and we have started to work toward these goals," Hasegawa says.

With regard to environmental sustainability, the company is considering how to align an Ajinomoto Group Zero Emissions Plan (AGZEP) with the overarching aims of the Paris climate deal, including the possibility of developing science-based emissions targets. "Science-based targets (SBT) is one of rationale to execute the Paris Agreement practically," Hasegawa says. "We are considering to harmonise AGZEP and SBTs in the near future."

Key AGZEP goals include a reduction in CO2 emissions per unit of production of at least 50% by 2030 against a 2005 baseline. In 2016, it had achieved a 33% reduction against its original 2016 target of 35%. Ajinomoto is also aiming to boost its renewable energy ratio to 50% by 2030. In 2016, its renewable energy ratio stood at 20%, up from 18% in 2015 and well ahead of the 15% target set for 2016.

Does sustainability influence Ajinomoto's ambitious programme of acquisitive expansion? Hasegawa says the company seeks acquisition targets with similar corporate cultures and shared values.

In the context of its alignment with global sustainability issues and the Sustainable Development Goals in particular, the company's acquisition of a 33.33% stake in pan-African food group Promasidor Holdings last November is an interesting case in point. 

Since striking that deal, Ajinomoto has been working to integrate its operations in Nigeria with those of Promasidor. "Both companies have experience in starting business from scratch in emerging countries, and the corporate cultures are similar. One of those is to solve social issues through food'" Hasegawa says. "In parts of Africa with low incomes, we are supplying basic seasonings and other basic food products at low price with high nutritional value. We are both contributing to improving the nutritional issues and lifestyles of the local people and therefore share a common value."

In seeking to find a place at the top table of global food companies, Ajinomoto is aware of the growing interest investors are taking in sustainability. "In the investing world, public pension funds are placing emphasis on ESG. Overseas investors, especially in Europe, place significant value on ESG initiatives, and there are a great number of financial institutions that evaluate a company from the perspective of sustainability," Hasegawa says. "Actively conveying the fact that the Ajinomoto Group has been bolstering its ESG initiatives, centered on ASV, will lead to sophisticated communication with investors."

While its aspirations are bold and ambitious, the company is candid about where it sees itself. "Our effort to create quantifiable non-financial targets as much as possible, in addition to financial targets, is we think almost the first among Japanese companies. However, our efforts in this area are still behind the food industry's global top ten," Hasegawa says. "We get the feeling that we trail in this respect more than we do in our positioning on corporate value and market capitalisation. Therefore, we want to begin our efforts with a sense of modesty about our current position."

Whatever its sustainability strategy and the ASV philosophy may say about Ajinomoto as a company, its outlook and approach suggests a globally informed sustainability strategy is a prerequisite for a company wishing to take its place among the elite group of multinational food businesses.