Interviews with Listed Companies Regarding English Disclosure
Kurita Water Industries Ltd.
Kurita Water Industries Ltd. (Kurita) has been consistently engaged in the water and environmental industries, providing water treatment chemicals and water treatment equipment to many countries around the world, realizing its corporate philosophy of "study the properties of water, master them, and we will create an environment in which nature and humanity are in harmony." As the company has historically had a high percentage of shares held by non-Japanese corporations, it has been working on disclosure in English from relatively early on. We interviewed Mr. Kosuke Arai, General Manager of the CSR & Investor Relations Department, Ms. Kumiko Sasaki, Manager of the Investor Relations Section, and Ms. Shizuko Yamazaki, Manager of the Shareholder Relations Section, about how the company has enhanced its English disclosure practices and the specific measures taken to achieve this goal.
Disclosure in English is Essential for Global Management
When and how did you start working on providing disclosure in English?
Yamazaki: We first started disclosing information in English around 2001 or 2002, beginning with financial statements, timely disclosure materials, and other materials that were important for investment decisions. Due to the high shareholding ratio of non-Japanese corporations in our shareholder composition, we disclosed the notice of the general shareholders meeting in 2013 and the report on corporate governance in English in 2016. Regarding our integrated report and sustainability report, we have been disclosing their predecessors in English since around 2007. We have the mindset that we should disclose information appropriately and fairly from a global perspective, and this stance has been passed down to the present.
Arai: I think it was around 2015, when we first acquired an overseas company through M&A, that this mindset was brought down to the employee level. We believe it is important to share information equally with all companies under the group umbrella. For example, although the integrated report is prepared for the capital market, we are also concerned about presenting it to our employees. Our appeal is first to the capital market and second to our employees. We believe that global management is not possible without disclosing information in English.
Identifying the Characteristics of Materials and Developing an English Translation Structure
What is your structure for disclosing information in English?
Arai: The Equity & SR Section is in charge of the timely disclosure of documents, materials related to the general shareholders meetings, and reports on corporate governance, while the IR Section is in charge of presentation materials and Q&A summaries for financial results briefings and IR events, integrated reports, and the IR website. We generally ask translation companies to translate those materials into English.
Yamazaki: Essentially, two people in the Equity & Shareholder Relations Section engage in the disclosure of information in English. The process of preparing disclosure materials in English is as follows: first, we finalize the base Japanese disclosure materials and ask a translation company to translate them, then our section checks the delivered materials and, if necessary, obtains reviews and confirmation from the related departments and from a legal perspective before disclosure. We use a translation company with a proven track record to translate notices of general shareholders meetings because they are voluminous and include many expressions based on the Companies Act, but we use the same translation company for other materials.
Sasaki: The Investor Relations Section also generally asks translation companies to translate Japanese disclosure materials into English, and about two people check the delivered documents. If the volume is small and the urgency is high, we sometimes translate the material ourselves, using previously disclosed materials for reference. Since the integrated report requires higher quality translations and includes scenes in which the president and other management members talk about their philosophies, we ask the translation company that is accustomed to translating narrative reading materials into English. We directly ask an interpreter to translate the summary of the Q&A session at the financial results briefing into English based on the actual dialogue.
What is the timeline for outsourcing timely disclosure materials that require a quick response?
Yamazaki: For materials that are regularly disclosed, it is relatively easy to set up a schedule in advance, and we expect to have translations done in three days to a week. If the content is decided just before disclosure, we ask translation companies in advance whether they can handle the translation or not.
You disclose the Japanese and English translations of the notice of the general shareholders meeting three weeks prior to the meeting. What do you do to expedite the process?
Yamazaki: We often have a tight timeline, so we do not request English translations of the entire document at once, but rather sequentially, starting with the parts that are finalized. For example, we ask for a narrowly defined general shareholders meeting notice or a part of an agenda as soon as it is finalized.
Reflecting the Company’s Philosophy in the English Translation
Are there any other things you pay attention to when disclosing information in English?
Sasaki: I am especially careful when translating and conveying keywords, such as words related to our vision for the company, into English for the first time. After working with the relevant departments in-house and deciding on the wording, we create an internal glossary to ensure that the wording is consistent from one disclosure document to the next. The glossary is also shared with interpreters and contractors who translate our disclosure materials into English.
Arai: We place great importance on our philosophy when we use our own words in our integrated report, sustainability report, and other reports. For example, "水に関する知" is our core competence, but it is usually translated as "water-related knowledge." Instead of using this expression, we use "water knowledge" in consideration of how we want it to integrate into our company. In this regard, we communicate with translation companies and conduct in-house checks to ensure that what we want to convey in Japanese is accurately expressed in English as well.
How have you been working on IR activities for overseas investors?
Sasaki: About one-third of our individual interviews are with overseas investors. I participate in conferences hosted by securities companies about three times a year and conduct five to six investor interviews at a time. Some requests for individual interviews come through securities companies, while others are directed to our IR representatives, but we generally accept all interview requests. Due to the impact of COVID-19, we have adopted an online interviewing method, but we feel that this is an advantage because it does not require travel. Although meetings with investors in Europe and the U.S. are held at 8:00 a.m. or after 5:00 p.m., employees who have young children are now able to participate. There have been cases in which participants have attended meetings remotely with their small children.
Using Dialogues with Overseas Investors to Improve IR Activities
What kind of response have you received from overseas investors regarding your company's information disclosure practices?
Sasaki: We have received comments that our "ESG information disclosure is extensive," and we believe that this kind of evaluation is due to the fact that we disclose our information in English. Also, in discussions with overseas investors, we are sometimes asked or advised to disclose information at a higher level in light of global standards. For example, in response to a suggestion that "it would be easier to convey the strengthening of governance in recent years if there were data on developments regarding the number of female officers and directors," we have made past trends more visible and included them in the integrated report. We try to improve our IR activities as much as possible in response to feedback obtained through discussions with investors.
Arai: We have disclosed our own KPI (amount of environmental impact reduction at customers - amount of environmental impact at our company) in our initiatives related to CSR, and received comments that it is easier to understand because it shows that our environmental contribution is linked to our company's growth. We are sometimes regarded as a “High-Margin ESG Name”, and I believe this is because our business model is viewed as such that a higher business performance leads to higher ESG score.
How have you been enhancing your ESG information disclosure practices?
Arai: We consider ESG scores and our inclusion in indices to be a measure of our ESG efforts. We have been enhancing our ESG disclosure practices because we believe it is important for us to disclose information based on solid ESG initiatives to have our initiatives properly evaluated. In our engagement with ESG rating agencies, we found that some evaluation items that we believe we have disclosed are sometimes judged to be "non-disclosure" because certain words are not used. So, recently, we have been trying to choose words that apply to the search criteria of the rating agencies. While improving ESG scores itself is never the objective, we are conscious of how we are evaluated by the capital market.
What advice would you give to companies aiming to enhance their disclosure practices in English?
Yamazaki: We think it is a good idea to decide in advance how the company will establish a disclosure system in English, and how the relevant departments should coordinate with each other according to the type and urgency of the disclosure materials.
Arai: I believe it is essential to verify whether or not the wording is used globally, rather than simply trusting the content of the translations delivered to us. To give an example, if "CSR活動" is translated as "CSR activities," a Web search using that phrase will only find hits from Japanese companies. I believe that increasing the number of companies using appropriate English will lead to an improvement in the quality of English disclosure practices across Japan.
(Interview on December 22, 2021)
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