COVID-19’s Impact on the Company and Status of Initiatives
We explain COVID-19’s impact on our operating performance and management policies, as well as status of initiatives.
Q.1 How has COVID-19 affected ITOCHU’s consolidated business performance, management strategies, and business model?
Our initial plan of consolidated business performance for FYE 2021 called for consolidated net profit of ¥400.0 billion. This incorporates a direct downward impact from COVID-19 of roughly 10%, excluding such impacts as falling resource prices. In addition, we set a higher-than-usual loss buffer of ¥50.0 billion, an increase of ¥20.0 billion from previous years. Our plan thus gave ample consideration to preparedness for uncertainty in the business environment.
Even before the worldwide spread of COVID-19, we have been responding to rapid structural changes and digitalization in client industries, and have steadily promoted initiatives to evolve and transform our existing business models. It is said that COVID-19 would rapidly accelerate changes in purchasing methods and preferences, as well as the digital shift. That said, the basic business flow—procuring and delivering what customers want—remains unchanged. Going forward, we will continue to take the social needs of individual countries and regions into account as we pursue our business from a customer viewpoint through a market-oriented perspective.
Q.2 Has COVID-19 prompted a change in ESG awareness?
Even if some business activities are suspended due to COVID-19, rather than responding with emergency actions, we believe companies should maintain responsible ESG management from a medium- to long-term perspective.
In addition to environment-related measures to date, such as addressing climate change and marine plastic pollution, the spread of COVID-19 provides an important opportunity to renew society-related initiatives, including the supply chain and human rights. In April 2020, we declared a new Group corporate mission of “Sampo-yoshi,” which is the philosophy we have upheld since the time of our founding. While ensuring that we maintain and improve profitability, we will continue working hard to resolve social issues by, for instance, providing a wide range of products and services and creating new businesses. To this end, we recognize the importance of remaining sensitive to changing social values and continuously undertaking proactive and consistent initiatives that contribute to ESG.
Q.3 What are some examples of initiatives ITOCHU is taking to sustain its business in an environment affected by COVID-19?
As the ITOCHU Group’s strength lies in the consumer sector, its businesses support the social infrastructure that forms the foundation of everyday lives in many ways. Accordingly, we are undertaking a host of initiatives to sustain corporate activities even in an environment affected by COVID-19.
For example, our subsidiary, HOKEN NO MADOGUCHI GROUP INC., which is one of Japan’s largest insurance agencies with walk-in stores, has promptly established a nationwide system to provide insurance consultations online, leveraging the ITOCHU Group resources, in order to respond to customer concerns about conducting insurance consultations face-to-face. This system went on line in July 2020. Another example can be found at an affiliated company, WingArc1st Inc., which provides software and services that help leverage corporate data. Amid the rapid shift to working from home, this company energetically deployed a web-based invoice distribution service both within and outside the ITOCHU Group. This move addressed the issue of preparation and shipping of invoice, which had presented a barrier to working from home. Through this service, WingArc1st Inc. helps to prevent infection risk at companies adopting the system and aided the shift in workstyles in an environment affected by COVID-19.
Through these improvements on the front lines of business and the steadily accumulated effect of small initiatives, the ITOCHU Group demonstrates its highly distinctive characteristics in business contributing to customers and society at large.
Q.4 Are there any changes in workstyles and human resource strategies?
To date, we have positioned human resource strategy as one of our important management strategies. Beginning with our introduction of a “Morning-Focused Working System” in FYE 2014, we have been making various efforts to improve employee health and create a rewarding workplace environment in order to increase labor productivity.
In an environment affected by COVID19, employee awareness has changed substantially with respect to workstyle reforms. The convenience of teleworking has improved, and online services have been further utilized. In addition, the development of a working environment that makes it easier to strike a better balance between work and home life has been accelerated, especially for employees with childcare or nursing care.
COVID19 has highlighted some of the advantages of working from home. We also need to pay careful attention to eliciting frontline opinions about some of the more subtle disadvantages. After conducting a multilateral analysis that takes into account the current personnel and performance structures as well as duly considering ways to improve disadvantages, we will strive to increase labor productivity even more.
Q.5What has been ITOCHU’s response to stakeholders with regard to COVID-19’s impact?
We set up a COVID-19 countermeasures headquarters in January 2020, when COVID-19 infections were beginning to increase. Prioritizing worker safety, we expanded the practice of working from home and temporarily evacuated employees from overseas locations. We continued with expanded PCR testing, erecting shields in office areas, and otherwise putting in place systems to ensure employees could work safely.
As a general trading company whose strength lies in the consumer sector, we have been working to fulfill our on-site customer service responsibilities, including at Group companies. At the same time, in order to contribute to the stability of society, we sustain important operations by maintaining supply chains in various fields while avoiding risks even when the infection spreads.
To prevent the spread of infection among shareholders, we significantly scaled back our general meeting of shareholders. Only ITOCHU executives were physically present. Along with the convocation notice, we prepared and sent shareholders a booklet containing Q&As on high-interest topics. In this way, we sought to foster a substantial understanding of conditions at the Company, even if shareholders were unable to be physically present.
As in the past, when announcing our FYE 2021 Management Plan, in addition to the quantitative targets including consolidated business forecasts, we disclosed qualitative targets focusing on important points in order for stakeholders to cultivate an understanding of our management policies and priority measures in an environment affected by COVID-19. We resolve to continue engaging proactively in dialogue to ensure we are evaluated positively in the markets and work to further enhance corporate value.
Comments from an Outside Director on Our COVID-19 Countermeasures
ITOCHU shared information about policies to address COVID-19 and measures to prevent infection with Outside Directors in a timely manner. As an Outside Director of ITOCHU, I tried to provide more practical opinions and advice based on the experience and knowledge I have gained through my involvement in healthcare over many years.
ITOCHU established an internal COVID-19 countermeasures headquarters in January 2020, just as the number of infections was beginning to increase. Headed by the CAO, the headquarters have been focusing on thoroughly implementing the infection protection measures necessary to sustain business operations as well as on such areas as reinforcing the testing system. From my perspective as a medical sector professional, these measures appear prompt and appropriate.
Leading corporate management in an environment affected by COVID-19 requires striking a balance between curtailing infection risk and minimizing the impact on business activities. I look forward to continuing in my role of working in tandem with the internal management team to develop and maintain an environment in which executives and employees can concentrate on their work with peace of mind.