NITORI Group’s Sustainability

NITORI Group’s

E SGMateriality 7

Effective corporate governance(CHINA) HOLDINGS CO., LTD, is in the process of moving on fromdirector, Ms. Naoko Yoshizawa offers the same degree of insightthe current situation, in which it purposely decelerated store openings

and perceptiveness with regard to DX and IT. I therefore expect

and paused for a while. In light of what’s been learned there, wethat these two directors will not only provide a female perspective,

should discuss the Company’s future strategy for other regions as

but will also bring their respective specialist skills into play.

well. The second theme is strengthening existing formats andDiscussion with Outside Directors 2

Audit and Supervisory(Committee
Members )expanding business areas. In this regard, we should discuss how toapproach new business areas such as SHIMACHU CO., LTD.’s home
center business and the apparel business of N Plus Co., Ltd., while

Could you tell us what perspectives you yourselves adopt whencommenting or expressing opinions at Board meetings?

Ando: The ﬁrst perspective I adopt is that of consumers. I’m always

leveraging the Company’s strengths. The third theme requiring

trying to ascertain whether the Company is managing to provide

discussion is digital transformation (DX). Pursuing more seamlessproducts that enable a large number of customers to experienceO2O is essential as the next phase for the Company, so we need toenriched homes. My criterion is whether the Company is continuously

discuss what type of measures should be taken to ensure proper

providing products that offer new forms of appeal, and when I have

CRM (Customer Relationship Management) as a means of enhancing

time, I go to look at competitors’ stores to ﬁnd out what they are doing

customer satisfaction. The fourth theme is ﬁnancial strategy; I thinkwith new formats. My second perspective is whether the Company

that, as the Company undertakes M&A and major investments, it will

can continue growing into the future, so I’m checking that thebe necessary to discuss medium- to long-term cash flow.

Company isn’t relying too much on its past successes and showing
reluctance to reform. The third is crisis management. Obviously, thisAt the shareholders’ meeting two female directors were appointed.
Could you tell us how you think the Board of Directors will changewith the addition of a female perspective?

We held a discussion with three outside directors who are Audit and Supervisory Committee Members: Mr. Takaharu Ando, Mr. Kazuhiro Suzuki,
and Mr. Tsuneyoshi Tatsuoka. The themes discussed included evaluation of the effectiveness of NITORI Group’s Board of Directors and thesustainable growth of the NITORI Group. The conversation was led by Kenichiro Aoya, Executive Ofﬁcer and General Manager of the Legal Ofﬁce.
*To avoid spreading COVID-19, those present wore face masks during the discussion and removed their masks only to have their photographs taken.

Ando: Precisely because women account for a large proportion of
the Company’s customer demographic, I have high expectations
that adding a female perspective to the management of thebusiness and hearing their opinions during Board discussions will
have a positive effect. What’s more, the fact that we now have a

Enhancing the Effectiveness of the Board of Directors
In evaluating the effectiveness of the Company’s Board of Directors,
we have aimed to delegate a greater number of decisions on
business execution-related matters to the executive directors, while
shifting the matters to be discussed by the Board of Directors to
medium- to long-term strategy. Could you tell us if you feel that thishas been successful, and if you think that the themes to be addressed
as agenda items by the Board of Directors are appropriate?

Ando: My impression is that increased delegation to the executive
directors and the shift toward discussion of medium- to long-term
strategy are progressing incrementally; I think things are heading in
the right direction. As one point to be aware of, however, I’d suggestthat minor changes or issues that occur at stores or other frontline
locations sometimes presage larger medium- to long-term issues,
so I feel that, rather than narrowing down the number of themes too
much, I’d like such frontline changes or issues to be addressed asa theme within the discussion of medium- to long-term strategy as
well. And I’d like us to keep that perspective in mind in future.
Suzuki: I feel that increased delegation to the executive directors
has brought about a shift from discussion of detailed matters to
discussion of medium- to long-term themes.
Tatsuoka: I have the impression that we’ve steadily transitioned
from “management-style” discussion of individual store openings
and similar matters to “monitoring-style” discussion of cross-cutting
issues. Looking ahead, as the Company works toward achieving its
targets for 2032, there’s a limit to what can be achieved simply
through organic growth of the furniture and Hfa businesses. I
therefore think it will be necessary to discuss medium- to long-term
strategy, taking into account changes in the operating environment.
53

Could you tell us which themes you think should be addressed asagenda items (or should be extended in scope) going forward?

Ando: Overseas regions such as the U.S. and Eastern Asia are far
ahead of Japan in terms of integrating online and offline services,and even within Japan itself the barriers to entering other businessspheres or industries are lower than they were previously. What’smore, companies trying out a variety of different formats haveappeared, so there is more competition. In such circumstances, I
think that Board of Directors meetings should include descriptionsof the latest trends among progressive retail businesses in Japanand overseas, and discuss the theme of potential risks to theCompany as a result of taking no countermeasures. And, withregard to SHIMACHU CO., LTD., which became a member of
NITORI Group, the theme of how the two companies should merge
and generate synergies over the mid to long term should beincorporated into discussions.

female inside director (Hiromi Abiko), will serve as encouragement
to many female employees.
Suzuki: The appointment of a female employee who started her careerat the Company as an inside director is a very signiﬁcant development.
I think it will raise motivation for the Company’s female employees.
And, as the Company’s products comprise numerous household items
including furniture, I think that opinions from a female perspective
represented in meetings of the Board of Directors certainly will have apositive effect. Not only does Ms. Abiko’s appointment increase
diversity, I also think it’s an appropriate appointment in terms ofcontributing to the Company’s strategy with regard to business formats.
Tatsuoka: In addition to beneﬁtting from the perspective of theCompany’s female customer base, as pointed out by my twocolleagues, I expect the Board of Directors’ discussions to be
enlivened by the addition of the younger generation’s perspective.
Looking ahead to potential changes in the post-coronavirus world,
this younger generation (theSuzuki: We need to discuss the course the Company should takegeneration closest to thein developing its business in order to achieve its mission andCompany’s customer base)vision. I believe that, in addition to discussing the Company’s

will be highly attuned toexisting formats, we need to discuss its entry into the new formats

shifts in consumerof apparel, including the business of N Plus Co., Ltd., andpreferences. Newly

restaurants, in the form of the NITORI Dining business. We also

appointed inside director,

need to talk about business development overseas, and in

Ms. Hiromi Abiko is highly

particular the course to be followed when expanding businesselsewhere in Asia, including the ASEAN nations.
Tatsuoka: I believe there are four themes that should be discussed
within a larger framework. The ﬁrst is overseas strategy. NITORI

insightful and perceptive withTakaharu Ando

Outside Director and Audit andSupervisory Committee Member,
NITORI Group

regard to human resources
development, training, andcoordination, while outside

involves commenting from a crisis-management perspective when ascandal or something similar occurs, but it also involves constantly
thinking about risk across all aspects of corporate management andlooking ahead to the future to offer comments intended to prevent
risks arising from issues that have not yet become apparent.
Suzuki: I believe the Company’s lineup of directors is diverse, and I
have a high opinion of the Board of Directors, which holds lively
discussions and is highly effective. Each individual director
provides objective opinions based on his or her own experienceand perspectives, and I myself intend to express my opinions froma compliance and governance perspective. The Company ismanaged by its founder and chairperson, Akio Nitori, and it’s his
charisma that’s enabled it to continue growing. This could
potentially create an atmosphere that makes it difﬁcult for insidedirectors to express disagreement freely. In such circumstances,it’s crucial that outside directors can speak freely, and I myself am
doing so. In fact, the atmosphere is such that everyone can fully
express their opinions to the chairperson as well, and I therefore
feel that this is a genuinely effective Board of Directors.
Tatsuoka: As my own distinguishing characteristic within the Boardof Directors is my experience of working at an economics-related
governmental ministry, my contributions to discussions are informedby my past involvement with matters including structural changes in
the Japanese economy and industry, corporate governance reform,
issues relating to energy and the environment, and trade policy
including geopolitical issues relating to Eastern Asian countries. At
the same time, I believe that the key to continuously enhancing
corporate value—the most important mission for directors—issustainability. To describe sustainability in my own words, it would
be “the capacity to always continue being regarded as essential by
consumers, even when the external environment is changing
dramatically.” I make a point of constantly keeping this perspectivein mind. During discussions, I strive for a combination ofunderstanding and vigilance. In addition to trying to fullycomprehend the Company’s corporate culture and its unique54

Kazuhiro Suzuki

Outside Director and Audit andSupervisory Committee Member,
NITORI Groupbusiness model integrating

and corporate identity. As long as the Company stays within Asia,

companies. To strengthen corporate governance even more, I’dmanufacturing, distribution,

it may be enough to simply stick with the current way of doing

ensure that those terms have been set properly. I think it’s important tolike the standard of the documents provided to the Board ofIT, and retail, I pay attention

things, but entry into the European and U.S. markets, where values

conduct accurate employee surveys to establish whether part-time

Directors to be further improved. Discussions would be enlivened

when my own common

differ signiﬁcantly, will necessitate discussion. In addition,

employees really do feel empowered, and to follow up by bringing any

by eliminating differences in the standard of documents produced

sense makes me feelstandardization and sharing of products leads to increased

issues to light and resolving them.

by individual departments and concisely summarizing issues foruncomfortable about certain

efﬁciency, but preferences and markets differ from one region to

Tatsuoka: Ultimately, the Company’s greatest asset is its people.

discussion in terms of where they arose, their background, howmatters or developments. I

another, so localization will also be required to some extent.

What’s struck me about the Company’s corporate culture is its ethos

they were handled, and the efﬁcacy of the measures taken. With

approach my role with the

Therefore, it will be necessary to ﬁnd the right balance betweenof striving to achieve targets—even those that appear ambitious—

regard to important topics for discussion, when there are mattersattitude that it’s important tostandardization and localization through trial and error. Meanwhile,by starting with the target itself and backcasting from there toover which opinions are divided at the Internal Board of Directors

maintain a balance between

as everybody’s pointing out, the biggest issue is human resources.

identify the required actions. I’ve realized that this ethos is not just(the body that deliberates on matters for discussion prior todeepening my understanding

In particular, as we learned through the Company’s experience inempty words, but an approach that has permeated through to every

meetings of the Board of Directors), if the points of contentionof the Company and retaining

Eastern Asia, when embarking on a phase of accelerated store

single employee. Meanwhile, the Company, for its part, appears to

could be clearly set out for the Board of Directors, the decision-

openings, a system is required to prevent a mismatch between thevalue its human resources because it invests a considerable amountmaking process up until that point would be easier to understand.

capabilities of the human resources and the store opening plans.

in people, including sending them to seminars in the U.S. On the

Meanwhile, from a risk management perspective, if reports couldAnd, when expanding into new regions, it’s important to have theissue of creating empowered environments, I believe that employees

be made to the Board of Directors not only after incidents havenecessary operating foundation, including standardized

can maintain their motivation and work energetically if theyoccurred, but whenever there are risks, or signs of risk, relating to

infrastructure for IT and operations, so a proper strategy needs toexperience three feelings simultaneously. These are: (1) the feeling

any aspect of the company’s management over the mid to long

be worked out alongside opening stores. When developing supplyof achieving self-fulﬁllment and personal growth, (2) the feeling ofterm, I think such risks could be averted by receiving usefulchains in each region, it’s important to ensure their resilience inbeing connected to the Company’s business performance andopinions and comments from outside directors with abundant

light of the risks in each country and region. The Company must

growth, and (3) the feeling of being connected to social contribution

experience in a wide array of ﬁelds.

make arrangements to monitor supply chains’ sensitivity toby providing enriched lifestyles to people around the world. As the

Suzuki: The documents provided to the Board of Directors havegeopolitical risks and situations systematically and continuously.

underlying infrastructure is already in place, including the corporate

improved, and the volume of documents is now at the right level,

culture and provision for training, I think the Company should seek

but I would like even more to be done in this regard. As Mr. Andoa degree of vigilance with regard to its management.

Achieving Sustainable Growth and Enhancing
Corporate Value for the Company
Could you tell us your thoughts regarding the risks associatedwith globalization and entry into markets overseas?

Ando: In addition to the time it takes for forays into overseas
markets to turn a proﬁt, companies are reluctant to waste theinvestments they’ve already made, so many ﬁnd it difﬁcult towithdraw. To avoid that from happening, I think it would be better todecide in advance the timing for reviews of Company’s policies on
withdrawing or temporarily pausing. The Company should also
make strategic preparations to develop human resources who canwork effectively in the global arena, in line with its future plans forentering new markets. And another important thing is to conduct
exhaustive local marketing in advance.
Suzuki: Although the Company still has scope for growth within
Japan, future expansion overseas is unavoidable, and I believe thatmaking inroads in Eastern Asia and the ASEAN nations isparticularly important. In Eastern Asia, the Company already has
experience of opening stores, so it has accumulated know-how, but
in new regions such as the ASEAN nations and Europe, where it
hasn’t yet opened any stores, it will be important to take full stock of
local circumstances, and work out how to deal with them. Suchcircumstances could include internal affairs, politics and economics,
living conditions, and feelings toward Japan. The Company should
then devise comprehensive plans for entering each market,
including development of distribution networks and IT infrastructure.
For example, the key to accelerating store openings in Eastern Asia
is human resources development targeting middle-ranking
executives, and when opening stores in Europe and the ASEAN
nations, it will be difﬁcult to achieve adequate results without ﬁrst
establishing a system for educating human resources, which should
include identifying the skills required and developing local
employees. When doing business with local suppliers as well, I
think the Company needs to gather information about the conditions
in each country or region, whilst also taking the SDGs into account.
Tatsuoka: When expanding overseas, alongside discussing thepolicy regarding which regions should be targeted, it’s also
necessary to consider how to build the Company’s brand image
55

employees requires it to think about their terms of employment and

Could you tell us your thoughts on creating empowered work environments
and promoting diversity from the ESG and SDG perspectives?

to make further progress in this regard. Moving on to diversity, it

said, it’s probably necessary to share information about theseems to me that the point is not to hold discussions withinprocess of internal decision-making, such as the points ofAndo: To create empowered work environments, the Company

formalized frames of reference deﬁned by gender and nationality.

contention when there’s disagreement at the Internal Board ofneeds to implement tangible measures, such as expanding telework

Instead, surely, what changes the status quo and leads to innovation

Directors. And I’d suggest that topics discussed at Audit andby pursuing DX and creating an environment in which employees canis the process whereby contact between human beings of various

Supervisory Committee meetings should also be reported to theuse satellite ofﬁces, although in essence it’s the intangible aspect—types triggers a chemical reaction. As implied by the saying “twoBoard of Directors, although not necessarily every time.

people—that’s more important. I think that further enhancing theheads are better than one,” it’s important for people with a variety of

Tatsuoka: While it’s a plus that the skills and perspectives offerededucation provided to executives to cultivate respected individuals

attributes and backgrounds to come into contact and react againstby the directors are becoming more diverse, I also see a need towho can raise the morale of their teams will do more to empowereach other. The Company already appears to have the foundations

review how deliberations are conducted in future so that discussions

employees than providing the right physical environment.

of a corporate culture that allows employees to constantly interact

don’t lose focus as a result of the increased number of Board

Suzuki: I feel that ESG and SDGs related initiatives initially had aand produce an effect that was not expected and clash over theirmembers compared with a few years ago. For complicated matters,

strong air of being responses to external pressure from Europe andapproaches, so it just needs to do more to cultivate this culture.

it would be advisable to provide fuller explanations prior to Board
meetings, reducing the time spent explaining agenda items during

the U.S., rather than being something inherently Japanese. Recently,
Could you tell us your thoughts on further strengthening theCompany’s corporate governance?

meetings as much as possible, to ensure more time to engage inhas grown at the Company too: for instance, it established theAndo: I have a high opinion of the Company’s Board of Directors,

diversity, I think we need to avoid running meetings the same way

Sustainable Development Goals Promotion Ofﬁce as a newwhich holds very lively discussions, even in comparison with other

we’ve always done, and instead embrace further reforms.

however, the idea that it’s normal for companies to engage with ESG
and SDGs has become more prevalent. Awareness of ESG and SDGs

actual discussion. In order to maximize the beneﬁts of greater

department to play a role
within the wider society as ameans of contributing as acompany. To produce results,
however, it’s necessary for not
only senior management, but
all employees, to be ESG and
SDGs aware. Moving on to theissue of creating empowered
workplaces, the Company’s
employment of a very large
number of part-time

Tsuneyoshi Tatsuoka
Outside Director and Audit andSupervisory Committee Member,
NITORI Group

56