Thank you very much for joining Daiichi Sankyo's ESG briefing out of your very busy schedule today. I'm Harada from Sustainability Promotion Department, Sustainability Management Group. I'm delighted to serve as emcee today. Thank you for your time. Presenters today are President and CEO, Sunao Manabe, and Chairman of the Board and Outside Director, Noritaka Uji. Director and CFO, Hiroyuki Okuzawa. Executive Officer and Head of Corporate Affairs Division, Hironobu Furuta. Vice President of Corporate Communications Department, Junichi Onuma, and Vice President of Sustainability Promotion Department, Masahiro Kato, are also attending.
First, Manabe will explain Daiichi Sankyo's promotion of ESG management. Then Uji will talk about Chairman's oversight of the group management. After the presentations for about 45 minutes, we will have Q&A sessions. We are planning to finish at 5:00 P.M. JST. Presentation materials for today are already posted on our website, so please refer to them if necessary. On-demand recording of this meeting will be available on our website later. Now, Manabe-san, please.
Manabe speaking. Thank you very much for joining Daiichi Sankyo's first ever ESG briefing, despite your very busy schedule today. When we announced our current five-year business plan in April this year, we explained the promotion of ESG management with a long-term perspective, which we are aiming for. Also, we identified materiality as material issues and set materiality KPIs linked to our current five-year business plan. Today in my presentation, based on these circumstances, I'd like to focus mainly on our group's ESG management towards realizing our purpose and the status of our efforts around materiality we selected. Our group's purpose is to contribute to the enrichment of quality of life around the world. This is the common belief among our group employees, and this is the origin for us.
We believe that each one of us having this belief in our day-to-day business activities, and facing the society and our customers with sincerity, will build the trust and confidence in our group. Together with our current five-year business plan, we also announced our 2030 vision in April. Towards realizing our 2030 vision of innovative global healthcare company contributing to the sustainable development of society, we aim to address the social issues, such as creating innovative pharmaceuticals, initiatives for SDGs, et cetera, that we are expected by society to solve. Through our business activities, we challenge ourselves to continuously provide innovative solutions based on our strengths, science and technology.
In order to flexibly deal with new social issues and changes in the social environment, such as climate change issues, which are becoming more serious, as well as associated health risks and the onset of unexpected diseases, et cetera, ESG perspectives are indispensable in order to incorporate the external environment into our management strategies. These are the perspectives to avoid damage detrimental to our value through governance and compliance, et cetera, maintain value creation foundations, such as human resources who create our competitive advantages, and create and expand social value, which would also lead to sustainable social development and business opportunities. We incorporate these ESG perspectives into our management and promote them together with our business. We aim to be a global healthcare company which can deliver to the world innovations we generate on our own.
This page shows the future external environment we are assuming and the roles we would play there in 2030, which we presented during the five-year business plan explanation. First, the promotion of digital transformation will enable us to leverage digital technologies to analyze various data. It is expected to bring big transformations also to healthcare services, which are the foundations to enrich the quality of life for people. We believe that the time will come when best healthcare solutions personalized for each individual will be provided in various life journeys of human beings from the birth to the end of life.
For example, gene testing will identify disease risks and causes. It will be possible to provide optimal solutions for disease prevention and treatment by using and analyzing accumulated big data. Capturing real-time health status through wearable products will enable data analysis and service provision remotely.
As a result of the advancement of digital transformation, various healthcare service providers are expected to emerge, including those from different industries, as well as companies with strength in IT and digital areas. In such an environment, we believe the value our group can offer with our competitive advantages is to contribute to treatment and prevention by providing modalities, leveraging our biggest strengths in science and technology. As treatment solutions following ADCs, we take challenges on various modalities such as messenger RNA, gene therapy, and digital solutions. We will pursue alliances with healthcare service providers and build a total care platform to provide the best modalities for the patients. We are hoping to be a company that can provide social value to each individual, address difficulties that could not be solved with existing drugs, and meet expectations.
This page on our value creation process visually explains how our group is creating and providing value to society towards realizing our purpose. In response to the requirements from society, such as responding to unmet medical needs and improving access to pharmaceuticals with our biggest strengths in science and technology as our source of competitive advantages, we are investing in value chain, our important capital, such as diverse and competitive human capital, intellectual capital, including pipeline technologies, know-how, et cetera, manufactured capital to enable the supply of top quality and innovative pharmaceutical products, et cetera. We are delivering our innovative pharmaceuticals, generic drugs, vaccines, and consumer healthcare products to patients. At the same time, through our business, we are also working on social issues such as environmental issues, promotion of diversity, and respecting human rights.
In this way, we in our group provide patients, stakeholders, and society with social and economic value we create through our business activities as a whole and reinvest it as capital. By continuing this cycle of our value creation process, we believe we can realize sustainable growth of the company and the society at the same time, and we have identified material issues we should address for sustainable growth as materiality. Next, I'd like to explain Daiichi Sankyo's strengths in science and technology as our source of value creation. Daiichi Sankyo Group, from before the integration, has delivered many innovative in-house products, such as Mevalotin, to patients around the world. New drug creation capabilities cannot be obtained overnight. ADCs such as ENHERTU have not been generated just in the past few years.
It takes a long time to create innovative pharmaceuticals, so we look 10 years ahead and beyond and maintain and strengthen our science and technology from a long-term perspective. This page shows Daiichi Sankyo's characteristics in terms of human resources, corporate culture, and core technologies, which constitute science and technology as our strengths. As for human resources, the three ADCs we created on our own have been generated by diverse talent with high level of expertise and rich experiences who have scientific assessment capabilities to refine drugs we have nurtured with small molecules. In other words, technologies originated from craftsmanship. Tenacious efforts by our researchers working on new drug development with strong belief. In other words, a high level of engagement and their eagerness for innovation are important elements to maintain our competitive advantages.
These are the great points that have been inherited at Japan-based research laboratories. At the same time, they have also been developed in our free and open-minded corporate culture. We, as management, would like to believe in our R&D capabilities, transfer authority, and actively provide opportunities to develop talent and implement fair assessment and promotion so that we can maintain our researchers' eagerness for innovation and demonstrate our strength in science and technology. As for core technologies, we believe we are unique as our core technologies include both medicinal chemistry technology for small molecule drug discovery and protein engineering technology for biopharmaceutical discovery. We are hoping to create next-generation modalities by combining our DXd ADC and these core technologies together.
As I mentioned at the beginning, our definition of ESG management is to conduct management with a long-term perspective to enhance both financial and non-financial value by reflecting ESG perspectives on our management strategies. We believe this management with a long-term perspective will lead to sustainable growth, not just of our own company, but also of the society as well. In recent years, the importance of value which cannot be read from financial statements is broadly recognized in the market valuation of corporate value. We think such non-financial value can be enhanced through ESG management with a long-term perspective.
Here, net assets are regarded as values shown on financial statements, and values not shown on financial statements include value of innovative pharmaceutical pipelines and value to contribute to stakeholders such as shareholders, investors, and employees, society, and the natural environment, which are considered as non-financial value. We aim to enhance such value sustainably through materiality. We will also disclose information related to non-financial value and work to make improvements for good understanding by shareholders and institutional investors as well.
Our efforts around materiality are our efforts to realize the social significance of our group, which is our purpose. The social value we create through these efforts leads to a contribution to the SDGs. To contribute to the enrichment of quality of life around the world is where we can contribute the most. With high expectations from society, this is linked to SDG Goal three, ensure healthy lives and promote well-being for all at all ages. Towards achieving this goal, we will also contribute to goals nine, 12, and 17 as well.
As a life science company, we actively try to reduce the environmental impact in our business activities and implement advanced countermeasures against climate change so that we will also contribute to goals seven, 12, and 13, etc. Also, our group as a whole will work on human rights, compliance, inclusion, and diversity, etc., as a responsible member of society. This page shows our materiality identification and KPI setting process. Our materiality identification started when we selected 36 issues from the perspective of CSR in fiscal year 2015. In FY 2019, we prepared a proposal for material issues considering ESG factors from the degree of importance to affect our group's mid to long-term corporate value and expectations from society, including various stakeholders for our group.
Through discussions at board meetings, we identified eight material issues at the end of FY 2019 and sorted them out as materiality on business and materiality on business foundations. In FY 2020, we also had discussions on the setting of KPIs. We started with considerations by each unit and department, and then we had discussions at the management level, including board members. With regards to compliance management and environmental management, we had deliberations at relevant committees as well. KPIs were approved by the executive management committee and the board of directors in March this year.
This page shows how we are going to manage materiality going forward. You can see our materiality management cycle throughout the year on the left side of this page. In materiality management, it's important to capture changes in the external environment and requirements from society in a timely manner. We will refer to the insight and knowledge we gain through constructive dialogue with internal and external stakeholders at materiality and improve or review KPIs where necessary. As for materiality management, you can see our structure on the right.
Corporate Planning Department and Sustainability Promotion Department are serving as the Sustainability Promotion Office. We check the progress of KPI target values through performance evaluation and goal management systems, as well as through various committees, and have discussions at the Executive Management Committee and the Board of Directors. Next, let me explain the status of our specific materiality initiatives. Today, I'd like to talk about materiality, which we couldn't explain enough when we announced our current five-year business plan. First, about improving access to healthcare. Last year, our society changed dramatically due to COVID-19. We recognized once again the importance of our initiatives to improve access to healthcare, including vaccines.
We established a group policy on access to healthcare, and we are working to improve access to healthcare through cooperation with external stakeholders. In the medium term, we will globally deploy our oncology products and aim to solve social challenges by utilizing our business foundations, such as our strength in science and technology. As our KPI target values by FY 2025, we have set our targets to increase the number of countries where our oncology products are launched, achieve the supply of COVID-19 vaccine AZD1222, Vaxzevria, intramuscular injection, and make progress in the development of our own messenger RNA vaccine, DS-5670, as planned.
Regarding our oncology product, ENHERTU has been approved in 37 countries and about 8,000 patients have already been administered with the drug. We are also rolling out expanded access programs by utilizing the systems of the respective countries. Under these programs, we have delivered four oncology products, namely ENHERTU, Quizartinib, Pexidartinib, and Midostaurin to more than 1,000 patients, including those who couldn't participate in clinical trials and those without access due to the pre-launch status of the product. As for DS-5670, phase I/II study we initiated in March this year is ongoing right now. We confirmed the efficacy and safety of this vaccine, so we have started phase II study this month and are planning to initiate phase III study by the end of the current fiscal year. We are aiming to commercialize the vaccine as a product by the end of calendar year 2022.
We are now making progress as planned. Regarding AstraZeneca's vaccine, Vaxzevria intramuscular injection, Daiichi Sankyo Biotech has engaged in its manufacturing in line with the plan. The vaccines have been provided to Southeast Asian countries, et cetera, through the Japanese government as well as through COVAX Facility. Vaccination in Japan has also started. In order to strengthen our efforts around our group policy on access to healthcare, which consists of three pillars, R&D, availability, and capacity building, we newly established a head of access to healthcare in November this year.
We put into place a structure to promote the sharing of measures and ideas to improve access to pharmaceuticals, not only in developed countries, but also in developing countries, and enable good collaboration among relevant organizations so that we can deliver the results of Daiichi Sankyo's innovations to more patients. By doing so, we will realize our purpose, that is to contribute to the enrichment of quality of life around the world.
This slide shows our activities to strengthen the regional medical infrastructure. Currently, in Myanmar, Nepal, and Zimbabwe, we are engaged in activities to solve issues such as underdeveloped medical infrastructure, training of healthcare personnel, and raising awareness of patients. As for the latest activities, since NCDs, that is non-communicable diseases, are increasing in developing countries based on the affinity with our business area, we are working on improving medical access in projects related to the oncology area. Next, I would like to explain the promotion of environmental management. Our group recognizes that we have a responsibility to work integrally in our business activities and environmental initiatives so that the activities for providing pharmaceutical products do not become a burden on the environment and threaten people's health and safety.
We have set long-term goals for 2050, aiming to achieve carbon neutrality, a recycling rate of 100%, and minimizing environmental risks. As the milestones toward achieving carbon neutrality by 2050, we have set our KPI targets to be 25% lower in FY 2025 and 37.5% lower in FY 2030 compared to FY 2015. However, due to the government's increase in the target for FY 2030, we will reconsider our targets. To raise the targets, we believe that we will need to achieve a 100% utilization rate of the renewable electricity as early as in FY 2030. In July of this year, we joined RE100, an international initiative aimed at making the electricity used in our business activities 100% renewable energy.
To achieve 100 renewable electricity utilization, we would like to introduce decarbonization technology as much as we can and cover the rest with renewable energy procurement. As a concrete measure, we are proceeding with the introduction of solar power generation equipment. The photos on the right show the solar power system of Daiichi Sankyo Chemical Pharma's Onahama plant and Daiichi Sankyo Europe's, Pfaffenhofen plant. At the Onahama plant, the operation of the equipment began in December last year. In the pharmaceutical industry, it is one of the largest self-consumed solar power generation facilities in Japan.
As a result, we can expect a CO2 reduction equivalent to about 20% of the total annual CO2 emissions of the plant. The solar power generation equipment at the Pfaffenhofen factory also started its operation in October this year. This will cover 8% of the factory's annual electricity consumption. At the same time, by purchasing electricity derived from hydroelectric power generation, we have already realized a 100% renewable energy factory. In addition, the factory is promoting the installation of EV charging stations that can be used not only by the employees, but also by the business partners and the local people, contributing to the promotion of decarbonization in the community.
This initiative has been well-received by the local people. Next, I will explain the development of the active participation of diverse human resources, creating competitiveness and advantages. As stated in the reason for selection, the group regards people as the most important asset, respects the diversity of each and every employee based on the human resources management philosophy, and aims for mutual growth between employees and the company through promotion and development of human resources. Specific KPIs include increasing the ratio of female senior managerial employees and increasing the positive response rate of engagement surveys.
To respond to the globalization and diversification that accompanies the expansion of our cancer business, we have created an environment in which human resources with various values can play an active role. Through the practice of core behavior, which is a globally shared behavior, we will foster our company's unique culture of One DS Culture. In FY 2020, we conducted an employee awareness survey in Japan, and the engagement score was an average of 76% for the entire Daiichi Sankyo group, whereas other companies' average was 59%. In FY 2021, we're planning to conduct an engagement survey on corporate climate, work environment, and development and growth opportunities using a globally same method across the entire group.
Next, I'd like to explain the current situation for promoting women's advancement. Our materiality KPI for women's advancement aims to achieve a 30% ratio of female senior managerial employees in FY 2025. As shown in the graph on the left, the ratio of female senior managerial employees in FY 2020, which was the starting point, was 16.3% globally, suggesting that we need a significant improvement here. The main reason for this is that the national ratio of female senior managerial employees in Japan is as low as 3.7%, and it's been a challenge to increase the ratio of female executives in Japan. The graph in the center shows the female recruitment ratio every five years at Daiichi Sankyo. The female recruitment ratio was very low at around 20% until the early 2000s.
This is one of the reasons why the domestic ratio has been low. The graph on the right shows changes in the ratio of female managers who are candidates for future senior managerial employees at Daiichi Sankyo alone. The ratio for FY 2020 was 7.3%, and we have set a goal of increasing the ratio of female managers to 15% or more by the end of FY 2025 in order to improve the ratio of female senior managerial employees. The first step in creating diversity is to ensure diversity in recruitment. In addition to the female recruitment ratio shown in the graph in the middle row, the mid-career employment ratio, which leads to increased diversity, has also improved.
In FY 2015, the ratio of female hires in Japan was a little over 30%, but now the ratio of males and females is about the same. As for the mid-career recruitment ratio, although it was only in the 10% range in FY 2015, we are currently conducting our recruitment activities by setting a goal of exceeding 40% in total in Japan in FY 2021. In addition to the recruitment efforts, we are actively developing female talents, building their careers, securing their growth opportunities, enhancing systems that encourage flexible working styles, supporting a work-life balance, and fostering awareness of inclusion and diversity. Now, I'd like to explain the promotion of compliance management. As shown in the reason for selection, as a healthcare company, we are asked to meet the high ethical standards.
Compliance is the foundation of our business activities, and we are not only observing laws and regulations, but also making steady efforts to improve the ethical standards of each and every employee and building a global governance system. The lower left shows our specific efforts to raise awareness of compliance. In addition to e-learning for all employees, we also conduct compliance training for our executives every year. To confirm the effectiveness of the training, the group companies in Japan have conducted a compliance awareness survey every three years. From this year, we will conduct a global employee survey on corporate climate every year to try to improve their compliance awareness. To further increase the transparency of the hotline, we established a global hotline this year, which can be reported in multiple languages 24 hours a day, 365 days a year.
As for compliance-related initiatives, we are strengthening our efforts to respect human rights in response to increasing demand from society. In June of last year, we established a human rights policy and are working to prevent and mitigate the occurrence of human rights risks through human rights due diligence. Last year, we conducted a human rights risk assessment using questionnaires for the domestic and overseas group companies. No significant risks have been identified, but we are working further on individual issues such as business partner management. Next, I'd like to explain about corporate governance toward the realization of our corporate philosophy. A highly transparent and effective corporate governance system is essential for the sustainable growth of our company.
For this reason, we have built and are operating a management system that can respond more quickly and flexibly to changes in the business environment, ensure compliance with laws and regulations, ensure management transparency, and establish a corporate governance system that has two wheels of a supervisory function for management and execution. After this part of presentation, Mr. Uji, an outside director and the chairman of the board of directors, will talk about the corporate governance from a social perspective. I will focus on the latest initiatives.
As stipulated in the KPIs, we comply with all the principles of Corporate Governance Code revised in June 2021, and disclose the implementation status on October 12th. The compensation committee also discussed the executive compensation scheme, and to strengthen incentives to further improve the company value, a new compensation composition was introduced to increase the various compensation ratios.
The figure on the right shows the CEO's compensation composition ratio before and after the system review. In addition to the change in the composition ratio, we have newly introduced the midterm performance-based share compensation as a long-term incentive compensation. In addition to financial indicators, R&D progress and ESG indicators are included in the goal achievement indicators. The nominating committee also discusses and deliberates on the formulation of skill matrices and the training and promotion of female executives, as well as my own appointment dismissal and the succession plan. This is a list of key external evaluations on our ESG initiatives. As you can see, we are used in various major indices, including those used by GPIF, the Government Pension Investment Fund.
In DJSI 2021, announced last week, we have been highly recognized by being ranked eighth in the pharmaceutical sector and have been selected for the world index for five consecutive years. We believe that the evaluations themselves, including the evaluations by other organizations, are improving year by year. We're recently selected by CDP, an international environment non-profit organization, to be included in the top evaluation list of the A list in the Climate Change Countermeasures Survey conducted last year. Since our disclosure on human capital and governance were enhanced this year, the MSCI score improved to be AA. That is double A. On the other hand, we're also aware that other companies are accelerating their ESG initiatives, as well as that the demands and expectations of society are at a higher level. We will need to further enhance our initiatives going forward.
This slide is an analysis of the evaluation results from the major ESG evaluation agencies, including DJSI, FTSE, and MSCI. The evaluations by the ESG evaluation agencies are used as indices to objectively measure the level of our initiatives to identify the issues of our company by comparing with the outside and to grasp the status of the ESG initiatives and the global standard level. We also report the analysis based on the ESG evaluation results at the management meeting, which leads to improvement of the company-wide initiatives. We're highly recognized for our practice of environmental and ethical compliance, quality controls, and occupational safety. Having said that, we're also aware that climate change in the environment, respect for human rights, and medical access in society and the organization of the board of directors and governors require further improvement.
So far, I have explained the promotion of ESG management for the realization of the purpose, the materiality initiatives, and the external evaluations and analyses of our ESG. The social and business environment surrounding our company is constantly changing. Going forward, we will continue to meet the expectations and demands of society. Based on trends in technological innovations such as digital transformation, we will continue to identify the pillars of further growth following the ADCs toward the realization of our 2030 vision. With an eye on a new modality as a pillar of growth, we will continue to discuss the relevance of materiality, manifestation of social values, and the values co-created with patients and other stakeholders.
We believe that today is a very valuable opportunity to exchange opinions with everyone, and we'd like to receive frank opinions and suggestions later to deepen the discussion. Coming next is Chairman Uji, an Outside Director, who will explain the management of the Daiichi Sankyo group from the perspective of outside directors. Mr. Uji, the floor is yours.
I'm Noritaka Uji, an outside director. This is the first ever ESG briefing by Daiichi Sankyo. I regard this as a very precious and meaningful opportunity to be able to talk directly with many market players, including investors. Today, in my capacity as an outside director and a chairman of the board, I'd like to talk about the effectiveness of the board of directors and the company's challenges towards sustainable growth. First, let me talk about myself. I joined the then Nippon Telegraph and Telephone Public Corporation, the current NTT, in 1973.
After engaging in NTT's privatization-related business and new business development activities, et cetera, I was transferred to NTT Data before the spin-off and was involved with the expansion of private sector enterprise business, the development of company-wide management strategies, et cetera. In 2007, I moved to NTT Holding Company. As representative director and senior executive vice president, I was responsible for the entire group's service creation, technology, and information strategies.
Due to these corporate management experiences and my knowledge and insight in the field of ICT expected out of me, I was appointed as an outside director for Daiichi Sankyo in 2014, and became the chairman of the board, the first outside director to take this position at Daiichi Sankyo in June last year. I'd like to talk about my initiatives to improve the effectiveness of the board of directors since I assumed the post of the chairman of the board from three perspectives, further activation of the board, aggressive governance, and activities and evaluations of the board of directors. First, about the activation of the board, I have been trying to deepen my communication with CEO Dr. Manabe and CFO Mr. Okuzawa, and other executive members.
At the same time, I enabled outside directors to attend EMC, executive management committee meetings as observers, leading to more active discussions during the board of directors meetings. By taking into consideration the contents of EMC meetings, the selection of the agenda and time allocation for the board meetings have been considered sufficiently. We allocate time for discussions, so we have more comments, not just from outside members, but also from internal members, including CEO, activating the board. In addition, I have changed the nomination committee and the compensation committee from advisory bodies to CEO to advisory bodies to the board in order to further strengthen their management oversight function. The two committees consist of outside directors only.
Active discussions are taking place, including considerations of CEO succession plans, development of female managerial employees, and the promotion of the success and the revision of the compensation system for the officers. One of the major roles to be played by the chairman of the board is to create a forum for active debate, utilize the knowledge and insight in line with the skills of the board members, and will summarize the discussions. Daiichi Sankyo's board of directors consists of nine members in total. Five are internal and four are outside directors, one of which is a female director. As is shown in the skill matrix disclosed in the current fiscal year, its composition is based on the company's mid- to long-term management direction and business strategies to sort out nine skills.
We have the skills that the board should have in order to properly exercise its decision-making and management oversight function. I think it's well-balanced as well. Outside directors are required to have an angle to check that internal common sense should not be seen by external parties and shareholders as no common sense, leverage our expertise and experiences, and increments the function to oversight the execution by management.
With regards to promoting the active role of women, environmental management, sustainability, such as access to healthcare and promotion of DX, digital transformation, as well as risk management, we can say that the outside directors have made a great contribution based on their experiences, knowledge, and insight. Regarding the aggressive governance, in today's volatile external environment, I believe that we must not hesitate to change while fully considering the risks if we are to continue our sustainable growth. We value not only defensive governance, but also the perspective of aggressive governance for improving our company's value over the mid to long term.
As the social environment has changed dramatically due to COVID-19, which has revealed a variety of social issues, we became strongly aware of the expectations and requests from society to enhance R&D and make use of our strengths in science and technology as well as ESG management. The members of the board of directors have been discussing how to meet those expectations and what to achieve with the 2030 vision toward the realization of a sustainable society. As one example, there are great expectations from society regarding the development and production of a vaccine for COVID-19, and we have been discussing at the board of directors meeting that it is an issue that we as a pharmaceutical company should tackle.
In addition to the case of vaccines, the outside directors at the board of directors meeting also support to make proposals based on a strong sense of mission after assessing the risks and reasonably deciding whether this investment is appropriate. Furthermore, the introduction of the midterm performance-based share compensation scheme and the consideration of the evaluation indicators, including non-financial indicators from this fiscal year, are also based on this perspective. Next, I'd like to talk about the activities and evaluations of the board of directors. We evaluate the board of directors every year to assess the status and understand any challenges. Based on the results from such evaluations, we conclude that the board of directors has been functioning properly, and its effectiveness is ensured at a high level.
Based on the vigorous opinions of the members, we are working to resolve issues further by extracting challenges and points for improvement that will lead to better functioning and effectiveness of the board of directors. Regarding the development of the fifth midterm management plan, which was the biggest theme of last year, the outside directors joined the discussion from an early stage, and the board of directors and the outside officer briefings were held for a total of six times, sometimes monthly, to discuss from the perspective of ESG as well. In the discussion of materiality, there was a lively exchange of views on the more active need for the environment, which is a very important social issue globally.
In FY 2021, we also plan to work on priority measures such as increased efforts aimed at corporate governance most suitable for the company and enhancement of Board of Directors' oversight functions for the oncology business and the international business. The board evaluation for FY 2021 is scheduled to be conducted by a third-party organization for the first time, and it has already started. Lastly, as an Outside Director and a Chairman of the Board of Directors, I'd like to talk about what we recognize as an issue that we should tackle in order to achieve sustainable growth.
First of all, regarding globalization, the group's purpose is to contribute to the enrichment of quality of life around the world. As our 2030 Vision, we aim to be a company of advanced global healthcare that contributes to the development of a sustainable society. Currently, the group is at the stage of strengthening its development and sales capabilities outside of Japan and enhancing its global presence to expand the results of our R&D globally.
We believe that it is also important to globally increase the number of stakeholders, including partners, who can make the world aware of the value created by the group, sympathize with our purpose and vision, and collaborate with us. In addition, human resource development is also important. Human resources are the source of the strength of the science and technology, and we need to work hard to develop human resources that will enhance our competitiveness to realize our vision. To respond to globalization and diversification, it is indispensable to create an environment where human resources with various values can play an active role and to have an organization with strong engagement.
We believe that it is important to develop a corporate climate that fosters a strong sense of mission among employees and a passion for continuous innovation. Regarding the digital transformation initiatives, we launched the DX Promotion Headquarters last year, aiming to transform healthcare by making full use of data and digital technologies. It is important to further utilize ICT and apply it in corporate management and business. Further efforts are needed to develop digital transformation that is unique to Daiichi Sankyo, which makes effective utilization of data, such as providing values to patients. Digital transformation is a corporate transformation that utilizes ICT, and I hope that even at the management level, they will increase their awareness of the importance of ICT and accelerate their efforts.
Lastly, regarding the promotion of ESG management, the group has adopted the concept of sustainability to tackle issues such as social and environmental problems. It has identified eight material issues that are highly demanded by society and are important for the group business. As CEO Manabe explained earlier, it is essential to further promote ESG management through materiality in order to improve the company's values, including non-financial value. Looking at the world of post-COVID-19 from a long-term perspective, we believe that further discussions on our future plans, including efforts to achieve social significance, are important for the board of directors. That is all for my discussion, but I'd like to continue to make efforts to improve our corporate value through such dialogues with everyone. Thank you very much.
Now Q&A session. Mr. Hashiguchi from Daiwa Securities, please.
Hashiguchi from Daiwa Securities. Thank you. I have a few questions. First of all, I want to ask you about materiality. On page 12, you explained materiality management. I didn't understand clearly how this is reflected on the material issues you presented this time. Could you please explain? I think there is no change in the material issues you presented today from the ones you presented last year in 2020.
As is shown on page 11, you focused on the setting of KPIs this fiscal year, so that's why materiality has not changed. Or did you have discussions and review, but as a result of the discussions, you decided not to change? If you had discussions, what kind of discussions did you have to come up with this result? Could you elaborate on the particular points where you raised your awareness as issues?
Thank you for your question. First, as was explained today, the eight material issues were decided based on two axes, the degree of importance at our company and also the requirements from society and our contribution to society. Including board members, we had lots of discussions on how important these material issues could be and which ones we are going to adopt, and we set them for the period of our current five-year business plan. This is our basis. As is shown here, we are having discussions, but we haven't reached the stage to change them in our discussion so far. We decided to continue working on the same material issues as materiality and discussed KPIs.
As you can see on page 12, going forward, we will continue to discuss based on changes in the social environment and discussions with our external stakeholders, but the ones we set will not change substantially in the future. We assume some modification or addition is necessary. In case of substantial changes in the environment, we may change and replace some, but we don't think that is going to be the case for the time being. We would like to focus on these eight material issues as we proceed with our current five-year business plan.
Thank you very much. Secondly, about climate change risks. What about the risks of any impact on your business sustainability due to the climate change in the future? This was not mentioned much today. How are you analyzing this? Could you please share the points where you need to improve or take action, if any?
We can assume various different scenarios. First, from our perspective, the situations surrounding various diseases could possibly change globally. Looking back on the history, there were huge unmet medical needs for infectious diseases in the past. Various drugs and treatments, including antibiotics, have been developed, so unmet medical needs were declining, particularly in developed countries. We also removed infection from our research focus before, but as has been seen with the COVID-19 pandemic, diseases and their conditions can possibly change.
That's one thing. Also, there can be climate change-associated damage to our facilities, such as the plants, factories, buildings, and production facilities. What can we do? We don't have business activities with so much environmental impact, but we'd like to reduce the environmental impact as much as possible, and we are continuing to make such efforts, and that's our current policy, which I think I explained today.
Thank you very much. Lastly, Mr. Uji said in his explanation he'd like to work on aggressive governance. I couldn't understand the meaning of this aggressive governance. Could you elaborate on this for me, please? What is the difference compared to aggressive management?
Let me respond. I worked in the field of IT before, and we often talked about the deployment of aggressive IT and defensive IT, so I was talking about such deployment. Defensive governance means ensuring good compliance and internal control, which is taken for granted for companies. On top of this, aggressive governance includes risk-taking to enhance corporate value in the mid to long-term or incorporating such elements into the compensation system, in my view. You asked me what is the difference compared to aggressive management. I think there are some overlaps, but I intentionally use the word aggressive because of the need for elements of aggressive versus defensive. I mentioned this from such perspective. Clear?
Thank you. You mean the way of thinking or philosophy to enhance the governance structure to facilitate management decisions and promote aggressive management, correct?
Yes, that's my understanding.
Understood. That's all from me. Thank you very much.
Next, Mr. Hyogo of Mitsubishi UFJ Trust and Banking.
Hyogo from Mitsubishi UFJ Trust and Banking. Thank you for your presentations today. I was able to see your sincere attitude towards your ESG initiatives, which I think was great. Based on this, allow me to ask a few questions. Today, Mr. Uji is joining, so let me ask questions to Mr. Uji. I have seen your value report, et cetera. I was able to fully recognize that Daiichi Sankyo's board members are having open and active discussions.
As a third party, what are the issues you could recognize concerning Daiichi Sankyo's governance and sustainability, if any? For example, from the perspective of board member diversity, there is no non-Japanese on the board. The only female director is from outside, not from inside. These points may stand out if seen from other industries. Could you frankly share issues you have recognized? This is my first question.
Thank you for your question. It's difficult to judge how frank and open I can be. It's difficult to see from outside, so please be open as this is a precious opportunity.
Okay. Personally, I think Daiichi Sankyo's governance is at quite a high level. Does that mean there is no issue?
Yes, there are issues. One of them is as follows. This is for the future. There is one female outside director on the board, but in the future, a female director from inside should be on the board. But the female internal board member cannot be realized overnight. We have to consider a mechanism to develop female managerial employees and promote their success. We are actively discussing these issues at the nomination committee. In terms of globalization, as you know, Daiichi Sankyo is also globalizing a lot. Now we have the oncology business unit, which is a global unit. In that sense, we need board members with more global outlook and perspectives.
They do not necessarily have to be non-Japanese foreign nationals, but there can be those people with such experiences and perspectives on the board, in my view. Also, as part of the corporate culture, there is some atmosphere of a seniority-based system, a little bit. Younger employees can also be promoted more as executive officers. I'm not saying that the current situation is bad, but there can be diversity from these aspects as well, which we are discussing right now. Hearing your comment, I also have felt the same way as well, so thank you for your supportive comment.
Secondly, I have a question on your compensation system to lower the fixed remuneration and increase the variable remuneration as the direction in society at large. As part of the aggressive governance, I think this kind of a perspective is necessary. By changing the system, are you beginning to see any changes in the behaviors and action from Manabe-san's perspective?
The next question may go to Mr. Uji, but could you explain the reasons for changing the system for the fixed and variable compensation?
Manabe would like to respond to the first part of your question.
We have just started. Any changes in the actual behaviors, it's difficult to tell. In terms of how the performance is evaluated, 60% is financial and 40% is non-financial within the midterm performance-based share compensation. I think everybody regards this as something very novel. People may not have expected the inclusion of this much non-financial portion, but it was decided through discussions at the compensation committee. As for ESG indicators, we received opinions from others. I thought it might have been difficult to include them this time, but they are included.
I think the mindset of those who are to be evaluated has changed substantially. We have just started, but I'm hoping to see a positive impact on their behaviors as a result. Let me add. As you can see from the ratio of the composition of compensation as part of corporate governance, 60% for basic compensation and 40% for variable compensation before the change. In principle, we thought that we should decrease the basic compensation and increase the variable compensation. By doing so, the higher compensation with the company's good performance and the lower compensation in case of the company's poor performance. We made changes based on these discussions.
As was mentioned, what's unique is the inclusion of the medium-term performance-based share compensation. 60% for financial and 40% for non-financial. What should be the ratio here?
Whether to include ESG indicators or not were discussed a lot at the compensation committee. By referring to other examples in society for a reference, we discussed what should be the right system for Daiichi Sankyo. We had discussions from these perspectives. In that sense, we have just started, and we have to see whether this will function. As an outside director, I'd like to watch this carefully.
Thank you. Restricted share-based compensation, et cetera, is important in a sense to be on the same boat with investors. ESG assessment should not end up as empty slogans, so thank you very much for including ESG indicators as evaluation items. Lastly, there was a mention of employee surveys. Of course, you have to see changes over time, so I do not intend to discuss the situation at a certain time point. By implementing employee surveys, what kind of employees Daiichi Sankyo would like to see as their profile, and what are the issues you are facing? This is my last question.
Furuta, Head of Corporate Affairs Unit, is going to respond.
Furuta from Corporate Affairs Unit speaking. Let me respond. Please turn to page 18 of the presentation material. On this page, on the left, you can find a pyramid, One DS Culture and Three Core Behaviors, which were established last fiscal year. What we want the most out of the engagement survey is to see whether these ideas are penetrating, whether our employees are practicing these core behaviors, and whether we are heading towards this One DS Culture correctly. In addition, as was explained by Manabe earlier, we also implemented employee surveys on ethical culture once every three years just in Japan, but we decided to conduct surveys every year by combining employee surveys on ethical culture and engagement surveys globally. That's the initiative this time. That's all from me.
Mr. Yamaguchi from Citigroup, please go ahead.
This is Yamaguchi from Citigroup. Can you hear me?
Yes.
Thank you. My first question is not about the mechanism of ESG, but it's rather about how the discussion is done as a topic. First, this applies to all the pharmaceutical manufacturers, but they only focus on their core medical products that are their strengths, and they would divest their OTC or generic products in addition to some of their long-listed products which they have done so already. I think there is a movement to carve those out. Your company, on the other hand, is somehow going in that direction, but it seems that you are taking the route of combining the OTCs and the generics in Japan.
I think the global trend nowadays is to split the company to generate a corporate value, just like what Johnson & Johnson has been doing. What is your internal discussion on this aspect, and what conclusion have you reached so far? If you have ever discussed such a topic, can you share that with us?
Due to various instructions from the Ministry of Economy, Trade, and Industry, we are supposed to discuss our business portfolio every year. Currently, we have our purpose of contributing to enrichment of quality of life around the world, and everything from our new drugs to OTCs, generics, and even vaccines lend themselves well to it. I don't think there is any contradiction.
However, for example, whether it is an OTC product or a generic product, I think it is critical to be able to provide a unique value of Daiichi Sankyo Group. For example, our group company, Espha, is now able to contribute by using authorized generics. Even if you look at the OTC lineups, I believe Daiichi Sankyo has been able to supply them as its own value in various ways based on its idea of evidence-based medicine, et cetera, in the background.
Regarding vaccines, there is messenger RNA recently, but Daiichi Sankyo's vaccine business is not that large. However, for example, many companies can contribute to inactivated vaccines, so Daiichi Sankyo doesn't need to add more investment there. For example, Daiichi Sankyo wants to create its value with messenger RNA as something that can deliver its own value. I believe that Daiichi Sankyo can provide unique value in various businesses. Of course, we need to consider business feasibility, but I think the biggest thing is that we can provide it in various forms. We're currently expanding this kind of business, but I think that it may change eventually, including the value we can provide in the future.
Thank you. Can I ask you one more question? This is a very difficult question to ask, but since Mr. Uji is also here today, I'd appreciate it if you could make a few comments.
In the case of your company, the number of affiliate companies like AstraZeneca is increasing globally, and you might be riding on the flow to increase various global values. In the future, it may be seen by the public that such companies may offer an acquisition or, in the truest sense, a merger of absorption. In such a case, you're not going to be prejudiced from the beginning and say no to them, but you will naturally need to discuss which case can provide value by comparing both scenarios. Have you been having a lot of discussions like that? Regardless of receiving such an offer, please tell us if there is an internal system in place to fully counter or discuss the matter when such an offer comes.
We discuss this matter every year, even before the general meeting of shareholders, as it is mentioned in the notice to call. The most important thing is how much profit the shareholders can get. As you said, I think we should see it if it's worth it, rather than responding to it from the beginning. We are not intentionally taking any corporate measures to prevent it. However, there might be various forms of offers. If the offer is not good for shareholders, such as trading at a high price and exiting from it soon after, of course, we will need to consider countermeasures by refusing such an offer. However, in general, we believe that the most important thing is the interest of our shareholders.
Thank you. Does Mr. Uji have any comment?
Yes. From the standpoint of an outside director or a chairman, the shareholders' views are the most important point, and if Daiichi Sankyo is seen in a way that attracts so much attention, that is very good.
However, recently, the stock price of Daiichi Sankyo has increased steadily, and the market capitalization has also increased, so I think it'll be quite difficult for anyone to make such an offer. In any case, it's not good to talk anything hypothetical. Basically, I think the point now is to respond in the direction that CEO Manabe mentioned. When we receive an actual offer, our position is to discuss the matter in detail at the time. Does that answer your question?
Yes. Thank you. That's all from me.
Mr. Sakai from Credit Suisse, please go ahead.
Hello. This is Sakai from Credit Suisse. I'm a total amateur on ESG, so I'd like to ask you a basic question. In the case of whistleblowers, which have recently become a problem in IT in Europe and the United States, and it's been a general interest in the case of pharmaceutical products, I don't believe there have been any strange acts or cases from the viewpoint of competition, such as hindering so-called general consumer activities. Having said that, please tell us if you have had any discussions on what to do with whistleblowers when you were considering the enhancement of internal compliance. This is my first question.
As I mentioned today, we are strengthening compliance and whistleblowing in various ways. The multilingual hotline is in operation for 24 hours a day, 365 days a year. If a compliance issue arises, we will respond immediately. If any case is not captured well there, it may go out as a whistleblowing case. What we can do is to try to solve any compliance issues or problems by ourselves first. If that still leads to whistleblowing, we would feel that our original management was not good.
Understood. I just wanted to ask the question for reference. I have another question. Now the pharmaceutical industry and pharmaceutical companies are all strengthening their systems for ESG and holding briefing sessions. But from the sell side's perspective, if you want to achieve a certain evaluation axis, such as a KPI or certain materiality, it'll be necessary to make an investment. How will you respond to that investment internally? Of course, it's an investment, so there might be a return. In case of ESG, it's very difficult for me to understand how this return should be considered.
What are your thoughts on this internally? For example, there's no doubt that the government will naturally work on the reduction of CO2. If you want to work as a company, you still need to invest a certain amount. What kind of returns can be obtained in the future, regardless of whether there will be any published figures? Can you tell us what the path is in that area?
First, in the short term, as you said, by conducting ESG management like this time, I don't think there will be any financial returns immediately. As I explained, we look at both financial and non-financial in the long run. As Mr. Sakai knows, there are many different reports, especially in Europe, about the growth of companies that have and that don't have ESG management. People try to invest in a company that adopts behavior indicators or even in the part of recruiting and hiring human resources, people would want to join and work for such a company.
It is the current perception that there are many things that can be expected in a non-financial manner. We think that there is an increasing trend of it recently. Regarding the environment, Daiichi Sankyo's burden is small, but that is why all companies should do this for sustainable growth. I hope you can gain a little bit of understanding by looking at the first slide of the ESG management.
Understood. I think I understand at least a little bit of your company's initiatives. Thank you very much.
Thank you.
Since there are no further questions, I call it the end of today's ESG briefing. We apologize for the inconvenience, but we would appreciate your frank opinions and kind cooperation by filling out our questionnaire. We truly appreciate your participation today. Thank you very much for your attendance today.