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Toward a New Era of Global CSR by Japanese Companies

Tags: CSR , Social Enterprise , International Cooperation , Business Management , Development Assistance

Naito, Toru

September 05, 2014

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Developing countries around the world are grappling with a multitude of challenges, from poverty and environmental destruction to conflict and human rights abuses. International organizations, national governments, aid agencies, and nonprofit or nongovernmental organizations have been working for years to address these problems through a variety of programs and initiatives. But until recently, private industry’s participation in these problem-solving efforts was indirect at best and was generally limited to business activities carried out under contract with governments or development agencies, such as construction of infrastructure or the supply of materials or equipment.

In recent years, however, the impact of global business on the developing world has reached unprecedented levels. Accelerating economic growth has made developing countries highly attractive to such corporations, whether as consumer markets or as bases of production. Today, the industrialized world pours far more capital into developing countries through private investment than through official development assistance. Where such business operations spring up, their impact on people’s lives can extend far beyond simple economics.

These circumstances have fueled a growing belief, exemplified in the United Nations Global Compact (UNGC), that corporations must behave as responsible members of civil society and work proactively in support of the environment, good labor practices, and human rights. At the same time, the past few decades have witnessed the global rise of “base of the pyramid” (BoP) businesses specifically oriented to improving conditions for people with the lowest income levels in the world. We are embarking on a new era of corporate social responsibility in which businesses are expected to make a direct contribution to the resolution of global problems.

Japanese Companies’ Timid Response

What sort of overseas initiatives have Japanese businesses taken in response to these new expectations? Unfortunately, surveys suggest that only a small fraction of Japanese companies’ CSR budgets are devoted to international cooperation. In the 2012 Keidanren Survey on Corporate Philanthropic Activities in Fiscal 2012, completed by 397 companies, only 2.0% of reported CSR expenditures fell under the category of “international exchange and cooperation.” Out of the survey’s 14 activity areas, international cooperation ranked ninth, following education, culture and the arts, academic and research programs, health and sports, the environment, assistance to disaster-stricken areas, local community activities, and social welfare.

Is this simply a reflection of Japanese citizens’ attitudes toward problems facing people in other parts of the world? While it is difficult to draw a meaningful statistical comparison between corporate philanthropy and the attitudes of private citizens, we can gain some idea of the general level of public concern with international development issues from a 2010 survey by Intage, Inc. The report Social Overview (Basic NPO Marketing Data Report) offers an analysis of Japanese citizens’ interest and involvement in various social issues based on a nationwide survey of more than 170,000 subjects aged 15–69.

In this survey, assistance to developing countries ranked sixth among 20 issues, after environmental protection, energy conservation and recycling, disaster relief, welfare services for people with disabilities, and healthcare, in which respondents reported being personally involved within the past year. It came out ahead of education, social welfare, and culture and the arts—all of which ranked higher than international cooperation in the aforementioned Keidanren survey. If we use the general public’s interest and involvement as a yardstick, corporate efforts in this field said to be coming up short.

The Tokyo Foundation’s 2013 Survey on Corporate Social Responsibility (sample: 218 companies) collected fairly detailed comparative data on Japanese CSR programs carried out within Japan and overseas, broken down into nine basic categories (human rights, poverty/hunger, infant mortality/maternal health, childhood poverty, women’s status, prevention of infectious diseases, the environment, preservation of regional and national culture, and other activities). The results shed light on the dominant character of Japanese CSR initiatives in other parts of the world.

The survey found that, while most Japanese corporations plan and administer domestic CSR initiatives independently in response to specific challenges and issues, their overseas philanthropy generally take the form of financial or in-kind donations to NGOs or NPOs. Asked how the company itself benefited from its CSR program, most respondents reported that their domestic initiatives (mostly developed and administered independently) benefited the corporation internally, by contributing to employee education and workforce development and by building technical know-how. But when assessing the value of their overseas programs, they pointed only to the public-relations benefit of a good corporate image.

Taken together, these survey data suggest that Japanese companies are insufficiently engaged in social issues in other parts of the world, particularly in comparison to the level of interest among Japanese private citizens. They also show that, when Japanese companies do engage in overseas CSR, the overwhelming emphasis is on financial and in-kind donations to other organizations, with the result that its value to the donor is limited to PR benefits.

Representative Examples of Global CSR by Japanese Corporations

Let us now examine some specific initiatives illustrating four favorite Japanese approaches in developing countries.

AFFORESTATION PROJECTS Among the most popular forms of overseas CSR by Japanese corporations, particularly those operating overseas, is support for local environmental programs. Environmental initiatives comprise the bulk of overseas CSR activities reported by companies responding to the aforementioned Tokyo Foundation survey, and afforestation projects figure prominently in this category. The following are some noted examples.

Toyota Motor Corp. has been engaged for 10 years in a project to stem desertification in China, a key market for the Japanese auto industry. Komatsu (mining and construction equipment), Sumitomo Forestry, and several major paper manufacturers are also carrying out tree-planting programs overseas.

It is particularly common for Japanese companies involved in logging as part of their core business to contribute to the renewal of forest resources through such programs. Afforestation projects are an effective way to enhance a company’s global image as a friend of the environment, and their outcomes are visible and easily gauged, making them popular with corporate insiders and consumers alike. The projects themselves are generally administered by Japanese or local NGOs or public agencies, with the corporation providing the funding. This makes such philanthropy easy to implement from the corporation’s standpoint. Tree-planting programs may also yield economic benefits for corporations, since they can be converted to carbon credits under the Kyoto Protocol emissions trading scheme.

COMPETITIVE GRANTS AND FELLOWSHIPS Another popular approach to overseas corporate philanthropy is to solicit applications for funding from individuals or grassroots groups oriented to social change. In fact, several Japanese companies have made an important contribution to Japanese international cooperation through ongoing programs of this sort. For more than 30 years, the Duskin Ainowa Foundation, established by Duskin Co. (cleaning products and services), has worked to foster leadership among young people with disabilities by sponsoring overseas training for disabled Japanese citizens and offering training in Japan to disabled persons from elsewhere the Asia-Pacific region. This program has helped build international trust and understanding, and it laid the groundwork for many of the overseas programs currently administered by Japanese organizations for the disabled. The Ajinomoto International Cooperation Network for Nutrition and Health (AIN), established by Ajinomoto (food and chemicals), awards funding for nutrition-related projects, selected from applications submitted by NGOs and NPOs. This program, which has continued for more than 10 years, provided the impetus and know-how for many of the overseas health and nutrition programs launched by Japanese NGOs in recent years.

“CAUSE MARKETING” IN PARTNERSHIP WITH INTERNATIONAL AGENCIES AND NGOS Cause-related marketing, in which a portion of the proceeds from consumer purchases goes to support a designated social cause, is on the rise among Japanese producers and distributors of consumer goods. This is a particularly effective variation on the theme of donating funds to support activities by public agencies, one which makes the most of the growing interest in assistance for developing countries among ordinary Japanese citizens.

One noteworthy example of this model is the Volvic “Drink 1, Give 10” (or “1L for 10L”) campaign, carried out in Japan by beverage giant Kirin in partnership with UNICEF (United Nations Children’s Fund). Through this program Kirin has raised funds to provide clean and safe drinking water for people in Mali over the course of five years while drumming up Japanese sales for Volvic mineral water. It deserves special mention as an example of CSR that yields economic and PR benefits while contributing tangibly to the lives of people in the developing world. Other examples of Japanese cause marketing in partnership with UNICEF are the “1,000 Toilets” project in Timor-Leste, sponsored by Oji Nepia (tissue paper), and the “Wash a Million Hands” project in Uganda, sponsored by Saraya (personal hygiene products). Other companies are carrying out similar programs in cooperation with Japanese NGOs. Morinaga (chocolate and confectionery) is using a portion of its profits to help the nonprofits ACE (Action against Child Exploitation) fight child labor and Plan Japan support children in Africa through its “1 Chocolate for 1 Smile” campaign.

FAIR TRADE The fair trade movement, which promotes fair compensation and decent living conditions for producers in developing countries, was introduced into Japan about 20 years ago. At first the market for fair trade goods was small, with only a handful of NGOs and fair trade organizations importing goods from participating cooperatives. But awareness of the fair trade movement and its products has spread along with public concern over social issues. Today quite a few big corporations have signed on to the fair-trade movement.

The trend has spread particularly rapidly in the food and retail sectors thanks largely to the active involvement of two major players, Zensho and Aeon. Assisting developing countries through the sale of their products is a good way for such businesses to leverage their marketing know-how for the betterment of humanity, and it is also an effective way of conveying their social responsibility to customers. For this reason, the trend is likely to continue.

Expectations Going Forward

How, then, can Japanese businesses beef up their efforts to address social ills around the globe, and what role can public agencies and NGOs play in the process?

LEVERAGING CORPORATE KNOW-HOW, TECHNOLOGY, AND HUMAN RESOURCES Japanese government and industry have been working cooperatively to expand Japan’s economic presence overseas in recent years, and we can expect more and more companies to incorporate overseas sourcing, production, and marketing in their business strategies. Meanwhile, the private sector’s potential contribution to development assistance has emerged as a major topic in discussions about options for assistance after 2015, the target year for the United Nations Millennium Development Goals. The expert panel set up by the Japanese government in March 2014 to update Japan’s ODA Charter has also highlighted the role of private investment and corporate philanthropy in international development.

Much of this discussion has focused on the potential economic benefits of foreign direct investment and BoP business ventures. But businesses can also play an important role in improving social conditions overseas through CSR initiatives. Unfortunately, Japanese companies’ expenditures on international cooperation and development have not kept pace with the public’s interest and involvement, as we have seen. What can be done to close the gap?

Clearly, Japanese businesses operating overseas need to invest more in CSR activities geared to specific problems in the locales where they do business. In doing so, moreover, they need to do more than contribute money; they must find ways to mobilize their corporate know-how, technology, and human resources.

In the wake of the Great East Japan Earthquake of 2011, a number of Japanese businesses won kudos by mobilizing their own special resources for effect relief programs. Fujitsu created a database to help match victims to relief organizations and services. The Google Person Finder gathered and posted information about the status of individuals in affected areas. And Honda provided access to local traffic data in disaster areas gathered through its bi-directional onboard navigation system. Each of these initiatives reflects a determination to find a way of contributing that capitalizes on the company’s strengths. If Japanese businesses would apply the same approach overseas and apply their special know-how to the issues facing developing nations, they could usher in a whole new era of innovative and effective overseas assistance.

GREATER CONCERN FOR THE ENVIRONMENT, HUMAN RIGHTS, LABOR Japanese businesses overseas are all too frequently the subject of controversies stemming from a lax attitude toward the environment, human rights, labor conditions, and legal compliance in the host country. Japanese companies are frequently cited for legal and ethical violations by international advocacy groups, to say nothing of complaints from the local community, and their overseas record is incomparably worse than their performance within Japan. This is a grave matter not only from the standpoint of social responsibility but also from the perspective of business risk management, and it needs to be addressed seriously as such.

In this connection, it is important to remember that global businesses today are being held accountable not only for their own business activities overseas but also for those of subcontractors to whom they outsource production, as well as businesses that supply materials and components. A top sporting goods company came under intense pressure to step up oversight when an international NGO revealed that its overseas subcontractors were using child labor. Western clothing brands have been called to account for substandard labor conditions among their overseas suppliers in the wake of tragedies that killed hundreds of garment workers in the Bangladesh. From society’s standpoint, big global corporations bear the greatest responsibility because they have the greatest power and influence. This is something Japanese companies need to keep in mind.

A group of leading Japanese CSR experts recently issued a paper titled “Principles of CSR and CSV.” The paper cautions against the growing tendency among Japanese business leaders to emphasize the concept of “creating shared value” over that of corporate social responsibility in defining the role of corporations in society. The authors of the report seek to shift the focus back industry’s responsibility vis-à-vis its impact on society, as set forth in ISO 26000 (international standards on social responsibility), which emphasizes continuous improvement to minimize a business’s negative impact on the environment and society.

This paper suggests ways in which public agencies and NGOs can help promote CSR among Japanese corporations. They need to take the initiative, as by organizing seminars and other events to inform and educate Japanese businesses about such guidelines as ISO 26000J and the UN Human Rights Norms for Business, and to familiarize business managers with some of the ethical problems and controversies that have arisen in connection with overseas operations and transactions. Government agencies providing support for overseas investment should draw up and publish exacting standards for corporate social responsibility, along with specific guidelines pertaining to child labor and other human-rights concerns. In addition, Japanese NGOs should develop their expertise in areas like environmental protection and human rights so that they can offer CSR monitoring and consulting services to companies that seek such support.

SOCIAL ENTREPRENEURS AS MODELS AND PARTNERS Social entrepreneurs around the world have spearheaded a business-centered approach to social activism that has begun to bear fruit. One of the best-known social entrepreneurship programs is the microfinance service run by the American organization Kiva. Kiva uses the Internet to directly connect small-scale lenders in the industrial world with small entrepreneurs in developing countries. More than 1 million people have used the website to extend loans of $25 or more, yielding upwards of $500 million in total investments. Similarly, the US nonprofit organization Kopernik (co-founded by a Japanese national) uses the Internet to solicit funds from individuals and corporations in order to supply people in remote communities with products that improve their lives through innovative but inexpensive technology. To date Kopernik has supplied some 30,000 products to people in 16 countries. Both undertakings take advantage of Internet technology to connect donors and recipients across national borders. They exemplify a new business model that holds the promise of continuity and expansion.

Entrepreneurial approaches to social problems in the developing world are taking hold in Japan as well. One example is Motherhouse, which sells high-quality handbags produced entirely in Bangladesh with local materials, in the process providing training and decent jobs to help lift Bangladeshis from poverty. Another is Hasuna, a jewelry maker that encourages values-based buying behavior by offering ethical products using environmentally friendly and human rights conscious materials from developing countries. Andu Amet is a purveyor of upscale bags and other accessories made in Ethiopia from Ethiopian high-quality sheepskin. Cross Fields and Very50 are “business-model nonprofits” that provide businesses and individuals with opportunities to train and address social needs in developing countries. Another example is Granma, a Japanese company that provides local support services for Japanese businesses seeking to launch social ventures or BoP businesses in developing Asian countries.

Of course, social entrepreneurs are not concentrated in the industrial world. To the contrary, the majority of social enterprises are local businesses launched in developing countries with the aim of providing the goods and services needed to solve regional problems and improve people’s lives. Such businesses often face higher financial hurdles at the launch and expansion phases than conventional companies oriented to maximizing profits. They also have an acute need for operational know-how and information on comparable undertakings in the region and around the world.

Ashoka was the earliest organization to recognize the potential of social entrepreneurship, and it has had a profound impact on social enterprises and the people connected with them. Using the rigorous criteria it developed independently, Ashoka has selected an elite group of social entrepreneurs called Ashoka Fellows, who receive ongoing support from the foundation and form an influential global network. Another pioneering organization is the US-based Acumen, which raises capital to invest in social businesses around the world. In Japan, Arun is an innovative investment firm that is dedicated to financing social enterprises in Cambodia and other developing countries.

Japanese corporations should pay close attention to these social entrepreneurs and pursue possibilities for collaboration with them. While the benefits of programs by aid organizations and NGOs have a tendency to vanish once the project comes to an end, social entrepreneurship offers the promise of expanding benefits to society through independent, sustainable economic activity.

Furthermore, since social entrepreneurship shares many of the basic management principles followed by conventional businesses, corporations may be well positioned to assess the viability and potential of a social venture from a business standpoint and contribute their own business skills and know-how to the undertaking. In addition, Japanese corporations can learn from the innovations of successful social enterprises and incorporate those approaches into their own CSR programs in developing countries.

Some Japanese corporations are already beginning to offer financial assistance to local social entrepreneurs and the organizations and networks that support them. For example, All Nippon Airways recently established a grant program for Ashoka Fellows. The new Benesse Social Investment Facility, launched by Japanese education giant Benesse, has already invested funds in an Indian education company. If this kind of assistance and cooperation spreads, it could usher in a whole new era in social activism.

TAPPING EXTERNAL KNOW-HOW When planning overseas CSR programs, Japanese corporations have a tendency to choose a general development issue and then donate cash or supplies to an NGO or aid organization working in that area. This simplifies things for the corporation, but it precludes the kind of assistance that leverages that business’s unique strengths. It also makes it difficult for a company to reap the internal benefits of corporate philanthropy with respect to the development of human resources and technical expertise. One key step to boosting the efficacy of Japanese overseas CSR is for companies to begin putting their own people on the ground and tackling social problems directly.

That said, it is scarcely practical for a group of employees with no prior experience in a country to march in, assess the needs of the local inhabitants, and design and implement an effective program to match. Corporations need to build new platforms, tapping the skills of employees with overseas experience and forging partnerships with local NGOs and social enterprises. Ricoh, a major manufacturer of copiers and other imaging solutions, recruited employees with international cooperation experience for a project team that is now working on-site with an Indian social enterprise to develop plans for a local BoP business.

Meanwhile, a number of government agencies and NGOs have instituted programs to provide corporate employees with experience in developing countries. JETRO (Japan External Trade Organization) dispatches young interns to work in public and private organizations in developing countries under a government program to foster “international readiness” in the Japanese workforce. The Japan International Cooperation Agency provides corporate employees opportunities for overseas experience and training through its new Private Sector Coordination Volunteer System. The nonprofit organization Cross Fields runs an International Corporate Volunteering program, under which corporate employees put their professional skills to work overseas helping NGOs and social enterprises address social needs.

Through overseas experience in the area of international cooperation, people gain a unique understanding of local culture and society and an ability to function independently in foreign countries. These qualities are of great value to corporations that are expanding their operations overseas or developing global CSR programs. According to JICA, inquiries from companies seeking to hire Japan Overseas Cooperation Volunteers alumni have quadrupled in the past two years. Daichi Konuma, co-founder and CEO of Cross Fields, and Hiroko Samejima, founder of Andu Amet, are both former JOCV volunteers. As corporate demand for personnel with international know-how continues to grow, NGOs can play a key role by pursuing cooperative human-resource programs consistent with their own mission.

From a long-term perspective, school education has a central role to play in the development of human resources capable of functioning in the global arena. With the help of funding from MEXT (Ministry of Education, Culture, Sports, Science, and Technology), under the Project for Promotion of Global Human Resource Development, many Japanese universities have recently launched study-abroad programs focusing on international development in cooperation with JICA and various NGOs. A MEXT program instituted in the 2014 academic year is providing funding for global education pilot programs at about 50 model high schools. While some Japanese schools have provided a limited amount classroom instruction about developing societies and international cooperation under such topics as international understanding and development, there is clearly a need for more extensive and widespread educational programs to promote understanding of global problems and educate people to fulfill their global social responsibility.

PROMOTING CROSS-SECTOR NETWORKING Earlier we looked at survey results showing that Japanese businesses place a relatively low priority on CSR programs in developing countries compared with the level of interest in the population at large. To a large degree, this failure may stem from insufficient knowledge regarding the situation in developing countries. Corporate officers may worry that they will be unable to explain such programs to shareholders or find qualified personnel to plan and implement them. If we want businesses to invest in more effective global CSR programs, then public agencies and NGOs involved in overseas development need to provide those companies with information on local conditions and problems, share examples of best practices in overseas corporate philanthropy, and offer concrete proposals for company-friendly CSR partnerships.

The nonprofit organization JANIC (Japan NGO Center for International Cooperation) has set up a Network for Promotion of NGO-Corporate Cooperation. Member NGOs and corporations are invited to participate in a variety of networking programs, including symposiums that explore successful NGO-corporate partnerships and task forces devoted to formulating guidelines for collaboration. Such opportunities for cross-sector networking—preferably including government aid agencies as well as businesses and nonprofits—have an important role to play going forward.

One good way to promote practical, project-oriented partnerships would be to organize forums dedicated to specific areas, such as environment, water, healthcare, education, and human rights, where people from business could meet with representatives of government, academia, and the nonprofit sector to discuss the issues and consider how they can be part of the solution.

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