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How Japanese Businesses Practice Social Sustainability: A Profile

Tags: CSR , Corporation , Business Management , Private Sector

Kamei, Zentaro

November 07, 2016

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© Yamanaka Tamaki (CC BY-NC-ND 2.0)
© Yamanaka Tamaki (CC BY-NC-ND 2.0)

The results of the second Tokyo Foundation questionnaire survey on CSR reveal that efforts are being made by many Japanese companies to integrate their core corporate activities and sustainability initiatives. With the adoption of the SDGs, more business may be prompted to think in global terms to ensure a sustainable future.

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1. ABOUT THE TOKYO FOUNDATION’S CSR CORPORATE SURVEY

A. Structure of the Survey

The CSR reports, sustainability reports, and other documents issued by companies provide basic information for examining the state of corporate social responsibility in Japan. Making comparisons using just these reports may be difficult, but in recent years Japan, too, has been making advances toward the application of common guidelines in this field with the publication of integrated reports. We also see studies by Toyo Keizai and other organizations,[1] along with NTT Resonant’s questionnaire survey of readers of environmental and CSR reports[2] and a growing number of surveys on socially responsible investment that draw on investors’ perspectives.[3] The results of such studies and surveys have made it easier to undertake comparisons among companies and to ascertain the current state of CSR as a management issue and a component of corporate activity.

Although corporations are increasingly being looked to as key actors in efforts to resolve social issues, there has not been much progress on analyzing and verifying the meaning of CSR initiatives for the companies that undertake them, how they are related to the creation and maintenance of corporate value, and other issues pertaining to social and corporate sustainability.

In the Tokyo Foundation’s latest CSR survey, we have taken into account the importance of integrating CSR activities with business operations, as was made clear in the 2014 CSR White Paper,[4] along with issues relating to the pursuit of such integration. In designing the latest questionnaire we have revised the list of social issues and the responses that have been hypothesized to contribute to integration. While doing so, however, we maintained the overall structure of the previous survey for the sake of consistency, notably the order of priority for the resolution of social issues and links to business activities, along with collaboration with nongovernmental and nonprofit organizations and of issues that companies face in promoting CSR.

In selecting the categories of social issues for our survey, we referred to the Millennium Development Goals, the UN Global Compact, the ISO 26000 guidelines for social responsibility, and other relevant materials, and at the same time we drew on our own distinctive perceptions as a public policy think tank. Social issues are generally shared across national borders, but many Japanese corporations have a tendency to look at domestic and overseas issues separately and show relatively less interest in the latter. For this reason we maintained the distinction between domestic and overseas issues in our latest survey.

In revising our categories of social issues, we looked at them not just as discreet phenomena but also in terms of who were being affected and what their causes were. We bundled issues where the targets of assistance were closely related or that had similar causes; conversely, we segmented items that needed to be distinguished on the basis of these criteria (Figure 1).

Figure 1. Revision of Social Issue Categories for the Survey[5]

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We asked respondents to identify specific responses that they consider effective for the sake of integration. And to clarify differences by type of company and the nature of CSR initiatives, we asked in greater detail about specific cases.

Figure 2. Major Survey Items Hypothesized to Contribute to Integration

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B. Replies

(1) Over 200 responses

In line with the points noted above, on August 1, 2014, we sent a questionnaire survey to about 2,000 listed and major unlisted corporations based on public information. We received responses by post or email from 212 corporations by the October 31 deadline.

Of the responding corporations, 85% were listed and 15% unlisted; over 80% of them had more than 1,000 employees (Figures 3a and 3b). The breakdown by industry, shown in Figure 3c, was similar to that of the previous survey.

Figure 3. Breakdown of Responding Companies

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(2) Who responded?

We received responses from 212 companies. How does this compare with other CSR surveys?

Needless to say, the survey was not sent to a random sampling of companies and so does not reveal statistical trends with respect to Japanese companies’ overall perceptions regarding CSR and social issues.

Companies report that they receive many requests to complete questionnaires of this sort. Inasmuch as their corporate responsibilities are being questioned, many give careful attention to this task. Due to limited time and personnel, though, they are forced to set priorities. Under the circumstances, any questionnaire receiving over 100 responses, CSR veterans note, can be called successful.

Perhaps a more important consideration in gauging the validity of this survey is the potential bias of the responses.

As noted above, most of the respondents were large companies, and around 90% had a department responsible for CSR, including cases where it also handles other matters (Figure 4). By way of reference, about 400 Japanese companies are believed to have departments responsible for CSR.

Both this time and in last year’s survey, many of the companies to which we sent questionnaires noted that the questions were hard to answer. We sought not just information about the content of their CSR initiatives but also explanations of the social issues that they were seeking to address with those activities. The “hard to answer” comment seems to hint at one feature of Japanese companies that we noted in the 2014 White Paper, namely, a tendency to place greater emphasis on action than on deliberation. There is little thinking oriented to taking an overview of social issues, identifying which of them the company should address, and considering what concrete action to take based on the company’s strengths and relevance to its business operations.

Which were the companies that were able to answer even the “hard” questions? They are large in scale, able to designate personnel responsible for CSR, and conscious of social issues from a long-term perspective—the group of companies, in other words, that are leaders in the CSR field. The results of our survey, then, can be thought of as representing the status of CSR at companies with the most advanced programs in Japan.

Figure 4. CSR Departments at Responding Companies

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2. MAIN FINDINGS

A. Initiatives by Type of Issue

Now let us look at some of the findings from the survey, beginning with the level of interest companies show toward each type of CSR issue. We asked respondents to report their company’s degree of interest in each of 10 categories of issues (including “other”), both within Japan and (as a separate answer) overseas.

Figure 5. Deliberation by Type of Issue

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Note: Responses to the question, “Of the following issues, on which are you conducting deliberations?”

 

(1) Less interest in “ecosystem preservation”

The results on the domestic side are presented in Figure 5a. In the previous survey, the environment was an issue for which the degree of integration with business operations was high. In the latest survey we divided this issue into three items: environmental pollution, response to climate change, and ecosystem preservation. While respondents’ interest in the first two items—pollution and climate change—was high, they showed notably less interest in ecosystem preservation.

As in the previous survey, interest in the issue of poverty, hunger, and income inequality was low, the lowest, in fact, for any of the items.

(2) Mistaking internal issues as social ones

Comparing the domestic and overseas results on the deliberation of social issues, we find that the figures for overseas are lower overall.

With regard to poverty, hunger, and income inequality, though, respondents showed greater interest on the overseas side. Even though poverty is a serious and growing problem within Japan,[6] the business community seems not very concerned.

For human rights, women’s advancement, and aging, the domestic levels of interest are higher than the overall average. I will come back to the issue of aging, but there is a strong likelihood that companies are treating the issues of human rights and women’s advancement as internal concerns—pertaining to their employees and other affiliated personnel—rather than as problems involving conditions in society.[7] This mindset may be adequate for purposes of maintaining and strengthening in-house solidarity, but companies should also be responsive enough to take an interest in conditions outside the organization and to actively engage with members of society, viewing this as an opportunity to reconfirm their raison d’être. By that measure, companies still have a long way to go when it comes to addressing social issues, even domestically.

It was after we finished conducting our questionnaire that Thomas Piketty became the talk of the town, with the publication of the Japanese translation of his Capital in the Twenty-First Century[8] causing a spike in concern about growing inequalities. As yet, though, we hear no talk of this leading to deliberation or implementation of CSR activities addressing this issue. For companies, social change represents at once a risk to existing business operations and a potential new opportunity. If companies seek to show interest in social issues and are intent on helping address them, they should start by eliminating the walls between internal and external issues. Dialogue with stakeholders is extremely important in this connection, a point I will discuss in detail below.

(3) High interest among companies with global sales

Figure 6 highlights the level of interest in social issues among companies with overseas sales.

It may be only natural for companies with overseas sales to display higher-than-average interest. The difference is particularly pronounced in the three environment-related issues and human rights—issues that often come up in the course of business operations. The higher level of interest thus also suggests that companies are not just selling to overseas markets but also have operations there.

What we should note in particular is that companies with overseas sales have a stronger interest than the aggregate in domestic social issues as well (Figure 6b). We can take this as an indication—from a different angle—of the aforesaid fact that there is still much more that companies, particularly those focused on the domestic market, can do to fulfill their social responsibilities.

Figure 6. Deliberation of Social Issues by Companies with Overseas Sales

a. Overseas

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b. Domestic

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(4) Emerging social issues

Social issues requiring attention are constantly changing, reflecting changes in society. Some of the newly emerging issues can be identified by looking at the responses in the “other” category, falling outside the nine issues offered as choices.

Figure 7. Breakdown of “Other” Social Issues by Number of Responses[9]

a. Domestic                                                                                              b. Overseas

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On the domestic side (Figure 7a), the most commonly cited other issue was “water resources.” This received almost no mention in our previous survey, so it would seem that it is rapidly coming to be perceived as an important issue. Citations of this issue also increased sharply on the overseas side (Figure 7b). In fact, many CSR reports now contain special sections detailing initiatives to protect water resources.

Issues relating to the Great East Japan Earthquake of 2011 were cited by many respondents in our previous survey. Companies appear to be implementing such programs on an ongoing basis, but the number citing this as an issue in the “other” category has declined.

On the overseas side, we see a marked increase in citations of “conflict minerals.” Looking at individual companies’ initiatives, we find that a number of them have started demanding that their suppliers also avoid such resources. Another serious concern is the bribery of government officials and other forms of corruption. Companies have been adopting guidelines and spreading awareness of them throughout their organizations as part of their specific efforts to address this issue.

B. What Companies Gained from CSR

Next let us look at the state of integration of CSR activities with business operations, which was the theme of the 2014 CSR White Paper. Figure 8 presents results achieved from CSR activities broken down by issue. The bottom row of the table presents the figures for initiatives that achieved successful results according to the companies’ own assessment. The issues are listed vertically, and the results achieved are presented horizontally.

The items on the left side of the horizontal axis—“provided new business opportunities,” “increased corporate earnings,” and “enhanced the company’s technological strength”—may be considered results that contributed mainly to increasing corporate value. The next group of four items—“proved useful for human resources development,” “proved useful for recruitment,” “led to identification/analysis and avoidance/mitigation of risks,” and “improved the company’s image”—relate to improving business operations and maintaining corporate value. In other words, the items on the left refer to results contributing to the creation of corporate value, and as we move toward the right, the items refer increasingly to its preservation.[10] One might say, then, that the range moves from items that are expansionary and dynamic toward those that are defensive and protective in nature.

Figure 8. Results Achieved from CSR Activities

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Note: Of companies with specific initiatives to address social issues, the results gained from those initiatives for each issue (multiple response).

 

If we look at the bottom row, “initiatives producing positive results,” we find that activities in every category were effective. The contribution to the creation of corporate value was especially large. The figure on the right, presenting the average number of positive replies per company (with a maximum of 7, indicating successful results in all categories), is also high. And we see relatively high shares of positive replies in both the “expansionary” items like new business opportunities and increased profits and “defensive” items like human resources recruitment/development and risk avoidance. This reflects companies’ ideal of achieving success in both of these areas.

Contrariwise, in the breakdown by issue, the figures are all lower than those for “initiatives producing successful results.” The issues that most closely approximate the “successful initiative” responses are “environmental pollution” and “response to climate change” (both domestic and overseas) and “response to aging” (overseas). “Response to aging” on the domestic side also shows a relatively high level of contribution to the creation of corporate value. Companies may henceforth seek to turn initiatives for these issues into new business ventures.

Needless to say, efforts to create new corporate value are not intrinsically better than those to maintain existing ones.[11] Most Japanese companies are business-to-business enterprises.[12] Value is easier to create downstream in the value chain, so many companies need to recognize the difficulties presented by their position. The fact that enhancement of the company’s image is nonetheless the biggest result of CSR shows that these companies are far from achieving “integration.” Companies need to give greater thought to learning from their successful initiatives in order for them to improve their CSR programs.

C. The PDCA Process in CSR

In this section we will take a detailed look at the PDCA—plan, do, check, act—process in CSR activities.

(1) Contact points with society and the deliberation process

a. Companies with departments for social issues tend to be more interested in those issues

First let us consider the deliberation process, including points of contact between companies and society. Figure 9 presents replies to a question concerning the process of deliberation regarding each issue and the actors involved in this process. We can see that basically the deliberation is conducted through discussions between departments within the company. With the exception of “poverty, hunger, and income inequality,” the deliberations are mainly conducted not within the CSR department but in other departments with relevance to each issue. Conversely, given the low level of interest in poverty, hunger, and income inequality, one might say that the existence or absence of a department responsible for particular issues affects the level of a company’s interest in those issues.

Figure 9. Deliberation Process for Social Issues (multiple response)

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b. Paucity of dialogue

When it comes to dialogue with stakeholders outside the company, even the highest figures for implementation are less than half the total: 45% for “ecosystem preservation” on the domestic side and 46% for “poverty, hunger, and income inequality” on the overseas side. It seems that the levels of implementation of dialogue are relatively higher with respect to issues that companies are unskilled at addressing, lack interest in, or know little about. Does that mean that they are well aware of the state of other social issues?
Figure 10 shows a breakdown of the replies concerning implementation of dialogue with stakeholders (not distinguishing between domestic and overseas). We see that 82% of the responding companies are implementing dialogue with stakeholders, including employees. Of these, some 60%–80% are implementing dialogue with parties outside the company. How should we assess the difference between the findings in Figure 9 and those in Figure 10? One possible explanation is that companies’ dialogue with outside stakeholders is not grounded in social issues. According to employees of corporate CSR departments, there is a tendency for dialogue to become an end in itself. The purpose of dialogue with stakeholders is to keep abreast of society’s ever-changing expectations, which surely arise out of social concerns. How can companies address various social issues without learning what is expected of them?

Figure 10. Dialogue with Stakeholders: Implementation and Partners

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c. Choice of dialogue partners affects interest in social issues

Figure 11 examines whether the levels of interest in social issues are different for companies that choose to conduct dialogue with civil society and with socially vulnerable groups. The results on the left are for the 111 responding companies that have dialogue with experts in the civil sector and socially vulnerable groups, and those on the right are for the total sample of 212 responding companies. We see a significant difference of over 10 percentage points for all issue categories except “poverty, hunger, and income inequality,” for which the absolute figures are low.

Figure 11. Interest in Social Issues (Impact of Dialogue on Quality)

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In order for society and businesses to be sustainable, interest in social issues must be enhanced. One means of doing this is through the choice of dialogue partners. I would suggest that companies not engaged in dialogue with civil society or socially vulnerable groups reconsider their choice of dialogue partners. And companies that have maintained such dialogue can improve their CSR programs by reexamining the significance of the dialogue and giving thought to which topics to address with whom.

The leading CSR companies described in this white paper[13] have grappled with such questions as “What is dialogue?” “What can companies and society gain from it?” and “How can successful dialogue be achieved?” People often associate dialogue with discussions between top executives and invited experts, meetings for investors, and employee gatherings. The case studies here demonstrate that true dialogue occurs in all of the company’s operations and that it is highly meaningful not just for society but for the company as well.

(2) Issues in the implementation process

a. High share of companies’ own programs

Looking at initiatives with respect to each social issue, we find that the share of programs (including business activities) undertaken independently by responding companies is generally high (Figure 12). It tends to be low, though, for the issues of “poverty, hunger, and income inequality” and “local community,” for which monetary donations account for a large share of initiatives; specifically, companies have been donating money and products to support NPOs specializing in the area of “poverty, hunger, and income inequality,” and they have been making donations to local events and other activities in the domain of “local community.”

Figure 12. Contents of Activities Implemented

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b. Further collaboration with civil society

Our survey also looked at the state of collaboration with NGOs and NPOs. We found that 73% of the responding companies are conducting this sort of collaboration. Of these, 77% report that they expect to draw on these organizations’ “implementation and execution skills in resolving social issues.” The shares seeking their “know-how in resolving social issues” and “deeper understanding of the surrounding issues” were both 73%. And 62% said they are mindful of the relevance of collaboration for “identifying, understanding, and coming up with proposals for social issues” during the deliberation process. Both the corporate and civil sectors will need to think of ways to broaden recognition of the value of collaboration.

We must also not overlook the fact that close to 30% of the respondents to our questionnaire—consisting mainly of top-tier corporations—reported that they were not conducting any dialogue with civil sector organizations. The main reasons they cited for this were, “We have no point of contact with NGOs or NPOs” and “We don’t know which NGOs and NPOs are appropriate as dialogue partners.” This would seem to be an issue for the “intermediate organizations” that have been established with the aim of supporting NPOs.[14]

Figure 13. Collaboration with Civil Sector Organizations

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c. Extending the scope of CSR throughout the value chain

What CSR initiatives are being taken vis-à-vis suppliers and other organizations in the value chain? Companies were asked to describe the scope of CSR initiatives being undertaken by the company itself, its subsidiaries, affiliates, and others.

We find that the scope of CSR initiatives extends through the entire value chain consisting of the companies themselves and their domestic subsidiaries. The figures for overseas subsidiaries are somewhat lower, suggesting that the scope CSR is not as extensive at overseas subsidiaries as in Japan.[15]

The case studies prepared in conjunction with this report present details of the initiatives directed at affiliates and others in the areas of raw materials and of production and processing.[16] In the years to come, we can expect companies to be called upon to take social sustainability into greater account in its procurement activities, regardless of whether the actors involved are in Japan or overseas and whether or not the company has an equity stake in them. And it will be necessary to focus not just on expanding the scope of the suppliers subject to CSR requirements but also on enhancing the quality of the initiatives taken.

Figure 14. Companies’ Perceptions of the Scope of Their Own CSR Activities

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d. Focusing on the familiar

The 2014 CSR White Paper noted that companies tended to place greater emphasis on action than on deliberation, resulting in an unsystematic approach to CSR, and our latest survey confirmed this tendency. Figure 15 compares the numbers of initiatives for which deliberations were conducted and for which actions were taken.

Normally, action should be preceded by deliberation. And since deliberation does not always result in action, it follows that the number of cases deliberated should be greater than actions taken. Deliberation is particularly important in the case of CSR, inasmuch as social issues requiring attention are constantly changing. But once again, our survey found that figures were often greater for action than deliberation, as shown in Figure 15 (highlighted items where the value for “action/deliberation” is higher than 100%).

Figure 15. Deliberation vs. Action

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(a): The number of responding companies reporting that concrete deliberations on issues are being conducted through multiple meetings in response to the query, “How much interest does your company have for each of the social issues listed below?”

(b): The number of responding companies reporting that they have in-house programs, make donations, elicit the participation of employees/managers to address social issues, etc., in response to the query, “Which among the social issues listed below are you addressing with concrete measures?”

 

In addition to the state of dialogue noted above, the findings regarding deliberation and action point to a fundamental issue for Japanese companies and Japan’s society as a whole.

Japanese companies and society, in other words, appear to have an unconscious preference for “unison,” perhaps as a result of the relative lack of mobility in the labor market. Many Japanese companies, especially the traditional doyens of the business community, are full of employees who were hired straight out of school. The situation has become somewhat more fluid in recent years due to mergers and acquisitions, but a commonly heard refrain at companies that have been through mergers is that corporate culture is hard to change. An organization whose employees share a common corporate culture is very strong when the objective is clear and the answers are in view, but when they are not, the organization may be quite frail. This culture of unison may be distinctively Japanese, with the West being marked more by an unbroken tradition of dialogue going back to Socrates and Plato.[17] Some, though, take the view that dialogue has always been an integral part of everyday life in Japan, as expounded by ethnologist Tsuneichi Miyamoto. Most Japanese companies that have grown into major corporations, though, seem to embrace the culture of unison over that of dialogue.

CSR entails identifying what the company can do to promote social sustainability and implementing those actions. Unison can be an invincible asset when society and the wellspring of the company’s competitive strength are fixed. But, as I have noted, when society is in flux, companies need to respond flexibly, which may entail sacrificing a degree of unison. There is likely to be strong resistance to such change, inasmuch as unison is usually seen as a source of strength, but companies must realize that change is inevitable if they are to secure their own and society’s sustainability.

For this, both deliberation and dialogue are indispensable. Antennas must be extended to pick up what people are saying and doing and to think continually about how the company’s competitive advantages can be put to work in society. The traditional emphasis on action may have been an asset when objectives and answers were easy to see. But from now on, as diverse values vie with each other and answers become less visible, this approach will need to be replaced. Also needed to ensure social and corporate sustainability will be new ways of promoting labor mobility and developing human resources.[18]

e. Is the long-term approach to CSR a strength or a weakness?

One finding of the latest survey is that companies tend to maintain individual CSR initiatives for extended periods. Figure 16 shows the breakdown by issue of the reported length of implementation.

Figure 16. Duration of Activities Implemented

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Note: Of companies reporting that they have specific CSR initiatives to address the issues indicated, the number of years they have been implementing those initiatives.

 

For most issues, implementation periods of 4 years or over accounted for 80%–90% of total initiatives, and there were also many issues where initiatives that had been carried out for periods of 11 years or more accounted for over half of the total.

These figures indicate the strength of Japanese companies’ long-term commitments. Extended implementation periods are also seen in most of the case studies of this report. We may say that one characteristic of Japanese companies is that once they start collaborating with a social business or supporting socially vulnerable persons, they stick with that commitment for a long time.[19]

Society is constantly changing, though, and with the passage of a few years, the same terminology may come to represent a different set of social issues.[20] Continuation of the same initiative may satisfy the stakeholders involved. But the long-term approach may actually cause companies to overlook changes in society’s expectations. This would not only be a loss for society but may deprive companies of opportunities to create and maintain corporate value and could even threaten their own sustainability.

Analysis of the tendency toward long-term undertakings may be an issue for Japan’s CSR. The companies covered in the case studies for this report[21] are taking advantage of the strength of their long-term commitments. By resetting the objectives both for society and for the company itself, they are giving greater substance to their own raison d’être. This can serve as one vantage point for Japanese companies as they review their CSR programs.

(3) Issues in the evaluation and improvement process

a. Setting Objectives and Conducting Evaluations

Setting objectives and conducting ex-post evaluations are just as important in CSR as in other business activities. Figures 17 and 18 show the status of these processes and the substance of the evaluations.

Over 60% of the respondents set objectives, and most of them also conduct ex-post evaluations. In the case of donations and participation in external programs, the commonly cited methods for evaluating the results were the receipt of activity reports from the NGOs and NPOs to which the donations were directed and visits to the sites where activities were held. In the case of in-house programs, which account for a major share of CSR activities, site visits were the most commonly mentioned method. Some companies also assessed their activities objectively through interviews with beneficiaries and third parties, although the number of such firms was in the minority.

Figure 17. Setting Objectives and Conducting Ex-Post Evaluations

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Figure 18. Methods of Checking Results

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It is natural for companies to check the results of their donations and participation in external activities by receiving reports. NGOs and NPOs prepare such reports in order to reveal the significance of their activities for beneficiaries. If their reports fail to convey the significance for beneficiaries, they cannot hope to win further support.

In the case of companies’ own activities, by contrast, the process of checking results cannot be said to be adequate. This would seem to be related to the emphasis on action over deliberation. What is to be learned from visits to the sites of activities? If the beneficiaries are present, it may be possible to observe their reactions. But such reactions represent only the immediate outcome of each activity’s implementation. They reveal “outputs” rather than “outcomes.” The fact that only 40% of the companies conduct follow-up interviews with beneficiaries shows the low level of interest in outcomes.

Behind this problem there probably lies a lack of focus on such questions as what companies are seeking to achieve from their CSR activities, what social issues they are addressing, what state of affairs would represent a resolution of the issues, and whether companies can say that they have accomplished something. In other words, the setting of clear objectives, which ought to be part of the deliberation process, is not being conducted properly.

A growing number of companies are setting targets for their CSR activities. But this is still a developing trend. For example, few companies have quantified their CSR objectives—something that Japanese corporations excel at when it comes to their main business activities. Some business people admit that they do not know how to go about quantifying CSR targets, which is admittedly a complex subject. Our report, though, introduces a number of case studies of companies that have succeeded in setting concrete targets and implementing assessments with reference to the significance of their activities for sustainability.[22] The quantification of objectives clarifies what the organization is aiming for and allows the objectives to be shared. It is an important element of incorporating CSR into mainstream business management.

b. Progress in publicizing CSR activities

Communicating CSR activities takes various forms. The most common approach is to introduce one’s initiatives on corporate websites, followed by the publication of CSR and integrated reports. This is quite appropriate, given the kind of companies surveyed. And to judge from the results of our interviews and observation of publicity materials, companies appear to be assigning differentiated roles to their websites and reports in line with the characteristics of each media.

Figure 19. Publicity Media for CSR (multiple response)

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Reflecting the fact that the companies surveyed are leaders in the field of CSR, about 70% of the respondents are also conducting overseas publicity of their CSR programs. The most commonly cited geographical targets are the United States, Europe, and Asia. All of these companies are conducting CSR publicity in English, and about 30% are also doing so in Chinese. Many companies are using both their websites and printed reports for CSR publicity in languages other than Japanese as well. According to our interview findings, the foreign-language content is often simply a translation of the Japanese content, but there are some companies that are undertaking regionally oriented publicity as part of their CSR programs, such as by putting together special sections in response to local expectations.

Figure 20. Overseas Publicity of CSR Activities

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(4) More time required for governance reforms to take hold

In the annals of Japan’s CSR, 2014 will be remembered as the year when the Stewardship Code was fully adopted. This code was published in February 2014 by an expert panel of the Financial Services Agency as “Principles for Responsible Investors: Japan’s Stewardship Code—To promote sustainable growth of companies through investment and dialogue.”[23] The code “defines principles considered to be helpful for institutional investors who behave as responsible institutional investors in fulfilling their stewardship responsibilities with due regard both to their clients and beneficiaries and to investee companies,” and it calls on them to “to enhance the medium- to long-term investment return for their clients and beneficiaries (including ultimate beneficiaries) by improving and fostering the investee companies’ corporate value and sustainable growth through constructive engagement, or purposeful dialogue, based on in-depth knowledge of the companies and their business environment.”

It was also in 2014 that the Companies Act was revised to strengthen corporate governance with provisions calling for the appointment of outside directors. In response to strong suggestions that more active use be made of outside directors in order to enhance the oversight functions of the board of directors over executives, the revision (1) created a new “company with audit and supervisory committee” system, (2) tightened the conditions for outside directors, and (3) introduced a requirement for companies that do not appoint outside directors to explain why it is inappropriate for them to do so.

Will these changes in the provisions for corporate governance have the same sort of impact that the amendment of Britain’s Pensions Act that came into force in 2000 had in contributing to the spread of CSR?[24]

In our latest survey, in addition to asking about the composition of responding companies’ boards of directors, we analyzed whether differences of composition resulted in different levels of interest in social issues. Specifically, we compared the 73 responding companies that have women or non-Japanese on their boards with the total sample of 212 responding companies.

Figure 21. Composition of the Board of Directors

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Though we found a difference of over 10 percentage points in interest in the social issue of “poverty, hunger, and income inequality” on the overseas side, there was no significant difference with respect to other social issues.

This result may be considered only natural in view of the current handling of CSR by boards of directors. Even though boards may receive reports on CSR-related matters, they seldom take up these matters as a subject for deliberation. CSR ought to be a core management issue relating to the company’s response to the expectations of society, but in practice it is not treated as such. And even when outsiders are included in boards of directors, if these members are from other private-sector companies, they are unlikely to have divergent social perspectives. Given this state of affairs, it will probably take time for concrete differences to appear.

This is an important issue for CSR, and we plan to continue monitoring progress in this area as we improve our survey in the future.

Figure 22. Implementation of Initiatives Addressing Social Issues: Comparison Based on Composition of Board of Directors

a. Domestic

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b. Overseas

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(5) Shared recognition of issues in promoting CSR

To conclude our analysis of the latest survey, let us look at what the responding companies see as the issues that they face in seeking to advance their CSR programs. We asked respondents to identify the issues that they face (1) at the executive level, (2) in their business operations, and (3) in their CSR departments.

Figure 23. Issues in Promoting CSR (multiple response)

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The most commonly cited issues at the executive level and in business operations were the same. The top three were “fitting CSR into business activities (pursing both simultaneously),” “insufficient understanding of CSR,” and “promoting in-house awareness.” Actual cases cited were also more numerous than for other issues. There is considerable overlap between these and the issues covered in this paper, and we see that even companies that are enthusiastic about CSR have common concerns relating to their CSR programs.

The issues in the CSR departments, on the other hand, seem to be slightly different. “Promoting in-house awareness,” which is part of these departments’ mission, ranks highest, and the second-place issue is “insufficient resources” (personnel, materials, and funds). If we look at this in conjunction with the issues cited in this paper, such as the tendency for CSR activities to extend over long terms and the process of setting objectives and conducting evaluations, we can say that it comes down to a question of how CSR programs are reviewed—a process that involves setting priorities, adopting a basic policy to serve as a yardstick, picking the social issues to address, and conducting dialogue with carefully selected partners—even though such a route may seem like a detour. The third-place issue, “Improving collaboration among departments” also overlaps the “promoting awareness” issue, and it also needs to be seen as one of the problems faced by CSR departments, which, as noted in our 2014 CSR White Paper, are liable to be isolated within their company. This is not an issue just for the CSR department but also one that needs to be addressed by corporate management. And it may be one manifestation of the fact that companies have not yet been able to build a shared awareness of what CSR is.

 

[1] For example, Toyo Keizai publishes CSR kigyō sōran (Comprehensive Corporate Listing of CSR).

[2] This survey, directed at readers of CSR reports, has been conducted since 2000. It also contains international comparisons and provides extremely important material for examining CSR in Japan. NTT has also held symposiums based on the survey.

[3] These include the surveys by the Japan Sustainable Investment Forum (http://www.jsif.jp.net/).

[4] In 2013, the Tokyo Foundation conducted a survey of approximately 2,000 Japanese companies to learn of their CSR initiatives. Essays based on the survey results and case studies of six companies were compiled into a CSR White Paper, published in Japanese in July 2014. English translations are available at http://www.tokyofoundation.org/en/topics/csr .

[5] Except where noted otherwise, the graphs and tables presented herein were created by the Tokyo Foundation on the basis of the latest CSR survey.

[6] Japan’s relative poverty rate is high among the members of the Organization for Economic Cooperation and Development, and it has been increasing over the years. According to Cabinet Office data, the poverty rate among single-female-parent households is especially high.

[7] The majority of the measures taken by companies in response to these issues consist of programs directed at their employees, including implementation of training and internal systems.

[8] Piketty’s work was published in French in the summer of 2013, in English in April 2014, and in Japanese in December 2014.

[9] Some of the “other” entries duplicated items included in the list of social issues set forth in the questionnaire. We have left these responses as submitted on the assumption that the responding companies were deliberately positioning these items separately.

[10] If one takes a long-term view, of course, all the items can be seen as contributing to the creation of corporate value.

[11] This point is extremely important, as talk of “creating shared value” is often marred by a lack of understanding regarding the true aims of CSR.

[12] This is discussed in detail in the case studies for this report. Of particular relevance is the case of Denso, which identifies values that only a B2B enterprise could create for its stakeholders.

[13] Specific examples include (1) Shiseido, which provides cosmetic care for cancer survivors and has conducted roundtable dialogue with stakeholders as part of the process of abolishing animal testing, (2) Fancl, which reconstructed its CSR program around its long-term interaction with a welfare facility, and (3) Marks & Spencer, which actively seeks out dialogue with a variety of stakeholders.

[14] In its 2001 report on intermediate organizations supporting NPOs, the Cabinet Office identified them as “organizations that grasp the changes in local communities and NPOs, act as intermediaries between NPOs and providers of human resources, funds, information, and other resources, and in the broad sense, coordinate supply and demand for services, aiming for symbiosis and collaboration in a pluralistic society.”

[15] As noted in the 2014 CSR White Paper, with regard to overseas subsidiaries many CSR reports present only an account of activities by volunteers and the like undertaken by various plants and offices, rather than the issues addressed.

[16] One example is seen in the case study of Fuji Xerox, which has set quantitative targets and collaborated with suppliers.

[17] This is seen in the many dialogues and in the Essays of Michel de Montaigne.

[18] The idea of building up CSR programs with a focus on human resources development appears repeatedly in the case studies for this report.

[19] This is something I often personally feel through my involvement in NPO management. It seems that many companies are extremely cautious about starting collaboration, but once they begin addressing a particular social issue, they go on deepening their involvement.

[20] For example, the interpretation of “human rights” is becoming much broader. This term covers an extremely wide scope, referring to the entirety of rights that every human possesses from birth. These include not just the right to life but also to rights relating to standard of living, health, education, employment, working conditions, and participation in society, along with freedom of speech, thought, and religion. How are companies to address all these rights in their activities? Needless to say, they must respond with a view to a full range of human rights while also respecting local thinking.

[21] Examples include Fancl, which has reconstructed its CSR program, Denso, which conducts CSR as a “window to society,” and Marks & Spencer, which has adopted a long-term vision.

[22] This is seen in Denso’s incorporation of CSR objectives into its business operations and in Fuji Xerox’s quantification of its objectives.

[23] http://www.fsa.go.jp/en/refer/councils/stewardship/20140407/01.pdf

[24] Under this law, pension fund trustees must disclose “the extent to which (if at all) social, environmental or ethical considerations are taken into account” in their investment principles. As a result, an increased number of pension funds in Britain have come to pursue socially responsible investment.

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