CSR and social communication expert Hideto DeDe Kawakita surveys the development of Japanese companies' CSR communication efforts over the last two decades and offers a prognosis for the future, when companies will need to engage more actively with civil society in deliberating, deciding, and acting on social issues.

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The International Institute for Human, Organization, and the Earth (IIHOE), of which I am the chief executive officer, is a nonprofit organization dedicated to the “democratic and balanced development of all the lives on the Earth.” Since its inception in 1994, IIHOE has pursued a variety of projects and programs designed to support nonprofits, social enterprises, and other organizations in their efforts to address social issues. Not long after our establishment, we began responding to requests from private businesses with a special commitment to corporate social responsibility (CSR) and a need for independent feedback from the nonprofit sector.

In the following, I would like to use this experience as a platform from which to survey the development of CSR communication and stakeholder engagement by Japanese corporations over the last two decades and offer my vision of the next stage in this evolutionary process.

The Rise of Sustainability Reporting

The 1992 United Nations Conference on Environment and Development (UNCED), or Earth Summit, held shortly after the collapse of the Soviet Union and the end of the Cold War, brought about a paradigm shift as international society awakened to the need for participation by private businesses and civil society in the resolution of issues formerly considered the exclusive domain of government negotiations. Japanese corporations became aware of the international community’s rising expectations regarding their role in addressing these problems and of growing public concerns about environmental degradation, and they responded with a concerted effort to communicate their environmental commitment through ads stressing their earth friendly products or describing their nature conservation campaigns, recycling programs, and other environmental initiatives.

Two subsequent developments with a major impact on CSR communication in Japan were the publication of an international standard for environmental management systems (ISO 14001) and the release of the first Sustainability Reporting Guidelines by the organization that was later to become the Global Reporting Initiative.

Conformance with international standards for environmental management began to assume the character of a requirement for manufacturing companies that relied on exports to the European Union. Starting with such manufacturers, the push for ISO 14001 certification gained momentum through the supply chain, encompassing suppliers of materials and parts as well as logistics firms and distributors.

Many of these Japanese businesses took to heart the public communication provision (4.4.3) of ISO 14001 and spearheaded the publication of annual reports disclosing environmental performance data and experimented with opportunities for dialogue with nongovernmental organizations (NGOs).

At around the same time, a consensus was emerging that more disclosure would not lead to greater trust as long as companies were free to pick and choose the data that reflected most favorably on them. Talks between NGOs and businesses led to the birth of the Global Reporting Initiative, a movement to standardize the content and indicators of corporate social responsibility. The publication of the GRI Sustainability Reporting Guidelines had a major impact on Japan’s more progressive companies, hastening the implementation of environmental management systems to facilitate monitoring and disclosure of environmental performance in conformance with international standards.

Generally speaking, however, environmental reporting by Japanese companies in the 1990s took the form of a rather self-serving monologue. In an effort to appear responsive to growing global concerns about the environment, Japanese businesses instituted environmental management systems and used them to collect data that they published once a year in a printed and bound environmental report.

Two major factors were responsible for the subsequent shift away from annual reports: the spread of the Internet and the costs associated with print publications.

As more people gained access to the Internet, computer-savvy netizens began to seek up-to-date information from corporate websites and other online sources, instead of waiting for the mail carrier to deliver copies of annual environmental reports. At the same time, executives and others began to question the purpose and cost effectiveness of such publications.

For whom were these labor- and cost-intensive booklets intended? Those who cared enough about social and environmental issues to read the reports were demanding ever more comprehensive, detailed, and up-to-date information. At the same time, it was hard to see how such reporting translated into higher sales or built brand credibility. Corporate officers in charge of environmental management and public communications were facing tough questions regarding the purpose and efficacy of their activities.

The Key Role of Independent Opinions

A few progressive companies responded to this challenge by soliciting independent opinions as a means of fostering credibility and improving their CSR programs, even while recognizing that such efforts were unlikely to have a direct impact on sales. In 2001, Yasuda Fire & Marine Insurance Company (now Sompo Japan Nipponkoa) asked me to write an opinion for publication in the company’s latest environmental report. Since then, I have written 117 opinions for 28 companies (Table 1).

More than 200 Japanese companies currently include independent opinions in their environmental and CSR reports. Unfortunately, the vast majority of these comments speak only to the content of the report, which is sent to the evaluator shortly before publication. By rights, an independent opinion should be more than a book report. Companies that are serious about continuous improvement need to hear the opinions of objective outside sources—that is, parties that have no other business relationship with the company—regarding specific areas in need of correction or long-term improvement, and use that information to monitor and rate concrete progress within the company under the PDCA (plan, do, check, action) management cycle.

With this in mind, IIHOE has adopted a policy of securing the client’s agreement on the following points before undertaking to write an independent opinion ( http://blog.canpan.info/iihoe/archive/34 , Japanese only).

1. The client shall impose no restrictions on the evaluator whatsoever with regard to the scope, content, or wording of his/her opinion or with regard to the scope of his/her pre-evaluation interviews.
2. The client shall impose no restrictions on whom the evaluator may interview for evaluation purposes.
3. The client shall respond promptly to the evaluator’s requests for pre-evaluation interviews and tours or inspections.
4. The client must report on its subsequent progress in each area identified as “needing improvement” in the final opinion, either through its website or in its annual report for the next fiscal year.

Interviews are a must, as the foregoing suggests. An opinion can only be written after face-to-face meetings with the company’s top environmental and CSR managers, as well as officers in charge of legal affairs, health and safety, information security, and business continuity planning. In fact, a typical opinion involves close to a dozen interviews, combined where possible with tours of production or sales sites. Those soliciting an independent opinion from IIHOE must be prepared to set aside at least one or two days for interviews and additional time to respond to follow-up questions. I have only the highest regard for those companies that have demonstrated their commitment to continuous improvement by requesting our services year after year.

Table 1. Number of Independent Opinions Provided by the Author (28 Companies as of February 2014)

When I first began writing these outside opinions, much of my criticism focused on the need to adopt management systems to ensure ongoing, companywide progress toward quantitative environmental goals and health and safety targets. In recent years, we have spent the bulk of our time with officers in charge of human resources and procurement. Generally speaking, these are the two divisions that have lagged behind in terms of internationalization, adoption of visual management tools (using quantitative measures and visual feedback to clarify challenges, targets, and progress), and standardization of CSR policies among domestic and overseas subsidiaries. Among the more progressive corporations, however, reporting by these divisions has gradually improved in respect to both quantity and quality.

By communicating our objective opinion regarding a company’s progress toward its own environmental and CSR goals on the basis of existing conditions and by identifying problem areas and suggesting future goals, we provide input critical to the C and A (check, action) phases of the PDCA cycle, helping supply a degree of discipline that is usually missing when all such evaluation is done internally.

Has Reporting Enhanced Public Trust?

The question remains: Have Japanese corporations succeeded in enhancing their credibility toward the public with respect to CSR?

One of the key tasks of NGOs like IIHOE is to prevent complacency and correct the innate tendency toward slanted, self-congratulatory reporting. Unfortunately, the influence of NGOs on the business community is relatively limited in Japan. This is one reason IIHOE, in partnership with NTT Resonant (operator of the environmental website Eco Goo and a member of NTT Group), has conducted an annual public opinion survey to monitor attitudes regarding sustainability reporting and CSR priorities. This survey, the only one of its kind in the world today, has expanded greatly in scope since it was first conducted in 2000. Initially limited to about 2,000 Japanese respondents, the sample now encompasses 30,000–40,000 residents in Japan and about 500 each in Britain, China, Germany, and Malaysia. In the following, I review some of the key points we have gleaned from 14 years of research.

Table 2. Public Awareness of Environmental/CSR Reporting

If we compare the results of the most recent (2013) survey with that carried out 10 years earlier (Table 2), we see a substantial decrease in the number of people who have either read or seen a sustainability (environmental or CSR) report, from 36.7% to 27.7%. Meanwhile, the portion with no prior awareness of such reports rose from 25.1% to a full 39.2%. Even making allowances for the 10-fold increase in sample size, these results are discouraging.

With regard to the content of companies’ sustainability reports, the percentage of respondents that deemed them either “quite trustworthy” or “fairly trustworthy” dropped from 54.2% to 47.9%. Yet the ratio that judged them “somewhat untrustworthy” or “completely untrustworthy” also dropped, from 12.3% to 9.9%. By contrast, those choosing the response “can’t say either way” rose from 33.0% to 41.8%. These trends may reflect the increasing complexity and detail of reporting in compliance with the GRI and ISO 26000 (social responsibility) guidelines, rendering the content difficult for the average reader to understand.

The survey also asked respondents which facets of CSR they considered most important for companies to report, choosing from the main GRI headings in the 2003 survey and from the ISO 26000 headings in 2013. The results are tabulated in Tables 3 and 4 below. In addition, in 2003 we were able to gather comparative data on the priorities of the reporting corporations themselves with the help of the Environmental Report Network (now the Sustainability Communication Network), an organization of corporate officers involved in environmental and CSR reporting (Table 3).

Table 3. CSR Priorities for Citizens and Companies, 2003

Since 2011, we have also been conducting the survey in selected countries overseas to gauge the perceived importance of CSR efforts under each of the ISO 26000 headings in Japan and overseas. Since then, a few noteworthy patterns have emerged.

First, Japanese respondents have consistently stressed the importance of labor and consumer issues, while respondents in in Britain and Germany seem more concerned with human rights. Within Japan, a growing perception gap has emerged between the younger and older generations with regard to the relative importance of various CSR topics. When asked to choose as many as three important CSR topics from the ISO 26000 core subjects, respondents aged 50 and over were most apt to choose the environment (selected by 62.9%), with labor practices coming in second (54.7%). Among respondent under 30 years of age, the top response was labor practices (66.5%), followed by the environment (48.5%).

Table 4. Perceived Importance of ISO 26000 CSR Topics

(% responding “very important”)

Within Japanese companies, we see a similar gap between the attitudes of the rank-and-file employees and members of management. The former attaches greater importance to labor issues than the environment, while the latter tend to feel that the company has fulfilled its social responsibility with its environmental policies and often have no plans for addressing such labor issues as diversity and equal opportunity over the medium or long term.

Figure 1. Perceived Importance of ISO 26000 Core Subjects by Country, 2013 (Choose Up to Three)

From Dialogue to Engagement

By illuminating perception gaps of this nature, our survey, we believe, has spurred CSR officers to push for new CSR initiatives and helped them make their case to executives and other corporate divisions. In this way, our survey is helping to raise the consciousness of Japanese CSR officers, and thereby contributing to the evolution of CSR policies and programs in Japan.

Each year the results of the latest survey are presented at the NTT Group’s Environmental/CSR Reporting Symposium, held in conjunction with the December Eco-Products exhibition, Japan’s largest environmental trade fair (sponsored by the Japan Environmental Management Association for Industry and Nikkei Inc.). For corporate employees involved in CSR, including personnel and procurement officers as well as CSR managers, the symposium has become one of the major events of the year. In addition to the survey results, each symposium features a panel discussion on a current CSR theme, chosen for its special relevance to Japanese business going forward.

A survey of the topics covered by the symposiums since 2000 (Table 5) underscores not only the evolution of CSR in Japan—including the shift from “monologue” to “dialogue” and the growth of efforts to stem climate change—but also the maturation of our discourse on the subject, as we tackled such timely themes as global credibility and organizational diversity.

Table 5. Environmental/CSR Reporting Symposium Themes, 2000–2013

In terms of production and sales, Japanese corporations are already active, successful participants in the global economy. But their success over the next two decades will likely hinge on whether they can align their values and governance structures to international standards. The key here will be their willingness to engage with civil society in deliberating, deciding, and acting on social issues, instead of simply thinking and acting on their own. At IIHOE, we hope to do what we can to encourage and support the kind of effective global engagement needed to maintain the prestige and popularity of Japanese brands around the world.