In the ever-evolving landscape of global business, one acronym has been making waves, resonating not just with corporations but also with conscientious investors and stakeholders – ESG, or Environmental, Social, and Governance factors. As we explore ESGs in Japan, let’s begin by understanding why they hold significance within the Japanese context.
In the modern business landscape, Environmental. Social, and Governance (ESG) considerations are not merely buzzwords; they’re the compass guiding companies toward sustainable growth while helping them avoid reputational and economic pitfalls. Japan, a global economic powerhouse, is acutely aware of the importance of ESGs in shaping its future. Let’s go into why ESGs in Japan matter, breaking down the ‘E,’ ‘S,’ and ‘G’ aspects.
E: Environment
The ‘E’ pillar, addressing environmental sustainability. Has gained substantial traction in Japan, largely due to unwavering government commitment. At COP26 in Glasgow in 2021, Japan’s Prime Minister, Fumio Kishida, made a groundbreaking pledge of USD10 billion over the next five years to transition Asia from fossil-fuel-fired thermal power to zero-emission alternatives like ammonia and hydrogen. This pledge harmonizes with Japan’s Green Growth Strategy, introduced in 2020, which aims to achieve net-zero greenhouse gas (GHG) emissions by 2050 to mitigate climate change.
Not stopping there, Japan solidified its algeria phone number library commitment by amending the Act on Promotion of Global Warming Countermeasures, legally anchoring its aim to achieve carbon neutrality by 2050.
S: Social
The ‘S’ in ESGs encompasses a broad spectrum of social issues. From business practices to employment and diversity. Japan has been making strides in various social domains:
- Antitrust Regulations: New regulations targeting digital platforms aim to bolster market fairness and competition.
- Gender Equality: The nation is intensifying efforts to promote gender equality, striving to create a more inclusive workplace.
- Human Rights Due Diligence: A growing emphasis is placed on ensuring human rights are upheld throughout corporate operations. Aligning with global standards.
G: Governance
Two critical aspects of governance under scrutiny in Japan are:
- Independence of the Board of Directors: Ensuring the board’s independence from undue influence.
- Effectiveness of Executive Compensation: Evaluating the alignment of executive pay with corporate performance.
Understanding ESGs in Japan
Are there notable ESG practices in Japanese companies?
- Takeda Pharmaceuticals, a global later on we will show you successful examples pharmaceutical giant headquartered in Japan, is a prime example of a company deeply committed to ESGs in Japan. Their core strategy, encapsulated in the “Patient, People, and Planet imperatives,” embodies their dedication to:
- Patient Care: Transforms science into treatments for patients and communities with limited options, addressing critical medical needs
- People Empowerment: Diverse and inclusive organization where people thrive, grow, and realize their potential
- Planet Stewardship: Safeguarding natural systems and human health
- Toyota, a global automotive leader from Japan, is deeply committed to reducing its environmental footprint and fostering sustainable development in all aspects of its business. This commitment is central to Toyota’s role in promoting ESGs in Japan:
Environmental Responsibility:
- Toyota strives to minimize its environmental impact across its operations, echoing the ‘E’ in ESGs in Japan, emphasizing environmental sustainability.
- Collaborative Partnerships: Toyota forges strong bonds with diverse individuals and organizations dedicated to environmental preservation. Addressing societal aspects of ESG.
- Initiative: Toyota’s proactive ESG initiatives include the Toyota Earth Charter, established in 1992 and revised in 2000.
- Environmental Responsibility: Rakuten addresses the climate crisis through tangible actions involving every part of its value chain, envisioning a future where it leaves a positive impact on the environment and its resources, aligning with the emphasis on environmental responsibility in ESGs in Japan.
- Social Inclusivity: Embracing diversity and inclusivity, Rakuten creates a safe environment where all employees can thrive. The commitment to social responsibility aligns with the societal aspects of ESGs in Japan. Promoting the well-being of its workforce.
- Governance Excellence: Rigorous governance enhances corporate value at Rakuten. The company continually strengthens its foundations for responsible management structures, upholding the trust of stakeholders. This governance commitment aligns with the ‘G’ aspect of ESGs in Japan, emphasizing ethical and transparent practices.
Struggling to scale your business in Japan?
How do cultural values influence ESGs in Japan?
ESGs in Japan are deeply rooted in a 400-year-old concept known as Sanpo Yoshi, meaning ‘three-way satisfaction’: benefiting the seller, buyer, and society. These enterprising individuals played a crucial role in early Japanese industry, facilitating everything from infrastructure development for manufacturing to the flow of Western goods into Japan after centuries of isolation.
These merchants, who traversed far and b2 creviews wide for business, recognized the importance of building long-term, trusting relationships with the communities they visited. They based their trading principles on Confucius’ ‘Golden Rule’ – ‘do unto others as you would have them do to you.’ This ethical foundation earned them acceptance across Japan and led to their immense success.
These enduring principles have had a profound influence on the development of modern ESG practices. By urging CEOs and leaders to run their businesses with a holistic perspective that considers employees and society, not just shareholders, Japan has cultivated distinctive ESG practices that would make ESG-conscious Western companies proud (See our articles covering American Companies in Japan and European Companies in Japan for some insights about their nature).
Putting Society First
This lower pay reflects a lesser focus on profit and personal gain. Allowing Japanese CEOs to prioritize the social purpose of their companies.
Honesty and Customer-Centricity
Japanese entrepreneurs are known for their frankness and honesty in dealings with customers. This drives them to create the best, most sustainable products for their customers.
Unique Initiatives Rooted in Sanpo Yoshi
Sysmex, the world’s largest blood testing company, gained a reputation for caring about its customers by providing quick and comprehensive blood tests in the 1970s. Recognizing the harm caused by commonly used refrigerants to the ozone layer in the latter half of the 20th century, Daikin swiftly developed ozone-friendly alternatives. They established the world’s first commercial-scale plant for a key alternative in 1997, showcasing their commitment to environmental responsibility.
This is the essence of Sanpo Yoshi, a philosophy that continues to pave the way for ESGs in Japan to flourish.