ISSN 1346-9029

FRI Research Report No.437 March 2017

Senior Research Fellow, Takafumi Ikuta

Japanese Companies̓ Activities in the Age of the SDGs

This is an English summarized version of FRI Research Report No.437 “Corporate Strategy in the Age of the SDGs” (2017) by Takafumi Ikuta (URL http://www.fujitsu.com/jp/Images/no437.pdf : available in Japanese only), edited for overseas readers.

FUJITSU Research InstituteEconomic Research Center

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1 Trends surrounding companies and SDGs

It has been more than a year since the United Nations launched the Sustainable

Development Goals (SDGs) in January 2016. SDGs are goals which the

international community should achieve by 2030 with the aim to achieve

sustainable development mainly with focus on economic growth, social inclusion,

and environmental conservation. SDGs have replaced the Millennium Development

Goals (MDGs), which were established in 2000 with a timeline set for 2015. The

MDGs had 8 goals and 21 targets, while the SDGs are far more extensive with 17

goals and 169 targets. The SDGs will serve as a global “common language” for a

long period, until 2030, in planning measures for addressing social challenges.

All U.N. member states including Japan are required to report their progress

towards achievement of SDGs and expected to establish domestic frameworks,

such as SDGs-related policies and indicators. Accordingly, the Japanese

government set up the SDGs Promotion Headquarters chaired by the prime

minister in May 2016, and laid down the SDGs Implementation Guiding Principles in

December 2016 based on the following vision: “Become a leader toward a future

where economic, social and environmental improvements are attained in an

integrated, sustainable and resilient manner while leaving no one behind.”1 As a

consequence, initiatives toward the achievement of SDGs are expected to begin in

earnest also in Japan.

Businesses will not be obliged to make efforts toward SDGs. However, business

communities, as well as governments of various nations, international

organizations, academic institutions, and NGOs, were involved in the SDGs

formulation process, and SDGs define the role of the private sector toward their

achievement. The international community can benefit significantly if major global

companies, which are rich in human resources, technology, and financial resources,

work on addressing social challenges in the entire supply chain. There are thus

great expectations for companies. Japan’s SDGs Implementation Guiding Principles

state that “it is critical that the private sector contributes to solutions for the public

agenda.”

In addition, the SDGs Implementation Guiding Principles stipulate the

government’s policies toward private sector engagement that the government will

1 http://www.kantei.go.jp/jp/singi/sdgs/

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consider incentive measures, such as sharing good practices of private-sector

businesses on advanced implementation measures and giving awards, as well as

making efforts for creating an environment conducive for companies in the private

sector to foster innovation in their businesses. In addition, the Ministry of the

Environment has been working on the formulation of guidance designed to promote

efforts for SDGs made by small- and medium-sized companies, with completion

targeted by the end of FY2017. Meanwhile, the Japan International Cooperation

Agency (JICA) has conducted projects aimed to promote base of the pyramid (BOP)

business that contributes to solving issues faced by the poor. Beginning from 2017,

JICA expanded the range of target businesses and started to provide support to

companies which are considering contributing to the achievement of SDGs through

business in developing countries2.

Consideration of SDGs, a common language for solving social challenges, is

essential for companies in planning their future corporate activities. There is a good

chance that corporate activities will inhibit the achievement of SDGs, and

companies will have to put weight on business activities that take SDGs into

consideration from the viewpoint of risk management. In addition, there will be an

increasing tendency that the perspective of SDGs will be incorporated in corporate

evaluation, etc. Many goals and targets are set out under SDGs, which suggests

that there are ample global business opportunities that can be addressed. The

desired course of action for companies is to review their business activities

including value chains from the perspective of SDGs to identify factors that could

have a positive impact and a negative impact, respectively, on society, and examine

new business opportunities and reduce risks.

According to the report by the Business and Sustainable Development

Commission (BSDC)3, achieving the SDGs will open up US$12 trillion of market

opportunities worldwide by 2030 in four sectors: “food and agriculture,” “cities,”

“energy and materials,” and “health and well-being.” The Japanese government’s

SDGs Implementation Guiding Principles set out eight priority areas: 1)

Empowerment of all people, 2) Achievement of good health and longevity, 3)

Creating Growth Markets, Revitalization of Rural Areas, and Promoting Science

2

http://gwweb.jica.go.jp/km/FSubject9999.nsf/3b8a2d403517ae4549256f2d002e1dcc/85bbeffde3b5679149258059002b561d/$FILE/%E2%96%A0JICA's%20Position%20Paper%20on%20the%20SDGs.pdf

3 Business and Sustainable Development Commission (2017) “Better Business, Better World”

（http://report.businesscommission.org/report）。

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Technology and Innovation, 4) Sustainable and Resilient Land Use, Promoting

Quality Infrastructure, 5) Energy Conservation, Renewable Energy, Climate Change

Countermeasures, and Sound Material-Cycle Society, 6) Conservation of

Environment, including Biodiversity, Forests and the Oceans, 7) Achieving Peaceful,

Safe and Secure Societies, and 8) Strengthening the Means and Frameworks for the

Implementation of the SDGs, as well as concrete measures under those areas. It is

possible for companies to explore new business opportunities in Japan and

overseas in relation to those measures4.

4 http://www.kantei.go.jp/jp/singi/sdgs/dai2/siryou1e.pdf

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2 Status of efforts by Japanese companies

2.1 Reference to SDGs

Figure 1 shows the status of reference to SDGs by 1,408 Japanese companies,

published in “2017 CSR Companies Complete Guide” (Toyo Keizai Inc. 2016). Of the

1,408 companies surveyed, 218 companies (15% of the total) make reference to

SDGs and 99 companies (7% of the total) are considering doing so. Totaling these

figures, about 23% of 1,408 companies either make, or are considering, reference

to SDGs. Given that it was from January 2016 that SDGs came into force, SDGs

have gained great attention from companies. The figure also indicates that the

percentage of companies that make, or are considering, reference to SDGs is higher

in manufacturing industries (including agriculture, forestry and fisheries, mining,

and construction) than in non-manufacturing industries.

Figure 1. Status of Reference to SDGs by Japanese companies

(Source) Created by FRI based on data from “2017 CSR Companies Complete Guide”

(Toyo Keizai Inc. 2016)

A comparison of percentages of companies that make, or are considering,

reference to SDGs in key industries show, as seen in Figure 2, that the

transportation equipment industry had the highest percentage (37%), followed by

the electronics (33%), foods (29%), finance/insurance (29%), and

chemicals/pharmaceutical (27%). On the other hand, percentages were relatively

low in industries, such as wholesale (9%), retail (10%), and iron &

Manufacturing

(733 companies)

Non-manufacturing

(675 companies)

Total

(1408 companies)

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steel/nonferrous metals (15%). Among manufacturing sectors, industries that

deliver goods to final consumers tend to have high percentages of companies that

make, or are considering, reference to SDGs. This indicates that a high percentage

of companies in those sectors place emphasis on explaining their engagement in

social challenges to consumers. Among non-manufacturing companies, the

finance/insurance industry has a high percentage of companies that make, or are

considering, reference to SDGs. The possible reason is that companies in this

industry place emphasis on screening companies for making investment, such as

through ESG investments, or providing loans by taking into account their

environmental, social and governance factors, which may have led to an increased

awareness of SDGs among them. On the other hand, the wholesale and retail

industries are characterized by a very large number of companies surveyed,

including small-size companies. This may be the reason that these industries had

low percentages of companies which make, or are considering, reference to SDGs.

Figure 2. Status of Reference to SDGs by Japanese companies by key

industry

(Source) Created by FRI based on data from “2017 CSR Companies Complete Guide”

(Toyo Keizai Inc. 2016)

(Note) Figures (%) shown on the right of the bars are the ratios of companies that

make, or are considering, reference to SDGs.

23%

29%

27%

15%

20%

33%

37%

20%

19%

9%

10%

29%

18%

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2.2 Efforts of major companies

Figure 3 shows the result of a survey of 219 Japanese companies ranked on the

2016 Forbes Global 2000 list5 on whether they make reference to SDGs, based on

the information publicly available on their websites, etc. (as of December 31, 2016),

to closely examine the efforts of major companies. Of the companies surveyed, 72

companies (33% of the companies surveyed) made statements about SDGs, and

11 companies (5% of the companies surveyed) disclosed that they had received

external indication on SDGs6.

Figure 3. Status of mention of SDGs by Japanese companies listed on the

Forbes Global 2000 (As of December 31, 2016)

(Source) Created by FUJITSU RESEARCH INSTITUTE based on “Forbes Global 2000”

(2016) and publicly available information of each company

Compared to the companies on the CSR Ranking of Companies surveyed as

described in 2.1, these 219 companies surveyed tend to be limited to large-size

companies7, 8. In addition, one would expect that the ratio of companies which

5 https://www.forbes.com/global2000/list/#country:Japan

6 Companies whose CSR Reports included third-party opinions “requesting consideration of SDGs”

(Companies which received external indication on SDGs and made mention of SDGs were classified under “companies that made mention of SDGs”.) These companies did not express their views or make mention of their direct/indirect efforts regarding SDGs but they expressed their recognition of SDGs. For this reason, they were distinguished from “companies that made no mention of SDGs”.

7 Forbes Global 2000 is a list of top 2000 publicly traded companies in the world, as measured

comprehensively by revenues, profits, assets, and market value. Accordingly, size of a company is not a selection criterion, but many of the companies on the list are large-size companies.

8 The difference between the survey of companies on the CSR Ranking of Companies and that of

Japanese companies ranked on the Forbes Global 2000 is that companies surveyed in the former are those which responded to the questionnaire conducted by Toyo Keizai Inc., while in the latter survey, the subject of the survey was publicly available information on all the 219 Japanese companies ranked

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responded that they made reference to SDGs when specifically asked about it, as

was the case in the survey for the CSR Ranking of Companies, is higher than the

ratio of companies which mention SDGs in publicly available information sources.

Considering these, the fact that the ratio of Japanese companies ranked on the

2016 Forbes Global 2000 that made statements about SDGs (33%) is higher than

the ratio of companies on the CSR Ranking of Companies that make reference to

SDGs (15%) indicates a very high level of interest on SDGs among major Japanese

companies.

Of the 219 Japanese companies, 56, which account for 57% of the 99 companies

ranked high (companies in the top 1,000), made statements about SDGs, while

only 16, or 13%, of the 120 low-ranked companies (companies ranked 1000 to

2000) did so, indicating a large gap between upper-ranked companies and

lower-ranked. A comparison of the 105 manufacturing and 114 non-manufacturing

companies ranked on the Forbes Global 2000 indicates a tendency that the ratio of

companies which made statements about SDGs is higher for manufacturers (47%)

than that for non-manufacturers (20%).

Figure 4 shows categorized statements about SDGs made by 72 companies,

which were among Japanese companies ranked on the Forbes Global 2000. The

most common case was statements about SDGs in messages from top

management (or director in charge) of a company included at the top-page of a

CSR report, etc., and 40 companies out of the 72 companies are classified to this

case. In Japan, we can see from this that “statements about SDGs” often means

under present circumstances that top management make statements that their

companies are aware of SDGs or are hoping to contribute to SDGs.

Some companies have already launched concrete measures. Specifically, there

are 10 companies which have reflected SDGs in their CSR policies and principles.

For instance, FUJIFILM Holdings Corporation relates their CSR plan promotion

policy to SDGs by conducting a review of the Medium-Term CSR Plan, whereby they

go over the progress in addressing their initially-set priority issues by taking into

account the perspective of SDGs9. NTT identifies CSR issues with a view to SDGs in

revising the NTT Group CSR Charter10. ANA plans to reflect SDGs in their following

CSR Policy11.

on the Forbes Global 2000.

9 http://www.fujifilmholdings.com/en/sustainability/valuePlan2016/process/index.html

10 http://www.ntt.co.jp/csr_e/groupcsr/csr_policy.html

11 https://www.ana.co.jp/group/en/csr/group/activity.html

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Figure 4. Details of statements about SDGs by 72 Japanese companies

ranked on the Forbes Global 2000 (As of December 31, 2016)

(Source) Created by FRI based on “Forbes Global 2000” (2016) and publicly available

information of companies surveyed

(Note) The total number of companies (total of the figures shown on the right of the

bars) exceeds 72 since there are companies which made different types of

remarks about SDGs.

There were 18 companies that made reference to SDGs when they analyzed their

materiality (priority areas and priority issues), which was the second most common

case following the case in which companies’ top management made statements

about SDGs in their messages. For instance, Bridgestone Corporation makes

reference to SDGs to identify social issues in examining priority areas for addressing

sustainability issues, and specifies areas in which they can contribute to SDGs12.

Asahi Group Holdings, Ltd. has renewed CSR priority themes by reflecting SDGs13.

Some companies are working to relate their businesses to SDGs. There were 13

companies which were comprehensively examining relevance between all 17 goals

of SDGs and their businesses. Since details of businesses differ among companies,

some companies indicated relevance between part of the 17 goals and their

businesses, while others showed relevance between all the 17 goals and their

businesses. For instance, Ricoh Company Ltd., after indicating top priority areas

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http://www.bridgestone.com/responsibilities/index.html 13

http://www.asahigroup-holdings.com/csr/philosophy/theme.html (Japanese)

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based on the materiality analysis, has set out goals for SDGs and concrete

initiatives related to the top priority areas14. Daiichi Sankyo Co., Ltd. has disclosed

a list of their comprehensive initiatives toward achieving goal for each of the 17

goals of SDGs 15 . There were 15 companies which picked out some of their

businesses and showed their relevance to SDGs, although they did not indicated

relevance between all of their businesses and SDGs. Ajinomoto Co., Inc., for

instance, has explained their nutrition improvement projects in developing nations

in relation to SDGs16. Toppan Printing Co., Ltd. relates SDGs to their support for

literacy rates improvement17 and calculation of water resources protection effects

of wood from forest thinning18.

There were three companies which disclosed their efforts for getting SDGs across

in the company. For example, ITOCHU Corporation has introduced their workshop

program on SDGs for their Group companies19, 20. Sekisui Chemical Co., Ltd. has

disclosed that SDGs were brought up in discussion at a presidents’ meeting of

overseas affiliates21.

In addition, there were eight companies which disclosed that they had made

indirect efforts for SDGs through participation in the UN Global Compact and the

World Business Council for Sustainable Development (WBCSD), etc. or through

initiatives by corporate foundations, although no direct action had been taken. One

unique example is the global advertising campaign to support SDGs, rolled out by

DENTSU INC. jointly with five major global advertising groups22.

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http://www.ricoh.com/csr/strategy/materiality.html 15

http://www.daiichisankyo.co.jp/corporate/csr/gc/#gc_list (Japanese) 16

http://www.ajinomoto.com/jp/activity/csr/report/ (Japanese) 17

http://www.toppan.co.jp/library/japanese/csr/files/pdf/2016/csr2016.pdf (Japanese) 18

http://www.toppan.co.jp/news/2016/12/newsrelease161214.html (Japanese) 19

https://www.itochu.co.jp/en/csr/itochu/office_penetration/index.html 20

http://blog.unic.or.jp/entry/2016/06/22/143159 (Japanese) 21

http://www.sekisui.co.jp/csr/csr_manage/management/index.html (Japanese) 22

http://www.dentsu.co.jp/news/release/2016/0627-008973.html (Japanese)

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3 Toward Strategic Utilization of SDGs

We may safely say that SDGs initiatives achieved sufficient results in 2016, the

first year of SDGs, considering that companies expressed their awareness of SDGs.

However, if companies do not plan or implement new initiatives with an eye to

contributing to SDGs nor do they make efforts for utilizing SDGs in corporate

management, being satisfied that they have explained their existing initiatives in

relation to SDGs, or the so-called ex-post labeling, there is a possibility that SDGs

initiatives will only be a temporary trend among companies. Amid the growing

interest in the relationship between companies and society, companies may face

increasing risks and lose market opportunities if their efforts for SDGs will be only

be temporary, considering that SDGs will continue to be a global common language

for discussing social challenges until 2030.

The following main challenges for SDGs were revealed as a result of examination

of Japanese companies’ previous efforts, or the status of consideration of SDGs: 1)

clarification of purposes, 2) organizational response, and 3) correct understanding

of SDGs. These challenges are interrelated in many cases, and companies’ efforts

for taking proactive action toward SDGs with great interest could lead to problems.

Under these circumstances, it is desirable that companies clarify the purposes of

utilizing SDGs. Possible examples are to avoid risks they assumed, create business

opportunities, improve understanding and evaluation from stakeholders, or utilize

for innovation of internal management. What they should avoid is to make public

their awareness of SDGs and disclose relevance between their businesses and SDGs

without going through sufficient discussion on their purposes for utilizing SDGs.

If companies clarify the purposes of their activities for SDGs to a certain degree,

it will lead to improvement in organizational response to SDGs. SDGs

comprehensively cover social challenges, and therefore stakeholders involved are

varied. Activities for SDGs may require involvement by a wide range of divisions,

such as IR, public relations, labor management, environment, CSR, corporate

planning, product development, and procurement, and thus it is desirable to

establish a cross-organizational framework. Discussion and examination about

SDGs by specific divisions, or individual responses by two or more divisions23,

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In the case of Japanese companies, in particular, there are cases in which the environmental division takes interest in and studies SDGs ahead of other divisions (e.g., the CSR division) because they have engaged in discussion on sustainability (mainly from the environmental viewpoint), such as preparation

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should be avoided.

If companies readily indicate reference between their businesses and SDGs

without adequate understanding of SDGs, they will be unable to show contribution

to SDGs in the end, which can lead to undermining of trust in them. SDGs cover

many, but not all, social challenges. In addition, SDGs are essentially goals set for

governments. Therefore, corporate activities can contribute to some but not all of

them. Accordingly, companies should not explain all their initiatives related to

solving social challenges in relation to SDGs just because they want to utilize SDGs

proactively.

These challenges have occurred partly because companies’ interest in SDGs has

risen sharply and they have rushed in too quickly. However, those challenges can be

improved if companies will make trials and errors in efforts for contributing to SDGs

and accumulate knowledge and know-how.

As mentioned above, there is a rapidly growing interest in SDGs among Japanese

companies. Companies, centering on large companies, have expressed their

awareness of SDGs, and some companies have started to take concrete action with

consideration to SDGs. The interest of Japanese companies is shifting gradually

from “What? (What are SDGs?)” to “How? (How to utilize SDGs)”. The question will

be “whether SDGs have been established firmly in corporate management” in 2017

and thereafter. Amid the progress of penetration of SDGs as a global common

language, the competitiveness of a company will depend significantly on whether

they can utilize SDGs well to continue their business activities based on providing

solution to social challenges through their core businesses. The key points in

examining strategic utilization of SDGs by companies are to consider “relations

between their businesses and SDGs” and “how to utilize SDGs” on the basic

premise that they “understand SDGs”. It is desirable, further, to “evaluate their

efforts from the perspective of SDGs.”

What is necessary for Japanese companies to show their presence in the global

society in 2030, the target year of SDGs, is backup from the entire business sector

and the government to take advantage of their strengths, in addition to individual

efforts of Japanese companies toward the achievement of SDGs. The Japanese

government’s SDGs Implementation Guiding Principles may seem that they were

created by reflecting all measures being implemented or examined by ministries

and agencies in the context of SDGs. We need to pay close attention to prevent the

of an environmental report. However, it is difficult for the environmental division to cover all the areas of SDGs, and it is desirable that companies consider establishing a top-down, company-wide system.

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implementation guiding principles from being reduced to “ex-post labeling”, just

like efforts by Japanese companies. The Japanese government needs to make

continuous efforts, such as support and information provision to companies and

raising their awareness, so that companies’ interest in and efforts on SDGs will not

end up being a temporary trend.

FUJITSU Research Institute, Economic Research Center

New Pier Takeshiba South Tower, 1-16-1 Kaigan, Minato-ku, Tokyo 105-0022, JapanTelephone:+81-(0)3-5401-8392 Facsimile:+81-(0)3-5401-8438

URL http://www.fujitsu.com/jp/group/fri/en/