JFS Newsletter No.175 (March 2017)
https://www.japanfs.org/en/news/archives/news_id035796.html

As a successor to the millennium development goals (MDGs) for 2015, the sustainable development goals (SDGs) were adopted by the UN General Assembly in September 2015. While the former mainly focused on improvements among developing countries, the latter target issues such as climate change, energy, health and employment in all countries, both developing and developed. The targets are shared by governments, businesses, civil society and people from all walks of life on Earth.

Sustainable Development Goals and Businesses

The SDGs are a set of 17 sustainable development goals and 169 targets supporting these goals. To promote achievement of the goals, the SDGs Index and Dashboard was launched to assess progress of 149 countries toward the SDGs, based on data from the World Bank, the Food and Agriculture Organization of the United Nations (FAO), the World Health Organization (WHO) and other organizations. It encourages each country to work toward these goals by comparing the efforts and performance of each country.

Meanwhile, a new, socially aware form of investment called "environment, society and governance (ESG) investment" has been gaining popularity worldwide. This takes non-financial information into consideration based on environmental, societal and corporate governance conditions. Today, about 30 percent of asset management balance in the world is said to be ESG investment. It is especially popular in Europe, where it accounts for about 60 percent of investment. In Japan, the percentage is still small, but the Government Pension Investment Fund (GPIF), the world's biggest fund, managing the employee and national pension reserves with about 130 trillion yen (about US$1.12 trillion), ratified the United Nation-supported Principles for Responsible Investment (PRI) and embarked on ESG investment. The percentage of ESG investment in Japan is expected to increase.

Efforts and performance toward achieving the SDGs are being used as criteria for evaluating ESG investment. In that way, and because companies make efforts in business development and corporate social responsibility (CSR), considering issues all human beings face, companies' sincere efforts toward trying to achieve the SDGs will be more and more important.

We often hear businesses complain, however, that they do not know how to use the SDGs, even though they understand how important they are.

It is in this context that Seiya Yokoyama, a student of Japan for Sustainability's chief executive, Junko Edahiro, who teaches at the Faculty of Environmental Studies at Tokyo City University, investigated the SDGs and published his graduation thesis titled "Response to the SDGs - Comparison between Japanese and Overseas Businesses." This newsletter article introduces good examples of efforts by Japanese companies to achieve the SDGs, revealed by the results of his study.

Selection of Subject Companies for the Study

The basis for selection of Japanese companies was Toyo Keizai's CSR Ranking, the only one of its kind in Japan, and for overseas companies, the "Global 100 Most Sustainable Corporations in the World" (Global 100 Index), compiled by the Canadian firm Corporate Knights and announced at the World Economic Forum (commonly known as the Davos Forum). A total of 100 companies, the top 50 from each ranking, were selected as targets for the study.

The number of companies working toward the SDGs is rather small because they are still so new. Therefore, the study chose companies in Japan and overseas with high ratings environmentally, socially and economically according to external evaluations.

Levels of Companies' Efforts towards the SDGs

As a preliminary survey, SDG-related business information on Japanese and overseas companies was collected and, based on this information, the companies were classified into six groups, as below. If a company fell under two or more groups, it was classified in the highest group among them.

0: Makes no mention of the SDGs.
1: Mentions the SDGs as a key word.
2: Describes how the SDGs relate to business activities.
3: Attaches importance to the SDGs or uses them in formulating CSR strategies or assessing the materiality of issues.
4: Picks out one or more of the SDGs and describes specific efforts toward them.
5: Mentions specific efforts toward the SDGs and describes specific outcomes or goals of the efforts.

Differences between Japanese and Overseas Companies

A summary of the survey results is presented below.

A graph is available (see the link below) showing the results of classifying the Japanese and overseas companies into the six groups. Compared with overseas companies, Japanese companies fall more into Groups 1 and 3, with fewer in Groups 2, 4 and 5.

Companies' efforts towards the SDGs.

Points were assigned to the companies in each group from 0 to 5, with 0 points given to Group 0 and 5 points to Group 5. The average points earned were 1.96 points among the Japanese companies and 2.5 among the overseas companies. This shows that overseas companies make stronger efforts than Japanese companies.

Other findings were that the level of efforts towards the SDGs depended on the size of the company, regardless of whether they were Japanese or overseas; and that Japanese business-to-business (B2B) companies such as those in energy, materials and machine industries ranked extremely low in average points while overseas B2B companies showed no such tendency.

As a result, Yokoyama concluded that, compared with overseas companies, Japanese companies in general make fewer specific efforts, mention top commitment to the SDGs less frequently, and use the SDGs less frequently in formulating CSR strategies. He recommended that companies review their efforts from an SDG perspective and organize efforts for each SDG, concluding that they could use the SDGs in various aspects of business, including appeals to consumers and investors and education of their employees.

Leading Examples

In his thesis, Yokoyama points out the best practices of domestic and foreign companies that he saw during his research, hoping that they would serve as models and hints to other companies. Let me introduce, now, two Japanese companies, the Ajinomoto Group and Saraya Co., which are proactively engaged in the SDGs.

Ajinomoto, one of JFS's corporate members, is among those classified in Group 5, the highest level. Saraya, on the other hand, was not included among the survey subjects, but used as a reference in classifying target companies for his thesis.

The Ajinomoto Group (a food manufacturer)
http://www.ajinomoto.com/en/activity/csr/pdf/2016/ajinomoto_csr16-en.pdf

"Ajinomoto Group Sustainability Data Book 2016" devotes four pages to describing the group's involvement in the SDGs and relevant activities.

Under the heading of "Ajinomoto Group Materiality," it says, "The Ajinomoto Group has consistently debated the relationship between business and global issues, starting with efforts to help resolve issues facing 21st-century human society. In light of the SDGs, the Group decided to review the issues and its own approach, and began surveying and discussing with external experts to help clarify how to frame business activities vis-a-vis SDGs."

The data book also refers to a questionnaire survey targeting external experts. It says, "The survey asked experts which items, from among the 17 goals, the Ajinomoto Group should focus on helping to solve, what contribution it should make, and if there were any materiality items that should be revised in light of the SDGs. The opinions have been shared internally to further future debate."

Mentioning nine goals (Goals 2, 3, 5, 8, 12, 13, 14, 15, and 17) as "SDGs closely linked to Ajinomoto business," the data book introduces Ajinomoto's initiatives for each of these goals.

As just described, Ajinomoto utilizes the SDGs as a framework for considering its policies. While examining the relationship between the 17 goals and its business, Ajinomoto integrates the SDGs into its major initiatives. That's why Ajinomoto is considered to have one the best practices.

Saraya Co. (a consumer goods manufacturer)
http://www.saraya.com/csr/report/images/report2016.pdf

Under the title of "Saraya's Policies" in the first section of its "Sustainability Report 2016," the company states that it promotes the SDGs for their contribution to both its business and society. This section also contains an SDG Comparison Table, in which 14 of the 17 goals are listed as SDGs that are material to Saraya. For each of those 14 goals, the table gives "Proposed Goals Related to Saraya," and "Relevant Products, Services, Projects, and CSR." What is remarkable about this table is that specific levels in the supply chain (upstream, Saraya, downstream) are indicated for each of the SDGs.

With the SDGs as part of its basic policies, Saraya examines the relationship between its business and individual goals, and tries to promote the SDGs not only by itself but also through its entire supply chain. This attitude can serve as a model for other companies.

Conclusion

Finally, we would like to cite a statement from the conclusion of Yokoyama's thesis.

He says, "Currently, only a small number of Japanese companies are engaged in concrete activities associated with the SDGs. It is necessary for them to recognize how the SDGs pertain to them. They should find what is missing with the help of leading examples such as Ajinomoto, which draws on advice from external evaluations, and Saraya, which considers the SDGs throughout its entire supply chain.

"If many companies around the world were to use the SDGs in their business operations, the SDGs would mean a great deal as universal goals. The companies' involvement would have enormous significance because they could work with various other entities, such as national and local governments, non-governmental organizations and citizens' groups. Efforts by each individual company would constitute a big step toward the achievement of these universal goals. "

Written by Seiya Yokoyama and Junko Edahiro