Sustainable Development Goals & SHOSHA (Excerpt version)
Analysis part of the report from Japan Foreign Trade Council, Inc.
Special Research Committee on Sustainable Development Goals & SHOSHA

1. The Shosha Business Model
Often called a “distinctly Japanese” style of business corporation, the Shosha came to the fore as
Japan achieved economic recovery and set about becoming a leading trading nation in thedecades World War II. The Shosha proactively expanded overseas and played a leading role inimports and exports, developing networks across the world, and performing a vital role in thedevelopment of the Japanese economy. In the years since, they have continued to play a crucial
double role, both importing solutions (goods and services) from overseas and taking Japanesesolutions to people in other countries at the same time.
Shosha Handbook 2020, published by the Japan Foreign Trade Council, shows how investments
have accounted for an increasing share of the revenue of the Shosha in recent years, in addition totheir traditional trading business in commodities and products. As the Handbook makes clear,
their business model in recent years has been based on the twin cornerstones of trading andbusiness investments. The Handbook also shows how the Shosha have succeeded in creating
numerous types of diverse businesses by harnessing their various functions, as shown in the tablebelow.
One characteristic of the Shosha approach to business is the “value chain strategy.” The Shosha
are involved in businesses that transect a wide range of fields from upstream to downstream
sectors, covering everything from developing and procuring materials, to manufacturing,processing, distribution, sales, and services. By involving themselves in a wide range ofinterrelated businesses across a wide range of sectors, the Shosha are able to gain a bird’s-eyeview of the business as a whole. By providing their services and functions as necessary
throughout the value chain, the Shosha are able to increase convenience for the customer and todevelop a business model that offers higher levels of added value.
The Shosha have come through numerous crises over the years. At various times, people haveargued that the Shosha are in decline, that the Shosha have outlived their usefulness, that the
winter years have arrived for the Shosha, and that their collapse and demise are now inevitable.
Time and again, these prophecies of doom have been proven wrong. The Shosha have overcome
these crises because they have continued to evolve. They have had the flexibility to adapt theirfunctions and roles in response to the shifting times and the changing demands of theenvironment in which they operate.
The United Nations Sustainable Development Goals (SDGs) were adopted by all 193 member
states in 2015. There is now a pressing need for progress toward achieving the goals on a global

level. The SDGs are a perfect example of a new need that has arisen with the changing times.
There is no doubt that the Shosha have an important part to play in responding to this new need.
Main Functions of the Shosha
Business transactions

Core functions that promote global trade

Information andresearch

Collect and analyze extensive, wide-ranging information for use
in business

Market development

Analyze supply and demand trends, and open up global markets

Business development
and management

Strengthen business development & promotion, and groupmanagement

Risk management

Minimize business risk

Logistics

Aspire to optimum overall logistics

Finance

Provide financial functions that are unique to Shosha, anddevelop leasing business

Organizer

Combine functions organically to develop projects

Source: Shosha Handbook 2020, Japan Foreign Trade Council, Inc.
2. The Affinities between the Shosha Approach to Business and the SDGs
There are many affinities between the Shosha business model and the SDGs. Our researchcommittee has carried out in-depth discussions to elucidate the nature of these affinities. We haveconcluded that there are six main points of affinity, namely: (1) Global networks, (2)Composite
approach, (3) Partnerships, (4) Innovation, (5) Bird’s-eye view approach, and (6) Focus on the
future. (See the table below, Affinities between the Characteristics of SDGs and Strengths of the
Shosha.) To put it another way, these six affinities represent points of contact, where the aims of
the SDGs and the direction of the Shosha approach to business are in alignment. By focusing onthese points of contact when considering the future of their businesses, the Shosha can contributeto the future of humanity and the planet, and turn this contribution into a business opportunity at
the same time. The SDGs outline comprehensive and general targets regarding the shape of the
future at these points of affinity, and also lay down a number of concrete targets. The frameworkof the goals themselves is quite free: they are not binding, and the goals need not be achieved inany determined way. This means that it is easy for distinctions to stand out. It is fair to say thatwhether the Shosha succeed in becoming a presence capable of playing a leading role in theworld in the twenty-first century will depend largely on whether they are able to tap into theseaffinities and this freedom, and on how effectively they can harness these aspects of the SDGs intheir business.

Affinities between the Characteristics of SDGs and Strengths of the Shosha
Characteristics of SDGs (perspectives
required to achieve the goals)
Global, borderless approach to social issues

Composite approach (2)Partnerships (3)Innovation (4)Bird’s-eye view approach (5)Goal-based governance (“back-casting”)

The Shosha strengths
Ability to grasp global issues quickly andrespond across national borders (Global
networks (1))
Ability to create business through diverse
functions and services (multi-facetedresources and expertise)
Large-scale project organization function
using partners with expertise in various
regions and fields (comprehensive strength)
Discernment to open up new business fields,
ability to offer solutions to diverse challenges(adaptability to change)
Involvement at each stage of the value chain(diverse activities from upstream todownstream processes)
Business development with a focus on the
future (6) (forward-looking, ahead of thecurve)

Let’s look at each of these six points in a little more detail.
(1) Global networks
The global networks possessed by the Shosha are one of their major strengths. The Shosha havebranches, independent corporations, joint ventures, and other affiliated companies andsubsidiaries in important locations throughout Japan and the world. Through their businessdealings around the world, the Shosha are able to collect and analyze huge amounts of
information in a wide range of fields, including politics, the economy, social conditions, industry,companies, markets, technology, laws, and taxation. They put these rich reserves of information
to use in their businesses, employing them in their business plans and management strategies.
This allows them to grasp global issues quickly and gives them the strength to respond to these
problems on an international level across national borders. This is one of their great strengths.
This strength matches well with the characteristics of the world in the twenty-first century thatmade the SDGs necessary in the first place, and with the concept of the SDGs as a means to solvethese problems. One of these characteristics is that while the underlying causes of problems may
be the same, they manifest themselves in various ways, and it is impossible to predict where or
how these manifestations will occur. The impact of climate change is one easy-to-understandexample. Although the single factor of climate change remains the same, in one place this mightmanifest in the form of violent typhoons and in others as flooding caused by concentrated heavy

rainfall. In other places, the same root cause might result in heatwaves and drought. The impactof this single cause makes itself felt in various ways in different times and places. The same istrue for poverty. As well as absolute poverty—people living on less than US$1.25 a day—there isalso the kind of relative poverty and child poverty that is a problem in Japan. Even though theroot causes—the state of social security systems, wealth disparities, and employment problems—
may be the same, the way in which these causes come to the surface as problems differs. Thismeans that the measures taken to deal with them must differ too. Accordingly, there is not asingle fixed approach to achieving the SDGs, and there is a great deal of freedom and flexibility
in terms of finding solutions to the problems they represent. Countries and regions differ in theircircumstances, environments, and cultures; similarly, it is possible to come up with different
solutions to problems as they become manifest in different areas of the world. The SDGs
approach allows countries and regions to take an autonomous and decentralized approach tosolving problems within their own areas, even while the actors working to develop these methods
and solutions cooperate and form broader networks with each other.
The global networks of the Shosha are perfectly placed to offer solutions of this kind. Whilecollaborating on a global level, the Shosha adapt to the diverse norms, cultures, environments,
and policies they encounter in the places where they do business, while the various parts of theirglobal networks work autonomously and in a decentralized manner to find solutions. They areswift to pick up on global challenges, and quick to turn their solutions to these challenges into
opportunities. The Shosha have business premises in more than 200 cities around the world, andgather information on a scale that cannot be rivaled even by the Ministry of Foreign Affairs andother government bodies. By building on this strength, the Shosha have the potential to play aleading role in making progress toward achieving the SDGs.
(2) Composite approach
Both general and specialized Shosha perform a wide range of functions, including business
transactions, information and research, market development, business development andmanagement, risk management, logistics, finance, and organizer.
The ability to harness these functions and offer diverse solutions is one of the main strengths of
the Shosha. This strength comes from the multi-faceted resources and expertise they can draw onfor solutions. Their ability to consider multiple approaches to a problem means that they can offer
solutions that consider the synergies and trade-offs between multiple different problems. This isvital in working to achieve the SDGs.
The SDGs make up the central part of the United Nations document 2030 Agenda for Sustainable
Development. In the outline of its philosophy and approach to the SDGs, the agenda document
repeatedly stresses that the 17 goals and 169 targets of the SDGs together form a single objective
and should not be thought of separately from one another. The SDGs form a single package.
Looked at individually, however, some trade-offs arise between some of the goals, if we consider
them based on current conditions. For example, ending hunger by 2030 (Goal 2) is likely torequire increased production of agricultural crops, but this may have a negative impact on
measures to address climate change (Goal 13), since agriculture is a major source of greenhousegas emissions. Several of the SDGs involve trade-offs of this kind. This is an inevitableconsequence of the fact that the goals were established following a political process ofinternational negotiations, and that logical consistency was not a priority in drawing up the goals.
However, making use of one’s strengths when faced with trade-offs of this kind is often whatleads to innovation. These apparent contradictions between some of the goals are precisely thereason why there is room for innovation and potential for business opportunities to arise. Let us
take the case alluded to above as an example. Is an increase in agricultural output crops reallynecessary to eradicate hunger? Some calculations suggest that if we could reduce food waste, itwould be possible to feed the world’s population without increasing agricultural output. The
ability to take a comprehensive view of the situation, including trade-offs, will be crucial tomaking a shift to this way of thinking about the problems.
Not many businesses have the ability to consider issues from a truly comprehensive perspective.
If the Shosha can harness and develop their strengths in this area, then achieving all the SDGs
goals may no longer be just a dream.
(3) Partnerships“Partnerships” are specifically mentioned in Goal 17 of the SDGs. Global partnerships make up a
central part of the targets. A considerable number relate to policies made by the public sector, butmany also relate to the business of the Shosha within the private sector. The Shosha are expected
to play a particularly important role in promoting “development, transfer, dissemination anddiffusion of . . .technologies” (Target 17.7), trade (Targets 17.10, 17.11), and multi-stakeholder
partnerships (Targets 17.16 and 17.17), among others. The content here concerns ways of
promoting actions to achieve the SDGs; these goals and targets therefore apply to all measures
aimed at achieving the other goals and targets too. This only increases further the expectations
that can be placed in both the general and specialized Shosha.
The function as an “organizer” of large-scale projects, having numerous business partners aroundthe world, and building on past experiences to choose the ideal partner for each case, is often
cited as one of the major weapons in the Shosha arsenal. The experience built up over the courseof working on the ground in regions around the world is particularly valuable. The importance of
these vast resources of accumulated experience, combined with their global networks, is beyond
measure. This will allow the Shosha to use their strengths to play a leading role in finding
solutions to the global challenges and goals of the SDGs within a local context.
It will be important to incorporate the perspectives of the SDGs, as goals that speak on behalf ofa sustainable future for humanity and the earth, into the objectives that the Shosha set out toachieve when they exercise these strengths in the future. Sustainability is a goal that has been
important for the Shosha in the past in terms of their human relationships in the areas where they
do business. In some cases, however, the tendency to accept local conditions and ways of doing
things may have led the Shosha to lend support to customs that are not sustainable. The role ofwomen in society and work styles are examples of areas where this may have been the case. The
reality is that in many countries around the world today, male-centrism and misogyny are still
deeply rooted in society. As the Shosha look to develop business opportunities in the SDGs era,
they will obviously do so on the basis of the legacy they have built up by entering local areas andworking within them to build sustainable relationships in the past. In addition, however, it is to behoped that companies will also look to develop their business in a way that shows awareness forthe global standards of the SDGs. In the case of the example cited above, companies could
provide an example by espousing gender equality in the workplace. Ultimately, this approach
will help companies to obtain resources and pursue high-quality production on a sustainablebasis, boosting the significance of their presence in society and helping to increase corporate
value.
(4) Innovation
As we saw in the section on the composite approach above, one of the major challenges with theSDGs is to resolve trade-offs between the goals and targets, and to increase the synergies
between them. For this, innovation will be essential. Innovation is the flip side of the composite
approach. It requires flexible thinking, and a way of thinking that can make the imaginative leap
from goals and objectives to seeing what is necessary to achieve them. In this sense, applicationsof the SDGs have the potential to steer the innovative capabilities of the Shosha in an even morepositive direction than ever before.
The Shosha have always continued to evolve and have successfully overcome numerous
challenges and difficulties in the past. They were able to do this by creating diverse businesses
and continuing to innovate. People often associate innovation with scientific breakthroughs, but
in the context of the Shosha the word is not limited to this sense. Their innovation often consistsof what Schumpeter would call “new combinations.” It is the innovation that arises from the richreserves of goods and services, markets, functions, uses, and technologies at their disposal, andfrom bringing them together to create new business.
(5) Bird’s-eye view approach
Both the general and specialized Shosha are involved in all stages of the business process, fromupstream to downstream sectors, and are involved in addressing issues that arise throughout the
supply chain even in the case of a single product. From one perspective, this could be regarded asincreasing the risk of entanglement in a multiplicity of problems. But from the perspective of theSDGs, it is fair to say that this approach brings the promise of bigger business opportunities.
One thing that is extremely important for sustainability is a perspective that can consider theentire supply chain. This will be particularly important for achieving the sustainable consumption
and production patterns that make up Goal 12. To achieve this goal, it will be necessary to linkconsumption to production, and the connection between these two is a cause of concern aroundthe world. In fact, linking consumption and production is a function that the Shosha alreadyperform, and this gives them a major advantage.
The approach is one that goes beyond merely looking at an object and stops to consider thestories behind the object and how it came into existence. Take clothing, for example. How were
the fabric and textiles sourced? Is the material made from organic cotton that has no impact on
the environment, or is it a manmade fiber? How were the textiles made? In a factory where men
and women work equally, and where there is no use of child labor? What about transportation?
Has care been taken to minimize carbon dioxide emissions in transporting the materials andfinished products? In the case of transport by sea, were steps taken to reduce the risk to marine
biodiversity and invasive species from ballast water? What about waste disposal and recycling?
To take an all-encompassing bird’s-eye view of these multiple supply chains, to provide
transparent explanations, and to work to increase traceability—these things are more difficult
than they may appear. Although international accreditation systems such as Fairtrade and theForest Stewardship Council act as frameworks that provide at least a certain level of traceability,
not all products are covered by these accreditation systems, and there are costs involved inaccreditation itself.
In these situations, if due diligence is carried out by the Shosha, and transparency is guaranteed
across the entire supply chain, there could be no greater value in terms of making progress towardachieving the SDGs. It is to be hoped that the Shosha will be aware of this strength they possess
and will work to reinforce it and put it to good use.
(6) Focus on the future
The SDGs only outline goals and targets: there is no fixed method by which they must be
achieved. The SDGs therefore represent a new style of global governance, in which people indifferent parts of the world are free to think of their own ways of achieving the goals, taking into
consideration the conditions and background of their own situation, while still working towardshared global goals. Treating the goals as a starting point makes it possible to come up with ideas
without becoming trapped by obstacles in the real-world. It becomes possible to think about theessence of the goals, to consider what is necessary and what is superfluous, to see what needs tobe done and what steps should be ruled out. This approach makes it possible to arrive at ideasthat would be unlikely to arise simply from an analysis of the status quo. It is from the gaps thatexist between the goals and the current reality that innovation can be born. When innovation
cannot achieve the goals in one single leap, it will be time to think of scenarios. One effective
approach is “back-casting.” This is the opposite of “forecasting,” which involves imagining thefuture based on the present situation. Instead, “back-casting” starts from an imagined situation inwhich the goal has been achieved and works back from there to consider scenarios that link theimagined future to the present. When we start out from our present position, there is a tendency
for obstacles and difficulties to loom large in our thinking—all the reasons why our goal might be
impossible to achieve tend to stand out prominently. But by working back from a position inwhich the goals have already been achieved, it is possible to see directions that remove theseobstacles. The SDGs can help to foster this kind of thinking.
The Shosha business model is often described as one that is focused on the future, and the Shosha
have long had a reputation as companies whose strengths allow them to act as pioneers who areoften ahead of the curve. The Shosha are not satisfied with their existing business; they are
constantly on the lookout for new suppliers, new customers, new markets, and new business. At
the same time, a constant process of reform is underway within the Shosha, as they work toadjust their business models, organizational structures, and approaches to management and adapt
them to the future.

In this sense, a perspective that looks at the present from the viewpoint of the future is one that
the Shosha have possessed for some time. Indeed, the concept of the SDGs themselves is one that
could be described without exaggeration as a typically “Shosha” kind of idea.
The future for the Shosha and SDGs
As we have seen, the strengths of the Shosha approach to business contain at least six elementsthat are likely to be extremely important in the effort to achieve the SDGs. These six factors arealso important core elements from the perspective of both Shosha business model and the SDGs.
These points of affinity are likely to become important pointers when considering the directionthat the Shosha will take in the years to come. The SDGs represent a vision for a sustainable
future for humanity and the planet we live on. If the Shosha can harness their strengths and tap
into the growth that can come from this vision, they can help to ensure their own future
prosperity as well.