Summary of Research Projectfor Social Evaluation and Certification (FY 2021)

Japan Fundraising AssociationMarch 2022

1Objective and outline of the research
Based on findings and recommendations from the research projects for the last two years, ” Research Project for Social Evaluation and Certification (FY2019 and FY 2020)”, this year’s research aimed at•

Presenting a model of social evaluation and certification that can be utilized by small- and medium-sized social enterprises•

Organizing the elements and support measures necessary for the dissemination of the social evaluation and certification in a sustainable way.

In achieving these objectives, the project conducted research on the existing social evaluation and certification frameworks in Japan and abroad as wellas on ecosystem development for dissemination and utilization of social evaluation and certification frameworks. The project then made a set ofrecommendations for Japan.

① Existing social evaluation and certification frameworks in Japan and abroad
The research looked into global trends surrounding social evaluation and certification frameworks such as the "SDG Impact" and the "B Corp Certification"
as well as existing certification frameworks in Japan such as the “Local SDGs registration and certification”. It examines the aims of frameworks, theirtargets, the management and operational system, and the incentive mechanisms.

Existing frameworks in Japan【Local SDGs Registration and Certification】••••

Since many of the programs have only been in existence for a shortThis policy was established with the aim of articulating the ways intime, each municipality is still experimenting with its respective

which businesses are achieving the SDGs and utilizing them in order

operation and support for enterprises. However, the research wasto realize an autonomous virtuous circle through local SDG finance, asable to identify that many municipalities are providing support for

presented by the "Study Group on SDG/ESG Finance for Regional

enterprises through the platforms and efforts to support collaboration

Revitalization.

among them.

”The Guidelines for Local SDGs Registration and Certification for Local【Social Enterprise Certification Program in Kyoto/Shiga】

Governments" were issued by the Cabinet Office in October 2020.

•The program began operating in April 2021 with collaborative efforts

Since then, 51 local governments have introduced and initiated thewith local credit unions in Kyoto and Shiga prefectures and Ryukoku

registration/certification as of February 28, 2022.

University. As of March 2022, no concrete incentives have been

Each local government has designed its own registration/certification
framework, criteria, incentives for businesses, etc., based on its own
objectives and goals while taking regional characteristics into account.

introduced for certified enterprises.
•It plans to introduce a program structure that allows enterprises to beranked higher according to the results of their efforts using a socialimpact visualization tool.

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① Existing social evaluation and certification frameworks in Japan and abroad
Existing frameworks abroad【 B Corp Certification 】••【SDG Impact Standards Assurance】

Since late 2020, B Lab has been working on a major revision of the•Developed by United Nations Development Programme (UNDP) withBIA (B Impact Assessment) and the scoring system in light of pressing

the goal of integrating sustainability and the SDGs at the core of

global issues, particularly climate change and economic inequality.

business and investment decision-making, the standard forFrom the perspectives of language and the cultural and social

enterprises was issued in July 2021. It embodies a hybrid model ofbackgrounds which are different from country to country, how tointegrating impact management into company’s business operation

spread the B Corp certification framework in Asia still remains as achallenge.

and corporate management.
•The assurance framework of the SDG impact standard is currently
under development and will be piloted globally in 2022.

② An ecosystem that enables dissemination and utilization of social evaluation and certification
In order to build an ecosystem for dissemination and utilization of social evaluation and certification, it is essential to consider the following three points:
design, quality, and incentives.

DesignQuality

Incentives

Only after the purpose of the evaluation

The evaluation and certification should have

After clarifying the roles of stakeholders

and certification is established, can thean established quality assurancewith the certification’s aim of social change,elements of the ecosystem, roles ofmechanism with consistency. Based on theit is necessary to design incentives for eachstakeholders, and other facts be determined.

"Credibility Principles" by ISEAL, thestakeholder to behave as expected. The

The research recognized that it is importantresearch clarified the certification should beresearch pointed out the factors andto (1) take a back-casting approach andorganized to ensure transparency andleverage points that generate behavioral

share the objectives of the certification fromfairness. In addition, the certification

changes of each stakeholder in the existing

the ideal vision of society, (2) clarify theprocess should be considered a chain ofsystem with and without certification, andpriority issues to be addressed, and (3)events rather than a series of independentssuggested the important points regarding

draw up and position the evaluation andpoints, and the roles of stakeholders andthe roles and incentives of each stakeholder.

certification design as part of the overall

engagement with enterprises need to beconcept of society.

specified. The governance system andflexibility of the certification are also
important aspects of consideration.

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Proposed Model for Social Evaluation and Certification
The research proposes a social evaluation and certification model organized from the three perspectives of "design," "quality," and "incentives.

DesignThe social evaluation and certification model proposed inthis research is an ecosystem model that will lead to solving
local issues and challenges and contribute to building abetter and healthier society.
•The certification should help enable local SMEs to create
an impact in solving complex and diverse local and social
issues.

•The certification should generate a new flow of capitalfrom the private sector to contribute to solving local andregional issues.

The role of the evaluation and certification is to verify thecontinuous implementation of impact management to bothbusiness operations and organizational management oflocal enterprises. The roles of the key stakeholders involved
are illustrated in the figure on the right.

Incentives

Quality
To ensure the fairness and credibility of the certification process,

Incentives should be designed to encourage the investment of publiccertification needs to be bestowed by a third-party "certification

funds and financing for businesses that contribute to solving local andprovider". The body that develops the evaluation and certification

regional issues where local enterprises cooperate with local

framework will need to provide clear criteria and guidance forgovernments and financial institutions, rather than a simple scheme

certification, as well as self-assessment tools and capacity-buildingthat provides additional points in local public procurement, fortraining for local enterprises. In consideration of local and regional

example. In order to promote these efforts, understanding andcharacteristics, it is recommended that the "certification providers"

support from local residents and business partners will also be

and supporting entity of the certification (group or individuals) are

important, and incentives have to be designed to generate behavioral

locally-based.

change in local residents.

4Findings and Recommendations【Social Evaluation and Certification Framework】
As a framework for the social evaluation and certification model, the research recommends that the "SDG Impact Standards" developed by the UNDP beused. Although the assurance framework is currently still under development, the reasons for this recommendation are as follows:•

It is a framework to evaluate and certify the impact management of both business operations and organizational management and is consistent withthe hybrid model that has been suggested by this research for the last two years of study.

•Since it is being developed by a UN institution, it is expected to be utilized widely by public institutions and quasi-public entities in each country.

•The SDG Impact Standards can be used by financial institutions as a means to demarcate businesses and organizations that create social andenvironmental impacts.

【The Japanese Context】
In Japan, the ”Local SDGs registration and certification” implemented by local governments has been spreading and itplays a role as a catalyst for disseminating ideas and practice of SDGs. As a result, it has produced some changes inbehavior among businesses, such as the creation of businesses that contribute to solving local and regional issues.
•【Entry point of SDGs】
Local SDGs
registration andcertification

In many cases, the main objective of the measure is to raise awareness of the SDGs in the local contexts.
Therefore, standards for registration and certification are set low as they put emphasis on the intention for future
initiatives and goals instead of current efforts.

•The "Local SDGs registration and certification" can be used as an entry point for businesses to take action, andenterprises that aim to implement impact management in both their business operations and organizational
management can be certified through the "SDG Impact Standards” certification.

•When introducing the "SDG Impact Standards” assurance, it would be advisable to promote a new capital flow forsocial businesses by creating and disseminating a "regional issue map" that indicates specific local issues with

【Deepening efforts
to achieve SDGs】
Social evaluation andcertification applying“SDG ImpactStandards”

priority capital needs.

Discussion for the futureThis research presented the possibility to introduce the “SDG Impact Standards” assurance as a framework for a social evaluation and certification modelwith the aim of creating a new capital flow for businesses and making an impact on complex and diverse regional and social issues. As a next step, theresearch suggests piloting this particular certification models at the local government level so that it can identify implementation issues, consider the rolesof key stakeholders, and design support measures.

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