THE NIKKEI WEEKLY October 8, 2012. Volume 50, Number 2562. Pp36-37

Trends in CSR Reports of Leading Japanese Firms (Fiscal 2012)
Use of ISO 26000 has spread, but strengthening the overall value chain, including
supply chains, and more proactive communication with outside stakeholders remain
issues.

Research/Writing:
Kayo Ito
Senior Staff
Sustainability Communication Group
Cre-en Inc.
Next year will mark a decade since what has been called the initial year of CSR in Japan
in 2003. In 2007, the number of companies beginning to report on the environment andCSR exceeded 1,000; even after the so-called Lehman Shock of 2008 and the March2011 Great East Japan Earthquake, the number of companies issuing reports has
continued to edge up.
Given the strong yen and the expansion of markets in emerging nations, we
saw many corporate leaders proudly proclaim that their companies were global in their2011 fiscal reports. Viewing ISO 26000 (the guidance for organization’s social
responsibility issued in 2010) as a kind of global license for CSR, more companies
could be seen utilizing ISO 26000 as a tool for inventorying their own CSR activities.
Overall, reports from Japanese companies have been in a maturation phasesince about 2008. Nevertheless, corporate involvement in resolving issues arising at theupper end of the supply chain (in mines and on farms, at manufacturing sites indeveloping countries, etc.), including human rights and labor problems, and community
issues such as infringement of the rights of local people, remains a work in progress.
While among Japanese companies some have demonstrated progressive initiatives, itwill likely take several years before these efforts overall can be raised to the next level.
The current survey targeted 77 companies, mostly previous award winners, outof reports from domestic and foreign firms published as of September 2012. Based on
the survey results, we looked at trends found in six areas—(1) Communication Tools,(2) Global Awareness, (3) Governance/Management, (4) Society, (5) Environment, and(6) Stakeholder Engagement—and using examples from the companies in question,
provided detailed commentary.
Communication Tools
1One characteristic of CSR reports in the era since the collapse of Lehman Brothers has
been that printed versions have grown thinner due to cost cutting, and in fiscal 2012,
many companies were seen issuing printed pamphlets as summaries, while using the
Web to provide more detailed disclosure of information. In some cases, companies havebegun issuing reports capable of being viewed on smartphones. Nevertheless, among
the companies covered by the current survey, approximately half (54%) positioned
paper versions as their primary media, focusing on their printed reports in terms of both
quality and volume, while 31% of the companies focused primarily on the Web.
The number of companies issuing combined/integrated reports edged up only
slightly, and of the companies in the survey, numbering seven of 60 domestic and oneof 17 foreign firms. Going forward, based on the release of The International Integrated
Reporting Council (IIRC) and other guidelines, discussion within companies of the needto integrate sustainability reports with annual reports, etc., is expected to grow more
active in light of companies’ own needs and various social issues. As more companies
use cost cutting as a reason for moving toward combined/integrated reports, somebelieve that it is vital to carefully determine the weight of sustainability reports aimed at
multiple stakeholders. Which format a company chooses will be based on an overall
determination that takes into account corporate risk management and other issues, but itshould be noted that upon internal discussion, a large number of companies have chosen
not to adopt the combined report format.
Under these circumstances, one major pharmaceutical company, rather thanomitting the sustainability report from its integrated report, actually leads off with acommentary on the position of sustainability in the company. It should also becommended for its proactive involvement in development of international frameworks
and rule-making. And while it isn’t a combined/integrated report, another major IT
equipment manufacturer includes in its CSR report an explanation of the kinds of value
it delivers to each of its stakeholders through its business, successfully conveying its
integration of business and CSR.
Global AwarenessOf the various CSR activities behind these reports, we would like to focus now on
global issues, such as listing of global staffing, and on levels of management based on
ISO 26000, which recently became a Japanese Industrial Standards (JIS).
As noted previously, many companies now proclaim themselves “global
companies,” but despite their stated efforts to actually expand their business at the
global level, the proportion of companies listing the number of their offices and staff by
global region remained at about 40%. This highlights the fact that even companies inwhich overseas revenue exceeds domestic sales do not have a firm grasp of the numberof workers they employee at their global sites. Going forward, these companies should
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probably treat understanding and disclosing this kind of minimal information as anurgent task.
With regards to ISO 26000, more than half of the Japanese companies coveredby the current survey have begun to take some kind of action, and the survey revealed
that companies which had already begun incorporating ISO 26000 in their actual CSR
activities from fiscal 2011 are working to deepen those initiatives. Specifically, while
there are still many companies at the initial stage of choosing an editing-driven reportformat that follows ISO 26000, or using an index-based format that displays key topics
along with the page numbers that address them, we also saw a number of companies
that have begun the work of inventorying their own CSR activities using ISO 26000 as abenchmark and identifying issues.
Two reports that most effectively reflect this kind of global awareness comefrom a major beverage manufacturer and a major household electronics company. The
former has a strong awareness of globalization, has positioned ISO 26000 at the core of
its efforts to promote CSR, and is working to strengthen its CSR management through aseries of dialogues with experts on each of ISO 26000’s core subjects. The latter reports
on its initiatives not from a “foreign vs. domestic” viewpoint, but based on a stance thatlooks at regions around the world. For example, in its section on performance, thecompany follows its description of performance in Japan with a parallel listing of
initiatives in Europe, the U.S., China and Asia-Pacific, comparing favorably with
reporting methods used by companies overseas.
Governance/Management
Key themes in this area are wide-ranging, from management commitment, status of
disclosure of the materiality selection process, and the links between business strategy
and CSR, to supply chain management and business continuity planning (BCP).
Management commitment focuses on how well a company integrates businessstrategy with CSR strategy, and how top management tells that story in its own words.
While a willingness to engage in this process comes across, in actuality only a handfulof companies clearly position CSR within the context of their mid-term management
plans. Among these were a major manufacturer of food products and a major homeelectronics manufacturer.
One of the other areas showing marked activity in recent years is thestrengthening of supply chain management (SCM). The survey showed that not only arecompanies establishing and disclosing procurement policies, but the speed at which
efforts are evolving to conduct CSR procurement audits and disclose the results is
steadily increasing. Behind this acceleration are the check functions provided by NPOs
and the expansion of networking capabilities with the front lines of the upstream portionof the supply chain. Among Japanese companies, food companies, clothing
manufacturers, residential builders and—in this Olympic year—sporting goods
3manufacturers have borne the brunt of this. In addition, the OECD has establishednational contact points (NCPs), or hotlines in each region, and some Japanesecompanies have been forced to respond to accusations of human rights violations
received by these hotlines. Going forward, these kinds of check functions will be further
strengthened, and companies will likely be forced to strengthen SCM as a part of risk
management.
Companies overseas offer many examples in which a dialogue with NPOs was
initiated early on, and these can serve as a reference for Japanese firms.
Society
We also conducted research in the area of human rights, diversity, security andregional/social contributions. While it was predicted that this year in particular, thenumber of statements addressing the aging society—a key issue in Japan—would rise,no marked increase was seen aside from a clear commitment by a major hygiene
products manufacturer to “contribute to a super-aging society through toileting care,”and a description by a major home builder of its residential designs for seniors. This
year also saw particular attention paid to disclosure of anti-radiation measures andradiation-related information, but in fact contrary to expectations, only a handful ofcompanies made such disclosures in their reports.
With regards to human rights, most companies went no further than reportingon internal training held to cover the various issues related to human rights. Issues ofhuman rights and labor were expressed in conservative terms reflecting individual steps
forward based on each company’s understanding of its current conditions, which tells us
something about the tendency of Japanese companies to disclose only what has actually
been accomplished.
With regards to diversity, we got the sense that many Japanese companies are
beginning, through internal training and other means, to touch on the essentials of andneed for diversity management. Along with the human rights initiatives noted above, we
hope that Japanese companies will engage in efforts to promote more substantive
activities going forward.
In terms of regional contributions that take advantage of firms’ core businesses,
as expected, many companies reported on their support for efforts to recover from the
March 2011 earthquake. Immediately following the disaster, employees at one majortransport company, visited the homes of the elderly to make deliveries and pick-ups oftheir own accord. The company then decided to donate 10 yen for every home delivery
parcel, eventually donating 14.2 million yen, an amount equivalent to 40% of net profit;
these activities also received outside recognition. Another piece of news still fresh inourmemory—though not directly related to the CSR reports—concerned a restaurant
chain that actually moved its head office to Ishinomaki, Iwate Prefecture, in an effort touse job creation as the foundation for supporting disaster recovery in the Tohoku region.
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What many stakeholders want is not just simple philanthropy, but something only thatcompany can accomplish—actions benefitting society that take advantage of a particularcompany’s distinctive characteristics.
Environment
With regards to the environment, we would like to focus on environmental management,
GHG management, Scope 3 and water management.
In particular, we focused on whether any companies had implemented revisions
to their mid- to long-term CO2 emissions scenarios given the impact of the Great East
Japan Earthquake, but in their reports for fiscal 2012, all of the companies left in place
the assumptions they had established prior to the disaster. Japanese companies mayneed a reprieve until debate about Japan’s dependence on nuclear power has matured
further, and the government establishes its energy scenario for 2050, before they willreevaluate their own emissions scenarios.
At the same time, more proactive movement was seen among several
companies with regards to Scope 3. One major marine transport company, asked by aconsigner to disclose information subject to Scope 3, made public its base unit for CO2
emission volumes and set up a section on its website to provide simple CO2 calculations
for its own cargo ships and air cargo, enabling the consigner to estimate CO2 emission
volumes for shipping overall.
In biodiversity, approximately half of the companies reported some kind of
initiative. Going forward, we foresee a polarization in this area, between industries withdeep ties to biodiversity (such as the construction and pharmaceutical industries), andthose less dependent on it. The former will promote management in areas close to theircore businesses, while the latter will focus more on initiatives as part of their social
action programs.
The issue of water management is one in which corporate initiatives face highexpectations internationally, at the United Nations and elsewhere, but we got the sensethat most Japanese companies have yet to begin addressing the issue. That said, one
beverage manufacturer has for some time clearly outlined its management of upstream
water sources, for which it has been highly commended. At the same time, a major
overseas food and beverage manufacturer titled its report “Meeting the global water
challenge,” implementing water management measures not only with regard to sources,
but across all so-called watersheds, a broader, more advanced level of activity.
One notable trend in 2012 following the Great East Japan Earthquake is that
the ICT and energy industries, among others, have begun working toward putting inplace smart infrastructure and making more aggressive use of natural energy. We gained
the impression that the concept of the smart grid, the subject of some attention prior to
the disaster, has achieved greater practicality and resulted in more complex,
cross-industry collaboration since the earthquake. For example, the Japanese subsidiary5

of one global computer-related firm reported on individual dialogues it held with themayors of Kitakyushu, Sendai and Ishinomaki, under the “Smarter Planet” corporate
vision inherited from the head office. Other notable examples include the Smart
City/Smart Community efforts of Japan’s leading electronics manufacturers; the Smart
Energy Network being developed by a gas company; and the plan announced by one oilcompany to switch its business to solar energy. Further, in connection with these efforts,
the chairman of one housing manufacturer leads off with a vision for reconstruction in
the disaster-stricken regions that calls for building a low-carbon model city. Thismeasure can be commended for both taking advantage of the company’s core business,
and working to resolve a social issue.
Stakeholder Engagement
One example of a company that proactively implements dialogue with its
stakeholders—the backbone of CSR—and reflects those discussions in its own CSR
activities, is a major copier manufacturer. Each year, the company selects materiality
based on a survey of its stakeholders, and includes messages from stakeholders inreporting on its actual efforts, a proactive approach to outside communication thatshould be commended. Another major manufacturer of home electronics held a dialogue
with nine NPO members concerning ISO 26000, and includes statements of opinion
from those NPOs in its report in the form of a stakeholder review. A major tire
manufacturer not only conducts dialogues at the community level, but provides reports
on how it responded to issues pointed out by stakeholders, clearly conveying thesincerity of its efforts.
In Closing
This survey focused on a group of companies considered to be at the forefront of CSR
in Japan, and as a result, we were very pleased to discover so many instances ofextremely positive efforts in areas such as ISO 26000 and the recovery from the Great
East Japan Earthquake. At the same time, while many companies have made progress inand improved disclosure regarding their efforts to strengthen supply chain
management—an area in which demands from stakeholders are expected to grow going
forward, particularly in the upstream segment of the supply chain—NPOs and others arealso enhancing their check functions, and as before, companies must remain vigilant. In
the same way, the reports also revealed that many Japanese companies have yet to fully
embrace human rights and labor as real issues.
From the viewpoint of risk management, as well, we look forward to Japanesecompanies taking a proactive approach to implementing communication and dialogue
with NPOs and other outside parties. Rather than downplaying or viewing NPOs withhostility, by engaging them as partners in dialogue, companies can avoid unnecessary
boycotts, suits, and other actions. Many examples of such successes can be found6

among companies overseas. We continue to hope that by boldly addressing andovercoming these issues, Japanese firms will be able to take their place in the world as
truly global companies.

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