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The Gradual Maturing of Japanese CSR: Highlights from the Tokyo Foundation’s Fifth CSR Survey

In December 2017, the Tokyo Foundation for Policy Research conducted its fifth annual CSR survey, centered on the theme “Reaffirming the Value of CSR.” In the following, we present highlights from our analysis of the results. (The complete analysis is available in the Japanese edition of the 2018 CSR White Paper.)

About the CSR Survey

In early December 2017, using publicly available information, the Tokyo Foundation for Policy Research mailed questionnaires to approximately 2,500 companies, predominantly corporations listed in the first section of the Tokyo Stock Exchange. The deadline for submission of completed questionnaires was February 28, 2018. We received completed surveys by post or email from 288 companies—the largest response in the survey’s five-year history. Of this number, 148 companies had participated in the previous year’s study, and 66 had taken part each year since the survey’s inception in 2013. This core group imparts an element of continuity to our expanding sample.

In terms of annual revenue, the largest share of responding companies fell into the ¥100 billion–¥500 billion group (Figure 1). By workforce size, companies with 1,000–5,000 employees predominated (Figure 2). Despite a substantial increase in participation (from 197 companies in the previous survey to 288 this time around), there was no significant change in the sample’s makeup in terms of sales or number of employees. Indeed, with respect to company size, our samples have been quite consistent over the years.

Figure 1. Breakdown of Responding Companies by Sales

Figure 2. Breakdown of Responding Companies by Number of Employees

What Issues Do Companies View as Important?

We the asked responding companies to separately identify the domestic and overseas social challenges they regard as important (Figure 3) and those on which they are taking action (Figure 4). As in the previous survey, our classification of social issues was based on the UN Sustainable Development Goals.

Figure 3. Identification of Important Issues in Japan and Overseas

Generally speaking, the results revealed more widespread concern over domestic issues than overseas problems. Only two issues, poverty and hunger, were cited more often as overseas than domestic concerns. Certainly, hunger and poverty are less urgent problems in Japan—still one of the world’s top industrial powers despite slower growth—than in many countries around the world. That said, the issue of child poverty has attracted much concern in Japan in recent years. In time we might expect to see this concern reflected in the survey’s results.

The five issues most frequently identified as important by responding companies were all challenges being addressed domestically: (1) economic growth, (2) climate change, (3) health and well-being, (4) gender equality, and (5) responsible consumption. The first and last of these in particular are closely linked to the traditional concerns of business management. We might also note that this bias toward issues linked to core business concerns has increased in recent years. Viewed in a positive light, the trend might be taken as a sign of progress toward the integration of CSR into core business operations. Viewed negatively, it might be seen as taking the easy way out. With the growing emphasis on CSR as an integral part of business management, there may be a tendency to prioritize business growth and profitability over the mitigation of social problems—the raison d’être of CSR. In this age of “strategic CSR,” there is a greater need than ever to maintain a strong sense of social purpose.

On Which Issues are Companies Taking Action?

We have received a good deal of feedback from companies stressing the importance of focusing on the issues that they feel they can address most effectively with the resources at their disposal, instead of spreading themselves thin by trying to tackle all 17 SDGs. With such considerations in mind, we asked each responding company to identify up to five social issues that it is tackling on a priority basis.

Figure 4. CSR Action Priorities

Note: Figures are of total points, with issues ranked first being assigned 5 points, second 4 points, third 3 points, fourth 2 points, and fifth 1 point.

As Figure 4 reveals, the bias toward domestic issues becomes even more pronounced when companies identify the priority targets of their CSR programs. While many Japanese companies acknowledge the importance of overseas issues, relatively few undertake concrete action to address them. Executives and CSR officers will doubtless argue that they lack the resources to address problems in other countries, but the fact is that Japanese CSR is widely regarded as insular and parochial in its focus. Surely there are overseas challenges that could be tackled in partnership with local stakeholders. Japanese corporations need to be more open-minded and adventurous in identifying potential targets for CSR action, asking themselves how they can equip themselves to address new challenges.

Overall, responding companies identified domestic measures for economic growth, health and well-being, and climate change as their top CSR action priorities. Relatively few cited gender equality. While the vast majority of Japanese companies acknowledge the importance of gender issues in Japan and overseas, they seem rather lukewarm about tackling those issues through concrete initiatives or policies.

In Japan, discussions of gender issues in the CSR context frequently focus on the relatively small number of women in top management positions. Boosting the share of executive positions held by women was identified as a national priority back in October 2014, when the government established an office dedicated to promoting the active participation of women in Japanese society. The low priority that companies place on gender issues in their CSR programs suggests a certain disconnect between government policy and the reality on the ground. It would behoove companies to examine the reasons for this disconnect and review their policies from the perspective of working women.

How Are Companies Tackling Social Issues?

For the purposes of our study, we have established three broad categories of CSR initiatives:

  • Philanthropic programs (financial or in-kind donations, pro-bono services, and employee participation in volunteer activities)
  • Socially responsible business processes (procurement, manufacturing, distribution, etc.) or internal functions (employment, personnel management, etc.)
  • Development or sale of products or services that contribute directly to the mitigation of social problems

In our view, none of these approaches is inherently superior or inferior to the others. They are all means to the same end of sustainable development. It is up to each company to choose the optimum mix on the basis of its own objectives and resources. We asked responding companies to classify their initiatives for addressing various issues under one of the three categories. The results are charted in Figure 5.

Figure 5. CSR Programs by Type (aggregated)
(number of responses)

a. Philanthropic programs (financial or in-kind donations, pro-bono services, and employee participation in volunteer activities)
b. Socially responsible business processes (procurement, manufacturing, distribution, etc.) or internal functions (employment, personnel management, etc.)
c. Development or sale of products or services that contribute directly to the mitigation of social problems
n=279

Roughly the same number of initiatives were identified as category “b” (socially responsible business processes and policies) and category “c” (development and sale of socially responsible products and services), while relatively few were identified with category “a” (corporate philanthropy). These results are somewhat unexpected, given that corporate philanthropy was long the preferred vehicle for CSR, requiring little more than a financial commitment or volunteer work by employees. When viewed in combination with the previously discussed response on CSR action priorities, this outcome suggests that the integration of CSR into core business operations may be proceeding at a faster pace than anyone had anticipated.

What Are the Perceived Corporate Benefits of CSR?

We asked respondents how they thought their companies had benefited from their CSR programs. The results are charted in Figure 6.

Figure 6. Perceived Benefits of CSR Activities
(number of responses)

a. Created new business opportunities
b. Facilitated recruitment, human resources development
c. Raised quality of products, services, technologies
d. Improved corporate or brand image
e. Led to better external evaluations (including SRI ratings)
f. Contributed to corporate profits
g. Helped in identifying, analyzing, or mitigating risk
h. No perceived benefits
n=274

The benefit most frequently identified was “b,” contribution to the organization from the standpoint of human resource development. In order to promote the integration of CSR into business operations, companies need not only sound leadership but also a companywide awareness and understanding of CSR issues, aims, and principles. Implementation of CSR programs contributes to the development of CSR-friendly leadership and workforce development in a kind of virtuous circle that is sure to boost the overall level of CSR in Japan. Certain companies rank high in the CSR indices year after year, and it seems safe to assume that such consistently strong performers are organizations that have set in motion a virtuous circle of social action and workforce development.

How Do Companies Rate Their Own CSR Programs?

Finally, let us look at the responding companies’ self-assessment of their CSR programs (Figure 7).

Figure 7. CSR Self-Assessment
(percentage of responses)

n=288

Overall, the leadership exercised by top management received the highest percentage of positive assessments. “Linked business operations with action on social issues” came in second, followed by “contributed to mitigation of social problems.” On the other hand, dissatisfaction with the allocation of budgetary and human resources remained high. This raises an interesting question. If top management were truly exercising effective leadership vis-à-vis CSR, would that leadership not mean greater allocations for CSR? Interestingly, respondents to the CSR survey conducted by Keidanren’s Council for Better Corporate Citizenship cited “lack of leadership by executives” as the biggest challenge to the promotion of CSR.[1] It is possible that executives who give lip service to CSR are less enthusiastic when it comes to committing resources, with the result that CSR officers experience a sense of missed opportunities.

However, satisfaction with the CSR budget does not necessarily correlate with the size of the budget. Among the survey’s participants were some smaller enterprises that responded positively on almost all self-assessment indicators, including allocation of budget and personnel. The key issues are whether a company is allocating the resources that it can afford to allocate and whether it is making optimal use of those resources to address social issues.

Conclusion

Underlying the choice of this latest report’s theme, “Reaffirming the Value of CSR,” is an awareness that Japanese corporations and their CSR efforts have come under rather harsh scrutiny of late. For example, in a position statement concerning the revision of the Corporate Governance Code and the creation of guidelines for dialogue with investors, the government’s Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code noted that the basic attitudes of Japanese executives had been slow to change and complained that dialogue with investors was still most often an empty formality.

Meanwhile, the Japanese public’s confidence in corporations as responsible citizens appears to be waning. In the latest Survey on Trust Toward Corporations, conducted annually by the Keizai Koho Center (Japan Institute for Social and Economic Affairs), 37% of respondents expressed a measure of confidence in corporations’ social function and responsibility, a drop of 6 percentage points from the previous survey, while 17% expressed a lack of confidence, an increase of 8 points.[2]

Yet judging from the results of CSR surveys and indices, Japanese companies are working harder than ever to meet their social responsibilities. How can we reconcile these two seemingly contradictory trends?

I suspect the reason for this gap is that the public’s expectations of Japanese businesses have risen. Having attained a level of maturity in the realm of CSR by embracing many recommendations for sustainability and good corporate citizenship, companies are unlikely to gain the public’s trust with the same kind of initiatives as those undertaken in the early days of Japanese CSR.

The latest survey incorporated questions probing the relationship between corporations’ social initiatives and their main business activities. The aim was to shed light on the progress and ongoing challenges of CSR in Japan while reaffirming its basic purpose and value.

Today, with the spread of concepts like “strategic CSR” and “creating shared value,” it is scarcely unusual—either from an academic or business perspective—to approach CSR in the context of strategic management. Traditional philanthropy, by contrast, seems to have fallen out of favor as a focus of CSR. As we see it, such trends are not inherently good or bad. The important thing is to integrate CSR into main business operations while building responsive companies capable of meeting society’s diverse needs. To respond nimbly, companies must be open to a variety of approaches. CSR is not an end in itself but a means of tackling the urgent social and sustainability issues facing humanity in the twenty-first century.

[1] http://en.kkc.or.jp/research/ss/

[2] http://en.kkc.or.jp/research/ss/

Hajime Kuramochi

  • PROJECT MEMBER, CSR Research