Overcoming Pandemic Challenges: Executive Summary of the CSR White Paper 2021

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Overcoming Pandemic Challenges: Executive Summary of the CSR White Paper 2021

C-2021-001-2-WE

The Tokyo Foundation for Policy Research’s CSR White Paper 2021 focuses on corporate efforts to address societal challenges amid the COVID-19 pandemic, promote workplace diversity, and reduce greenhouse gas emissions.

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Since fiscal 2013, the Tokyo Foundation for Policy Research has been conducting an annual survey of CSR policies among Japanese companies and publishing a white paper containing analyses of the results, expert commentary, and case studies of companies with exemplary practices.

The latest white paper, published in Japanese in December 2021, focuses on corporate efforts to address societal challenges amid the COVID-19 pandemic. The Sustainable Development Goals Report 2021 published by the United Nations notes that while the pandemic has had a generally negative impact on the 17 Sustainable Development Goals, with some goals unlikely to be achieved by 2030, the global crisis also offered an opportunity to rethink our lifestyles in ways that could help enhance sustainability.

In Japan, COVID-related restrictions compelled many companies to cut back their CSR activities and engendered a new slew of challenges, but there were also positive repercussions. This year’s white paper examines how the pandemic affected the priorities, initiatives, and employment practices of Japan’s corporate sector.

Other key topics addressed in this year’s white paper include promoting workplace diversity and reducing greenhouse gas emissions. Both issues are discussed in articles by contributing experts. The former, in particular, has been subject to various pandemic constraints and requires a closer examination of how companies are dealing with—and self-evaluating the progress they are making on—this issue.

The latter is of pressing importance as well, given the October 2020 announcement by the Japanese government of a policy to achieve carbon neutrality by 2050. Our questionnaire survey, therefore, included items aimed at ascertaining the emission-reducing initiatives being taken in each industry and the level of participation in relevant international frameworks.

The following is a summary of the findings from the questionnaire survey and analysis provided by experts, along with proposals for further action.

Impact of the Pandemic

The societal challenges many responding companies chose as being critical during a pandemic were “health, well-being, and aging,” “economic growth and employment,” and “sanitation”—topics that were not necessarily material issues for the company. “Gender equality,” on the other hand, was not closely linked with COVID-19, although it was cited more frequently by businesses with high shares of female employees, such as those in the service and retail industries.

Very few companies went so far as to reexamine their management philosophy in the wake of the COVID outbreak, but many, particularly in the service and retail industries, were prompted to adjust their longer-term management plans and material issues.

A majority (58%) of respondents said that the challenges wrought by the coronavirus were being addressed through “business creation and innovation,” with a similar share noting that they hoped to continue pursuing the business opportunities and innovations spawned by the pandemic even after it subsides.

A small but significant number of companies have taken steps to introduce or expand flexible work styles, embracing “job-type” recruitment of specialists and easing restrictions on side jobs. Many of these firms said they intend to maintain such policies after conditions return to normal, suggesting that the pandemic has prompted long-term changes in employment practices.

On the other hand, businesses that expanded their full-time, regular staff outnumbered those that streamlined their workforce. Similarly, more companies cut back on nonpermanent staff than increased it. There were wide discrepancies in employment trends, though, according to industry.

Need for Resilience

The experts contributing to this white paper concurred that the pandemic demonstrated the need for enhanced resilience through both internal resources (to withstand disruptive social or economic developments) and external networks (to ensure continuity during times of crisis). Employee loyalty, sound financials, and R&D assets were among the internal factors cited as being crucial to business survival and growth in the face of adversity. The main external factors, meanwhile, were a robust supply chain of reliable transaction partners, customer loyalty to prevent declines in sales, and good investor relations to stabilize share prices.

Both internal and external factors contribute to a positive reputation, which, in turn, can boost employee satisfaction and corporate creativity, leading to lower financial risks, supply chain sustainability, and heightened customer and investor loyalty.

One prescription for enhancing crisis-resistance and ensuring growth under adverse conditions is “mindful management.” This involves closer stakeholder engagement to build resilience both internally (through in-house policies and practices) and externally (by considering the well-being of business partners and customers and engaging in ethical marketing practices).

To recapitulate, many businesses noted that they intend to maintain the innovations and work-style reforms introduced following the outbreak of COVID-19. Although gender equality was broadly regarded as a material issue, it was not strongly identified as being pertinent to the pandemic. And experts noted that rather than bemoaning the negative impact of the pandemic, businesses should seek to utilize the consequent organizational and policy changes as stepping-stones to long-term growth.

A positive social reputation, moreover, developed through close, mindful engagement with stakeholders, can enhance both the internal and external factors that contribute to resilience during times of crisis.

Promoting Workplace Diversity

The latest survey revealed there has been significant progress in workplace diversity over the past year, with more respondents reporting higher—rather than lower—shares of women in the workforce, in management positions, and on corporate boards, as well as higher shares of workers with disabilities or from foreign countries. There were considerable differences among industries, though, in the level of progress made.

In fact, 9 of 10 responding companies reported they were promoting diversity. Of these firms, greater advances appear to have been made by businesses having an explicit diversity-hiring policy. The share of companies without such a policy reporting lack of actual progress, meanwhile, was about the same as that of businesses that made no specific claims to promoting diversity.

Surface- versus Deep-Level Diversity

Socially responsible labor practices, as articulated in the ISO 26000 guidance, have often been likened to diversity management, which emphasizes both surface-level (physical appearance) and deep-level (underlying attributes) diversity. Owing to the view that diversity management is a source of corporate competitiveness, it had hitherto not been integrated into CSR as a core subject.

In recent years, though, attempts have been made to consolidate the two through multi-level models, which use the concept of intersectionality to identify individuals as a cross-section of such attributes as class, gender, and ethnicity. By considering a broad range of attributes, these models can lead to an understanding of both surface- and deep-levels differences and enable issues to be addressed concurrently through CSR and diversity management at the macro (multinational, national), meso (organizational, task force), and micro (individual, personal) levels.

In sum, achieving workplace diversity is facilitated when it is fully integrated into management strategy through the clear articulation of specific targets and achievements. CSR initiatives and diversity management can be enhanced, moreover, when employees are identified not just by such surface-level factors like gender or ethnicity but also by underlying attributes, including personal values and workstyle preferences. Additional strategic benefits may accrue from efforts to place diversity management at the heart of CSR

Reducing Greenhouse Gases

Of the steps being taken to reduce greenhouse gas emissions, “conserving energy use” was cited by the highest percentage (85%) of responding companies, followed by “using environmentally friendly products and services” (68%), “switching to renewable sources of energy” (55%), and “reviewing the production process” (51%). The shares for all categories were higher among manufacturers than in the nonmanufacturing sector.

By type of stakeholder to which respondents gave precedence in their environmental social, and governance (ESG) activities, those giving priority to shareholder/investor interests were less likely to be reducing emissions by “reviewing physical distribution,” “reviewing the marketing process,” “using environmentally friendly products and services,” “switching to renewable sources of energy,” and “undertaking R&D,” compared to companies that prioritized their employees, customers, and the government. This suggests that stakeholder interests have a role in the effort businesses make to reduce GHG emissions.

Companies that establish, assess, and disclose their GHG reduction targets had higher-than-average rates of current or intended participation in three international climate-action frameworks, namely, the Task Force on Climate-related Financial Disclosures, Science-Based Targets, and the RE100 initiative to achieve 100% renewable electricity. Higher rates were similarly found among respondents identifying “climate change and disasters” as a material issue, indicating that GHG reduction is recognized as both a CSR and management imperative.

The Advent of a Circular Economy

Political commitment and technological breakthroughs have turned renewable energy into the least expensive of energy sources in Europe. Renewables are also being eyed in Europe and the United States as a means of attracting ESG investment and for their potential to generate huge profits.

Japan, meanwhile, has been playing catch-up, announcing its goal of achieving carbon neutrality only in October 2020. The slow start in the energy transition will not only adversely affect cost-reduction efforts and ESG investment but could also expose Japanese exports to additional taxes under the carbon border adjustment measures being considered by the EU.

Measures are well underway in Europe to secure the mineral resources needed in the production of renewable-energy and energy-saving equipment through the circular economy. Transitioning to a more regenerative model is expected to create 180,000 jobs and result in 7% annual growth in Europe by 2030. France is spearheading an effort to establish international standards for the circular economy, which could affect manufacturing and quality standards in Japan going forward.

That said, the ongoing energy transition and growth of the circular market can present major opportunities for Japanese businesses. While the country is poor in natural resources, it boasts a large volume of used and discarded electronic devices. This can be turned into an advantage by applying the country’s highly advanced recycling technologies. And by designing products in ways that are conducive to recycling, manufacturers can strengthen their standing in the global circular economy.

As for renewable power generation, a key consideration is winning the agreement and support of the communities where the plants and facilities are to be located, such as by granting local partners a big say in the project’s decisions.

CSR Research Project