The word "sustainability" is now commonly heard in everyday life, but there are still many people who do not fully understand what it means.

Why are countries and companies around the world working on sustainability? What exactly is sustainability? In this article, we will clearly explain the meaning of sustainability, which is often vaguely understood, how it differs from the SDGs and other concepts, and the benefits of incorporating it into management.

We will also touch on the use of data, which is essential for corporate sustainability strategies, so be sure to read to the end.

What is sustainability?

The word "sustainability" means "ability to continue" in Japanese. It was first used in official documents in the report "Our Common Future" published in 1987 by the World Commission on Environment and Development, and was featured as a central concept in the report.

The report defines sustainability in the context of "sustainable development" as follows:

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Source:Our Common Future | United Nations

In other words, Achieving sustainability in all areas, including the environment, society, and economy, and acting with consideration for long-term impacts rather than just short-term profits and results.Say.

Background to the attention

In 2006, Kofi Annan, who was Secretary-General of the United Nations at the time, proposed the Principles for Responsible Investment (PRI) to the financial industry, providing guidelines stating that "ESG issues should be incorporated into the investment decision-making process." Later, in 2010, the International Organization for Standardization issued "ISO260000," a guideline on the social responsibility of organizations.

In 2011, the EU announced its "New CSR Strategy 2011-2014," which clarified the definition of CSR as "the responsibility of companies for their impact on society." Also in the same year, the OECD revised its "Guidelines for Multinational Enterprises" to include the statement that "companies have a responsibility to respect human rights."

In 2012, CSR Europe, a leader in CSR promotion, launched the Enterprise 2020 project and began providing a platform and know-how for putting CSR into practice.

Then in 2015, the Sustainable Development Goals (SDGs) were adopted at the United Nations Summit, presenting 2030 goals and 17 targets to be achieved by 169 toward realizing a sustainable international economy and society.

Against this backdrop, the term "sustainability" has rapidly become widespread. CSR (Corporate Social Responsibility) regulations and initiatives have progressed, primarily in developed Western countries, and the importance of corporate social responsibility has increased.

Additionally, frequent occurrences of large-scale natural disasters and climate change have made individuals more aware of the need to protect the environment, which is also thought to be a factor in the focus of attention on sustainability.

The differences between sustainability, ESG, CSR, and SDGs

"ESG," "CSR," and "SDGs" are all terms that are often heard in conjunction with sustainability. Here, we will explain the differences between sustainability and these terms one by one.

Differences from ESG

What is ESG?"Environment" "Social" "Governance"It is an acronym for the three perspectives that a company should incorporate into its management in order to grow in the long term.

The three ESG factors are:

In order for a company to grow in the long term, it is necessary toThree perspectives: "Consideration for the natural environment," "Contribution to social development," and "Self-management system for sound management"It is essential to not only pursue profits for our company, but also to consider ESG issues from an environmental, social and governance (ESG) perspective.Gaining social trustis required.

Difference from CSR

CSR is an abbreviation for "Corporate Social Responsibility" and is written as follows in Japanese:"Corporate Social Responsibility"This refers to a company's responsibility to a wide range of issues, including its stakeholders (employees, consumers, customers, investors/shareholders), the natural environment, and social contributions.

The aforementioned ESG is an important aspect of CSR and is essential for achieving sustainability and the SDGs, which will be described later.

Differences with SDGs

SDGs is an abbreviation for "Sustainable Development Goals" and in Japanese it is"Sustainable Development Goals"These are 2015 international goals adopted at the United Nations Summit held in September 9 to improve the natural environment and international community.

Many companies and organizations in Japan are also working on the SDGs, which has helped to widely disseminate the term and concept of sustainability.

About PRI (Principles for Responsible Investment)

As the term "ESG investment" suggests, investors are beginning to evaluate companies not only based on financial information such as cash flow, but also from an ESG perspective.

The Principles for Responsible Investment (PRI), proposed by the United Nations for the financial industry in 2006, sets out the following six principles for responsible investment as guidelines for investment institutions.

The number of PRI signatory institutions has been steadily increasing since its launch in 2006. As of the end of 2022, the number of signatory institutions will be 5,314. The total amount of assets under management is 121.3 trillion dollars (approximately 1 quadrillion yen at an exchange rate of 135 dollar = 1 yen), which is about 6000 times Japan's GDP.

*Created by our company based on an article from Asahi Shimbun Digital
Source:What is the PRI (Principles for Responsible Investment)? An explanation with practical examples of initiatives: [SDGs ACTION!] Asahi Shimbun Digital

About the GRI Standards

The GRI Standards are a global framework created by the Global Reporting Initiative (GRI), headquartered in Amsterdam, Netherlands, that is used when disclosing information about a company's sustainability efforts. By disclosing information using the GRI Standards, it becomes easier to evaluate a company's sustainability efforts.

When working on sustainability, companies can gain greater social trust by disclosing information about their activities and contributions and fulfilling their accountability as a company.

What is Corporate Sustainability?

Corporate sustainability is the aboveA concept that applies the idea of ​​sustainability to corporate activitiesIn addition, we will determine our management policies by focusing not only on the perspective of "protecting the natural environment" but also on "business sustainability."

For example, Fast Retailing Co., Ltd., which operates fast fashion brands such as UNIQLO and GU, publishes the following corporate sustainability statement on its website:

<Six priority areas (materiality) that Fast Retailing should address in its sustainability activities>

Creating value through products and sales

Respecting human rights and working conditions in the supply chain

Environmental consideration

Coexistence and mutual prosperity with the community

Employee Happiness

Proper management

Source:Our Priority Areas for Sustainability | Fast Retailing Co., Ltd.

By formulating a corporate sustainability policy, we can solidify management policies that include an ESG perspective and achieve consistent management with regard to sustainability.

Why sustainability needs to be integrated into business operations

Many people may think that sustainability, ESG, and CSR are things that can be incorporated into business management to improve evaluations from consumers and investors. However, sustainability is no longer just a"For companies that don't respond, this could cause fatal damage."に な っ て い ま す.

One domestic example of ESG where social risks became apparent was the suicide of a female employee of a restaurant chain operator due to overwork in 2012. The founder's inappropriate comments on the issue and the company's response to it were severely criticized by the media and consumers, and the company was labeled a "black company," resulting in a large drop in the company's share price.

In addition, in 2016, a major issue arose regarding the suicide of a female employee at an advertising agency due to overwork, and the company was referred to prosecutors and indicted for violating the Labor Standards Act. The company received strong criticism from the media, lost contract opportunities due to its suspension from bidding, and the top management was forced to resign.

Another example of an environmental risk that became apparent was the explosion that occurred while an oil company was drilling for crude oil in the Gulf of Mexico. A large amount of crude oil leaked into the ocean, causing enormous damage to the marine ecosystem, air pollution, adverse effects on the fishing industry, and negative rumors. The company has paid a total of approximately 400 billion dollars (approximately 3 trillion yen) in compensation to local residents and environmental restoration costs.

As in the examples above, if a company fails to consider sustainability and ESG, it could have a major impact on its management and the survival of its business.

The benefits of incorporating sustainability into your business

As mentioned above, sustainability is something that all companies must address. And for companies, there are many benefits to incorporating sustainability into their management. Here we will explain three major benefits.

Improving corporate image (branding)

Incorporating sustainability into management has the benefit of improving the company's image as a "transparent company that is highly concerned with protecting the natural environment and contributing to society."

For example, in Japan, paper straws are being adopted mainly by major restaurant chains such as Starbucks Coffee and McDonald's. Paper straws are highly sustainable because they do not use petroleum as a raw material and can be disposed of as combustible waste.

In fact, according to a survey conducted by Neo Marketing Co., Ltd., a company that provides comprehensive marketing support, 1,000% of respondents (n=65.2) said that they had a better impression of companies that introduced paper straws.

Additionally, since 20% of people in their 59.0s responded that their impression had not changed, it is possible to hypothesize that younger generations are more likely to think that being conscious of sustainability is a given.

Reduce energy and material costs

By promoting management that incorporates sustainability, the introduction of recycled energy and materials can also lead to reduced energy and material costs.

For example, many leading IT companies such as Meta (formerly Facebook) and Amazon.com have introduced solar power generation. Amazon.com has launched 274 renewable energy projects, including solar power generation, and has previously procured enough power to power 300 million U.S. homes (Amazon NewsThan).

Additionally, many companies are working to reduce costs by using recycled energy and materials, such as melting trash and the ash from incinerated trash at high temperatures of over 1,200 degrees and using the solidified material as concrete material.

Achieving strategic recruitment activities

Improving a company's image through management that incorporates sustainability will help companies realize strategic recruitment activities, especially in terms of securing talented Gen Z talent.

As mentioned above, people in their 20s, who are the core of Gen Z, tend to think that "it's natural to be conscious of sustainability." Therefore, companies that are not conscious of sustainability are likely to be excluded as potential employers.

In order to secure talented talent among Gen Z, the quickest route to strategic recruitment may be to first shift to management that incorporates sustainability.

On the other hand, the generation that is conscious of sustainability also includes the millennial generation (born between 1980 and 1995).

According to a document released by PwC Japan, 60% of millennials responded that they "understand, empathize with, and take action to address environmental and social issues." This is one point higher than the results of Gen Z who responded similarly.

A shift towards management that incorporates sustainability may also be attractive to talented millennial workers.

"Data Utilization" Supports Sustainability Strategy

As mentioned above, utilizing data generated by sustainable activities can lead to the creation of new business. Furthermore, data utilization is essential for implementing a sustainability strategy that incorporates sustainability into business strategies.

For example, by collecting and analyzing a wide range of user content posted on social media, it is possible to understand what impressions consumers have of sustainability and what kind of corporate activities they expect from it. It is also possible to use social media to survey how consumers feel about the sustainable activities promoted by companies.

In order to realize a company's sustainability strategy, it is necessary to evaluate the company's sustainability activities from multiple angles using a variety of data indicators.

Using data to check the health of companies

As interest in corporate sustainability activities grows, companies are beginning to take steps to objectively evaluate their own companies' sustainability.

Materials released by the Ministry of Economy, Trade and Industry in December 2022The paper discusses the importance of "SX (Sustainability Transformation)*," which promotes the use of various sustainability data as KPIs (key performance indicators).

Examples of sustainability data

Source:Survey on ESG Data Collection and Disclosure 2022 | Deloitte Tohmatsu (quoted from the document)

SX, which promotes this sustainability data as KPIs, can truly be thought of as a "corporate health check."

*SX (Sustainability Transformation) refers to the "synchronization" of social sustainability with corporate sustainability, as well as the management and business transformation required to achieve this.

Possibility of creating new business

There is also a gradually growing movement to utilize the data generated through sustainable activities.

For example, Salesforce Japan, which develops SFA systems, offers Net Zero Cloud, a sustainability management solution aimed at a carbon-free society. Net Zero Cloud calculates greenhouse gas emissions and renewable energy utilization rates based on a variety of data.

There is also the potential to create new business opportunities, such as:

• Supporting agriculture and fisheries using uniquely collected environmental data
• Energy consulting utilizing know-how gained through the use of recycled energy

It can be said that a key issue for companies living in a sustainable society is not just incorporating sustainability into their management, but also developing and creating new business from it.

In conclusion

Until now, many people have understood the meaning of sustainability but have not been able to visualize its specific connection to business. We hope that this article will deepen your understanding of sustainability.

While getting a concrete idea of ​​the connection between sustainability and business, please think about what your company can do to protect the natural environment and promote social and economic development.

References

• Top 10 "Next Generation Innovative Companies" Selected by Investors and Entrepreneurs | XICA Co., Ltd. https://xica.net/xicaron/next-innovative-company/
• Naoko Nemoto (Professor, Graduate School of Business and Commerce, Waseda University) "Issues Surrounding ESG Investments (2021)"https://www.mof.go.jp/pri/research/seminar/fy2021/lm20210622.pdf
• Why "true sustainability management" is needed | PwC Japan Group https://www.pwc.com/jp/ja/knowledge/prmagazine/pwcs-view/202105/32-01.html
• Japan Federation of Bar Associations "Guidance on Responding to ESG (Environmental, Social, and Governance)-Related Risks - Toward Collaboration and Dialogue between Companies, Investors, and Financial Institutions" (2018)https://www.nichibenren.or.jp/library/ja/opinion/report/data/2018/opinion_180823.pdf