Japan’s CSR Policy

February 2017 Economic and Industrial Policy Bureau

Ministry of Economy, Trade and Industry

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Overview of Japan’s CSR policy

・Aging Society ・Shrinking Population and labor force

・Medical/Health ・Education etc.

・Business & Human Rights in Emerging Economy ・Conflict Minerals ・Supply Chain Issues ・Water Risk ・Indigenous people ・Bribery etc.

Social Challenges/ Issues

Global Local

Companies

Labor regulations, Human Rights Protection, Social Security, ODA, etc.

Sustainable Growth/ Value Creation

Policies for Encouraging

Companies’ Transforming Social Challenges to

Management Challenges

Strategic CSR/CSV Policy Direct Involvement

to Societal Challenges

Management Challenges

Contributing to Solving Social Challenges

Government of Japan

Corporate Tax Reform, Promoting Entrepreneurship Venture Business etc.

(Traditional) Economic/Industrial

Policy

・NGO/NPO

・Researchers

・Int. Organizations

・Media

Transforming Social Challenges to Management Challenges

Solutions

Addressing and Tackling Social Issues as Business Management Challenges

Major Issues/ Policy initiatives

Stakeholder Engagement and Value Creation

1. Sustainable Value Creation and Investment Chain The Study Group on Long-term Investment (Investment

evaluating ESG Factors and Intangible Assets) toward Sustainable Growth

2. Realization of Work Style Reform 3. Diversity/ Promoting Women’s Empowerment Nadeshiko Brand, Diversity Management Selection 100, etc. The Study Group for Ideal Approaches to Diversity

Management as a Competitive Strategy

4. Enhancing Health and Productivity Management Health & Productivity Stock Selection, etc.

Responsible Business/ Social Challenges

5. The Sustainable Development Goals (SDGs) The Sustainable Development Goals (SDGs) Promotion

Headquarters

Business and Human Rights The Research Project by IDE-JETRO

Business/ Public Platform 6. CSR Forum Japan, etc.

International Cooperation UN/ OECD WGs & NCP, EU-Japan CSR WG, APEC, etc.

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1. Sustainable Value Creation and Investment Chain (Overview)

Capital flow

Pension Funds (Asset Owners)

Stock Exchanges Sell-side Analysts

Intellectual Capital

Human Capital

Manufactured Capital

Natural Capital

Financial Capital

Governance

Capital allocation • Distribution • Recomposition • Combination

Creation of “Earning Power”

Product/Service Markets

Consumers

Beneficiaries

Private Investors

Dialogue/Engagement

Asset Management (Asset Managers)

Institutional Investors

(Fund providers)

Financial Market（Market

Participants） Companies

Board of Directors

Management Companies & Institutional Investors Disclosure Dialogue/ Engagement (incl.

Exercise of voting rights)

Social Capital

Creation of “Sustainable Corporate Value”

Corporate Governance Code

Amendment of Companies Act

JPX‐Nikkei Index 400 Stewardship Code

Pension system & operation

GPIF

NISA/ Defined contribution pension

METI established a Study Group on Long-term Investment (Investment evaluating ESG Factors and Intangible Assets) toward Sustainable Growth on August 24, 2016.

3 (Source) http://www.meti.go.jp/english/press/2016/0822_03.html

METI established a Study Group on Long-term Investment (Investment evaluating ESG Factors and Intangible Assets) toward Sustainable Growth.

The Study Group consists of over 20 members: companies, investors such as GPIF which is the world’s largest pension fund in Japan, academics and international organization.

METI will publicize recommendations by the end of March, 2017.

1. Sustainable Value Creation and Investment Chain (Discussion Points)

Investors Market participants

Desirable form of evaluation and decision-makings in long-tem investment (investment evaluating ESG/intangible factors)

Stewardship & Fiduciary duty Expected roles s of market

participants and analysts

Desirable disclosure Desirable dialogue and

engagement (incl. exercise of voting rights)

Companies Ideal approaches of evaluation and decision-making for the long-term investment Investors Perspectives on mid to long term corporate value of companies and ideal approaches of evaluation

Companies

Desirable management form of decision-makings in long-tem investment (investment evaluating ESG/intangible factors)

Desirable governance for optimal utilization of capitals (Human capitals, intellectual capitals, manufactured capitals, etc)

Desirable form of information provision to investors and stakeholders

Focal Points

Companies & Investors Ideal behaviors, dialogue & mutual communications

Discussion Points

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2. Realization of Work Style Reform Prime Minister Mr. Shinzo Abe held the first meeting of the Council for the

Realization of Work Style Reform on September 27.

The Council will consider what the necessary legislation and policies for work style reform are, compile a concrete action plan within this financial year, and submit the relevant legislation to the Diet, with a sense of urgency.

Providing equal pay for equal work

An increase in wages/ improvement in productivity

Improvement of long work hours

Support for career change /re-employment

Creating an environment where it is easy for women and young people to work

Promoting employment among the elderly

Facilitating a work-life balance The issue of the acceptance of foreign personnel

The Council will focus on 9 areas below:

Diversity Management Selection 100

Enterprises that are achieving

management results through utilizing the abilities of diverse human resources including women, senior citizens, foreign nationals, etc. are awarded.

Selected enterprises: 174 (fiscal 2012~2015)

Nadeshiko Brand

Listed enterprises that are outstanding

record in terms of promoting the empowerment of women are introduced to investors as "medium- to long-term growth brands."

This is jointly implemented by the Ministry of Economy, Trade and Industry and Tokyo Stock Exchange.

Selected brands: 45 companies (fiscal 2015)

3. Diversity / Promoting Women’s Empowerment In order to promote the empowerment of women as a growth strategy, it is

necessary for diverse human resources including women to fully exhibit their capabilities in the corporate and economic society, and thereby boost competitiveness.

For this purpose, the empowerment of women will be promoted as a corporate management strategy.

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Disseminating best practices Approach to capital markets

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3. Diversity / Promoting Women’s Empowerment

It is significant for Japanese companies to clarify better approaches to diversity management, which will contribute to improving their growth and profitability, and to further attract the attention of companies or investors to their diversity management.

To discuss measures to achieve the goal, METI established a Study Group on Diversity Management (Diversity 2.0) as a Competitive Strategy.

Corporate Management Reform Feedback from Stakeholders

Potential policy measures: Provide guidance on diversity

management toward corporate management reform

Support companies in carrying out reform

ex. Enhancing B-to-B cooperation

Global long-term investors

The labor market

Investment evaluating ESG Factors, Nadeshiko Brand, The Act on Promotion of Women's Participation and

Advancement in the Workplace

(Source) http://www.meti.go.jp/english/press/2016/0819_01.html

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4. Enhancing Health and Productivity Management Since FY 2014, METI and the Tokyo Stock Exchange (TSE) have been

conducting the Health & Productivity Stock Selection. 25 companies are selected as 2016 Health & Productivity Stock

Selection

[i] the positioning of health and productivity management in management philosophy and policies [ii] organized frameworks established for tackling health and productivity management [iii] specific systems established for ensuring health-conscious management as well as measures introduced for implementing them [iv] measures established for assessing and improving health and productivity management [v] adherence to laws and regulations and risk management

Evaluation Framework

(Source) http://www.meti.go.jp/english/press/2016/0121_01.html

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5. The Sustainable Development Goals (SDGs)

Prime Minister Mr. Shinzo Abe held the 1st meeting of the SDGs Promotion Headquarters on May 20.

All Ministers of State served as the members. The Headquarters will establish guidelines for Japan’s implementation

of SDGs. The stakeholders meeting was also held on September 12.

<FY2016> Cooperation between companies and stakeholders including NGO/NPO and governments for achieving the SDGs <FY2015> Global Strategy on CSR for Competitiveness of Companies <FY2014> CSR Management of Companies <FY2013> ISO 26000 and Other CSR Standards in Businesses ＜FY2012＞ Business and Human Rights in Emerging Economies ＜FY2011＞ Non Financial Disclosure

6. CSR Forum Japan The CSR Forum Japan is a business initiative advocating corporate social

responsibility founded in 2004 with METI support. Consisting of highly motivated, leading multinational corporations, the forum is regarded as one of the most outstanding networks in Japan.

The forum annually conducts a variety of studies and has been establishing productive affiliations with relevant national and international organisations since being established.

Recent Research Subjects

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Mission

Support companies in sharing their experiences, insights and latest information on CSR.

Conduct research projects on CSR policies and business activities.

Foster close communication and cooperation between companies and relevant organisations.

Contribute to the international/national policy debate on CSR.

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6. CSR Forum Japan As the main research subject for FY2016, the Forum focused on “the

cooperation between companies and stakeholders including NGO/NPO and governments for achieving the SDGs”.

FY 2016 Members

Global framework and major issues - Identify social issues pertaining to key companies on a global level, with particular focus on SDGs trends and correlation with corporate activities will be researched and analyzed.

Case study - Measures taken in Japan and internationally on cooperative efforts between international institutions, governments, and industry will be researched and analyzed.

Challenges/Proposals

Research Framework

Chair: Tetsuyuki Kagaya ( Hitotsubashi University) Adviser: Yoshihiro Fujii (Sophia University) Committee:

Panasonic Corporation Bridgestone Corporation Global Compact Network Japan Ernst & Young Institute Co., Ltd. ITOCHU Corporation AEON Co.,Ltd ANA HOLDINGS INC. CSO Network Japan Hitachi, Ltd. Toray industries, Inc. Toshiba Corporation Sony Corporation

Toshiba Corporation Sony Corporation SHISEIDO CO.,LTD Institute for International Socio-Economic Studies Sompo Japan Nipponkoa Insurance Inc. Lloyd’s Register Quality Assurance Limited AJINOMOTO CO.,INC Honda Motor Co., Ltd. Fujitsu limited DAIKIN INDUSTRIES,LTD

Observer: METI, Development Bank of Japan Inc., Mitsubishi UFJ Financial Group, Inc.