Speech: the 18th Science Council of Asia
Updated: Feb 21, 2019
Mr. Masaya Futamiya,
Chair of Committee on Corporate Behavior & Social Responsibility, Keidanren
Director - Chairman, Sompo Japan Nipponkoa Insurance Inc.
5th – 7th December 2018
Science Council of Japan (SCJ)
Thank you for your introduction. I’d like to extend my congratulations on holding the 18th Science Council of Asia Conference. It is also my great honor to have this opportunity to give a keynote speech today.
Keidanren, Japan Business Federation, is a comprehensive economic organization with a membership comprised of 1,380 representative companies, major industry associations and regional economic organizations. As I will explain in more detail later, we encourage our member companies to adhere to the Charter of Corporate Behavior that Keidanren has established as general rules of conduct for responsible corporations.
Now I’d like to move on to the theme of this year’s conference, “The Role of Science for Society: Strategies towards SDGs in Asia.” This is a very important theme for companies. All of you may be surprised to learn that Keidanren has positioned the achievement of SDGs as one of its top priority policies and is proactively pursuing that goal. There is also a growing trend among our members to link SDGs not only to their corporate philosophies, but also to their management strategies. Today, I’d like to explain why Japanese companies are attaching such importance to SDGs and how they are approaching them.
In recent years, with the advancement of globalization and information technology, the world has dramatically changed. People, money, and tangible and intangible goods are moving across national borders freely and instantaneously. And as companies around the world have connected to each other around the world, many countries have achieved remarkable economic growth. In particular, the Asian region has become the center of global growth, and the combined GDP of the countries in the SCA has increased by about 12.5 times between 1980 and 2017. It is projected to grow even further, by another 50%, between now and 2022.
On the other hand, we are still facing a range of social issues. Poverty, widening disparity, climate change are just some of the problems that are becoming increasingly serious in the world. These problems are causing drastic social change and destabilization. For example, even just looking back on this year, there have been numerous incidents that we could not have even imagined just a year ago. We can see moves towards anti-globalization and protectionism, and worry about our ability to maintain a free and open international economic order founded on the rule of law. Yes, it is just the foundation of the development of economic society.
Companies are also now facing another, completely new change. That is the “digital transformation.” It is said that the rapid development of new technologies such as the IoT, AI, and Big data will bring about a 4th industrial revolution. Keidanren predicts that this wave of digital transformation can change not only industry but also society, culture, and customs as well. Of course, the corporate activities will also fundamentally change.
In an uncertain and unpredictable age, “sustainability” will become a key value. Various actions have already been taken in the international community from this perspective of sustainability. In 2011, the United Nations Human Rights Council adopted the Guiding Principles on Business and Human Rights. It calls on, not just governments, but also business enterprises, to adopt approaches towards respect for human rights. Also, in the adoption of the Paris Agreement, numerical targets were set for greenhouse gas emissions, and the governments and companies of each nation have been called on to take action to achieve those targets. Further, in September 2015, SDGs were adopted unanimously at the UN General Assembly. They are comprehensive and ambitious. These internationally shared goals are working towards realizing a sustainable society. I believe “the SDGs are the integration of human wisdom.” Companies are required to exercise creativity and innovation to deliver on them. In such social change, if companies were to continue with the conventional and unsustainable approach, those companies may not be able to survive in the long term. Then we must change our approach. “There will be no success in business unless they are beneficial to society.” Companies need to make this notion central to their actions. I believe those companies that utilize the digital transformation and create new sustainable value to society will become the leaders of the next era.
From this perspective, Keidanren has come up with a new approach to delivering on SDGs. We call this “Society 5.0 for SDGs.” This completely new concept allows companies to become not followers but leaders in the achievement of SDGs.
Society 5.0 is the fifth newest society in the history of human social development, starting from Hunter Society, Agrarian Society, Industrial Society, and Information Society. This concept states that by taking maximum advantage of innovative technologies, we want to put an end to the kind of argument that would force us to make a choice between economic growth, or protecting the environment or social stability. Society 5.0 is a concept that would make the most use of digital transformation to create a completely new future society, one that will achieve both economic growth and resolutions of social issues.
If we rush into digital transformation without changing our conventional mindset, the society may become bad one in which people are dominated by new technology, or in which only advanced nations will enjoy its benefits. Instead of these kinds of societies, Society 5.0 is a concept that seeks to create a society of “No one left behind”, which means everybody can pursue diverse lifestyles and happiness through digital transformation. To put it another way, it seeks to create a society that has delivered on SDGs.
Under this concept, companies’ goods and services can be re-interpreted as being not merely products, but solutions to social issues that deliver on SDGs. Also, it will be those corporate innovations that contribute to Society 5.0 that will become the key to the achievement of SDGs. Keidanren thinks the realization of “Society 5.0 for SDGs” is the true business responsibility to our society and is promoting this concept proactively.
Very recently, Keidanren released a policy proposal that comprehensively sums up the concept of Society 5.0. The proposal offers prospects for a wide range of areas in Society 5.0, including cities and regions, energy, disaster prevention and mitigation, healthcare, agriculture and food, logistics, manufacturing and services, finance, and public services. I would be delighted if you would take the time to read this proposal.
Also, Because Society 5.0 for SDGs aims to achieve the transformation of society as a whole, its concept cannot be realized by just one company, one industry, one country, or one entity. Enterprises, and academics, are called on to boldly break down those invisible walls between stakeholders, and to create new value with diverse stakeholders. Society 5.0 for SDGs will also be achieved through the construction of an innovation ecosystem. It means the cyclic system that innovations will connect organically with other innovations and create further new innovations.
To this end, Keidanren has produced “Innovations for SDGs: Road to Society 5.0,” a collection of case studies showcasing corporate innovations for each of the 17 SDGs. For example, for Goal 11, an innovation in the electrical industry can be found alongside an innovation in the retail industry. We think it can provide a new perspective. Different industries can combine their efforts to create new innovation while working toward achieving the same SDGs. Also, because the SDGs are a common global language for social issues, they will be useful for smooth coordination not only between enterprises, but also with diverse stakeholders. We believe, this collection of innovation case studies has the potential, to become a platform for problem solving and value creation.
As an example, I’d like to present a case from my own company, Sompo Japan Nipponkoa Insurance. Weather Index Insurance, which aims to deliver on Goal 2, Zero Hunger. For farmers engaged in agriculture in the Central Arid Zone in Thailand and Myanmar, drought is a major economic risk. To cover that risk, my company decided to develop and offer Weather Index Insurance. It is a micro-insurance that would pay a predetermined insurance benefit when a weather index, such as for temperature, wind speed, or rainfall, exceeds certain conditions. Therefore we need accurate rainfall data because it is essential to rolling this insurance out as a business. However this can be difficult in developing countries. Then we built a partnership with the Remote Sensing Technology Center of Japan, which provides rainfall data obtained by earth observation satellites. So we were able to estimate rainfall data of many developing countries and also enabled us to turn this idea into a business. This will realize sustainable agriculture, contributing to the delivery of Goal 2, as well as Goals 1 and 13. This is an excellent example of achieving both economic growth and solutions to problems through the use of satellite data.
Keidanren has set up a special SDGs website, where it periodically updates these cases studies and adds new ones. When the website was launched in July this year, there were 165 cases in Japanese, and 86 in English. As interest has grown in the website among Japanese companies, we have been receiving more and more new examples, and the number now stands at 218cases in Japanese and 120 in English. As well as the ability to search by the 169 targets, company name, or keyword, the website also has more details about Society 5.0 for SDGs, so I hope you will take the chance to explore the site.
Next, I’d like to talk about Keidanren’s Charter of Corporate Behavior. In November last year, Keidanren revised its Charter of Corporate Behavior, which serves as general rules of conduct for Keidanren member companies. This major aim is that we encourage our member companies to include Society 5.0 for SDGs in their corporate activities and management strategies. Keidanren first introduced this Charter from a corporate ethics and compliance perspective in 1991. At the time, it was quite innovative, with nothing like it seen before.
The Charter consists of a preamble, which states the overall intent of the document, and 10 articles. There is also a supplementary document, “Revision of the Charter of Corporate Behavior” which explains in simple terms the purpose of the revisions, and an “Implementation Guidance,” which gives specific examples on how top management and responsible divisions can implement the Charter.
Based on the intent of the Society 5.0 for SDGs, the new Charter states that “the role of a corporation is to take the lead in the realization of a sustainable society.” This is truly a declaration that corporations will engage in the SDGs, not passively, but proactively. The ten articles that follow the preamble detail the specific behavior that corporations should adopt.
The 1st article calls on corporations to strive for both economic growth and the resolution of social issues through innovation. The Implementation Guidance offers the use of innovative technologies in corporate activities and the promotion of open innovation as specific ways to achieve this.
So far, I have stressed the new concept of Society 5.0 for SDGs. But the promotion of responsible behavior is a major premise to delivering on the SDGs. Articles 2 to 10 of the Charter indicate what kind of behavior is required.
Article 4, which calls for respect for human rights, is a new addition to the Charter. The Implementation Guidance discusses human rights due diligence; that is, understanding the Guiding Principles on Business and Human Rights and putting them into practice.
Article 10 deals with the importance of leadership by top management and the encouragement of supply chains. The role of top management is paramount to putting the spirit of the Charter into practice. Top management should understand the SDGs and reflect them in management policies, and encourage behavior based on the Charter’s principles within the corporation and its supply chain. Keidanren is actively encouraging top management to display leadership through activities such as holding symposiums for top executives.
From March to June, 2018, Keidanren conducted a questionnaire survey of its member companies on the Charter of Corporate Behavior, to obtain a picture of how they are approaching the Charter. We received responses from 302 of the 1373 member companies. The numbers themselves maybe slightly high because companies are already involved in SDGs. But the survey findings did give us a picture of the situation in Japanese companies.
Firstly, about 80% of the companies said that they had incorporated “the realization of a sustainable society” into their management philosophies and corporate codes of conduct and guidelines. Next let’s look at the results when we divide the responding companies into two groups—those with net sales of 500 billion yen or more and those with net sales of less than 500 billion yen. Then we can see that about 70% of the large companies had incorporated this concept into the management of their business. But, in smaller companies, the percentage was only around 50%. For your information, there were no major differences between industries. We learned from these results that when we promote the SDGs, it is necessary for us to support companies while considering their scale.
In the survey regarding engagement in the SDGs, 35% of companies responded that they had already mapped their business activities to the individual goals of the SDGs. However, if we include those who are currently considering or planning to consider such mapping, the figure increases to about 80%. It indicates the high degree of interest in this subject. On the other hand, only about 10% of respondents were using the SDGs to identify the areas of impact to their value chains, setting key performance indicators, and integrating them into management. Based on this finding, Keidanren intends to engage in further support, such as sharing examples of best practice and holding workshops.
Regarding the state of engagement in the 17 goals of the SDGs, as you can see, many companies responded that they were engaging in Goal 8: Decent Work and Economic Growth, Goal 9: Industry, Innovation and Infrastructure, and Goal 13: Climate Action.
We also surveyed our members on their approaches to respect for human rights. About 80% of the respondents have established policies regarding respect for human rights and are developing systems and pursuing education and training. However, we found that there is still some way to go in some areas such as the implementation of human rights due diligence.
I’d like to note here that the Japanese government is currently working on the development of a national action plan based on the Guiding Principles on Business and Human Rights. Keidanren is actively involved in that process and we hope to keep pursuing it through private-public collaboration.
The Tokyo Organising Committee of the Olympic and Paralympic Games has declared that the 2020 Games will be the first in history to be planned and run in accordance with the Guiding Principles on Business and Human Rights.
Running the Games in accordance with these Guiding Principles will be mandatory from the Paris 2024 Games onward. But the Tokyo Committee decided to adopt it voluntarily. We believe that it will provide a model case for the organization of the Olympics and Paralympics.
Furthermore, I'd like to introduce that Keidanren Committee on Nature Conservation has taken for the achievement of the Aichi Targets. That is the revision of "Declaration of Biodiversity by Keidanren". Keidanren enacted it to promote biodiverse activities for the first time in 2009. Recently, Keidanren has made major revisions to the Declaration. The aims behind these revisions were to reflect the changes in society since its establishment and to make it easier for companies to incorporate the Declaration into their own operations. There are three key points to the revisions. The first key point is "Responsibility of top management.” The first clause declares the aim of “realizing a sustainable society through building a society that coexists with nature,” by top management. The second key point is a “global perspective.” In addition to the voluntary promotion of local actions in line with the characteristics of the region, the Declaration expresses the importance of extending those actions to global supply chains. The third key point is the Promotion of Integrated Environmental Corporate Management. We have recently proposed this new concept. The aim is to conduct corporate management that incorporates wide-ranging environmental activities to develop a society co-existing nature closely to climate change and circular economy. Keidanren will continue to promote “the mainstreaming of biodiversity” through these activities. I'm sure that these can contribute to achieve not only SDG 13, 14, 15 but also all goal.
Keidanren is also pursuing dialogue and cooperation with the UN and other international organizations, governments, economic organizations, academics and other diverse stakeholders. I visited New York in this past July and gave a presentation in the SDG Business Forum, which is the world’s largest business event concerning the SDGs. I have also exchanged views about the realization of Society 5.0 for SDGs with many people, including United Nations, UNDP and UNICEF, economic organizations, the scientific community, and various NGOs. In total, Keidanren representatives talk to several hundred organizations a year.
Furthermore, next year, 2019, Japan will host G20 and TICAD 7, and there will be a summit-level meeting on SDGs during the UN General Assembly in September. As the host of B20, the business version of G20, Keidanren will hold discussions with the economic organizations and we plan to announce a joint statement. The main theme of those discussions will be Society 5.0 for SDGs.
I understand that today’s host, the Science Council of Japan, will also serve as the secretariat for Science 20. I am sure that many of you here today will attend S20 and other conferences. As I said earlier, Society 5.0 for SDGs is not something that can be realized by one company, one industry, one country, or one entity. I believe that we can do it with everyone's help. I'm positive that if you were to encourage companies to engage in Society 5.0 for SDGs in S20, it must provide tremendous momentum for those companies. Let's create a new future society, together.
 IMF (2018), World Economic Outlook (nominal GDP, USD)