How can companies do it?

By Malcolm Foster

As businesses big and small increasingly wake up to the importance of sustainability, some are not really sure where to start. Others have quickly begun to align their business practices to reduce waste and environmental damage, protect human rights, and seek sustainable sources of energy—all aspects of this catch-all term.

Recognizing sustainability as a priority has prompted many companies to go through a “re-visioning process” to redefine their objectives and purpose. Some of these steps question the basic tenets of capitalism, said Ben Fouracre, the Japan representative at business advisory company Berkeley Research Group, LLC.

**Ben Fouracre**

Japan representative director, Sustainable Corporation Programs lead, Berkeley Research Group, LLC

“It’s no good just to make money anymore. Businesses need to be profitable, but earn that profit without damaging the planet or society,” he said. “Companies are realizing they need some kind of ethical purpose for existing.”

But it’s not just about doing good things; it’s about survival. Businesses are realizing that taking action on climate change, plastic waste, and worker exploitation makes good business sense and is closely linked to their own futures. Ignoring these issues is perilous. “Is our company, our existence sustainable?” Fouracre said companies are asking themselves, “Is our business still going to be relevant in 20 years?”

Sustainability also has a personal meaning for many. Dieter Eckert, chief executive officer of TÜV SÜD Japan Ltd., a unit of the German safety, security, and sustainability solutions company, recently became a grandfather. “I have a great interest in ensuring that my grandson will experience an environment and conditions which are worth living in.”

Wrestling with questions about how to create a sustainable world—and what that means for corporate and individual behavior—are the first steps companies and organizations need to take, according to consultants interviewed by The ACCJ Journal.

**Tove Kinooka**

Director and co-founder Global Perspectives K.K.

“Companies need to recognize and understand their role in the global ecosystem,” said Tove Kinooka, director and co-founder of Global Perspectives K.K., a sustainability integration consultancy. “When you start to zoom out, you see how interdependent everything is, and how a company’s actions have ripple effects beyond its supply chain.”

Wake-up Call

The Covid-19 pandemic has dispelled any doubts about that broader impact, driving home how interconnected our world is. “It’s been a massive wake-up call,” Kinooka said. “The pandemic seems to have really catalyzed a true desire for action, rather than just talking about things. We’re seeing a lot more companies saying, ‘We want to do something,’ which is very cool.”

Once companies are convinced about the importance of sustainability, it’s vitally important that the vision be embraced at the top. This must be done as a key part of the corporate identity, not treated as a compliance issue or a reaction to activists or investors, the consultants said. “It can’t just be window-dressing,” said Fouracre. “At the very top of the organization, the leadership team has to define where they stand.”

**Dieter Eckert**

President and CEO TÜV SÜD Japan Ltd.

In the past, sustainability issues were often lumped together under corporate social responsibility (CSR) and, usually, delegated to a department that had very little power or decision-making ability.

That term isn’t used very much anymore, because the “responsibility angle makes it seem that it is something you don’t really want to do,” said Heather McLeish, a director at EY Japan Co., Ltd. and co-chair of the American Chamber of Commerce in Japan (ACCJ) Sustainability Committee. Sustainability now is becoming a core part of corporate identities.

Mapping It Out

The first step toward this is mapping out a company’s value chain—all the points at which the business touches people and the environment—and zeroing in on the biggest sustainability risks, as well as the biggest opportunities, the consultants said.

Most companies already have risk profiles, so it may mean reconstructing these in light of issues such as environmental impact, human rights, waste management, and gender equality. That can mean a major overhaul.

*United Nations Sustainable Development Goals*

One helpful way to break down sustainability goals is to think of them in three inter-related categories, which can pair with the 3Ps:

Social (people)
Environmental (planet)
Economic (profits)

Another acronym that’s often heard to summarize this is ESG, for environmental, social, and governance criteria.

Risks vary widely depending on the industry. For a coffee producer, for example, looking at their business through this lens would mean examining the natural environment in which the coffee is grown, the living and working conditions of the people who grow and pick the beans, as well as their communities and the way the coffee is transported, processed, packaged, and delivered to customers. There’s waste and energy use to consider, too.

Key risks include:

Impact on climate change
Exploitation of workers
Use of child labor
Exposure to hazardous chemicals
Lack of access to education and healthcare

**Heather McLeish**

Director EY Japan Co., Ltd.
Co-chair Sustainability Committee

Any of these, if exposed, might damage the company’s reputation, and hurt sales from increasingly conscientious consumers, Kinooka said.

For manufacturers, the value chain is more complicated because parts and raw materials come from all over the place and involve thousands of suppliers and transporters. It’s hard to know each one’s labor or environmental conditions.

Major concerns include:

The source of raw materials
The carbon footprint of transporting materials
Parts and labor practices among suppliers

“The factory may be careful about its waste management and other things, but where do all these particular elements actually come from? And how do they get to the factory?” said Kinooka. “There are lots of hidden risks. There’s potential for corruption and exploitation. It can get murky.”

Strategic Opportunities

On the flip side, companies should also use this process to see strategic opportunities that come from paying more attention to sustainability.

If a coffee business builds good relationships with the growers and invests in schools, health centers, and farmer training, “then they not only get a healthier, better-educated workforce, who can understand and implement new techniques for improving yields and reducing environmental degradation, but they also have a strong story with which to engage consumers,” Kinooka suggested.

Initially, people may tend to see prioritizing sustainability in a negative light—having to restrict or sacrifice things, such as avoiding plastic, limiting travel, or even not eating meat, said Robin Lewis, co-founder of mymizu, a platform that aims to reduce plastic bottles by providing information about 8,500 free water-refill locations around Japan and thousands more around the world.

**Manabu Yamanaka**

Engineering manager, Building Construction Products Division, Caterpillar Japan LLC
Co-chair Sustainability Committee

“But another way to look at this is that it is possibly the biggest opportunity, in terms of job creation and economic growth, [so far] in the 21st century,” Lewis said. “It’s a huge opportunity for companies to fundamentally transform what they’re doing, access new consumers, and grow their market share.”

Pick a Few

The United Nations Sustainable Development Goals (SDGs) can provide a helpful framework for companies trying to identify objectives that are related to their businesses.

But the commitment needs to be genuine. Sometimes, companies have done very little, despite paying lip service to the SDGs by posting the colorful ring emblem prominently on their website and claiming to be contributing to certain goals. “There’s a lot of SDG-washing going on,” said Kinooka.

Once companies have mapped out their entire business, they can categorize their activity according to the 17 SDGs, making it easier to choose which goals best align with their operations, said Eckert of TÜV SÜD Japan, which provides safety testing, inspections, and certification.

Generally, it is better to pick a few goals and take meaningful action on them, rather than spread yourself too thin, the experts said. “It’s much more credible to focus on a few [goals], especially for smaller companies, and to be able to show what you are doing,” said Hannah Perry, a director at Finsbury Glover Hering and vice-chair of the ACCJ Sustainability Committee.

“Companies get this wrong all the time, because they try to do too much,” said EY’s McLeish.

Easy Wins

Educating and engaging employees is the next vital step—and without this, the venture will fail, the consultants said.

Companies that invest time and effort in informing workers about why sustainability is important, and getting them emotionally engaged, generally have more successful outcomes. Workers need the intellectual reasoning behind these new priorities, as well as an invitation to be emotionally invested and to be shown how they can make a difference.

That gives them a sense of ownership, rather than a feeling that they are simply doing things because they were told to do so by their boss. “If employees see sustainability as a compliance issue or a top-down demand, it’s not going to last,” said Lewis, who is also co-founder and director of Social Innovation Japan, a platform designed to bring together entrepreneurs, nonprofits, governments, big business, and academia to tackle real-world problems.

Joy Jarman-Walsh, a Hiroshima-based consultant at Inbound Ambassador, the sustainability-focused company which she founded, agrees that talking with your staff is critical. Encouraging and training employees to look out for wasted water, food, or electricity will make them feel that they are contributing to efforts that make a real difference—and it will also save the company money, she said. “Then the employees feel better about the brand because it’s more ethical, it has more integrity.”

Once staff are engaged, start looking for “easy wins,” Lewis suggested. Plastic waste is a huge problem that employees can immediately start addressing by being encouraged to bring their own bags and water bottles, and some companies have even started banning single-use plastic items.

To inject some fun into the endeavor, Lewis’s non-profit runs the mymizu Challenge that helps companies set up competitions between departments to see which department can most reduce the use of plastic bottles over the course of a month.

**Hannah Perry**

Director Finsbury Glover Hering
Vice-chair Sustainability Committee

For hotel or restaurant chains, food waste may be an issue. Employees could connect with local farms and see if they have a compost system, or donate to Second Harvest, a group supported by the ACCJ Community Service Advisory Council that feeds homeless people, Jarman-Walsh suggested.

Pandemic-related travel restrictions have also prompted companies to reconsider how much travel—a big generator of carbon emissions—is really necessary, the experts said.

Proactively seeking input from staff—asking them, What’s important to you? What do you think we should change?—will also motivate them and lead to more sustainable business practices, said Fouracre.

Employees have detailed knowledge of their segment of the business, so may come up with creative alternatives to things such as packaging or energy use that will probably benefit the company.

With growing calls for supply chain transparency, some companies are looking at setting up hotlines for employees to report problems they see in the supply chain.

And expect to get calls, Fouracre said. “Before you set up a hotline, make sure you’re prepared, and make sure you’re serious about making changes, because if people report it, they expect to see some action.”

One company that did this was surprised to get a lot of sexual harassment-related calls, which they were not expecting, he added.

Sitting down together with key stakeholders—investors, employees, local leaders, and non-governmental organizations—to hear their top concerns and how they view the company is also a valuable exercise, said EY’s McLeish. “It’s always surprising. At every stakeholder engagement that I’ve been a part of, the management goes away saying, ‘I don’t know why we didn’t do this earlier.’”

Not a New Concept Here

European companies are considered the global leaders in sustainability, largely because legislation there has progressed the fastest, requiring companies to meet various environmental and human rights standards.

But while Japan may lag in implementing sustainability practices, many businesses here have welcomed the concept and are eager to put them into action, the consultants said. That’s probably because there’s a long history to the idea that companies have a social responsibility to care for their employees and surrounding community, as well as the environment.

**Robin Lewis**

Co-founder mymizu
Co-founder and director Social Innovation Japan

“Japanese companies have always been set up with the purpose of providing a benefit to society. They’re looking for long-term relationships and have a community ethos,” explained Fouracre, who said that Japanese trading companies he’s engaged with have been particularly proactive.

At Marubeni Corporation, for example, employees highlighted their own corporate philosophy of using the 4Rs—reduce, reuse, recycle, and return to earth—which they felt was a simple but obvious way to approach sustainability, he added.

McLeish said she has never had to sell the “why” a company should be doing this. “Never once in Japan. What we’ve had to sell is the ‘how’ to make it work.” EY is in a good position to show this by example, thanks to its own carbon-negative ambitions and success, which is outlined in a case study starting in this issue.

Still, some Japanese businesses are reluctant to make changes as the rest of the world moves ahead, and many consumers don’t weigh sustainability factors very much when buying products, some experts said.

“Japan is being left behind in terms of sustainable infrastructure, and that’s a real worry to me,” said Jarman-Walsh.

McLeish sees anecdotal evidence that suggests consumers are becoming more sensitive to these issues, “but, overall, most people don’t seem to care. They don’t boycott companies or push for change,” she said. “Young people do seem to care more.”

Tackling sustainability can seem like a huge goal, so McLeish recommends setting up short-term milestones, so that management and employees can see their progress.

The Long View

Going green can take money. Committing to sustainability goals often requires upfront investment—in cleaner forms of energy or better waste disposal, for example—that can dent short-term profits. That’s a challenge for listed companies under pressure from investors to produce results every quarter.

But increasingly companies are realizing that making those investments for the long term—a key to sustainability—is not

only good from an ethical standpoint, but it makes good business sense, experts said.

“It’s not just about looking good and being nice. It’s realizing that if we want to protect our supply chain, our resources, and our people, we need to invest now or we’re going to have a big problem in the future,” said Kinooka.

Caterpillar, for instance, is investing in a power source that will eventually replace the diesel engines it uses in its excavation and construction equipment, said Manabu Yamanaka, engineering manager of the Building Construction Products Division and co-chair of the ACCJ’s Sustainability Committee. Electric motors can power smaller vehicles, such as passenger cars, but currently are not strong enough for the large tasks and heavy-duty work required of backhoes and reloaders.

**Joy Jarman-Walsh**

Founder and sustainability consultant Inbound Ambassador

Investing in new technologies to explore every possible solution is imperative from a corporate survival standpoint, he said. “We cannot yet say what the major solution for powering small and large construction equipment will be, but we are investing in this area to prepare and look for all potential opportunities,” said Yamanaka, who shares a detailed case study of Caterpillar’s activities in this issue.

Sometimes, small business owners will balk at the upfront costs of solar panels or electric vehicles, for example, but usually those investments end up reducing costs over the long term—and they will give your brand a boost among consumers, said Jarman-Walsh.

Astroscale, an international company headquartered in Japan that aims to remove, and prevent the creation of more, space junk, sees one of its chief purposes as keeping Earth’s orbits safe and sustainable for the future. “We often describe ourselves as space environmentalists,” said Group Chief Operating Officer Chris Blackerby.

Astroscale is developing spacecraft that will capture defunct satellites and rocket upper stages, which are circling the Earth along with millions of tiny pieces of debris—all of which could damage existing satellites that provide us with communication and ways to analyze weather and climate patterns. The company successfully launched its End-of-Life Services by Astroscale demonstration (ELSA-d) mission on March 22.

“We want to make sure that the global commons—in this case the orbital environment—is usable for future generations,” Blackerby said. “As a society, we are wholly reliant on data from satellites, whether it’s for exchanging money, communicating, or understanding our climate … I don’t think people really are aware of how much we benefit from satellites in orbit, and how big a problem this is.”

Blackerby said it’s “very short-sighted” to avoid investing in sustainability practices that bring long-term benefits. “There will be negative impact on future economic activities if we don’t pay attention to the environmental, societal, and governance context.”

Youth Wave

The younger generation is more concerned and passionate about sustainability—after all, they will inherit the earth—and that has big implications both for consumers and recruiting talent, the consultants said.

If companies aren’t taking meaningful steps regarding climate, energy, human rights, and gender equality, they will be facing growing ranks of consumers who may reject their products and services, and instead turn to competitors who are.

They may also have a hard time attracting talent. “Future employees will be saying: ‘Sorry, if you can’t show me that you’re really serious about this, I don’t want to work for you. I’m going to go work for that other company that actually is doing something,’” said Kinooka.

**Chris Blackerby**

Group chief operating officer Astroscale Holdings Inc.

This line of thinking extends to diversity and gender equality. Some companies may have a hard time seeing this as part of the people/social side of sustainability, which they may equate more with labor standards and human rights. Reframing the issue may be necessary.

“Isn’t equal treatment a basic human right?” asked Kinooka. “If we look at equal treatment of all people—whether that’s gender-based, racial, LGBTQ, disabilities, or whatever type of diversity we’re talking about—when it comes down to it, it’s fundamental human rights, and we’re serious about being fair and equitable.”

That means not excluding anyone from the workforce, supply chain, or customer base, she said.

Gender Roles

Gender balance is a huge challenge for Japanese companies, the consultants agreed. Jarman-Walsh said setting quotas for women in management or key departments is the only way to rectify this.

McLeish said companies need to do a better job of bringing women into the leadership pipeline. Some companies will come to her and say they want to put women in senior management, but don’t have any, she said. “I tell them, ‘Well, that’s a corporate fail. How are you planning succession for the future?’”

This requires a big rethink on gender roles and real changes in family, company, and society, McLeish said. Some women will turn down promotions because they are expected to assume most of the child-rearing and household duties, as well as take care of elderly parents, and they don’t want to spend long hours at the office or out entertaining, as is required of senior executives, she pointed out.

The solution may have more to do with reeducating and helping men revise their own understanding of their roles, particularly in the home, McLeish said. There are plenty of seminars about what it means to be a working mother, but none about what it means to be a working father. “We’ve spent a lot of time talking about changing gender roles for women, but we’ve neglected to talk about the changing gender roles for men,” she pointed out.

“I believe we’ve just left men hung out to dry: just keep your head down, work hard, and you’ll get promoted and move forward,” McLeish added. “I feel that’s led to a great deal of confusion as to what their role is.”

Getting men to think more flexibly about their role and offering more support at home might free women to play a more active part in business and politics, she said, and help Japan narrow its gender divide, which shows up in the wage gap between men and women and the tiny fraction of women in corporate and political leadership.

Gaining Credibility

Communicating what you’re doing as a company on sustainability is also important because you want people to know—but it must come across as credible and genuine.

This can be a tricky balance, as some businesses are doing great things but are too modest to broadcast their activities, or aren’t very good at publicizing them effectively. Others will hype things too much, and increasingly savvy consumers and activists may be able to tell they are being deceived. That will backfire. “Behaviors are changing, and many consumers now consider sustainability in their purchasing decisions,” Perry said.

One way to bring credibility to a company’s efforts is to get third-party certification that your company is really meeting targets and making a difference, said Jarman-Walsh. “You can then put that on your website and branding materials so that consumers will trust you.” TÜV SÜD’s safety inspections and certificates could help with this.

Social media has become an increasingly important way of doing public relations, and Jarman-Walsh suggests tapping influencers on Instagram and YouTube. You may invite those who already have a reputation for talking about zero waste and sustainability to visit your company or try your products.

“They can introduce your business to their fans, who are already motivated to look for sustainability,” she said. “Then you would have a really good inroad, and it’s probably a lot cheaper than traditional marketing.”

Overall, it’s important to understand that sustainability involves executing a strategy, but it is also about people and focusing them on a unifying purpose, the consultants said. “We really want companies to understand that people and processes need to be aligned. You can’t transform if you forget about the people side of things,” Kinooka said. “And it takes both intellectual understanding and emotional engagement to move people to action.”

Embracing sustainability

Beyond ESG

Possibility for Continuity