May 31, 2019
From the viewpoint of sustainably improving corporate value, it is considered an important challenge for companies to take appropriate approaches toward integrating SDGs* into their management and attracting ESG investments.**
To address this, in November 2018, the Ministry of Economy, Trade and Industry (METI) inaugurated the SDG Management / ESG Investment Study Group. Since then, the study group held 6 meetings and held a rich round of discussions. On May 31, 2019, METI hereby announces that based on the discussion of the study group, it has prepared “The Guide for SDG Business Management,” a well-organized compilation explaining: approaches that companies should take in introducing SDG business management, viewpoints that investors may take in assessing companies’ such efforts and other issues.
Since the United Nations (UN) stipulated the Principles for Responsible Investment (UNPRI)*** in 2006, global society has been rapidly and dramatically committing to ESG investment which is placing weight on sustainability. Against this backdrop, the UN Sustainable Development Summit 2015 adopted the Sustainable Development Goals (SDGs), international goals to overcome global social challenges and achieve a sustainable world.
Amid the current trend in which companies worldwide are proactively committed to integrating SDGs into management so as to attract ESG investment, many large companies and venture businesses in Japan appear to be embarking on cutting-edge efforts to enhance corporate value by connecting SDGs to management.
In light of this trend, the Sustainable Development Goals Promotion Headquarters (Director-General: the Prime Minister) of the government of Japan formulated the Expanded SDGs Action Plan 2018 (June 2018) and the SDGs Action Plan 2019 (December 2018), setting goals for propelling the Initiative for Promoting SDG Management and encouraging companies and other businesses to integrate SDGs into their management strategies.
2. SDG Management / ESG Investment Study Group
In response to this trend, in November 2018, METI inaugurated the SDG Management / ESG Investment Study Group. Since then, the study group held 6 meetings, bringing together CEOs of large companies and venture businesses representing Japan, investors and a head of an university as members as well as heads of international organizations as guest members, and held discussions. Under the leadership of the government, the study group served an opportunity for the members to hold discussions on SDG business management and ESG investments, bringing together top-level stakeholders in a variety of fields, and this provision of such opportunity is a world-pioneering effort.
Specifically, the study group focused on successful cases of SDG business management inside and outside Japan and held in-depth discussions from a variety of standpoints concerning approaches that companies should take in integrating SDGs into their management and viewpoints that investors may take in assessing companies’ such efforts.
Moreover, the study group is part of METI’s initiatives for encouraging companies and investors to make constructive dialogues, on which METI has been strongly and continuously placing weight by considering them as an important challenge since its formulation of the Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation. In this context, the study group held in-depth discussions on points of contention to uncover the details of the significance of SDGs for companies and investors.
3. Compositions and overview of the Guide for SDG Business Management
Based on the discussion of the study group, the guide is composed of two parts: “Part 1. SDGs－A source of value,” a section explaining Japan’s recognition of current situations concerning SDGs from a variety of viewpoints, and “Part 2. Practicing SDG business management,” a section, referring to Part 1 as a basis, describing well-organized viewpoints useful for companies in practicing SDG business management.
Overview of the Guide for SDG Business Management
Part 1. SDGs－A source of value
I. What SDGs mean for corporations
- SDGs as a “common language” connecting corporations with the world
- SDGs as a future oriented tool
- SDGs: Risks and opportunities in corporate management
- Japanese corporate philosophy and SDGs
- Startup companies and SDGs
II. What SDGs mean for investors – SDG business management and ESG investment –
- Environmental changes affecting investors
- Evaluating long term corporate value and SDGs
- Performance of companies doing SDG business management
III. A “bridge” to multi-stakeholders
- The millennial generation as “SDG natives”
- SDGs and employees/consumers
- The role of universities as an “aggregation of knowledge”
- Collaboration is a key to SDG business management
Part 2. Practicing SDG business management
I. Economic rationality and solutions to social issues
- Pioneer new markets with finding economic rationality
II. Specify important issues (“materiality”)
- Identify priority issues and invest resources
III. Create innovation
- Collaboration on innovation to solve social issues
- Top executives take the lead in new business
IV. “Scientific and logical” verification / evaluation
- Thoroughly “scientific and logical” verification/evaluation
- Actively utilize international standards
V. Management systems that secure a long-term perspective
- Sustain SDG business management with “systems”
VI. Promotion as a “value creation story”
- Weave and deliver a “value creation story”
- Deliver messages to “the people you want to choose you”
- Accurately communicate, engage, and create greater value
- In conclusion
As a new compass of future efforts, the guide is expected to be used not only by Japanese companies but also by companies worldwide seeking integration of SDG business management into their management, investors inside and outside Japan who support business activities of such companies, related organizations and the governments of overseas countries.
Taking advantage of appropriate opportunities such as G20, METI will strive to convey messages and information on the guide to people inside and outside Japan, including information on outstanding efforts of Japanese companies involving SDG business management, and will also endeavor to disseminate and popularize the guide.
*1. The Sustainable Development Goals (SDGs) are international goals to achieve a sustainable world.
**2. ESG investing takes into consideration not only financial information of target companies but also information on target companies’ efforts for the environment, society and governance.
***3. The Principles for Responsible Investment (PRI) are principles that offer actions for incorporating ESG issues into decision-making processes of institutional investors and aim to improve long-term results brought about by investments for beneficiaries.
Division in Charge
Industrial Finance Division, Economic and Industrial Policy Bureau