Latest trends on sustainability and reporting in Japan

2024-01-02GoldenBee责任编辑0

Guests conducted discussions on topics including the latest trend of global CSR information disclosure, finding ways to corporate responsibility communication, and exploring the value of CSR reporting. Masao Seki, Steering Committee Chairman of Council for Better Corporate Citizenship (CBCC), introduced and explained the current progress and trend of CSR reporting in Japan.

The following is key takeaway of Masao Seki's speech:

I am very pleased to be able to participate in this forum again this year. I am Masao Seki, serving as the Chairman of the CBCC Steering Committee. I extend my heartfelt thanks for this invaluable opportunity to present the latest trends in sustainability and reporting in Japan.

Today, I would like to discuss three key points. Firstly, there has been notable progress in the disclosure of sustainability information as financial information, both globally and domestically, in the actual practices of companies. Secondly, there is a heightened interest among companies, investors, and stakeholders in understanding the tangible outcomes and impact of sustainability initiatives on society. Lastly, I would like to introduce two upcoming topics in sustainability information disclosure: Idea of Avoided Emissions and need for Nature Positive Strategy.

Starting with the first point, there is a growing trend in the disclosure of sustainability information as financial information rather than non-financial information. This is a major trend globally and within Japan.

The Japanese government, since the beginning of this year, has mandated companies to include a section on "Philosophy and Initiatives Regarding Sustainability" in their annual securities reports, thereby obligating them to disclose sustainability information. The Financial Services Agency has also implemented various promotional policies, including awareness campaigns and establishing inquiry desks related to sustainability information disclosure.

Japanese companies are responding in kind by actively engaging in the disclosure of sustainability information as financial information. The number of companies issuing integrated reports in accordance with the Integrated Reporting Framework has reached approximately 900, marking an increase of over 20% compared to the previous year. Additionally, the number of companies endorsing TCFD or the Task Force on Climate-related Financial Disclosures is over 1,000, which is the highest in the world.

Although it is still a long way from the TCFD, there is a growing interest in the final recommendations of TNFD or the Task Force on Nature-related Financial Disclosures, which were announced in September. Keidanren or Japan Business Federation has been actively organizing events related to TNFD, including workshops and case study sessions based on practical examples attempted by Japanese companies, since the beta version stage. In this way, companies in Japan are gradually understanding TNFD, and some are already disclosing information in line with TNFD frameworks.

The Japanese industrial sector is progressing with both discussions on international rule-making for nature-related information disclosure as financial information, and its integration into management practices.

The second key trend is the increasing interest of companies and financial institutions in impact evaluation, its information disclosure, and impact investment.

Disclosing information related to sustainability initiatives not only influences corporate value but also demonstrates how meaningful and significant contributions have been made to society and how important these contributions are to address challenges in response to stakeholder demands. Companies need to identify and disclose materiality from these dual perspectives: Corporate Value Creation and Impact to Society.

The UNDP initiated the "SDG Impact Training" globally from August to October of this year. Following this, Keidanren is collaborating with the UNDP to conduct "SDG Impact Training" seminar for member companies in August this year.

Investor and financial institution interest is also increasing, and the Financial Services Agency has established the "Impact Investment Discussion Committee" to begin policy-level discussions. As shown here, Keidanren has also issued a recommendation titled "Use of impact evaluation to promote purpose-driven dialogue with investors" encouraging corporate initiatives.

So far, in summary, I introduced two significant trends: sustainability information disclosure as financial information and the evaluation and disclosure of impacts related to sustainability initiatives. Very importantly, these two trends are not mutually exclusive but deeply interconnected, creating a mutually reinforcing synergistic effect.

As the third key trend, I would like to mention two topics that are currently not receiving much attention but are expected to gain importance in the near future in sustainability information disclosure.

One is the concept of "Avoided Emissions."

Traditionally, corporate information disclosure regarding climate change has focused on disclosing emission inventories, measuring and disclosing for Scope 1, 2, and 3.

But Avoided Emissions focuses on understanding and evaluating how much GHG emissions would have been emitted if specific products or services contributing to overall societal GHG reduction were not present. This involves estimating, based on certain rules, the amount of GHG that have been cut with those products or services, extending beyond the scope of a company's emission inventory, to accurately evaluate a company's contribution to climate mitigation solutions and their effectiveness.

WBCSD has proposed this concept and provided guidance for measurement. It has also drawn attention at the G7 Environment Ministers Meeting and was mentioned in their communiqué.

This slide aims to capture the broader role that companies should play, including Avoided Emissions. To achieve rapid and extensive GHG reduction globally, companies must not only focus on Scope 1, 2, and 3 but also, in a sense, should act on Scope 4, which is Avoided Emissions. Moreover, scope 5 and 6 mean that companies should exert influence not only through emission reduction efforts but also through policy advocacy, engagement with and influencing consumers and citizens, acknowledging that companies need to have a greater impact beyond their direct emission.

Another topic I want to introduce is the global movement towards addressing Nature Positive.

Recently, on November 9th, Business for Nature, an initiative by companies in which I serve as an Advisory Group member, released the Nature Strategy Handbook. Translations into multiple languages, including Chinese as seen here, were also announced.

This initiative encourages companies to formulate strategies for the Nature Positive in four steps: Assess, Commit, Transform, and Disclose.

Unlike the widely adopted approach for climate change actions, where clear actions for GHG reduction have been widely embraced and companies are working towards them, addressing Nature Positive requires companies to first analyze their impact and dependency on nature, then develop unique strategies. And these strategies and their implementation status must be transparently disclosed to stakeholders. Business for Nature has initiated the "It's Now for Nature" campaign, urging as many companies worldwide as possible to formulate and publicly disclose their Nature Positive strategies.

This concludes my presentation. Thank you very much for your kind attention.

Speaker | Masao Seki

Edited by: Ren Qiao

Source: Compiled based on the speakers' speeches on the conference

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