September 25, 2017

The Same, But Different: Some Thoughts on Japanese Business

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I recently visited Tokyo on a business trip and had the chance to meet with a number of Japanese companies. At the end of a three-hour meeting with sustainability professionals from a dozen or so multinationals, the host asked me for my impressions of Japanese organizations and their sustainability efforts. My honest answer: “I’m confused.”

My perspective is limited, but I can compare what I know about corporate sustainability in general to how these execs described the way things work in Japan. I left with the impression that these big companies were both leading and lagging. The core tension seems to be between, on the one hand, their unusual ability to take a broad, long-term, systemic view of business and its role in society; while, on the other, approaching sustainability tactically in narrow, somewhat dated terms.

Consider how many Japanese companies have set ambitious, long-reaching sustainability goals, with many focused on what they can accomplish by 2050 (decades further out than most Western companies are comfortable thinking about). Look at Sony’s Road to Zero goal of leaving no environmental footprint by 2050. Or Toyota’s Environmental Challenge 2050, which lays out a similar vision for its vehicles and plants, but then adds expansive statements about building a recycling-based society in harmony with nature.

While I was there, I also learned about some companies I hadn’t been familiar with. An executive from Kao, a $12.5-billion consumer products company, told us about its solid performance on energy, waste, product redesign, and more. But what surprised me was Kao's corporate mission, “The Kao Way,” which begins: “Our mission is to strive for the wholehearted satisfaction and enrichment of the lives of people globally and to contribute to the sustainability of the world.”

Besides Unilever’s Sustainable Living Plan, very few companies have put sustainability at the center of their corporate vison and strategy. For most, the sustainability mission, if there is one, is in a silo.

So, thinking big and long term seems more comfortable for Japanese companies. As one specific proof point, anecdotally I’d say that more Japanese companies (and those in the EU) have embraced the Sustainable Development Goals as a blueprint for their targets. Companies in the U.S. seem to lag on this front.

And yet, there was one really important area where Japanese corporate sustainability was behind. The sustainability and top executives are still talking only in terms of “corporate social responsibility,” not the broader more impactful sustainability-style language we see in the U.S. and EU. It’s about the common good and philanthropy. It’s not like U.S. companies have all made sustainability into core strategic issues, but the language still felt dated in Japan.

For all of those differences, a lot seemed eerily familiar, even when many people I met with insisted that “things are different” in Japan. Part of that perception gap is based on some misperceptions about stakeholder pressure in the West. For example, they told me that consumers in Japan don’t really care much about the environmental or social aspects of products, unlike, they thought, those Western consumers that are forcing the hand of sustainability leaders such as Unilever. Or, they’d tell me, investors don’t care and just want short-term performance.

Sure, there may be some differences in stakeholder pressure – e.g., the people from consumer products companies said the “clean label” movement I described was not big in Japan, and I don’t have regional data to argue the point one way or the other. But I had to break it to them that consumers in the West, outside of a few product categories such as organics and some personal care, are not really driving the agenda, either. In fact, I hear the samecomplaints about consumers from the big CPG companies here.

And the mantra “Wall Street doesn’t get it” is getting less true in Western sustainability circles, but I still hear it a great deal. The institutional investors around the world are asking more questions about long-term issues, but the analysts and hedge fund guys? Not so much.

In total, the conversations I had while sitting down with 20 sustainability execs in Japan to share my Big Pivot story – a saga of mega-trends, a growing clean economy, Millennial attitude shifts, big risks and opportunities, and corporate heroes – felt incredibly familiar.

They face similar hurdles in the marketplace and perhaps more so internally, where they’re not taken as seriously as they should be. Again, that CSR-only languagesidelines them. It likely explains, along with Japanese culture in general, the self-effacing approach I witnessed: It’s really hard to get them to brag about anything they’ve done.

These companies are likely doing more than we realize, and more than they give themselves credit for. But they need to advocate for their importance in their enterprises.

So, in essence, corporate sustainability in Japan is the same as … but also different from ... everywhere else.

On a lighter note, here are some random impressions from an outsider coming to Japan:

In total, it was a fascinating and eye-opening trip, from bathrooms to boardrooms.

(This post first appeared at Sustainable Brands online.)

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