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«14 CSR White Paper Economy ESG Investing as an e Unchanging Face of Japanese Antidote to Myopic Employment Management International A airs Japanese ...»

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November 2015


CSR White Paper


ESG Investing as an

e Unchanging

Face of Japanese

Antidote to Myopic




A airs

Japanese CSR in the

Bene ts of Closer

Age of Responsible



Global Investing

Voices from the

Syl Community

Businesses Driving

Oil and the City:

Positive Social Change

Hope, Expectation,

and Development in Kirin Group, Dentsu Inc., Takeda

Ghana Pharmaceutical, Itochu Corp., Sompo Japan Nipponkoa Japan Perspectives Japan Perspectives is an English-language journal published by the Tokyo Founda- tion containing articles from the Foundation’s website. In addition to translations of the public policy research recommendations made by the Foundation, Japan Perspectives offers timely insights into and analyses of Japanese politics, economy, society, and culture written speci cally for overseas readers.

The Tokyo Foundation is an independent, not-for-pro t think tank that brings together the minds and skills of outstanding human resources through policy re- search and global leadership development projects to offer fresh perspectives that lead to positive social change.

Visit the Foundation’s website at: www.tokyofoundation.org/en All rights reserved. These articles, either in full or as an excerpt, may not be reprinted, copied, or retranslated without the express permission of the Tokyo Foundation.

Citations must specify the source. The opinions expressed in the articles are those of the respective authors and do not necessary represent the views of the Tokyo Foundation.

Publisher: Masahiro Akiyama (President) Editor-in-Chief: Akiko Imai (Executive Director) Senior Editor: Nozomu Kawamoto (Public Communications) Associate Editors: Kaoru Matsushita (Public Communications) Junko Suzuki (Public Communications) Mikiko Fujiwara (Public Communications) Production Manager: Asako Uemura (Public Communications) The Nippon Foundation Bldg, 3rd Floor, 1-2-2 Akasaka, Minato-ku, Tokyo 107-0052, Japan Tel: +81-3-6229-5504 (Public Communications) Fax: +81-3-6229-5508 E-mail: info@tkfd.or.jp URL: www.tokyofoundation.org/en ©2015 The Tokyo Foundation Recent Articles from the Tokyo Foundation Website No. 14, November 2015 Contents CsR White PaPeR A Branding Strategy for Creating Shared Value: Kirin Group

The Tokyo Foundation Incorporating Diversity as a Core Business Value: Dentsu Inc.

The Tokyo Foundation ESG Investing as an Antidote to Myopic Management

Mariko Kawaguchi Japanese CSR in the Age of Responsible Global Investing

Hiroshi Komori

Creating and Sustaining Corporate Value through Global Dialogue:

Takeda Pharmaceutical

The Tokyo Foundation A Bottom-Up Approach to CSR: Itochu Corporation

The Tokyo Foundation The Evolution of CSR Communication in Japan: From Reporting to Dialogue and Engagement

Hideto DeDe Kawakita

Identifying Materiality through Stakeholder Engagement:

Sompo Japan Nipponkoa

The Tokyo Foundation eConomy The Unchanging Face of Japanese Employment

Ryo Kambayashi inteRnational affaiRs Benefits of Closer Japan-NATO Cooperation

The Tokyo Foundation Japan’s Difficult Choices in Navigating Its Ties with Russia

Masahiro Akiyama The Politics behind Russia’s Support for Syria

Paul J. Saunders VieWs on China The AIIB and Japan’s Development Assistance

Hiroyuki Kato VoiCes fRom the sylff Community Oil and the City: Hope, Expectation, and Development in Ghana................. 115 ThienVinh Nguyen A Remembrance of Books Lost: Bengali Chapbooks at the British Library... 121 Aritra Chakraborti The Urban Art of Hip Hop among Young Immigrants in Palermo, Italy........ 126 Martina Riina CSR White PaPeR September 16, 2015 A Branding Strategy for Creating Shared Value Kirin Group The Tokyo Foundation Achieving Growth in a Mature Market The Japanese beverage market is extremely competitive. Not only is the overall market shrinking due to the low birthrate and aging population but young people are also drinking less alcohol. Happoshu and other beer-like drinks have become popular with the public, and price competition is getting fiercer. The retailing structure is also changing, with a shift from old-fashioned neighborhood liquor stores to large-scale chains. A similar situation is faced by the soft drinks sector, where a gradual fall in prices is continuing.

While this might be welcomed by consumers, it is a tough situation for companies. For those competing in this mature market, achieving sustainable growth is more important than ever. When we look at the global food and beverage industry, we see that companies like Nestle and Unilever have been proactive in placing CSR at the center of their corporate strategy.

The Kirin Group’s regional headquarters for Japan, Kirin Company, Ltd., benchmarked the practices of those industry leaders and outlined what it should do (Figure 1). The first answer was “operational restructuring”. The second was a move to “brand-centered management.” Kirin has resolved to shift from conventional CSR (corporate social responsibility) to CSV (creating shared value) with the aim of creating synergies between its social initiatives and business operations. The concept of CSV has been expounded by Harvard University professor Michael Porter based on the idea that creating value shared by both society and businesses is integral to the competitive strategies of those companies.

Consumers do not usually think about the global impact of everyday products.

For example, it might be difficult for them to picture how the manufacturing process of a product affects the ecosystem of a distant part of the world.

But this could change if companies had greater awareness of how their business operations are connected to social issues and informed customers of their efforts

–  –  –

Figure 1. Operations of the Kirin Group Source: Kirin Group.

to address them. The result would be a fuller understanding of those issues, which could lead to stronger affinity with the company.

Kirin strives to create social value through six themes: (1) protecting human rights and working conditions and (2) prevention of corruption, which are compliance issues; (3) food safety and security and (4) protecting the environment, which relate to sustainability; and (5) strengthening bonds between people and society and (6) well-being, which are themes that Kirin is characteristically well-positioned to address.

CSV Division

So how exactly does Kirin go about realizing a brand strategy that creates social value? Kirin has realigned and consolidated its domestic drinks business (Figure 2).

First, it merged its separate R&D departments for beer (and other alcoholic drinks), nonalcoholic drinks, and wine into the Research & Development Planning Department.

It also set up a CSV Division to look after brand strategy, as well as to advance the integration of the company’s initiatives to address social issues and its main business operations.

The CSV Division consists of the CSV Management Department, Strategic

–  –  –

Figure 2. Kirin’s Corporate Structure (as of January 2013) Branding Department, and Corporate Communications Department, and its mission is to advance “brand-centered management,” employing a long-term perspective based on unified management of CSV and product brand strategy.

Typically, CSR departments that deal with social issues work and think according to a longer timescale than other departments and can find itself at odds with the rest of the company. But at Kirin, because the department is also responsible for brand strategy—which, too, employs a longer timescale—the company has created an environment where CSR initiatives are not forced to conform to the short-term pace of other business operations. Even when differences in perception arise, they can be harmonized over a longer span of time.

Because it is also responsible for branding, the CSV Division has the resources and the authority to undertake those activities. And by drawing on its corporate communications functions, it is capable of supporting new marketing approaches.

Needless to say, the division is responsible for promoting the integration of the company’s social initiatives and business operations. By linking these various functions it can deepen understanding of CSV and facilitate its implementation. It has been given a solid position within the company’s human resources structure, indicating the strong commitment the company is making to pursuing CSV.

There are few companies with a similar philosophy of creating shared value for

7 CSR White PaPeR

society and business or that place the department responsible for such creation at the core of its business strategy and corporate structure. In most cases, CSR departments are positioned within such administrative divisions as general affairs or public relations. It is rare for them to be incorporated into management planning or for them to share strategies with core business operations.

Companies will increasingly need to integrate their social initiatives and business operations to secure a respected place in society, and the failure to do so will expose them social “landmines” that could seriously damage the company’s reputation or public image. The restructuring of Kirin’s business is one organizational response to achieving that integration.

A Framework for Integration

Kirin’s innovations are not just organizational; they are found throughout the company’s operations and in the work performed by individual employees.

When many companies plan to launch a new project or make an investment, they usually base their decisions on internal documents that summarize the meaning of the project for the company and include such information as market potential, the company’s strengths, and the amount to be invested and likely returns.

When the decision is about ways to innovate or improve business practices, the document may contains facts about required technologies and cost advantage so as to facilitate decision-making by management and further discussions by the departments concerned. The document becomes a guide for action and may be described as the project’s DNA. It can also serve as a catalyst for further innovation, so companies devote considerable energy to creating the most useful documents they can.

Kirin believes that creating social value will enhance its brand strength, promote human resources development, and ultimately boost its competitiveness.

This requires striking a balance between its social initiatives and business operations. To check whether this balance has been achieved, Kirin has created a common a yardstick to measure the success of both activities, which is used throughout the company (Figure 3). When a CSV project is heavily focused on solving social issues without relevance to business operations, it will be little more than conventional corporate philanthropy. If, on the other hand, it is slanted toward profit (which both management and employees are inherently pursuing), the company will find itself trapped within the constraints of a competitive business environment.

Kirin likely decided on this approach because of Japan’s highly competitive

–  –  –

Figure 3. Kirin’s Integration Strategy Source: Based on interviews conducted by the Tokyo Foundation.

beverages market. In this environment, many new products have very short lifespans, quickly falling by the wayside as victims of price competition.

This may also be regarded as the roots of Kirin’s CSV, as it needed to manufacture products with shared value for both society and business under what is called the Kirin integration strategy.

Learning from Past Successes

A philosophy is often not enough to significantly boost competitiveness. Kirin thus took a renewed look at its past successes and discovered a common point among them: they all combined social initiatives and business operations. Examples of such success were shared among the managers and staff.

The Great Tokyo Earthquake of September 1923, for example, damaged Kirin’s Yokohama factory, forcing it to boost production at its newly built factory in Sendai. While it succeeded in increasing output, it faced a problem in shipment. At the time, bottled beer was packed in wooden crates, and the bottles would strike against each other and often break during transport.

So that the bottles would not break, the Sendai factory asked local farmers to produce bundles of rice straw as cushioning material. From the company’s perspective, they were able to reduce the number of damaged bottles, while from the farmers’ viewpoint, they were able to earn twice as much money as from their usual rope-making side work during the off-season, meaning that they did not need to leave their farms to find work in the cities. Kirin regards this project as the start of its CSV initiatives—a project that created value both for the local community and the company itself.

–  –  –

Figure 4. Support Enabled by Volvic’s “Drink 1, Give 10” Campaign Source: Kirin’s website Another example is a project initiated by Volvic, a mineral water company that is now part of the Kirin Group.

The project’s name is “Drink 1, Give 10.” Each time a customer buys a liter of bottled water, the company donates funds to UNICEF to enable the provision of 10 liters of drinking water to residents in Mali (Figure 4).

UNICEF’s Mali office has a project to dig wells and maintain them for the first 10 years of use. The program has provided 3.98 million liters of clean water from 70 new wells, repaired 169 hand pumps, and installed 14 solar-powered water supply systems (as of September 2013). The under-5 mortality rate in Mali is quite high, partly due to infectious diseases. The clean and safe water from this project can help prevent infection and can allow children—who no longer need to walk long distances to fetch water—to go to school.

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