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Sony doubles down on ESG goals amid coronavirus pandemic

Company pursues new identity focused on social and environmental impact

Trees are reflected by the entrance of the Sony headquarters building in Tokyo.   © Getty Images

TOKYO -- In March, when coronavirus infections first began to spike in the U.S., Rob Stringer, the CEO of Sony Music Entertainment based in the pandemic epicenter of New York, told Sony Chairman and President Kenichiro Yoshida that U.S. companies were busy setting up funds to combat the disease.

Yoshida wasted no time following suit.

Sony's chief met with his executives, including Shiro Kambe, the senior executive vice president in charge of sustainability. The next week, Sony announced the establishment of its own fund.

Sony has accelerated its drive for social and environmental goals as the world focuses more attention on corporate behavior in the fallout from the coronavirus pandemic, pushing efforts from helping those affected by the disease to essentially eliminating its environmental footprint. 

The company's focus on environmental, social and governance factors stems from its increased awareness for its role in the world at large, under an official mandate adopted last year. It also comes at a time when the pandemic has driven an interest in stakeholder capitalism, in which corporations think beyond shareholder interests, and so-called ESG investing is gaining strong momentum.

"The coronavirus has made us realize anew that society and the world are the basis for our company's business," Kambe told Nikkei.

The $100 million capitalization of Sony's coronavirus fund is one of the biggest among Japanese corporations. One of its first moves was to donate $10 million to the World Health Organization's COVID-19 Solidarity Response Fund.

Sony is also using the fund to aid those in the music industry. For example, the company participated in a relief program sponsored by Music.com, a U.S.-based community website operator. The program provides money to 500 artists that submit videos.

The company has also made donations to education, supplying free programming learning kits in Japan, the U.S. and China.

Sony has distributed free programming kits in Japan, the U.S. and China through its coronavirus fund.

In just a few months, Sony has offered support whether it comes to games, music, films, electricity or education. Standing behind this activity is the company's newly established sense of purpose.

Sony first unveiled its purpose statement last year: Fill the world with emotion, through the power of creativity and technology.

"Our founder wanted to revive the burned-out ruins of Japan through technology" after World War II, Kambe said. "Our awareness of that tends to fade with time, so we wrote our purpose statement to say why Sony exists in the current era."

The company interpreted that statement not as a goal but its reason for existence.

"For this company to be able to be sustainable for the long term, it's important for us to clearly define our company's reason for being for employees to share it," Yoshida said.

The sense of purpose spread throughout the company and led to higher understanding of the environmental, social, and corporate governance goals that undergird the vision, otherwise known as ESG.

"I feel proud working for Sony," said an employee.

Sony CEO Kenichiro Yoshida speaks on the importance of ESG factors. (Photo by Kosuke Shimizu)

This approach is reflected in the company's environmental measures as well. In his first entry as president in an internal blog, Yoshida stressed that Sony exists within the greater world, and that a healthy environment is necessary for its continued operation.

As part of this, Sony has set up a fund to support startups developing environmental technologies that address issues like climate change and biodiversity. The fund will invest 1 billion yen ($9.46 million) over the course of three to five years, which it plans to recoup in about a decade.

"I don't think it will grow immediately, so we'll take our time," Kambe said. "Of course, we do need to secure returns."

Sony's goal is to achieve a "zero environmental footprint" by 2050, which it breaks down into five-year midterm plans. For example, the company wants to increase renewable energy use from about 5% in fiscal 2019 to at least 15% in fiscal 2025 and 100% in fiscal 2040.

"It's extremely important to set goals and announce them. After that, we'll put in place concrete plans based on scientific methods," Kambe said. "The 'S' [in ESG] covers a broad and diverse range of factors, so I think the specific areas of focus will differ from company to company."

Outside actors have kept a close eye on Sony's efforts. Sony is rated AAA by MSCI for its exposure to and management of ESG risks -- above Google parent Alphabet's AA and Netflix's B. Germany-based Arabesque S-Ray gave the company an ESG score of 65.1 points as of Sept. 23, above Nintendo and Apple.

But challenges remain. U.K.-based nonprofit Know the Chain in June ranked 49 companies involved in information and communications technology based on their response to forced labor risks. Sony was given a score of 36 out of 100, which was above average but significantly behind Hewlett Packard Enterprise's 70 and Apple's 68.

"The company is encouraged to work with local or global trade unions to support freedom of association in its supply chains," the nonprofit said, as one improvement Sony could make. The company is expected to face greater pressure to step up its game as nonprofits and research companies speak out on these issues.

Sony plans to incorporate environmental and social goals in under its next medium-term strategy, which kicks off next year. Combined with its planned name change to Sony Group in April, the company aims to pursue a new identity as an active stakeholder in the world at large.

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