From Shintaro Yamaguchi
With the Japanese government taking the lead -- and the business community stepping up to the challenge -- Japan has made marked progress in raising awareness of and facilitating action on the United Nations' Sustainable Development Goals (SDGs).
The 17 goals were agreed in 2015 to serve as a global blueprint to end poverty, fight inequalities and tackle climate change by 2030.
In the lead-up to the G-20 Osaka Summit on June 28-29, Japan has presented an action plan for achieving the development goals in Japan through Society 5.0 (a program based on human-centered society, leveraging data and new technologies), regional revitalization and the empowerment of women.
The Keidanren, the business grouping, has updated its Charter of Corporate Behavior to support the realization of a more sustainable society, Japanese CEOs have been vocal in supporting SDGs, and the Tokyo 2020 Olympics and Paralympics are championing sustainable procurement for the Games. As the primary driver of economic activity, business is widely recognized as essential to achieving the 2030 Agenda. While many businesses have voiced their support for the development goals, it will be critical for companies to embed these goals into their core strategies and operations -- from developing environmentally-friendly technologies and establishing sustainable supply chains to ensuring fair labor conditions.
Businesses worldwide stand at a critical juncture -- several pioneering companies are beginning to integrate SDG principles into their core strategy while others are continuing to work out how to make a start. Recognizing the significance of incorporating sustainability principles in their businesses, some Japanese companies are taking concrete action while others are in the deliberation phase.
It's worth noting that integrating SDGs into business often requires a mid-to-long term perspective at odds with business's typical focus on short-term, primarily financial metrics. For example, creating a more sustainable supply chain could result in greater financial costs in the short-term while delivering greater environmental, social and financial benefits in the long run.
While this inherent conflict presents certain challenges, it is critical that businesses, shareholders and consumers actively engage in dialogue on sustainable and inclusive business models to better understand their benefits.
The increased prominence of investments incorporating environmental, social and governance (ESG) factors, with pension funds leading the way in Japan, reflects the investment community's interest in a more sustainable future. Companies in Japan and abroad have adopted international indexes and reporting standards to enhance disclosure of ESG-related risks and developments.
While corporate sustainability reports have more commonly been used to evaluate investment risk in the ESG context, including in connection with the Task Force on Climate-related Financial Disclosures, they could also serve as a forum for businesses to communicate their long-term sustainability strategies.
Ultimately, SDGs and ESG investments are challenging us to critically reflect on our social and economic systems and to work toward developing a more sustainable and inclusive society. This requires nothing short of a systemic transformation. It is important to move beyond shareholder value at a corporate level and equally vital to move beyond GDP as a primary measure of success at a macro one.
The growing income disparities, the rise of populism and the increased distrust of institutions in some quarters in today's world are symptoms of an economic system that is dislocated from society's needs.
For society -- and businesses -- to flourish, we need to reframe our broader institutional frameworks, reshape the way we measure and report on financial performance of businesses and develop measurement standards that help companies understand the impact and value of business to society. A healthy economy needs a healthy society -- and vice versa.
With the heads of state convening for the first SDGs summit in New York this September, there is much discussion in the international community on the progress made and the way forward. Achieving the sustainable development goals will require a truly collaborative effort across stakeholders on a global basis. While this will involve challenges, through sustained commitment, a sense of urgency and a fundamental understanding of what is at stake, we must all strive to achieve a society that is both sustainable and delivers benefits to all stakeholders.
Shintaro Yamaguchi is a partner and inbound tax leader at PwC Japan and led PwC's engagement with Think 20 (T20) Japan.