Research Commitee Report
"Sustainable Socio-economic System and Corporate Social Responsibility"

Executive Summary
Chapter 1 Thinking about CSR
Professor, Graduate School of Commerce, Hitotsubashi University

The first chapter shows an outline of our basic ideas and theoretical framework on this report. In our country, corporate social responsibility (CSR) has come to be an important management subject and has drawn unprecedentedly much attention in recent years. From the perspection of the stakeholders (employee, labor union, investor, consumer, environment, community, etc.), this report analyses the problems in each domain, and shows an indicator of a new corporate society. CSR is a concept that companies fulfill accountability to their stakeholders by integrating social and environmental concerns in their business operations.
CSR does not remain in philanthropic activities, compliance and risk management. It is called for reflecting upon the way of everyday business activities itself. The total corporate value is evaluated by not only the financial index but the social and environmental index. In order to become a socially responsible corporation, it is important that the corporations should be supported by the stakeholders and to build relationships of trust with them.
The following three points are considered in this chapter ; expected CSR, current situation in Japan, and required policy of corporation.

Chapter 2 CSR and Stakeholders
Nobuyuki DEMISE
Professor, Faculty of Commerce, Meiji University

The stakeholder concept is useful to understand CSR. Stakeholders represent society, so corporate social responsibility means that corporation is responsible to their stakeholders. Stakeholders may be affected by the decisions and actions of corporation, and stakeholders may affect the decisions and actions of corporation. Thus, stakeholders have interaction with corporation.
Main stakeholders for Japanese corporations were banks and other corporations that belonged same KEIRETU, corporate group, and employees who were employed for "lifetime".
But these relationship changes, for recent depression influence the structure of Japanese corporate society. NPO are growing up in Japan, and someone affect corporations.
Stakeholder management is important for CSR. Some corporations carry on a dialogue between their stakeholders and enter into partnership with stakeholders. They recognize the stakeholder view is necessary for business success.

Chapter 3 Labour and CSR
Naoto OHMI
Director of Policy Bureau, UI Zensen

It is an important factor of CSR for the both labour and management to conclude and comply with their labour agreement on the job security of employees (union members) and maintenance and improvement of working conditions.
In recent years, as corporate activities are advanced across national borders and uncontrollable issues by governments and trade unions have started to happen, the need to monitor the behavior of multi-national companies through setting up codes of conduct has increased, some international institutes establish rules or guidelines on corporate behavior of multinationals, and some of global trade unions have agreements with specific companies on code of conduct.
On the other hands, in Japan, the ratio of corporate codes of conduct which have article on labour is small. The level of trade unions' commitment to monitoring of CSR is also low. A considerable number of Japanese enterprise-based unions are deeply involved, in substance, with decision-making process and sharing of information in their companies. Under such a matured industrial relations, there is a possibility that the commitment of trade unions to CSR to be raised ever than before. As for monitoring, it is also possible for trade unions to collect information and to find problems through their network. This could be helpful to early solution in the event of that a problem arises.
Taking advantage of the above characteristics, it is necessary to focus more on labour and enhance the level of commitment of trade unions in CSR.

Chapter 4 Working Women and CSR
Representative, Women's Initiative for Advancement in Japan

Not a family but an individual is the basic unit of economy. In Japan, however, it is quite difficult for women or female workforce to become a stakeholder in SRI. The reality of women's work life in Japan is that: women "enter workforce at 22 years old, around 50% of them leave the initial work place within three years, get no promotion, even remained and worked hard for about 10 years, quit the job, get married and bear children at 29 years old, return to work as a temporary worker at 35 years old, after reaching a certain stage of child bearing, find some affordability at 45 years old but not enough to purchase investment funds, and become a domestic and neighboring helper at 55 years old. Especially, the low wage of a temporary worker is an immediate problem that calls for early correction.
Presently, the lifetime wage of women, who quits the work then returns as a temporary worker, is about one-fifth of those who continue to work as a full-time employee. The "Women and Work Research Center" has set the independent standards to assess company activities, with an aim to establish a "Working Women Fund."
In their activities, the issue of temporary workers, which is unique to Japan, becomes a bottleneck for internationalizing their standards.

Chapter 5 Agenda around the issue of Human Rights and the Corporate Social Responsibilities
Secretary-General, The International Movement Against All Forms of Discrimination and Racism (IMADR)

The issue of human rights is one of the areas that has not progressed as far as the most of the development of activities with regards to the Corporate Social Responsibilities (CSR) in Japan. Even Nippon Keidanren's Charter of Corporate Behavior and the recent white paper on CSR management by Keizai Doyukai allocate only a few lines for human rights issues.
For Japanese corporate enterprises to develop relevant activities for human rights and the CSR, the work should be carried out at first to set concrete agendas to be addressed, by putting in order relationships between different human rights agenda and various forms of business while promoting awareness on comprehensive human rights. In the course of that work, while in accordance with various international principles and legal framework, it will be important to breakdown 'human rights' into different categories of rights and also to identify what types of corporate enterprises exist in order to analyze relations between these categories of rights and each type of business.
At the same time, ideas should be developed on what kind of policies and measures could be effective for enabling an environment in establishing human rights and the CSR, such as the introduction of legislation on anti-discrimination in the field of labor issues or the introduction and active promotion of bids standards, which are conscious of human rights, for corporate enterprises by government agencies.

Chapter 6 Consumers and CSR
Chairman, Green Consumer Research Group

"Consumer issues" concerning the threats to the life, health and assets of consumers are old but also new issues. In recent years, we have seen fewer actions of big company which directly threaten the life or health of consumers. However, consumers seeking advice of public organizations are steadily increasing, which call for the further development of legislation to protect consumers. In the past, the response to a consumer claim used to repeat the process of: the occurrences of consumer injuries; development into a social problem; case-by-case legislation for consumer protection; and the calming down of the situation.
The policies for appropriateness of company activities to serve consumers and supporting consumers are improving though still insufficient. Also companies are required to voluntarily develop the system of consumer claim response. For the policy proposals in this field, the research is to outline the questions of: what kind of a system a business entity should develop in the fields directly related to consumers, such as product safety and consumer services; and how the current situation of information disclosure is; and what items should be disclosed.

Chapter7 CSR and People-friendly "Accessible Design"
Secretary General, The Kyoyo-Hin Foundation

In principle, no corporations intend to provide products and services that do not accommodate people with vast differences in ages, disabilities, languages, and so forth. However, if we are to ask whether "all the products and services" are made in a way usable or easy-to-use for the disabled or elderly, the answer will definitely be "no."
Compared with 20 years ago, however, the concept of "everyone is the customer and the user" seems to have taken root among public service entities since the enactment of the Barrier-free Transport Law and what called the Heartful Building Law. The private sector, also, seems ready to strive for further advancement in this respect, compared with 20 years ago. Efforts have been made to reduce inconveniences, and to set up unified standards among industry associations. Corporations start to pursue the needs of the disabled and elderly, for whom they have hardly taken note as consumers in the past.
On the other hand, the "market principle" is the very key for the activities of private corporations, so the efforts are "still ongoing in search" for the way to address issues in various fields. It may not be made public but not too few corporate managers would likely question "why companies with the purpose of making profits should conduct semi-volunteering projects?"
In response to such corporate managers, this chapter will review the "provision of people-friendly products and services," which in the past used to be considered as a special service to be dealt with individually, as a part of "CSR" along with "environmental protection" and "employment."

Chapter 8 SRI and Evaluation of Corporate Value
Mariko KAWAGUCHI, Senior Analyst, Industry Consulting Department, Daiwa Institute of Research Ltd.

Socially Responsible Investment is attracting attention as a promoter of CSR.
SRI is said to have begun the US in 1920s, by Christian churches who avoided investing in 'sin stocks' such as tobacco, alcohol and weapon. In the 1990s', when environmental management began to gain support from business communities, assessing business's environmental management has been regarded as indispensable in evaluating corporate value, and positive connection between CSR and corporate value began to have been noticed.
In the last ten years, SRI asset is growing rapidly in the western world. In the US, the total SRI asset grew 3.4fold, and in Netherland, 15times from 1995 to 2003. In the UK, total SRI asset expanded 10times from 1997 to 2001. These SRI have social screens, such as negative screens that omits sins stocks, and positive screens which picks up best in class company within each industry regarding each CSR criteria such as environmental management, human rights and labor issues.
It is now becoming well known that CSR has positive relation with long-term corporate value. However it is still a challenge to evaluate monetary value of CSR for the short-term and recently some research has been published, estimating climate risk.
In the near future, evaluating CSR impact on corporate value will be an important concern not only for SRI investors but corporations with high CSR practices.

Chapter 9 CSR and Community
Kanji TANIMOTO, Professor, Graduate School of Commerce, Hitotsubashi University
Masa-atsu DOI, Visiting Researcher, GISPRI

Recently in a market society, a business corporation is expected to tackle the social problems in the community by philanthropic activity in collaboration with NPO/NGOs. Corporate community activity in Japan has been conventionally understood as"returning profits to society", or "doing good secretly". However, recently community support activity is positively evaluated by Socially Responsible Investment(SRI), which has grown rapidly since the second half of the 1990's. In the West, the new flow of "Strategic Philanthropy"and"Cause-Related-Marketing"(CRM) has been popular in the corporate community activity since 1980's. These strategies are based on the way of thinking of utilizing the company's limited resources efficiently, and utilizing their expertise and experience of the business in the community activities. It is important for a company to reconfirm the mission, communicate with NPO/NGOs and build a collaborative relationship with them in doing the community activity. Moreover, building the intermediate support organization which functions as an information center and a coordinator with a company and NPO/NGO is a hot issue.

Chapter 10 Japanese Institutional Investors Promoting the Development of Socially Responsible Investment
Tsukasa KANAI, Deputy General Manager, Pension Investment Dept., The Sumitomo Trust

In the recent asset management society, we often find topics related to socially responsible investment (SRI). The concept of SRI contains 2 aspects i.e. social screening and shareholder advocacy. In relation to the screening aspect, it is expected in the Japanese SRI that the positive screening method based on the "triple bottom lines" will be in the mainstream. In this type of screening we are not necessarily concerned with the consistency with fiducially responsibility, which has often been questioned overseas in case of the negative screening.
With regard to the shareholder advocacy, the essence of SRI is expected to prevail through the incorporation of social or environmental elements into voting standards for shareholders. In both of these aspects, the institutional investors in Japan are playing a very important role in developing socially responsible investment by providing SRI related financial products. We do believe that the Japanese SRI market will steadily grow as the number of investment institutions providing SRI funds increases. We also expect that the aspect of shareholder advocacy will have a strong influence on the Japanese corporate governance that hasn't paid as much attention to environmental or social elements as in foreign-based corporations' cases.

Chapter 11 CSR as an Emerging Critical Element to Companies' Sustainability in the Global Marketplace
Hitoshi SUZUKI, Department Manager, Social Contributions Dept., Corporate Communication Div., NEC

Interest in CSR (Corporate Social Responsibility) is rising globally. One of the major reasons for this growing interest is the pace of economic globalization, to which some attribute negative social and environmental impacts, particularly on developing countries. Accelerating diversification of corporate stakeholders is another reason for the rising interest in CSR.
For example, NGO power and influence over sustainability and human rights are growing around the world. People are increasingly concerned about the environment, health and safety, and about allegations-- and evidence -- of corporate misconduct and injustice.
Intensive media coverage and development of the Internet draw even more attention to these issues. As a result of all these factors, much attention is being given to voluntary CSR codes and standards, to the related interests and actions of governments, and to SRI index evaluations that promote CSR management and practices.
However, the most influential factor is supply chain risk management. Leading multinational companies are now applying CSR practices to their supply chains in order to ensure the ongoing success of their business. In order for Japanese companies to avoid risk and sustain their positions in the global marketplace, it is critical that they introduce, practice and enforce CSR management. This diligence must extend to self-disclosure regarding their supply chains and business partners around the world.

Chapter 12 CSR-Related Initiatives led by Japan Association of Corporate Executives
Hiroaki FURUSE, Manager, External Activities, Corporate Business Intelligence, Fuji Xerox Co., Ltd.

Since its establishment, Keizai Doyukai, or Japan Association of Corporate Executives, has been one of the pioneers in the area of "Corporate Social Responsibility." In 2003, it issued the 15th Corporate White Paper, which was widely received as a result of serious discussion on CSR among corporate managers. Their argument was based on their convictions of what an ideal society should pursue.
In the White Paper, the aspirations of top management are considered the driving force of CSR. Furthermore, the pursuit of CSR is recognized not as cost but as an investment. It places importance on fundamental questions such as why a company exists. In addition, it proposes a Corporate Evaluation Standard as a tool for driving CSR efforts.
The results of the self-assessment by the Corporate Evaluation Standard show how Corporate Japan addresses CSR. Efforts in creating a CSR-adherent system are making progress. Particularly, manufacturers and large corporations lead environmental efforts. Major challenges for the future include empowering female employees and ensuring effective governance.
A lack of active dialogue between corporate managers and stakeholders could be indicative of why CSR has not taken root in Japan despite Doyukai's previous proposal. Doyukai should engage in such dialogue in its future activities.

Chapter 13 Initiatives by the Nippon Keidanren and the CBCC to Promote CSR in Japan
Tomoko HASEGAWA, the Deputy Director, the Council for Better Corporate Citizenship, Manager, International Economic Affairs Bureau, Japan Business Federation

Japan Business Federation (Nippon Keidanren) and its affiliated organization; the Council for Better Corporate Citizenship (the CBCC) has long been promoting Corporate Social Responsibility (CSR) in Japan.
Nippon Keidanren first established "Charter of Corporate Behavior" in 1991, it revised the Charter in 1996 and published the Implementation Guidelines for the Charter. In 2002, Nippon Keidanren published the third revision of the Charter, requesting its member corporations to establish and maintain a system for promoting ethical corporate conduct within corporations. In October of 2003, Nippon Keidanren established a Sub-Committee on Socially Responsible Management to discuss the Japanese corporate views on CSR and issues facing Japanese Corporations.
The CBCC, through the activities of its Study Group on CSR and the Working Group on the ISO CSR standardization, studies the trend of Global CSR and it engages in networking activities with the leading CSR organizations overseas. The Nippon Keidanren and the CBCC believes that in promoting CSR, it is essential to respect corporate autonomy and voluntary initiatives, given the diverse nature of CSR.

Chapter 14 Current Issues and Future Perspectives of CSR in Japan
Professor, Graduate School of Commerce, Hitotsubashi University

Each sector of Japan addressing CSR will face the following four issues in the future:

(1) Development of, and the support for, NPO/NGO : Need to develop NPO/NGO that can study and assess the activities of businesses and government from an independent viewpoint, and recommend policy proposals. Also required is the presence of intermediate support organizations that can develop the alliance between NPO/NGO and businesses.
(2) Increase CSR studies and develop CSR education system at universities : In our corporate society, most people have shown less interests in CSR, and fewer researchers studied "business and society" as a research subject. Now researchers are expected to develop management systems and education programs in cooperation with businesses and NGOs, while presenting policy proposals.
(3) Recognition of a role of the government : The government needs to base CSR for its industrial policies through coordination among ministries and agencies. Moreover, it is necessary to enhance CSR not only by regulatory measures, but also by preferential policy and tax measures.
(4) Establishment of a multi-stakeholder forum : Need to develop a system in which businesses and economic entities study CSR in cooperation with the government and NGOs. In practice, it is necessary to set up a multi-stakeholder forum where economic entities, government sector (ministries and agencies), NGOs related to environmental, consumer, and social issues, labor unions and other stakeholders participate and discuss CSR.

Executive Summary
(Survey Report)
Chapter 1
Corporate Social Responsibility by Machine-industry Companies in Europe
Assistant Professor
Stockholm School of Economics

This study focuses on Europe, which has a good reputation for its advanced approach to corporate social responsibility (CSR). It assesses the status quo, and considers why European companies are so more active than other regions by the following steps.
First, European companies are compared with those in Japan, the United States and other regions. Comparisons are also made between different European countries.
Second, three theoretical models (institutionalism, resource dependency and information diffusion) are shown to explain regional differences in the performance on CSR.
The third step examines nine machine-industry companies in Northern Europe, which apparently exhibit particularly high CSR performance, to see what they carry out as CSR activities, how they conceive CSR and how their performance is characterized. The research is conducted not only by the investigation into corporate reports but also by the interviews with those directly engaged in CSR activities.
The conclusion points out that CSR-consistent values, norms and perceptions have traditionally existed in Europe, that European companies tend to hold stronger and broader approach to stakeholder relations, and that wide network is being established to help many companies share and diffuse relevant information. All those factors contribute to the advancement of CSR performance in Europe.

Chapter 2 Current Movement of CSR in EU
Professor, Graduate School of Commerce, Hitotsubashi University
Director, Research Planning, Global Industrial and Social Progress Research Institute

Research team visited five cities in EU (Geneva, London, Copenhagen, Paris and Brussels) to survey the latest movement of European CSR and the EU Multistakeholders Forum (EMSF).
Interviewed were the European Commission and other twenty organizations including ILO, UNEP, CSR Europe, Euro Chambres, WBCSD, EuroSif, Amnesty International, Friends of the Earth, International Chamber of Commerce, Royal Institute of International Affairs, and Business in the Community.
The subjects commonly asked to each organization were as follows: (1) Basic recognition/understanding of CSR; (2) Issues of CSR implementation; (3) Assessment of the EMSF's roles and activities; and (4) Future perspectives of the European CSR.
In the EMSF, discussion on sector-specific CSR is ongoing with inclination toward the development of pragmatic guidelines, while shelving the philosophical debate on "Should the CSR be Voluntary or Mandatory." To promote the awareness of CSR in the SME sector is recognized as one of the most important issues in the European Community.