The Institute

Research Projects in 2003

I. Sustainable socio-economic system and corporate social responsibility (CSR)

II. Harmonization between Trade and Environment

III. How China Affects Japan after its Accession to WTO, and Japan's Countermeasures

I.Sustainable socio-economic system and corporate social responsibility (CSR)

1. Background

As the influence of corporations in a globalized society augments, the voice demanding CSR (corporate social responsibility) becomes louder on many aspects, including the human right protection of corporate employees, consideration for the health and safety of consumers, and contribution to local communities.

In an attempt to encourage the voluntary adoption of CSRs by corporations, various schemes have been devised, including OECD's Guideline on multi-national corporations (1977), Global Compact proposed by UN Secretary General Annan (1999), and GRI that requests parties to submit environmental and sustainability reports. Many of multinational corporations and society-conscious corporations in Europe and US consider CSR as a core element of management along with the provision of economic benefits to shareholders and consideration to environment, and develop a consensus that the harmonized attainment of these triple elements is essential for the development of a sustainable society and the sustenance of corporations.

In Europe, the European Multi-Stakeholder Forum on CSR chaired by the European Commission was formed in October 2002 with participants from every social segment related to corporations such as business communities, labor unions, consumer unions, and NGOs. In addition, the Forum has observers such as the European Parliament, ILO, OECD, UNEP, and is addressing the issue of social reform through the dissemination of CSR.

As corporations deepening the sense of CSR and governments implementing CSR promotion measures, a new social trend is emerging and growing momentum, including SRI (socially responsible investment) to assess corporate measures, execution of the right to vote, campaign to boycott /buycott, shareholders' execution of voting right, awards such as FTSE4GOOD, and attempt of rating certifications such as SAS000.

While the recognition of CSR's significance and importance advances mainly in the European and American societies and industries, Japanese society in general has shown a low-key response toward CSR, except the cases of some foresighted corporations. In some cases, Japanese corporations entering a foreign market with the diluted sense of CSRs, have met condemnation from NGOs for the lack of CSR through their local business activities.

According to "The 15th Corporate White Paper" published by Keizai Doyukai (Japan Association of Corporate Executives) in March 2003, the importance of corporations taking socially responsible actions begins to penetrate slowly into the minds of business leaders, and the dissemination of CSR concept in the Japanese society seems to shift from "why" to "how."

Including some multi-national corporations, many corporations actively doing businesses in Japan advocate and practice the world's top-class environmental consideration as their management concept. These companies have greater advantages in their pursuit of attaining the triple bottom-lines, and may present a model of an advanced sustainable society to the global community, through their active addressing of concrete measures for CSR.

A research committee on "Sustainable socio-economic system and Corporations' Social Responsibility" was formed, in order to identify what kind of a sustainable society model Japanese society and market aim to build, what are the issues involved, how to proceed to overcome such issues, and how to disseminate the messages embodied in a model to a global community,.

2. Major review items

(1) CSR issues of Japanese corporations and the ways to overcome them

The committee is to conduct case studies to identify what kinds of issues exist between corporations and their stakeholders, and what kind of measures can be taken to address them, under the growing awareness of CSR concept in the Japanese Society. Also, on the issues identified above, the committee is to address: corporations' creative efforts needed to solve the issues; market's and society's assessment of corporate actions and a way to provide supportive approaches; and furthermore policy issues in creating a favorable environment through support measures to encourage smoother resolving of issues.

(2) Japanese type CSR model

In European and American societies, globalization trend coexists with the tendency to seek national and regional identities. Each society is asking corporations to adopt CSRs based on the value standards that combine global universality and locally unique standards.

The committee will address how the Japanese society, aiming to realize further development and reform, is to derive what kind of value standards, and on the basis of such standards what kind of CSR actions will be required to corporations and it will further search a way how corporations and societies relate to each other in not so far future.

Especially, the committee will build a model that can be called "Japanese style CSR model," which incorporates the factors to encourage originality, as corporations are asked to address CSR in a creative way for issues unique to each.

(3) Harmonized achievement of triple bottom-lines

Although corporations actively addressing CSR are winning the social understanding such as seen in the dissemination of SRI, to achieve triple bottom-lines (TBLs) of economic results, environmental consideration, and the CSRs practices is still an extremely challenging issue for corporations.

As symbolized by over 10,000 sites in Japan awarded the certification of ISO 14000 series, environmental consideration taken by Japanese domestic corporations is the world's top level, providing a huge advantage toward the attainment of a sustainable society.

With such background, Japanese style CSR model to be developed by this Committee will identify what management strategies are required to maintain competitiveness, while fulfilling the harmonized achievement of triple bottom-lines.

Name list of Committee members ( in Alphabetical Order )
Chair Kanji Tanimoto Professor, Graduate School of Commerce, Hitotsubashi University
Member Nobuyuki Demise Professor, Faculty of Commerce, Meiji University
Masaatsu Doi Visiting Researcher, GISPRI
Hiroaki Furuse Manager, External Activities, Corporate Business Intelligence, Fuji Xerox Co., Ltd.
Yasuyuki Hoshikawa Secretary General, The Kyoyo-Hin Foundation
Tsukasa Kanai Deputy General Manager, Pension Investment Dept., The Sumitomo Trust
Chieko Kanatani Representative, Women's Initiative for Advancement in Japan
Mariko Kawaguchi Senior Analyst, Industry Consulting Dept., Daiwa Institute of Research Ltd.
Yoshiki Midorikawa Chairman, Green Consumer Research Group
Hideki Morihara Secretary-General, The International Movement Against All Forms of Discrimination and Racism
Hitoshi Suzuki Department Manager, Social Contributions Dept., Corporate Communication Div., NEC
Naoto Ohmi Director of Policy Bureau, UI Zensen

.Harmonization between Trade and Environment

Background and purposes of the research

Today, there is a growing consensus that environmental issues have reached beyond the scope of regional efforts and rather require global scale approach. Moreover, the world economies that used to prosper with international trade as the core of economies and societies can no longer strive without addressing the very presence of global environmental issues. The only way forward is to aim for the sustainable development through the harmonization of trade and environment. For this reason, we find heightened activities in recent years to review and study the environmental aspect of socio-economic systems.

In the face of such reality, the international community has already shown some movements. At the Earth Summit of 1992, countries agreed to apply environmental and trade policy treaties in a way to complement each other so to achieve sustainable development. The foreword of WTO agreement entered into force in 1995 included the words "to protect and conserve environment" for the first time. Moreover, the Doha Declaration adopted at the Fourth WTO Ministerial Meeting held in November 2001 identified "environment" as an important negotiation agenda of the future.

However, there is no denying that intense conflicts still exist between developed and developing countries, and between trade promoters and environmental protectionists, in areas such as how to distinguish justifiable environmental protection measures from disguised ones, or how to address trade restriction measures of multilateral environmental agreements (MEAs) at WTO. Thus, the issue of environment and trade is an extremely difficult theme to build multilateral consensus.

With that fact in the background, GISPRI established the "Research Committee on the Harmonization between Trade and Environment," for the purposes of identifying, sorting, and reviewing potential problems involved in the relationship between WTO and the UN Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol, which are central to GISPRI's review of MEAs, as well as of avoiding any conflict that may arise during the implementation process of various domestic environmental measures to be introduced upon the Kyoto Protocol's entry into force.

As the Kyoto Protocol is rumored to enter into force by next spring, with the growing probability of ratification by Russia, each party is actively searching a way to achieve their reduction target through domestic measures, which are expected to have higher likelihood to affect international trade. At this point, however, one cannot really say that the relationship between the Kyoto Protocol and WTO including their international negotiation processes has been fully investigated, except in a case of few individual papers published by the limited number of experts. Rather, the full investigation has been hampered by the strong antipathy felt by developing countries against WTO's addressing of environmental implication, since they fear that "environmental consideration" can be used by developed countries to cover trade protection measures. The withdrawal of US, the largest CO2 emitting country, from the Kyoto Protocol may further undermine WTO's efforts to address environmental issues. Under this situation, the Committee plans to submit information for the benefit of Japanese industries in their designing of basic strategies, by reviewing potential issues pertaining to the relationship between WTO and UNFCCC and the Kyoto Protocol, and identifying what measures to be taken.

Organization of the Committee

Chaired by Mitsutsune Yamaguchi, Professor of Economics at Keio University, the Committee is consisted of 6 members including: Yoshinori Abe, Associate Professor of Law at Gakushuin University; Jiro Tamura, Professor of Law at Keio University; Masato Dogauchi, Professor of Law at the University of Tokyo; Ken Matsumoto, Executive Advisor at the Center for Fair Trade and WTO Studies; and Shinya Murase, Professor of Law at the Sophia University. In addition, the officers of the Multilateral Trade System Department and Environmental Policy Division of the Ministry of Economy, Trade and Industry participate as observers.

The future course of the Committee

The Committee convened its first meeting on July 24, 2003, and re-recognized the past efforts in the harmonization between free trade and environmental protection, while reviewing the characteristics of the Kyoto Protocol, and identifying various issues inclusive of the fact that the purpose of the Kyoto regime itself may contradict with free trade. In the future, the Committee will further clarify the characteristics of UNFCCC and the Kyoto Protocol; determine their relationship with WTO; reveal the relationship between Kyoto Mechanisms and WTO and their potential problems; and deepen the discussion on what measures Japanese Government can take in their efforts to promote global warming measures based on the General Principles to Promote Global Warming Measures, and on how extensive the domestic measures can be taken to provide environmental effects, depending on the interpretation of current WTO agreements under the presumption of their continued application. The Committee plans to meet five times before March 2004, and will summarize their findings to a report.

III. How China Affects Japan after its Accession to WTO, and Japan's Countermeasures

China has achieved outstanding economic growth through their reform and openness policy adopted since 1980's, and it now faces a new developmental stage with its accession to WTO in December 2001, Beijing's hosting of Olympic Games in 2008 and Shanghai's hosting of Expo in 2010. In other words, China has become the "global factory," with their personal income growing significantly especially among coastal region residents. Now the world is eying China not only as the world's supply base but also as a gigantic market for demands. For example, the number of cellular phone users has grown rapidly to reach 200 million people by 2002, making China the largest market for cellular phones. This certainly proves the scale of magnetism China can offer as a consumer market.

Under such trend, the automobile industry, which epitomizes the machinery industry of Japan, rushes to enter the Chinese market in a competition to form joint ventures with Chinese companies. Such movement certainly demonstrates their recognition of China as the last remaining market of a gigantic scale.

However, there still remains certain degree of non-transparency factors in China concerning their future directions for politics, economy and society, for example the future moves of current Hu Jintao / Wen Jiabao regime inaugurated in 2002, and the poorly-managed initial response to SARS epidemics, which shook the world in early 2003. With China's accession to WTO, the world awaits with anxiety what direct and indirect changes it imposes on China.

The Research Group on China's Accession to WTO and its Effects on Japan started the study of China from fiscal 2002, and plans to further intensify its study in fiscal 2003.

In the fiscal 2002, the Group studied mainly:

(1) Assessment of changes in China after its accession to WTO (trends of administration, politics, and economy in China with its accession), and
(2) Trend of Chinese market, with a focus on strategically important industries, on the basis of why Japanese companies enter the Chinese market, and what kinds of risks exist there, as well as the issues involved in Japanese companies' strategy toward China.

In the fiscal 2003, the Group expects the need for broader-based research activities regarding the entry into Chinese markets, especially about the above item (ii). On top of such survey and research, the Group plans to summarize the overall approach of Japanese companies' strategy toward China, with the review of a way to design supportive measures for Japanese companies that explore strategies toward China.

To be specific, the Group will invite lecturers from individual Japanese companies that have advanced to Chinese market, in addition to the lecturers among the Group members, expand the scope of hearing from such lectures, continue to survey and study the measures taken by individual companies, and summarize the study based on the following viewpoints.

(a) Analyze the motivation of companies to advance into China and their strategies with the addressing of risks that may accompany the advancement into Chinese market (based on the hearings from the management executives of large and/or mainstream corporations, about the risks involved in the protection of intellectual rights and the collection of bills).
(b) What the private sector can do and what it needs to do independently, as the strategies for the advancement into Chinese market, and
(c) Policy support for the strategies of advancement into Chinese market (the issue of risk evasion, the designing of dispute resolving mechanism, etc.)

As an effort to disseminate the Group's conclusion, we plan to hold an open forum during the 14th GISPRI symposium to be held on February 5, 2004.

As of July 16, 2003, the Research Group is consisted of the following members:
Chair: Dr. C.H. Kwan, Senior Fellow, Research Institute of Economy, Trade and Industry Tsugio Ide, Professor, Graduate School of Media and Governance, Keio University
Dr. Fukunari Kimura, Professor, Faculty of Economy, Keio University
Dr. Jian Min Jin, Research Fellow, Economic Research Center, Fujitsu Research Institute
Yasuhiro Goto, Columnist / Editorial Writer, Nihon Keizai Shimbun Inc.
Shinji Shimahara, General Secretary, Japan-China Investment Promotion Organization
Kenji Hattori, Professor, Faculty of Modern Chinese Studies, Aichi University
Yasuhi Harada, Executive Research Fellow, Economic and Social Research Institute, Cabinet Office, Government of Japan
Akira Furuya, Acting General Director, Itochu Management Consulting Co., Ltd.
Masaki Yabuuchi, Director, China-North Asia Division, Overseas Research Department, Japan External Trade Organization