Japanese corporates are facing growing pressure from investors, the government, and the broader public to raise ESG (environmental, social, and governance) standards in terms of their policies and practices. This has been compounded by the Covid-19 pandemic, which has brought a clear focus onto achieving more sustainable growth.
While this trend appears to be driving genuine change – with recent progress in areas such as reducing the use of plastics, weighting internal evaluation criteria for key staff more strongly towards ESG, and investment into funds that are focused on gender equality – there are also signs that for some companies, it is more about paying lip service than implementing a substantive overhaul.
Nevertheless, the broad direction of travel is clear, and pressure to implement better ESG standards will continue to mount, even if this transition is slow. Companies operating in Japan that fail to do so face an increasing risk of deterring both domestic and foreign investors, as well as consumers.
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