BreakThrough Study Idea

Two reasons why SMEs should work on SDGsKoichi Yokota

<Series 1(Total 4 series)>


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Does our company really have a future using the same business model? Many SMEs face such concerns. The SDGs, which were set as common goals for achievement by 2030, can be a way to break free from the feeling of blockage. We discussed topics such as detailed factors and important points for when incorporating SDGs in business with Koichi Yokota, President of Yokota Associates, Inc., a company involved in a wide range of SDGs-related businesses. Yokota is also a Project Professor at the Keio University Graduate School. The interview will be published in four installments.

◆What are SDGs?
SDGs or the Sustainable Development Goals are a collection of global goals adopted by the United Nations General Assembly in September 2015 for the years 2016 through 2030 under the "2030 Agenda for sustainable development." The agenda consists of 17 goals such as "poverty," "hunger," "climate change," "energy," and "education" and 169 targets laid down for specific targets under these 17 goals for achieving a sustainable society. They were adopted with the participation of more than 150 member state leaders to succeed the Millennium Development Goals (MDGs) formulated in 2001. At the July 2017 session of the United Nations General Assembly, 232 indicators were adopted for measuring the progress of each of the targets.

17 goals of the SDGs (from the United Nations Information Centres website)

SDGs initiatives and ESG management will be required by business partners

Currently, many companies in Japan and overseas are working on the SDGs, which were unanimously adopted by the United Nations General Assembly in 2015. However, according to the "Survey on the Degree of Recognition, Implementation, etc., for SDGs by SMEs" conducted by the Kanto Bureau of Economy, Trade and Industry in December 2018, the percentage of SMEs who answered "We have no knowledge of SDGs" has reached 84.2%.

"In my opinion, the main factor is that many SMEs are not listed on a stock exchange, so they are under little pressure from the market. Recently, ESG investment is increasing at an accelerated pace, and no major companies listed on stock markets will be free from such pressure."

ESG investment is a code of conduct for determining investment destinations by prioritizing non-financial information such as corporate initiatives in the areas of environment, society, and governance. The scale of this ESG investment is growing rapidly in each country each year. Global ESG investment in 2018 reached approximately $31 trillion. The financing activities of listed corporations are directly affected by this ESG investment. Compared to non-listed corporations, listed corporations are increasingly sensitive to businesses and activities (such as SDGs) that contribute to society. This effect is steadily spreading to SMEs.

"Large corporations that focus on ESG management are also paying close attention to the business conditions of their suppliers. There have been problems in which overseas suppliers of well-known companies have been forced to ignore human rights. In this era, in order to become a business partner selected by major companies, SMEs cannot be indifferent to ESG and SDGs."

Furthermore, some financial institutions have provided loans to SMEs based on the evaluation of intangible assets, such as ESG management and SDG initiatives.

"Today, SDGs are no longer just another factor which affects business; instead, SDGs are a core business activity."

Corporations themselves feel a sense of blockage towards the future

Yokota firmly emphasizes the need to incorporate SDGs into business for SMEs who are worried if their company will have a bright future simply by continuing to use the same business model, or who feel a sense of blockage towards the future.

"The biggest feature of SDGs is not predicting the future, instead, it is "backcasting." This refers to formulating curent action by working backwards from the ideal form envisioned for 2030. In the current era, backcasting is essential to growing your business."

Hitachi has already implemented backcasting from 2030 when formulating its medium term management plan. Moreover, the Marui Group, a major distribution company, has announced its next vision for until 2050, and has stated that it will continue operation towards achieving these goals. Even SMEs seeking to become suppliers to such major corporations cannot take the attitude of focusing on the present and neglecting to consider the future. We are soon approaching the day when the ability to explain goals beyond current business will lead directly to business opportunities for SMEs.

"Don't fall into the dilemma of innovation; specifically, that you cannot deviate from the path leading to barely acceptable levels of revenue. Instead, take this opportunity to seriously consider whether a future really exists for your company simply by continuing to use the same business model.

Series Galvanizing the "corporate middle class" in order to exist as a sustainable company after 2030

Series 1 Two reasons why SMEs should work on SDGs
Series 2 Driving the SDGs will give you an advantage in the race for talent
Series 3 Identifying business tips for social entrepreneurs who succeeded through collaboration
Series 4 Galvanizing the "corporate middle class" in order to exist as a sustainable company after 2030

Koichi Yokota
President, Yokota Associates, Inc./Project Professor, Keio University Graduate School of Media and Governance

Entered Nikkei Inc. in 1988. After leaving Nikkei in 2011, he established Yokota Associates, Inc. Yokota has been a Project Professorr at the Keio University Graduate School of Media and Governance since 2015. He is involved in branding, marketing, CSR, CSV, HRM, innovative fields, and work-style reform at numerous companies, as well as regional revitalization in various regions. Yokota also conducts numerous lectures on SDGs at the Japan National Commission for UNESCO, the Organization for Small & Medium Enterprises and Regional Innovation (JAPAN), and training held at major companies.

◆ Main Written Works
"30 Keywords Changing Digital Workshift Marketing" (co-authored/Sangakusha Publishing) Published in 2018
"Tomorrow Will be Pioneered by Tomorrow" (co-authored/ Sekigakusha) Published in 2015
"Social Impact—Creating Shared Value (CSV) Changes Corporations, Business, and Work Style" (co-authored/Sangakusha Publishing) Published in 2014
"How to Created a Beloved Company" (co-authored/ Sekigakusha) Published in 2014

Coverage date January 9, 2019

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