From CSR to IB: An Overview on Japanese Companies Situation and Challenges

February 28 2013 Takafumi Ikuta Senior Research Fellow, Economic Research Center, Fujitsu Research Institute (FRI)
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Issue
Building a business model which solves social problems is useful for BOP market development. Japanese companies should use CSR activities strategically.
Inclusive Business
CSR CSR activities

Strategic CSR General business model Sustainable business model

Minimum

Corporate profit

profit

Social contribution activities

Social value
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Steady social contribution activities

Keidanren Social Contribution Activities (SCA) Survey 431 companies
FY2011 SCA total expenditure JPY 246 billion SCA expenditure per company JPY 571 million Average % of current profits 2.46%
5

Hundred million
6

SCA expenditure per company

Expenditure for earthquake

Average % of current profits

4
3
3

Earthquake expenditure incl.

2
2

0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

FY
2

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 FY Source: Japan Keidanren

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Donation based SCA

Keidanren SCA Survey
Contents of SCA expenditure per company
6 5
Hundred million

4
3 2 disaster area
Donations Support for

program

Self-planning

1
0 2004 05 06 07
FY
3

08

09

10

11
Source: Japan Keidanren
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Overseas SCA diverging from core business

Detailed investigation of Keidanrens SCA survey (FRI; 2009)
348 companies responded. 396 responses from 194 companies corresponded to international SCA. Fact : Mainly BOP market
Developed countries

Fact : Mainly donations

Other than donations Including donations (other-planned)

2%

22%

50%
Developing/Emerging countries

98%

Including donations (self-planned)

28%

Fact : Only 7 cases (2%) of SCA were strongly related to core business
Source: FRI, based on Keidanren materials
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Involvement with BOP business

Toyo Keizai Inc.s CSR Kigyou Souran (Companies Complete Guide)

20

Total
20111,117 20121,128

20

Manufactures
2011591 2012598

20

Non-manufactures
2011526 2012530

15

15

15

10 5.5 5 4.5 0 2011

6.6

10 6.9

8.7

10 4.2

5 5.9 0 2012 4.9 6.4

3.8 5.3

4.0 0

2011

2012

2011

2012

Planning Involved FRI based on Toyo Keizai Inc.s CSR Companies Complete Guide Source:
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Position of BOP business

Toyo Keizai Inc.s CSR Kigyou Souran (Companies Complete Guide)

35

Total
20111,117 20121,128

35 30 25 20 22.5 15 10 5

Manufactures
2011591 2012598

35
30 25 20

Non-manufactures
2011526 2012530

30
25 20 15 10 5 0 2.3

27.8 23.9

15 16.6 10 5 12.5

18.5

3.1 2012

2.0 2011

2.5 2012

2.7 2011

3.8 2012

2011

Future business opportunity Ongoing business Source: FRI based on Toyo Keizai Inc.s CSR Companies Complete Guide
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Recognition of Japanese Companies(2012)

Matrix of 2012 data
Involvement
Involved Planning Not yet Total

Ongoing business Position Future business opportunity

Social contribution/ No answer/ Others

2.7% 2.3%

0.0% 5.1%

0.4% 15.1%

3.1% 22.5%

0.9%
5.9%

1.4%
6.6%

72.1%

74.4%

Total

87.6% 100.0%

10% of total is involved or planning its BOP market activities with consideration of business development
7

Source: FRI based on Toyo Keizai Inc.s CSR Companies Complete Guide
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So far
Present situation of Japanese companies 1. Corporate interest in BOP business or IB is increasing 2. Most companies do not use their CSR activities strategically in developing/emerging countries Existing gap between SCA and BOP market development Japanese companies should ask themselves: 1. Am I seriously thinking of developing business in BOP markets? 2. Can I change my thinking that CSR activitiesSCA? With change in thinking and management reform
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Changing mindset for inclusive business

Avoid to consider with focus only on business for BOP market Aim to develop a new market (with high BOP ratio) and consider a business model including social problem solution Try to check if its SCA and/or CSR activities could use effectively for its new market development

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Executing strategic CSR to open BOP markets

Reconsider BOP business Dealing with project base
Develop products which address social problem-solution needs Fit with management resources and CSR policy

Reconsider CSR activities

Match between goals, content, region Social, economic evaluation of results

Establish internal management systems

Dealing with whole company

Corporate policy which clearly connects CSR and core business Close ties between CSR and overseas business divisions Introduce CSR evaluation index and PDCA cycle
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Reconsidering CSR activities

Confirm match between activity goals, content, and region
Goals Activity and core business Activity region and business Related Related
Existing business New business

Giving back, philanthropy

Materials supply
Manufacturing base

Employee satisfaction Risk management Reputation, branding Business development

Not related

Market

No direct relation

Making goals clear is necessary

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CSR activities for business development

Activity should connect to core business and region
Goals Activity and core business Activity region and business Related Related Existing business New business Not related
Materials supply
Manufacturing base

Giving back, philanthropy

Employee satisfaction Risk management Reputation, branding Business development

Market

No direct relation

Rethink the need for activities whose connection to core business cant be explained
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Considering CSR activities as entrance

Start out with goal of social contribution and search for future business opportunities
Social contribution goals
Giving back/philanthropy

Considering business model

Grasp social needs Product development Marketing Market access Value chain Dissemination Personnel training Procuring capital Collecting capital etc.

Partnership Local partner Government Intl support agency Research agency etc.

Employee satisfaction
Risk management Reputation, branding

Business development

Visualization of activity results in terms of business and social benefits Communication strategy fitting into goals
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IB development by strategic CSR

CSR activities using core business
Providing free in-house products/services Products/services recognition Improved image Increased business opportunities in future

Transition to business development from CSR activities

Develop products/ services which meet social needs Product/service recognition Open sales channels Increase market for own products/services

Example of creating market to deal with social needs of BOP

Meeting social needsnutrient enriched foods, water purification tablets, electricity generator, cooking appliances

Low price and small sized retailfoodcomodity, health & sanitation, etc.
Job creation and industry developmentusing regional resource and labor force Infrastructure-buildingenergy, communications, financial, etc.
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