KOTRA Publishes Japan ESG Trend Report... "Need to Recognize Importance of ESG Disclosure"

[Asia Economy Reporter Suyeon Woo] KOTRA published a report on the 15th regarding the ESG (Environmental, Social, and Governance) management trends of Japanese companies. This was to understand Japan's trends as ESG management rapidly emerges as a global trend, with strengthened ESG information disclosure and management compliance.

According to the report, the Japanese government is encouraging ESG management not by adopting mandatory ESG policies like Europe, but through ▲gradual strengthening of regulations on companies ▲specific information disclosure to facilitate global investors' smooth understanding of Japanese companies' ESG management status ▲periodic announcements of guidelines and best practices to establish a solid culture of ESG management information disclosure.

As more Japanese companies recognize the importance of ESG, voluntary participation at the corporate level is also continuing. According to a survey report on ESG responses published by the Research Institute of Economy, Trade and Industry (RIETI), the perception that active ESG responses will lead to increased company profits and enhanced future profit stability is gradually spreading among Japanese companies. In fact, the number of integrated reports containing ESG information by Japanese companies has increased more than 25 times over the past decade (23 companies in 2010 → 579 companies in 2020).

Meanwhile, evaluations of ESG information disclosure by Japanese companies show a significant perception gap between companies and investors. In particular, investors have consistently raised concerns such as insufficient ESG information disclosure, lack of established appropriate evaluation methods for ESG investments, and inadequate systems related to ESG investments. Accordingly, Japanese companies are expected to strengthen systems that can provide more transparent non-financial information on key issues affecting corporate value in the future.

Additionally, since COVID-19, global investors' interest has focused on ESG items such as ▲labor relations (layoffs, salary reductions) ▲work environment (remote work, infection risk) ▲supply chain management. Consequently, it is anticipated that the focus of both the Japanese government and Japanese companies will expand from governance (G) and environment (E) to the social (S) aspect of ESG.

The report emphasized that, referring to Japan's case, Korean companies also need to recognize the positive effects of introducing ESG management and the importance of ESG information disclosure. It added that, especially to enhance the effectiveness of ESG information disclosure, it is important to communicate with various stakeholders, identify areas for improvement in disclosed information, and continuously reflect those improvements.

This content was produced with the assistance of AI translation services.