Financial materiality of sustainability: the Japanese context

This paper examines Japanese companies in the context of an emerging focus on the financial materiality of sustainability. Specifically, we address the question of how many Japanese companies identify and quantify financial benefits of their sustainability initiatives in their public reporting compared with international peers. Drawing upon original data from the 2013 Dow Jones Sustainability Index (DJSI) assessment, we demonstrate that Japanese companies out-perform other geographies on reporting the business benefits of their environmental initiatives while under-performing in reporting a similar link on social aspects as well as linking sustainability to the broader corporate strategy. We analyse the reporting of business benefits in the environmental domain of 14 Japanese companies from the automotive and technology industries. For this we focus on their reporting against the Japanese Environmental Accounting Guidelines, which we identified as a key reason behind the detailed reporting on business benefits. We conclude by recommending Japanese companies to improve their reporting on financial materiality by extending beyond the current focus on environmental conservation to the full range of environmental and social issues as well as by including indirect benefits in their assessment and reporting of benefits. Reprinted by permission of Greenleaf Publishing