“Ethical consumption” is now a well-known buzzword. Ethical consumerism refers to the consumer activism in which consumers consider how they can help solve social issues that matter to them individually and at the same time support the business operators that are taking action on such issues.

That said, the greatest challenge is how to judge whether a business is ethical. On our blog page, we have already featured a couple of interviews with the respective CEOs of the Good On You and CoGo apps, both of which help shoppers identify which companies are ethical. The Economy for the Common Good is also a global movement that aims to visually depict companies’ commitment and contributions to the common good and drive change in consumer behavior and other actions.

Articles on our Blog page
Good On You: Interview: Is your shopping behavior hurting the world?
CoGo: Interview: To connect consumers and businesses for the good of people and the planet
Economy for the Common Good: An economic system that prioritizes people and the planet

While these initiatives originated in countries outside Japan, there are some projects in Japan that also seek to provide greater clarity around the ethical standards of companies. One such project is the Ethical Report Card of Companies conducted by the Citizens’ Network to Build a Sustainable Society through Responsible Consumption (SSRC). I therefore decided to attend the event announcing the results of the FY2023 report card.

The results announcement was held at the University of the Sacred Heart, Tokyo, and online

Author: Keiko Kondo
Writer and supporter of individuals and organizations striving to create inclusive communities.

What is the Ethical Report Card of Companies?

After launching in FY2016, the Ethical Report Card of Companies has now been published seven times. Every year, different industries are chosen for the survey with the top companies in terms of sales evaluated.

FY2016: Food processing, apparel
FY2017: Cosmetics, convenience stores, home delivery service
FY2018: Home appliances, restaurant chains
FY2019: Café chains, beverages
FY2021: Supermarkets
FY2022: Food processing
FY2023: Apparel

The apparel industry — the focus of the seventh edition in FY2023 — was also surveyed in the very first evaluation in FY2016. The year 2023 marked the 10^th anniversary of the collapse of the Rana Plaza building in Bangladesh, a deadly disaster that brought to light the problems of the garment industry. It will be noteworthy to see what has changed over the seven-year period since the first report card, especially in light of the growing interest in ethical fashion.

Companies surveyed in the 7^th survey

Fast Retailing*
Shimamura*
Adastria
Ryohin Keikaku
Wacoal Holdings
World*
TSI Holdings
Onward Holdings*
Aoyama Trading*
United Arrows

(asterisk denotes companies also surveyed in 2016)

The SSRC that conducts the survey is a network of 38 NGOs from all over Japan, which champion the significance of the project. Each NGO possesses expertise in the environment, human rights and other fields, and they utilize their perspectives when carrying out the evaluations.

The survey covered the following seven areas.

1. Sustainability management structure
2. Consumer protection & support
3. Human rights & labor practices
4. Social responsibility and contribution
5. Peace & non-violence
6. Animal welfare
7. Environment

For the survey, the network members responsible for each area fill in their research results based on each company’s website, integrated report, and other publicly available information to a survey sheet. The completed survey sheet is then sent to the company for feedback, corrections, and other information that ought to be included. If the company responds to this request, the SSRC members review it, engage in communication with the company, and reflect the responses in the results.

Around 100 people attended the event, including representatives from NGOs and the companies in the survey, and researchers

Announcement of FY2023 survey results

This year’s announcement was a hybrid format event that was held at a venue and streamed online. The results of the survey are as follows. The SSRC website has a chart with a more detailed breakdown of the environment category (in Japanese).

The companies with well-developed policies have higher scores

While no overall score is calculated in the Ethical Report Card of Companies, the radar chart serves as a useful reference for comparison

Overall characteristics

• Seven of the 10 companies responded (in the first survey in FY2016, none of the five companies responded)
• Compared to the first report card, progress has been made in the areas of sustainability management structure, human rights & labor practices, and the environment
• No observable progress has been made in the area of peace & non-violence, and animal welfare

1. Sustainability management structure

• The items in this category mainly examined whether the company has a basic policy and what kind of supply chain measures are being implemented
• Nine of the 10 companies have identified material issues; six of them are listening to the opinions of stakeholders
• Employee training on sustainability is an area of concern: two companies provide training to some workers, whereas two other companies provide training to full-time employees
• Six of the 10 companies are aware of at least their tier-2 suppliers

2. Consumer protection & support

• All of the companies implement initiatives to encourage action on the part of the consumers, such as in-store collection of used clothing; however, consumers could perceive this as an attempt to encourage buying through mass sales and then clothing collection; companies need to come up with better ways of communicating such initiatives
• Four of the 10 companies provide information to consumers encouraging them to practice sustainable consumption
• The information on each company’s website is heavily geared toward investors, with less emphasis on appealing to consumers
• No efforts are being made to address greenwashing and bluewashing

3. Human rights & labor practices

• All of the companies evaluated in the first survey earned a higher score this time around; the biggest improvements were an increase from 1 to 7 for Aoyama Trading and from 1 to 5 for Shimamura
• Three companies fully implement the human rights due diligence process (Fast Retailing, Ryohin Keikaku, and Wacoal)
• Two companies partially implement it (Aoyama Trading and United Arrows)
• As many companies consider the prevention of labor exploitation and the protection of workers’ rights to be premised on compliance with Japan’s Labor Standards Act and information disclosure about it unnecessary, this information is not disclosed on their websites; however, since labor-related laws may not prevent all forms of human rights violations, the companies must implement and disclose their measures to prevent them from occurring

4. Social responsibility and contribution

• The information on each company’s website is geared toward investors and information about their social contributions is hard to find
• Nine of the 10 companies have established a policy concerning contributions to society (compared to only one of the five companies in the first survey)
• None of the companies have a policy that mentions the impacts of their entry into, or withdrawal from, a region

5. Peace & non-violence

• None of the companies have a policy or plan concerning peace & non-violence, which indicates a low level of awareness regarding these issues
• Japanese companies could be called upon to respond to an emergency, for example, by suspending operations during events like the coup in Myanmar or when Russia invaded Ukraine; consumers would ideally want to see such proactive involvement in these scenarios

6. Animal welfare

• Scores were low across the board; eight companies out of ten scored “1”
• Five of the 10 companies still handle items made from real fur
• Four of the 10 companies have a policy or standards concerning animal welfare

7. Environment

• Three of the 10 companies have introduced an environmental management system (EMS)
• Three companies conduct internal audits and four conduct external audits, which is low compared to other industries
• Eight of the 10 companies aim to conserve resources and reduce waste as part of their environmental policy; however, none of them mention the order of priority for the 3Rs (“reduce” should be prioritized)
• In the first survey, the companies had only adopted partial measures to reduce waste, such as by reusing packaging materials, but the latest survey indicates that efforts are being made at each stage, from product planning and design to sales
• Only two companies have formulated, and disclosed, a policy on the management of chemical substances
• Only one company is actively working to protect raw water and secure water resources

A Japanese grassroots initiative worth supporting

Q&A session: the representatives of the NGOs that specialize in each category of the survey announced the results for their respective fields

By attending the event, I sensed that companies have changed considerably over the seven years since the first survey. As a consumer myself, having the opportunity to see each company’s approach through the results of the survey is helpful when choosing which products to buy. Someone attending the event also commented during the Q&A session that it would be good if the report card could be published in English as well for the benefit of persons visiting Japan. This made me realize that there is a language barrier that needs to be overcome in order to reach a broader audience.

Also, even though the Ethical Report Card of Companies is a survey of large corporations, I heard that the SSRC has created a self-assessment tool for SMEs based on the survey. The tool aims to support SMEs in their quest to become ethical companies, so it will definitely be a project worth watching up ahead.

In this day and age, I believe both companies and NGOs aspire to be ethical. While it is often said that you cannot change the past, nor other people, for the NGOs, companies are the “other people” they want to change. It is a completely different matter if those other people are opposed to ethical production, but if they more or less have the same objectives in mind, information like this report card could be instrumental in instigating change. I believe that if we take action in our respective spheres, we can help make society even more ethical.