A New standard for corporate value? Sustainable branding [Part 1]

Definition of Sustainability

Sustainability is the concept of "aiming for a society where current and future generations can live prosperously while ensuring environmental, social, and economic sustainability." Driven by the 17 Sustainable Development Goals (SDGs) set by the United Nations, the movement to redesign corporate activities is accelerating.

The 17 SDGs set by the United Nations (Quoted from the SDGs Club, Japan Committee for UNICEF)

The "Three Pillars of Sustainability" represent the three fields—"Environment," "Social," and "Economy"—that companies and society should prioritize to achieve sustainable development. This is closely related to ESG (Environmental, Social, and Governance), and each pillar includes the following:

① Environmental

Key Content: Climate change measures, renewable energy adoption, energy saving, circular economy, decarbonization This pillar aims to minimize the impact on the global environment and promote the sustainable use of natural resources.

・Climate change measures: Reduction of greenhouse gas emissions such as CO₂, and adaptation to climate change. ・Adoption of renewable energy: Moving away from fossil fuel dependence by utilizing solar, wind, and geothermal energy. ・Energy saving: Reducing energy consumption through efficient capital investment and operational improvements. ・Realizing a circular economy: Designing and operating with a focus on the 3Rs (Reduce, Reuse, Recycle) and zero waste. ・Decarbonization: Aiming for carbon neutrality (net zero) in all activities, including products, services, and logistics.

② Social

Key Content: Employment diversity, working environment, respect for human rights, community coexistence, social contribution This pillar concerns how companies and organizations impact people and local communities.

・Employment diversity: Accepting and supporting the active participation of diverse talent, including gender, nationality, and age. ・Improvement of working environment: Ensuring a safe and healthy workplace, appropriate working hours, and welfare benefits. ・Respect for human rights: Respecting the rights of employees, business partners, and other stakeholders, and eliminating unfair treatment. ・Coexistence with local communities: Vitalizing regions through collaboration and support for local businesses and residents. ・Social contribution activities: CSR (Corporate Social Responsibility) activities such as educational support, disaster relief, and volunteer work.

③ Governance (Economic)

Key Content: Fair management, strengthening governance, information disclosure, supply chain transparency This pillar addresses the reliability and transparency of a company's management structure and decision-making processes.

・Fair management: Elimination of misconduct and thorough compliance with laws and regulations. ・Strengthening governance: Enhancing the oversight functions of the board of directors and auditing bodies. ・Promotion of information disclosure: Disclosing not only financial information but also environmental and social initiatives (non-financial information). ・Supply chain transparency: Responsible procurement through the selection and auditing of suppliers, requiring consideration for human rights and the environment.

The Three Pillars are Interconnected

These three pillars are not independent but are structured to influence one another.

For example: ・Environmental considerations increase the trust of the local community (Social) and contribute to the evaluation of management (Governance). ・Supply chain transparency (Governance) directly links to respect for human rights (Social) and decarbonization (Environmental).

The Importance of Sustainability Management

As the external environment surrounding companies changes rapidly, interest in sustainability among investors and stakeholders is growing. Consequently, addressing sustainability is now frequently linked to core management issues, distinguishing it from traditional CSR, social contribution activities, or philanthropy. In other words, even the fundamental prerequisites of management are undergoing a transformation. Interest in sustainability is not limited to a managerial perspective; it has spread beyond capital and consumer markets into the labor market as well.

For instance, according to Bain & Company's "Survey on Consumer Sustainability Consciousness in Japan and the Asia-Pacific Region (January 2022)," over 80% of consumer respondents stated they are willing to pay a premium price to purchase products that consider sustainability.

Furthermore, as a figure indicating the rising interest in sustainability within the labor market, a 2023 survey by IDEATECH Inc. revealed that nearly 20% of student respondents cited "attitudes and initiatives toward SDGs" as a factor in choosing an employer. This is a noteworthy trend for predicting future movements.

Sustainability has become an essential factor that can no longer be ignored, not only in management but also in measuring corporate value. Given this, it is a natural progression that the approach to corporate branding, which addresses the very core of business management, must also evolve.

Sustainability: The New Standard for Corporate Value

Sustainability is no longer an "option" for companies; it is a "prerequisite."

The true purpose of corporate branding is to clearly state "for whom, for what, and how the company exists," and to build value together with society. A sustainability perspective serves as the "compass" for addressing these questions at their most fundamental level.

In the past, corporate branding was skewed toward "visual appeal," such as logos, catchphrases, and advertising strategies. In the modern era, however, "how a company addresses social issues" is directly linked to the brand image itself.

What are the New Trends in Corporate Branding?

・Clearly defining the company's reason for being (Purpose)

→ "Purpose" refers to a company's raison d'être or mission—why it exists and what kind of value it provides to society. This mindset focuses on the company's "role" and "aspirations" within society, rather than mere profit-seeking.

・"Communicating Sincerity" in environmental and social contributions

→ Rather than simply advertising that they are "working on" initiatives like sustainability, DE&I (Diversity, Equity, and Inclusion), or community contribution, companies are now required to disclose and share these activities in an honest and verifiable manner. "Communicating sincerity" refers to: ① Presenting objective figures such as CO2 reduction amounts or recycling rates; ② Sharing challenges that were not met, such as stating "further improvements are needed in area X"; and ③ Incorporating objective information by utilizing third-party certifications or indices from authorized organizations. These actions clearly demonstrate to consumers the difference between genuine effort and "greenwashing," which will be discussed later.

・Demonstrating consistent values across all brand experiences

→ A brand is formed not only through "logos" and "advertisements" but through every experience a customer encounters. Even if a brand advocates for sustainable values, its credibility will collapse if there are contradictions at touchpoints such as the purchasing experience, customer service, packaging, or support. Ideally, consistency should permeate all touchpoints with stakeholders—from product design and packaging to store operations and customer interaction. In this regard, companies are strictly questioned on "walk the talk"—whether there is any contradiction between what the brand says and what it actually does. To achieve this, it is necessary to integrate the philosophy of sustainability into the brand strategy.

Definition and Characteristics of Sustainable Branding

Sustainable branding is an approach that "places the commitment to contributing to a sustainable society at the core of the brand." It requires intrinsic transformation rooted in all corporate activities, rather than a superficial image strategy.

Traditional branding generally involved strategically designing the "uniqueness" and "appeal" of a company, product, or service to establish a positive brand image and impression in the minds of consumers. As an approach, emphasis was placed on how to create a strong impression of the "functional value" and "emotional value" of a product through logos, taglines, packaging, website design, SNS, and advertising strategies.

In contrast to traditional branding, sustainable branding designs strategies with a greater emphasis on society and the environment. It is an approach that communicates sustainable actions and visions as a brand experience amidst dramatic changes in society and markets. Its characteristics include: ① placing the aforementioned corporate "Purpose" at the center of the brand; ② prioritizing storytelling and sincere actions regarding environmental and social contributions; and ③ shifting the criteria for value and empathy toward the manufacturing process, background, materials, and stakeholder involvement, rather than just the functional value of the product or service.

In essence, sustainable branding is a sustainable management strategy that practices "how the company wants to exist" within its relationship with society and transforms that stance into brand equity. If traditional branding was a strategy of "appearance" (how things are shown), sustainable branding is brand building for a new era centered on the sincerity of "inner being" (how things are).

In this section, we will break down the specific steps companies can take to integrate sustainability into their brand strategies.

Step 1: Articulating a Sustainability Purpose

The process begins by clearly defining the intersection between social issues and your business within the company's philosophy and vision. For example, a manufacturing company might define it as "realizing a circular economy," while an educational business might focus on "equity in learning opportunities." Defining sustainability in a way that is deeply rooted in your business domain is crucial.

Step 2: Ensuring Consistency Across All Brand Experiences

Trust in a brand is built when sustainability values are consistent across every aspect: product design, packaging materials, store layouts, advertising expressions, and employee education.

Step 3: Transparent Communication and Disclosure

No matter how excellent an initiative may be, if it is not communicated, it is as if it does not exist. Companies are required to continuously disclose information from both quantitative and qualitative perspectives through ESG reports, websites, social media, and other channels.

As the number of companies discussing sustainability increases, "greenwashing" has become a growing concern.

While there is no single fixed definition of greenwashing, it generally refers to making unsubstantiated claims about environmental friendliness regarding the nature or extent to which financial products, investment strategies, or corporate activities have a positive impact on the environment or climate. It involves suggesting that a company’s business model, activities, or products have a net-positive or neutral environmental impact, even when they may actually be harmful. Today, it is widely accepted that greenwashing can occur regardless of whether it is intentional or unintentional.

Addressing greenwashing has become a major challenge not only for consumers but also for financial institutions and investors worldwide. This is because retail and institutional investors who prefer "green" investments are gaining a stronger presence in the market, making the authenticity and reliability of green claims a critical factor in investment decisions. Superficial sustainability does not truly contribute to green or social causes, nor does it solve environmental or social issues.

There is also an increasing trend in enforcement actions against greenwashing, where companies claim to support sustainability or the SDGs without actual substance. Various regulatory authorities and actors are initiating enforcement proceedings against companies they believe are misleading the market. Examples of targeted greenwashing include the following:

① Branding Greenwashing

→ Greenwashing an organization's profile, activities, and vision as a whole.

② Fund Product Greenwashing

→ Misrepresentation or mis-selling of investment products.

③ Financing Greenwashed Assets

→ Providing "green" finance to assets that have been greenwashed.

④ Financial Reporting Greenwashing

→ Financial institutions making false or misleading statements regarding environment-related disclosures.

Regulatory authorities around the world are paying closer attention to these challenges. In this environment, each company must face the questions: How should we address greenwashing? How can we avoid it and gain true trust?

To gain trust:

・Disclosing sustainability results with numerical data

→ Publicly share specific figures such as CO2 emission reduction rates, recycling rates, renewable energy usage ratios, and improvement status in the supply chain. By clearly showing the gap between goals (KPIs) and actual performance, the transparency of progress is enhanced. Disclosure through data ensures objectivity and serves as an evaluation criterion for ESG investment from an investor's perspective, not just a consumer's.

・Obtaining certification or evaluation from third-party organizations

→ Acquire sustainability certifications from international organizations such as B Corp, ISO 14001, SBTi, CDP, or EcoVadis. Utilize third-party evaluations and reports from NGOs, NPOs, and research institutions to demonstrate objective assessments. The key is to include evaluations from a neutral standpoint rather than relying solely on self-assessment. This also helps mitigate the risk of being suspected of greenwashing.

・Honestly sharing negative information

→ As mentioned above, it is vital to include neutral and objective evaluations. Furthermore, companies are required to honestly share negative information that they might prefer not to disclose. By "sincerely" communicating unmet sustainability goals, environmental incidents, challenges, or lessons learned, a company can ensure "transparency," which leads to trust.

Greenwashing is becoming more complex, and regulations from monitoring bodies are expected to tighten in the future. We are entering an era where companies, the financial institutions that invest in them, investors, and consumers themselves are required more than ever to confront the true meaning of sustainability and face environmental and social issues head-on.

Sustainability is no longer an "option" for companies; it is a "prerequisite." The true purpose of corporate branding is to clearly state "for whom, for what, and how the company exists," and to build value together with society. A sustainability perspective serves as the "compass" for addressing these questions at their most fundamental level.

In the second part of this series, we will delve deeper into sustainable branding and explore specific successful case studies.

Sustainable branding is not something that can be achieved overnight. However, the accumulation of steady dialogue and action will pave the way for a company's future and build a genuine connection with society. Now is the time to review your brand strategy from a broader perspective that looks toward the global environment and society, and to build a brand that excels in sustainability.

References: ・"Efficient Collection and Strategic Utilization of Sustainability-Related Data for Sustainable Corporate Value Creation (Dec 13, 2022)": Corporate Accounting Office, Economic and Industrial Policy Bureau, Ministry of Economy, Trade and Industry (METI) ・"Report on the Efficient Collection and Strategic Utilization of Sustainability-Related Data (Interim Summary) (Jul 18, 2023)": Corporate Accounting Office, Economic and Industrial Policy Bureau, Ministry of Economy, Trade and Industry (METI) ・"Current Status of Sustainability and SDGs in Japanese Companies: The Beginning of Sustainability Management in Japan" ・"For the Sustainable Development of All Companies: Guide for Utilizing Sustainable Development Goals (SDGs)": Ministry of the Environment, Japan ・"Greenwashing and How to Avoid It: An Introductory Guide for the Asian Financial Sector (Japan Edition)": AIGCC, ClientEarth