Japan's key role in building back better

The global spread of COVID-19 has undermined the future prospects of human society.

Until now, many countries have promoted globalization and digitalization under the banner of the market-first principle, guided by technological innovations that seek to generate profits by prioritizing economic rationality.

As a consequence, while these moves have led to dramatic advancements in the economy and society, environmental destruction, the widening gap between rich and poor, and other “distortions” have ballooned to a level that can no longer be ignored. The pandemic has exposed the negative aspects of the problem, providing us with an opportunity to question the sustainability of human society.

We should capture this opportunity to redefine capitalism and have the courage to build a new, sustainable economic and social system supported by a broad range of stakeholders. The "new normal" in our future society will be characterized by constant discontinuous change. Now, each of us is called upon to be aware of this challenge with the willingness and imagination to break away from the past and envision the future we wish to shape.

A new vision of capitalism and role of businesses

Businesses have an enormous role to play in resolving issues that threaten the sustainability of human society, such as the global environmental crisis, widening disparities and social division, which have become more apparent as a result of the COVID crisis.

As leaders of innovation, companies must function as the driving force behind the new economy and society of the future. History has shown that many firms have taken the initiative in social transformation by providing innovative products and services. Intrinsically, businesses shoulder social expectations to be a presence that offers long-term value.

Companies of the future will be required to individually shape strategies that provide value to society and enhance people’s happiness 30 to 50 years from now, even if that may not necessarily translate into returns in the short term.

And long-term corporate actions that create social value and enhance the sustainability of human society will lead to higher corporate value in the present. When the values and profits companies create are redefined, actions taken towards achieving the Sustainable Development Goals should be viewed not as short-term costs, but investment in the future that will generate returns in the years ahead.

If we succeed in shaping a capital market that recognizes this kind of corporate value, we will be able to build a "new capitalism" that maximizes the potential of businesses and embraces social sustainability and people's happiness.

Japan’s strengths

In recent years, we have begun to witness signs of the emergence of a new, budding capitalism that embodies the driving force of corporations, the leaders of innovation, as exemplified by the impact of ESG investment ratings by various institutions on corporate value assessment.

This trend has made contributions to the SDGs and social sustainability a given for all companies around the world. People no longer identify with management that is not conscious of social value; rather, in capital markets of the new era, it may even result in a decline in corporate value.

As we seek to establish this trend in society, Japan may be in a position to advise the rest of the world. Traditionally, the Japanese have a deep-rooted sense of value that emphasizes relationships with society, spirit for common good of society, and the balance between altruism and self-interest.

At the inaugural meeting of the Regional Action Group for Japan, Executive Chairman Klaus Schwab referred to the importance of the traditional Japanese idea of “sanpō yoshi”, which translates as three-way satisfaction between the seller, buyer and society as a whole, as we move towards the “great reset” for the new stakeholder capitalism.

“Sanpō yoshi” was never meant to be a dogma – it is practical wisdom based on values traditionally cultivated in Japan for the sustainability of society. This practical wisdom is essential in spearheading the transformation for a new capitalism and contributing to the development of a sustainable society.

Konosuke Matsushita, the founder of Panasonic Corporation, believed that a company should "develop people before making products” and noted that companies, as public entities of society, should develop and utilize human resources to benefit the world. Likewise, many of our Japanese predecessors managed their businesses and provided social value based on the conviction that corporations exist for the common good of society as a whole.

SOMPO Holdings, a company I manage, launched a nursing care business in Japan, a nation grappling with challenges in an ageing society, which represents the future to which the world is headed. This is our investment into the future for the common good, towards a more prosperous future society, as we seek to realize sustainable nursing care services that employ technologies and data to enable individuals to fulfill their lives in the way in which they choose.

I am convinced that the creation of social value based on practical wisdom by Japanese companies will contribute to the realization of the SDGs around the world.

Steps for Japan to become an indispensable country

The current pandemic has the potential to prompt many countries to turn more inward and to foster conflict and division over national interests. A glance at the international community shows that we are in need of unifying forces as well as leaders who can point to a clear way forward. It is precisely this situation that makes me convinced that Japan has a role to play in contributing to the "great reset" of the world.

In spite of lagging on diversity and other metrics – as pointed out in the World Economic Forum's “Global Competitiveness Report Special Edition 2020” – Japan has various resources that can drive future growth including the world's third largest economy and market size in GDP, technological capabilities cultivated by goods manufacturing, and high-quality real data such as medical data from a universal health insurance system.

Japan can exercise leadership in the “great reset” towards the new economy and society by initiating social changes through innovation that uses these resources and Japan's unique practical wisdom; and in being a role model, as a country that has experienced and overcome these challenges. This is the first step that Japan can take to become not only a valuable country, but one that is indispensable for the rest of the world.