With his cutting-edge knowledge of quantum theory, the Italian theoretical physicist and best-selling author Carlo Rovelli argues in his 2020 book “Helgoland” the importance of perceiving the world as an “interactive web of relationships”, not just as one. random agglomeration of “matter. “
Borrowing from this imagery, one could say that economic activity also represents this kind of interactive network. For example, an automobile is made up of roughly 30,000 parts and components, against the backdrop of a colossal division of labor and supply chain system that impacts the jobs and lives of countless people across the world. regional communities and, ultimately, on the global environment as well.
IMPROVE “MARKET ACTIVITIES”
However, people are usually only concerned with the cost and quality of goods or services of immediate interest. Any further information is difficult to find, although we try to dig deeper.
However, even if individual consumers and businesses make decisions in their own best interests based on limited information, the result is generally an asset to society as a whole – or so has long been thought, thanks to the presence of an “invisible hand” which is an asset of market capitalism.
On the other hand, the worsening of social disparities and the climate crisis in recent years have intensified the efforts to revise the economic system currently in place, whose pendulum has swung too far in the direction of a place of market principles and shareholders’ interests above all else. .
Business leaders and politicians began to advocate on behalf of “stakeholders” and to call for a “restructuring of capitalism”.
The global COVID-19 pandemic has also spurred this new way of thinking.
Noting that government spending is swelling among advanced countries, the Japanese administration headed by Prime Minister Fumio Kishida sees “flaws in the prevailing new-liberalism” and emphasizes “redistribution.”
This is good news, provided it leads to an efficient redistribution of wealth for the benefit of low-income people and to improvements in health and environmental policies. We hope that the Kishida administration will live up to its commitment.
But the government is not omnipotent, and globalization has created a growing number of problems that Japan cannot solve on its own. If the administration tries to overcompensate in the wrong direction, it defeats the overall objective by undermining the efficiency of the market and hampering technological renovation.
However, it would seem relevant to improve the functioning of the market itself as well. It requires a new system that takes into account market influences on the company that have not been taken into account in past market transactions. Such a system should be created with a broad view of the ânetwork of relationshipsâ in the background.
And it is happening, as we speak.
UP THE SUPPLY CHAIN
Kao Corp., a manufacturer of daily household items, has installed a large solar power generation system at its plant in Sakata in Yamagata Prefecture. The cost of this investment was determined by the calculations of the company’s âinternal carbon pricingâ.
Carbon pricing determines the price a business must pay, in proportion to the amount of carbon dioxide it releases, to impose greenhouse gas emissions on society.
In Kao’s case, the monetary value of the reduction in CO2 emissions achieved through the use of solar energy would be equivalent to 25% of the cost of the investment.
Kao aims to further reduce CO2 emissions through wider use of internal carbon pricing methods to measure its direct emissions and in energy supply while more accurately grasping the quantities of emissions from its supply chains. , including the supply of raw materials and their transport.
Regarding the relationship between âbusiness and human rightsâ, the focus is on its impact on society through the supply chain.
The 2011 United Nations Guiding Principles on Business and Human Rights established that respect for human rights is a business responsibility, and nations around the world are in the process of creating relevant systems. .
Their aim is to ensure that the United Nations International Covenants on Human Rights and core labor standards – prohibition of forced labor, elimination of discrimination in employment, against certain types of work and protection of the right to form unions – are fully respected throughout the supply chain.
UN Guiding Principles require companies to exercise due diligence. In this regard, Japan’s largest business group, Keidanren (Japan Business Federation), wrote a manual last month.
âThis is still a new concept in Japan, and it needs to be promoted regularly and patiently,â noted Tomoko Hasegawa, CEO of Keidanren.
To what extent should due diligence be applied to the supply chain?
âEven in European and American companies, many say it cannot go beyond direct trading partners, although the laws of other countries tend to try to enforce it much further upstream,â Hasegawa said. “There isn’t one ‘right’ answer, and we just have to keep improvising while trying to set our priorities.”
QUESTION THE ROLE OF GOVERNMENT
Focusing on the supply chain adds to the weight and scope of corporate responsibility. It may seem like a heavy burden. But while it can result in a system in which individual companies are able to compete on a level playing field according to defined rules with a clear purpose, it can motivate companies and society to support each other and move forward together.
But for this to happen, a just system and broad social consensus are needed. And that requires the government to play an important role as well.
A supply chain perspective cannot be overstated, even in discussions of economic security.
Of course, you have to keep the whole chain in mind when trying to buy goods and technologies that directly affect people’s lives.
But the goals of economic security are abstract. Not only do different nations have different interests, but they are also influenced by prevailing circumstances.
If economic security is managed behind closed doors, the economy itself could be compromised. This would inevitably happen if the government decided to prepare a particular industry, inflating that industry beyond its capacity to its own detriment.
Any discussion of the supply chain must also take into consideration workers and contractors. The Kishida administration supports wage hikes and opposes tough negotiations to bring prices down, but can the prime minister guarantee results?
To ensure that issues of policy making and corporate management are not raised just for time-limited discussions, a system must be built to reflect the interests of people other than shareholders and corporate officers. ‘business.
Kishida’s slogan of a “new form of capitalism” will quickly reach its expiration date unless acted upon. He must indicate his precise direction this year.
–L’Asahi Shimbun, January 4