My main area of research is considering problems related to ESG (environmental, social, and corporate governance) from the perspective of corporate law. Corporate law—examples of which include the Companies Act and the Financial Instruments and Exchange Act—is a collective name for legal rules that govern the economic entities we call “companies” and their activities.

Today, sustainability initiatives—such as the adoption of Sustainable Development Goals (SDGs)—are being promoted in various quarters, and investors now use the stance that a company has on issues related to ESG as a new criterion for evaluating its feasibility and credibility.

Research into ESG issues takes place from various viewpoints. I myself am particularly interested in the role that corporate law can play in matters concerning the environment. In the world of jurisprudence, it was previously the norm for research into environmental problems to be tackled from the perspectives of civil law, administrative law, and international law.

Corporate law refers to those laws designed to coordinate the interests of companies and their shareholders, creditors, and other stakeholders. Indeed the goals of Financial Instruments and Exchange Act are to protect investors and to ensure the economy grows in a healthy manner.

Accordingly, it has long been thought that corporate law is not suited to dealing directly with climate change and other environmental issues.

Evaluating company prospects through ESG initiatives

In Japan, the Stewardship Code, a set of principles for responsible institutional investors to follow, and the Corporate Governance Code, which establishes fundamental principles for effective corporate governance of listed companies, were introduced in the mid-2010s; the widespread adoption of this “double code” has led to an increased focus on matters concerning the environment.

For example, Supplementary Principle 2.3.1 of the Corporate Governance Code compels Boards of Directors to recognize the importance of positive and proactive measures toward climate change and other sustainability issues.

The code aims to ensure that listed companies achieve sustainable growth and increase corporate value over the medium to long term. Additions to the code, such as the above supplementary principle, were deemed essential for achieving these aims, given the need to face up to environmental and other sustainability issues.

Reimagining corporate law from the perspective of environmental conservation

Opinions among experts are split on the subject of to what extent corporate law should reflect environmental issues. However, if we wish to ensure not only that the economy stays within planetary boundaries, but also to positively strengthen the earth’s capacity to recover, then we must reimagine the concept of capitalism. Indeed, I personally believe that we ought to redraw the frameworks of corporate law so that conservation of the global environment is defined as one of its fundamental principles.

Said differently, I believe that the frameworks of corporate value ought to be drastically overhauled so that ensuring that the synchronization of corporate sustainability and environmental sustainability becomes the main method by which companies make a profit.

In this way, viewing corporate law through an environmental prism encourages an alignment between activities aimed at ensuring sustainable corporate growth and activities aimed at protecting the global environment.

My university mentor told me that research and education are two halves of a whole. In my university seminars, together with my students I therefore research problems related to ESG from the perspective of corporate law. My students, who are in their teens and 20s, might be described as “SDG natives”—and they have a great interest in such themes.

Initiatives to combat environmental and other ESG issues have wide-ranging benefits: they contribute to society, protect the global environment, and lead to corporate growth. I intend to continue my research and educational activities to ensure that this is understood by as many executives and businesspeople as possible.

The book I recommend

“Kigyo Kankyo Ho”(Law of Business and Environment)
by Eiichi Yoshikawa, Sophia University Press

Eiichi Yoshikawa is a pioneer in research for using corporate law to solve environmental issues. When I was a high school student, I read a synopsis of Yoshikawa’s seminars in a Sophia University pamphlet, and I developed a powerful interest in his research. This book set me on my current path—I keep it close at all times.

Interviewed: January 2024