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ESG x Startup Report: Current State of ESG Efforts Among Japanese Startups and Learnings From Japanese/International Case Studies

MPower Partners
September 09, 2022

ESG x Startup Report: Current State of ESG Efforts Among Japanese Startups and Learnings From Japanese/International Case Studies

MPower Partners

September 09, 2022
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  1. 0
    Copyright © 2022 by MPower Partners. All rights reserved.
    ESG x Startup Report
    September 2022
    Supported by (in Japanese syllabary order)
    Current State of ESG Efforts Among Japanese Startups and
    Learnings From Japanese/International Case Studies

    View Slide

  2. 1
    Copyright © 2022 by MPower Partners. All rights reserved.
    • Provide transparency on current state of ESG efforts among
    Japanese startups and key challenges faced
    • Synthesize key learnings from advanced case studies
    Objective
    • Survey implementation and analysis of 50 Japanese startups to
    understand current status of ESG efforts
    • Interviews with 10 domestic and international companies
    engaged in advanced ESG efforts
    • Literature research and BCG global insights/expertise
    Approach
    Survey responses and expert interviews: June–July 2022
    Research
    period
    1. Current state of ESG efforts — Japanese startups
    • Current ESG situation inside and outside Japan
    • Current state of ESG efforts among Japanese startups
    • Survey results and analysis
    2. Learnings from ESG practitioners
    • Significance of ESG initiatives
    • 7 Principles for activating ESG efforts
    • Summary of recommended actions
    Report
    structure
    ESG x Startup
    Report Overview
    Report authors Supported by (in Japanese syllabary order)

    View Slide

  3. 2
    Copyright © 2022 by MPower Partners. All rights reserved.
    As interest in ESG grows worldwide, it is becoming increasingly integrated among large
    Japanese companies. In contrast, Japanese startups are struggling to determine how
    best to approach ESG topics given the following reasons:
    • Because the correlation between ESG and business performance/impact is unclear,
    it is given low priority, resulting in limited allocation of resources.
    • Although companies believe they should get involved in ESG, because they find the
    whole concept so challenging, they’re unable to take that first step.
    However, a select number of successful startups are increasingly implementing ESG-
    related efforts as a means for sustainable growth. These companies are starting early
    and personalizing their ESG efforts according to what makes sense for them, regardless
    of their size.
    This report summarizes the following elements to help startups implement ESG
    successfully:
    Chapter 1 provides a quantitative understanding on the current state of ESG efforts
    among Japanese startups based on a survey of 50 startups in Japan. The section looks
    into actual initiatives implemented across ESG areas and bottlenecks, in addition to
    actual impact of ESG initiatives to business performance, among other topics.
    • The majority of companies that responded to the survey were middle-stage (Series
    B funding secured/planned) or later.
    Chapter 2 summarizes the significance of ESG initiatives and explores 7 Principles for
    activating ESG efforts based on expert interviews with 10 leading startups in Japan and
    overseas
    We trust this report will be helpful to a wide range of startups (from seed-/early-stage
    to pre-/post-listing) and enable sustainable growth.
    Introduction

    View Slide

  4. 3
    Copyright © 2022 by MPower Partners. All rights reserved.
    Overall
    Environmental
    Social
    Governance
    Executive Summary (1/2)
    Current State of ESG Efforts Among Japanese Startups
    Note: 1. DEI = Diversity, Equity, and Inclusion
    • ESG efforts driven by “growing social momentum for ESG” and “requests from investors and employees”
    • 4 main objectives for engaging in ESG efforts are “branding,” “promoting the purchase and use of company services and
    products,” “loyalty and retention improvement,`” and “development of strategies”
    • Most startups that have engaged in ESG efforts feel there has been a real impact on their business. In particular, a large
    number of startups feel their efforts contributed to the “promotion of employee retention & recruitment”
    • The primary bottlenecks working against undertaking ESG are “lack of resources” and “lack of knowledge on ESG”
    • DEI1: Although the level of DEI efforts varies by company, at many startups, the proportion of women in management roles
    tends to be very low compared with the total share of women employees
    • Talent engagement: Most companies have implemented “support for remote work” and “childcare leave”
    • Except for environmentally focused/manufacturing startups, “efforts to measure and reduce GHG emissions” are currently
    limited
    • Limited representation of internal and external “women & foreign nationals on Board of Directors”
    • Significant difference in level of whistleblowing initiatives implementation by stage, with most later-stage companies having
    a whistleblowing process and half of them actually “utilizing the whistleblowing process"
    • Greater tendency for later-stage startups to engage in data security and privacy efforts compared with early-stage ones
    Early-stage: Series B or before
    Later-stage: Series C onwards

    View Slide

  5. 4
    Copyright © 2022 by MPower Partners. All rights reserved.
    1
    2
    3
    4
    5
    6
    7
    Customize and integrate ESG as part of the overall business
    strategy, ensuring it is adapted to fit the needs of the
    organization
    Link key organizational values with employee
    evaluations/hiring requirements to ensure those values are
    ingrained deeply in all employees
    Change and evolve governance structure in response to a
    company’s stage and market changes
    To recruit and retain talented personnel, create a diverse
    work environment where employees from all backgrounds
    can thrive
    Without compromising on speed, develop a mechanism to
    respond to risks that occur/increase as a company expands
    Identify company’s key challenges by developing a
    quantitative understanding of its situation and conducting
    benchmarking against other companies
    Underpinned by management commitment, execute on
    actions that can be undertaken in the short term even
    without vast resources/knowledge
    Direction
    setting
    Org
    develop-
    ment and
    growth
    Effective
    mgmt. &
    risk
    control
    1
    2 3 4
    Strategy formulation
    Culture
    develop-
    ment
    Organization
    building
    (mgmt.
    structure)
    Organization
    building
    (HR dev. &
    retention)
    5
    6
    7
    Risk mgmt.
    Current issue visualization
    Bottleneck resolution
    Principles That Guide ESG Initiatives
    Executive Summary (2/2)
    7 Principles for Activating ESG Efforts

    View Slide

  6. 5
    Copyright © 2022 by MPower Partners. All rights reserved.
    Report Content
    Current State of ESG Efforts Among
    Japanese Startups
    • Current ESG situation inside and outside Japan
    • Current state of ESG efforts among Japanese startups
    • (Survey results and analysis)
    1
    2 Learnings From ESG Practitioners
    5
    • Significance of ESG initiatives
    • 7 Principles for activating ESG efforts
    • Summary of recommended actions
    Copyright © 2022 by MPower Partners. All rights reserved.

    View Slide

  7. 6
    Copyright © 2022 by MPower Partners. All rights reserved.
    Report Content
    Current State of ESG Efforts Among
    Japanese Startups
    • Current ESG situation inside and outside Japan
    • Current state of ESG efforts among Japanese startups
    • (Survey results and analysis)
    1
    2 Learnings From ESG Practitioners
    6
    • Significance of ESG initiatives
    • 7 Principles for activating ESG efforts
    • Summary of recommended actions
    Copyright © 2022 by MPower Partners. All rights reserved.

    View Slide

  8. 7
    Copyright © 2022 by MPower Partners. All rights reserved.
    ESG Current Situation Inside and Outside Japan
    1
    Although ESG engagement level varies by country and region, it continues to grow in
    importance (especially in Europe), driven by investor request (institutional investors,
    VCs, etc.) and consumer demand toward companies (including startups)
    ESG outside
    of Japan
    Japan has lagged behind Europe in terms of ESG engagement. However, recently, due
    to stricter regulations and rising interest in ESG, an increasing number of companies in
    Japan (especially large companies) are becoming more proactive in that regard
    ESG in Japan
    Although startups are aware of the increasing interest and demand for ESG, overall
    they are struggling to prioritize and advance ESG efforts given their limited
    management resources
    Current status
    of Japanese
    startups
    What is
    ESG?
    ESG is a strategic framework for companies to realize sustainable growth
    by organizing various key company business activities into the three categories of
    E (Environmental), S (Social), and G (Governance)
    Current state of ESG
    efforts among
    Japanese startups

    View Slide

  9. 8
    Copyright © 2022 by MPower Partners. All rights reserved.
    Current State of ESG Efforts Among Japanese Startups
    (1/2)
    1
    • ESG efforts driven by “growing social momentum for ESG” and “requests from investors and employees”
    – Top 3 reasons triggering ESG implementation: 68% of respondents mentioned that their ESG efforts are fueled
    by “growing social momentum for ESG” with 50% citing “requests from investors” and 24% “requests from
    employees”
    • 4 main objectives for engaging in ESG efforts are “branding,” “promoting the purchase and use of company
    services and products,” “loyalty and retention improvement,” and “development of strategies”
    – 72% of respondents selected one of the above four reasons as their primary objective
    • Most startups that have engaged in ESG efforts feel that doing so made a real impact on their business. In
    particular, a large number of startups felt efforts contributed to the “promotion of employee retention &
    recruitment”
    – 93% of companies that engaged in ESG efforts cited at least one factor that “had a real impact on business
    performance and operations”
    – 46% of respondents to the above question selected “promotion of employee retention & recruitment” as one
    of the top 3 factors
    • The primary bottlenecks working against undertaking ESG are “lack of resources” and “lack of knowledge on ESG”
    – 42% of respondents mentioned that they “cannot afford to allocate resources to ESG” and 16% cited a “lack
    of knowledge on ESG” as key bottlenecks
    Early-stage: Series B or before
    Later-stage: Series C onwards
    Overall
    Current state of ESG
    efforts among
    Japanese startups

    View Slide

  10. 9
    Copyright © 2022 by MPower Partners. All rights reserved.
    Environmental
    Current State of ESG Efforts Among Japanese Startups
    (2/2)
    Note: 1. DEI = Diversity, Equity, and Inclusion
    • Except for environmentally focused/manufacturing startups, “efforts to measure and reduce GHG emissions” are currently limited
    – 74% of respondents have not yet measured GHG emissions; 64% have no initiatives in place to reduce emissions
    • DEI1: Although the level of DEI efforts vary by company, at many startups, the proportion of women in management roles tends to be
    very low compared with the total share of women employees
    – Although 42% of companies have not engaged in DEI initiatives, 32% have invested in training to minimize employee prejudice and bias
    – 78% of respondent companies have 20% or higher women employee representation, but only 26% have 20% or more women in
    management roles
    • Talent engagement: Most companies have implemented “support for remote work” and “childcare leave”
    – 88% of respondents answered that they have “established a remote work policy” and 86% answered that they have a “childcare
    leave system for employees”
    Social
    • Limited representation of internal and external “women & foreign nationals on Board of Directors”
    – (Internal/external directors included) 50% of respondent startups have no women directors and 88% have no foreign national
    director representation on their BOD
    • Significant difference in level of whistleblowing initiatives implementation by stage, with most later stage companies having a
    whistleblowing process and half of them actually “utilizing the whistleblowing process"
    – 97% of later-stage startups have “a whistleblowing mechanism/process” and 53% have “whistleblowing mechanisms that had
    actually been used”
    • Greater tendency for later stage startups to engage in data security and privacy efforts compared with early-stage ones
    – 97% of later stage startups have worked “to maintain compliance with privacy regulations” and “manage the security of
    information terminals used by employees”
    – 64% of startups have a data privacy incident tracking system in place with 53% of those with such systems actually measuring
    incidents
    Governance
    1
    Early-stage: Series B or before
    Later-stage: Series C onwards
    Current state of ESG
    efforts among
    Japanese startups

    View Slide

  11. 10
    Copyright © 2022 by MPower Partners. All rights reserved.
    Overview of Survey Respondent Companies
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Unfunded
    or pre-
    Series A
    funding
    raised/
    planned
    Series C
    funding
    raised/
    planned
    Series A
    funding
    raised/
    planned
    Series B
    funding
    raised/
    planned
    Listed
    company
    4%
    24%
    8%
    38%
    26%
    (% of companies)
    2 4 12 19 13
    Number of
    companies
    Total: 50
    companies
    Full-time employees
    Other employees
    (% of companies)
    4%
    10%
    22%
    32%
    20%
    6%
    2% 4%
    201~
    300
    0~10 Over
    500
    11~30 31~50 301~
    500
    51~
    100
    101~
    200
    28%
    32%
    24%
    6% 6%
    2% 2%
    301~
    500
    201~
    300
    101~
    200
    0~10 11~30 31~50 51~
    100
    Stage Number of employees (as of end of 2021)
    (Employees)
    (Employees)
    (% of companies)
    1
    Survey: Overall
    Later-stage
    Early-stage
    Current state of ESG
    efforts among
    Japanese startups

    View Slide

  12. 11
    Copyright © 2022 by MPower Partners. All rights reserved.
    ESG initiatives driven by "growing social momentum for ESG" and further
    catalyzed by "requests from investors and employees"
    40%
    14% 12% 10%
    28%
    36%
    18% 14%
    16% 10% 12%
    Consumer
    needs &
    opinions
    Growing
    social
    momentum
    for ESG
    Requests
    from investors
    6% 6%
    Requests from
    employees
    Research &
    case studies
    demonstrating
    the need for &
    effectiveness
    of ESG
    4%
    6%
    Expansion/
    consideration
    to enter
    overseas
    markets
    Requests
    from business
    partners
    12%
    Others No initiatives
    implemented
    4%
    Incidents incl.
    accidents/
    problems
    Top 1
    Top 2&3
    68%
    50%
    16%
    24%
    4%
    20% 18% 16%
    10%
    2%
    Please select the factors/events that led you to initiate/accelerate your ESG efforts
    (please select and rank up to the 3 most applicable options, in order)
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Overall Current state of ESG
    efforts among
    Japanese startups

    View Slide

  13. 12
    Copyright © 2022 by MPower Partners. All rights reserved.
    4 main objectives for engaging in ESG are "Branding," "Promoting the purchase
    and use of company services and products," "Loyalty and retention
    improvement," and "Development of strategies"
    20% 24%
    14% 14%
    8% 6% 6%
    28% 18%
    20% 16%
    24% 20% 16% 12% 14% 8%
    Innovation
    catalyst
    2%
    Others
    Branding Risk
    management
    Loyalty and
    retention
    improvement
    Promotion of
    purchase/usage
    of company's
    services/products
    Development
    of strategies,
    clarification/
    visualization
    of company's
    direction
    2%
    Increase level
    of interest
    and aspiration
    to work for
    the company
    Improvement
    of motivation/
    work efficiency
    4%
    Clearance of
    financing and
    investment
    requirements
    2%
    48%
    42%
    34%
    30%
    26%
    22% 20% 20% 20%
    Top 1
    Top 2&3
    Please select the key objectives/goals when engaging in ESG efforts
    (please select and rank up to the 3 most applicable options, in order)
    Total of Top 4: 72%
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Overall Current state of ESG
    efforts among
    Japanese startups

    View Slide

  14. 13
    Copyright © 2022 by MPower Partners. All rights reserved.
    Out of the startups that have engaged in ESG efforts, 93% felt a real impact on
    their business performance and operations
    Engaged in ESG efforts: 45 companies
    Felt real impact from ESG efforts: 42 companies
    Approx. 93%
    (42 out of 45
    companies)
    felt that ESG
    efforts had a
    real impact
    on their
    business
    Please select the aspects of how engaging in ESG efforts contributed to real impact on your company’s
    business performance and operations
    (please select and rank up to the 3 most applicable options in order)
    20% 24%
    10% 8% 12% 10%
    26%
    10%
    20% 20% 12%
    14%
    Improvement of
    purchase/usage
    of the company’s
    services/products
    by consumers
    46%
    Improvement
    of employee
    retention and
    recruitment
    Minimize
    risk/damage to
    the company
    Improvement of
    purchase/usage
    of company’s
    services/products
    from business
    partners
    Promotion of
    cross-functional
    communication
    among employees
    Improvement
    in investment
    commitment/
    valuations
    from investors
    6% 4% 2%
    Others
    20%
    6%
    Engaged in
    ESG efforts,
    but no actual
    impact felt
    4%
    30%
    No engagement
    in ESG efforts
    Top 1
    Top 2&3
    34%
    28%
    24%
    6% 6%
    14%
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Overall Current state of ESG
    efforts among
    Japanese startups

    View Slide

  15. 14
    Copyright © 2022 by MPower Partners. All rights reserved.
    Key bottlenecks working against ESG efforts undertaken include lack of
    resources and lack of knowledge on ESG
    2% 2%
    42%
    16%
    6% 6% 6% 6% 14%
    Can’t see/feel
    the benefits
    of ESG from
    the company’s
    perspective
    Difficult
    to allocate
    resources
    to ESG
    Stakeholders
    don't
    understand,
    even if engaging
    in ESG efforts
    ESG
    requirements
    /requests
    vary among
    stakeholders,
    making it
    difficult to
    approach
    Lack of
    knowledge
    on ESG
    Difficult to
    reach
    consensus on
    ESG initiatives
    implementation
    due to varying
    levels of
    recognition of
    ESG importance
    within the
    company
    Unable to
    prioritize
    among ESG
    initiatives
    Unable to
    identify specific
    approaches to
    priority
    initiatives
    Others No bottlenecks
    0%
    What are the primary bottlenecks impeding your engagement in ESG efforts?
    (please select and rank up to the 3 most applicable options in order)
    Top 1
    reason
    Want to engage in ESG Decide to engage in ESG
    Prioritize among
    ESG initiatives
    Decide
    what to
    engage in
    Limited reason to
    engage in ESG efforts
    Various constraints make it
    challenging to start the actual
    engagement
    Don’t know where to
    start/what to prioritize
    Don’t know
    exactly how
    to execute
    Bottle-
    neck
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Overall (bottlenecks) Current state of ESG
    efforts among
    Japanese startups

    View Slide

  16. 15
    Copyright © 2022 by MPower Partners. All rights reserved.
    Startups’ efforts to measure and reduce greenhouse gas emissions are currently
    limited
    74%
    4%
    20%
    2%
    0%
    40%
    80%
    Level 1:
    No measurement
    of GHG emissions
    directly
    attributable to
    the company
    (Scope 1)
    Level 3:
    Measures
    emissions up to
    in-house use of
    electricity,
    heat, and
    steam (Scope 2)
    Level 2:
    Measures
    GHG emissions
    only directly
    attributable to
    the company
    (Scope 1)
    Level 4:
    Measures up to
    indirect emissions
    from business
    activities of
    suppliers related
    to the company
    (Scope 3)
    64%
    24%
    6% 6%
    0%
    40%
    80%
    Level 4:
    Implementation
    of emission
    reduction
    initiatives and
    effectiveness
    measured based
    on target setting,
    /implementation
    of improvement
    initiatives
    Level 2:
    Implementation
    of initiatives to
    reduce emissions,
    but effectiveness
    has not been
    measured
    Level 1:
    No specific
    initiatives
    Level 3:
    Implementation
    of initiatives to
    reduce emissions
    and effectiveness
    measured
    Characteristics of companies with high level of engagement in measuring and reducing GHG emissions:
    • Companies engaged in environment-related business operations and activities
    • Companies likely to receive environmental response requests from the supply chain both upstream and downstream
    Level of effort to measure GHG emissions Level of effort to reduce GHG emissions
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Environmental Current state of ESG
    efforts among
    Japanese startups

    View Slide

  17. 16
    Copyright © 2022 by MPower Partners. All rights reserved.
    No engagement
    42% of companies have not engaged in DEI initiatives, but 32% have invested in
    training to minimize employee prejudice and bias
    42%
    32%
    26%
    22%
    14%
    4%
    10%
    Others
    (Managers/executives)
    participate in learning
    opportunities
    regarding DEI
    Set Diversity, Equity,
    and Inclusion (DEI)
    policies
    Invest in training
    and resources to
    eliminate employee
    prejudice, bias, etc.
    Set diversity goals
    appropriate to the
    no. of employees
    and business (e.g.,
    no. of women and
    foreign nationals)
    Include customers
    and business
    partners in company
    Diversity, Equity, and
    Inclusion (DEI) policy
    Please select whether your company engages in the following initiatives related to employee Diversity,
    Equity, and Inclusion (DEI)
    (multiple selections allowed)
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Social Current state of ESG
    efforts among
    Japanese startups

    View Slide

  18. 17
    Copyright © 2022 by MPower Partners. All rights reserved.
    While 78% of companies have 20% or higher women employee representation,
    only 26% have 20% or higher women in management roles and only 18% have
    20% or higher women in CXO roles
    78%
    26% 18%
    22%
    74% 82%
    More than
    20% women
    Less than
    20% women
    Staff Management CXO
    18%
    82%
    92% 92%
    Less than 20%
    foreign nationals
    8%
    Staff CxO
    More than 20%
    foreign nationals
    Management
    8%
    Number of
    companies (%)
    Percentage of women employees in each tenure
    (Ref.) Percentage of foreign nationals in each
    tenure
    About 80% of all companies
    have 20% or more female
    employee representation
    Around 20% of companies have 20%
    or more women in management/
    CXO roles
    1
    Number of
    companies (%)
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Social Current state of ESG
    efforts among
    Japanese startups

    View Slide

  19. 18
    Copyright © 2022 by MPower Partners. All rights reserved.
    88% of companies are engaged in "setting up a remote work policy" and 86% are
    working on a "childcare leave system for employees"
    98%
    88% 86%
    68% 66% 66% 62% 58%
    52%
    46% 44% 42%
    16%
    8%
    Track
    record of
    male
    employees
    taking
    childcare
    leave
    Support
    groups
    set up by
    topic
    (working
    parents,
    foreign
    nationals,
    etc.)
    Track
    record of
    female
    employees
    taking
    parental
    leave
    Preparing
    disaster
    prevention
    manuals,
    etc. to
    ensure
    employee
    safety as
    priority
    (e.g., in
    case of
    disaster)
    Remote
    work
    policy
    Attendance
    mgmt.
    system
    0%
    Childcare
    leave
    system for
    employees
    Employee
    mental
    health
    support
    Specific
    leave
    initiative
    (e.g.,
    menstrual
    leave)
    Support
    for
    balancing
    work &
    childcare
    Support
    for
    balancing
    work &
    nursing
    care
    Employee
    engagement
    survey (if
    available,
    provide
    name of
    tool
    implemented)
    Provide
    career
    support
    such as
    coaching/
    mentorship,
    etc.
    Existence
    of supplier
    selection
    policy
    No
    engagement
    Others
    0%
    Please select whether your company engages in the following policies/processes regarding talent
    engagement (multiple selections allowed)
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Social Current state of ESG
    efforts among
    Japanese startups

    View Slide

  20. 19
    Copyright © 2022 by MPower Partners. All rights reserved.
    Limited representation of women and foreign nationals on boards of directors,
    both internal and external
    Women internal & external directors Foreign national internal & external directors
    Appointment of women directors to BOD
    50%
    Appointment of foreign national to BOD
    12%
    10% 14%
    26%
    50%
    Women external
    directors only
    Have both
    women internal &
    external directors
    Women internal
    directors only
    No internal or
    external women
    directors
    6% 2% 4%
    88%
    Foreign national
    external
    directors only
    Have both foreign
    national internal
    & external
    directors
    Foreign national
    internal
    directors only
    No internal or
    external foreign
    national directors
    Appointment of women internal directors
    24%
    Appointment of foreign national
    internal directors
    8%
    1
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Governance Current state of ESG
    efforts among
    Japanese startups

    View Slide

  21. 20
    Copyright © 2022 by MPower Partners. All rights reserved.
    Significant difference in level of whistleblowing initiatives implemented by
    stage with 97% of respondents in the later stage having a whistleblowing
    mechanism in place and 53% with a track record of using it
    50%
    33%
    17%
    0%
    30%
    60%
    Level 3:
    Whistleblowing
    mechanism/
    process in place with
    record of actual use
    Level 1:
    No whistleblowing
    mechanism/
    process
    Level 2:
    Whistleblowing
    mechanism/
    process in place, but
    no record of actual use
    60%
    0%
    30%
    3%
    Level 3:
    Whistleblowing
    mechanism/
    process in place with
    record of actual use
    Level 1:
    No whistleblowing
    mechanism/
    process
    44%
    Level 2:
    Whistleblowing
    mechanism/
    process in place, but
    no record of actual use
    53%
    Please select the level of implementation regarding whistleblowing mechanisms/
    processes in place (select only the most appropriate answer)
    Early-stage (n=18) Later-stage (n=32)
    Whistleblowing
    mechanism in place
    50%
    Whistleblowing
    mechanism in place
    97%
    1
    Early-stage: Series B or before
    Later-stage: Series C onwards
    Whistleblowing
    track record
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Governance Current state of ESG
    efforts among
    Japanese startups

    View Slide

  22. 21
    Copyright © 2022 by MPower Partners. All rights reserved.
    Greater tendency for later-stage startups to engage in data security and
    privacy efforts with 97% "maintaining compliance with privacy regulations" and
    "managing security of information terminals used by employees"
    61% 56% 67% 56%
    39% 44%
    22% 33% 22%
    0%
    100%
    0% 0%
    97% 97% 88% 84% 75% 72% 66% 56%
    41%
    3%
    0%
    100%
    0%
    Obtain privacy
    Mark/ISMS
    Implement/
    use
    vulnerability
    assessment
    tools for in-
    house
    developed
    code
    Establish data
    management
    officer
    Security
    management
    of information
    terminals used
    by employees
    Maintain
    compliance
    with privacy-
    related
    regulations,
    privacy laws,
    PIPL, etc.
    Establish data
    management
    policy
    Set up two-
    step
    authentication
    to gain access
    to company
    information
    Conduct third-
    party security
    audits/system
    audits
    Develop
    security
    handbook
    Others No engagement
    Later-stage (n=32)
    Early-stage (n=18)
    What initiatives do you implement around data security and privacy?
    (multiple selections allowed)
    1
    Early-stage: Series B or before
    Later-stage: Series C onwards
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Governance/Social Current state of ESG
    efforts among
    Japanese startups

    View Slide

  23. 22
    Copyright © 2022 by MPower Partners. All rights reserved.
    64% of surveyed
    startups have a data
    privacy incident
    tracking system in
    place, with 53% of
    those with such
    systems actually
    measuring incidents
    64%
    36%
    Do not
    implement
    Implement
    100%
    Existence of methods and tools to
    measure the number of data-
    privacy-related incidents
    Existence of Methods and Tools Used to Measure the Number of
    Data Privacy Related Incidents and Number of Incidents in 2021
    Number of incidents in 2021
    (related to handling of personal
    information)
    0 incidents:
    14 companies
    1~2 incidents:
    12 companies
    3~4 incidents:
    3 companies
    5 or more incidents:
    2 companies
    No tracking of
    incidents:
    1 company
    1
    (17 of
    32 companies)
    53%
    of companies
    implemented
    a system
    Note: n = 50
    Source: MPower/BCG "Survey on ESG Initiatives (2022)"
    Survey: Governance/Social Current state of ESG
    efforts among
    Japanese startups

    View Slide

  24. 23
    Copyright © 2022 by MPower Partners. All rights reserved.
    Report Content
    Current State of ESG Efforts Among
    Japanese Startups
    • Current ESG situation in Japan and outside of Japan
    • Current state of ESG efforts among Japanese startups
    • (Survey results and analysis)
    1
    2 Learnings From ESG Practitioners
    23
    • Significance of ESG initiatives
    • 7 Principles for activating ESG efforts
    • Summary of recommended actions
    Copyright © 2022 by MPower Partners. All rights reserved.

    View Slide

  25. 24
    Copyright © 2022 by MPower Partners. All rights reserved.
    Securing investment
    (short- to medium-term)
    Sales improvement
    (medium- to long–term)
    Ensuring sustainable growth
    Significance of ESG Initiatives
    3 Key Contributions of ESG to Business Performance and Operations
    Future
    (fore-
    cast)
    ESG may become increasingly important to a
    wider range of industries due to increased
    awareness of ESG among consumers and
    stricter regulations/social pressures/etc. on
    large companies
    ESG could become increasingly important,
    including at pre-listing stage, as VCs abroad
    continue to integrate ESG factors when
    making investment decisions
    Current
    status
    For directly ESG-related businesses/
    manufacturing startups, S (Social) and
    E (Environmental)-related efforts contribute
    and respond to customer needs and business-
    partner requests
    For startups that are going public/just listed,
    G (Governance)-related efforts contribute to
    preparations of and responses to institutional
    investor requests
    For startups across a wide range of
    stages/industries, S (Social) and
    G (Governance)-related efforts contribute to
    overcoming barriers/risks to sustainable
    growth
    As the scale of startups (funding amount)
    abroad is increasing, ESG may become
    increasingly important to achieve sustainable
    growth in Japan
    Barriers/risks to sustainable
    growth listed on following page
    2
    1
    Responding to trade requirements of large
    companies and consumer preferences (B2C)
    Raising funds from VCs, achieving listing
    requirements, and appealing to investors after
    going public
    Creating an organization & strategies for
    continued business growth
    3
    2
    Significance/
    principles for ESG

    View Slide

  26. 25
    Copyright © 2022 by MPower Partners. All rights reserved.
    (Ref.) Barriers/Risks to Sustainable Startup Growth
    Startups carry unique risks and challenges different from those of large corporations as they strive for sustainable
    growth
    • Key functions (especially around finance/HR) become concentrated in the hands of select personnel, resulting in a
    black box (even within a small organization) making it difficult to prevent/notice violations and wrongdoing
    • The company culture that was naturally shared within the startup at the onset starts to break down as the org
    keeps growing (50~100 staff) with the overall organization robustness and purity declining
    • Inability to adapt organizational structure and board composition to match each stage/changes in market
    condition results in a gap between the organization's board/executive structure/capabilities and what is required
    • Amid accelerated competition for top talent among startups, the organization is unable to retain and recruit
    talent necessary for continued and stable growth/maintaining top quality
    • As a result of organizational expansion and remote work due to Covid, there is less interdepartmental
    communication among employees, leading to a decline in information transparency and collaboration
    • After the business reaches a steady state, staff and the organization become fixed at optimizing the existing
    business, resulting in creative and innovation stagnation
    • When a business that has been performing well suddenly faces a crisis due to rapid changes in the
    market/competition, the organization itself collapses along with the business and the crisis cannot be overcome
    2
    Significance/
    principles for ESG
    Advanced startups mitigate the above risks and
    achieve sustainable growth through ESG (especially S/G) efforts
    A
    B
    C
    D
    E
    F
    G

    View Slide

  27. 26
    Copyright © 2022 by MPower Partners. All rights reserved.
    1
    2
    3
    4
    5
    6
    7
    Customize and integrate ESG as part of the overall business
    strategy, ensuring it is adapted to fit the needs of the
    organization
    Link key organizational values with employee
    evaluations/hiring requirements to ensure those values are
    ingrained deeply in all employees
    Change and evolve governance structure in response to a
    company’s stage and market changes
    To recruit and retain talented personnel, create a diverse
    work environment where employees from all backgrounds
    can thrive
    Without compromising on speed, develop a mechanism to
    respond to risks that occur/increase as a company expands
    Identify company’s key challenges by developing a
    quantitative understanding of its situation and conducting
    benchmarking against other companies
    Underpinned by management commitment, execute on
    actions that can be undertaken in the short term even
    without vast resources/knowledge
    Direction
    setting
    Org
    develop-
    ment and
    growth
    Effective
    mgmt. &
    risk
    control
    1
    2 3 4
    Strategy formulation
    Culture
    develop-
    ment
    Organization
    building
    (mgmt.
    structure)
    Organization
    building
    (HR dev. &
    retention)
    5
    6
    7
    Risk mgmt.
    Current issue visualization
    Bottleneck resolution
    2
    Principles that guide ESG initiatives
    Significance/
    principles for ESG
    Recap
    7 Principles for Activating ESG Efforts (1/2)
    Principles for Linking ESG Initiatives to Sustainable Growth, Based on Advanced
    Case Studies From Inside and Outside Japan

    View Slide

  28. 27
    Copyright © 2022 by MPower Partners. All rights reserved.
    Direction
    setting
    Org
    develop-
    ment and
    growth
    Effective
    mgmt.
    & risk
    control
    7 Principles for Activating ESG Efforts (2/2)
    Principles for Linking ESG Initiatives to Sustainable Growth, Based on Advanced
    Case Studies From Japan and Outside Japan
    2
    Although the above principles apply foremost to middle-stage and larger companies, it’s important
    for earlier-stage companies to understand these principles that help companies through their maturity
    Principles that guide ESG initiatives
    Change and evolve governance structure in response to a company’s stage and market changes
    • Establish optimal governance as HR/org requirements change along with organizational and surrounding
    environment evolvements
    Link key organizational values with employee evaluations/hiring requirements to ensure those values are ingrained
    deeply in all employees
    • Verbalize values from an employee's perspective and embed them within the organization to levels where all
    employees can understand and recite them
    To recruit and retain talented personnel, create a diverse work environment where employees from all
    backgrounds can thrive
    • Develop a comfortable working environment for foreign engineers and one that does not disadvantage women
    Without compromising on speed, develop a mechanism to respond to risks that occur/increase as a company
    expands
    • Document/formalize knowledge and develop a mechanism that prevents and/or detects early misconduct
    Identify company’s key challenges by developing a quantitative understanding of its situation and conducting
    benchmarking against other companies
    • Cultivate a common understanding of key challenges within the company by leveraging data and agreeing on
    necessary initiatives
    Underpinned by management commitment, execute on actions that can be undertaken in the short term even
    without vast resources/knowledge
    • With management support, a volunteer-based team can start working on issues of interest and foremost need
    Customize and integrate ESG as part of the overall business strategy, ensuring it is adapted to fit the needs of the
    organization
    • Embody ESG considerations into management thinking to materialize initiatives for sustainable growth
    Initiative objective
    Significance/
    principles for ESG
    2
    3
    4
    5
    6
    1
    7
    Strategy
    formulation
    Culture
    development
    Organization building
    (mgmt. structure)
    Organization building
    (HR dev. & retention)
    Risk mgmt.
    Current issue
    visualization
    Bottleneck
    resolution
    Copyright © 2022 by MPower Partners. All rights reserved.

    View Slide

  29. 28
    Copyright © 2022 by MPower Partners. All rights reserved.
    Principles for ESG (1/7): Strategy Formulation
    2
    Significance/
    principles for ESG
    Customize and integrate ESG as part of the overall business strategy, ensuring it is adapted to
    fit the needs of the organization
    Strategy formulation
    • Leverage ESG as one
    perspective to evolve
    the organization and
    overall business (e.g.,
    refer to MPower ESG
    Playbook and this
    document)
    • Management works to
    understand the
    significance of pushing
    ESG initiatives forward
    to the overall company
    and clearly verbalizes
    such meaning in its
    own words
    Start by engaging in initiatives that are important for the company from a business/product/organization lens, rather than being overly
    fixed on fitting everything into an ESG framework
    • " As a printing company that uses large volumes of paper, we implemented measures that took into account the environmental requests
    of our customers as we sought to close deals with large companies." (Raksul)
    • " In alignment with our vision, we commit to increasing accessibility. To this end, we have visually impaired engineers participate in
    the development process of our product and strive to continually improve our offering." (freee)
    • " As the business required strong relationships with the local community, we worked to contribute to the revitalization of the
    community through education and other fields." (EC startup: Japan)
    • " When the company’s ESG activities were included in product promotion emails, the conversion rate became higher than usual,
    resulting in increased product sales." (Cosmetics startup: US)
    Accelerate initiatives by ensuring management's commitment and clear understanding of how their business is linked to the ESG framework
    • " In the initial phases, our COO was in charge of all ESG-related initiatives, which were addressed not as ESG specific, but as a part of
    our broader management agenda." (EC startup: Japan)
    • " Unless management has a deep understanding, it will be very challenging to materialize ESG plans and detail out how ESG links with
    broader strategy." (Money Forward)
    • " A strong CEO commitment is essential, as it touches the core values of the company and naturally implies a trade-off between ESG
    mid- to long-term contributions and short-term expenditure." (Contentsquare: France)
    • " It's difficult to measure ESG effectiveness in terms of short-term ROI, so budget/resources need to be secured based on a strategic
    decision/direction on the part of the CEO." (Logistics startup: South Korea)
    Advanced case studies
    • 93% of companies that implemented ESG initiatives selected at least one factor, believing that it "made a real contribution to business
    ops/performance"
    – E.g., 46% said that the initiatives led to "promotion of employees retention & recruitment," while 34% said that they led to
    "increased purchases/usage of company products/services by business partners"
    Survey results
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews
    1
    Specific action plans

    View Slide

  30. 29
    Copyright © 2022 by MPower Partners. All rights reserved.
    Principles for ESG (2/7): Culture Development
    2
    Significance/
    principles for ESG
    Link key organizational values with employee evaluations/hiring requirements to ensure those
    values are ingrained deeply in all employees
    Culture development
    • Inscribe values written
    from the employee
    perspective (that can
    be directly linked to
    evaluation and
    recruitment) under the
    Company Philosophy
    • Formulate/review
    standards for employee
    evaluation and
    recruitment based on
    core company values
    • Increase visibility of
    company values to
    employees (e.g., post
    through various
    channels including in-
    house newsletters,
    embedded as part of
    employee awards,
    Slack emojis, etc.)
    Synthesize the values/philosophy you want employees to embody/care about and link them to employee evaluations/hiring requirements
    • " We developed hiring requirements in alignment with values crystalized from an employee’s perspective and encourage our employees
    to work in accordance with those values after joining the company as well." (EC startup: Japan)
    • " All group employees shared a culture of 'Speed, Pride, Teamwork, Respect, Fun, and values of 'User Focus, Technology Driven,
    Fairness’." (Money Forward)
    • " Crystalizing a concrete purpose that integrated the perspectives of all stakeholders has been helpful in ensuring everyone's alignment
    in the same direction." (Kickstarter: US)
    Ensure that company core values are easy to recall in terms of overall content/volume, and increase employee exposure to these values in
    order to ingrain them fully to the point where they can be well understood and repeated by all employees
    • " While we have a corporate culture that values autonomy, we actively hold company-wide events (online included) to provide
    opportunities for everyone to share experiences in alignment with core values." (freee)
    • " We work to engrain values in our employees by posting them within the company and using them as names of meeting rooms and
    providing associated awards." (EC startup: Japan)
    • " We reduced the overall length and number of values to make it easier for employees to remember them as well as posting them in
    various places around the office, including restrooms." (B2C service startup: Japan)
    Advanced case studies
    • 46% of respondents selected “promotion of employee retention & recruitment” as one of the top 3 factors they believe ESG initiatives
    made an actual contribution, with 20% selecting it as their top factor
    • 52% of respondents selected “talent engagement” as one of the top 3 important issues within ESG, with 10% selecting it as their top
    issue
    Survey results
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews
    2
    Specific action plans

    View Slide

  31. 30
    Copyright © 2022 by MPower Partners. All rights reserved.
    Principles for ESG (3/7): Organization Building (Management Structure)
    2
    Significance/
    principles for ESG
    Change and evolve governance structure in response to a company's stage and market changes
    Organization-building (Mgmt. structure)
    • CEO/COO/CHRO and
    other management
    consider and prepare
    to meet organizational
    design requirements
    for each startup stage,
    factoring mid- to long-
    term perspectives
    • Based on changing
    market
    environment/technolog
    ical trends/business
    strategies, identify key
    capability gap areas
    and hire the necessary
    personnel
    • (before/after IPO)
    Review BOD
    composition in
    response to
    institutional investors’
    requests and to meet
    listing requirements
    Review management structure in line with market changes/company stage even before considering going public
    • " The presence of a COO who understood the appropriate org design required at each stage contributed to overall steady growth."
    (EC startup: Japan)
    • " A professional with knowledge in overseas business/Web3 joined our board of directors to strengthen the business."
    (B2C service startup: Japan)
    • " Regardless of whether the company plans to list or not, it's always looking to evolve its management structure, such as by hiring a
    CSO (Chief Strategy Officer), in line with technological evolution." (Kickstarter: US)
    Review BOD composition before/after going public in response to investor requests and opportunity to restructure the organization after
    IPO
    • " We became more conscious of our board's diversity (gender and nationality-wise) after going public and in response to requests from
    institutional investors." (EC startup: Japan)
    • " We hired talented new personnel and adjusted our management structure to align with the organization’s growth phase and key
    transitions, including when listing the company." (freee)
    Advanced case studies
    • 56% of early-stage companies selected "risk management promotion" as the main objective of corporate governance, with 34% of later-
    stage companies also emphasizing "strategy formulation and direction clarification" as a key goal
    Survey results
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews
    3
    Specific action plans

    View Slide

  32. 31
    Copyright © 2022 by MPower Partners. All rights reserved.
    To recruit and retain talented personnel, create a diverse work environment where employees
    from all backgrounds can thrive
    Principles for ESG (4/7): Organization Building (HR Development & Retention)
    2
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews, web research
    Nikkei Business Online, "The Return of Takashi Mitachi's 'Management Lens Box': What Elements of Diversity Contribute to Innovation?" (August 7, 2017)
    Organization building (HR development & retention)
    Significance/
    principles for ESG
    • Set KPIs to measure
    how conducive the
    work environment is
    toward maximizing
    contribution from a
    diverse workforce and
    assign a
    representative/depart
    ment responsible to
    oversee improvements
    • Management to ramp
    up and learn the
    importance of
    DEI/unconscious bias
    via books and web-
    based learning
    • Conduct regular
    unconscious bias
    training for all
    employees
    To hire as many talented professionals as possible, expand the addressable talent pool by creating a work environment where a
    diverse workforce can thrive
    • " There should be a large addressable talent pool to enable sustainable growth and feel that a company that only employs people with
    strong physical stamina would be an unbalanced/distorted organization." (freee)
    • " Given the lack of domestic engineers in Japan, we adjusted our internal communication language and cultural environment to attract
    talented foreign engineers." (EC startup: Japan)
    To retain key talent, create an environment conducive to helping all employees maximize their individual abilities and contributions
    • " We conduct company-wide DEI trainings, including unconscious bias training, to help employees understand matters from the
    perspectives of others." (freee)
    • " To help push work-style reform initiatives and understand issues from a woman employee's perspective as well, we decided to
    appoint a female president." (Web service startup: Japan)
    • " HR oversees DEI-related KPIs, such as ‘the percentage of employees who understand DEI concepts/value,’ which is reflected in
    bonuses." (Vestiaire Collective: France)
    In addition, a diverse workforce contributes to the organization's overall creativity and understanding the needs of a broader customer base
    • " A high level of diversity in terms of industry background, country of origin, career path, and gender is positively related with
    innovation." (BCG's Takashi Mitachi in Nikkei Business Online)
    • " We strive to hire employees from a diverse set of countries and gender in order to understand the needs of customers in each nation."
    (Vestiaire Collective: France)
    Advanced case studies
    • While 78% of companies surveyed have "20% or more female employees" representation, only 26% have "20% or more female managers"
    • 32% of respondents "invest in training and other resources to eliminate employee prejudice, bias, etc."
    • 62% of respondents answered that the purpose behind DEI initiatives is to "improve employee retention," while 46% cited them as being
    to "increase employee interest/aspiration to work for the company"
    Survey results
    4
    Specific action plans

    View Slide

  33. 32
    Copyright © 2022 by MPower Partners. All rights reserved.
    Principles for ESG (5/7): Risk Management
    2
    Significance/
    principles for ESG
    Without compromising on speed, develop a mechanism to respond to risks that occur/increase
    as a company expands
    Risk management
    • Implement harassment-
    prevention training to
    clarify "what is vs.
    what is not allowed"
    • Establish internal and
    external
    whistleblowing
    channels and ensure
    that whistleblower
    protection/confidential
    ity rules are well
    understood across the
    organization (e.g.,
    incorporate within
    trainings, etc.)
    • Document internal
    knowledge/manuals
    leveraging
    documentation tools
    While taking measures to prevent misconduct as much as possible, develop a system to detect early and manage misconduct effectively
    under the assumption that there will be a few cases
    • " We established a contact channel to report misconduct 2~3 years before going public, taking early measures on listing requirements
    including risk management." (EC startup: Japan)
    • " We established a harassment counseling office that guarantees confidentiality and independence prior to the enactment of the Power
    Harassment Prevention Act." (B2C service startup: Japan)
    • " We introduced a service that constantly detects and records harassment within the company detecting problems more reliably than
    whistleblowing." (B2B tech startup: UK)
    Document knowledge and make it accessible to the organization instead of concentrating it in the hands of an individual
    • " We try to eliminate situations where information is known only to certain individuals as much as possible, and actively share
    knowledge/best practices through Notion and other tools." (B2C service startup: Japan)
    • " We established a system to share knowledge regarding DEI and the company approach from management level to the most junior
    employees in a top-down/ cascading manner." (Vestiaire Collective: France)
    • " We enable employees to share knowledge/learn any time by utilizing an e-learning platform that is constantly updated."
    (Vestiaire Collective: France)
    Advanced case studies
    • 64% of respondents have "tools to measure the number of data privacy incidents," out of which 53% have experienced "incidents
    involving the handling of personal information"
    • 80% of respondents have "a whistleblowing mechanism/process" in place and approx. half of them have utilized such a mechanism
    • 97% of later-stage respondents "maintain privacy compliance" and "manage security of information terminals/devices used by
    employees"
    Survey results
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews
    5
    Specific action plans

    View Slide

  34. 33
    Copyright © 2022 by MPower Partners. All rights reserved.
    Principles for ESG (6/7): Current Issue Visualization
    2
    Significance/
    principles for ESG
    Identify company's key challenges by developing a quantitative understanding of its situation
    and conducting benchmarking against other companies
    Current issue visualization
    • Regularly conduct an
    engagement survey to
    be completed by all
    employees and
    explain/share the
    results afterwards
    • Analyze data through
    various lenses, such as
    time series and gender,
    to identify key issues
    and implement PDCA
    cycles
    • Consider and assess
    initiatives to engage in
    by referencing other
    companies that can
    serve as benchmarks
    and provide
    perspective on target
    goals
    Clarify current status and key challenges faced by the company through surveys and crystalize initiatives important for the company
    • " People survey results are linked to existing HR system reforms to quantitatively visualize challenges faced by the company." (Raksul)
    • " We run original people surveys on an annual, monthly, and bi-weekly basis to understand the latest situation and engagement of our
    staff and to adjust measures accordingly." (freee)
    • " We conduct a people survey once every two months with the survey participation rate and survey results impacting employee and
    executive bonuses, respectively." (Vestiaire Collective: France)
    Referring to initiatives undertaken by other companies, clarify engagement level and target goals the company is aspiring to achieve
    • " Based on direction from outside directors, we exchanged information with other companies in order to understand the current status
    of initiatives undertaken and ESG scores. We prioritized clarifying and crystalizing target goals." (Money Forward)
    • " Benchmarking ESG-related initiatives of large companies, including recruit[ing] and other companies, with similar business
    content/size enable[ing] us to identify what we should be working on next and the commitment level we should be targeting." (freee)
    • " Leveraging OKRs (Objective Key Results), we clarified the target level of engagement both in terms of quantitative and qualitative
    KPIs." (EC startup: Japan)
    Advanced case studies
    • 33% of companies in the early stages and 63% in the late stages implement an "employee engagement survey"
    • 44% of respondents are asking investors for "assistance on setting up and monitoring KPIs related to ESG initiatives"
    Survey results
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews
    6
    Specific action plans

    View Slide

  35. 34
    Copyright © 2022 by MPower Partners. All rights reserved.
    Principles for ESG (7/7): Bottleneck Resolution
    2
    Significance/
    principles for ESG
    Specific action plans
    Underpinned by management commitment, execute on actions that can be undertaken in the
    short term even without vast resources/knowledge
    Bottleneck resolution
    • Senior management to
    participate in
    workshops and
    information-exchange
    meetings with other
    companies to deepen
    understanding of ESG
    topics, etc.
    • Develop a cross-
    departmental team of
    volunteers with a keen
    interest in ESG to work
    with the support of
    senior management
    • Initially, push forward
    initiatives in a lean
    manner and, even if
    results are not perfect,
    develop outputs and
    communicate both
    internally and
    externally
    Initially, a volunteer-based team should tackle feasible challenges being supported by management
    • " Supported by a team of three volunteers, the CSO acts as the leader and head of ESG activities." (Kickstarter: US)
    • " Members interested in ESG voluntarily worked on DEI and related initiatives with the company’s approval and encouragement." (freee)
    After going public, reorganize initiatives that have been conducted to date without much emphasis on ESG and disclose them under an ESG
    framework
    • " Rather than launching new ESG-related initiatives, we first organized and disclosed existing initiatives by linking them to an ESG
    framework." (Money Forward)
    • " After going public, partially at the request of investors, we reorganized internal initiatives to date linking them to an ESG
    framework." (freee)
    Leverage information from both outside resources and existing institutions, even if the company has limited ESG expertise
    • " We initially leveraged accessible online information and books to learn ESG basics while simultaneously working on projects."
    (EC startup: Japan)
    • " The CSO is developing relationships and collaborating with external organizations in order to address gaps in ESG knowledge and
    accelerate future initiatives." (Kickstarter: US)
    • " After going public, we consulted with an external organization knowledgeable on ESG issues in order to determine which specific
    initiatives we should prioritize." (freee)
    Advanced case studies
    • 42% of respondents cited "lack of resources" and 16% "lack of knowledge of ESG" as the biggest bottlenecks hindering ESG initiatives
    undertaking
    Survey results
    Source: MPower/BCG "Survey on ESG Initiatives (2022)," interviews with leading companies in Japan and outside of Japan, expert interviews
    7

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  36. 35
    Copyright © 2022 by MPower Partners. All rights reserved.
    Summary of Recommended Actions
    2
    Recommended actions (Green text: recommended to start as early as possible)
    • Leverage ESG as one perspective to evolve the organization and overall business (e.g., refer to MPower ESG Playbook and this
    document)
    • Management works to understand the significance of pushing ESG initiatives forward to the overall company and clearly verbalizes
    such meaning in its own words
    • Implement harassment prevention training to clarify "what is vs. what is not allowed"
    • Establish internal and external whistleblowing channels and ensure that whistleblower protection/confidentiality rules are well
    understood across the organization (e.g., incorporate within trainings, etc.)
    • Document internal knowledge/manuals leveraging documentation tools
    • Senior management to participate in workshops and information-exchange meetings with other companies to deepen understanding
    of ESG topics, etc.
    • Develop a cross-departmental team of volunteers with a keen interest in ESG to work with the support of senior management
    • Initially, push forward initiatives in a lean manner and, even if results are not perfect, develop outputs and communicate both
    internally and externally
    • Set KPIs to measure how conducive the work environment is toward maximizing contributions from a diverse workforce and assign a
    representative/department responsible to oversee improvements
    • Management to ramp up and learn the importance of DEI/unconscious bias via books and web-based learning
    • Conduct regular unconscious bias trainings for all employees
    Initiative objective
    • Regularly conduct an engagement survey to be completed by all employees and explain/share the results afterwards
    • Analyze data through various lenses, such as time series and gender, to identify key issues and implement PDCA cycles
    • Consider and assess initiatives to engage in by referencing other companies that can serve as benchmarks and provide perspective
    on target goals
    • Inscribe values written from the employee perspective (that can be directly linked to evaluation and recruitment) under the
    Company Philosophy
    • Formulate/review standards for employee evaluation and recruitment based on core company values
    • Increase visibility of company values to employees (e.g., post through various channels including in-house newsletters, embed as
    part of employee awards, Slack emojis, etc.)
    Significance/
    principles for ESG
    • CEO/COO/CHRO and other management consider and prepare to meet organizational design requirements for each startup stage,
    factoring mid- to long-term perspective
    • Based on changing market environment/technological trends/business strategies, identify key capability gap areas and hire the
    necessary personnel
    • (before/after IPO) Review BOD composition in response to institutional-investor requests and meet listing requirements
    2
    3
    4
    5
    6
    1
    7
    Strategy
    formulation
    Culture
    development
    Organization building
    (mgmt. structure)
    Organization building
    (HR dev. & retention)
    Risk mgmt.
    Current issue
    visualization
    Bottleneck
    resolution

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  37. 36
    Copyright © 2022 by MPower Partners. All rights reserved.
    Leverage
    MPower ESG Playbook
    to Guide Your ESG
    Efforts
    MPower HP https://www.mpower-partners.com/blog_jp_category/playbook/
    https://mpower-partners.notion.site/mpower-partners/EN-
    MPower-Startup-ESG-Playbook-e6af70b0c18a4f93b6fbee62a9d6cdb2
    MPower
    Notion
    JP
    EN
    https://mpower-partners.notion.site/mpower-partners/JP-MPower-
    Startup-ESG-Playbook-40a2c7e005bc43cf8cb25237de05dc5f

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  38. 37
    Copyright © 2022 by MPower Partners. All rights reserved.
    Companies That
    Answered the
    Survey (30)
    Agatha
    Alue
    Asuene
    AxisRoot Holdings
    CureApp
    enechain
    ENECHANGE
    Euglena
    freee
    Gojo and Company
    HashPort
    JEPLAN
    Luup
    Manga Box
    MediPhone
    Mitsumoa
    On-Sight
    RABO
    Rehab for JAPAN
    Ridge-i
    SENSYN ROBOTICS
    SHE
    souco
    Spiber
    Star Mica Holdings
    TechMagic
    UniFa
    Wovn Technologies
    XTalent
    Yuimedi
    *Includes only companies that
    have given permission to disclose
    their company name
    *In addition, 20 companies chose
    to remain anonymous
    *Listed in alphabetical order
    1
    2
    3
    4
    5
    6
    7
    8
    9
    10
    11
    12
    13
    14
    15
    16
    17
    18
    19
    20
    21
    22
    23
    24
    25
    26
    27
    28
    29
    30

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  39. 38
    Copyright © 2022 by MPower Partners. All rights reserved.
    Contentsquare
    freee
    Kickstarter
    Money Forward
    RAKSUL
    Vestiaire Collective
    1
    2
    3
    4
    5
    6
    Companies
    Interviewed (6)
    *Includes only companies that
    have given permission to disclose
    their company name
    *In addition, 4 companies chose
    to remain anonymous
    *Listed in alphabetical order

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  40. 39
    Copyright © 2022 by MPower Partners. All rights reserved.
    Contacts
    Managing Director & Partner
    Katsuyoshi Kurihara
    [email protected]
    Managing Director & Partner
    Miho Orimo
    [email protected]
    General Partner
    Yumiko Murakami
    [email protected]
    Principal
    Yuna Sakuma
    [email protected]

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  41. 40
    Copyright © 2022 by MPower Partners. All rights reserved.
    © MPower Partners. 2022. All Rights Reserved.
    This report was created based on joint research and study by MPower Partners and Boston Consulting Group (BCG).
    This document has been prepared in good faith on the basis of information available at the date of publication without
    any independent verification. MPower and BCG do not guarantee or make any representation or warranty as to the
    accuracy, reliability, completeness, or currency of the information in this document nor its usefulness in achieving any
    purpose. Readers are responsible for assessing the relevance and accuracy of the content of this document. It is
    unreasonable for any party to rely on this document for any purpose and MPower and BCG will not be liable for any
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    Receipt and review of this document shall be deemed agreement with and consideration for the foregoing.
    This document is based on a primary qualitative and quantitative research executed jointly by MPower and BCG.
    MPower and BCG do not provide legal, accounting, or tax advice. Readers are responsible for obtaining independent
    advice concerning these matters. This advice may affect the guidance in the document. Further, MPower and BCG have
    made no undertaking to update the document after the date hereof, notwithstanding that such information may
    become outdated or inaccurate. MPower and BCG do not provide fairness opinions or valuations of market transactions,
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    information, and conclusions contained in this document are based upon standard valuation methodologies, are not
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    data and assumptions from these sources used in these analyses. Changes in the underlying data or operating
    assumptions will clearly impact the analyses and conclusions.
    This document is not intended to make or influence any recommendation and should not be construed as such by the
    reader or any other entity.
    This document does not purport to represent the views of the companies mentioned in the document. Reference herein
    to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does
    not necessarily constitute or imply its endorsement, recommendation, or favoring by MPower or BCG.
    Apart from any use as permitted under the Copyright Act of Japan, no part may be reproduced in any form.
    Disclaimer

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  42. 41
    Copyright © 2022 by MPower Partners. All rights reserved.
    Thank you

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