Introduction

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What is the Yanagi model?

The "Yanagi Model" is a unique framework for measuring and improving corporate value through ESG evaluation.
In this model, the environmental, social, and governance elements are converted into concrete indicators in line with the actual state of corporate activities, and their impact on corporate value is evaluated based on these indicators.
It has three main features:

Emphasis on direct relevance to corporate value

The Yanagi model goes beyond simply doing good environmental, social and governance deeds, focusing on how they increase corporate value.
A notable feature of this report is that it clearly defines the specific impact of each indicator.

Addressing issues unique to Japanese companies

The model is designed taking into account Japan's corporate culture and market environment, differentiating it from ESG evaluation standards in other countries.
For example, we take a deep look at the unique challenges of board composition and talent development.

Transparency and effectiveness based on data

In the Yanagi model, indicators are set based on measurable data and the progress of each is evaluated transparently.
This makes it easier for companies to formulate and implement specific improvement measures.

This ranking, based on the Yanagi model, is a practical guide for improving the competitiveness of Japanese companies. In this article, we use this ranking to consider how companies should advance ESG management.

Average age of directors indicates flexibility and challenges in governance (No. 1)

The number one ranking, "average age of executives," is a core indicator in the field of governance and an important factor in evaluating the flexibility and future orientation of corporate governance.

The advantage of having a low average age for executives

The following effects are expected from increasing the number of young executives:

- Promoting innovation
Younger executives have the ability to bring new perspectives and ideas to management when responding to modern challenges such as digital transformation and carbon neutrality.

- Improved risk response capabilities
Younger executives can respond flexibly to rapidly changing markets and technological advances, improving a company's ability to quickly adapt to changes in the environment.

The benefits of an older executive team and the importance of balance

On the other hand, having a higher average age for executives brings the following benefits:

・Experience and deep insight
Executives with many years of practical experience contribute to predicting risks and developing avoidance strategies.

- Reliability of decision-making
Older executives make decisions with a long-term perspective, so they are more trustworthy when it comes to formulating business strategies aimed at sustainable growth.

The ideal management structure is one in which young and experienced executives coexist in a balanced way.
This means that we need to have directors from a diverse age range, not just young people or just old people.

Current Situation and Challenges of Japanese Companies

Japanese companies are characterized by the high average age of their executives, which has highlighted the following issues:

- Delayed generational change
If the turnover of executives is slow, there is a risk that the introduction of new values and technologies will be delayed.

- Lack of progress in promoting young people
There are limited opportunities for young people to participate in the decision-making process, making nurturing the next generation of leaders a challenge.

Approaches for improvement

- Diversifying the pool of executive candidates
One approach to consider is to breathe fresh air into the organization by promoting diverse talent as executive candidates.

- Developing the next generation of leaders
I also believe that it would be effective to develop a training program to quickly improve the management skills of young employees and systematically develop the next generation of managers.

- Intergenerational collaboration
As mentioned above, generational diversity is important, and one way to think about it is to create a system where young people and veterans can work together to make decisions that incorporate the perspectives of both parties.

Environment: Recycling-based society and responding to climate change

The following items are considered important in the environmental indicators:

Realizing a recycling-oriented society "Industrial waste emissions (2nd place)" and "recycling rate (3rd place)" are important indicators for realizing resource-circulating management.
These efforts will reduce costs and create new business opportunities while reducing the environmental impact.

Responding to climate change: "CO2 Emissions - Scope 2 (5th place)" and "CO2 Emissions - Scope 3 (22nd place)" are important indicators for measuring a company's specific efforts, such as the use of renewable energy and improving energy efficiency.

Social: Human resource development and employee engagement

In terms of social indicators, the following initiatives are attracting attention:

Human resource development: "Total training hours (9th place)" and "Number of new managerial appointments (15th place)" indicate how much a company is investing in improving its employees' skills.
Improving these indicators is expected to improve the capabilities of the entire organization.

Employee Engagement "Employee engagement (ranked 25th)" is an important indicator that is directly linked to employee productivity and strengthening corporate culture.
Creating an environment in which employees can work comfortably strengthens a company's competitiveness.

Guidelines for improving corporate value

As mentioned above, there are many factors to consider, and the 2024 edition of the "Top 30 ESG Indicators for Increasing Corporate Value" published by ABeam Consulting Ltd. can be considered very useful information as a guideline to support the sustainable growth of companies.
By utilizing environmental and social indicators, such as the average age of executives, companies can not only increase their competitiveness but also build a foundation for long-term growth, so if you are interested in ESG, please take a look at the link at the beginning.