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Japan for Sustainability Newsletter #186
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February 28, 2018

Japan for Sustainability (JFS) is a non-profit communication platform to
disseminate environmental information from Japan to the world, with the
aim of helping both move onto a sustainable path.

See what's new on our web site: http://www.japanfs.org/en/
E-mail: info@japanfs.org

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In the February 2018 issue of the JFS Newsletter:

- Nishiawakura's Initiative for Self-Dependence Attracting Motivated
Young People to Migrate to the Village and Start Businesses (Part 1)

- "Good Companies in Japan" (Article No. 2):
Seeking "Happiness" for All Stakeholders

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Nishiawakura's Initiative for Self-Dependence Attracting Motivated
Young People to Migrate to the Village and Start Businesses (Part 1)
https://www.japanfs.org/en/news/archives/news_id036016.html

Nishiawakura is a "village" ("mura," Japanese rural district) with a
population of 1,480 people as of January 2018. It is located at the
northeastern end of Okayama Prefecture where it borders Hyogo and
Tottori prefectures. The village is among mountains about a two-hour
drive from Okayama City, the capital of Okayama Prefecture. The village
covers 57.97 square kilometers, of which about 95 percent is mountainous
forests. In turn, 84 percent of those are artificial forests dominated
by Japanese cedar and cypress.

In Japan, a large-scale trend occurred from 1999 through 2010 of
neighboring municipalities merging with each other. Even under less than
flourishing circumstances, about 60 percent of Nishiawakura's residents
opposed merging, and the village decided to remain autonomous. The
village's financial constitution, however, was the weakest in the prefecture,
and a national census showed its population to have decreased by about
10 percent between 2008 and 2013. It was thus thought that the
population would continue to decrease if nothing was done. In this
disadvantageous situation, Nishiawakura has continued making efforts to
develop the village on its own, and has thereby become a model for the
success of regional revitalization on the basis of forestry. In this
issue, we introduce initiatives of Nishiawakura -- which has attracted
attention from all over Japan -- in the past and present, as well as its
prospects for the future.

Most artificial forests in Nishiawakura, as with in other regions
throughout Japan, were planted during the country's postwar years of
rapid economic growth. With subsequently broader distribution of
inexpensive imported wood, Japan's forestry dwindled, leading to
insufficient attention to practices such as forest thinning. Lack of
thinning and other forest management efforts leads to degradation of
artificial forests.

Facing these circumstances, the village established the "Initiative with
a 100-year Vision of Forests" in 2008. This initiative aims for the village,
cherishing the thought of ancestors who planted the trees 50 years ago
for the sake of future generations, to make concerted efforts for
another 50 years to raise the forests into splendid 100-year old forests.

Initiative with a 100-year Vision of Forests
https://www.japanfs.org/en/files/nl_180228_02_en.jpg

As the above figure shows, this initiative is being implemented not only
with support from the village office using its special-purpose budget
accounts, but also as a comprehensive approach by the forestry
cooperative, private businesses, and others. To raise trees planted 50
years ago into splendid 100-year old forests, it will be necessary to
continue forest thinning and other management practices using an
economically sustainable mechanism. In this context, the village is
promoting two projects, the "100-year Old Forest Creation Project,"
aiming to develop forests, and the "Morinogakko Project," aiming to
develop wood products for end users.

The 100-year Old Forest Creation Project is being promoted mainly by the
local government, with the village office keeping forests on behalf of
their owners, thinning them out and maintaining roads for forest
operations. On this project, the village has signed a long-term forest
management agreement for 10 years with the forest owners, under which it
bears all the costs for these operations. Regarding proceeds from the
sale of wood thinned from the forests, half of the proceeds remaining
after deducting sales costs are provided to the forest owner, while the
other half are allocated to the Initiative with a 100-year Vision of
Forests.

Nishiawakura's forest is made up of roughly 3,000 hectares of privately
owned forest areas, 1,000 hectares of company-owned forest areas, and
1,300 hectares of government-owned forest areas. The village spent 10
years concluding the agreement with about 800 private forest owners
(approximately 1,600 hectares in total, slightly more than half of the
privately owned forest area). The village continues to reach out to
other forest owners to obtain their agreement for entrusting their
forest management to the village.

Currently, the 1,600-hectare privately owned forest area managed by the
village and the 1,300-hectare village-owned forest area have obtained
Forest Stewardship Council (FSC) certification, an international
certification for sustainable forest management. The village intends
eventually to obtain this certification for all the forests in the village,
so as to increase the added value of local wood.

The village is not only selling wood derived from thinning of forests
under proper management as logs, but also promoting the development of
wood products for end-users to increase the added value of the local
wood. In this regard, the village established the Shared Forest Fund in
2009 to support the Initiative with a 100-year Vision of Forests. The
fund has been designed to accept contributions of 50,000 yen (US$442)
from people living in urban areas to support the initiative. The money
is used in promoting the commercialization of wood products for
revitalizing the forests, and also to hold tours for contributors with
the aim of providing them opportunities to deepen their interactions
with the village.

In October 2009, a company named Nishiawakura Morinogakko (literally,
"Nishiawakura Forest School") was established. It has been promoting
development and sale of products that harness local resources. To make
use of wood that comes from thinning of artificial forests, this company
has built a new wood processing factory. The company now fulfills
functions ranging from procuring raw wood and sawing, drying and
processing it, to selling wood products. In addition to wood processing,
the company focuses on marketing and also on nurturing new entrepreneurs.
It is vigorously promoting the processing, distribution and sale of
domestic wood by, for example, developing and selling DIY kits for
individuals, and supplying interior materials for residential houses and
materials for large buildings. The company also plans and operates
forest-related tours and events.

The company's website declares: "We aim to optimize the value of wood
based on a model of sawing logs in small quantities to produce a variety
of goods to support small-regional forestry. Our mission is to maximize
the value of local wood for the development of local forestry while
becoming more closely involved in our customers' lives."

One of its popular items is Yukahari Tiles, 50 centimeter square tiles
made of solid wood. Arranging the tiles on the floor provides solid wood
flooring. People living in rental apartment houses can also enjoy this
type of flooring. It is easy even for women to install it, and when
moving out, people can take the tiles to their new quarters. Also, when
dirt or damage to the tiles becomes a nuisance, they can be replaced
with new ones. In this way, the company has expanded its operations,
achieving a surplus through its own business alone in 2013, relying on
no subsidies at all.

Morinogakko is not the only company running a business that focuses on
forests, the source of capital of in this region; various other
companies also run businesses focusing on forests here. For example,
furniture manufactured by Youbi Co., which makes furniture using local
wood, is highly regarded domestically and internationally. Another
example is Mokkun Co., which manufactures and sells safe wooden products,
toys, furniture, etc.

A0 Inc. was established by Daisuke Maki, president of Nishiawakura
Morinogakko, in October 2015 for subsequent challenges in Nishiawakura.
Morinogakko came up with a scheme to produce value from forests by
manufacturing products using thinned wood. Maki said that through this
activity, the idea came strongly to him that, "While this entire region
has diverse untapped value, is it right for us just to sell wood and
wood products? Beyond the bounds of farming, forestry and fisheries, we
should bring together value in the form of natural resources among these
industries."

A0's business objective is to promote circulation within the local
economy among farming, mountain and fishing villages to improve their
demographic movement. Its business fields span everything from
construction, real estate, and fostering of local ventures to media
management, inland water culture, animal meat processing, and
distribution. Meanwhile, its company name, A0, has its roots, so to
speak, in the "A0 layer," the top organic matter layer in forest soils.
It is an important layer, serving as nutrition for trees and protecting
the soil from rain. Maki said, "We aim to become the soil that produces
diverse value for society just like this layer, which is inconspicuous
yet helps enrich forests."

Based on this desire, what A0 commercialized first was amazingly "eels
from the forest"! Since keeping the water temperature at 25 to 30
degrees Celsius is necessary in eel farming, it is rarely attempted in
cold areas like Nishiawakura. Triggered by the idea of woodchips
(otherwise discarded) being useful as fuel, the company tried its hand
at farming eels. This was the first step for linking forestry and fisheries.
The facility for farming eels is the gymnasium of the former Kageishi
Elementary School, which had closed down.

In eel aquafarming, eels are generally raised so that they become ready
for shipment in about half a year. A0, however, takes more than a year
to raise eels, administering no drugs to them until they grow large.
Even doing this, the company can make a profit in one or two years. Maki
says, "It is important to preserve forests, which are assets to be
managed over a super long term, such as several decades or a century,
but businesses that earn profits in the short term are also important."

Woodchips generated in lumbering and processing are not the only fuel
used in eel aquafarming. Morinogakko manufactures and sells half-split
disposable chopsticks made from domestically grown Japanese cedars,
using no colorants, bleach, mildew-proofing agents or other additives.
These disposable chopsticks are available at a roadside market selling
local products in Nishiawakura and are used at restaurants across Japan.
Disposable chopsticks used at village facilities are also collected and
used as fuel.

Water in the tanks used in eel farming always needs to be circulated and
filtered to be kept clean. A0 is also studying the use of Japanese cedar
and cypress bark for filtration. The bark was formerly discarded. It is
expected that bark constituents will have the effect of improving the
underwater environment and enhancing the health of fish. Furthermore,
since eels mainly eat fish powder made by drying and pulverizing fish,
including bones, eel dung and the waste water from the tanks is full of
nutrients, including nitrogen, phosphorus and calcium. Such nutrients
are adsorbed by bark used for filtration, and then good-quality compost
can be made from the bark.

There is also a plan to circulate the waste water itself through plastic
greenhouses. Since it is warm water, it can heat the space inside the
greenhouses. Farm products are cultivated in the greenhouses, while
vegetable stems and other inedible parts of the produce are used to make
compost which is used in the fields. Maki said, "We do not just
cultivate eels. In an environment surrounded by forests, we aim to link
forestry with fisheries and produce a circular flow while using the
blessings of these forests.

A roadside market located in Nishiawakura named "Awakurando" started
including "eels from the forest" on its menu. Disposable chopsticks used
to eat the eels become fuel to cultivate them. Those who eat the eels
can also feel involved in such a large circular flow.

Takahiro Ueyama, director of industrial tourism in Nishiawakura, said,
"The Initiative with a 100-year Vision of Forests has contributed to the
expansion of various approaches and the launch of a number of companies.
Nine years have passed [since the start of the initiative], and currently,
130 people, accounting for 9 percent of our population, who had moved
out are returning to the village. A0 alone employs more than 20 people.
The number of children in the village was 126 in 2010 and has increased
to 154 now. This year, our population is expected to increase by 21 people."

In an era when many regions cannot function without constant reliance on
subsidies or grants, Nishiawakura has continuously attracted attention
as a model of successful regional revitalization in Japan. In the next
issue, we will introduce the village's efforts to be 100 percent self-sufficient
in energy, as well as to work on not only natural capital but also social
and economic capital. Please stay tuned!

Written by Junko Edahiro

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What can we learn from their long-term efforts to raise 100-year old
forests? Please share your ideas and leave comments!
https://www.japanfs.org/en/news/archives/news_id036016.html#comment

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"Good Companies in Japan" (Article No. 2):
Seeking "Happiness" for All Stakeholders

This JFS newsletter series introduces selected examples of good
companies in Japan as described in the book "Jizoku Kano-na Shihon Shugi"
("Sustainable Capitalism," published in Japanese) by Kazuhiro Arai,
director and asset manager of Kamakura Toshin, a Japanese investment
company. This month, in the second article of the series, we introduce
four companies that have built unique and close relationships with
clients, suppliers, shareholders, and consumers based on the view that
companies should make not only their employees but also anyone
associated with the companies and their brands happy.

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Steady Work for Suppliers' Employees through Stable Year-Round Production:
Dainichi Co.

Dainichi Co., a Niigata-based manufacturer of products such as household
kerosene-fan-heaters, commercial oil heaters, and humidifiers, is one
of the "good companies," maintaining top production and sales shares in
the domestic market. The company has a business policy that it should
seek not only its own business sustainability but also the livelihood
stability its own and business partners' (suppliers) employees.

Most heating equipment makers in Japan manufacture most of their
inventory in the autumn and winter since product demand tends to focus
on the winter season. By doing so, they can idle their factories in
other seasons, but the result is unstable employment not only for their
own factories but also suppliers who produce the parts.

Dainichi tackled this issue by adopting a year-round production system,
which protects employment for not only its own workers but also those of
its business partners. This means that Dainichi's factories need to
carry inventories outside of the winter season, but on the other hand,
constant production throughout the year brings merits. The company says
it can manage with the optimal amount of production equipment and
manpower. Employees become more skilled and produce better work.
Suppliers also benefit. Getting orders all year round enables them to
provide stable employment for their workers, which helps avoid the loss
of workers to other industries.

About one thousand people are involved in the production of Dainichi
heating equipment, counting about 500 Dainichi employees plus employees
of suppliers' factories. The number of "beneficiaries" increases to a
few thousand people when employees' families are also counted. Hisao
Yoshii, president of Dainichi, says "The value of maintaining our
business here in Niigata is that we can create local employment, and
this supports and protects the livelihoods of people who live here.
Creating many workplaces in Niigata is making a contribution to the
region."

Supporting Business Clients with Free Management Consulting: Cota Co.

Kyoto-based Cota Co. is primarily engaged in the manufacture and sale of
cosmetics and medical products for hair care, targeting beauty shops and
hair salons all across Japan. The company provides unique management
consulting services to its clients.

Cota's approach is to spread its share its management improvement system
with beauty shops. Beauty shop owners may be highly skilled as
hairdressers, but might not be strong in management knowledge, so Cota's
sales force offers free management advice to their clients' shops.

The system encourages client shops to shift to a business structure
capable of making a profit throughout the year. It also deals with the
work environment and human resources development, aiming to help the
shops grow their businesses.

Sales reps at Cota not only sell hair-care products but also give
management consulting services to clients. New sales reps usually need
at least three years to become proficient at this, but Cota believes
that the efforts to nurture its clients' businesses will result in its
own sales growth.

Business partners' growth leads to their own growth. In this sense,
Dainichi and Cota have the similar management philosophies though they
operate in completely different industries.

"Shareholder Fans" Support Long-Term Management Orientation: Kagome Co.

Kagome is a leading grower and supplier of tomato products in Japan,
including tomato and vegetable juices, as well as other products made
from natural foods. The company makes an active effort to attract
individual shareholders it calls "fan shareholders."

Kagome declared an objective in 2001 to get 100,000 "fan shareholders."
Since then, the company has worked to gain fans domestically by offering
shareholder benefits, organizing factory tours, holding talk events with
the president, and so on. As a result, the number of individual
shareholders increased from about 6,500 to 200,000. The company's
shareholder general meetings are unique in that they allow shareholders
to speak directly with board members and employees to deepen their
understanding of the company's activities and products.

Compared to other companies in the industry, Kagome's shareholders are
less likely to sell their shares in spite of relatively high share prices versus
earnings, so its share price did not fall much after the 2008 Lehman
Brothers collapse that triggered a financial market meltdown and the
2011 earthquake and tsunami in Japan, when share prices of many
companies in Japan dropped significantly.

As Kagome has cultivated many "shareholder fans" who support the company,
it can avoid the pursuit of short-term profits and instead proceed with
management based on the long-term view. The company is tackling such
social challenges as using 100 percent domestically-grown tomatoes for
its tomato juice, to contribute to sustainable farming in Japan. Through
its efforts to support the sustainability of domestic agriculture as Japan's
top tomato juice maker, Kagome can make a major positive impact on
society.

Building a Community of Makers, Sellers and Customers: Motherhouse Co.

Under its mission to "show the potential of developing countries" by
establishing a globally competitive brand with those countries,
Motherhouse Co., based in Tokyo's Taito City, specializes in apparel
products and handcrafts with a main focus on bags made in Bangladesh.
The firm is involved in everything from product development,
manufacturing and quality guidance, to marketing in developed countries.

After CEO Eriko Yamaguchi witnessed the reality of workers in developing
countries, she launched Motherhouse to transform the pattern of workers
having to work for low wages as a result of excessive price competition
and low prices. To create comfortable workplaces in Bangladesh, like a
"second home" for workers, the company established some of the country's
best working conditions, with high salary levels, promotions based on
skill, good pension and medical insurance programs, and fun events such
as picnics once a year. The company also emphasizes worker training for
the production of high quality products.

Bolstered not only by fans who support the corporate philosophy but also
by high product quality, Motherhouse sells its bags at prices that are
not particularly inexpensive in the Japanese market, and the firm does
not discount its prices. With this pricing strategy, the company is able
to ensure that adequate revenues can go to workers to pay decent wages.

Not merely satisfied with creating decent working conditions and
offering education at its factories, Motherhouse aims to create a
community that will "bring a smile" to all the stakeholders of the brand.
The company hosts tours for customers to visit its factory in Bangladesh,
with 250 participants so far. The company also invites to Japan factory
workers who through their efforts have made a big contribution to the
business, and facilitates communications with customers at events, to
help nurture the workers' dreams. Such efforts foster feelings of
belonging and trust in the company's stakeholder community toward
Motherhouse customers.

Daisuke Yamazaki, vice president of Motherhouse, said "I want to change
today's capitalism which is a system running out of control."

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In this article we have introduced examples of companies that emphasize
the happiness of business partners and shareholders as well as employees.
In the coming articles, we will cover more Japanese "good companies"
from different perspectives. Please stay tuned!

See also:
"Good Companies in Japan" (Article No. 1): Valuing Employee Happiness
and Trust
https://www.japanfs.org/en/news/archives/news_id035984.html

Edited by Noriko Sakamoto

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[JFS Web Site Additions of the Month]

- This month's cartoon:
Enjoy "up-cycling"! (2018/02/08)
https://www.japanfs.org/en/manga/manga_id036005.html

- JFS Newsletter No.185 (January 2018)

"We Sell Services, Not Products": Using LCA to Measure
the Environmental Benefits of Nihonkai Gas's Heater Rentals
(2018/02/15)
https://www.japanfs.org/en/news/archives/news_id036008.html
Healthy Living through Improved Air-Quality and
Environmental Protection: Programs to Prevent Health Damage
from Pollution(2018/01/31)
https://www.japanfs.org/en/news/archives/news_id036000.html

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