Non-Financial Capital Value Creation: Assessing Japan’s Path to an ESG-Friendly Economy Through the Yanagi’s Model

Abstract

This paper explores the possibility of Japan adopting the Non-Financial Capital and Equity Spread Synchronization Model, also known as the Yanagi's model, to build an environmental, social, and governance (ESG)-friendly economy. The Yanagi's model focuses on incorporating non-financial elements, such as ESG factors, into companies' traditional financial performance measures. By doing so, the model aims to enhance firms' long-term sustainability and value creation. This paper assesses the potential benefits and challenges of implementing the Yanagi's model in the Japanese context through a review of relevant literature and case studies. The literature suggests that integrating ESG factors can lead to improved financial performance, reduced risk, and increased reputation for companies. However, there are also concerns about the lack of standardization and transparency in ESG data, as well as the potential for greenwashing or superficial adoption of ESG practices. Despite these challenges, this paper argues that the Yanagi's model could serve as a viable path for Japan to build an ESG-friendly economy, given the country's recent push for sustainability and the growing demand for socially responsible investments. This paper suggests several recommendations for improving the model, such as increasing transparency and standardization in ESG data, enhancing stakeholder engagement, and promoting a culture of long-term value creation. Overall, this paper concludes that while there are challenges to adopting the Yanagi's model, its potential benefits for building a sustainable and ESG-friendly economy in Japan make it a worthwhile pursuit.

Received: 22 June 2023 | Revised: 14 September 2023 | Accepted: 1 October 2023 

Conflicts of Interest

The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

Data available on request from the corresponding author upon reasonable request.

Author Contribution Statement

Asheer Rahman and Varsha Varghese: Conceptualization, Methodology, Software, Validation, Formal analysis, Investigation, Resources, Data curation, Writing - original draft, Writing - review & editing, Visualization, Supervision, Project administration.