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Review of CSR Report 2012 from Nintendo Co Ltd.
Nintendo: Not putting a smile on everyone's face
By elaine cohen (BeyondBusiness) on August 29, 2012 at 2:44pm.
You are all familiar with the Nintendo Big Brands: Game Boy, Wii and a range of other Nintendo games, which have gone a long way to revolutionizing the way kids (and many adults) spend their free time. What you might not be familiar with is that the Nintendo Company was founded in Japan in 1889, producing hand-made playing cards. That's a far cry from the digital, technical, fast-paced gaming portfolio of the modern Nintendo Company which has sales at around $8 billion and 200 million consumers worldwide, employing almost 5,000 people, about half of whom are in Japan. In Japan, apparently, the Nintendo 3DS has achieved sales of over five million units, which makes it the fastest-selling video game system in Japanese history.
Nintendo's CSR Report is full of many nice words, including the company's CSR tag-line "Putting Smiles on the Faces of Everyone Nintendo Touches." There are indeed some interesting aspects of Nintendo's CSR report which create smiles. The use of video gaming technology to advance education and help increase children's curiosity and motivation to learn is certainly worth smiling about. A new 3D Pictorial Guide to Flora and Fauna (and biodiversity) "opens the door for ordinary people to readily obtain professional knowledge about nature". 3D imaging is even used in the Louvre museum in Paris as an audio guide. Similarly, Nintendo software is used to teach consumers about animal welfare and responsible pet care, developed in collaboration with an animal rights association in Spain, and Nintendo helps parents grapple with safe gaming for children in collaboration with academics in Italy. Nintendo attests to making progress on supplier adherence to responsible purchasing and sourcing guidelines and conducts factory inspections to monitor progress. In the workplace, Nintendo has a very low turnover rate and average 12.5 years tenure, showing good stability, and the policy is to enable work until age 65, although retirement in Japanese companies is usually at age 60. Nintendo also has policies which offer workplace flexibility for child and family care, including a "reemployment system" for individuals who had previously resigned in order to care for children or family members. Quite a few smiles.
However, this report did not put a smile on the face of those concerned about one of the most significant issues in the electronics industry today – conflict minerals. Nintendo ranked bottom in a 2012 study by EnoughProject which assessed the commitment and performance of 24 electronics companies to combatting the issues associated with conflict minerals, stating that "Nintendo has made no known effort to trace or audit its supply chain". Nintendo was the only company to receive a zero score. Nintendo doesn't cover this in its CSR Report for 2012, focusing on, apparently, only the things that put smiles on the faces of Nintendo bosses. Nintendo's President says "Our growth depends on whether we can connect the smiles of all people involved with Nintendo." In considering the "smile value chain", it might make sense for Nintendo to cast the net a little wider. The question of marketing practices, for example, especially to young people, a CSR minefield of a different kind, is also not addressed.
Nintendo devotes much space to its supply chain, proclaiming to have updated the Nintendo CSR Procurement Guidelines and having completed 9 factory inspections in 2011. However, as Nintendo outsources its entire manufacturing requirements, this seems to be a very small number. Nintendo does not disclose how many factories overall are engaged in the production of their products, worth billions of Yen. Additionally, Nintendo does not disclose how many of these factories were in compliance with the Nintendo guidelines, nor corrective action that was taken, if any.
Nintendo's environment section is dominated by a long description of chemical substance control, which is mainly about how Nintendo complies with legal requirements for chemicals in its products. In the area of carbon emissions, the fact that total emissions reduced in 2011 is cause for some smiles, but the significant (42%) increase in tons of CO2 emitted per 100 million yen of sales versus 2010 goes unexplained. In fact, precisely how Nintendo calculates carbon emissions and what is or isn't included is not explained, so we have no way of knowing exactly what the numbers represent.
Nintendo has been reporting on CSR for some years, and the PDF download is a short summary version (14 pages) of a more comprehensive online report. The online version is nicely navigable, and is structured around Nintendo's six core stakeholder groups: consumers, business partners, employees, environment, community and regulators. The report does not follow any known framework, and the online version does not include a search facility, so getting to specific information requires a lot of clicking and scrolling. Similarly, there is no materiality assessment or prioritization of issues, which leaves Nintendo a lot of scope to report on those things which make people smile and leave out the rest.
The report includes a message from the Chief Executive of Sustainability Forum Japan, Mrs Ayako Sonoda. Mrs Sonoda describes her experience after reading the Nintendo report and testing the 3D software, confirming to have " personally used the software with my colleagues, and we enjoyed learning about flowers and birds and made many discoveries, which led us to become more interested in nature." Her praise for Nintendo's progress seems rather superficial and her commentary does not add to the credibility of the report, appearing rather like a supportive friend who has been asked to amplify positive aspects of Nintendo's CSR programme. A more objective and perhaps critical commentary would have added to the credibility both of the Sustainability Forum in Japan and of Nintendo's reporting.
Nintendo's online report includes a feedback questionnaire. It contains several relevant questions – some open, some tick-box - about the content and user-friendliness of the Nintendo report. I was tempted to send feedback, including a question about conflict minerals, but then noticed the sentence: "Please also note that we are unable to individually respond to any feedback received." I therefore declined to fill out the questionnaire. Frankly, the number of people who are interested enough to provide feedback on sustainability reports is so low that I would expect that companies who are genuinely interested in reader feedback and dialogue would make every effort to encourage this. Knowing in advance that Nintendo does not intend to put a smile on my face by acknowledging my feedback is a big turn-off and reduces my level of trust in their serious intent.
Finally, Nintendo's report is public-relations-oriented, data-light and shallow. Not the type of report that puts a big smile on my face. There is a degree of credibility in Nintendo's intention to be perceived as a strong CSR player, and it appears that several basic responsible-business policies are in place, and there is certain freshness about Nintendo's simplistic approach. However, a core structure which demonstrates an integrated approach to CSR and sustainability appears to be lacking, and the short, stand-alone examples of practice from various parts of the Nintendo world raise more questions about how Nintendo is performing overall than they enlighten us about different CSR practices. Nintendo should get off the fence on sustainability and move forward with a genuinely transparent, materially-focused and balanced report.
The CSR tag-line about putting smiles on people's faces is perhaps a fun approach, and certainly we need more smiles in the world. However, I think it falls short of reflecting the true social value of a business such as Nintendo. I would recommend the company thinks again about its true impacts. When everyone is smiling, what actually has changed?