From Oct. 22–26, a delegation of 20 Japanese entrepreneurs and members of the impact startups ecosystem attended the SOCAP23 social entrepreneurship conference in San Francisco. Each year, SOCAP brings together investors, entrepreneurs and social impact leaders with the aim of solving some of the world’s toughest challenges with market-based solutions.
Early in 2023, Japan’s Ministry of Economy, Trade and Industry (METI) launched an entrepreneurship development and overseas dispatch program called J-StarX. J-StarX aims to produce entrepreneurs with an international presence, and the program provides these ambitious entrepreneurs with opportunities to connect and learn from business leaders from around the world. In October, 20 companies were selected to participate in the program and receive concentrated support.
Japanese impact companies took the spotlight
Aiming to solve social and environmental issues by reconciling both public interest and economic viability, five Japanese impact startups introduced their companies and pitched their ideas to potential investors and business partners.
Katsuji Imata, president of the Social Impact Management Initiative (SIMI), described the current situation in Japan, including the growth of impact investment. He also discussed government support through J-StarX and the five-year plan for startup development.
One of the impact startups was AiCAN, which provides artificial intelligence services to help end child abuse. “Let’s find solutions to make a tragedy-filled world a safer place,” Kota Takaoka, CEO of AiCAN, said.
In addition to AiCAN, TBM, EF Polymer, Dots for, and Ashirase took the stage to pitch their businesses. Each business aims to solve a unique social challenge. TBM promotes the use of new materials made from limestone and material recycling to solve environmental problems. EF Polymer seeks to address the issue of farmland drought by using a naturally derived superabsorbent polymer. Dots for’s goal is to transform rural areas in Africa through digitalization, while Ashirase uses a navigation system to help people with visual impairments walk independently.
Thanks to the participation of J-StarX and other delegations, SOCAP had a block of programming focused on Asia for the first time.
Sarah Sterling, executive director of entrepreneurship at SOCAP Global, praised the Japanese government’s five-year plan for startup development and the J-StarX program. “Government recognition, financial support and provision of tax credits and benefits are very necessary to support the survival and expansion of startups,” Sterling said, adding that programs for impact startups and support organizations such as the J-StarX social entrepreneurship course are also extremely valuable.
Sterling also provided her thoughts on the pitches of the five Japanese companies. “These were innovative solutions to problems that had been considered extremely difficult to solve,” she said. “They have the potential to scale it up, not only in Japan, but globally.″
Many of the participants in the SOCAP sessions were from North America, mainly fund providers and foundations related to social impact and impact startups. Each session focused on topics primarily of interest to North American fund providers, such as impact measurement, climate change, gender equality and development support for Africa.
Sterling said that Japan’s initiatives were a breath of fresh air. Their inclusion also helped increase diversity among SOCAP participants and provided new perspectives.
The global impact investment market has grown tenfold in five years
While investing in impact startups is similar to ESG investing — an ethical investing strategy that stands for environmental social and governance — it is characterized by its clear intention to address specific social issues. The goal is to not only lower the risk and optimize investment returns, but to assess the positive impact the investment can generate for society.
A survey by the Global Steering Group for Impact Investment (GSG) National Advisory Committee and the Social Impact Investment Foundation (SIIF) showed that, at the end of March 2022, the balance of impact investment — the sum of the investment balances of 46 organizations that responded to the survey — was $39 billion (about 5.85 trillion yen), up 4.4-fold from the previous year.
Over the past two years, impact investing has taken off in Japan. Keidanren, Japan’s most influential business lobby, released a report in June 2022 titled “Using ‘Impact Indicators’ to Promote Purpose-Driven Dialogue.″ In October of that year, the Impact Startup Association was launched.
In June 2022, the Japanese government published its revised plan for new capitalism, which explicitly included “comprehensive support measures for impact startups.”
Connections were the takeaway for Japanese entrepreneurs
People join SOCAP to discover new global investment opportunities, stimulate the flow of impact investing and expand action to make the world a better place.
The participating Japanese entrepreneurs have also connected with people seeking investment and partnerships.
EF Polymer COO Kunihiro Shimoji said he was able to speak with a representative from the impact investment department of a public interest organization.
Kunihiko Ono, the CEO of SAKA NO TOCHU, a company that promotes environmentally friendly agriculture, said partnerships have been fruitful in advancing his business. “I’m glad I came here and found a partner that I can immediately work with,” he said.
“While there are many companies in the U.S. working on environmental conservation and supporting ethnic minorities through coffee production, I compared ourselves with them and was able to gain confidence in our business and realized we are good enough in terms of quality, methods, production volume and sales results. That was a big takeaway for us,” Ono added.
Communities build resilience
Many impact startups worldwide aim to obtain B Corp Certification, which is issued to companies that meet high standards of social and environmental responsibility.
More than 7,400 organizations globally have been certified as B Corps, making it a driving force in the global impact startup movement. As of January 2024, only 36 companies and organizations in Japan had been accredited. But with many companies under review, Sarah Schwimmer, head of strategic growth at B Lab Global, says enthusiasm is growing in Japan.
“Younger generations, in particular, want to work in a place where their values align with those of the company. These companies can attract top talent in a competitive market, even if they can’t afford a top-tier salary,” Schwimmer said.
Schwimmer added that B Corp Certified companies that can form a community and support each other by purchasing products from each other can also build resilience.
The demand for more transparency and responsibility from suppliers — and increased scrutiny on issues like human rights violations and environmental pollution in supply chains — provides an additional incentive for businesses to obtain B Corp Certification. By purchasing from Certified B Corps, companies can reduce their exposure to supply chain risk.
One of the delegates, Mamoru Ichikawa, secretary general of the Impact Startup Association, said, “I realized that a benefit of obtaining B Corp certification is not just increasing sales, but also getting to know the process of achieving the certification and the existence of the tight-knit community.”
“I would like to leverage this experience and knowledge to build a community of entrepreneurs and stakeholders who aim to solve social issues in Japan,″ he added.
