• Kyodo

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Financial regulators will revise the Tokyo Stock Exchange’s corporate governance code in June to include a provision requiring listed companies to “respect human rights.”

The move by Tokyo Stock Exchange Inc. and the Financial Services Agency comes amid heightened pressure on Japanese companies to respond to China’s alleged human rights abuses against the Uyghur Muslim minority in its far-western Xinjiang region.

With Western governments, including the United States, imposing sanctions on China over allegations of forced labor, firms’ responses to such violations are falling under increased scrutiny by investors.

An action plan compiled by the Japanese government last October only requested that companies pay attention to human rights issues, including those of their overseas business partners.

But the new governance code, aimed at prompting action through greater awareness of such issues among management, will oblige companies to take concrete measures, based on revisions to their governing principles, to avoid losing investment from overseas.

Earlier this month, it became known that U.S. Customs and Border Protection had blocked a shipment of men’s shirts by the Uniqlo casual clothing chain in January for alleged violation of an import ban on items containing cotton sourced from Xinjiang.

The new guidelines stipulate that a company’s board of directors should recognize that human rights are an important issue that can lead to opportunities for profit and consider proactively addressing the issue from the perspective of enhancing corporate value.

It recommends actions such as investigating whether overseas business partners are using forced labor and asking for corrective measures be taken if they are found to be doing so.

Sportswear firm Mizuno Corp. has already said it will stop using cotton sourced from Xinjiang in its products, while Kagome Co., a juice and sauce ingredient maker, has announced plans to stop using tomato paste produced in the region by the end of 2021.

The FSA will require all listed companies to submit corporate governance reports in line with the new regulations by December this year.

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