The long road-from dying pines along the Sea of Japan to tree planting along the Great Wall of China

When I was a still a student, I opened a small clothing shop in my Japanese hometown of Yokkaichi City, after it was destroyed by fire in the Pacific War. We started with a staff of five, including ex-soldiers. Fifty-seven years have passed since then.

My hometown was at one time infamous for its industrial pollution. Nowadays, thanks to a variety of measures it is quite different, but at one time Yokkaichi was enveloped in a cloak of pollution. Even though my home was about eight kilometers away from an industrial complex, the plants in my garden stopped bearing fruit, sweet olive trees stopped flowering and my Japanese cedars began to die. Many people fell victim to what became known as "Yokkaichi asthma," suffering from sulfur dioxide gas in the air. But today, Yokkaichi is a different place. It now has blue skies and is a beautiful town. Growing up in such a place heightened my awareness of environmental problems from an early age.

As our company continued to open new stores all over the country, I frequently drove from the west side of central Japan to the northeastern areas of the Japan's main island of Honshu. In comparison to 12 or 13 years ago, the scenery along the Sea of Japan today has changed considerably. In winter, trees along the coastal roads once stood strong against the winds from the Sea of Japan, but they have gradually turned brown and now many are dead. Seeing this, it occurred to me at the time that sulfur dioxide gas must have been in the air, so I decided to raise the issue whenever I had the opportunity. But no one was interested.

People suspected that the pollution came from China across the sea. If that was true, a solution could only be found through cooperation between Japan and China. In this light, the AEON Environment Foundation (http://www.aeon.info/ef) set up by my company was able to hold the "Japan-China International Symposium on Environmental Issues," in 1993, 1995, and 1997, led by Ichiro Kato, the chancellor of the University of Tokyo at the time. Through cooperation with the Chinese Environmental Institute, many scholars participated in the symposium, establishing a platform where various environmental discussions could take place. The head of the Japan's Environment Agency even participated. In this context, we proposed a plan to plant trees near the Great Wall of China. By planting trees there we began an initiative to raise awareness and concern for the environment that has now spread around the world. Today, we are planting trees in many places, including shopping centers in Malaysia and Thailand. Of course we have also planted many trees in Japan, near shopping centers from Hokkaido in the north to Kyushu in the south.

Our tree-planting efforts have grown gradually, and the number of trees planted at our shopping centers is now over four million. Planting trees in this way preserves the environment and is useful in raising environmental awareness among local people.

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Learning from corporate philanthropy in Minneapolis

The environment is not just a problem for businesses, but also every one of us as individuals. It is a problem that each one of us should be concerned about and deal with. The AEON Environment Foundation was established about 12 years ago. Nowadays, not a day goes by that we don't see the word "environment" in the media, but if you looked at a newspaper in Japan at that time, I wonder how many times you would have seen it. Today things have improved, however. The fact that Japan's Environment Agency was promoted recently to a more powerful Ministry of the Environment is one sign of that change.

I started off my working life with my family's clothing store chain called "Okada-ya." We sold Japanese traditional "kimonos." Later, through a merger with another company, it grew to be the supermarket chain "JUSCO CO.,LTD.." Ten years passed quickly, then twenty. As president at the time, I thought that the life span of any business was approximately thirty years so, I wondered how I could transform the company and help it continue to survive in a changing world. This is the reason why I wanted to change JUSCO.

Thirty-two years ago, when JUSCO was created, Japan was enjoying a period of rapid economic growth. After 20 years in business, our sales had reached a landmark at one trillion yen (about U.S.$8 billion). At that point, I realized that if we did not change we would not survive another generation. So for our twentieth anniversary year, we changed the name of the corporate group to AEON. That was 12 years ago. The decision meant we had to throw off the name of JUSCO, but with a trillion-yen business, in reality that's not such an easy thing to do. We did, however, in the face of much resistance, manage to change JUSCO's logo. Currently, Japan is working hard on governmental and economic restructuring, but because of strong resistance these reforms are not going smoothly. The truth is, the bigger the problem, the bigger the reforms that are needed, and the harder the task becomes.

It was just before Japan's economic "bubble" began that we acquired an American specialty chain named Talbots. We also had partnerships with numerous other companies so I would often go to New York and other places in the United States on business. Talbots' parent company was a Minneapolis-based foods-maker named General Mills. Minneapolis is located in the central United States, where corporate philanthropy is thriving and where 3M and various other top-notch corporations are also based.

In an area well known for its corporate philanthropy, Minneapolis was the first place to create a "five percent club," where 5 percent of corporate pretax profits was used for community activities. Other ideas followed, like the three percent club, the one percent club and others. With these companies, corporate philanthropy flourished in the Minneapolis area. This is what I learned when I went to General Mills.

Target, which is ranked number two in discount stores worldwide (after Wal-Mart), is owned by Dayton Hudson Department Store Company, which recently changed its name to Target Corporation. The name "Dayton Hudson" was an old, well-known name in Minneapolis.

At one point, Dayton Hudson Department Store was the target of a corporate takeover. I heard that to prevent this from happening, even the state laws were changed, in the fear that similar companies that were so actively contributing to the local community might be subject to such takeovers by companies outside the region. Here we learned how important it was for a company to take root and contribute to the local community.

So we continued to visit the United States, and eventually we acquired the Talbots chain. At that time Talbot's had 130 apparel specialty stores in U.S. shopping centers, but we have now grown to 800 stores nationwide, and ours was the first Japanese-owned subsidiary to be listed on the New York Stock Exchange. Furthermore, in partnership with Britain's Laura Ashley, we established Laura Ashley Japan in 1986. So as we were no-longer just a supermarket chain, for our twentieth anniversary we changed the group's name from JUSCO to AEON.

In terms of pronunciation in Japanese, Jusco was a very strong company name. Daiei is also a very strong company name. In Japanese, all company names with a voiced consonant are very strong, but when an brand apparel business such as Laura Ashley joins the group, you need something other than just a strong name. In the Japanese sense, "Sony" is a very smart company name. With this approach to corporate naming, we urged members within the company to change our name to "AEON Group."

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"Environment": A key word for the 21st Century

When I was considering what we should do for Jusco's twentieth anniversary, I used what I learned in America and established an "AEON 1% CLUB," deciding to use one percent of all pretax profits on projects for the community. But I thought that even this was not enough. The three pillars of this one-percent club are environmental preservation, promotion of culture, and international exchange. Among these, I thought that the most important was environmental preservation.

Looking at history, humanity has flourished and created magnificent civilizations where there was water and greenery. But all of those civilizations that exhausted their supply of water and greenery eventually collapsed. The Egyptian and Greek civilizations are good examples. Water and greenery are very big, very important factors.

During the year of Jusco's twentieth anniversary, the Berlin Wall collapsed and the world took a step closer to ending the tensions between "East" and "West," which was a key issue of the twentieth-century. No doubt various problems will arise during the twenty-first century, but I believe that the most important one will be "North-South" problems-gaps between the rich countries of the North and the poor countries of the South. A key word in this problem is "environment." Besides the AEON 1% CLUB, we created the AEON Environment Foundation to deal with this issue.

The foundation, as I explained before, plants trees, holds events like the Japan-China International Symposium on Environmental Issues and supports various communities in tackling environmental problems. Initially, about 50 million yen (about U.S.$400,000) were used yearly to support various community groups and non-governmental organizations, but currently that figure is around 100 million yen (about U.S.$ 800,000).

Regarding community involvement, at last Japan too has also moved from bureaucracy-driven to community-driven environmental efforts. There has been a gradual increase in people believing that it is in Japan's best interest for this to happen and I believe that this movement is very good.

Other recent activities carried out by the AEON 1% CLUB include the building of schools in Cambodia. This year we opened 21 schools there. Land mines left over from the war have hurt many people and still many remain buried. Five years ago we started sending aid to Cambodia, and this has been in cooperation with the Japanese Red Cross for three years. We have been supporting the Limb-fitting Center in Battambang. The province of Battambang is located close to the Thai border, where most of the land mines remain. We explained to the customers in our shops about the misery caused by land mines, and invited donations. With these donations, combined with the funds from the AEON 1% CLUB, we have provided about approximately 50 million yen a year (about U.S$ 400,000) over three years to help run the artificial limb center.

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The "100 Sacks of Rice" School in Cambodia

One day I went to Cambodia to see one of the schools that we had built. After driving about four hours from Phnom-Penh along a dirt road we entered Cambodia's real countryside. Here, the schools have no electricity and many children do not even wear shoes. One school has five classrooms used in rotation for two groups of students, but as it was the summer vacation when I visited, only one of these classrooms was being used. There were about 30 students ranging from about seven to sixteen years old in this classroom and I remember being very surprised at what they doing. They were using a computer.

There were no power lines here in the countryside, so how could it be that I was standing there and witnessing the children, absorbed in what they were seeing on the computer screen? It turned out that a solar panel on the roof and wind power provided enough energy to power it. But what also surprised me was how this one computer had made it out to the Cambodian countryside. Apple Computers Inc., as a strategic business move, had donated one computer to every primary school in Cambodia!

What surprised me even more was the name of the school. When donations are made to Cambodian schools, the donor is able to create a nickname for the school, which is then written on the school wall. In this school's case it was "One Hundred Sacks of Rice." After asking around, I learned that graduates of Nagaoka High School here in Japan had collected and donated money to the school, and given it that nickname. (For the meaning of the nickname, see http://www.city.nagaoka.niigata.jp/dpage/syomu/kome100/english/e-spirit.html.)

In March 2002, we opened another 21 schools in Cambodia. I went to an opening ceremony, and there the children's eyes shone so brightly it made me think that when they become adults they are going to make Cambodia a truly wonderful nation. The Cambodian people have a very grand history, and I think that with new leadership they can recover and become a truly grand nation again.

After the schools' opening ceremony, we went to a place near Angkor Wat with some locals to plant trees. The land was once used by the army and even to that day it was still completely denuded. There we planted about 5,000 trees. For the next three years, while building more than 20 schools a year, we will also plant trees.

Back in Japan we have called on Japanese parents to bring their primary and middle school students to opening ceremonies of the schools we support in Cambodia. We had about 20 children come from Japan the first year. When both parents and children saw the young Cambodians studying, they realized how affluent Japan was and decided to make changes in their own lifestyles back home.

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"A new shape for a new generation"

On the eleventh of every month our shops have "AEON Day." Customers shopping on this day receive yellow receipts, which they can put into boxes bearing the names of various non-governmental and non-profit organizations. By doing this, customers are able to contribute even in a small way to a cause of their choice. After six months, the receipts are totaled, and one percent of the amount is donated to the group to buy something they require.

AEON Day is not originally our idea. It is a Korean one. When we were learning about Korea we discovered that a Korean supermarket chain used this system, so we decided to try it as well. Currently, there are many changes occurring all around the world in business. While we are carrying out various community activities, we also have to change the company itself at the same time. Moving into the twenty-first century our company is facing a period of great change. We have to learn from others, as we did from Korea.

At our general meeting in May 2001, shareholders approved the new name, and on August 21 that year, JUSCO CO.,LTD. became AEON CO.,LTD.. From that point, we had to change into something totally new, to do something that we had never done before, to change into a new shape for a new generation.

From the age of 20, for 55 years I had led the company. As it entered into the twenty-first century, I thought that the company had to change to survive, so two years ago, at the age of 75, I offered my resignation. This was at the same time we changed the company name. I had realized, as others probably did within the corporation, that I was a twentieth-century businessman, not one for the twenty-first century. So I resigned as chief executive officer.

Since purchasing the Talbots chain in the United States I had been chairman, and during that time we managed to see quite remarkable growth. Last year when I resigned from the AEON Group, the then head of Talbots Arnold Zetcher threw me a farewell party. At the general meeting for stockholders of Talbots where I made my resignation as a member and Chairman of the board of directors, many Talbots executives came to wish me farewell, and I received a parting gift. When I opened it I saw the words, "The Okada Scholarship for Harvard Business School has been established for the next six years." This was my commemorative present. I don't know how much Talbots is paying to Harvard business school every year, but it gives me great joy to receive thank you letters from both Harvard Business School and scholarship recipients. As this kind of commemorative present is not unusual in the United States, I couldn't help thinking how far Japan, and corporate thinking in Japan have to go.

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"If a company's management blames its poor results on the economy, what's the point of having management at all?"

As I conclude, I would like to speak about the discrimination that exists between industries in Japan. For example, when the "mad cow disease" [bovine spongiform encephalopathy] problem hit Japan's beef industry in 2001, professional breeders received subsidies from the government to help them out. The government also subsidized the dairy products maker Snow Brand. It also subsidized "yakiniku" restaurants (that serve grilled beef), but refused to give a single yen to supermarkets that sell meat. Another example is the cost of electricity. Rates for manufacturing industries and non-manufacturing businesses (i.e., retail and others) are different. When I was head of the company, I was always asking the Ministry of Trade and Industry (now the Ministry of Economy, Trade and Industry) "Don't you recognize retail as an industry?" If you look around the world, most of the largest businesses are in retail. Not energy, not oil, not cars, not even computers. The world's biggest retail company is Wal-Mart. Its annual turnover is approximately 30 trillion yen, and it employs 1.2 million people. And Wal-Mart is only 40 years old. In fifty-five years I was able to create a company with a turnover of three trillion yen, but in just 40 years Wal-Mart reached ten times that size. They did this in a free market while actively contributing to the community.

Another difference between Japanese and American companies is made obvious when looking at annual reports. In Japan, June is the month when shareholders' general meetings are held and annual reports are distributed to stockholders. And when you open the first page of a report in Japan what do you see? Some excuse for poor corporate performance, blamed on the country's economy. I always ask myself "What fool decided to write this?" If the company is faltering because the economy is not going well, what's the point of having management? This sort of excuse is ridiculous. Japanese businesses think very much like this, and must fundamentally change.

Commit!

Finally, on the topic of corporate reports, the typical company in Japan, even the large ones listed on the stock exchange, tend to brush over the topics of corporate contributions to society and environmental problems. I always tell people in the Aeon Group, "You must include environmental issues and contributions to the community and in the annual report." "Why," you may ask? Because when you write it down, then you have to do it!

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