On June 19, 2019, Mercari presented about its current efforts being taken towards ESG and sustainability. Standing for “Environment, Social and Governance,” ESG is a concept held by western companies that is now spreading around the world as a vital factor linked to mid-term and long-term corporate growth.

Why is Mercari trying to tackle social and environmental issues rather than simply focusing on its own business growth? We interviewed our COO and ESG project owner Fumiaki Koizumi, along with project members Sumika Tabara, Kazuki Fukami, and Akiko Ichikawa. They discussed various topics including the pursuit of an ESG initiative characteristic of Mercari, the process involved, and the ideas behind the reusable “Mercari Eco Pack.”

Koizumi mentions during the interview that Mercari has been a “paradox” for a long time. What exactly does he mean by that? Mercari was listed on the Tokyo Stock Exchange Mothers Index exactly a year ago, and has become even more deeply rooted in society since then. Because of that, we had many questions to ask regarding Mercari’s future direction.

ESG is about management. It’s important to provide value to society through business

– We’d like to ask about ESG. Can you start by telling me why Mercari is getting involved, and what led to this decision?

Koizumi: I think that Mercari’s business goes hand-in-hand with the ESG mindset and the SDGs (Sustainable Development Goals) that are helping the world establish recycling-oriented societies. An item that no longer has value to one person might have a lot of value to a different person. By utilizing this value gap in the Mercari marketplace to effectively circulate items, we can attract customers while being environmentally-conscious and while generating profits. I think that one of Mercari’s strengths is its ability to combine business and sociability as a company. We’ve been around for 6 years and have over 1800 employees in our entire Group, including members from over 40 different countries. In order to continue growing into a more global service, I think that Mercari needs to send a very clear message regarding its stance on society. ESG was our best opportunity to do this.

Fumiaki Koizumi (President & COO)

– So this decision included not just a Japanese perspective, but a global one as well?

Koizumi: Yes, and that’s why we needed to send a consistent message on a global scale. Mindsets concerning SDGs and circular economies are becoming more and more common in the rest of the world, and the concept of ESG has been widely used in capital markets and in companies as well. We at Mercari also hope to communicate our stance on society through ESG. I think that this is important to us as it will also lead to an increase in our corporate value.

– It seems like there aren’t many Japanese companies considering ESG yet.

Koizumi: That’s right. Japan certainly has a culture that’s averse to wasteful actions, but we’ve never communicated this on a global scale. We’re now actively conveying the values we want to provide to society the same way a global company would. It’s possible that we’ll see a trend in the future where companies of all different sizes aim to communicate their sociability to the world. Without messages like these, it’s very difficult to gain support from customers and from society, and it’s also more difficult to be chosen by candidates looking for places to work.

– That definitely sounds like an essential point for companies to consider. What direction was Mercari aiming for with this particular ESG initiative?

Koizumi: CSR (Corporate Social Responsibility) is another concept similar to ESG and involves companies taking on activities not directly related to their main business. I think it’s a great thing to do, but I also feel that it’s best to provide value to society through one’s actual business as it has a better chance of leading to long-term efforts that stick. That’s what Mercari is aiming for.

– I see! The ESG project started within the COO office, but can you tell me why this happened?

Koizumi: ESG initiatives are generally done for investors, so it’s common for IR departments to be in charge. However, I believe that ESG is connected to the very root of management. Shintaro Yamada (Founder & CEO) and I believe that these initiatives should be taken with the management’s consensus. I’ve developed this mindset through my experiences with PR, marketing, and HR, which have taught me a lot about handling external communication. Another part of ESG involves considering the best communication methods for connecting with society and customers. I feel that this is best handled by the COO office.
The Mercari ESG website features a message from founder Shintaro Yamada

Revisiting Mercari’s unique ESG and why we didn’t play by the book

– I’d like to ask about how things went right after the ESG project was launched. What was it like in the beginning?

Tabara: We started by focusing on preparations and research before deciding on key issues. Although ESG has become a global concept, it’s still a bit unclear to many people. Questions we need to consider include “How will we respond to society’s questions regarding our involvement in ESG?” “What information will we disclose when responding and what guidelines will we use?” and “How can we showcase our company’s unique traits?”

The questions and answers depend on a lot of factors, making it very case-by-case. We did a lot of research using ESG reports from global companies and academic journals. I think the most amount of time was spent between the phase for research and the phase where we decided on the key issues.

We decided on five key issues: “Creation of a recycling-oriented society,” “Establishment of culture and education for that society,” “Promotion of regional activity,” “Development of a safe, secure, and fair environment for transactions,” and “Strengthening of compliance and risk management”

– Was all of this research conducted internally?

Koizumi: ESGs generally involve inviting a consulting agency to the company and developing strategies after conducting investigations. These cases employing external communication are not uncommon. However, we wanted to avoid that because we felt that people wouldn’t be able to differentiate our ESG reports from all the others. Since Mercari is aiming to be an organization capable of making its own decisions and change, we used our own means to conduct thorough discussions and develop our own strategies. I think this whole process is what ESG is about – our aim is to use ESG to communicate our stance and messages to society. Having these discussions is one thing that helps us develop and refine our stance.

– Just earlier, Tabara brought up the question of how the company can showcase its unique traits. How did Mercari end up making its ESG report?

Tabara: As Koizumi said, we didn’t want to write a report that people felt like they’re already read before. But when showed our first report to institutional investors, experts, and stakeholders, we actually got feedback like “it sounds like a third party wrote this” and “it doesn’t sound like something from Mercari.”

Sumika Tabara (COO Office)

– So it wasn’t original enough?.

Tabara: Right. We were probably playing it too safe, and we unintentionally went with an approach that was completely ordinary. That’s when we had a realization – we were using various materials for research, but they’re really supposed to be nothing more than a foundation. We stopped clinging on to existing approaches and decided to make a new report from scratch, keeping it characteristic of Mercari’s culture. We ended up with a report that faithfully retold the experiences and ideas of Mercari founder Shintaro Yamada. Also, as Koizumi mentioned earlier, Mercari’s business itself is directly linked to the ESG mindset and the creation of a recycling-oriented society. We figured it would be important to take on a global scheme and communicate it in a way that’s faithful to Mercari’s style.

Ichikawa: The feedback we got from the institutional investors, experts, and stakeholders was spot on. But it would have been meaningless if we just accepted that feedback without questioning it. Instead, we actively tried to push the project forward while processing and digesting that feedback.

Akiko Ichikawa (COO Office)

– So ESG was a chance for Mercari to take a look at itself and rethink what it stands for, right?

Fukami: I really think it was. Through ESG, Mercari was able to come up with the “roots” that it provides to society. We’ve started with CSR and taken on other efforts, but they were simply the branches and leaves. We didn’t have the roots until now.

– Was were some of those other efforts?

Fukami: Simply hearing phrases like “establishing a recycling-oriented society” or “maintaining a safe, secure, and fair trading environment,” didn’t actually remind people of Mercari. To overcome this, we kept track of them, organized them, and developed a connection between the words to the actual achievements. I think that being able to send a clear message about Mercari’s assets, the ideas that led to the company’s creation, and the goals we want to achieve in the future, were very important opportunities for the company.

Mercari Eco Pack: Changing the Way We Think About Packing Materials

– On June 5, as part of the efforts to establish a recycling-oriented society, Mercari announced the “Mercari Eco Pack.” This drew a considerable amount of attention from the public, but what’s the story behind its creation?

Fukami: Mercari is about helping people take things with little value to them and delivering them to people who do find value. The flip side is that as Mercari grows as an EC marketplace, so does the volume of materials being used to pack these items. Mercari alone consumes a significant amount of packing materials, and takes up a large percentage from the home delivery market as a whole. We couldn’t ignore those numbers when thinking about ways to help Mercari establish an ideal society. Because of that, we decided to create the Eco Pack which can be reused as many times as needed, just like the items that are resold and reused through Mercari.

The reusable packing envelope, “Mercari Eco Pack”

Koizumi: To be honest, Mercari has been dealing with a paradox for a while. As we aimed to become a company helping people find new value for their unused items, we also ended up using a great deal of cardboard and creating waste. This is something that both we and our customers noticed. When we announced the Eco Packs, we heard a lot of voices from our customers like “this is a new concept!” and “this is exactly what I wanted!”

– So Mercari successfully took an idea and turned it into a tangible creation. What points did you have to consider the most when creating the Eco Pack?

Fukami: We had to consider what kind of messages we would be sending to customers through the Eco Pack. The goal wasn’t simply to create new packing materials – we wanted to change the way customers think about packing materials to begin with. The Eco Pack is nothing more than a means of sending a message, which is that “reusability should be a normal and everyday thing.” We wrote in our press release about the sociability of Mercari as a company and business, and we hope to continue working with customers to establish a culture that promotes the recycling and reuse of packing materials.

– Mercari also sells its own packing materials in addition to the Eco Pack, right? Will these changed one-by-one?

Fukami: I think we’ll need to change them as they are also part of our so-called paradox. We can’t completely eliminate them as it would hinder usability for the customers, but I think there is a lot of room for change which we are currently discussing. We’re also hoping to take a unique and Mercari-like approach to address the use of tape and cushioning materials – not just cardboard.

Kazuki Fukami (COO Office)

Tabara: I think that paradoxes are found not only in our product but also in the company as a whole. For example, we throw away a lot of plastic waste like bottles in our office. Now that we’ve started with ESG and the Eco Pack, many employees have been pointing out that our waste-handling in the office is strange and doesn’t match Mercari’s image. I think that the ESG and Eco Pack presentations were a great opportunity to highlight and face the contradictions found within our company. From a branding perspective, I think that there’s a lot we can do to become more consistent.

– This matches the idea of “a company capable of making its own decisions and change” that Koizumi mentioned before, right?

Koizumi: That’s right. I think that ESG and the Eco Pack helped get employees more engaged. We’re happy that reactions from our international members have been particularly positive. Although the majority of our members coming from overseas have limited experience using the Mercari app, we’ve heard a lot of voices saying “I’m glad to see the company heading in this direction.” I think that the ESG and Eco Pack reached them thanks to the fact that we were able to share information on a global scale.

Mercari can’t establish an ideal society alone: We need to strengthen our partnerships

– Lastly, I’d like to ask about plans for the future. Tabara, what do you have in mind?

Tabara: We’ve established our goals and the five key issues we want to tackle as a company. To succeed, each issue will have an owner in charge of taking action and sharing information as needed. Another factor is communication with investors – we’ll be increasing the number of meetings we have with them so that we can share our ideas for increasing our long-term company value and receive their feedback. I hope to work on this actively as I believe it will bring our management to a new level.

– So you’ll be able to communicate using ESG as a tool, right?

Tabara: Exactly. I hope to transition away the mindset where quarterly PLs (Profit and Loss Statements) and BSs (Balance Sheets) alone are used to measure corporate value, and instead evaluate based on mid-term and long-term goals alongside decisions on what to invest in. Recently, due to major changes in social and environmental issues, mid-term and long-term financial outlooks are more difficult than before. Because of this, investors want more “non-financial information,” like Mercari’s specific plans for raising its own corporate value. In retrospect, I think that this ESG was valuable in the sense that we were able to take unique communication approaches.

– What do you think, Fukami?

Fukami: It might sound obvious, but in order to become the company we want to be, there is a limit to what we can accomplish by ourselves. Getting the industry, partners, and stakeholders involved would help us have a much bigger impact on society and clarify what needs to be done to solve the challenges ahead of us. It might be a mid-term or long-term thing, but our goal is to establish systems that are sustainable.

Tabara: That’s definitely important. Even with the Eco Pack, there’s only so much impact Mercari can have by itself. If we’re going to promote the reuse of packing materials, we’ll have to work together with apparel brands and EC businesses around the world.

Koizumi: Our only choice is to listen to the customer voices, strengthen our action plans, and get as many partners as we can. Now that we’ve started with ESG and Eco Pack, we want to continuously take action and find opportunities to collaborate with partners holding the same interests as us.

Ichikawa: I agree – I want to help find ways to scale our projects. Aside from businesses, collaborating with local government organizations and NPOs may be an option as well. We want to continue expanding our possibilities rather than arbitrarily setting a limited scope.

– ”Promoting regional activity” was one of the 5 key issues, right?

Ichikawa: Yes. For example, local governments could create their own official Mercari accounts, collect unused items from residents, and turn them into money. This could lead to a system allowing residents to pay their bills or taxes using items instead of money. Although this is probably considered impossible right now, the chances of making it happen are far from zero. There’s also plenty of room to try out ideas that aren’t necessarily unique or experimental.

– Paying taxes with objects… That’s definitely something Mercari would push for! Koizumi, would you like to wrap things up?

Koizumi: As part of the management, I think it’s important to keep on sending the same message. Any company can present an idea and get people excited, but this usually ends with the vision fading and being completely forgotten in the span of 6 months to a year. We want to prevent ourselves from going down that path by choosing our actions after carefully considering our customer and employees’ circumstances. Mercari’s mission is to create value in a global marketplace where anyone can buy & sell, and our three values are “Go Bold,” “All for One,” and “Be a Pro.” We’ve been able to make these values stick in the company by repeating them consistently. I have no doubt that this has bred a culture that employees can be proud of, and also reaches our customers leading to increased usage of our app. We don’t know exactly how far our company and services will go, but we definitely want to establish Mercari’s values so that anyone can relate to them. This is just the beginning.