How to Manage Conflicts in the Process of ESG Integration? A Case of a Japanese Firm

Abstract

The adoption of environmental, social, and governance (ESG) principles has pressured firms to change their internal operations, creating conflicts regarding meeting sustainability standards. This study uses paradox theory lens to examine conflicts in ESG integration in a business model and explore resolution strategies. We used the case study of a top ESG leader in the information and technology sector—the Ricoh Group. We identified conflicts for environmental, social, and governance factors and found they adopted a synthesis strategy for conflict resolution for all ESG issues. ESG conflicts were resolved by emphasizing that ESG practices are a global requirement with ESG department support and management power. Environmental conflicts were resolved through shifting from cost-of-capital-centric to market-competitiveness-centric. Additionally, social conflicts were resolved through feedback on market needs. We state that using the ESG framework as a promise for future finance, where its adoption of ESG practices may positively impact future financial performance and might support the integration process. We stress the importance of constant feedback with all divisions about ESG regulations and their status and progress toward achieving ESG goals. We further highlight conflict-resolution strategies adopted to support the integration of the ESG framework into the business model.