What Is SX (Sustainability Transformation)? A Clear Guide to Its Meaning, Background, and Implementation
The business environment is undergoing significant changes due to labor shortages, rising energy costs, supply chain disruptions, and increasing demands for information disclosure from business partners. In this environment, companies must focus not only on short-term revenue and cost reduction but also on building a business capable of sustaining long-term growth.
Against this backdrop, SX (Sustainability Transformation) has emerged as a key business strategy. SX is not simply about environmental initiatives; it is an approach that encourages companies to rethink their management practices and business models from a sustainability perspective, ultimately enhancing corporate value over the medium and long term.
In this article, we will explain the fundamentals of SX, why it is gaining attention, how it differs from DX, GX, and the SDGs, and the key practical considerations for companies implementing SX.
What Is SX?
SX stands for “Sustainability Transformation,” which is also referred to in Japanese as “sustainability transformation.”
NRI defines SX as transforming management and business operations to enhance a company’s ability to generate the resources needed for long-term, sustainable growth and to create further value by delivering long-term value that contributes to societal sustainability.
In other words, SX should be viewed not only as a matter of treating social and environmental considerations as costs or obligations, but also as a management transformation that enables companies to continue creating value over the long term.
For example, themes closely related to SX include the following.
- Responding to decarbonization and energy-saving requirements
- Reviewing raw material procurement and supply chains
- Investment in human capital
- Strengthening Governance and Information Disclosure
- Developing new businesses and services based on social issues.
In this way, SX is not about increasing CSR activities; rather, it is an approach to redesigning management strategy, business strategy, and operational processes from the perspective of sustainability.
Why SX Is Gaining Attention Now
The growing focus on SX is driven by changes in the external environment surrounding companies.
1. Social issues are becoming business management priorities
Climate change, natural disasters, fluctuations in energy prices, human rights due diligence, and geopolitical risks now have a more direct impact on business than they did in the past. These are no longer merely external factors; they have become management issues that affect sales, procurement, costs, supply systems, and recruitment.
2. Demands from business partners and investors are increasing
Large companies in particular are increasingly asking suppliers to demonstrate environmental responsibility, human rights practices, information disclosure, and governance structures. Even for companies that are not publicly listed, the ability to explain their sustainability initiatives is becoming increasingly important for maintaining business relationships and winning new orders.
3. Intangible assets and human capital are becoming increasingly important
METI’s Ito Review 3.0 also emphasizes investment in intangible assets, dialogue with investors, and the development of a value-creation story as essential to enhancing long-term corporate value. We are now in an era where competitiveness is shaped not only by facilities and sales, but also by less visible assets such as talent, knowledge, brand equity, and organizational culture.
4. Medium- to long-term competitiveness is being put to the test
In an era when short-term efficiency gains alone are not enough to adapt to future change, companies become more resilient when they can clarify which social issues they will address and how, while building on their own strengths. SX can serve as a framework for translating that direction into business management.
The Differences Between SX, DX, GX, and the SDGs
Because SX is often confused with similar terms, it is important to clarify the differences.
The Difference Between SX and DX
DX is an initiative to transform operations and business models through digital technology. Typical examples include reducing paper-based processes, making better use of data, and rethinking customer touchpoints.
SX, on the other hand, is the concept of embedding corporate sustainability and long-term value creation into management. DX is not SX itself, but it can be a powerful means of supporting SX. For example, visualizing energy consumption, integrating supply chain data, and analyzing workforce data are all ways DX can help advance SX.
The Difference Between SX and GX
GX stands for Green Transformation and refers to an approach focused primarily on environmental transformation, such as decarbonization and the transition to new energy systems.
SX has a broader scope than GX. It considers not only the environment, but also talent, governance, local communities, business relationships, and the long-term sustainability of corporate value. GX is sometimes positioned as one component of SX.
The Difference Between SX and the SDGs
The SDGs are the Sustainable Development Goals set out by the United Nations. They provide a framework that indicates the direction society as a whole should pursue.
By contrast, SX is an approach in which companies transform their management and business operations in response to these social changes and expectations. If the SDGs represent goals for society as a whole, SX can be seen as a practical perspective for incorporating those goals into corporate management.
Why companies should engage in SX
SX is not relevant only to a handful of large corporations. It is also becoming increasingly important for mid-sized companies and SMEs for the following reasons.
It becomes easier to prepare for business continuity risks
Issues that affect business continuity are increasing, including rising raw material prices, dependence on specific business partners, talent shortages, and disaster risks. By reviewing the company from an SX perspective, it becomes easier to identify where future risks may arise.
Become more likely to be chosen by business partners
This is especially true for B2B companies, where customers are increasingly looking at how the entire supply chain is responding. Even without undertaking large-scale regulatory initiatives, being able to explain your company’s policies and actions helps build trust.
It becomes easier to connect on-site improvements with management policy
There are many on-site improvement measures, such as energy saving, process standardization, inventory optimization, and the development of training systems. By applying an SX perspective, companies can avoid treating these as one-off improvements and more easily connect them to the overall direction of management.
Creates opportunities for new value propositions
Addressing social issues can reveal opportunities for new products, services, and proposal themes. For example, systems that help customers reduce labor, improve visibility, and enhance traceability can also become value propositions in the context of SX.
Operational Themes to Review Through SX
Because SX can seem abstract, it is important to translate it into practical business themes.
Understanding energy and resource use
Assess how well energy consumption and resource losses are being tracked across factories, offices, logistics, and other operations. When too much remains invisible, it becomes difficult to determine where meaningful improvements can be made.
Improving Supply Chain Visibility
Concentrated supplier bases, transaction management that depends on specific individuals, and fragmented quality and delivery information can all increase risk. It is important to organize business partner information and build a structure that is resilient to change.
Investment in People and Organizations
Recruitment, employee development, skills transfer, evaluation systems, and workplace conditions are directly tied to sustainable business operations. In industries facing ongoing labor shortages, investment in human capital can become a clear source of competitive advantage.
Information Disclosure and Data Management
It is also important to organize data that can support internal management decisions, not just external communications. When information is managed in scattered Excel files or on paper, it becomes difficult to support continuous improvement and accountability.
Expected Benefits of SX
By pursuing SX, companies can expect benefits such as the following.
- It becomes easier to identify medium- to long-term management risks
- Strengthen your ability to communicate clearly with customers and business partners
- It leads to cost optimization through energy savings and operational improvements.
- Helps retain talent and strengthen organizational capabilities
- It becomes easier to identify new business opportunities.
However, some aspects of SX are difficult to quantify in the short term. For this reason, it is important not to focus solely on short-term results, but to start with initiatives that can be sustained over time.
Key Points to Keep in Mind When Advancing SX
Because this is such an important theme, companies need to be careful that a poorly designed approach does not turn it into a mere formality.
Moving Beyond Slogans
Simply stating that the company prioritizes sustainability will not drive action on the ground. It is necessary to connect management priorities with practical business issues and clearly define what needs to change.
Avoid simply increasing the burden on frontline teams
Simply increasing the amount of information collected or the number of reporting items places a disproportionate burden on frontline teams. It is important to systematize data collection and aggregation so the process can be sustained over time.
Avoid rolling it out across the entire company all at once
If initiatives are rolled out across the entire company from the outset, priorities can easily become unclear. It is often more effective to start with themes that have a significant impact or with departments where action is easier to implement.
Keep external messaging aligned with actual practices
If external communications get ahead of the company’s actual internal progress, trust may be damaged. It is important to clearly distinguish between what has already been achieved and what still needs to be addressed.
Basic Steps for Advancing SX
1. Identify the social changes that affect your company
Identify external factors that affect your business, such as climate change, talent shortages, customer and supplier requirements, regulations, and investor expectations. There is no need to cover everything; a practical approach is to begin with the themes most relevant to your company.
2. Visualize the current situation
Assess the current state of operations, data, organization, procurement, and information management. The starting point is to understand what is visible and what remains unclear.
3. Decide on priority themes
Prioritize initiatives such as energy saving, procurement management, human resource development, and disclosure infrastructure based on both business impact and feasibility.
4. Start small and verify the results
Start with a limited set of departments or operations, then test the approach while assessing both improvement outcomes and operational challenges. Building on small successes makes it easier to expand the initiative company-wide.
5. Combine it with DX to build a structured process
Continuity is essential for SX. If data collection, sharing, and analysis rely too heavily on manual work, the initiative will not take root. The key is to improve visibility and systematize processes so they can be managed sustainably without placing an excessive burden on teams.
How SMILE Can Help
SX cannot move forward on principles alone; it only becomes effective when it is connected to on-the-ground process design and data readiness. In practice, this makes questions such as where to start and how to minimize the impact on existing operations key issues.
SMILE supports phased implementation, from organizing business challenges and evaluating systemization to development and operation.
Companies considering DX or the use of AI should start with small operational improvements.
Summary
SX is an approach that incorporates social sustainability into management while aiming to achieve medium- to long-term corporate growth and value creation. It goes beyond environmental initiatives to include perspectives that affect overall management, such as talent, governance, supply systems, and information disclosure.
Today especially, a company’s ability to adapt to social change is directly linked to its competitiveness. It is important to start by organizing the themes most relevant to your business, begin on a small scale, and turn them into initiatives that can be sustained over time.
FAQ
Are SX and the SDGs the same?
They are not the same. The SDGs provide a framework for sustainable development goals for society as a whole, while SX is a management concept in which companies reflect these social changes in their business strategy to achieve sustainable growth in corporate value.
Is SX only relevant to large companies?
No. SX is highly relevant even for small and medium-sized enterprises, as it affects customer and supplier requirements, talent acquisition, business continuity, energy cost management, and more. It is important to define the scope of initiatives based on the company’s size.
What should we start with first to advance SX?
A practical first step is to identify the external changes that have the greatest impact on your company and assess which data and business processes are currently not visible.
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