SX stands for “Sustainability Transformation.” Japan’s Ministry of Economy, Trade and Industry defines it as an initiative to align the sustainability of society with the sustainability of companies, carry out the management and business transformations required to achieve that alignment, and improve corporate value over the long term in a sustainable way.

Put simply, it is a shift in management that treats responses to social issues not as costs, but as a source of future business opportunities and competitiveness. Its defining feature is linking the company’s approach to the environment, people, supply chains, local communities, and governance with business strategy and investment decisions.

In recent years, many companies have faced the following changes.

• Requirements for decarbonization and resource circulation are becoming increasingly demanding.
• Labor shortages and the challenges of passing on skills are becoming increasingly serious.
• Companies are increasingly being asked by investors and business partners to explain non-financial information.
• Geopolitical risks and fluctuations in raw material prices are putting business continuity to the test.

Ad hoc responses to these changes are not enough. Companies need to identify where risks exist in their business and where growth opportunities lie, then reassess management, operations, and investment as an integrated whole. This is why SX is attracting attention.

SX is often confused with DX and the SDGs, but its purpose and role are somewhat different.

SX cannot move forward on principles alone. In practice, companies need to review areas such as the following.

When advancing SX, it is more practical to start by assessing the current situation and proceed step by step, rather than beginning with a grand vision alone.

Step 1. Map social issues to your company’s challenges

The first step is to identify the social issues that are relevant to your company. For a manufacturer, for example, key topics may include energy costs, CO2 emissions, procurement risks, labor shortages, and quality traceability.

From there, companies should clarify where “what society expects” overlaps with “what affects their own profitability and competitiveness.” This is the starting point for SX.

Step 2. Decide on priority themes

Simply listing issues will not move the business forward. The first step is to narrow the focus to the themes that should be addressed first, considering their management impact, feasibility, return on investment, and medium- to long-term importance.

Example:

• Visualize factory energy usage and identify opportunities for improvement
• Consolidate supplier information and make supply chain risks visible
• Standardize work that depends on specific individuals and redesign operations so skills can be passed on more easily.

Step 3. Define your metrics

In SX, simply “doing good” is not enough. Companies need to set KPIs to measure progress and results.

Example:

• Energy consumption
• Defect rate
• Rework effort
• Number of delivery delays
• Employee turnover rate
• Data entry time
• Supplier evaluation implementation rate

It is important to look not only at financial metrics, but also at non-financial indicators that contribute to future corporate value.

Step 4. Align your operations and systems

This is where DX becomes effective. If Excel-based management is fragmented, figures differ from department to department, or reporting takes too much time, it becomes difficult to drive SX forward.

For example, the following types of improvements can be effective.

• Centralize core business data
• Automating Frontline Data Collection
• Digitization of workflows
• Visualization with BI
• Building a management platform for supply chain information

Step 5. Start small and scale across the organization

Aiming for company-wide transformation from the outset can place a heavy burden on frontline teams and make the initiative more likely to lose momentum. A more realistic approach is to start with a single department, factory, or business process, then expand while assessing both results and challenges.

SX is not only relevant to large enterprises. Small and medium-sized businesses are already being affected through customer and business partner requirements, hiring challenges, rising energy costs, and other pressures.

For small and medium-sized enterprises, the following approaches are a good way to get started.

• Organize the information requested by business partners
• Select one paper-based or manual process and make it visible.
• Define the Data That Should Be Collected on the Frontline
• Set improvement themes in six-month cycles.
• Use external partners to build sustainable processes without overburdening the organization

What matters is not issuing an impressive statement, but creating conditions in which frontline teams and management are aligned in the same direction.

There are several points to keep in mind when advancing SX.