How Japanese Companies Are Addressing Their Carbon Footprint

In recent years, Japanese companies have ramped up their efforts to tackle carbon emissions and support global sustainability goals. However, Japan’s heavy reliance on international carbon credits, especially those sourced from developing countries, has raised concerns. Critics argue that some of these projects may lack strong environmental benefits or proper monitoring and verification systems. Let’s take a closer look at Japan’s approach to this issue.

Regulations Governing Carbon Emissions in Japan

One of the key regulatory frameworks for addressing carbon emissions in Japan is the Act on Promotion of Global Warming Countermeasures (APGWC). This law mandates companies to measure, report, and reduce their greenhouse gas (GHG) emissions. Businesses exceeding specific emission thresholds must submit detailed plans outlining how they aim to cut emissions and monitor their progress.

Many companies have pledged to achieve carbon neutrality. Japan is also one of them, which pledged to achieve carbon neutrality by 2050. This national target has further strengthened regulations such as the Carbon Pricing system, which includes carbon taxes and emission trading schemes. Thanks to those efforts, companies are incentivized to adopt cleaner technologies and improve energy efficiency.

How Companies Are Evaluated

Japanese companies are evaluated on their carbon reduction efforts based on several criteria. Here are some examples:

1. Emission Reductions: Companies are assessed on the percentage decrease in their GHG emissions compared to baseline levels. This includes reductions achieved through energy efficiency, renewable energy adoption, and process improvements.
2. Emission Offsetting: Offsetting involves compensating for emissions by investing in projects like reforestation, renewable energy, or carbon capture and storage (CCS). Companies that are unable to offset their emissions through these methods can reduce their carbon footprint by purchasing carbon credits.
3. Transparency and Reporting: The government requires the implementation of the Greenhouse Gas Emissions Accounting, Reporting, and Disclosure System. Organizations are obligated to report their emissions data and reduction efforts through this system.
4. Alignment with Global Standards: Many companies adopt international standards like the Science-Based Targets initiative (SBTi) or align their goals with the United Nations’ Sustainable Development Goals (SDGs).

These frameworks, such as the Science Based Targets initiative (SBTi) or the Greenhouse Gas (GHG) Protocol, play a crucial role in enhancing a company’s credibility in its environmental efforts.

Are the Standards Rigorous?

Japan’s regulatory standards for carbon emissions are stringent but still evolving. The government emphasizes sector-specific benchmarks, recognizing that industries like manufacturing, energy, and transportation have unique challenges. In Japan, as well as in other countries like the EU, manufacturers are subject to energy efficiency benchmarks that specify how much energy they should consume per unit of production. Companies must meet or exceed these benchmarks to avoid penalties or reputational damage. To ensure compliance, third-party verification bodies audit companies’ emissions data and reduction measures.

However, the situation is not straightforward. Why? Critics highlight that Japan’s continued reliance on carbon offsetting and fossil-fuel-based energy presents a major obstacle. Although carbon offsetting helps reduce emissions, it doesn’t tackle the fundamental need for a shift to renewable energy sources.

Support Mechanisms for Companies

Many major Japanese corporations, including Toyota, Sony, and Mitsubishi, have set ambitious targets to reduce carbon emissions, with some aiming for net-zero by 2050. You may be asking, “Why is this achievable?” The answer lies in the strong support these companies receive from both the government and private sector organizations:

1. Government Initiatives:
   • Subsidies and Tax Incentives: The government provides financial assistance for renewable energy installations and energy efficiency improvements.
   • J-Credit System: This national program enables companies to trade credits earned from emission reductions or sequestration projects.
   • Carbon Pricing Mechanisms: The introduction of carbon taxes and emissions trading schemes pushes companies to adopt cleaner practices.
2. Private Sector Collaboration:
   • Industry Associations: Groups like Keidanren (Japan Business Federation) encourage companies to set voluntary emission reduction targets and share best practices.
   • Technology Partnerships: Collaborations between large corporations and startups foster innovation in carbon reduction technologies.
3. Global Partnerships:
   • Japanese firms often partner with international organizations to implement cross-border offsetting projects, such as renewable energy plants in developing countries.

Japanese companies have been actively investing in renewable energy projects across Asia, particularly in countries like Bangladesh, Indonesia, and the Philippines. According to Reuters, since 2019, Japanese firms have invested in new LNG import terminals with a combined capacity of 16.2 million tons in these regions. This investment is helping enhance energy security and facilitate the transition to cleaner energy sources.

Leading Examples

Take Toyota Motor Corporation, Sumitomo Forestry, and Panasonic Holdings Corporation for examples. They are leading efforts in sustainability. Toyota aims for carbon neutrality by 2050, focusing on hydrogen fuel cells, hybrid, and electric vehicles, while also engaging in reforestation projects for carbon offsetting. Sumitomo Forestry emphasizes afforestation and reforestation to support carbon sequestration and biodiversity conservation. Last, Panasonic is committed to achieving net-zero CO2 emissions by 2050, investing in renewable energy solutions like solar panels and energy storage systems.

Challenges and Opportunities

You might have a big question: Is this shift towards environmentally friendly practices having a positive impact? This is one of the biggest challenges governments worldwide face, as it hinders the growth of this sector. While notable progress has been made, Japanese companies encounter obstacles like high upfront costs for adopting renewable energy and upgrading technology. Moreover, transitioning from a fossil fuel-based energy grid to renewables is a slow process.

However, these challenges also present opportunities. Companies that lead in sustainability can enhance their brand reputation, attract ESG-focused investors, and gain a competitive edge in global markets. According to Consumer Sustainability survey from Blue Yonder, Younger shoppers are more decisive and consistent in their purchasing decisions, with 85% of Gen Z and 84% of Millennials stating that sustainability is a key factor in their choices.

Conclusion

Japanese companies are playing a pivotal role in reducing carbon emissions and advancing global sustainability efforts. Through stringent standards, innovative strategies, and strong support systems, they prove that environmental responsibility can go hand in hand with business success. Even for companies unable to take direct action on environmental issues, there are numerous ways to enhance corporate ESG initiatives. As mentioned earlier, purchasing carbon credits is one such option. Some companies are already buying these credits from Canadian organizations to offset their carbon footprints. At Carbon Da Capo, we are here to support your company’s CSR efforts. Let’s take action together!