"Carbon Neutrality" Can Be a Catalyst for Enhancing Corporate Value

As interest in achieving "carbon neutrality" (net-zero greenhouse gas and CO2 emissions) grows both domestically and internationally, companies are accelerating their efforts.

On August 24, 2021, the Dentsu Inc. Japan Network Sustainability Promotion Office and Dentsu Inc. Team SDGs hosted the "Carbon Neutrality Frontline Webinar: The Crisis and Business Opportunities of Carbon Neutrality for Companies." This series reports on the webinar content over two installments.

This installment covers the keynote speech by Professor Yukari Takamura of the University of Tokyo's Future Vision Research Center and the talk session featuring Rie Takeshima and Yu Hayashi of Dentsu Inc. Team SDGs.

Business Toward "Carbon Neutral by 2050"

First to take the stage was Professor Yukari Takamura from the University of Tokyo, who researches legal and policy issues related to climate change and energy. Based on global trends surrounding carbon neutrality, domestic policy, and financial market movements, she explained the responses now required of companies as follows.

Global temperatures have already risen by 1.09°C compared to the 19th century during the 2011-2020 period. Unless significant reductions in greenhouse gas emissions are achieved within the next few decades, temperatures could easily exceed a 2°C rise this century. Global warming is causing rapid changes in the atmosphere, oceans, cryosphere, and biosphere, significantly impacting the frequency and intensity of extreme weather events.

Against this backdrop, global efforts to achieve carbon neutrality (a decarbonized society) are intensifying. Under the 2015 Paris Agreement, which sets the long-term goal of limiting global temperature rise well below 2°C and pursuing efforts to limit it to 1.5°C—aiming for a decarbonized society by the latter half of this century—over 120 countries have set targets equivalent to limiting the temperature rise to 1.5°C, such as achieving "carbon neutrality by 2050." Japan also declared its "carbon neutral by 2050" goal in 2020. Riding the global wave of carbon neutrality, an increasing number of companies within Japan are setting carbon neutrality by 2050 as their target.

Regarding why companies are moving toward carbon neutrality, Mr. Takamura stated that while climate change can certainly negatively impact business and pose risks, "demands for decarbonization and CO2 emissions reduction are emerging across financial markets and entire supply chains, making climate change response a critical factor influencing corporate value." Financial institutions and investors are actively urging companies to disclose climate-related risks, and in some cases, are exercising their voting rights.

"Domestically, some financial institutions have declared their intent to achieve net-zero greenhouse gas (GHG) emissions in their investment portfolios by 2050, and this trend is expected to accelerate further," said Takamura.

This demonstrates how corporate and financial market actions are significantly influenced by domestic and international policies aiming for carbon neutrality. Takamura predicts that since approximately 85% of Japan's GHG emissions originate from energy use, future efforts will focus on further improving energy efficiency alongside "maximizing the introduction of renewable energy." He also suggests that measures like achieving zero emissions for residential and commercial buildings and halting new sales of gasoline-powered vehicles could be strengthened.

Furthermore, he stresses the need for policies to develop systems, rules, and infrastructure for the social demonstration and implementation of new technologies that leverage Japan's technological strengths. He also highlights the importance of monitoring policy trends in "sustainable finance," which supports corporate GHG emission reductions through financial means.

Finally, Mr. Takamura summarized what is now required of companies amid these changes as follows:

"Investor interest is growing significantly not only in climate change responses but also in the circular economy and biodiversity. Creating sustainable products and services, including carbon neutrality, directly enhances evaluation from business partners and investors. Furthermore, considering that the products and services created by one company support many others, pursuing carbon neutrality can also be seen as enhancing the corporate value of our partners' customers."

Insights from the 'Dentsu Inc. Carbon Neutral Consumer Survey'

Next to take the stage were Rie Takeshima, Project Leader at Dentsu Inc. Team SDGs, and Yu Hayashi, SDGs Consultant within the same team. They drew insights for future corporate initiatives from the results of the "Dentsu Inc. Carbon Neutral Consumer Survey," a fixed-point survey revealing consumers' awareness of carbon neutrality and their perceptions of companies actively pursuing it.

First, regarding awareness of the term "carbon neutral," over half of respondents reported having heard it. By age group, awareness increased with age, while it was also notably high among teenagers. Hayashi explained, "When we surveyed awareness of the SDGs, the graph showed a similar curve. This indicates teenagers tend to be highly sensitive to sustainability."

Subsequently, a survey on awareness of initiatives within the 14 key areas identified by the government as having potential for carbon neutrality growth revealed that awareness was relatively high for three areas: "Making renewable energy the main power source," "Decarbonizing automobiles and realizing battery storage technology," and "Realizing a resource-recycling society." However, it was found that initiatives in other areas are still largely unknown to the general public.

Furthermore, in interviews about global initiatives, the majority of respondents perceived that "the world is more actively engaged" in all areas. Mr. Takeshima explained the gap between perception and reality, stating, "Looking closely at the details of the initiatives, it seems that Japanese companies are more advanced in some areas. However, since the general public has the impression that the world is more advanced, I think it is necessary to clearly communicate how Japanese companies compare to the rest of the world."

The survey selected a total of 40 companies from various industries to examine public awareness and expectations regarding their carbon neutrality initiatives. Mapping these results by industry reveals each sector's current position, both experts stated.

"For example, the automotive industry tends to have relatively high levels of both awareness and expectations regarding carbon neutrality efforts. This is likely because both individual company initiatives and industry-wide efforts are easily understood as connected to carbon neutrality," stated Hayashi. Conversely, the real estate and construction/housing industries show lower levels of both awareness and expectations. This is because both individual companies and the industry image as a whole are perceived as having a weaker connection to carbon neutrality. He explained that these results offer hints for the measures each industry should pursue.

① High Awareness & High Expectations (Automotive Industry)
This industry is expected to lead the charge toward carbon neutrality. Cross-industry collaboration and proactive communication with the international community are essential.

② Low Awareness, High Expectations (Transportation Industry, Electrical Equipment/Machinery Industry, Energy Industry)
Awareness is already high among sensitive individuals, so future efforts should focus on expanding awareness to a broader consumer base. The key is to clearly connect these concepts to consumers' daily lives.

③ High Awareness, Low Expectations (Food Industry, Retail Industry)
Beyond consumer touchpoints, promoting carbon neutrality across the entire supply chain, including back-end operations, is essential. Simultaneously, initiatives and communications that allow customers to tangibly experience carbon neutrality through their interactions are key.

④ Low Awareness, Low Expectation (Real Estate Industry, Construction/Housing Industry, Telecommunications Industry)
It is essential to explain how the industry's carbon neutrality efforts relate to consumers' lives and what benefits they bring.

Mr. Takeshima stated, "Many companies are already working toward carbon neutrality, and consumer awareness is gradually increasing. To further enhance understanding and empathy going forward, it is crucial to develop communication strategies tailored to the characteristics of the industry and the company itself."

Finally, survey results on consumer perceptions of companies pursuing carbon neutrality were presented. It was revealed that over half of consumers not only consider companies working toward carbon neutrality as "worthy of support" and "trustworthy," but also express a desire to "use their products/services long-term" and "purchase/use their products/services."

"We can see that carbon neutrality initiatives are important for both tangible benefits and engagement," concluded Mr. Hayashi.

Through the keynote speech and talk session introduced here, it became clear that by pursuing carbon neutrality, companies can enhance their reputation among stakeholders like investors and business partners, potentially leading to expanded product lines, increased sales, and improved customer loyalty. While swift and proactive action toward carbon neutrality is required, this shift also appears to present significant business opportunities.

Next time, we'll report on a webinar that explored what companies should do to achieve both a carbon-neutral society and corporate growth, featuring real-world case studies!