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The predicament in Japan’s supply chain


In a rare admission for the world’s largest automaker and Japan’s most powerful company, Toyota’s CEO Koji Sato admitted last week that there were “limitations” to his ability to provide support for his truck subsidiary Hino Motors.

On the same stage in Tokyo, Martin Daum, the head of Daimler Truck, issued an equally stark warning that the merger of the two groups’ truck units in Japan was essential to survive in the race for carbon neutrality.

“We need to turn a system that has been successful for the past 120 years into a completely new system within the next 10 years,” Daum said, noting that the effort would require new infrastructure for energy generation and distribution. “We have to do it to save the planet. This is so extensive that you cannot do it alone.”

Consolidation within the country’s busy auto industry is long overdue. But Toyota’s decision to lay off its commercial truck unit – marked by repeated emissions and fuel efficiency scandals – comes as the company faces pressure from shareholders to improve its governance structure and climate policies.

Two of the largest U.S. public pension systems — the California Public Employees’ Retirement System and the Office of the New York City Comptroller — voted against Akio Toyoda’s reelection at its upcoming annual meeting after proxy advisor Glass Lewis criticized the Toyota chairman for chairing a board that was not sufficiently independent. Along with Institutional Shareholder Services and the Church of England Pensions Board, the U.S. pension plans also supported a shareholder proposal to increase public disclosure of the company’s climate lobbying efforts.

Toyota said it would actively engage with shareholders and consider the most appropriate governance structure.

The automaker has been repeatedly criticized by investors for not being aggressive enough with its electric vehicle rollout and appearing overly protective of its hybrid technology. The criticism is not new, but at the heart of the problem is a climate change challenge that goes far beyond the predicament facing Toyota.

One of the greatest risks for companies is the competitive disadvantage they would face if, despite good intentions, global investors judge that Japan, which is heavily dependent on coal, natural gas and oil, adopts environmental policies that are inconsistent with the the rest of the world.

The country has pushed for an energy transition and climate strategy in Asia that does not sacrifice economic growth, saying the situation for developing countries in the region was “unique” compared to advanced economies in the US and Europe. The push for ammonia as a means of reducing emissions has also recently met opposition from other G7 members as it threatens to prolong existing fossil fuel infrastructure.

In the business world, Panasonic, Hitachi and others have been campaigning for a new environmental benchmark – called “avoided emissions” or Scope 4 – that would quantify the contributions companies make to reducing carbon emissions in wider society by offering energy-saving products and services. offer. In Panasonic’s case, the company argues that its contributions to lowering emissions by selling car batteries for use in Tesla’s electric vehicles should be recognized, even if the battery production is carbon intensive.

While the concept has gained support from asset managers such as London-based Schroders, critics have warned that creating a new climate measure would distract companies from actually reducing their carbon footprint in their own operations and supply chains.

Kim Schumacher, an associate professor of sustainable finance at Kyushu University, says Japan’s push for ammonia and avoided emissions is fundamentally driven by the need to make Japanese products more competitive, even if they are produced with a larger carbon footprint than those in other countries. countries with more low-carbon energy sectors.

Right now, companies with manufacturing sites in the country, such as Sony, are struggling to meet demands from Apple and other global customers to reduce the carbon footprint of their domestic supply chains.

The climate challenge also comes at a particularly sensitive geopolitical time. Global semiconductor companies, including Micron, Samsung Electronics and Taiwan Semiconductor Manufacturing Company, plan to ramp up production and research in Japan in response to the risks of the US-China technology war.

But if Japan is to position itself as a reliable and chain-friendly partner to the West, it will only do damage if its climate efforts, regardless of their logic, are seen as going against the global tide.


Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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