Factors promoting business strategies, activities, and long-term commitment for climate change mitigation: a survey of Japanese enterprises

Currently, businesses worldwide are expected to make long-term commitments aimed at climate change mitigation to achieve carbon-neutrality by 2050. However, before companies make long-term commitments, they may need incentives or institutional arrangements that encourage them to act. Previous studies have suggested that these incentives and institutional arrangements differ from those offered to encourage short- and mid-term activities. Japan has established a government-industry collaboration to mitigate climate change. This framework has proven to be organized and effective in undertaking climate action for the short- and medium-term; however, a more effective framework could be developed to promote a long-term strategy. This study surveyed 235 Japanese companies to examine effective institutional arrangements related to climate action. It demonstrated that the business sector aims to formulate institutional arrangements to ensure fairness and transparency in its climate change actions. Accordingly, norms, financial incentives, and accountability were identified as important factors. Furthermore, norms set by industry associations and international organizations influence the establishment of long-term commitments, unlike those set by third parties. Financial incentives were effective for encouraging long-term commitments and general mitigation activities, notably short- to mid-term activities. Information disclosure and verification by a third party had a positive effect on ensuring accountability in vision and quantitative target-setting for CO2 emission reduction. Long-term commitments are encouraged when such institutional arrangements serve as a self-regulating system for companies to establish and implement their vision.Key policy insights The role of non-state actors has attracted attention for achieving climate-related goals. Thus, identifying a mechanism that incentivizes non-state actors, particularly in the business sector, is crucial.Traditionally, government-guided frameworks have worked well in Japan. This study demonstrates the role of business associations, international organizations, and third parties in formulating institutional arrangements that promote a long-term commitment toward the 2050 vision.Industry associations and international organizations serve as norm-setters, while third parties act as a verifying body, enforcing fairness and transparency. Thus, appropriate institutional arrangements could serve as a self-regulating system to encourage companies to achieve climate change-related actions.