For most companies, business as usual is based on a fundamentally unsustainable model, with linear definitions of growth that are making way for new imperatives around sustainability. This is why we made sustainability a critical part of Fabric’s mission.
With this 2022 report, we share our second annual study into Sustainability in Japan. Our goal is to enable organisations to rethink their approaches to sustainability — aligning to Japanese principles like sanpo-yoshi, an Edo-era idea of creating shared value between the business, their customers, and society.
We know that brands are already bringing sustainable value propositions to consumers, with business leaders interviewed in our 2021 report sharing a belief that all of their products and services will take part in a sustainable transition, although many organisations are only at the start of this journey.
The decisions made in this transition will determine which brands and businesses succeed in the future, adapting to a new model around sustainable growth.
Each category transition will be shaped by a unique set of factors, and we have already conducted category specific studies with clients in lifestyle, food, technology, and financial services to help develop their sustainability and brand strategies. This overall Sustainability in Japan 2022 report is a broader study with outcomes for brands across categories.
The study focuses on the role of consumers in Japan, as understanding their key enablers, drivers, and barriers will support sustainable transitions across all categories, while providing longitudinal trends around the pace of change.
By putting people at the centre of the study, we’re able to identify critical insights into sustainability behaviours in Japan that can fill a key insight gap for brands and businesses, as well as government, not-for-profits, academics, and all stakeholders in Japan’s future.
We’ve also applied a systems thinking approach, looking at systemic social and environmental challenges in Japan, and working with experts in key areas like food to explore the underlying problems in their industries.
Throughout the report we refer to people as consumers, not to play into narratives around consumerism, but because it’s the clearest descriptor when looking at the relationships between businesses and their customers.
People are critical for achieving a sustainable future, but these futures are still unclear, which is why it’s important to enable shared value creation between all stakeholders in society.
Japan losing ground
Sustainability consciousness in Japanese consumers is shaped by layers of societal and economic context, and it’s important to understand this before jumping into the behaviours identified in our study.
The framework many brands are using to shape their sustainability strategies for Japan is the United Nations Sustainable Development Goals (SDGs). Their ubiquity across business and government narratives around sustainability in Japan makes them a key model which forms a structure around our consumer research.
According to the Sustainable Development Report 2022, Japan has a score of 79.6%, which means it dropped two places to 19 out of 167 countries since our previous study. (Sachs et al, 2022). Japan has failed to make significant progress on national priorities of: ‘gender equality’, ‘climate action’, ‘life below water’, ‘life on land’, and ‘partnerships for the goals’.
Some of the systemic challenges for Japan include:
- Decarbonising its energy sector, where renewables currently make up 6.3% (Sachs et al, 2022);
- Reducing plastic waste, with 8.2kg per person exported annually (Sachs et al, 2022);
- Reducing food loss, around 25 million tons annually (MOE, 2021);
- Addressing the ageing society, with 34% of people projected to be over 65 by 2040 (Ha, 2020); and
- Population decline, dropping by a record 644,000 in 2021 (Kyodo News, 2022).
There are businesses and organisations working hard to turn these around, and some government policies designed to take action, but the lack of progress means that if there isn’t a new wave of sustainable innovation, these could contribute toward a slow decline in Japanese society.
Business and governance issues
Over the past decade, Japan’s publicly listed companies started coming under pressure to disclose their sustainability performance to international investors and fund managers, who together own around 30% of Japan-listed securities (Nikkei, 2021).
As Environmental, Social, and Governance (ESG) became a standard practice globally, Japan’s corporates have had to play catch up, spending time and resources on audits and metrics, with few progressing to take meaningful action.
In October 2020, the Japanese government announced a net carbon neutral target of 2050, and many of Japan’s corporates have followed this pledge. However, these announcements have come with few details about how to reach that goal (MOFA, 2021).
One of the reasons is that Japan’s industries are already relatively energy efficient due to a national response to the 70’s oil shock, with another push made after the Fukushima nuclear disaster in 2011. The biggest challenge is switching away from fossil fuel imports, which requires a coordinated national strategy.
There has been a coordinated government and business effort to develop a hydrogen-based energy infrastructure, although there is no guarantee that this approach will work. Other solutions that fit Japan’s geography are also possible, such as solar sharing, offshore wind, and geothermal.
But even if renewables can drive innovation in the electricity industry, Japan will still need low carbon industrial process heat to ensure its valuable high-grade steel — responsible for 15% of carbon emissions — and other material industries remain globally competitive (Zissler et al, 2021).
Japan’s power market was deregulated in 2016, but change is still slow (Pilier, 2016). Many businesses find it difficult to hit their climate targets with Japan’s carbon intensive energy grid. Companies like Amazon Japan have taken this into their own hands, developing solar generation assets in partnership with Mitsubishi Corp., an example of the market disrupting impact of global businesses in Japan.
We should welcome government and business announcements like the 2050 carbon goal, but this must also come with significant pressure to speed up the transition, while clearly articulating the journey.
Within ESG, it is governance that will be hardest to shift. The average age of a Japanese CEO is 60 years old, with many holding deeply engrained beliefs around social impact and gender equality in particular, making it an imperative for organisations to to set out clear visions that include governance policy innovation, removing doubts about the capacity for change (Nippon.com, 2022).
This ESG transition could be hardest for Japan’s small and medium businesses, who account for the majority of jobs and gross domestic product (GDP).
They are dominated by the service sector, but also include thousands of manufacturing companies who are critical for Japan’s trade balance, exporting components and machine parts into global supply chains. The levels of embodied emissions in this ecosystem is increasingly a competitive disadvantage for these exporters, and without good measurement practices, they could struggle to reach the reporting requirements of global markets.
This is a challenge, as there are significant sustainability goals Japan needs to work toward beyond carbon emissions — particularly social and governance areas around gender equality. Again, global companies in Japan are the ones pushing progressive employment conditions and higher standards, attracting top talent while forcing local employers rethink their policies.
Environmental issues
Japan is a naturally green country, with 68% of land mass covered by forests, thanks to historical forest preservation policies and practices (Nippon.com, 2020). Of these mountainous forest regions 60% are designated natural, and there are around 3,000 not-for-profits working on forest restoration (MAFF, 2020).
There are challenges around conifer plantations, which are an increasing environmental liability and source of pollen that causes allergies for the Japanese population. These were mass planted in the post-war years to replace natural forests that were used in construction, covering 27% of land (MAFF, 2021).
Climate and disaster risks are significant in Japan, with the combination of extreme weather, typhoons, flooding, landslides, and earthquakes making it one of the most challenging locations in the world.
50% of the Japanese population lives on land that would sink below water during flooding, and 75% of assets are concentrated in urban areas (Nikkei, 2022). Japan recently came in 4th on the global Climate Risk Index, largely due to high per capita deaths from extreme weather events, with responses to these events estimated to cost around 0.5–1% of GDP annually (David et al, 2021).
Investing in climate risk mitigation will benefit both Japan and its regional and global partners. Japan has led in the past around technological innovation and geopolitical diplomacy around containing China’s ambitions in the Asia-Pacific — it is now critical that governments and business do the same on sustainability and climate. Japan needs to start by building credibility around the new contemporary framing of sustainability.
The SDGs include a spillover index, which assesses external effects along key sustainability dimensions, with higher scores relating to more positive and fewer negative actions in that country. Japan’s (67.3%) score is below the OECD average (70.7%), indicating there is still a long way to go. Another useful metric is the overshoot index, which indicates Japan’s resource use is 7.9 times a self-sustainable level (Earth Overshoot Day, 2022).
Japan doesn’t appear to be a high polluting society on a surface level, but this is often due to approaches that hide the impact of convenience and customer-centric lifestyles. This includes the greenhouse gas emissions that consumers don’t see day-to-day, which in Japan are around 9 tons per capita, about the same as Germany, but twice as high as France (MOE, 2013).
Consumers do participate in recycling systems and carefully divide rubbish into 3 or 4 streams, providing a perception of action — but this is often then used in thermal recycling that burns waste to generate electricity. This was world leading technology 20 years ago, but not today.
We explore Japanese consumer awareness around their lifestyles and how this connects to broader sustainability challenges in depth later in the report.
Social and cultural issues
Japan has a collectivist, conflict-averse culture that solves problems through ‘kizukai’, a mindset of being conscious about your impact on others.
These narratives about Japanese society are real, but don’t fully account for the cultural differences that are a legacy of Japan’s history, the role of non-Japanese residents in influencing change, and the underlying tensions that can drive social transitions.
The shared experience of the COVID-19 pandemic has been a significant driver of shifts in Japanese society, particularly around work culture.
Remote work proved that Japan’s long office hours weren’t accurate measures of productivity, and had been constraining the work-life balance of many in the workforce. New hybrid work policies led by international companies have trailed behind global standards, but are still a big change for Japan.
The pandemic also amplified challenges around workforce participation, with people of a working age decreasing to just 59% of the population, partly due to the intersecting problems of gender equality, an ageing society, and marginalisation. The employment policies and societal expectations that are preventing gender equality are of immediate concern, with a gender pay gap of 22.5% and female representation in parliament at 9.9% (Sachs et al, 2022).
The majority of elderly Japanese people are healthy and active contributors to society, with untapped potential and knowledge that could be returned to the labour force. They also make major contributions to the economy, especially in domestic tourism which is an important part of regional revitalisation efforts.
Over recent decades regional communities have been depopulated due to young people moving to cities for jobs — a trend which has just started to reverse due to the affordances of remote work and the availability of cheap rural properties.
Although regional revitalisation isn’t a specific SDG, it is a national priority. The rural communities at demographic risk are key parts of Japan’s cultural identity, with people maintaining an ongoing connection with the traditional produce, food, makers, and stories of their furusato (home towns) across the 47 prefectures.
The pace of change
Japan’s biggest challenge going forward isn’t the ability to evolve and adapt, but to ensure sustainable change happens fast enough.
There is a narrative that a regenerative revival in Japan is difficult due to a passive public, where people expect government and business to solve big, wicked problems, and people just follow. This mindset leads to policy making designed to protect current affluence and quality of life as much as possible, resulting in a slow decline.
The Japanese political system reflects this, with a relative lack of democratic engagement, a turn out of around 55% in the 2021 general election (which was actually up from a record low in 2015), and participation dominated by elderly voters (Nippon.com, 2021). Despite the urgency of sustainable change, much of Japan’s political bandwidth is taken up with economics, regional geopolitics, security, and constitutional reform.
This is why brands and businesses need to take the lead in driving sustainable transitions in Japan, working with consumers and employees to develop new value propositions that accelerate the pace of change.
Brands are certainly constrained by the context described above, but they are also able to move at a rapid pace, with a closer relationship to consumers and culture, while playing a critical role in the Japanese economy.
The opportunity for shared value creation is huge. To do this effectively, brands need to understand the emergence of the conscious consumer in Japan, from their behaviours and barriers through to the opportunities for engagement. This is what will inform brand stainability strategies, and be the starting point for future growth.
Approach
Our research approach for the ‘Sustainability in Japan 2022’ study was designed to help businesses understand consumers in Japan, providing a foundation to kickstart their category-specific sustainability strategies.
We used a series of methods to explore the problem space around sustainability issues in Japan by triangulating data from: a quantitative consumer study, thought leader interviews, trend analysis, additional data, and synthesis workshops.
1. Quantitative consumer study Fielded to a panel of 6,800 Japanese respondents aged 15–69. This is designed to be a representative view of the Japanese population across demographics and prefectures, with the ability to define segments and groups based on the responses.
2. Expert interviews Engaging industry experts throughout the research process to develop the study, expand on trends identified, and gain insight into actions and opportunities. These included: brand leaders, business owners, academics, activists, community members, and policy makers.
3. Trend analysis Scanning and analysis across qualitative and quantitative sources for pieces of data that collectively indicate trends, including: social behaviours, government policies, academic studies, and business or startup investments. We continually sense/scan at the edges of society for sustainability related data points.
4. Additional data Complementing the report with longitudinal data from previous years, consumer ethnographic research (interviews, contextual enquiries) we completed over 2021–2022, and industry specific data from studies completed with partners.
5. Synthesis workshops Workshops with our team and partners to synthesise the qualitative and quantitative data above into the themes, focus areas, and outcomes in the report.
Defining sustainability consciousness
As part of the 2022 study we’ve developed new methods for understanding consumer behaviours and attitudes around sustainability and brands, building on the approaches introduced in previous years.
In the study we measure sustainability consciousness through a 54 question scoring matrix that covers: 6 sustainability dimensions, agree/disagree statements, and behavioural questions. From this we assign scores of -4 to +30 for each participant from the 6,800 panel of people aged 15–69, identifying their overall sustainability consciousness. This data is then triangulated with attitudes and behaviours identified through the other methods above, synthesising this into an understanding of the different groups.
This study also includes some changes from previous years, which could impact the longitudinal parts of the study, the biggest being the shift from measuring ages 18–65 in 2021 to 15–69 in 2022.
We’ve also shifted from a sustainability engagement score in 2021 to a sustainability consciousness score in 2022, to more accurately distinguish between awareness and behaviour in our analysis.
This is explored in detail in ‘Part 1: Conscious Consumers’.
Defining generations
When defining generational differences we acknowledge the biases, assumptions, and generalisations made by business, media, and the public when using these terms. There are shared societal and historical experiences which influence their decision making, although nowhere near the level assumed in the public consciousness.
Balancing this, these terms are also widely understood by businesses in Japan, and by comparing differences between sustainability consciousness and demographic age groups we can start to unpack some of the generalisations about these groups. We are also able to measure longitudinal shifts between generations, looking at their beliefs as they change over time.
Our 2022 study includes participants aged 15–69, adding more to both Generation Z and Baby Boomers groups, although this is still a smaller range of these groups than other definitions.
