Tipping points, leverage points, and the shape of sustainable change in Japan

This article is an excerpt from our research publication SJ3: The pathway to regenerative business. A Japanese version is available on Note.

Summary

• Sustainable transformation occurs in three phases: emergence, acceleration, and stabilisation, with tipping points between stages.
• Leverage points in a complex system offer opportunities for significant outputs and minimal input.
• Tipping points are coming in high impact areas where at least 20–30% of people would like to make a change: renewable energy (33.7%), sustainable homes (22.1%), gender equality (27.4%), electric vehicles (31.2%), and impact investing (22.8%).
• Government and industry can drive further transformation through strategic interventions.

Sustainable transformation typically never follows a linear path. Instead, we can observe environmental, political, and socio-economic tipping points, which mark rapid change in certain conditions.

Allen and Malekpour¹ present an ideal sustainable transition in an S-shaped curve with three phases: emergence, acceleration, and stabilisation. Tipping points mark the boundary between the first two, when reinforcing feedback suddenly increases and balancing feedback decreases.

In order to cause a tipping point, around 17–30% of the population needs to be engaged, depending on the complexity of the issue.

Our research has shown that sustainability consciousness has been rising gradually in Japan, but the majority of the population remains in the Low consciousness group, motivated primarily by price and convenience.

People will more readily switch to sustainable alternatives in certain categories, where there is a clear win-win with tangible benefits. For example, participants in our 2021–2022 studies shared they believe the aroma and taste of Fairtrade organic coffee is superior, justifying the premium price. Conversely, these was a perception of poor cleaning quality in eco-friendly kitchen and bathroom products.

Change isn’t solely in the hands of individuals. Government, businesses, and not-for-profits all have the potential to facilitate transformation in certain parts of the system, known as ‘leverage points’. Environmental scientist Donella Meadows defines these as, “places within a complex system … where a small shift in one thing can produce big changes in everything”.²

So what are some of the key potential tipping points for sustainable behaviour in Japan — and where can companies and the Japanese government be more proactive in triggering change?

Sustainable lifestyle changes

Some actions that contribute to a sustainable society are already widespread in Japan.

Over 65% of respondents in our 2023 study vote in elections, 54% choose to walk, cycle or use public transport, and the four R’s — reducing, reusing, repairing and recycling — are now mainstream, adopted by more than the tipping point threshold of 30%.

Even among the negative consciousness group over 60% turn out to vote, and over half have chosen more sustainable forms of transport.

At the other end of the spectrum, attending a protest is inconceivable for 63% of people in Japan, and the majority have never considered reducing meat consumption, despite its proven impact on reducing your carbon footprint.³

The most useful data is in sustainable actions that people would like to do, but have yet to put into practice. These include areas of significant potential impact for business, government, and communities, and can form the basis of strategies that respond to anticipated tipping points.

1. Renewable energy

Our 2023 study found that 33.7% of people in Japan would like to switch to renewable energy in future.

The Japanese government has been actively promoting renewable energy since the deregulation of the market began in the late 1990s⁴, and as part of the Clean Energy Strategy to achieve carbon neutrality by 2050 and efforts to diversify the country’s energy mix.⁵

A noteworthy initiative is the Feed-in Tariff (FiT) system, introduced in 2012 to incentivise renewable energy development, which offers a guaranteed purchase price for electricity generated from renewable sources, incentivising further research and development.

This has indeed encouraged a wave of new developers and retailers of renewable energy, including Shizen Energy, Looop, and TRENDE. A related innovation, which has generated interest from major Japanese energy suppliers and startups alike, is peer-to-peer (P2P) energy trading, which uses blockchain technology to allow individuals and businesses to buy and sell excess renewable energy directly with one another.

There is an opportunity to educate people about the possibilities of switching to renewable energy, lower administrative barriers, and provide compelling incentives to strengthen adoption nationwide.

2. Sustainable homes

As well as opting for greener home electricity, investing in a more sustainable home is potentially one of the most environmentally impactful actions someone can take.

Positively, our 2023 study found that 28% of people in Japan would like to renovate their homes to make them more energy efficient, and 22.1% would like to move to a more sustainable home in future.

Notably, government policies, like Tokyo’s recent mandate requiring solar panels in all new homes starting in 2025, may also be helping to drive this positive shift towards renewable energy.

Meanwhile, manufacturers are innovating energy efficient houses that do not compromise comfort design or comfort. Sekisui House, the leader in this field, has built over 76,000 ZEH (zero energy houses), with 93% of new detached houses being net zero energy in 2022, a new record.

A cultural shift that is yet to happen is in maintaining and updating houses over the long term, and shifting away from a ‘disposable home culture’ that is neither environmentally nor financially sustainable.

3. Gender Equality

As one of the UN SDGs where ‘major challenges remain’ for Japan⁶, the government has been making concerted efforts to address the issue of gender equality.

Our 2023 study found that Japanese people are open to contributing to closing the gap, with 27.4% saying they would like to make this change.

Although there is substantial room to improve, the Womenomics initiative launched in 2013 made progress on several fronts. Large and medium businesses are now required to disclose their gender statistics and share action plans for women’s empowerment, a generous parental leave system was introduced, and the number of childcare facilities increased, encouraging women’s return to the workforce after giving birth.

Under global pressure, more companies in Japan have been developing Diversity, Equity and Inclusion (DEI) policies, hiring and promoting women, addressing pay equity and establishing Employee Resource Groups.

The Government Pension Investment Fund (GPIF) also began making ESG investments, influencing the investment market.⁷ As well as taking advantage of the schemes that their employers offer, people can support women-owned companies or ‘Nadeshiko Brands’, a title awarded by METI and the Tokyo Stock Exchange to companies that excel in women’s empowerment.⁸

By influencing daily behaviour, companies can play an important role by challenging gender stereotypes and creating new norms in both their internal and external practices.

4. Electric Vehicles

31.2% of participants in our 2023 study shared that they would like to switch to an electric vehicle in future.

A major piece of the government’s goal to achieve net zero GHG emissions by 2050 is its push for eco-friendly mobility.

By 2035, all new cars sold in Japan will be Clean Energy Vehicles (CEVs), which includes: Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicle (PHEVs) and Fuel Cell Electric Vehicles (FCEVs), but not Hybrid Electric Vehicles (HEVs). The government is now offering car buyers subsidies of ¥800,000 yen for the purchase of these vehicles.⁹

Global EV sales are set to increase by 35% in 2023, mainly driven by China, Europe and the United States; Japan is lagging behind. Smaller and more affordable electric ‘kei’ cars lead the market, but overall, EVs still accounted for only 3% of new passenger vehicles in Japan, compared with 39% in China.¹⁰

Domestic innovation may still be the gamechanger Japan has been waiting for. Toyota, which had long been betting on hydrogen, has recently adapted its strategy and announced a full BEV lineup in December 2021, claiming a breakthrough in solid state battery technology in June 2023.

The new battery reportedly has a 10-minute charging time and 1,200 kilometres range, and will be mass-produced within five years.¹¹

Enhancing the convenience of EVs and fostering increased competition, along with the added boost of government subsidies, has the potential to bring about a seismic shift in customer preferences within the automotive industry.

Today, people are more willing to make small sacrifices such as shunning plastic bags or bottles, than to make costly, and impactful, investments. Nascent interest in EVs is an important exception — especially since factors such as the high cost of vehicles, financing arrangements, durability, and depreciation encourage people to keep their cars for longer periods and tend to preclude sudden changes in the automotive market.

5. Impact Investing

22.8% of people in our 2023 study said they would like to invest in sustainable companies in future.

Although the Japanese impact investing market still accounts for less than 4% of the global total, it’s growing rapidly. Investments more than quadrupled from 1.3 trillion JPY in 2021 to 5.8 trillion yen in 2022, as a result of both increased investment level as well as new investing institutions.¹² Moreover, 84% percent of institutions surveyed planned to increase impact investing in the coming years, indicating continued growth.

The Japanese government is actively facilitating impact investing, with efforts including offering tax incentives, regulatory flexibility, and promoting social impact bonds, which can drive innovation through private sector investment.

On the corporate level, a growing number of organisations are engaging in impact investing in Japan, ranging from management firms to venture capital firms to major banks and insurance companies.¹² Although all major Japanese banks are actively involved in impact investing, and offer such funds, there is still a need to raise awareness and understanding through clearer communication.

Impact investing is an important area where individuals can also magnify their personal influence. According to GSG, awareness is highest among Generation Z and Millennials who already have some degree of investment experience, with over half of investments being related to climate change mitigation or healthcare.¹²

Although there is still some debate about the transparency and financial returns of impact investment, the market is still clearly in its infancy and we can anticipate a gradual normalisation over time.

The shape, and speed, of transformation

The shape of sustainable change in Japan, as in any country, is not simple. Attempting to fit it onto a typical S-curve may seem feasible, but upon closer inspection, we discover its true nature — a jagged landscape composed of various curves, intricacies, and sectors, each with their own distinct dynamics of change.

Some of these S’s are steeper than others, already moving from emergence to acceleration.

Renewable energy (33.7% of participants), sustainable homes (22.1%), gender equality (27.4%), electric vehicles (31.2%), and impact investing (22.8%) are all substantial areas that would have significant social, environmental, and economic impact — and where a significant proportion of the population would like to make a change.

Importantly, these groups have yet to take concrete action, highlighting opportunities for government and companies to drive transformation through effective policies, communication, education, and innovation.

Overall, it’s the confluence of these various tipping points and leverage points that can expedite Japan’s overall pace of transformation in the years to come.

References

1. Allen, C., Malekpour, S. (2023) Unlocking and accelerating transformations to the SDGs: a review of existing knowledge. Sustain Sci 18, 1939–1960. Available at https://doi.org/10.1007/s11625-023-01342-z
2. Meadows, D (1999) Leverage Points: Places to Intervene in a System. https://donellameadows.org/archives/leverage-points-places-to-intervene-in-a-system/
3. The Guardian (2021). Meat accounts for nearly 60% of all greenhouse gases from food production, study finds. https://www.theguardian.com/environment/2021/sep/13/meat-greenhouses-gases-food-production-study
4. Tokyo Gas (2023) Deregulation of the Electric Power and Gas Markets. https://www.tokyo-gas.co.jp/en/IR/library/pdf/anual/17e06.pdf
5. JapanGov (2023) Clean Energy Strategy to Achieve Carbon Neutrality by 2050. https://www.japan.go.jp/kizuna/2022/06/clean_energy_strategy.html
6. Sachs, J.D., Lafortune, G., Fuller, G., Drumm, E. (2023). Implementing the SDG Stimulus. Sustainable Development Report 2023. Paris: SDSN, Dublin: Dublin University Press, 2023. 10.25546/102924
7. Matsui, K. (2023) ‘Womenomics’ can bring women back to the workplace after COVID. https://fortune.com/2022/05/10/japan-womenomics-gender-equality-covid-economic-recovery-kathy-matsui/
8. Nadeshiko Brands Selected for FY2022 (2023). https://www.meti.go.jp/english/press/2023/0322_001.html
9. ITA (2021) Japan Transition to Electric Vehicles. https://www.trade.gov/market-intelligence/japan-transition-electric-vehicles
10. Mainichi (2023) Global EV sales to jump 35% to record 14 million units in 2023: IEA. https://mainichi.jp/english/articles/20230513/p2g/00m/0bu/020000c
11. Davies, R. (2023) Toyota claims battery breakthrough in potential boost for electric cars (2023). https://www.theguardian.com/business/2023/jul/04/toyota-claims-battery-breakthrough-electric-cars
12. The Japan National Advistory Board, The Global Steering Group for Impact Investment. (2022) https://impactinvestment.jp/user/media/resources-pdf/gsg-2022_en.pdf

Fabric is a Strategic Design and Sustainability consultancy helping businesses move towards more innovative, sustainable futures. Based in Tokyo, we’ve been consulting with global and local companies since 2004. We have extensive experience bringing together design thinking, sustainability, and human insight to deliver good strategy for clients.