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Article

How Meaningful Are Modest Carbon Emissions Reductions Targets? The Case of Sumitomo Electrical Group’s Short-Term Targets towards Longer-Term Net Zero

by
Natalie Warzywoda
,
Paul Dargusch
and
Genia Hill
*
School of Earth and Environmental Sciences, University of Queensland, Brisbane 4072, Australia
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(7), 4287; https://doi.org/10.3390/su14074287
Submission received: 12 January 2022 / Revised: 16 March 2022 / Accepted: 31 March 2022 / Published: 4 April 2022
(This article belongs to the Special Issue Going Net Zero—Case Studies of How Firms Are Managing the Challenge of Ambitious Emissions Reduction Aspirations)
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Abstract

:
Japan is one of 196 parties who adopted the Paris Agreement and is committed to reducing greenhouse gas emissions to achieve net zero by 2050. Greenhouse gas emissions are predicted to increase global temperatures by +3.8° in 2100 under RCP8.5. In response to the Paris Agreement, Sumitomo Electrical Industries Ltd. (Osaka, Japan, 107-8468) (a Japanese manufacturing company) has committed itself to being net zero by 2050. The aim of this research was to determine the overall GHG reductions of SEI to evaluate whether they have met their sustainability development goals and emissions reductions target. Evaluation of the GHG targets pledged by SEI was performed using secondary data analysis from their most recent company sustainability report. They estimated 1,372,000 tons of CO2-eq emissions in 2019 for the company globally. This accounted for scope 1 and 2 emissions estimates. They implemented a conservative target of a 0% change in emissions between 2017–2019, but recorded a reduction of 13%. Summitomo Electrical Industries Ltd. implemented transport changes, energy savings, and developed ‘ECO’ products to meet their sustainability and carbon management goals. SEI have demonstrated that modest targets can lead to meaningful carbon emissions reductions through potentially low-cost, easily implemented, and accessible options. Addressing the target of net zero, however, will only be addressed in large-scale emissions reductions practices which will be the determining factor for SEI’s ambitions of net zero by 2050. Their conservative approach shows that there is room for more ambitious carbon management within Summitomo Electrical Industries. Moving forward, several carbon emissions management actions can be implemented to further reduce emissions including carbon capture and storage, purchasing offsets, and investment in renewable energies. There are limitations to this desktop study including data reliability. However, this is a useful first step for investigating carbon management performance.

1. Introduction

Post-industrial increases in atmospheric greenhouse gas (GHG) concentrations have been unequivocally linked with anthropological activities [1]. Continued increases in GHG concentrations are occurring with carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) estimated at annual averages of 410 ppm, 1866 ppb and 332 ppb, respectively, in 2019 [1]. All GHGs are converted to their CO2 equivalent (CO2-eq) (labelled in this report as CO2) which relates to their equivalent CO2 global warming potential. GHGs contribute to mean global surface temperature increases, through increased radiative forcing, with temperatures likely to reach >2 °C under the defined representative concentration pathway 8.5 (RCP8.5) by 2100 [1]. Rises in atmospheric CO2 concentrations are linked with increases in surface and oceanic temperature, change in precipitation, reduction in ice sheets and impacts to vegetation and wildlife [1]. Climate change is contributing to alterations in immediate weather patterns and long term changes of heat waves, frosts and drought [2]. Climate induced environmental degradation has been directly linked to negative impacts on human health and economic performance [3]. If the current warming trends continue, it is expected that global temperature increases will reach +3.8 °C by 2100 unless CO2 emissions are significantly reduced [4].
The Paris Agreement is an internationally binding treaty developed to limit climate change with the overarching aim to limit global warming below 2 °C [5]. Near zero future global carbon emissions are required to stabilise global surface temperatures [6]. The Paris Agreement was adopted by 196 parties in 2016, including Japan, which has committed to being net zero by 2050 [5,7]. Following the 2011 Fukushima Daiichi accident, there was a substantial increase in carbon emissions due to a reduction in nuclear power [8]. However, from 2013, Japan’s emissions began declining [8]. In Japan, the manufacturing sector is responsible for a majority of the country’s CO2 emissions with exports of goods being a major contributor [9]. Sumitomo Electric Industries Ltd. (Osaka, Japan, 107-8468) (SEI) is a major company involved in manufacturing in Japan that has taken steps to reduce its carbon footprint. The Sumitomo environmental philosophy states that ‘it is primarily important to establish a society that is sustainable and has less environmental impact, and contributes to society by providing products and services’ [10].
After revision for the fiscal (financial year) 2019, SEI added new initiatives to reduce GHG emissions by a further 5% (from fiscal year 2017) by 2022 [10]. SEI added initiatives to promote the introduction of renewable energy and environmental awareness throughout the company [10]. Analysis of the GHG emissions reductions by SEI has not been performed and can be utilised in further comparisons with similar firms to determine the most effective carbon offset plans for the manufacturing sector. The aim of this report is to explore company targets, reported reductions in GHG emissions and steps taken to meet these targets. It will investigate reductions in reported emissions, methods utilised to achieve their targets and analyse carbon management performance.

2. Overview of the Firm

SEI was established in April 1897 in Japan and has since moved global, operating in over 40 countries with 416 subsidiaries and affiliates [11]. Based primarily in Japan, it has global operations throughout Europe, Asia and America [11]. Its capital stock currently sits at 99.7 million yen and as of 31 March 2020, it had 289,930 employees with approximately 6020 non-consolidated [11].
SEI developed and uses an innovative copper refining technique to construct multiple products from copper wires including power cables, telecommunication cables and electric wires [11]. Since the company’s establishment, it has expanded into five (5) other sectors using wire development technologies including automotive, info-communication, electronics, environment and energy, and industrial materials [11]. SEI is part of the manufacturing sector and is routinely divided into the Sumitomo Electrical Group (SEG) and Sumitomo Wiring Systems (SWS) [11].
The main theme for environmental preservation is the prevention of global warming into 2022 and a target of 0% change in CO2 emissions from fiscal year 2017 [10]. This has been established in line with two of the sustainable development goals (SGDs): (1) affordable and clean energy, and (2) climate action. They have also developed several targets and pledges for global warming prevention.

3. Pledges

The SEI company sustainability report (CSR) covers the targets and pledges that have been put forward to meet net zero by 2050 (Table 1) [10]. A secondary data analysis was performed using the open access information obtained in the SEI company sustainability report (CSR). All figures and tables represented throughout this report were constructed using this information to enable clear identification of targets, goals and effectiveness of emissions reductions. The set targets were compared across multiple years (2017–2020) to determine the trajectory of their emissions reductions and provide further recommendations to be utilised throughout the manufacturing sector. The overarching pledge is to have no increases in GHG emissions by 2022 from the fiscal 2017 estimates. Currently, SEI are aiming for a 5% reduction in GHG emissions from production sites and reducing CO2 emissions from products by 150,000 tons/year by 2022 (relative to 2017) (Table 1). They have developed these pledges in line with multiple SDGs through assessment of major environmental risks and their management goals for each. Other areas in which they pledge to reduce emissions include energy consumption, product construction, and their ‘ECO’ range expansion (Table 1).
Several environmental risks have been identified by SEI in their CSR report with countermeasures and implementation activities noted [10]. These risk factors are categorised into the physical and regulatory risks of climate change. The physical risks include temperature increase, sea level rise, and increased typhoon size and frequency. The regulatory risks include regulations on atmospheric CO2 emissions, wastewater discharge, carbon pricing (tax), reduction of GHG emissions, environmental product labelling and renewable energies.

4. Emissions Estimates

All CO2 emissions estimates for SEI were available in their sustainability report covering 2018/2019 but lacked current data for 2020 targets (Table 1, Figure 1 and Figure 2) [10]. When compared with 2019 global CO2 emissions estimates for the manufacturing sector, SEI contributed <1% [12,13,14,15]. In Japan in 2019, SEI contributed approximately 2% overall to the manufacturing sector CO2 emissions estimates. However, only scope 1 (direct) and scope 2 (indirect) emissions were utilised for this estimate (Figure 1). SEI have reduced their scope 1 and 2 reportable emissions in 2019 by 11% from 2018 (Figure 1). Scope 3 was also estimated, with a reported 6921 thousand tons/year in 2019. This includes organisational and product footprint estimates.
The transport of products, both nationally and internationally, contributed significantly to CO2 emissions for SEI [16]. Emissions from international transport declined by 9%, whereas national travel throughout Japan increased by 2%. In total, the emissions reduction in 2019 from the transport sector of SEI was 7% from 2018 estimates (Figure 2). This brought the reportable CO2 emissions down to 89,489 tons/year in 2019. There are currently no reported values for fiscal 2020.

5. Emissions Reductions

The CSR provides multiple ways in which SEI reduced their reported emissions [10]. The absolute CO2 emissions reductions globally for SEI were 13% (relative to 2017) (Table 1) and have been reported by the company as a result of a decrease in emissions from electricity use and electricity waste (i.e., heat loss). Throughout their report, they highlight four (4) ways in which they reduced their CO2 emissions to help tackle climate change. There was no information on the use or purchase of carbon offsets; rather, they tried to improve their energy efficiency in production and the office, promotion and development of ‘ECO’ products, and reduction of fossil fuel use through transport and export. Environmental audits were implemented to ensure companywide compliance with environment-related laws and internal environmental policies.

5.1. Energy Efficiency

Improved energy efficiency was selected to reduce energy consumption and wastage with a total target of a 6% and 15% reduction by 2019 and 2022, respectively (Table 1). These totals are the combined targets for the ‘Global warming prevention and energy saving practices’ detailed in Table 1. SEI achieved a reduction of 8.8% through the implementation of the energy reduction measures in 2019 (Table 1). This is the combined total for the reduction of CO2 in logistics and reduction of energy consumption for unit sales and floor area. They eliminated wasteful power consumption and enabled faster detection of equipment malfunctions. Equipment was evaluated using ultrasonic wave (or infrared) instruments to detect steam and compressor air leaks. SEI also identified, developed, and evaluated performance of new technologies to reduce heat loss (heat waste) and promote heat recycling. Multiple divisions within the company were similarly given the task of working closely together to improve the overall efficiency in energy use.

5.2. Office-Based Emissions Reduction Practices

There were multiple reported office-based energy saving practices that were implemented to reduce energy consumption (per unit sales). The targets for office-based reductions practices have been identified and presented in Table 1 (Offices); however, current data on the efficacy of these practices are unknown. Estimates on the efficacy of these practices are not currently available. The main practices implemented revolve around reducing emissions at the individual level throughout the company. This was done by increasing energy efficiency practices through turning off lights and air conditioning when offices and rooms are not in use (i.e., offices, toilets, meeting rooms), introduction of economy and power-saving modes for office devices, and the use of zone lighting during overtime hours. Employees were also encouraged to dress appropriately for the season to reduce the use of air conditioning and climate control practices.

5.3. Transport

Transport was a major contributor to the reduction of overall emissions in SEI and has been calculated at a reduction of 7% (the total difference between 2018 and 2019 emissions) throughout their export and transport estimates (Figure 2). This reduction was due to implementation of more efficient national transportation. There was a shift in transport type from truck to rail with the reestablishment of the JR Sanyo Main rail line in 2019. The transport loading areas, networks and relay points were also altered to create an improved loading efficiency and reduce the number of trucks utilised. The amount of ‘urgent’ transportation needed was also reduced; however, this was due to stabilisation in products rather than implementation of transport protocols.

5.4. ECO Products

ECO products have been developed and placed into three broad categories: (1) ‘ECO-minds’, (2) ‘eco-products’ and (3) anti-global warming. These products have been estimated to reduce CO2 emissions by 144,000 tons in fiscal 2019 (Table 1). The expansion of environmentally friendly products was designed to reduce environmental impact during production and social use.
ECO product categories define the steps and evaluation process used in making environmentally conscious products [16]. The first step (‘ECO minds’) evaluates resource conservation, harmful substance reduction, product lifespan, ease of reuse and recycling, and environmental impact reduction throughout the development and use of the product. Packaging also undergoes similar assessments. ‘Eco-minds’ products are new products or design changes to existing products after environmental assessment.
The second step is ‘eco-products’, which has its own set of assessment criteria that identifies outstanding environmental features [16]. The criterion includes waste reduction and recycling, energy and water use efficiency and savings, recyclability and compostable products, reusability, biodegradability and longer service life.
The third step identifies products that contribute directly to global warming reduction [16]. Anti-global warming products directly contribute to the reduction of CO2 emissions during and after production (consumer use).

5.5. Cost

Environmental accounting reports for SEI grouped all costs associated with GHG emissions reductions [10]. In total, SEI invested 2,630,000,000 yen in 2017, 2,857,000,000 yen in 2018 and 1,651,000,000 yen in 2019 towards energy saving practices [10]. It was also reported that the economic effect (energy cost reduction with no investment) was 723,000,000 yen in 2017, 268,000,000 yen in 2018 and 351,000,000 yen in 2019. Between 2017 to 2019, SEI has reduced their investment in energy saving practices by 63% and reported a 49% decrease in economic effect. Unfortunately, a breakdown of costs was not published, prohibiting comparison of methods for GHG reduction.

6. Discussion

Improvement of carbon management activities can be defined by several steps, including (1) measuring emissions, (2) setting objectives, (3) avoiding generating new emissions, (4) changing activities to reduce emissions, (5) switching to less GHG intensive energy sources, (6) assessment of aims and objectives, (7) purchasing offsets and (8) reviewing implemented practices [17]. SEI have defined a number of these steps throughout their sustainability report suggesting a good assessment of carbon management and performance for the company. The SEI CSR shows the reliability and rigorousness of emissions reporting and estimates [10]. They have accounted for scope 1, 2 and 3 emissions and included information pertaining to energy and material usage, violations, targets and performance estimates [10]. SEI have included scope (i.e., emissions sources targeted) and long-term targets in reaching net zero which are two main issues for many firms in their reporting and the initial stages of GHG emissions reductions [18].
Compared to other manufacturing companies in Japan, SEI outperformed in their GHG emissions reductions. In the most recent CSR, they reported a global reduction in scope 1 and 2 emissions of 11% (Figure 1), whilst other companies such as Kirin Holdings reported reductions of 8% [19] and Toyota reported reductions of approximately 6% globally [20]. SEI have also considered scope 3 emissions with significant reductions estimated. Product transport and distribution accounted for this reduction following re-instatement of the rail network in Japan [10]. In comparison across the manufacturing sector, SEI have done a good job in their emissions reductions. Through defining their relative and absolute targets, they are able to counteract the potential decrease in relative emissions even as the company grows and emissions increases (i.e., emissions per employee or floor space) [21].
SEI has been very effective at meeting many of their goals for GHG emissions reductions, addressing climate change and supporting their license to operate and grow new business. They have, however, been very conservative in their absolute emissions reductions target for 2019/20 (Table 1). Although their overall reduction was significant, their lack of absolute GHG reduction targets allows for increases in emissions in other parts of the company. To ensure that carbon management is effective, it is essential to have continued and regular reviews [21]. Therefore, their short-term goals for emissions reductions should be re-evaluated and updated. Long-term goals alone are less effective at meeting CO2 reductions targets as companies can change over time [21]. Governance experts suggest that in order to reach net zero, firms should adopt long-term targets with smaller interim targets that enable emissions reductions over set time periods [22]. Therefore, short-term goals as defined by SEI are better for overall emissions reductions targets and can be updated regularly [21]. SEI have set multiple goals to reach prior to their 2022 targets that enable constant evaluation of carbon emissions and potential changes in practices. Environmental management accounting has positive impacts on carbon management and quality of information disclosed to the public [23].
A firm’s environmental management and strategy are related to their financial performance and innovation [24]. Product development attracts consumers and can bring a competitive edge that increases the company’s economic performance [24]. The implementation of ‘ECO’ products has helped SEI to address sustainability, innovate, mitigate waste and combat climate change. Eco labels are marketing strategies that enable support of sustainability practices for a firm; however, this is only effective when clearly communicated to stakeholders [25]. Policy design and representation to the public are critical for influencing public support for sustainability technologies and uptake of GHG reduction practices [26,27]. Stakeholder engagement is difficult to quantify but has been defined as a key factor influencing carbon management policies [21]. The ‘ECO’ product labelling in SEI can improve support from stakeholders and open communication is fundamental for stakeholder engagement and companywide carbon management [21].
Staff engagement is also critical for carbon management with employee contribution and involvement vital [21]. SEI effectively involved staff in emissions reductions practices in multiple ways (outlined in Section 5). Commitment and engagement of employees to net zero within a company is a critical determinant of successful implementation of carbon management plans [21]. The outcome for SEI in terms of their emissions reductions through staff engagement, however, is yet to be determined.
More efficient carbon reduction technologies and policies should be utilised by SEI due to the high concentration ratio of emissions outflows (i.e., high number of exports) [9]. Transformations in energy supply and demand through changes in the quantity and type of energy used can enable firms to meet sustainability goals without heavily investing in negative emissions programs and technologies [28]. Therefore, a more efficient and sustainability-driven production line should be utilised and SEI should strive for greater reductions in CO2 by 2025. More ambitious short-term GHG emissions reductions are required to compliment less aggressive implementation of decarbonization practices to increase the likelihood of reaching net zero [29]. Overall, the manufacturing sector, SEI included, is a direct contributor to emissions throughout the production and distribution of goods and services [9]. There are correlations between increasing GDP and increased CO2 emissions for multiple countries including Japan [3,30,31,32,33]. Although SEI has pledged to be net zero, they need to increase sustainability practices as the economy continues to grow and develop. SEI needs more aggressive carbon emissions reductions protocols to reach net zero and pave a sustainable future. There are several technologies that can be implemented to reduce emissions in energy services; however, they require substantial implementation costs which is a barrier for many firms [34].

7. Conclusions

Sumitomo Electric Industries Ltd. has developed and implemented good carbon management protocols that have achieved most targets in 2019. They have, however, been conservative in their approach to reducing emissions globally which have limited their overall reductions. Regardless of surpassing their targets with meaningful reductions in GHG emissions, SEI set modest targets that were, perhaps, too conservative if they hope to achieve net zero by 2050. This finding suggests that modest targets can lead to greater outcomes through innovative approaches to emissions reductions or that the manufacturing firm has easily accessible and cheap emissions reductions options. It is therefore the subsequent, highly ambitious large-scale, emissions reductions steps that are the demining factor, rather than the initial steps and modest targets, for ascertaining meaningful company-wide practices for carbon management and reductions. There are several limitations to this desktop study including reliability and validity of published data, use of secondary sources, modification of data sources and dependence on published data. To overcome the limitations of secondary data analysis as presented in this study, ideally, primary data collection for the company would occur. Unfortunately, this may not be feasible on such a scale and for only one company. Therefore, future research detailing comparisons of emissions reductions achieved, targets and strategies for emissions reductions should occur between firms in the same sector. This would provide a good context for the sector in achieving net zero and illustrate firms with excellent emissions reductions that can be used for carbon managers in a contemporary setting. However, this evaluation provides a good baseline for improvements to carbon management with the estimate provided.
To further improve carbon management performance, SEI can investigate the following recommendations:
  • Purchase offsets—Offsets enable compliance with GHG emissions allowances and reductions by paying a separate organisation to reduce their emissions. However, there can be uncertainty in carbon offsets and over-crediting of reductions [35].
  • Carbon capture and storage (CCS)—CCS is the process of capturing CO2 emissions at a source and storing it in a suitable location (usually underground). It can also be removal of CO2 directly and indirectly from the atmosphere. With greater social acceptance and political incentives, it can contribute further to emissions reductions [36].
  • Invest in renewable energies—renewable energy activities are able to mitigate CO2 emissions long term and are beneficial both ecologically and environmentally [37].
  • Revaluate emissions reductions targets—continual evaluation and refining of emission targets can help SEI achieve better short-term outcomes towards their net zero target [21].
  • Implement nature-based solutions—managing and restoring ecosystems can address both biodiversity loss and climate change. Nature-based solutions provide a crucial role in long term carbon emissions reductions and can reduce the impact of land use change, providing potential cooling towards the end of the century [38,39].

Author Contributions

Conceptualization, drafting, analysis, N.W.; supervision, editing, P.D.; drafting, editing, G.H. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not Applicable.

Informed Consent Statement

Not Applicable.

Data Availability Statement

Publicly available datasets were analysed in this study. This data can be found here: CSR. Available online: https://sumitomoelectric.com/sustainability/csr (accessed on 8 August 2021).

Conflicts of Interest

The authors declare no conflict of interest. The funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, or in the decision to publish the results.

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Figure 1. Global GHG (CO2-eq) emissions (thousand tons/year) estimates for Sumitomo Electrical Industries Ltd. for each fiscal year. Data are from scope 1 and scope 2 CO2 emissions. Green triangle denotes reduction and red triangle denotes increase in % of CO2 emissions compared with the previous year. Sourced from Sumitomo Electrical Industries [10].
Figure 1. Global GHG (CO2-eq) emissions (thousand tons/year) estimates for Sumitomo Electrical Industries Ltd. for each fiscal year. Data are from scope 1 and scope 2 CO2 emissions. Green triangle denotes reduction and red triangle denotes increase in % of CO2 emissions compared with the previous year. Sourced from Sumitomo Electrical Industries [10].
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Figure 2. Sumitomo Electrical Industries annual transport CO2 emissions for both national (throughout Japan) and international transport. Sourced from Sumitomo Electrical Industries [10].
Figure 2. Sumitomo Electrical Industries annual transport CO2 emissions for both national (throughout Japan) and international transport. Sourced from Sumitomo Electrical Industries [10].
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Table
Table 1. Targets for environmental sustainability for Sumitomo Electrical Industries for fiscal year 2022 with smaller targets for 2019/2020 and the estimated reductions for 2019 (relative to fiscal 2017). The associated SDGs are shown. The targets for reducing emissions comes from both the business activities and products of the company. Results from 2020 are currently unavailable as well as several 2019 reductions estimates. Source information: Sumitomo Electrical Group CSR Report [10].
Table 1. Targets for environmental sustainability for Sumitomo Electrical Industries for fiscal year 2022 with smaller targets for 2019/2020 and the estimated reductions for 2019 (relative to fiscal 2017). The associated SDGs are shown. The targets for reducing emissions comes from both the business activities and products of the company. Results from 2020 are currently unavailable as well as several 2019 reductions estimates. Source information: Sumitomo Electrical Group CSR Report [10].
ItemDescriptionTargets (Reduction from 2017)2019 Results (Reductions from 2017)Sustainability Development Goals (SDGs)
202220202019
Business ActivitiesGlobal warming prevention and energy saving practicesAbsolute CO2 emissions reductions globally0.0%-0.0%13.0% Sustainability 14 04287 i001
Reduction of energy consumption (per unit sales)5.0%-2.0%0.5%
Reduction of energy consumption (per unit floor area)5.0%-2.0%6.2%
Reduction CO2 in logistics (per unit sales)5.0%-2.0%2.1%
Production sitesReduce GHG emissions5.0%3.0%--
Reduce energy consumption (per unit sales)5.0%3.0%--
OfficesReduce energy consumption (per unit sales)5.0%3.0%--
TransportReduce CO2 emissions (per unit sales)5.0%3.0%--
ProductsExpand ‘ECO’ product rangeIncrease products with less CO2 emissions (reduction in CO2)150,000 tons/year140,000 tons/year135,000 tons/year144,000 tons/year
Register ‘ECO Mind’ products (% of new products)100%-100%100%
Maintain 100% registration of new ‘ECO Mind’ products100%100%100%100%
Increase ratio of Eco-Products (in sales)70%66%64%64%
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Warzywoda, N.; Dargusch, P.; Hill, G. How Meaningful Are Modest Carbon Emissions Reductions Targets? The Case of Sumitomo Electrical Group’s Short-Term Targets towards Longer-Term Net Zero. Sustainability 2022, 14, 4287. https://doi.org/10.3390/su14074287

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Warzywoda N, Dargusch P, Hill G. How Meaningful Are Modest Carbon Emissions Reductions Targets? The Case of Sumitomo Electrical Group’s Short-Term Targets towards Longer-Term Net Zero. Sustainability. 2022; 14(7):4287. https://doi.org/10.3390/su14074287

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Warzywoda, Natalie, Paul Dargusch, and Genia Hill. 2022. "How Meaningful Are Modest Carbon Emissions Reductions Targets? The Case of Sumitomo Electrical Group’s Short-Term Targets towards Longer-Term Net Zero" Sustainability 14, no. 7: 4287. https://doi.org/10.3390/su14074287

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