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Why Corporate Influence is Important
Since the Kyoto Protocol of 1997, implementation of climate-motivated policy has been hindered worldwide by corporate lobbyingmore
The climate change issue is now described as a global emergency. The UN IPCC’s October 2018 Special Report on Global Warming of 1.5°C laid out the urgency to act on climate. It highlighted the limited role for thermal coal power beyond 2030 and the need for decisive policy interventions by governments around the world to drive the energy transition towards lowering greenhouse gas emissions. However implementation of such policy remains inadequate. Corporate lobbying against climate policy remains a key blockage. A number of key regulations that have suffered are highlighted on the map.
- Lawsuits from industry associations in 2015-2016 halted the US Clean Power Plan
- Industrial lobbying has hindered the EU’s flagship Emissions Trading Scheme from its introduction in 2005
- Since 2015, climate rules on vehicles have been compromised in the US and the EU by auto industry lobbying
- Vested interests in Japan and Australia are pressing for a role for thermal coal misaligned with the IPCC's guidance
Without addressing such persistent negative lobbying, global progress on climate change remains unlikely.
Carbon Policy Footprint
Investors are increasingly concerned with corporate climate lobbyingmore
Various criteria are used to measure the impact of individual companies on climate change. Scope 1, 2 and now Scope 3 emissions, disclosed by companies since the late 1990s, are used to assess the physical greenhouse gases (GHG) emissions from corporate operations. The issue of negative corporate influence over climate policy globally is escalating as the climate change issue is increasingly seen as an “emergency” and a “crisis”. The Climate Action 100+ (CA100+) investor engagement process made up of 450 investors (including Japan's GPIF pension fund), collectively managing over $40 trillion in assets, has prioritized the issue of lobbying.
InfluenceMap piorneered the concept of the "Carbon Policy Footprint" and maintains the world's leading platform analyzing corporate policy engagement on climate policy and is part of the Technical Advisory Group of the CA100+ as a data provider.
InfluenceMap’s Methodology
InfluenceMap's system adheres to objectivity, transparency and ease of comprehension and use.more
InfluenceMap has developed a process for scoring and ranking companies and industry associations on their activities to influence climate change policy.
- InfluenceMap's system adheres to key features of sound corporate assessment metrics: objectivity, transparency, ease of comprehension and use, and allows for like-for-like comparisons across and within sectors.
- InfluenceMap's system does not judge climate policy itself but instead measures corporate positions against Paris Agreement-aligned benchmarks of governmental policy and Science Based Policy (SBP) benchmarks based on analysis of IPCC statements.
- InfluenceMap defines "policy engagement" based on the UN Guide for Responsible Corporate Engagement in Climate Policy (2013) which defines a range of corporate activities as engagement, such as advertising, social media, public relations, sponsoring research, direct contact with regulators and elected officials, and political funding.
- InfluenceMap relies on a range of data sources which are publicly accessible and are reliable representations of corporate policy engagement. Documents are assessed in numerous languages including Japanese language source materials.
The Role of Industry Associations
Investors are now increasingly concerned at powerful industry groups and how they are influencing climate policymore
Industry associations and federations around the world have a clear function to influence policy in the interests of their corporate members. The UN Guide for Responsible Corporate Engagement in Climate Policy clearly outlines the important role that they play.
- They have dedicated resources to track policy and regulatory making processes and to effectively influence them for the benefit of members.
- Policy makers are strongly influenced by industry group lobbyists who present arguments based on economic growth and employment.
- An especially powerful part of the industry association landscape are cross-sector industry groups. They claim to represent the interests of large sections of the economy.
- These include the US Chamber of Commerce, BusinessEurope and the Japan Business Federation (Keidanren). These are all opposing Paris-aligned policy in their regions.
- Many of their most powerful corporate members have clear and strong climate goals individually, such as renewable energy commitments. There is therefore an issue of "misalignment" between industry groups and many of their corporate members on climate change policy positions.
Climate and Energy Policy in Japan
There are now sharp differences between the energy positions of key Japanese corporations and those of the government and the Keidanrenmore
Japan announced its updated nationally determined contribution (NDC) as part of the UNFCCC process in March 2020. Japan's 2020 submission targets 22-24% renewables, with less than 2% of this being wind power, and 26% coal in the electric power generation mix by 2030.
- This focus on coal and low renewable ambition differs sharply from views expressed by key Japanese corporations. The cross-sector group, the Japan Climate Leaders' Partnership (JCLP) representing blue-chip corporations including AEON, Fujitsu, Ricoh and Mitsubishi Real Estate, has called for the government to aim for a 50% renewables target by 2030, around double that of its latest NDC proposal.
- Prior to the NDC submission, the Japan Climate Initiative issued a statement urging the Japanese government to raise Japan’s greenhouse gas emission reduction target, a message signed by over 150 blue-chip Japanese corporations.
- Given this apparent dissatisfaction with how the voices of many Japanese corporations are being reflected in government policy on climate and energy, this research provides a data-driven analysis of corporate influence over such policies in Japan.
How Policy Influencing on Energy and Climate Works
The Japan Business Federation (Keidanren) dominates but its positions are driven by powerful sector-specific groups in its membershipmore
Energy and climate policy in Japan is formulated by close cooperation between industry, the bureaucracy and the Cabinet Office. The key entities in each of these sectors are: the Japan Business Federation (Keidanren), the Ministry of Economics, Trade and Industry (METI) and the Cabinet Office of the ruling LDP party.
- Keidanren is a Tokyo-based federation with more than 200 staff and over 100 key industry associations across the Japanese economy as members. On the climate change issue, Keidanren has long argued for a voluntary, sector-specific approach. It has for decades aggregated the sector based plans via its industry association members as its positions on energy and climate issues.
- This research shows that within the industry association system in corporate Japan, intensive policy engagement on climate and energy policy is characterized by detailed engagement on a range of key policy streams, such as the Strategic Energy Plan, the Long-term Strategy Under the Paris Agreement and the Global Warming Countermeasures policy.
- It is further characterized by representation on key government and Keidanren committees who influence such policies and provide detailed comments in response to government consultations.
Heavy Industy Sectors Dominate Policy Engagement
The most powerful and active voices are from groups representing electric power, iron & steel and the automotive industrymore
This research shows only seven sectors show intensive policy engagement on climate and energy issues through their respective industry associations.
- These are iron/steel, electric power, automotive production, cement, electrical machinery, oil/petrochemicals and the coal value chain. The positions of these groups thus are heard by the government most prominently. These seven industral sector specific groups representing less than 10% of Japan's GDP
- Absent from this intensive policy engagement on climate and energy are industry associations representing key sectors such as healthcare, retail, financial services, logistics, construction and real estate. This is despite many individual companies such as AEON (Japan's largest retailer) having clear goals to procure 100% renewable energy, as well as these sectors representing almost 70% of Japan's value-add GDP.
- Certain non-fossil fuel and powerful sectors have shown some positive policy engagement on climate-related policy areas. real estate industry group has shown engagement in sector-specific policies such as those relating to Zero Emission Buildings (ZEB) and building energy efficiency.
Conclusions
The issue of industry group opposition to Paris aligned policy is a global issue of concern now to large institutional investorsmore
- To make corporate policy engagement in Japan on climate change and energy policy more representative of the broader economy, reform will likely be needed in how industry associations interact with the government on policy issues.
- Importantly, industry associations representing key economic sectors like healthcare, retail, financial services, logistics, construction and real estate should be more actively engaged on a range of climate-related policy streams to express their positions and climate goals more clearly.
- Keidanren states it "establishes consensus in the business community on a variety of important domestic and international issues". This statement should be challenged by the corporate sector and the government on climate and energy policy engagement.
- This research indicates that, even within Keidanren's membership, only a narrow group of sectors are actively engaging on climate-related policy and it thus likely listens to their voices predominately which does not necessarily represent the majority of members.
- Transparency and governance reform of powerful cross-sector industry groups, along with more active engagement in climate-motivated policy by non-fossil fuel sectors, will therefore be required.
