Climate plans in the transport industry: how do Japanese firms perform? 

At the end of 2022, the World Benchmarking Alliance published the first edition of their climate and energy benchmark for the transport sector. This benchmark measures and compares the world’s 90 most influential transport companies (public transport, railways, airlines, shipping) on their low-carbon transition strategies. Let’s have a look at the main findings from this benchmark, and how Japanese firms perform. 

What are WBA climate benchmarks? 

The World Benchmarking Alliance (WBA), a global non-profit running benchmarks of 2000 firms against their contributions to the SDGs, is publishing assessments of climate plans of companies in various sectors. The assessments are based on the ACT methodology developed by ADEME and CDP to measure the quality of corporate low-carbon transition plans. 

After electric utilities, oil and gas companies and car manufacturers, WBA published at the end of 2022 the transport industry’s first comprehensive assessment of companies, combining ACT assessments (conducted by CDP) and “just transition” assessments to provide an overall score covering the environmental, industrial and social dimensions of the low-carbon transition. 

The benchmark covers 90 firms from 30 countries, including 8 from Japan, including public transport operators, railways, airlines and shipping companies. 

A sector not aligned yet with the Paris Agreement 

WBA key findings demonstrate how critical it is for the transportation sector to intensify steps toward decarbonization right now. As a high-emitting sector that accounts for a remarkable 37% of total greenhouse gas emissions among all end-use sectors, the transportation industry’s significance in determining whether the Paris Agreement’s target can be met is indisputable. Transport companies must act quickly to achieve a just and equitable low-carbon transition.  

Based on the outcomes of the 90 companies’ assessments, WBA identified 5 key findings: 

1. Even though more than half of the evaluated transportation companies have set long-term net-zero targets, their low-carbon transition plans are lacking in clarity, depth, and intermediate targets. 
2. Transport companies are not making adequate use of their expertise and industry platform to engage key stakeholders to make the 1.5°C transition. 
3. The majority of the companies fail to disclose sufficient information on R&D and capital expenditure. 
4. Only a small number (3%) of transportation corporations practice adequate human rights due diligence. 
5. All assessed companies perform poorly on transition planning, putting a workforce of around 10 million workers at risk. 

How did the Japanese companies perform? 

Among the 90 companies that were ranked, 8 of them are Japanese: Central Japan Railway (8th), Japan Airlines (18th), ANA Holdings (21st), NYK Line (32nd), Yamato Holdings (37th), Tokyu Corporation (38th), Hankyu Hanshin (49th) and SG Holdings (54th). Overall, the Japanese companies perform moderately, placing among the two thirds of all companies listed.  

In railway transport, the main rail operating company in central Japan, JR Central ranked 8^th among the 90 companies with an ACT rating of 7.9B=. It is important to note that it is a rather rare feat for Japanese companies to rank among the top 10 across all WBA climate benchmarks. JR Central received positive feedback for its ambitious 2030 target of reducing emissions by 46% compared to 2014. 

In air transport, Japanese companies stand out, taking two of the first three ranks: Japan Airlines is the best performing airline globally, and ANA comes third, just after IAG, the European parent company of British Airways and Iberia. Japan Airlines was praised for having ambitious targets supported by a mid-term target, but WBA also called the company to establish a science-based transition plan to strengthen the credibility of the pathway towards the goal. ANA received positive feedback for having science-based targets and leading initiatives such as the Sustainable Aviation Fuels (SAF) Initiative. But WBA also calls the company to enhance its decarbonization target and better disclose its R&D expenditures for low-carbon technologies. Japan Airlines received an ACT rating of 7.4C-, while ANA was rated 5C-. 

Shipping company NYK Line (Nippon Yusen), received an ACT rating of 5.5C= for its low-carbon transition plan. The company received praise for its science-based targets and actively investing in R&D. However, the non-disclosure of what proportion of the said R&D expenditure is invested in low-carbon vehicles and energies affected the company’s total score.  

The benchmark illustrated that most of the Japanese companies ranked lack detailed interim targets and the adequate R&D expenditure on the technology their transition strategies rely on. The “trend” component of the ACT ratings also indicate that if the assessment was to be held again in the near future, Japanese companies would be unlikely to improve their score – and could even lose points while peers in other countries may get a higher rating.  

Recommendations from WBA to Japanese companies  

Upon analyzing the results of the benchmark, we have listed some of the key recommendations from WBA to Japanese transport companies.  

Disclosure 

Japanese companies should be more transparent about what proportion of the R&D expenditure is invested in low-carbon vehicles and energies. Companies should make strong commitments to continue to invest in innovation. This is critical as most of their emissions reduction plans rely on new technologies. 

Detailed & ambitious strategy 

The majority of Japanese firms’ target setting was deemed to be insufficient to hold management accountable for short, medium, and long-term action to reduce emissions. Companies should define regularly spaced intermediate goals to incentivize near-term efforts toward long-term objectives. 

Stakeholder engagement 

Very limited evidence was found of the companies’ commitment to social dialogue or of the categories of stakeholders the companies engage with on a just transition. Furthermore, no evidence was found to demonstrate the companies’ ongoing social dialogue and meaningful engagement with affected stakeholders. Japanese companies can increase engagement in social dialogue through training offered to employees and affected stakeholders. 

More information  

World Benchmark Alliance 2022 Transport Benchmark (English) 

ACT Methodology