We’ve talked enough. It’s time for action. But how?―Sumitomo Corporation’s true commitment to decarbonization

Fossil fuels, such as oil, gas, and coal, are commonly blamed as the primary cause of environmental burdens. This is an outcome of our exploitation of such resources, specifically promoting oil, gas and other fossil energy development to improve our standard of living and achieve the continued growth of many businesses. However, in response to the recent international call for decarbonization efforts, energy development businesses and enterprises need to consider a major change in business activities.

“Needless to say, Sumitomo Corporation is no exception,” said Takuji Misawa, who had been engaged exclusively in the energy field since joining the company before taking up his current position to manage the decarbonization business.

“Climate Change is such an imminent threat that companies need to drastically change direction. On the other hand, Sumitomo Corporation must also fulfill its mission of ensuring a stable supply of energy to its customers. This is not an either-or matter. We must create strategies to achieve both at once.” (Misawa)

In April 2021, Sumitomo Corporation established the Energy Innovation Initiative (EII). Its aim is to accelerate the Sumitomo Corporation Group’s carbon neutrality initiatives, focusing on the following three priority areas:

One highlight of EII lies in its framework, which grants decision-making authority to each business division to act on its own initiative, as suggested by its name. It is also notable that EII is designed to be a company-wide cross-organizational business organization.

Rui Takahashi, a member of EII, described the importance of building a company-wide cross-organizational structure, saying, “as climate change and decarbonization are common issues that are related to all businesses, it is essential to build a structure to connect independent business units so that we can bring together the knowledge, approaches, and strengths built up by each unit and combine them effectively to drive strategy development.”

The Carbon Solution Team, set up directly under EII and launched in April 2022, is also a cross-organizational function. The new arm of EII is in charge of the carbon credit business for the company, chiefly for project promotion and trading management.

“Carbon credits (emissions trading),” in a broad sense, refers to the market scheme of trading greenhouse gas emissions according to the emissions reduction or removal quantity.

The carbon credit business can help commercialize decarbonization projects that are difficult to implement for the purpose of monetization. Proceeds from the sale of carbon credits can be used to fund project development and promotion activities. Also, companies can support decarbonization projects by purchasing carbon credits even if it is difficult for them to create a business conducive to decarbonization due to financial, personnel, technical or other reasons.

“For the purpose of achieving carbon neutrality, utilization of carbon credits can become a key strategy. However, the carbon credit market is still immature and unstable, and more discussion is needed to establish trading and utilization rules to prevent greenwashing* and other problems. Hoping to create a more business-friendly market environment, we will continue gathering relevant knowledge, and consider getting involved in the institutional rulemaking process in the future.” (Takahashi)

*Greenwashing: a form of advertising that misleadingly portrays products and services as more environmentally friendly than they actually are

Many companies are aiming for carbon neutrality, and they need to choose methods to achieve their aim from many different options. Looking to meet these needs, Sumitomo Corporation provides “decarbonization consulting” and “reduction solutions” to prepare customized CO2 emissions reduction plans according to each company’s business size and other attributes. This service is developed jointly by the Carbon Solution Team, to which Takahashi belongs to, and the GX CONCIERGE team headed by Misawa.

Misawa explained about the above-stated internal collaboration using the analogy of a health checkup. Like obtaining a whole set of health data by performing a full-body checkup, consulting service plans start by collecting a range of relevant data on the subject, such as business size and operational details as well as greenhouse gas emissions trend, and visualizing the subject’s current situation based on the data.

Following checkups, physicians and dietitians give specific advice to individual subjects―to lose some weight, for instance, and change dietary, exercise and lifestyle habits. Likewise, we offer CO2 emissions reduction plans tailored to the specific needs of individual companies, choosing suitable items from a variety of options for many approaches, such as energy-saving, fuel conversion, facility electrification, and solar power generation. After choosing all appropriate options in the consulting process, the plan can provide the final solution option―purchasing carbon credits to “cover a shortfall.”

“To make it easier to comprehend, you may think that the collaboration builds a service structure with GX CONCIERGE at the entrance and Carbon credit at the exit,” said Takahashi. Also, as Misawa said, “our GX CONCIERGE desk has been receiving inquiries from an increasing number of companies” seeking solutions to issues they face in going carbon neutral.

“Aiming to become like a good hotel concierge choosing from a huge list of restaurants the one best suited to the request of each guest according to their preference and budget, our concierge service is working to enhance the menu and develop new options to be able to better respond to the needs of clients. We are doing this by taking advantage of our unique strengths as an integrated trading and business investment company.” (Misawa)

It has been two years since the establishment of EII. Awareness of carbon neutrality has increased, and he feels that dialogues on this topic are taking place in various settings inside and outside of the company.

There are many challenges yet to overcome, however. Decarbonization efforts need to be accelerated to meet the target year for carbon neutrality, but it takes a long time for many new technologies to be implemented. “It’s frustrating, but we must be patient for now,” said Takahashi.

“It’s important to work on decarbonization initiatives from two time perspectives―for projects to be carried out immediately and those which take a long time to be implemented, like utilization of hydrogen energy and fusion energy technologies. While persisting in steady efforts, we publicly present medium- to long-term plans. I believe this is important to earn trust from our shareholders and other stakeholders. We’re sowing seeds now, and moving forward with patience and looking forward to reaping the fruits.” (Takahashi)

Misawa warned against seeing a time span of 20-plus years up to 2050, the target year, as long enough to make progress as needed. He also noted that this issue is not something to be addressed only by governments and companies.

“We should also note that, in addition to actions driven by governments and companies, the awareness and behavior of individual persons is essential. Efforts need to be promoted from both sectors on an ongoing basis. Personally, I have become more aware of electricity consumption in everyday life. Each time I plug in an appliance, I think of Japan’s energy mix (power supply composition). I believe that continued efforts will make a difference.” (Misawa)

To wrap up this article, Takahashi described two essential things for EII to ensure in developing activities effectively on an ongoing basis. One is building relationships with our allies. Climate change and decarbonization are too enormous a challenge to be dealt with by a single organization. It is imperative for various enterprises and institutions as well as individuals from all countries to join forces to take international and cross-sectoral approaches toward achieving carbon neutrality.

The other thing is commitment to the role assigned to EII, in particular, the Carbon Solution Team and GX CONCIERGE, in helping clients with overcoming problems and many enterprises and society at large moving forward with their initiatives, while Sumitomo Corporation Group is deploying all its functions for executing the company’s carbon neutrality strategies.

“At present, we are sowing seeds, with patience and persistence, in order to put decarbonization plans into practice. We are hoping that goals will be achieved and clients will appreciate our services that have contributed to the results, and then, we will feel our efforts have been rewarded. I’d like to envision a big-picture goal for the future beyond 2050.” (Takahashi)

Interviewed and written by: Rie Omori
Photo by: Yutaro Yamaguchi