Sustainability & Social Responsibility

In 2025, Japan ranks 19th in the global SDG Index, down one place from the previous year. While this remains a relatively strong position, key challenges persist, particularly in areas such as gender equality, climate action, resource efficiency, and biodiversity. These issues directly impact the business environment, influencing regulatory expectations, operational risks, and investor confidence.

From a European business perspective, the implementation of sustainability policies in Japan still appears largely symbolic. The widespread use of SDG branding in communications and campaigns is not always matched by regulatory clarity, enforcement, or financial incentives. This creates uncertainty for companies investing in genuinely sustainable practices and limits opportunities for market differentiation.

In energy and climate policy, Japan has yet to send strong and credible signals to support a decisive shift away from fossil fuels. Recent government announcements, such as halting the operation of inefficient coal plants, reiterate existing commitments but lack concrete timelines and mechanisms. Regulatory complexity, limited grid access, and policymaking structures dominated by legacy industry actors further slow the transition.

Japan’s updated Strategic Energy Plan and NDC, which include a 73% emissions reduction target by FY2040, are steps forward. However, credible implementation will require clear planning and better alignment with international best practices, including a more level playing field for businesses offering proven low-carbon solutions including renewable energy.

On corporate disclosure, Japanese companies are increasingly active in frameworks such as CDP, SBTi, TCFD, and TNFD. In fact, Japan currently leads the world in the number of companies registered as early adopters of TNFD, reflecting growing awareness of nature-related financial risks. However, these climate and biodiversity commitments often lack concrete follow-through in terms of governance, risk management, and integration into core business strategy. As global expectations rise, it will be critical to move beyond disclosure and demonstrate measurable outcomes.

In the area of resource use, Japan continues to face high levels of food and plastic waste and lags behind in developing comprehensive circular economy policies. Despite increasing consumer awareness, demand for sustainable products remains relatively low, in part due to limited labeling systems, insufficient regulatory guidance, and lack of public communication. Many European companies are ready to bring experience and innovation to this space, but clearer rules and incentives are needed to unlock their full contribution.

Gender equality also remains a critical issue for the business community. Japan ranked 118th in the World Economic Forum’s 2024 Gender Gap Index, the lowest among developed countries. Structural barriers to women’s leadership and limited progress on work-life balance not only constrain the domestic talent pool but also affect international companies. European firms operating in Japan often face cultural barriers when attempting to implement global DEI standards, including gender equality targets set by their headquarters.

The European Business Council encourages the Japanese government to move from symbolic engagement to more consistent, transparent, and internationally aligned sustainability policies. Doing so will enhance business predictability, improve competitiveness, and create new opportunities for partnership and innovation. The EU-Japan Green Alliance could offer a foundation for advancing these shared priorities through structured public-private cooperation.