Incentive Schemes for Japanese Companies' Voluntary Environmental Initiatives - Empirical Analysis Based on Case Studies and Questionnaires

Author Name TANIKAWA, Hiroya  (Senior Fellow)
Creation Date/NO. August 2004 04-J-030
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In recent years increasing numbers of companies have been putting theories of sustainable and environmentally responsible management into practice, in the realization that environmental protection efforts can mesh with their own corporate interests. Given the inclinations of firms in this new environmentally-aware era, voluntary initiatives have grown in importance as a way of implementing environmental programs. Behind this lies the fact that Japan has already achieved some of the highest standards among developed countries for environmental protection and energy conservation, so marginal costs of environmental measures are generally very high; endlessly responding with stricter regulation will present major problems such as the crowding out of resources and the political and social costs that go along with introducing and enforcing regulations. Under such circumstances, positive consideration must be given to alternative measures through voluntary initiatives.

The research for this paper involved intensive interviews with eight leading Japanese companies, a survey of EU firms with advanced environmental practices, and a questionnaire covering 408 companies listed on the first section of the Tokyo Stock Exchange with proactive approaches to environmental initiatives. The results confirmed that the various patterns of incentive schemes for voluntary corporate environmental initiatives suggested by theoretical and empirical studies in Europe and the U.S. can already be observed to a considerable extent for Japanese companies as well.

In making use of the various benefits to be expected from voluntary environmental initiatives as a policy measure, the biggest issues are how to prevent free-riders and how to ensure corporate efforts are sufficient to meet policy ends. As well as using voluntary initiatives effectively by designing appropriate systems based on the kinds of incentive schemes mentioned above, it is particularly necessary to clarify their legal and regulatory status.