Knowledge Introducing Carbon Neutrality Initiatives by Region and Country – What Are the Risks of Delayed Action?

To achieve carbon neutrality, a variety of measures have been put in place. Global companies are expected to address not only the energy and materials they consume directly (Scope 1 and 2) but also indirect emissions (Scope 3) generated throughout their supply chain. In the following sections, we examine the regulatory trends for carbon neutrality in different regions and countries.

Within the EU, as a major initiative in addressing climate change, the “European Climate Law” was adopted by the European Council in July 2021. This law legally enshrines greenhouse gas reduction targets for 2030 and 2050, supported by the comprehensive “Fit for 55” policy package.

Key measures include:

• Strengthening emissions trading (increasing the target from 43% in 2005 to 61% by 2030)
• Raising energy efficiency targets (improving from 32.5% in 1990 to between 36% and 39% by 2030)
• Prohibiting the sale of new gasoline vehicles after 2035

The United States aims to decarbonize its power sector by 2035. In addition, the U.S. is promoting electrification in the industrial sector, while in areas where electrification is challenging, the use of clean hydrogen is being encouraged.

Furthermore, the energy transition strategy includes regulations on HFCs (as substitutes for ozone-depleting substances) and methane emissions from oil and gas development. In the aviation sector, the plan is to shift to sustainable aviation fuels, with specific measures being implemented across various sectors.

In the APAC region, countries such as Singapore, Thailand, Indonesia, and Vietnam have set unique national targets and policies. With rapid economic growth in the region, efforts to curb emissions are taking on heightened importance. One notable requirement is that companies address a broad range of emissions—especially Scope 3—throughout their supply chains.

Calculating and disclosing CO2 emissions across the entire supply chain is one of the critical challenges in ensuring corporate sustainability and meeting regulatory requirements.

In many companies, Scope 3 emissions can account for up to 80% of total emissions. However, calculating and disclosing these emissions presents numerous risks and challenges. For example, many overseas operations lack robust data collection systems, and obtaining accurate information from local suppliers can require significant effort. Overcoming these hurdles requires companies to fully understand these risks and proactively develop strategic responses.

In industries with strict environmental regulations, such as manufacturing and the automotive sector, companies are actively demanding that their suppliers disclose more information. This can be seen in a growing movement to require Tier 1 (primary supplier) companies to calculate and provide their Scope 3 emissions data.

This trend is also cascading down to Tier 2 and Tier 3 (sub-supplier) levels, thereby increasing the need for parent companies to manage the entire supply chain. For example, one automobile company has built a system for tracking emissions across its entire supply chain through its “Green Procurement Guidelines” and now requires its partner companies to supply detailed emissions data.

Investors, financial institutions, and other stakeholders are increasingly scrutinizing companies’ environmental performance. In Europe, directives such as the Corporate Sustainability Reporting Directive (CSRD) require companies to disclose environmental performance information, including transparent CO2 emission data throughout their supply chains.

Furthermore, consumers are increasingly inclined to choose products with lower environmental impacts. Failure to properly calculate and disclose emissions data can lead to significant risks, including a decline in corporate value and a loss of competitive standing. This makes it essential for companies—across all locations—to adopt a strategic, company-wide approach.

Achieving carbon neutrality requires that companies precisely track and manage CO2 emissions both at the corporate (overall operations) and the product level. Visualizing CO2 emissions allows companies to set realistic reduction targets and implement effective mitigation measures. These efforts not only help companies meet environmental regulations but also enhance corporate reputation and competitiveness.

Tracking and managing CO2 emissions across the entire company not only ensures compliance with environmental regulations but also provides critical data for strategic decision-making. For example, by accurately measuring electricity consumption in factories and offices, emissions from company vehicles, and emissions generated during manufacturing processes, companies can develop effective reduction strategies.

Moreover, by communicating their CO2 reduction initiatives externally, companies can enhance their corporate value, while setting company-wide environmental goals and monitoring progress can also help raise environmental awareness among individual employees.

Understanding the environmental impact throughout a product’s lifecycle—from raw material sourcing to manufacturing, transportation, usage, and disposal—enables companies to develop more sustainable products. This approach also helps to foster stronger partnerships and can lead to cost savings and overall supply chain optimization.

Managing CO2 emissions on both the corporate and product levels not only fulfills a company’s social responsibility to reduce environmental impact but also supports sustainable growth and improved competitiveness.

Achieving carbon neutrality requires compliance with international regulations. Delays in responding to information disclosure or emissions reduction requirements—whether within a company or among its partners—can lead to risks such as loss of supplier status, suspension of transactions, and a decline in corporate value. Therefore, companies should start by visualizing CO2 emissions and then proceed with strategic, timely responses.

At KDDI, consulting partners with extensive experience in supporting carbon neutrality are ready to help you with your sustainability management. Please feel free to contact us.

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