1. The importance of environmental risks and corporate sustainability (SDGs and ESG) and our approach
(1) Risks of environmental pollution and waste pollution
Environmental pollution and waste pollution risks are not “somebody else’s business,” but are “real risks” that can befall any company. In particular, environmental pollution and waste risks are always present in real estate transactions, M&A transactions that involve the transfer of real estate, and factory operations by manufacturers. These risks have recently been attracting a great deal of attention, but in fact, they have existed for a long time, and until now, they have not been apparent or been recognized as major risks.
The risk of environmental contamination and waste being discovered can be fatal to a company. For example, in one case where a company was found to have illegally dumped waste, the removal costs amounted to approximately 48 billion yen, and in another case where highly concentrated contamination was discovered at the site of a new fresh produce market in Tokyo, the cost of remediation exceeded 85.8 billion yen. In addition, the creation (or expansion) of environmental pollution can damage a company’s reputation in society, and the response after the risk is discovered can also be highly criticized, resulting in extremely serious damage to the company’s survival, including loss of customers.
In addition, not only corporations but also their directors and other officers have been held criminally liable, or have been held personally liable for extremely large amounts of compensation through shareholder derivative suits (There is a court case that ordered more than 40 billion yen in damages against an individual director.)
Environmental pollutants and wastes are diverse (e.g., specific toxic substances, dioxins, oil pollution, asbestos, PCBs, underground pilings and other underground buried and latent materials), and there are an extremely large number of laws and regulations compared to other legal fields. In addition, there are numerous rules, notices, guidelines, etc., and each municipality has its own ordinances and regulations, making the content and scope of regulations that must be understood extremely broad and complex.
Furthermore, these regulations are revised and updated on a daily basis, and without timely and appropriate updates, it is not uncommon for an act that was legal not long ago to be in violation of new regulations without the knowledge of the violator.
In addition, one of the circumstances that makes it difficult to respond is the fact that administrative responses are not uniform from municipality to municipality in environmental administration, and it is important to note that each administrative agency may have a completely different viewpoint on interpretation of laws and regulations.
We have extensive experience in resolving disputes through litigation, mediation, arbitration, and other methods throughout Japan regarding various issues related to environmental pollution (soil contamination) and waste, as well as in negotiating with local governments and administrative agencies, and handling administrative penalties and criminal proceedings. We also have a great deal of experience in negotiating with local governments and administrative agencies regarding administrative penalties and criminal proceedings. We do not merely provide knowledge, but provide services backed by our overwhelming track record and experience.
(2) Corporate Activities and Sustainability (SDGs and ESG) Law
In recent years, the global environment surrounding companies has been changing remarkably, and efforts to address SDGs (Sustainability Development Goals) and ESG (Environment, Society, and Governance) have been attracting attention.
In connection with energy decarbonization, companies are required to reduce greenhouse gas emissions and conserve energy in their business activities, and are required by various laws to report regularly to the national and local governments. Failure to report may result in administrative penalties and punishments. In the real estate sector as well, efforts to improve the energy-saving performance of buildings, LCCM (Life Cycle Carbon Minus) homes, and net-zero energy buildings and homes (buildings and homes with a zero-energy consumption balance) are gaining momentum, and there is an increasing number of real estate-related environmental certifications.
In addition, companies are increasingly required to address corporate governance and climate change, and are required to disclose such initiatives (disclosure of ESG and non-financial information, such as those related to the TCFD (The Task Force on Climate-Related Financial Disclosures)). In response, shareholders, including activist funds, may engage the company to promote ESG initiatives.
In order to respond to these requirements, especially in the case of periodic reporting, it is essential to consider regulations in Japan and overseas where the company has subsidiaries, and to understand whether each subsidiary is subject to the above regulations and periodic reporting systems and to what extent disclosure is required. Needless to say, there is a need for a policy study on how to address this issue as a global company in the first place.
We also provide support for corporate governance and climate change initiatives, including energy conservation, greenhouse gas reduction, and other initiatives, as well as for the implementation and disclosure of periodic reporting systems in Japan and abroad.
(3) New alternative energy and recycling-related businesses
In recent years, there has been an increasing focus on the issuance of so-called ESG financial products such as green bonds and sustainability bonds, as well as ESG investments in companies that are actively engaged in ESG/SDGs initiatives. In addition, a variety of new businesses are being considered that take into account ESG/SDGs perspectives in their corporate activities.
For example, there has been active consideration of new businesses such as recycling businesses using waste materials, construction waste, and left over soil from construction generated by the company, renewable energy businesses such as solar and wind power generation, as well as the development and commercialization of new alternative energy sources such as waste power generation and batteries.
Numerous legal regulations must be navigated for waste reclamation and power generation, and it is important to design the most economically rational business based on these regulations. In addition, for renewable energy, it is not always easy to establish new power generation facilities (solar power, wind power, etc.), obtain permits and licenses, and negotiate with local governments, and there is active business entry by acquiring existing companies through M&A.
We have extensive experience not only in navigating regulations and obtaining permits for renewable and other alternative energy and recycling-related businesses, but also in advising businesses as a whole, assisting with M&A (due diligence) of renewable energy facilities and operators, and establishing funds.
Links to major environment-related regulatory sites
- Act on the Promotion of Effective Utilization of Resources
－Ministry of Economy, Trade and Industry Website (Japanese) - Basic Act on Establishing a Sound Material-Cycle Society
－Ministry of the Environment Website (Japanese) - Act on Promotion of Procurement of Eco-Friendly Goods and Services by the State and Other Entities
－Ministry of the Environment Website (Japanese) - Plastic Resource Circulation Act
－Ministry of the Environment Website (Japanese) - Act on the Promotion of Sorted Collection and Recycling of Containers and Packaging
－Ministry of the Environment Website (Japanese) - Law for Promotion of Recycling and Related Activities for the Treatment of Cyclical Food Resources
－Ministry of Agriculture, Forestry and Fisheries Website (Japanese) - Construction Material Recycling Act
－Ministry of the Environment Website (Japanese) - Act on Recycling of End-of-Life Automobiles
－Ministry of Economy, Trade and Industry Website (Japanese) - Law for Recycling of Specified Kinds of Home Appliances
－Ministry of Economy, Trade and Industry Website (Japanese) - Law for the Control of Export, Import and Others of Specified Hazardous Wastes and Other Wastes
－Ministry of Economy, Trade and Industry Website (Japanese) - Industrial Safety and Health Act
－Ministry of Health, Labour and Welfare Website (Japanese) - Ordinance on Prevention of Health Impairment due to Asbestos
－Ministry of Health, Labour and Welfare Website (Japanese) - Fire Service Act
－Ministry of Internal Affairs and Communications Website (Japanese) - Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities
－Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry Website (Japanese) - Electricity Business Act
－Ministry of Economy, Trade and Industry Website (Japanese) - Factory Location Act
－Ministry of Economy, Trade and Industry Website (Japanese) - Noise Regulation Law
－Ministry of the Environment Website (Japanese) - Vibration Regulation Act
－Ministry of the Environment Website (Japanese)
