Toshihiko Goto Chair, Environmental Auditing and Research Group

1. ２．６．２００５ UNECE Working Group on Environmental Monitoring and Assessment Japanese Environmental policy and tools for the monitoring, reporting and SMEs’ EMS Toshihiko Goto Chair, Environmental Auditing and Research Group

2. 1 Diagram of Policy Approaches Used in Policy Mixes Characteristics of environmental problems Expected effects Causes are limited, and measures urgently taken to maintain national minimum Relationship of causes and effect are complex, or causes cannot be limited, so preventive measures must be taken Various parties are causing the problem, so it is necessary to reform the behavior of multiple parties to solve the problem. Low Direct regulatory methods Change in social system Framework control methods Prohibition of obligation of specific actions PRTR Law Chemical substance control based on Air Pollution Control Law Total pollutant load control Technical development and environmental investment Emission trading Environmental taxes Emission methods Tax concessions Manifest system Degree of freedom for decision-making Voluntary agreements Subsidies Green purchasing Voluntary action plans Change in values and behavior Voluntary action plans High Note:The items in this figure are loosely classified for the purpose of Illustrating the concept of policy mixes.The decision–making freedom varies according to the specific details of each system, so the positions of methods in the figure do not accurately represent the degree of freedom. Presentation:Ministry of the Environment Procedural methods Information methods Static environmental assessment Environmental labeling LCA Environmental impact assessment system Environmental performance assessment Environmental management system Environmental design Environmental reports Environmental accounting Presentation: Ministry of the Environment

3. 2 Company Activities and Environmental Communication Governments Consumers Stakeholders, Investors,financial Institutions,etc ・Green purchasing ・Environmental reports ・control ・Green purchasing ・Questionnaires and opinion surveys ・Seminars ・information disclosure ・Green investment, Green financing Companies Environmental Management System ・Explanatory meeting for local communities Local residents NGOs,researchers, Mass, media,etc ・Rating and awards Disclosure of environmental information ○ Environmental advertisements (TV,newspapers,magazine,etc) ○Environmental reports ・Environmental accounting ・Environmental performance assessments,etc ○ Web sites ・Factory inspections, site reports ・Investigations and analysis, Opinions and proposals Client companies subsidiaries Waste after end of product life ・Green procurement ・Transportation ＜Company activities such as supplying products and services＞ (raw material procurement ,manufacturing,transport,sales,product,collection,etc) Waste generation ○Environmental labeling ＜Environmental actions in companies＞ Providing environmental education to employees,cultivating Their environmental awareness and evaluating the environmental performance of work ・Policy formulation Reduce and energy utilization Politics Divisions Employees Ministry of the Environment

4. Evaluation of Environmental Management and Environmental Communication 3 Green of markets Assessment by interested parties Environmental competition Disclosure of Environmental information Improvement in quality of environmental management Green purchasing Green investment etc. Reaction of financial markets ・Pursuit of environmental efficiency Use of economic methods In environmental policies ・Introduction of environmental accounting Acquisition of ISO4001 Certification Introduction of EMS ・Environmental reporting Environmental strategies Recognition of environmental problems Time 1990s 2000 Ministry of the Environment

5. 4 Transition of ISO14001 certified companies ratio Results from the Green Corporate Activity Survey 2003 / Ministry of the Environment

6. Types of Recognized Environmental Loads (multiple answers allowed) 5 Results from the Green Corporate Activity Survey 2003 / Ministry of the Environment

7. 6 Information disclosed (multiple answers allowed) Results from the Green Corporate Activity Survey 2003 / Ministry of the Environment

8. 7 Social and Economic AspectsMentionedon the Reports Results from the Green Corporate Activity Survey 2003 / Ministry of the Environment

9. Transition of the number of environmental report creation companies 8 Results from the Green Corporate Activity Survey 2003 / Ministry of the Environment

10. 9 Distribution of Environmental reports Results from the Green Corporate Activity Survey 2003 / Ministry of the Environment

11. 10 Trends of reporting in Japan ■Japan has produced a large number of high quality environmental reports, and is beginning to broaden full sustainability aspects.Japan has the largest number of companies are notable in that most of their reports conform to published guidelines-whether government or GRI- enabling effective comparison. ■The Japanese Ministry of Environment plans to establish a third party review scheme for environmental reports on a voluntary participation basis. It is estimated that the number of environmental reports published for domestic corporations larger than SMEs will increase within a few years. Japan is now planning to establish a simplified certification of public environmental reports. Towards transparency: progress on global sustainability reporting 2004 / ACCA

12. KPMG International Survey of Corporate Sustainability Reporting 2002 11 The KPMG International Survey of Corporate Sustainability Reporting 2002 covers environmental, social and sustainability reports from a total of almost 2000 companies, including the top 250 companies of the Global Fortune 500 companies (GFT250) and the Top 100 companies in 19 countries (Top100).

13. Number of GFT250 companies with a corporate report by country (1999, 2002) 12 KPMG International Survey of Corporate Sustainability Reporting 2002

14. Corporate reporting by country, Top 100 in 19 countries (1996, 1999, 2002) 13 KPMG International Survey of Corporate Sustainability Reporting 2002

15. 14 Principle Functions of Environmental Reporting Environmental reporting has two fundamental functions: external (or social) function and internal function, which promotes environmental activities in business activities. It plays very important role in strengthening environmental activities in voluntary business activities. The following three are external functions, which can be considered as a tool as environmental communication between the business organization and the public. (1) Function to disclose information to fulfill the responsibility of social accountability of businesses (2) Function to provide information that is useful for decision making of interested parties. (3) Function to promote environmental activities as a pledge and review between business organizations and the public. The following two are internal functions. (4) Function to establish or revise environmental policies, objectives and programs of business organizations. (5) Function to motivate the management and employees and to encourage environmental activities of them. When writing and publishing environmental reporting, it is important to design the environmental reporting properly work as these functions. Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

16. 15 General Reporting Principles of Environmental Reporting Environmental reporting is published as a tool for environmental communication from the perspective of social accountability. The following five principles are essential in order to make environmental reporting an effective tool for environmental communication and discharging social accountability. Environmental reporting which does not meet with these principles is more as an environmental pamphlet. 1.Relevance Environmental reporting needs to provide information which is useful for interested parties’ decision making by reporting the state of environmental burden caused by business activities and environmental programs that mitigate the burden and it needs to be issued in proper timing. 2.Reliability Environmental reporting needs to state reliable information. Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

17. 15 General Reporting Principles of Environmental Reporting (2) 3.Clarity Environmental reporting needs to provide necessary information with clear and easily understood expressions to avoid misunderstandings among interested parties. 4.Comparability Information included in environmental reporting needs to be comparable between different reporting periods of the business organization. Even among different business organizations, information that enables certain comparison should be provided. 5.Verifiability Information written in environmental reporting needs to be accompanied by the basis and foundation of the statement and it should be verifiable with objective standpoint. Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

18. 16 Structure of Environmental Reporting  There are “Necessary Components of Environmental Reporting”. These are components, essential for making environmental reporting a tool for environmental communication that provide useful information to interest parties’ decision making, and for discharging social accountability. All these components are included in the most current environmental reporting. The necessary components and information for environmental reporting are: 1.Basic Headings, 2.Summary of Policy, Targets, and Achievements of Environmental Conservation, 3.State of Environmental Management, 4.State of Activities for Reduction of Environmental Burden, and 5.State of Performance of Businesses in Social Aspects. Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

19. 16 Structure of Environmental Reporting (2) 1.Basic Headings This includes CEO’s statement (including summary and pledge), the foundation of reporting, and a summary of the nature of the business, this contains fundamental components to ensure the reporting functions as a communication tool between the business and the society, and provides useful information to interest parties’ decision making. It is also necessary that CEO’s statement includes not only a greeting, but also a summary of environmental activities of the business organization and pledge of the commitments to society. The necessary components are the following three headings. (1)CEO’s statement (including summary and pledge) (2) Foundation of reporting (Reporting organization, time period, fields, division in charge of publication, and contacts) (3) Summary of the nature of the business Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

20. 16 Structure of Environmental Reporting (3) 2.Summary of Policies, Targets, and Achievements in Environmental Conservation This component is concerning with policies, targets, plans, achievements and material balance of business activities with regard to business’ environmental conservation activities, and this part describes the state of environmental burden and the outlines of environmental activities of the business. It is appropriate for targets, plans, and achievements, including state of environmental burden, to be summarized in a table. The necessary components are the following four headings. (4) Environmental policies regarding environmental conservation (5) Summary of objectives, plans of environmental activities and achievements in environmental conservation (6) Material balance of the business activity (7) Summary of environmental accounting information Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

21. 16 Structure of Environmental Reporting (4) 3.State of Environmental Management This is a section in which the state of the entire environmental management is described. Each of the state of the environmental management system, the state of supply chain management for environmental conservation, the state of research and development of environmental, the state of the disclosure of environmental information and environmental communication, the state of compliance with environmental regulations, and the state of social contribution should be described independently. The necessary components are the following six headings. (8)State of environmental management system (9)State of supply chain management for environmental conservation. (10) State of research and development of technologies for environmental conservation and environment- conscious products/services (11) State of the disclosure of environmental information and environmental communication (12) State of compliance with environmental regulations (13) State of social contribution related to environment Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

22. 16 Structure of Environmental Reporting (5) 4)State of Activities for Reduction of Environmental Burden The current state and achievements of environmental performance of the business organization to reduce environmental burden with yearly changes should be stated in accordance with the nine core indicators described in the “Environmental Performance Indicators for Businesses” . Measures which reduces environmental burden in the upstream and the downstream of the business, such as green procurement and the reduction of environmental burden by producing or selling products that cause less environmental burden throughout their life-cycle should be mentioned in this section. This section would be the biggest in the volume of information in environmental report. The necessary components are the following eleven headings. (14)    Total amount of energy input and measures to reduce it (15)    Total amount of material input and measures to reduce it (16) Amount of water input and measures to reduce it (17) Amount of greenhouse gasses emission and measures to reduce it (18) Amount of chemical substances emission and transportation and measures to reduce it (19) Total amount of products or sales (20) Total amount of waste generation and final disposal and measures to reduce it (21) Total amount of water disposal and measures to reduce it (22) State of environmental burden caused by transportation and measures to reduce it (23) State of green procurement and measures to promote it (24) State of products and services that contribute to reduction of environmental burden. Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

23. 16 Structure of Environmental Reporting (6) 5)State of Performance of Businesses in Social Aspects In recent years, the scope of environmental reporting has been widened, and information on social aspects in activities of business organizations have become to be a part of sustainability reporting or social and environmental (CSR) reporting, as it is already mentioned. Reporting of social aspects is, however, still in a stage of development. These guidelines, therefore, describe representative information discussed in sustainability reporting guidelines published in Japan, show information that is required to disclose by laws and regulations, and summarize information that will be important in future. (25) State of Performance in Social Aspects Environmental Reporting Guidelines / Ministry of the Environment (Government of Japan)

24. Relation Between Business Activities and Circulation of Materials 17 Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

25. 18 Relation with Environmental Performance Indicators Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

26. 19 Relations Between Business Activity and Core Indicators Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

27. 20 Structure of Environmental Performance Indicators Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

28. 20 Structure of Environmental Performance Indicators (2) Operational Indicators Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

29. 20 Structure of Environmental Performance Indicators (3) Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

30. 20 Structure of Environmental Performance Indicators (4) Environmental Management Indicators (Sub-Indicators) Management Related Indicators Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

31. Relation Between the Core Indicators and The Sub-Indicators from the Viewpoint of Material Balance 21 Core Indicators (Quantitative Information) Sub-Indicators (Qualitative Information) Input BUSINESS ACTIVITIES Output Core Indicators (Quantitative Information) Su-Indicators (Qualitative Information) Environmental Performance Indicators Guideline for Businesses / Ministry of the Environment(Government of Japan)

32. 22 Components of the Eco-Action 21, EMS for SMEs 1.Guide to Self-Checking of Environmental Burden 2.Guide to Self-Checking of Environmental Measures 3.Environmental Management System Guidelines 4.Guide to Self-Checking of Environmental Burden 1.Guide to Self-Checking of Environmental Burden This guide provides a simple tool to measure environmental burdens generated by each organization. It is necessary to know what kind of and how much environmental burdens each organization produces in order to establish an environmental system and to operate it in proper manner. Eco-Action 21Environmental Management System – Environmental Activities Report Guidelines

33. 22 Components of the EcoAction 21 (2) 2.Guide to Self-Checking of Environmental Measures This is a checklist that helps the determination of aspects that the organizations are expected to perform environmental activities. This checklist enables the participating organizations to evaluate the achievement of each environmental program and to determine how the program can be improved. 3.Environmental Management System Guidelines The EcoAction 21 provides a set of environmental management system guidelines that is easier for SMCs to implement. These guidelines are based on ISO14001 standards set by the International Organizations for Standardization and are intended to promote environmental activities of SMCs and to make them more efficient and effective. When an organization plans an environmental management system, it should start with the outcomes of these checklists described in ① and ②. 4.Environmental Activity Report Guidelines These guidelines describe environmental activity reports, which SMCs should compose and publish. Composing and publishing an environmental activity report is a first step of environmental communication. Eco-Action 21 Environmental Management System – Environmental Activities Report Guidelines

34. 23 Procedure of the Eco-Action 21 Eco-Action 21Environmental Management System – Environmental Activities Report Guidelines

35. Worksheet for choosing environmental aspects that are needed to be included in environmental management system 24 Eco-Action 21Environmental Management System – Environmental Activities Report Guidelines

36. Environmental Management System Guidelines Eco-Action 21Environmental Management System – Environmental Activities Report Guidelines

37. 25 Composition of Environmental Activity Reports Environmental activity reports shall include the following information ①Environmental policy ②Environmental objectives and their performance ③Outlines of major environmental action plans ④Evaluation of the results of environmental activities ⑤Information of nonconformance to environment-related laws and regulations and litigation if there is any. Eco-Action 21Environmental Management System – Environmental Activities Report Guidelines

38. 26 Publication of Environmental Activity Reports Organization shall equip environmental activity reports in their offices and provide them for public review. Organization shall send a copy of environmental activity report to the Secretariat (The Secretariat will publish the name of the Eco-Action 21 organizations). In addition, if it is possible, environmental activity reports should be submitted to the “Environmental Report Data Base,” which is maintained by the Ministry of the Environment, posted on the organization’s internet homepage, and published as a form of pamphlet. Eco-Action 21Environmental Management System – Environmental Activities Report Guidelines