“We have focused on environmental issues as one of the top priorities of managerial problems…we wish to incorporate new ideas, actions and technologies to realize a truly sustainable society.”¹
Mr. Takeshi Uchiyamada, Chairman of Toyota
Toyota and Climate Change
Throughout its history Toyota has been synonym with innovation. From Just in Time production to the Prius, the Japanese company has characterized itself by setting lofty goals to advance the frontiers of the automobile industry. Because of that, Toyota is the largest automobile manufacturer in the world. In its 79 years of existence, the company has had to deal with all sort of challenges from a weakening Japanese economy to massive recalls. Most recently, the company has identified a new challenge: Climate Change.
Climate Change can have a profound impact on businesses. As temperatures rise due to greenhouse gases, a series of health, food, water, and political risks are emerging impacting the day-to-day operations of almost every firm. Climate change is of concern to Toyota’s executives for several reasons. For example, political and security risks caused by the pressure on water and food can disrupt the demand for its cars. Furthermore, given the polluting nature of automobiles, changing consumer behavior can diminish the appeal of the brand and also hurt demand. Lastly, regulatory shifts that require more efficient cars can disrupt the business model of car manufacturers.
However, opportunities can also surface. Can Toyota position itself as the “clean” automaker to increase its attractiveness? Could introducing clean technologies help reduce production costs and increase competitiveness?
The Toyota Environmental Challenge
Toyota recognized that to remain competitive and act according to its values it needed to 1) pursue environmental technologies and 2) develop voluntary actions to address environmental issues. The main goal behind these actions was to increase demand, reduce costs and give back to society. In 2015 Toyota launched its Environmental Challenge 2050. In it, the company committed that by mid-century it would go beyond zero environmental impact and have a net positive impact on society. The plan has 6 main components:
- New Vehicle Zero CO2 Challenge: The goal is to reduce vehicle emissions by 90% compared to 2010 levels. To achieve this, the company will continue improving mileage of vehicles and “will promote the development of next-generation vehicles with low or zero CO₂ emissions—hybrid, plug-in hybrid, electric, and fuel cell vehicles and further accelerate the spread of these vehicles.”²
- Life Cycle Zero CO2 Challenge: Toyota wants to move further and reduce emissions in material production, and disposal and recycling of vehicles. To accomplish this, the company is using different components (e.g. carbon fiber), using less materials, recycling some of them, and improving the design to be able to better dismantle cars.
- Plant Zero CO2 Challenge: By 2050 Toyota wants to achieve zero CO2 emissions in its plants. Actions include implementing low CO2 production technologies (e.g. shortening production processes), improving energy use, and optimizing production lines to reduce waste.
- Challenge of Minimizing and Optimizing Water Usage: The goal is to reduce the amount of water used in manufacturing processes and components by using clean technologies on material production (e.g. painting) and purifying water to return it.
- Challenge of Establishing a Recycling –based Society and Systems: The Company wants to improve resource efficiency. To succeed in this effort it will “use eco-friendly materials, use parts longer, develop recycling technology, and make vehicles from the materials of end-of-life vehicles.”³
Contribute to society
- Challenge of Establishing a Future Society in Harmony with Nature: To promote a culture of sustainability the company has engaged in activities like planting trees, providing environmental education, and funding conservation efforts.
The Road to Green
Toyota has set itself ambitions sustainability goals to address the challenges of climate change. Most importantly, it has done so in a manner that advances its business goals by increasing demand for its vehicles and reduces the costs of production. In the face of adversity, the company was able to identify opportunity. For example, it was among the first to recognize that changes in regulation and consumer behavior would increase demand for hybrid cars. At the same time, it acknowledged that although it was necessary to make investments to reduce its carbon footprint, initiatives like improving energy use and using materials from end-of-cycle vehicles could make the company more competitive.
However, big questions remain for Toyota. The Company has developed a detailed plan to mitigate its environmental impact. However, its plan of action to adapt to climate change is not yet evident. How is the company protecting its assets against extreme weather events? How will the firm’s supply chain cope with the pressures on water? How will Toyota’s partners and suppliers react to political and security risks related to climate change?
- Toyota Environmental Challenge 2050 Report. www.toyota-global.com/sustainability/environment/challenge2050/. Accessed November 3, 2016.