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Loss and Damage - Adverse Impact of Climate Change

This March marks two years since the Great East Japan Earthquake, and in Japan, the debate regarding energy and disaster preparedness still continues. Meanwhile, climate change and resource constraints are prompting other countries worldwide to also explore potential means of creating environmentally-friendly, green economies as the basis for conducting business. Against this backdrop, in 2012, Aeon’s ECO Project set ambitious targets for the period to 2020 based on the three strategies of Reduction, Generation and Protection. The targets under the project are (i) to reduce energy consumption by 50% compared to 2010; (ii) to install 200,000 kW of renewable energy ; and (iii) to convert 100 stores across Japan into disaster preparedness centres to enable them to contribute to their local communities. This month we talk to Yukiyo Komatsu, Aeon’s Group Chief Environmental Officer, about the background to the Group’s environmental activities within Japan, as well as its initiatives elsewhere in Asia.
Yukiyo Komatsu
Yukiyo Komatsu
Group Chief Environmental Officer,
Aeon Co., Ltd.

1991: Joined Aeon
2000: Appointed manager of
    Aeon Jusco Nagayoshi store.
Fiscal 2011 to present: current position.

Related Link:
AEON. Co., Ltd.

March 2013

A Company Rises to the Challenge
of Building Sustainable Communities
in Asia

Yukiyo Komatsu
Group Chief Environmental Officer, AEON Co., Ltd.

The eco Project’s Origins

---The ECO Project sets three challenging targets based on three separate strategies. What was the starting point for these targets?

After the Kyoto Protocol went into effect, Aeon responded in 2008 by announcing its Aeon Manifesto on the Prevention of Global Warming, which set a targetof reducing Aeon’s total CO2 emissions by 1.85 million tons over five years (compared to the 2006 level). At the time, some expressed doubt that the target could be met, but in fact we achieved it in 2011, one year ahead of schedule. Meanwhile, internal discussions regarding the next target were already under way. At first we spent a long time debating how far we should raise our target in terms of the Reduction, or energy conservation, strategy. Based on the expertise already available with regard to energy conservation, we knew that we could reasonably target a 38% reduction through a combination of measures that we were already capable of implementing. When it came to reductions beyond that level, however, our deliberations ran into difficulties. Nonetheless, we considered the likely potential for advances in technological innovation over the next 10 years, and, following heated debate, decided to be bold and go for the 50% figure.

---The latest targets entail large-scale investment and personnel costs; weren’t the internal hurdles to progress considerable?

Nuclear power generation was suspended after the Great East Japan Earthquake, and the tighter supply-demand balance for electricity combined with other factors to completely transform the power situation in Japan. We responded by performing cost-benefit simulations for reducing energy consumption, incorporating such elements as projected electricity price rises and the capital expenditure required. This enabled us to build a convincing case for Reduction from a business management perspective. We then moved on to address the second strategy of Generation, bearing in mind that Japan had introduced a Feed-in Tariff (FIT) scheme for renewable energy, and that it would be necessary to help diversify Japan’s power sources. We set ourselves the challenging target of installing 200,000 kW of renewable energy.

Initially we intended to base the ECO Project on the two strategies of Reduction and Generation. However, people within the company were asking what we had learned from the earthquake and its aftermath. That was what prompted us to think about what we as a retailer could contribute to our customers in the communities where we operate, and that in turn gave rise to the Protection strategy.

However, we found it difficult to decide what we should actually do, or even what we could do. Immediately after the earthquake, Aeon opened up its stores to serve as evacuation centres for local customers, but water and gas were in short supply and power cuts meant it took a long time to resume business. As a result of reassessing that situation, we eventually arrived at a policy of equipping ourselves to offer local infrastructure upon which customers could depend in an emergency. In line with this policy, we decided to install emergency evacuation shelters, as well as photovoltaic and private (cogeneration(*2)-based) power generation capability aimed at ensuring energy self-sufficiency.

---Are the three strategies linked?

Yes, we now have a clear idea of the ideal we are striving to achieve. That means accomplishing what we have set out to do based on all three strategies, which will enable us to contribute to society through commercial facilities within "Smart Communities". We operate a business of considerable breadth and scope and our customers therefore expect a great deal of us, which is why there is so much we can do. We can reduce energy consumption or generate energy, and we can also provide power exchange and storage capacity, as well as preparing for natural disasters.

---So a Smart Community is the result of combining a variety of necessary functions?

Yes, exactly. There is a limit to how much individual stores can reduce energy consumption, and that is where the idea of community comes in. This year we will be opening a new store in Osaka. Positioned as a "Smart", disaster-resilient store connected to the local infrastructure, it will embody the ideal we are striving to achieve. In addition to functioning as a disaster preparedness centre, it will house infrastructure for photovoltaic power generation as well as private (cogeneration-based) power generation and local heating and air conditioning. The surplus heat from private power generation will be available for use by the local community, thereby also contributing to energy efficiency. Looking ahead, we intend Aeon’s new large stores to develop as the hubs of Smart Communities that combine both energy efficiency and disaster preparedness.

Background to environmental activities

---What was it that created the conditions for these activities to flourish?

I think our founder’s ethos was undoubtedly a factor. Aeon traces its roots to the city of Yokkaichi, which suffered from serious pollution. Aeon’s environmental activities probably had their origins in the sense of impending crisis that our founder felt when witnessing these pollution problems at first hand in the 1960s. During the late 1980s, when the Berlin Wall had collapsed, bringing an end to the "East/West divide", he believed that the key issue in the 21st century would be the "North/South divide"—that is, the disparity in access to resources between the industrialised nations and the developing nations. Realising that this divide would in turn lead to environmental issues, he concluded that the growth of corporations must be accompanied by environmental preservation and the sustainable development of society at large. This prompted him to set up the Aeon Environmental Foundation and the Aeon 1% Club, which contributes 1% of Aeon’s pre-tax profits to environmental and social initiatives. Once these organisations were up and running, they eventually led us to where we are today. We intend to continue passing on this approach, which is shared across the Aeon Group; in September 2012 we established the Aeon DNA University within the Company as one means of doing this

Environmental activities elsewhere in Asia

---Aeon also operates in other Asian countries outside Japan; do its activities in those countries reflect the same environmental approach?


Small Scale Shop in Vietnam
Small Scale Shop in Vietnam
Elsewhere in Asia, Aeon is equally committed to contributing to the sustainable development of local communities. At our Chinese headquarters and our ASEAN headquarters in Malaysia we have formulated CSR (Corporate Social Responsibility) policies to cover everything from the environment to social contribution, and we are currently in the process of considering CO2 emission reduction targets and other KPIs. Nonetheless, we cannot deny that our targets overseas still remain low. This could reflect the fact that we have been emphasising business expansion rather than improving energy efficiency and other measures to reduce the environmental load. The fact is that, whereas countries like Japan have been successful in improving energy efficiency in the past, the situation differs in other Asian countries, where people seem to find it difficult to believe they could make significant reductions in their energy usage. That is why we decided to start by conducting trials. In our Shunde store in China, for example, we implemented an ESCO project(*3), which is starting to yield results. We aim first to show actual achievements demonstrating that it is quite possible to reduce energy consumption through knowledge and ingenuity. Then we will use those achievements to decide on road maps and targets for the future.

---What specific initiatives is Aeon involved in?

Last year, our stores in Malaysia, Thailand and Vietnam were selected for a feasibility study relating to the development of a bilateral offset credit mechanism. The study was conducted by NEDO, a Japanese government-affiliated organisation. In each country, energy efficiency measures currently used in Japan were implemented across all the targeted stores, which varied in size from large stores to supermarkets and convenience stores. Energy saving devices and measuring instruments were actually installed in the stores and the potential energy savings were verified. The results demonstrated that, according to the estimate for one Malaysian store, for example, an annual cost saving of JPY20 million was possible. In Thailand and Vietnam, too, the results were quite promising, and we are now putting together new initiatives with a view to establishing MRV(*4) methodology for energy efficiency.

If we could create an energy efficient convenience store in Vietnam, we could use that as a model for other small stores in Southeast Asia and apply the model to our stores in the Philippines, for example. An approach such as this would speed up our ability to multiply the number of energy efficient stores. However, there are energy conservation methods that are the norm in Japan, but are still not used at all elsewhere in Asia. Clearly, adjustments will need to be made for different countries to address the differences in energy situations and climates compared with Japan, but there is still a great deal we can do using a standard model across the region. We can develop more large stores based on the Malaysian example, and for medium-sized stores we can build on results obtained in China.

Future deployment of the model in Asia

---Is it possible that the energy efficiency model Aeon is pursuing in Asia could spread to other business operators and industrial sectors?


Large Scale Store in Malaysia
  Large Scale Store in Malaysia
Well, we aim to contribute to the sustainable development of local communities elsewhere in Asia as well as in Japan. And to do that, we envisage a process whereby Aeon would first introduce the model in its own stores, creating more and more examples of energy efficient stores, and would eventually extend the model laterally to other business operators and industries. One reason why Aeon’s energy efficiency model can be extended to other industries in Asia is that the Aeon Group includes Aeon Delight Co., Ltd., a facility management services(*5) company. Moreover, three years ago we launched the Aeon Energy Research Group, which used trial data to investigate the technological aspects of all potential energy efficiency measures under a range of climate- and store-related conditions. It compiled individual assessments of energy efficiency, which were screened to identify measures for adoption. Initiatives such as these contribute to our ability to create energy efficient facilities that are both effective and suited to their localities.

---In addition to conducting such initiatives, Aeon is also a member of the Japan Climate Leaders’ Partnership (J-CLP)(*6), which makes recommendations on climate policy from a corporate perspective. During fiscal 2013 the general meeting of the Intergovernmental Panel on Climate Change (IPCC) will be held in Japan; what do you hope will be achieved in terms of climate policy?

Climate change is an urgent issue that all stakeholders the world over need to tackle. As a company we are taking proactive steps, but I feel that recently Japan’s policy has to some extent stalled. If Japan can develop a more robust national policy going forward, the transition to a low carbon society will be accompanied by greater ingenuity and new business opportunities. With this in mind, I hope that J-CLP can make constructive recommendations to the government. And for the same reason I hope that we can persuade more companies to join us in striving to achieve environmental goals.

---Thank you very much.

* Position and title are correct at the time of the interview.
ECO Project
*2: Cogeneration: the production of electricity using waste heat (as in steam) from an industrial process or the use of steam from electric power generation as a source of heat. (Reference: Merriam-Webster)
*3: ESCO projects finance energy efficiency-oriented retrofitting, using the resulting savings on lighting, heating and water to cover the initial costs. (Reference: Japan Association of Energy Service Companies).
*4: MRV: Stands for Measurement (of the extent to which reductions in greenhouse gas emissions are being achieved), Reporting (to the international community) and Verification (of the reductions achieved). The process ensures transparency and accuracy in countries’ efforts to reduce emissions. (Reference: EIC Net-Japanese only).
*5: Facility management service: A comprehensive management approach to ensure that the ownership, operation and maintenance of fixed properties for business use (land, buildings, structures, equipment, etc.) are optimised from a business management perspective (i.e. minimum cost with maximum benefit). (Reference: Japan Facility Management Association).
*6: The Japan Climate Leaders’ Partnership (J-CLP) is a business coalition that regards spearheading the transition to a sustainable low carbon society as a business opportunity.

About "Monthly Asian Focus: Observations on Sustainability"

Until 2010, IGES released "Top News on the Environment in Asia" on a yearly basis. For over 12 years since its establishment of IGES in 1998, "Top News" collected and organised information about environmental issues and policy trends in the region.

In January 2011, IGES launched the new web-based series "Monthly Asian Focus: Observations on Sustainability" in which leading environmental experts deliver their take on latest trends of sustainable Asia.

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