Introduction

Research is taking place in various academic fields regarding corporate initiatives on green innovation. My interest particularly focuses on a management approach. Here, I would like to take a look at the objective of research from a management approach, while looking back at the historical relations between business and environmental issues.

Environmental issues and trade-off relations

Initiatives focusing on the global environment have been in the spotlight since the so-called social issues of environmental pollution and destruction of the 1970s. Of these, the influences companies make on the global environment have called for attention. They are no longer expected to only provide products and services, but are also expected to conduct business activities that agree with the surrounding environment and global environment.

Finding solutions to environmental issues traditionally have been the task for policies. Specifically, environmental regulations to constrain business activities have been tried to resolve environmental issues. For example, there are regulations on gas emissions from automobiles and restrictions on use of specified toxic substances in electronic equipment.

In order to question the rights and wrongs of these environmental policies, various research have been taking place. Research in environmental economics applies economic knowledge. Research in management philosophy, business ethics and corporate governance discuss the shape and sense of ethics companies.

To companies in the 1970s and 80s, activities on environmental issues drew a line from regular business activities. For that reason, they were regarded as philanthropy, and thought of as something that raised business costs and exerted negative influences on productivity and competitive strength. While efforts towards environmental issues were needed as a social perspective, it is burdensome as an individual corporate perspective. This caused a trade-off relationship.

“Green innovation” for environmental issues

In recent years, however, the belief of efforts toward environmental activities being philanthropy and burdensome has gradually disappeared. As the term Corporate Social Responsibility (CSR) appeared in the 1990s and 2000s, solving environmental issues as an extension of regular business and activities that endeavor to provide environmentally friendly products and services have become active. Providing environmentally friendly products and services that requires technology development is costly, however, as consumer awareness is rising, in the long run, the number of customers who purchase these products is also increasing.

For example, take the Prius that is sold by Toyota Motor Corporation. The Prius is called a hybrid vehicle. Hybrid means “combination”, and gets its name from being equipped with two power sources, the internal-combustion engine that is driven by the fossil fuel, oil (the gasoline engine), and the electric engine powered by electricity (the electric motor). As the CO２ produced by the burning of oil is a cause of global warming, international efforts are underway to reduce the amount of CO２ emissions. Because hybrid vehicles run by using not only oil, but also electricity, CO２ emissions are less than those of regular gasoline vehicles. However, since developing the hybrid system of the Prius costs a lot, the Prius is more expensive than regular gasoline vehicles. Nevertheless, the Prius is so popular that there is a waiting list to buy it. That is because of its good fuel efficiency. The fuel efficiency of regular gasoline vehicles is said to be 7-10km/l, whereas the Prius is 20-30km/l. For that reason, the cost of gas is halved when travelling the same distance. Therefore, the Prius is budget-friendly in the long term. Because of the fuel efficiency and reduced CO２ emissions of the Prius, people prefer to buy the car even at a high price.

In this way, there are more companies who actively aim to be environmentally friendly and make a profit.

Innovation research issues in the environmental field

So, what does the research trend look like in corporate activities regarding the environmental field? As an example, research into environmental regulations and technological innovation has been taking place in the academic field of environmental economics. Harvard University professor Michael E. Porter, who is also well known in the management strategy field, postulated the hypothesis, “Appropriately introduced environmental regulations will promote innovation activities of companies.” This hypothesis is called the “Porter hypothesis,” and ever since has been investigated by many researchers. However, because many investigations have taken place in environmental economics, much analysis has been made at the macro-level, and there hasn’t been much analysis on individual business or business projects.

Research on CSR and business innovation activities is also progressing. Theoretically, in addition to the view that CSR promotes business innovation, it is agreed that business innovation promotes CSR. However, not much time has passed since the emergence of CSR, so there has been little empirical research thus far.

We can understand that although companies actually conduct innovation activities in the environmental field, there has been almost no research on innovation mechanisms using companies or business projects as the subject of analysis until now. This untouched field is where my interest lies. No matter how excellent the technology you may possess, if it does not generate a profit for the company, then the innovation cannot be called a success. How to commercialize excellent environmental technology, build a business model and create a structure that turns it into profit for the company is a business management issue. This is, as mentioned in the title, about taking a management approach for research on green innovation. Using actual business projects as subjects, this is a form of research that elucidates the business management process from technological development to the commercialization stage, to the end where it bears a profit.

Innovation mechanisms in the environmental field and competitive strength of Japanese companies

This research, in a time where innovation in the environmental field is increasing, can also be said to be practically meaningful research. Excellent environmental technology will not necessarily bring profits to the companies. It is also necessary to consider competition and cooperation with rival companies both at home and abroad, expand the market and create a structure that will be profitable for the company. Particularly, Japanese companies have these management issues. I believe it is important for Japanese companies to solve these problems in order to keep its place in international competition.

Let us take a look at the example of solar power generation. Solar power generation is said to be a renewable energy that emits no CO２, and as long as the sun exists, unlimited power can be generated. Because power is generated from the sun’s rays, solar panels are required. A feed-in tariff system began in Japan in 2011, and the demand for solar panels, for both residential-use and nonresidential-use, increased. Looking at the breakdown of shipments of solar panels in Japan, as of 2012, about 90% of residential-use panels, and about 70% of nonresidential-use panels were made by Japanese companies. At first glance, you may think that this high share brings profits to the Japanese companies. However, the number of domestically made solar panel products being sold by Japanese companies is decreasing. The current situation is that the products are only assembled in Japan and sold as domestic products, or panels supplied as OEM from China are sold with Japanese company brand names affixed, so a lot of the profit goes to countries, such as China, which have low labor costs. In the background to this phenomenon is a fierce price competition in the solar panel market. There are several types of solar panels. However, at the moment, products using silicon semiconductors in order to convert solar rays into energy are the mainstream. Including home electrical appliances, there is almost no difference in performance of most semiconductors, and characteristic of consumer preference is swayed by price. In this way, in the area of solar power generation, even if Japanese companies possess excellent technology, they are in the difficult situation of not being able to enjoy the fruits of profit while trying to build a competitive advantage.

So, how can they popularize products that use superior environmental technology and build a system that creates a profit for their own company? To deepen knowledge regarding innovation management in the environmental field, it is necessary to accumulate research on innovation mechanisms in this field from a management approach.