In environmental policy, voluntary approach, in which the private party set their own target to address environmental issues and attempt to achieve them, has gained less attention compared to command-and-control regulation or economic instruments such as tax or cap-and-trade systems,. This is largely due to the belief that it is an ineffective policy; that it is a deception by the private sector. First, it is criticized that compliance cannot be expected in voluntary approaches since it lacks penalty clauses. Second, the appropriateness of the targets is doubted since companies can set their own ones.

However, Japan has witnessed tangible results under voluntary initiative by the business sector on its efforts to combat climate change. In June 1997, the Japan Business Federation (Keidanren) launched a voluntary action plan to reduce CO2 emission with the participation of thirty seven industrial organizations. Twenty eight of thirty seven organizations belonged to the industrial sector and energy conversion sector, and set a uniform target of“endeavoring to reduce CO2 emissions from the industrial and energy-conversion sectors to below the level of fiscal 1990 by fiscal 2010.” For the purpose of aligning to Kyoto Protocol’s first commitment period (2008 to 2012), the target was later changed to “achieving the target level as an average over the five years of the Kyoto Protocol first commitment period (fiscal 2008 to 2012)”. Their share of CO2 emission in Japan was 42%, and the share among industrial and energy conservation sector was 76%. By fiscal 2008, the numbers of participating industrial organizations increased to sixty one, thirty four of them belonging to the industrial and energy conversion sector.

The targets, although voluntary, were declared as a commitment to the society, and institutional framework was established afterwards to monitor the progress. First, after the plan was launched in 1997, follow-up was conducted every year, and its results are publicized through the website. Second, a third party evaluation committee with members from academia, NGO, and research institutes was established in 2002. The Committee has annually evaluated the progress of the voluntary action plan, and pointed out areas for improvement. Third, the Action Plan was positioned as a pillar of the Japanese government’s climate change policy, and its progress towards achievement was also reviewed by government councils.

As a result, the average emission marked 12.1% reduction from the target of fiscal 1990 level. An attribution analysis shows during fiscal year (FY) 2008 to 2012, compared to FY 1990, production activity increased 2.0%. CO2 emission factor (CO2/MJ for fuel use and CO2/kWh for electricity consumption) contributed 0.0%, and Change in CO2 emissions per unit of output, which reflects improvement of energy efficiency, decreased by 14.1%.

Despite this result, voluntary approach’s reputation is still unsavory, and Japan’s case is seen as an exceptional; that it was enabled by the nation’s unique culture and tradition. However, looking outside environmental law, there are reasons to believe that under certain circumstances, voluntary approach can be successful.

However, contrary to the conventional wisdom, voluntary approach has the potential to carry out tangible results. While admitting that culture and tradition plays a great role for success, it points out that other factors can provide incentives for companies to tackle environmental issues.

First, voluntary approach has been criticized of its lack of compliance since it does not have penalty clause. However, when gaining a bad reputation is crucial, compliance can be observed even without disciplinary provision. This situation can be seen when the parties interact with each other in various aspects and have long relationship, and under achievement will be recognized by assuring transparency.

For example, peer reputation enables compliance without penalty clause in international law. Some treaties contain military sanctions or trade restrictions for violating countries, but due to the high cost of such sanctions, they are not carried out often. Still, non-compliance is more costly since they have the burden of persuasion to the fellow countries, and bad reputation influences future actions or treatments in other areas. Similar situation can be observed in dispute settlement among neighbors in Shasta County, which is at the north end of California. There, “truthful negative gossip” to the violators plays the main role to promote compensation to tort cases or nuisance cases.

In addition, under hierarchical relationship, subordinates will have incentives to comply the rules without penalty clauses, especially when they have collaborative relationships. Furthermore, public reputation can lead to companies to comply since gaining bad reputation will damage their corporate brand. The diffusion of CSR (corporate social responsibility) and the increase of social responsibility investment leads business sector to comply what they declared.

Another criticism of voluntary approach is that the target will be set too loose. However, this puzzling issue is not peculiar to voluntary approach; the same problem is raised in carbon tax or cap-and-trade style emission trading scheme. Thus, it will be beneficial not to simply blame voluntary approach for this reason but to think of the methods to overcome the shortcomings. One idea to overcome this is to impose explanatory duty about the appropriateness of the target to the private sector. In other words, this is to cast the burden of proof that the target is at an “appropriate” level to the companies or business associations that set the target. Through disclosing this information to the public, necessary information for verification will be available when its appropriateness is doubted. In addition, examination through third party with expertise will offer an opportunity for objective and detailed assessment. Once this is done, we can shift the burden, and require the doubter to make steady argument to rebut the explanation made by the private sectors

In short, if the following conditions are met, there is no reason to believe that voluntary approach cannot be successful in other countries than Japan.

(1)  Long term collaborative relationship between companies or business associations and the government.

(2)  Annual or periodical follow-up and information disclosure to ensure transparency.

(3)  Proper Plan-Do-Check-Action cycle with the involvement of the third party committee.

(4)  Cast the burden of proof to the private sector that the target is stringent.

(This is the summary of the research paper Kohei Kubo wrote for the Environmental Law and Policy LLM Colloquium).