Defaulting On Climate Is Not an Option

For corporate directors in Japan, the legal mandate to identify and manage climate-related risks goes well beyond the obligation to act in their company’s interests. As climate risks escalate globally, incorporating them into governance practices is no longer merely about fulfilling regulatory expectations—it is an existential, business-critical imperative that may determine a company’s survival.

For corporate directors in Japan, the legal mandate to identify and manage climate-related risks goes beyond their obligations to act in their company’s interests.

As climate-related risks escalate globally, incorporating them into governance practices is no longer merely  about fulfilling regulatory expectations – it is an existential, business-critical imperative that could determine a company’s very survival.

Directors can afford neither the reputational damage stemming from misguiding institutional investors and the market – nor the operational setbacks that could ensue from neglecting climate-related oversights.

Hence, the only way forward is to right their wrongs.

Directors must move beyond viewing climate risk management merely as a matter of reporting compliance. 

In line with the established Companies Act and the Civil Code of Japan, corporate directors must abide by the obligations to act in their companies’ best interest, comply with the laws and uphold the duty of care. 

Failing to rigorously address climate-related risks is a failure of all these legally-mandated duties.

Put simply, dismissing climate governance is tantamount to neglecting the very company they are meant to serve.

Rising legal and regulatory pressures make it clear that climate risks are material business risks that must be central to board-level governance and risk management. Failing to identify, manage or disclose these risks constitute a clear breach of duty  – a personal liability for the corporate directors themselves.

These obligations are further reinforced by the growing oversight of the Financial Services Agency (FSA) and other authorities, which are urging corporate leaders to move beyond false solutions and symbolic ESG gestures toward more meaningful governance.

Directors and boards can no longer fail to:

1. Ensure the reliability and accuracy of climate disclosures – to avoid inconsistencies that may constitute greenwashing.
2. Maintain clear, board-level oversight of climate risks, considering that legal responsibility remains with the directors even when operational tasks are delegated to management.
3. Oversee risks related to nature loss, ecosystem depletion or biodiversity decline given many Japanese giants’ dependency on natural resources.
4. Act with the same due diligence as a reasonably prudent director would under comparable circumstances including seeking for expert advice.
5. Prepare for rising litigation exposure, investor scrutiny and financial consequences if climate risks are ignored or mismanaged.

The message is unmistakable: directors who fail to act are exposing both the companies and themselves to risks of litigation and regulatory scrutiny.

Climate negligence is not just bad oversight; it is a liability waiting to be realised.