What is the difference between GX and DX? A clear explanation of the current landscape, key points for implementation, and real-world examples
What is GX?
GX stands for Green Transformation. It refers to transforming the economy and society while working to reduce greenhouse gas emissions. Renewable energy sources such as solar, wind, and hydropower are attracting attention as alternatives to fossil fuels, which generate greenhouse gases.
Why GX is becoming increasingly important
The following three factors explain why GX is becoming increasingly important.
- The Growing Severity of Global Warming
- 2050 Carbon Neutrality Declaration
- The expansion of ESG investment
Global warming is not only raising temperatures; it is also contributing to rising sea levels and an increase in natural disasters such as floods and droughts. Because fossil fuels such as oil and coal generate greenhouse gases, the primary driver of global warming, efforts to reduce their use are accelerating.
Another reason GX has come to be seen as important is the 2050 Carbon Neutrality Declaration announced by the Japanese government in 2020. This declaration is an initiative to reduce greenhouse gas emissions to net zero by 2050.
The goal is to bring human-generated greenhouse gas emissions, including CO2, down to net zero through measures such as tree planting and forest management. Today, more than 120 countries are working toward carbon neutrality targets.
A third reason GX has come to be seen as important is the expansion of ESG investment. ESG is an acronym formed from Environment, Social, and Governance.
ESG investing is the movement to invest in companies that conduct their business with consideration for the environment and society. Since ESG perspectives were incorporated into the UN’s investment principles for institutional investors in 2006, ESG investing has continued to spread worldwide.
In this way, global warming, carbon neutrality commitments, and ESG investment have made GX increasingly important.
The Current State of GX Initiatives
In Japan, various initiatives are underway, including the Basic Policy for the Realization of GX, the Green Growth Strategy, the 6th Strategic Energy Plan, and the establishment of the GX League. As shown in the image below, CO2 emissions, which account for about 60% of greenhouse gases, have been declining year by year, but the reality is that related efforts are still not as active as they need to be.
Agency for Natural Resources and Energy, “Challenges and Responses for Achieving GX (Green Transformation)”
(Source: Agency for Natural Resources and Energy, “Challenges and Responses Toward Achieving GX (Green Transformation)”)
Japan has introduced many policies to promote GX, but the lack of specific examples of practical initiatives has become a barrier. To accelerate GX efforts going forward, it will be important to understand developments overseas.
Benefits of Pursuing GX
The following are three key benefits of pursuing GX.
- Improving the company’s image
- Reducing Energy Costs
- An increase in public-sector budgets
As public attention to environmental issues continues to grow, engaging in GX can enhance a company’s image. It can improve favorability and trust, while also strengthening corporate branding. In addition, as a company becomes more widely recognized for its GX initiatives, it may attract a broader range of investors and improve its ability to secure top talent.
Engaging in GX can also help reduce energy costs. Even implementing typical energy-saving measures such as Cool Biz and Warm Biz can lower energy consumption.
In addition, switching to clean energy sources such as solar, wind, and hydropower can help reduce fuel costs. While the cost of transitioning to clean energy is often cited as a concern, the Agency for Natural Resources and Energy expects these costs to decline in the future.
Another benefit of pursuing GX is the increase in public funding. The following subsidies can be used to support GX initiatives.
- The Green Growth category of the Business Restructuring Subsidy
- Green Category of the Manufacturing Subsidy
- Subsidies and other support programs to promote energy-saving investments
By pursuing GX, companies may be eligible for the following subsidies and grants, which can help reduce the financial burden of implementation costs.
In addition, the requirements for these public funding programs are expected to be relaxed going forward, making them easier to access.
What Is DX?
DX stands for digital transformation. It refers to initiatives that use digital technologies to establish new business models for a company. Rather than simply digitizing individual tasks, DX is characterized by rethinking business operations as a whole and creating new business models.
Why DX Is Considered Important
There are three main reasons why DX is considered important:
- The 2026 Digital Cliff
- Accelerating digitalization
- Shortage of IT talent
The 2026 Digital Cliff refers to the risk that Japanese companies could fall behind in global digitalization, resulting in economic losses of up to 12 trillion yen from 2026 onward. The term gained attention after it was used in the DX Report published by the Ministry of Economy, Trade and Industry. Because many companies continue to rely on systems and software that have been in place for many years, the national government is making an all-out effort to promote digitalization.
Another reason DX has become a priority is that consumer behavior has shifted increasingly toward the web in recent years. Companies are expected to understand customer needs and provide products and services that meet them. With a shortage of IT talent in Japan, the need to leverage external tools and services is growing.
The Benefits of Implementing DX
There are five key benefits of implementing DX.
- Reducing IT-related costs
- Addressing the shortage of IT talent
- Reducing the Risk of Economic Losses
- Encouraging the Renewal of Existing Systems
- Reducing IT-related risks
Advancing DX enables companies to automate a wide range of operations, including manufacturing, sales, and inventory management, improving operational efficiency and reducing costs. As a result, it can help address labor shortages and reduce economic losses. DX can also serve as an opportunity to replace legacy systems with newer solutions.
According to the DX Report: Overcoming the “2026 Digital Cliff” in IT Systems and Full-Scale Deployment of DX, published by the Ministry of Economy, Trade and Industry, legacy system aging is overwhelmingly one of the most common barriers to advancing DX.
Specifically, companies are facing a range of issues, such as poorly organized data that is difficult to use, shortages of system operators, and heightened security risks.
By promoting DX, companies can move away from structures that rely heavily on visibly outdated legacy systems and create an efficient work environment powered by modern systems that also provide greater security.
The Relationship Between GX and DX
GX and DX have different objectives, but they are closely connected. To implement energy-saving measures that are representative of GX, such as Cool Biz and Warm Biz, companies need to improve operational efficiency. Achieving that efficiency requires business innovation through the use of digital technologies—in other words, DX. In this way, advancing DX is essential to pursuing GX.
Key Points for Implementing GX Initiatives
Finally, here are three key points for putting GX initiatives into practice.
Refer to the Basic Policy for Realizing GX
To achieve GX, it is useful to refer to the “Basic Policy for Realizing GX,” announced in February 2023. The policy outlines how organizations should approach DX by industry and business sector, including the five items listed below.
- Promoting Thorough Energy Conservation
- Structural Transformation of the Manufacturing Industry
- Making renewable energy a primary power source
- Use of nuclear energy
- Promoting the adoption of hydrogen and ammonia
To achieve GX, it is important to understand how much greenhouse gas your company emits. Assess your current emissions, consider how to reduce them and whether a shift to renewable energy is feasible, and then set clear targets.
Establish a framework for promoting DX
Because achieving GX also requires advancing DX at the same time, it is important to build a foundation for promoting DX. The “Green Growth Strategy Through Achieving Carbon Neutrality by 2050” clearly states that digital infrastructure is essential.
Keep the following points in mind as you move forward with DX.
- Clarify the Vision for DX
- Developing Strong Talent Within the Company
- Actively leverage digital tools
- Use data effectively
Because DX initiatives involve costs, companies also need to establish a structure that enables close coordination with management.
Gather information on the GX Promotion Act, international rules, and related topics
To achieve GX, it is also important to gather information on the laws and international rules related to GX. The GX Promotion Act, passed by Japan’s National Diet in May 2023, sets the future direction of Japan’s energy policy and is a key law for companies to understand as they advance their GX initiatives.
For example, the “growth-oriented carbon pricing” framework established under the GX Promotion Act requires companies to pay taxes and levies based on their carbon dioxide emissions.
By gaining a deeper understanding of this mechanism, companies can see how reducing CO2 emissions can help lower operating costs. Recognizing these direct business benefits can also encourage actions that reduce CO2 emissions.
Ultimately, understanding the GX Promotion Act can be said to support companies in achieving GX.
These laws and rules may change at any time. In particular, new environmental regulations are likely to emerge in response to global conditions. To avoid missing such changes, companies need to continuously monitor relevant websites and gather the latest information. Because it is often difficult to check websites manually on an ongoing basis, it is also important to digitalize this work with tools and include it as part of DX initiatives.
Go to the product details page for SustainaMonitor, the sustainability management support tool
Summary
GX stands for Green Transformation. It refers to transforming the economy and society while working to reduce greenhouse gas emissions. Renewable energy sources such as solar, wind, and hydropower are attracting attention as alternatives to fossil fuels, which generate greenhouse gases.
To achieve GX, companies need to establish a framework for promoting DX and understand requirements such as the GX Promotion Act and international rules.
The sustainability information notification tool “SustainaMonitor” helps you stay up to date with the latest environmental and ESG-related information from both domestic and international websites. In addition to monitoring GX laws and regulations, if your team also needs to check other websites, consider using “SustainaMonitor” as a way to improve operational efficiency.
About SMILE
SMILE is an IT solutions company that supports companies in advancing GX and DX. Through business process digitalization, web system development, AI utilization, data platform development, and more, we deliver the most effective DX solutions tailored to each customer’s challenges.
By combining Japanese-quality project management with Vietnam’s development capabilities, we provide a high-quality development structure with excellent cost performance. We can support every stage, from requirements definition and design to development and operational improvement, so companies just beginning their DX journey can consult with us with confidence.
We also provide practical solutions for the data visualization, operational efficiency improvements, and automated information gathering needed to advance GX.
If you are facing challenges with GX or DX initiatives, or are considering specific ways to move forward, please feel free to contact SMILE.
Start a Consultation on Advancing GX and DX
We work with you to design an approach tailored to your company’s situation, from assessing the current state to implementing systems and improving operations.
- You can clarify current operational and data-related challenges.
- You can design implementation steps that fit your company's structure.
- You can also build a framework that remains easy to operate after implementation.
- You can use data to verify results and make improvements.
- You can start exploring AI and IoT applications in the areas where they are most needed.
