GX stands for Green Transformation. It refers to efforts to shift from a society and industrial structure centered on fossil fuels to a sustainable society that uses renewable energy, with the goal of reducing greenhouse gas emissions, especially CO2.

In Japan, GX is used as a general term for policies and initiatives aimed at achieving a decarbonized society, led mainly by the Ministry of Economy, Trade and Industry. A key feature of GX is that it goes beyond environmental measures and aims to achieve both carbon neutrality and economic growth.

What the government aims to achieve through GX

Through GX, the Japanese government mainly aims to achieve the following three goals.

Reduce greenhouse gas emissions by 46% by 2030 compared with FY2013 and achieve carbon neutrality by 2050

Shift to a stable and sustainable energy supply structure

Create new markets and demand, strengthening industrial competitiveness and economic growth

Basic approach to realizing GX

Japan has a high proportion of manufacturing, and many factory facilities and infrastructure assets have been operated for long periods. Therefore, the transition to decarbonization cannot be completed in a short time and requires a phased approach.

For this reason, through revisions to the Energy Conservation Act and the development of the GX Promotion Act, the government is first promoting energy efficiency while encouraging a shift to renewable energy. It is also building mechanisms to encourage early corporate investment by indicating a future direction for carbon pricing.

One major trigger for global attention on GX was the Paris Agreement adopted in 2015. This is an international framework in which countries agreed to reduce greenhouse gas emissions in order to limit the rise in global average temperatures.

Worsening global warming and environmental issues

In recent years, the global average temperature has continued to rise, and the effects of climate change, such as heat waves, heavy rain, sea level rise, and ecosystem changes, have become more visible. These issues affect not only the environment but also society and the economy.

The global trend toward decarbonization

In Europe and many other countries and regions, systems for decarbonization are being developed, including expanded adoption of renewable energy and mandatory information disclosure. For companies, environmental action is no longer optional; it has become an important theme for maintaining competitiveness.

GX positioned as a priority investment area in Japan

In Japan, GX is positioned as part of the growth strategy. The government has indicated a policy of promoting large-scale investment through public-private cooperation, and policies to achieve both decarbonization and economic growth are being strengthened.

Expansion of the ESG investment market

Investors are also increasingly interested in companies' environmental responses. A company's stance on decarbonization and the quality of its disclosure now affect financing and corporate valuation.

The government is advancing various measures to realize GX.

GX Implementation Council

The government continues to hold the GX Implementation Council with experts, discussing energy policy, investment promotion measures, carbon pricing, and related topics.

GX League

The Ministry of Economy, Trade and Industry established the GX League as a place where companies actively working on GX can collaborate with government, academia, and financial institutions. It is a framework where companies learn from each other in practice while discussing rule-making and emissions trading.

Promoting decarbonization in local communities and daily life

The Ministry of the Environment is also focusing on decarbonization in local communities, housing, and building sectors. Through local pilot cases, energy-saving buildings, and renewable energy adoption, it is supporting GX across daily life.

The GX Promotion Act is an institutional framework for accelerating the transition to a decarbonized society. Its pillars include issuing GX Economy Transition Bonds, establishing a GX Promotion Organization, and introducing growth-oriented carbon pricing.

GX Economy Transition Bonds

As a way to secure funds for GX investment, the government plans to issue GX Economy Transition Bonds to support technology development and capital investment for decarbonization.

GX Promotion Organization

The GX Promotion Organization is positioned as an organization that supports private-sector GX investment and operates emissions trading systems.

Growth-oriented carbon pricing

This approach promotes decarbonization investment by putting a price on corporate emissions. In Japan, it is expected to be introduced in stages while emphasizing compatibility with economic growth.

For companies, GX is no longer something that is merely nice to address; it is becoming a management issue that must be tackled.

Responding to regulations and disclosure requirements

Companies are increasingly required to explain their environmental responses, including disclosure of climate-related information and reporting on energy use.

Growing investor interest

Investors evaluate decarbonization efforts as part of corporate value. A company's stance on GX affects financing and market evaluation.

Changes in consumer behavior

More consumers are choosing environmentally conscious products and services, and GX can lead to new business opportunities.

DX is essential for realizing GX because decarbonization requires accurately understanding energy use and CO2 emissions and continuously improving them.

The role of DX in promoting GX

• Improving operational efficiency by moving away from paper and manual work
• Collecting, storing, and analyzing data
• Visualizing energy usage and emissions
• Optimizing the entire supply chain

For example, by using IoT, companies can monitor the operating status and power usage of factory equipment, vehicles, and buildings in real time. Analyzing that data helps clarify improvement points and enables more effective GX measures.

Manufacturing

By visualizing factory electricity use by equipment, companies can more easily identify energy-saving opportunities. Using AI and remote support can also improve equipment operating efficiency and reduce travel.

Logistics

Introducing IoT in warehouses and vehicles makes it easier to monitor temperature and humidity, vehicle operation, and driver health. Improving transport and delivery efficiency helps reduce both costs and CO2 emissions.

Agriculture

Using auto-steering agricultural machinery, drones, and sensor-based data collection can reduce labor and improve productivity. Decisions can become more accurate based on data such as temperature, humidity, and soil conditions.

To realize GX, companies need more than system implementation. They need mechanisms suited to on-site challenges and an operational structure that enables continuous improvement. Smile supports companies' GX and DX promotion end to end, from organizing business issues to system development and operational improvement.

Smile's main support areas

• Support for digitizing and visualizing business operations
• Building data collection platforms using IoT and cloud technologies
• Development of business systems, web systems, and mobile applications
• Renewal and modernization of existing systems
• Operational efficiency and advanced analytics using AI
• Building support structures for in-house DX capability

What Smile values

Smile values advancing DX in a practical way while understanding each customer's business and on-site operations, rather than acting merely as a development vendor. Leveraging our development experience with Japanese companies, we provide smooth support from requirements organization to design, development, and operations through a BrSE-centered structure.

We can also support knowledge accumulation and in-house capability so that customers can continue improving by themselves in the future. For data use and business improvement for GX, we help build mechanisms that are easy to use on site and easy to maintain continuously.

Consultations we can support

• You are not sure what should be visualized first for GX
• You want to consider mechanisms using IoT and cloud technologies
• You want to build systems useful for CO2 reduction and energy management
• You want to advance DX but do not have enough internal IT talent
• You want to build a structure with future in-house capability in mind

If you have concerns about promoting GX or DX, please feel free to contact us. We will propose the best approach for your company's situation.

GX is an initiative that aims to achieve both the transition to a decarbonized society and economic growth. Today, GX is not limited to government-led policy; it is an important theme that affects corporate competitiveness and sustainability.

To realize GX, promoting DX is essential. Through data collection, analysis, and visualization, companies must understand energy use and emissions and run continuous improvement cycles.

Going forward, companies working on GX will need not only environmental responses but also perspectives on creating new value and growing their business. To do so, it is important to first understand the company's current situation and steadily advance GX and DX from what can be done.

Smile provides GX and DX support tailored to each company's challenges and objectives. We support a wide range of needs, from system implementation and operational improvement to in-house capability development, so please feel free to contact us.