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In a rare admission for the world’s biggest automaker and Japan’s most powerful corporation, Toyota Chief Executive Koji Sato admitted last week that there are “limits” to its ability to deliver a support for its Hino Motors truck subsidiary.

On the same stage in Tokyo, Martin Daum, the boss of Daimler Truck, issued an equally grim warning that the merger of the two groups’ truck units in Japan was essential to survive in the race to carbon neutrality.

“We need to change a system that has been successful for the past 120 years within the next 10 years into an entirely new system,” Daum said, noting that the effort would require new infrastructure for power generation and distribution. “We have to do this to save the planet. It’s so huge that you can’t do it alone.

Consolidation within the country’s overcrowded auto industry was long overdue. But Toyota’s decision to offload its commercial truck unit – marred by repeated emissions and fuel efficiency scandals – comes as the company faces pressure from shareholders to improve its governance structure and climate policy. .

Two of America’s largest public pension systems — the California Public Employees Retirement System and the New York City Comptroller’s Office — voted against Akio Toyoda’s re-election at their upcoming annual meeting after the adviser in proxy Glass Lewis criticized the chairman of Toyota. for chairing a board that was not sufficiently independent. Along with Institutional Shareholder Services and the Church of England Pensions Board, US pension plans also backed a shareholder proposal calling for more disclosure about the company’s climate lobbying efforts.

Toyota said it would actively engage with shareholders and consider the most appropriate board structure.

The automaker has repeatedly been criticized by investors for not being aggressive enough with the rollout of electric vehicles and seems overly protective of its hybrid technology. The criticism is not new, but at the heart of the problem is a climate change challenge that goes far beyond the predicament Toyota faces.

One of the biggest risks for companies is the competitive disadvantage they would face if, despite good intentions, global investors deemed Japan, heavily dependent on coal, natural gas and oil, to turn to a policy environment out of step with the rest of the world.

The country has pushed for an energy transition and climate strategy in Asia that does not sacrifice economic growth, saying the situation of developing countries in the region is “unique” compared to advanced economies in the United States and Europe. . His push for ammonia as an emissions reduction tool has also recently come up against a violent reaction from the other members of the G7 since it risked extending existing fossil fuel infrastructure.

In the corporate world, Panasonic, Hitachi and others have campaigned for a new environmental metric – called “avoided emissions” or Scope 4 – that would quantify companies’ contributions to reducing carbon emissions in society at broad sense by offering energy-efficient products and services. In the case of Panasonic, the company argues that its contribution to reducing emissions by selling car batteries for use in Tesla’s electric vehicles should be recognized, even though the production of the batteries is carbon-intensive.

While the concept has won support from asset managers such as London-based Schroders, Critics have warned that creating a new climate measure would prevent companies from actually reducing their carbon footprint in their own operations and supply chains.

Kim Schumacher, associate professor of sustainable finance at Kyushu University, says Japan’s push for ammonia and avoided emissions is fundamentally driven by the need to make Japanese products more competitive, even if they are produced with a larger carbon footprint than those produced in other countries. countries with more decarbonized energy sectors.

Currently, companies with manufacturing sites in the country, such as Sony, are struggling to meet demands from Apple and other global customers to reduce the carbon footprint of their domestic supply chains. .

The climate challenge also comes at a particularly sensitive geopolitical moment. Global semiconductor companies including Micron, Samsung Electronics and Taiwan Semiconductor Manufacturing Company are planning to increase manufacturing and research in Japan in response to the risks posed by the technological war between the United States and China.

But if Japan wants to position itself as a reliable and respectful Western supply chain partner, it will only do harm if its climate efforts, however logical they may be, are seen as going against the grain.

kana.inagaki@ft.com