Marubeni to sustain development and profits
The global business climate, as much as the physical one, is changing rapidly.
Business leaders and governments are calling for a new agenda. Companies, they say, must generate value not just for their own shareholders, but for all stakeholders: workers, suppliers, customers, the environment, and communities. The UN’s 17 sustainable development goals (SDGs), which cover a range of objectives from the eradication of poverty to action on climate change, are now a new business lodestar. And all this comes at a time when the squalls of mega competition, technological change, and black-swan events roil markets.
Sustainable growth is no easy task in such a turbulent climate, but one type of unique entity, a type of highly diversified Japanese trading house known as a sogo shosha, appears particularly well placed for this challenge.
Sogo shosha operate astoundingly diversified businesses comprising thousands of suppliers in hundreds of countries while directly and indirectly employing hundreds of thousands. What’s more, these trading houses not only trade, but also invest and manage companies directly. Over time, they have accumulated expertise in logistics, finance, and risk management across multiple markets. Charles Darwin famously said “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” And the sogo shosha have certainly proven adept at change; these firms have thrived for more than a century by constantly adapting their business models to new opportunities at global scale.
If these entities, with their vast network, operations, and knowhow, commit seriously to SDGs, the impact would be immeasurable.
SDGs are in its DNA
Leading the charge to meet the new sustainability agenda is the Marubeni Group, one of the big five of the Japanese shosha. Last year, the company identified four areas linked to SDGs that are vital to the company’s future: climate change; sustainable forestry; human rights and co-development with communities; and sustainable and resilient value chains.
“Contributing to SDGs is in our DNA,” says Nobuhiro Yabe, Chief Sustainable Development Officer “Marubeni’s history has been one of anticipating social needs and issues and proactively delivering solutions. Today, society is demanding sustainability, so delivering on SDGs will generate sustainable value for our company.”
Marubeni’s recent headline-grabbing decisions demonstrate this strategy.
In September 2018, as part of its commitment to mitigate global warming, the Marubeni Group pledged to cut its coal-fired power net generation capacity of approximately 3GW in half by 2030. Also, it will no longer enter into any new coal-fired power generation business as a general principle. Instead, the Marubeni Group is expanding its portfolio in the renewable energy business, aiming to grow green revenue from JPY 700bn in FY2017 to JPY1.3 trillion by the end of March 2024.
In January of this year, Marubeni signed a deal with Qatar, taking a 20.5 per cent stake in a project to construct an 800MW solar plant. The plant would be the first-of-its-kind in Qatar. The news follows the start of commercial operations last year for another solar power plant in the United Arab Emirates, a 1,177MW capacity plant in which Marubeni has 20 per cent ownership.
These solar projects are helping countries in the region to gradually decrease their dependence on fossil fuels, while solidifying Marubeni’s presence in the burgeoning global renewable energy business.
Delivering decentralized renewable energy
The world will need not only more environmentally-friendly electricity generation, but also effective platforms to connect buyers and sellers of increasingly decentralized and small-scale renewable power. To that end, Marubeni has already developed a profitable and effective business model over the past two decades.
In 2001, Marubeni established SmartestEnergy Limited (SEL) as a new kind of electricity company that buys power from small, independent, mostly renewable energy producers and sells it to various customers. Since then, the company has grown its annual turnover to over GBP 500 million, with annual power purchase contracts of over 3GW and power supply contracts of over 7TWh, and a reputation for industry-leading customer service.
Contributing to SDGs is in our DNA
Chief Sustainable Development Officer
“Since we started working with SmartestEnergy in 2012, we’ve received a high level of service. They’ve taken the time to understand our industry and tailored a product and service to meet the needs of dynamic property portfolios such as those we manage. We are particularly pleased with the certification of renewable supplies for the entire portfolio helping us and our clients to achieve our ambitions for sustainability,” says David Mead, Associate for JLL, the global real estate services provider.
“Working with SmartestEnergy has enabled us to progress our sustainability credentials over time too. Having begun on a standard renewable product, our portfolio is now powered solely by natural renewables (wind, solar and hydro generation) whilst our own offices consume renewable power from a specific source.”
Among other innovations, SEL pioneered the practice of providing “origin certificates” in the UK which guarantee that the energy comes from specific renewable sources of wind, solar, tidal, and /or biogas.
As demand for renewables grows and liberalization of electricity retail markets accelerates in numerous countries, Marubeni is looking to export the Aggregation and Supply platform business beyond the UK. Last year, SEL launched its first overseas operations in the US. It plans to enter into the retail electricity markets in the states of New York, California, and Texas, and is eyeing other countries and continents as potential markets as well.
Brightening the world off-grid
In parts of the world lacking reliable grids, Marubeni has ambitious plans to bring power to millions of people.
In 2018, the company took a stake in WASSHA (Swahili for light), a Japanese startup that provides rental electronic lanterns charged by off-grid solar panels in Tanzania.
“What is unique about WASSHA, compared to the other off-grid solar businesses in the region, is that we rent to customers in off-grid areas that may not be able to afford to directly buy electronic devices,” says Suguru Tsuzaki, General Manager of team-Ⅱ, Power Business Dept.-Ⅳ
The affordable lanterns which WASSHA offers at around JPY25 per day through local agents provide multiple benefits. Compared to traditionally used kerosene lamps, the electric lanterns generate no harmful smoke and pose less fire risks, while still allowing study and work after dark. WASSHA’s lanterns also have USB hubs to recharge mobile phones. This feature helps off-grid clients stay connected without having, as often is the case for those in rural areas, to walk miles to access the nearest electricity source. Currently, WASSHA lanterns provide light to 40,000 households in Tanzania.
In partnership with Marubeni, WASSHA is looking to expand into other countries in the African continent, where about half of its 1.2bn population is said to not have access to power utility services. As the price of solar technologies have fallen and Africans become wealthier, demand for off-grid power products is surging. The World Bank estimates annual sales in the market will grow to as much as USD 8bn globally by 2022, compared to USD 1bn in 2016, much of it driven by African demand.
Along with WASSHA, last year Marubeni also took a stake in Azuri Technologies, a UK-based company that sells solar panels, rechargeable batteries, and electronics like TVs on an installment basis in Africa. The two-pronged investment strategy aims to capture different income-level customers in the booming off-grid solar market and beyond.
Towards a circular economy
The energy sector, though vital for combatting climate change, is only one of the myriad businesses in which a shosha operates. For Marubeni, forestry products and textiles have been traditionally strong domains. In both, the company has focused on sustainability.
Marubeni fully owns and manages a total of 140,000 hectares of tree plantations across Australia and Indonesia. The company’s commitment to sustainably manage its plantation forest goes back to the year 2000, when it invested in Western Australia Plantation Resources Pty Ltd. (WAPRES) to sustainably produce wood, mainly from eucalyptus trees. Its Indonesian plantation, next to a Marubeni-owned pulp factory, in which the company took a majority stake in 2005. Its plantation forest is certified by international forest certifications.
“Our forest products division has been contributing to sustainable practices long before discussion about SDGs,” says Masayuki Hashimoto, General Manager of Sustainability Management Dept.
WAPRES now exports over one million tonnes of cut and processed wood chips to Japan and China from its safe and sustainable operations, that protect the environment and support local communities.
Elsewhere, Marubeni is aiming to make fashion greener.
Last year it announced a capital alliance with US-based Tyton BioSciences, a startup which has developed a highly efficient and sustainable process to recycle textile materials.
Using its networks with leading companies and across various suppliers in the apparel industry, Marubeni hopes to transform – through Tyton’s textile recycling technology – the traditional linear supply chain of mass production, use, and disposal of textiles into a sustainable global circular supply chain of fashion.
“Tyton’s technology can recycle both polyester and cotton, which represents mass materials of the world’s expanding JPY 150 trillion fashion market,” says Tosuke Nakamura, Deputy General Manager of the Functional Textile Department. “We aim to be pioneers that open up this potentially huge textile recycling market.”
A circle of infinite opportunities
Phasing out of brown into green energies, connecting renewable energy producers with responsible consumers, providing affordable off-grid light, sustaining forests, and creating a circular economy for fashion: these are only some of the many contributions Marubeni is already making in the realm of SDGs.
Looking forward, the visual image of vision for the Marubeni of the future “Global crossvalue platform” suggests boundless possibilities. The logo is in the shape of a simple circle. A circle is a polygon composed of an infinite number of sides: countless opportunities for sustainable growth and profit await those, like Marubeni, willing to look for them.