Panasonic Group GX Strategy: R&D Initiatives Toward a Decarbonized Society

Achieving virtually zero greenhouse gas emissions, also known as “carbon neutrality,” by 2050 is a top priority for modern enterprises. At a time when society as a whole is searching for the ideal form of Green Transformation (GX) to realize a way of life independent of fossil fuels, how should R&D functions approach the medium- to long-term theme of environmental issues and link this theme to corporate growth? Tatsuo Ogawa, Panasonic Holdings Corporation (PHD) Executive Officer and Group CTO, and Hideo Ohara, General Manager of the Technology Division’s Manufacturing Innovation Division, introduce examples of the latest initiatives and discuss the Panasonic Group’s approach to these issues.

In January 2022, the Panasonic Group formulated its long-term environmental vision Panasonic GREEN IMPACT (PGI), setting the goal of achieving virtually zero CO₂ emissions (Scope 1 and 2) at all operating companies by 2030 while realizing a reduction in CO₂ emissions of more than 300 million tons, or approximately 1% of total global CO₂ emissions, by 2050.

What does corporate R&D look like in the context of addressing and resolving global environmental issues? In September 2023, PHD announced that in addition to its existing focus on carbon neutrality and circular economy, it will also begin work toward “nature positive” (biodiversity restoration)*. PHD is promoting research and development with GX as a pillar of its growth strategy.

* Nature positive: A set of international goals, established at the 15th Conference of the Parties to the United Nations Convention on Biological Diversity (COP15) in 2022, that seek to halt and reverse nature loss. Source: https://www.unep.org/un-biodiversity-conference-cop-15

“The mission of PHD’s Technology Division is ‘to create a world you would never see without us.’ To realize a society that is sustainable and promotes well-being, we are actively working toward co-creation and new businesses, communicating with likeminded people both inside and outside the company,” said CTO Ogawa. “PHD has its own corporate research institute, while each operating company has an executive serving, like I do, as CTO. These CTOs regularly meet to discuss human resource development and other issues that need to be addressed by the entire organization, practicing company-wide technology development management.”

“Endeavoring to realize ‘an ideal society offering both material and spiritual abundance,’ the research and development activities of the PHD Technology Division focus on the two domains of GX and Cyber-Physical Systems (CPS),” explained Ogawa.

“GX is an initiative led by the Japanese government that focuses on the shift from fossil fuels to clean energy,” he continued. “CPS, on the other hand, is a concept unique to the Panasonic Group, which aims to realize a ‘better life’ for people by combining the physical realm with the digital, data-driven cyber realm.”

Taking the lead in areas that are beyond the reach of individual operating companies and themes with longer-term timeframes, the PHD Technology Division plays a supporting role that transcends the boundaries of operating companies to strengthen the competitiveness of each company.

As mentioned above, the Technology Division’s approach to GX centers on promoting research and development in the three areas of carbon neutrality, circular economy, and nature positivity. Its goal is to create future impacts in these areas.

“A few years ago, we were only talking about directions, but now we’re growing our business to the point where we’re looking at mass production. We will continue to make investments, however modest, over the next 10 to 20 years in themes that deviate a bit from the areas that each of the operating companies is working on—mainly energy and resource-related themes. I believe that being in a position to do this is PHD’s true value,” said Ogawa.

** Specific examples of GX technologies can be found at the end of this article

Ohara, who is leading hydrogen-related R&D (including fuel cells) and working to build momentum for a hydrogen society through business collaboration, said: “Since the 1970s, the Panasonic Group has been involved in a number of businesses that are highly compatible with the environment and energy. Some of the technologies we’ve introduced to the market have ended in failure. I guess you could even describe our research and development efforts as a series of failures. To avoid being discouraged by a single failure and keep the light of challenge burning, we’ve taken a long-term approach to cultivating technologies that can be useful to society while remaining in step with the times.” Resources and knowledge that fail to flourish during initial development are being passed on to the next technology over a time horizon of 10 or 20 years.

“Bringing a project to fruition requires connecting not only with in-house project members, but also with experts in the particular area—this is especially true in the field of energy, where creating a system for public-private collaboration is required. Driving ahead with a project while promoting an attitude of co-creation is critically important,” said Ohara.

The Panasonic Group has a wide variety of “seeds” with the potential to grow into viable businesses. “We continue to research and develop seeds with potential for the future, no matter how small. We will continue to create businesses that are highly compatible with the global environment from a medium- to long-term perspective,” said Ohara.

In terms of tackling R&D as a corporate entity, Ogawa said: “When taking a long-term view, the first thing you need is a mindset of never being discouraged by failure. On top of that, in order to create future value, we must constantly ask ourselves how far we can improve the resolution of our business hypotheses. We need to move forward while revising our assumptions and reviewing the numbers—such as whether or not the NPV (Net Present Value) is increasing.”

To improve resolution, how does Panasonic measure and evaluate the value of its businesses and companies? The Panasonic Group is currently promoting activities to standardize avoided emissions to promote their adoption worldwide.

Avoided emissions refers to CO₂ emission reductions that occur outside of a company’s value chain, such as emissions reductions made possible by the use of products and services by customers and within society. Panasonic believes that a company should be evaluated not only in terms of the amount of CO₂ and other greenhouse gases that are emitted in its value chain as the result of business activities, but also in terms of the avoided emissions it generates. To this end, Panasonic is taking part in global-level discussions to promote the creation of an international standards for avoided emissions.

“It would be ideal if avoided emissions become a common metric worldwide and, on that basis, the PHD Technology Division could select themes that offer growth opportunities and get a comprehensive view of the high and low probabilities for success,” said Ohara.

“Standardization is not something that a single company can achieve on its own, so we are promoting the idea by working together with other companies that share our concerns,” said Ogawa. “We are also working together with the Ministry of Economy, Trade and Industry (METI) and the Ministry of the Environment (MOE) to find ideal use cases. Most recently, we’ve been approached by key people at financial institutions, and are discussing how to incorporate an avoided emissions component into the financial mechanism.”

Regarding the future of research and development within the Panasonic Group, Ogawa said: “When you start working on it as a business, having the mindset of aiming to be the best in the world is critical. How do we set KPIs in a competitive environment? Rather than settling for areas where we can get an easy win, we choose to go into uncharted territory even if it means potential failure. We are trying to instill this spirit throughout the entire group.”

“Today, our focus is on contributing to the realization of a society that uses safe and green energy and resources. On the delivery of safe and inexpensive energy where it is needed. This attitude aligns with the ‘Tap Water Philosophy’ of our founder, Konosuke Matsushita. We will continue to promote research and development while sharing this philosophy with each and every one of our engineers,” said Ohara.

If you mesh well with the timing and trends of the times, new possibilities open up. The Panasonic Group will continue to think about what the world will be like 10 years from now, seek new light through co-creation, and relentlessly advance into uncharted territory.

This article is based on an online seminar entitled “How R&D is Confronting Environmental Themes—Approaching Panasonic HD’s Challenge” held on February 14, 2024, on the business intelligence platform SPEEDA.