JP Energy Conservation Act — SABC Rating and Benchmark System for Designated Businesses
ENFORCEMENT TIMELINE
Fully operational since FY2016 (Reinforced with non-fossil conversion in April 2023)
Overview
Under the Act on Rationalizing Energy Use, businesses whose annual energy consumption reaches 1,500 kiloliters or more in crude oil equivalent are designated as specified businesses. Based on the periodic reports these businesses submit, the Ministry of Economy, Trade and Industry rates and publishes their energy conservation efforts on a four-tier scale (S, A, B, and C) under the SABC rating system. For certain industries, a benchmark system is also applied, setting medium- to long-term energy efficiency targets that businesses are expected to work toward more concretely.
Enforcement Timeline
Fiscal 2016: Full operation of the SABC rating system begins, classifying businesses based on their annually submitted periodic reports.
April 2023: Following amendments to the Energy Conservation Act, an evaluation item covering the shift to non-fossil energy, including the leveling of electricity demand, is added to the benchmark targets and rating criteria.
End of July each year: The deadline for submitting periodic reports and medium- to long-term plans covering the previous fiscal year's energy use.
Around winter each year: The Ministry of Economy, Trade and Industry notifies and publishes each business's rating (S, A, B, or C).
Business Impact
Businesses rated B (showing stalled progress) or C (requiring attention) for two consecutive years become subject to guidance and advice, and if no improvement is seen, face the risk of formal recommendations, public disclosure of the company's name, and fines of up to 1 million yen. Published ratings also directly affect how businesses are viewed by ESG investors and business partners. Since the 2023 amendment, evaluation now covers not only simple energy savings, such as a 1% annual improvement in energy intensity, but also the proportion of non-fossil energy used, requiring procurement and facilities management teams to incorporate concrete plans for renewable electricity adoption and process electrification or fuel switching into their reports. Major customers aiming to maintain an S rating, including large manufacturers and IT companies, are increasingly placing strict demands on their suppliers to improve energy efficiency and meet CO2 reduction targets.