Survey finds most Japanese firms lagging on circular economy shift

Despite the Japanese government positioning the circular economy as a pillar of its national growth strategy, a new survey suggests that corporate implementation remains sluggish, with a shortage of specialised talent cited as the leading obstacle.

Members Co., Ltd., a Tokyo-based provider of digital transformation (DX) services, released the findings of its “Survey on the Actual Status of Circular Economy in Japanese Companies 2025” on 27 November. The report highlights a significant disparity between national policy ambitions and the operational reality of Japanese businesses, indicating that only a small fraction of companies have successfully integrated circular principles into their operations.

The survey, conducted in October among 412 business professionals, indicates that only 13.4 per cent of respondents report their companies are actively engaged in circular economy initiatives, either company-wide or within specific departments. In stark contrast, a combined total of 81.7 per cent of respondents stated that their organisations have either not undertaken any initiatives or that they are unaware of any such efforts.

This slow adoption comes more than a year after the Japanese Cabinet approved the “Grand Design and Action Plan for a New Form of Capitalism 2024 Revised Version” in June 2024, which explicitly designated the transition to a circular economy as a key national strategy. The survey results suggest that while the government has set the direction, the private sector struggles to follow suit.

Among the companies that have begun initiatives, the focus remains heavily on traditional environmental measures. The most common activity, cited by 29.1 per cent of active companies, is resource efficiency and waste reduction. Conversely, business model transformations such as Product-as-a-Service (PaaS), sharing platforms, or subscription models remains a low priority, with 7.8 per cent of companies stating they have no plans to adopt such models. This data points to a hesitation among Japanese firms to move beyond basic environmental compliance toward fundamental business innovation.

The report identifies a complex web of obstacles hindering progress. The most frequently cited barrier is a shortage of personnel with specialised knowledge and know-how, at 24.5 per cent. This is closely followed by the lack of legal frameworks and government support (21.4 per cent), immature technology and high costs (20.9 per cent), and difficulties in information sharing across the supply chain (19.9 per cent). The proximity of these figures suggests that companies face a compounded set of challenges involving human resources, regulation, finance, and logistics simultaneously.

The nature of these challenges shifts as companies advance in their sustainability journey. The survey analysed issues related to Life Cycle Assessment (LCA) calculations and found that companies in the early information-gathering stage struggle primarily with internal issues, such as the cost of calculation tools and defining evaluation methods. However, “advanced companies” that are actively implementing circular strategies report different hurdles. For these frontrunners, the difficulty of collecting data from suppliers becomes a prominent issue (28.9 per cent), alongside the persistent lack of internal expertise (48.6 per cent). This indicates that as initiatives deepen, the barriers move from internal planning to external supply chain collaboration.

The survey also gauged readiness for the Digital Product Passport (DPP), a system being advanced by European Union policy that records sustainability information throughout a product’s lifecycle. Only 15.5 per cent of Japanese companies are preparing for DPP compliance. However, nearly 70 per cent are either gathering information or monitoring trends, showing a high level of awareness if not action. Notably, companies with an overseas sales ratio exceeding 10 per cent showed a higher tendency to be preparing for DPP, suggesting that global market requirements are a stronger driver for transparency than domestic pressure.

Members Co., Ltd. concludes that for Japanese companies to convert the circular economy from a cost centre into a source of competitive advantage, they must overcome these “four barriers” of talent, rules, cost, and collaboration. The firm emphasises that utilising digital transformation to facilitate data sharing and investing in specialised human resource development will be critical for future growth.