Quantitative text analysis of sustainability reporting: Decarbonization strategies and company characteristics in Japan

Following the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), listed companies in Japan must disclose sustainability-related information since the 2023 financial year. As carbon neutrality becomes integral to corporate management, understanding the strategic approaches taken by companies is crucial. The new reporting standard provides a unique opportunity to conduct large-scale, standardized analyses of corporate sustainability strategies, which was unfeasible in Japan due to a lack of comparable datasets. This study applies natural language processing techniques to quantify and statistically analyze the novel dataset of corporate sustainability strategies listed on the Tokyo Stock Exchange Prime Market. The analysis elucidates the relationship between decarbonization strategies, company size, industrial sector, and financial indicators. The key findings are as follows: 1. Large companies have the resources to focus on ‘climate change scenario analysis’ and ‘materiality management systems,’ while small companies emphasize inclusion such as ‘women's roles’ and ‘climate-related governance.’ 2. Strategies in energy-intensive and financial sectors engage more with ‘climate change scenario analysis.’ 3. Company size and industry significantly influence the focus of sustainability strategies, whereas the impact of financial indicators is relatively less pronounced. These findings offer actionable insights for policymakers, emphasizing the need for industry- and size-specific measures to support decarbonization efforts. For business leaders, the proposed methodology provides an explicit understanding of their sustainability strategies' impact on social responsibility and profitability. This research is expected to contribute to developing a new reporting framework for evaluating corporate sustainability strategies from the perspective of balancing social and corporate values. • The first large-scale text analysis of sustainability/net-zero strategies in Japan. • Company size/sector shapes decarbonization strategies more than financial indicators. • Large firms focus on climate scenarios; small firms prioritize governance roles. • Financial/energy-intensive sectors are focused on analyzing climate change scenarios. • Less exposed sectors such as Services show a weaker focus on future climate scenarios.