Japan’s Act on Promotion of Corporate Social Responsibility in Natural Resource Sectors, enacted in 2021, quietly introduced what is proving to be a notable shift in how firms—particularly in high-tech industries—are expected to manage the social and environmental risks embedded in their raw material supply chains. While not as headline-grabbing as some other regulatory frameworks, this act reflects Japan’s broader efforts to position itself as a leader in ethical sourcing, especially in sectors where the stakes—both geopolitical and environmental—are high. The early implementation phase, now in full swing, is offering useful lessons for companies grappling with rare earth mineral sourcing and the complex web of actors involved in those supply chains.
What’s striking is how the act encourages, rather than outright mandates, due diligence. This softer touch—one that blends regulatory expectation with a degree of voluntary uptake—has had mixed results so far. On one hand, major electronics manufacturers have taken visible steps toward mapping their supply chains with greater precision. On the other, smaller firms or those with more diffuse supply networks seem slower to respond, either daunted by the task or perhaps unsure where to begin. There’s also, it must be said, a degree of confusion in some quarters about what exactly constitutes sufficient due diligence under the act. That ambiguity is likely intentional, providing flexibility but also making benchmarking more difficult.
For Japanese electronics firms willing to engage seriously with the act’s aims, linking open mining concession data to smelter supply chains has emerged as a key tactic. Mining concession data, often released by host countries as part of transparency or anti-corruption efforts, provides details on where rare earth elements are extracted, who holds the rights, and in some cases, what environmental and labor standards apply. By integrating this data with internal supplier records—purchase orders, delivery schedules, quality reports—companies can start to build a more complete picture of their sourcing footprint. But as always, the reality is messier than the theory. Not all host countries provide concession data in machine-readable or reliable formats. And mapping that data onto smelter-level transactions, especially when dealing with intermediaries or traders, remains a challenging task.
Some firms are experimenting with workflow tools that pull together disparate data streams—mining concessions, smelter declarations, shipment documents—into unified dashboards. The hope is that such systems can help compliance teams spot anomalies or red flags more easily. For instance, if a supplier claims material originates from a low-risk mine, but no concession data supports that, or if shipping patterns suggest an alternative origin, those discrepancies can be flagged for further investigation. These tools, though promising, are still evolving. Much depends on data quality, staff expertise, and frankly, the willingness of firms to probe deeper rather than accept supplier assurances at face value.
Publishing a transparency report on rare earth sourcing is increasingly seen as a way for firms to signal alignment with the act’s objectives. The process for doing so is still taking shape, but a few common steps are emerging. Typically, companies start by gathering internal sourcing data and cross-referencing it against available open concession records. The next step often involves preparing a summary of due diligence measures taken—audits conducted, supplier questionnaires issued, third-party verifications sought. Some firms are choosing to go further, publishing lists of smelters and refiners, along with assessments of associated risks. The final report, usually posted on corporate websites or submitted to relevant ministries, aims to strike a balance between transparency and commercial confidentiality. Getting that balance right is, admittedly, not easy. There’s always the risk of revealing too much—or too little—and neither serves a firm well in the long run.
What’s clear so far is that early implementation of the act is revealing both strengths and gaps in Japanese supply chain governance. The tools and data exist, at least in part, to enable meaningful due diligence. But making those tools work in practice, across complex, often opaque supply networks, remains a work in progress. Some firms are further along than others, driven perhaps by customer demands, investor pressure, or simply internal conviction. Others are only just beginning to grapple with what the act requires of them, and how they might respond in a way that is both credible and sustainable.