4-9. Stricter U.S. EPA Regulations and Corporate Risk

The United States Environmental Protection Agency (EPA) is accelerating the enforcement of its regulations to protect the environment and public health. New standards are being introduced, particularly in climate change, chemical management, and air and water quality, making compliance more important than ever for companies with U.S. operations or those exporting to the U.S. market. While the EPA's tightening regulations pose risks, they also present an opportunity for companies to strengthen their competitiveness through environmental initiatives.

1. The Rationale for Stricter Regulations

The EPA is tightening regulations due to the worsening health effects of climate change and air pollution, and the growing environmental risks from hazardous chemicals. Since the Biden administration took office, environmental policy has become a top priority at the federal level, with a focus on CO2 reduction mandates, methane emission regulations, and stricter controls on PFAS (per- and polyfluoroalkyl substances), known as "forever chemicals."

2. Key Areas of Regulatory Enforcement

The EPA is strengthening regulations in the following areas:

• Greenhouse Gas Regulations: Raising emission standards for power plants and manufacturers, and tightening emission reporting requirements.

• Hazardous Chemical Management (TSCA Amendments): Stricter approval processes for new chemicals and mandatory risk assessments for existing substances.

• Water Quality Protection (Related to the CWA): Stricter effluent standards and measures to combat groundwater contamination.

• Waste Management (Related to RCRA): Expanding the definition of hazardous waste and strengthening its management.

3. Corporate Risks

If companies fail to comply with the stricter regulations, they face a number of risks:

• Legal Risk: Fines and cease-and-desist orders for violations.

• Reputational Risk: Loss of trust from consumers and investors who are sensitive to environmental issues.

• Increased Costs: Higher capital expenditures and operational costs to achieve compliance.

• Market Risk: Potential loss of business opportunities due to stricter procurement requirements from business partners.

4. Impact on and Response for Japanese Companies

Japanese companies that export products to the U.S. or have production facilities there must constantly stay updated on the latest EPA regulatory trends. Recommended actions include:

• Strengthening EHS Audits: Verify compliance status at their own facilities and with suppliers.

• Monitoring Regulatory Information: Collect information during the EPA's public comment and proposed rule stages.

• Risk Avoidance Through Proactive Investment: Achieve compliance beyond current regulations by introducing advanced emission reduction and wastewater treatment technologies.

• Increasing Disclosure Transparency: Proactively report on environmental initiatives to investors and customers.

Summary

While the EPA's stricter regulations pose significant risks to businesses, they also represent a crucial opportunity for achieving sustainable growth. For Japanese companies, it is essential to accurately grasp EPA regulatory trends and take proactive environmental measures to maintain global competitiveness. The key to future business growth is to strategically leverage regulatory compliance not as a "cost" but as a part of "value creation."