1. Decarbonization Is Now Embedded in Global Supply Chains
Net-zero commitments and ESG regulations are becoming the shared language of global supply chains. In recent years, mechanisms such as the Carbon Border Adjustment Mechanism (CBAM), the International Sustainability Standards Board (ISSB), and the Science Based Targets initiative (SBTi) have gradually taken effect, making carbon accounting, carbon certificates, and green procurement not just an added option, but a baseline requirement for any company that wishes to remain part of the global supply chain.
For example, CBAM entered its transition phase in 2023 and is scheduled for full implementation in 2026, covering high-emission industries such as steel, aluminum, chemicals, and cement. Exporters who cannot provide verifiable carbon data and energy certificates will face additional tariffs. In the U.S., the Biden administration’s proposed Clean Competition Act similarly aims to impose extra charges on high-carbon imports.
Under these growing pressures, global brands are passing carbon reduction responsibilities down to their supply chains, requiring suppliers to provide reliable, verifiable, and comparable data — and using that performance as a condition for contract renewal and future orders. Whether supply chains can keep pace depends on whether companies have consistent, mutually recognized, and practically executable systems to turn carbon data into trust in the eyes of the market.
2. Taiwan and Japan: Shared Strengths, Practical Gaps
Japan has long been a leader in institutional frameworks and standardization. Since the implementation of the Green Purchasing Law in 2000, companies have widely adopted management systems such as ISO 14064 and ISO 14001. In recent years, Japan’s Ministry of Economy, Trade and Industry (METI) and the Ministry of the Environment have continued to promote green growth strategies, investing in hydrogen, renewable energy, and circular economy pilot projects to encourage more companies to pursue decarbonization.
However, according to a 2023 survey by Japan’s Ministry of the Environment, while large companies have relatively mature carbon accounting systems, SMEs still often rely on parent companies or meet only minimum legal requirements. Coverage for SMEs remains at about 40%, and most lack mechanisms for regular updates and third-party verification.
In Taiwan, the supply chain is built on agile SMEs that tend to react quickly to new regulations. Since 2024, the Climate Change Response Act has introduced mandatory greenhouse gas management. Taiwan’s Environmental Protection Administration has so far assisted more than 1,200 SMEs in launching initial carbon inventories. Yet many suppliers, while able to produce basic carbon data, still lack consistency with international customer requirements for format and verification — meaning extra effort and cost to adapt.
Image source：FreepikOn paper, Taiwan and Japan complement each other well: Japan offers expertise in institutional design; Taiwan has the agility to test and adopt solutions quickly. But turning that complementarity into a working system that can be replicated across supply chains still hinges on who sets verification rules and how formats are recognized across borders.
Many international standards already provide common ground for carbon accounting and disclosure. But when it comes to daily execution, these standards must be translated into practical processes tailored to each industry and region. Without local tools or mutually accepted processes, companies might comply with the same international requirements yet still waste resources reformatting and verifying data in different ways. Bridging this gap — turning global frameworks into mutually trusted, local systems — is a piece Taiwan and Japan still need to build together.
3. From Demonstration to Daily Practice
Recent Taiwan-Japan collaboration offers useful reference points. For example, TSMC and Sony’s joint investment in the JASM fab in Kumamoto combines advanced process technology with regional renewable energy supply plans. It is widely expected that its carbon accounting and energy certification will follow the parent companies’ policies, becoming a potential model for integrating low-carbon manufacturing with clear governance.
However, many smaller suppliers at the end of the chain face real and immediate execution challenges. A single ISO 14064 third-party verification can easily cost hundreds of thousands of NT dollars, a significant burden for a small parts manufacturer with annual revenue in the low millions. Even when the report is complete, different customers often demand different formats and audit details, forcing suppliers to repeatedly process the same data and stretch their limited teams thin.
This is why more accounting firms and consultants now help businesses integrate ESG accounting, IFRS S1/S2, and TNFD frameworks directly into internal controls, shifting sustainability reporting from a one-time outsourced task to a traceable, ongoing routine. Some trade associations and third-party verifiers have begun to offer shared templates and industry guidelines, helping suppliers cut down on duplicated work and inconsistent documentation.
For SMEs, carbon accounting is gradually becoming less of a compliance cost and more of a practical management tool that connects directly with financial systems. The more the process can be standardized and modularized, the more businesses can control the cost of disclosure and turn ESG into a real source of competitive strength.
Further Reading
For more insight into how Taiwan and Japan can build on technological advantages to expand green growth and regional partnerships, see our earlier article: https://en.yaofengcpa.com.tw/article_detail/Japanese-culture-250627
4. Rising Pressures for Verified Data
CBAM began its transition phase in 2023 and will fully enforce carbon border taxes by 2026. ISSB disclosure rules are now in effect for listed companies to report climate risks and provide verifiable data, and SBTi is steadily expanding supply chain-level decarbonization requirements.
These rules may be initiated by large corporations, but execution almost always lands on smaller suppliers first. For example, a Taiwanese electronics parts supplier has already been asked by an international brand to submit three years of consistent carbon accounting data through a designated online platform, with annual third-party audits. For SMEs with limited resources, this becomes an unavoidable cost if no trade body or regional platform steps in to help standardize tools and processes.
Consolidating verification logic, data formats, and audit workflows into a shared supply chain baseline will be key to controlling compliance costs and helping more SMEs stay in the game.
5. System Strength Becomes Supply Chain Trust
Decarbonization and ESG disclosure start with external pressures but come down to internal consistency and credible data. As global supply chains reorganize and ESG rules become part of market entry thresholds, Taiwan and Japan will need to lead with examples that show how technology partnerships can be backed by systems that are credible and replicable.
Industry associations could play a bigger role in forming demonstration alliances, promoting shared carbon accounting tools, and setting up verification databases. Establishing clear frameworks for cross-border recognition within component supply chains could help keep execution costs reasonable enough for more SMEs to follow.
From joint technology to shared systems, the next advantage will belong to those who shore up trust through practical, consistent governance. Those who build this first will have a stronger position when ESG requirements become a true competitive line in the next wave of supply chain reshaping.