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Renewable energy is an essential step toward finding a solution for increasingly serious global environmental problems. In April 2006, Sojitz established a new Energy & Mineral Resources Business Development Office and became involved in a renewable energy business. In Brazil, we have undertaken an ambitious bioethanol and sugar production business integrating all processes from growing sugar cane to manufacturing and selling the finished product, based on a total investment of 420 billion yen. The business hopes to be processing 5 to 10 percent of all domestic sugar cane by 2021.
Through Environment-related Business Activities, Sojitz Tackles Global Environmental Problems
Increased Focus on the Energy and Mineral Resources Business from a Long-term, Global Viewpoint
It is known that the use of fossil fuels has a negative impact on the global environment. An urgent priority today is to develop and use new eco-friendly mineral resources and energy.
Sojitz’s mineral resources and energy operations have traditionally centered on oil and coal. In response to the changing needs of society, however, we established a new section, the Energy & Mineral Resources Business Development Office, in April 2006, which is headed by the president of our Energy & Mineral Resources Division. This reorganization allows us to make more effective use of our technology and experience in various fields and to more actively pursue environment-related business activities such as renewable energy including biofuels, emissions trading and high-efficiency use of fossil fuels.
Sojitz Takes a Stake in a Bioethanol Business in Brazil
The highest-priority large-scale project for our Energy & Mineral Resources Business Development Office is a bioethanol and sugar manufacturing business in Brazil. Sojitz acquired 33.33 percent of the outstanding shares of ETH Bioenergia S.A. (State of Sao Paulo, Brazil) in October 2007, established by Odebrecht, S.A. (State of Bahia, Brazil), a major Brazilian conglomerate, for 9.2 billion yen, and is working together with Odebrecht on integrated production of bioethanol and sugar starting from growing the sugar cane on plantations to manufacturing and sales of the finished product.
In Brazil, bioethanol made from sugar cane has been available as a fuel alternative to gasoline since the 1970s and today it is sold at ordinary gas stations alongside gasoline. Sales of FFV (flexible fuel vehicles) capable of running entirely on bioethanol started in 2003, and such vehicles now account for over 80 percent of new cars sold. Demand for bioethanol as vehicle fuel is expected to climb even higher.
Sojitz farms in pastureland in the central southern part of Brazil, far from the Amazon rainforest
Large areas of unused land have been converted to land for sustainable farming.
Seeking Potential for the Renewable Energy Business in Coordination with Local Companies
Brazil is the world’s second-largest producer of bioethanol and is also one of the main consumers of this fuel. Sojitz is participating in the business in Brazil not just to help ensure stable production of biofuels but also to boost our competitiveness in world markets.
In coordination with Odebrecht, Sojitz is expanding operations through M&A of local business companies and has already bought one bioethanol producer outright. Future plans call for acquiring three more companies to enlarge production facilities so as to increase production capacity. Targets for the first stage are to process 16 million tons of sugar cane yearly by 2016, producing 980,000 kiloliters of ethanol and 790,000 tons of raw sugar on a yearly basis. Further expansion is envisioned for the second stage, processing 44 million tons of sugar cane by 2021 yielding 2.6 million kiloliters of ethanol and 2.4 million tons of raw sugar per year, when Sojitz aims to process 5 to 10 percent of all sugar cane processed in Brazil.
A Brazilian gas station selling both gasoline (gasolina) and ethanol (alcool)
Operating Plants and Cultivating Larger Areas with Maximum Concern for Social and Environmental Impact
Bioethanol is a carbon-neutral fuel: that is, the amount of CO2 absorbed by sugar cane while it is growing is equal to the CO2 emitted when it is used, and it is known for its low environmental impact. In particular, when sugar cane is used to produce bioethanol, sugar can be converted directly into ethanol, a more simple and efficient process than when corn or other inputs are used, since in that case starch content must be converted to sugar first and then to ethanol. Additionally, bagasse (sugar cane pulp) can be used to fuel the plant, resulting in greater reductions of CO2. Bagasse generates more than enough electricity to operate the plant, so the excess can be sold. Therefore, plants require no outside electricity supply and can be operated self-sustainably.
Where expansion of land for growing sugar cane is concerned, land is converted from pasture or unused land, not from land used for growing grain or other crops. This avoids the food-related issue such as when more land is used to grow corn for ethanol production. In this project, land is replanted and left to lie fallow in planned six- to seven-year cycles for each plot to ensure stable production. Ultimately, we plan to expand the area under cultivation to 470,000 hectares without increasing the environmental burden.
For the time being, the bioethanol produced in Brazil will be consumed locally, but in future it could be exported while also meeting domestic demand.
Businesses outside the Energy Sector or in Other Countries
Sojitz is interested in developing its bioethanol and sugar production business in Brazil in other sectors of environment-related businesses. For example, ethanol can be used not simply as fuel but also as a raw material for various industrial products. To exploit this potential, we are thinking of supplying Braskem S.A., an Odebrecht subsidiary and South America’s largest petrochemical company, with ethanol for its “green plastic” (plastic made from ethanol, not petroleum) business. We are also promoting sales of electricity with emissions rights, production of electricity using biomass fuel, and in the future, we aim to set up integrated production of biomass fuel, for which global demand is rising, from raw material production through to sales.
General Trading Company Resources Helping Solve Environmental Problems
Yoshiyuki Nunomura
General Manager,
Energy & Mineral Resources
Business Development Office,
Energy & Mineral Resources Division
Solutions must be found soon for environmental problems, and there is a lot of vitality in the environment- related business. I am certain that effectively combining the business acumen and the wide-ranging technological expertise that Sojitz has developed as a general trading company will unleash major possibilities. With our bioethanol and sugar business in Brazil, we are operating a farm for the first time, and we hope to build on this experience to help solve food-related issues in the future.
In January 2008, we established an Environment and New Energy Business Development Committee and the Energy & Mineral Resources Business Development Office serves as its secretariat. With “environment” as the keyword, we hope to organically link the functions of the company and speed up promotion of the environment-related business.
Today, the concept of appropriate forest management has become established, and logging that takes environmental impact into consideration has become more common. Sojitz’s new business model, contributing to local communities by tree-planting on barren soil, is attracting attention. The key to the project’s success is emphasis on building a win-win relationship based on communication between stakeholders and Sojitz and its Vijachip (Vietnam) joint venture.
New Business Model Contributing to Local Community Development
Afforestation Project and Wood Chip Production for Environment Preservation
Japan, the world’s third-largest papermaker after the United States and China, imports large amounts of wood chips, the raw material that goes into paper. But as paper consumption increases, forests in developing countries are cut down, leading to serious environmental destruction.
How to ensure a stable supply of wood chips, an important resource, while protecting forests? Seeking the answer to this question, Nissho-Iwai, one of Sojitz’s predecessor companies, established Vijachip, a joint venture with a local Vietnamese company, in 1994. Wood chip plants were built in four provinces in central Vietnam, mainly near the coastal city of Da Nang, and afforestation projects were begun in nearby areas at the same time.
This region suffered severe damage during the Vietnam War due to bombing and the use of defoliants, and traditional slash-and-burn farming also left many areas barren. Vijachip, through wood chip production and afforestation activities, has made these bare areas green again, which coincides with the Vietnamese government’s push to remediate the natural environment.
Afforestation projects in four provinces in central Vietnam
As the forestry model spreads, it also creates jobs in processing, transport, etc.
Foresters may plant these free acacia hybrid seedlings anywhere they like.
Acacia Trees Restore the Soil
Central Vietnam is full of barren lands like these.
Government afforestation programs planted mainly eucalyptus, and Vijachip also planted this species at first. But whereas eucalyptus is fast-growing, it is vulnerable to insect pests in central Vietnam’s climate. Vijachip therefore decided to plant acacias, which fix nitrogen, a nutrient, in the soil and help restore the soil’s productive capacity. Most trees planted by Vijachip today are acacias.
Acacias not only help improve the soil, they prevent hot winds from blowing hard and help restore the environment in various ways, as flora and fauna that had disappeared return to the area and rich stores of underground water are maintained. Planting acacias also makes farmland productive again, and farming is being resumed in some places.
Contributing to Local Economic Development
Continued rising demand for paper means that large amounts of wood chips are always needed.
The most noteworthy feature of this business, which involves planting trees over an area of more than 26,000 hectares, is that it is not the usual large-scale tree-planting operation by a foreign company. Five local forestry companies hold stock in Vijachip and also participate in the project as partner companies. Vijachip provides loans or distribute free seedlings to local farmers, the people mainly involved in planting and caring for the trees.
The trees planted are harvested seven years later and bought by Vijachip, which processes the wood into wood chips exported to Japan. The number of trees Vijachip will buy is set in advance, which guarantees the farmers growing the trees a certain income and reinforces their motivation to plant trees.
Providing funds not only as donations for seedlings but in the form of loans for plantation encourages people to work so they can eventually become self-supporting through forestry work. This afforestation model, developed through talks not just with local companies but also administrative authorities, is helping to lay the foundations for a self-sustaining industry. The program, which greatly contributes to economic development of the entire region by raising the people’s standard of living, enjoys a favorable reputation.
Prospects for the Future
A forest of acacia hybrids is once again home to birds.
After relatively successful operation of this model in Vietnam, Sojitz is considering expanding it to other countries, mainly ASEAN members such as Laos and Cambodia. The program will be further fine-tuned to better ensure environmental preservation, contribute to the local economy, and attain higher profitability.
We are also thinking of applying the know-how gained from this business model into other areas, for example in nonfood biomass operations involving sugar cane or coco palm.
Spreading the Spirit of Prospering Together with Local Communities
Tadahiro Kinoshita
General Manager,
General Merchandise Department,
Textiles &General Merchandise Unit,
Consumer Lifestyle Business Division
“There is no point in doing this unless everyone involved with the project is happy.” That has been the guiding rationale ever since Vijachip was set up. In fact, the greatest significance of this project is that it has benefited Sojitz, Vijachip and local farmers alike.
When we expand this model to other countries or other fields, we shouldn’t forget that we and the local communities are involved in the project together, and that communication is the keyword for making our business possible.
