Responding to TCFD

Responding to TCFD Recommendations

Climate change is greatly impacting society and Epson sees it as a serious social problem. The goal of the Paris Agreement is to achieve decarbonization and keep the increase in the global average temperature to below 2℃. Epson has set science-based targets (SBT) for reducing greenhouse gas emissions to help achieve this. We are taking action against climate change to reach these targets in line with the policies articulated in the value creation story, Environmental Vision 2050, and the Epson 25 Corporate Vision.

Epson indicated approval of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in October 2019. Epson has enhanced its disclosures (on governance, strategy, risk management, and indicators and targets) based on the TCFD framework so as to enable good communication with shareholders, investors, and a broad spectrum of other stakeholders.

Scenario Analysis Findings

We conducted a scenario analysis based on the TCFD framework to assess the financial impact of climate-related risks and opportunities on Epson's strategy. We found that in a 2℃ scenario in which rapid progress on decarbonization is achieved, there is transition risk of higher operating costs than in a 4℃ scenario due to the imposition of policies and legal regulations. However, Epson's strength lies in products and services that have a lower environmental impact (e.g., consume less power and produce less waste). We confirmed that these products and services match the materialities that Epson has identified-to "advance the frontiers of industry" and "achieve sustainability in a circular economy"-, providing opportunities for business expansion. This expansion will help customers reduce their environmental impacts and contribute to the containment of climate change.

Based on the results of these assessments, Epson will continue to try to maximize its opportunities while addressing recognized risks so as to achieve the decarbonization of the Paris Agreement, which we believe is a rational goal both for society and for Epson.

On the other hand, even in a 4℃ scenario in which global warming has advanced because the world failed to take measures beyond what are currently being taken, we found that the impact of physical risks on our domestic and overseas sites due to weather extremes would be small.


Governance

Important matters related to climate change are supervised by the board of directors, which receives reports at least once a year from Epson's Corporate Strategy Council, a deliberation and advisory body for important management issues, including climate change, that affect the Epson Group.

In addition, Seiko Epson's president and representative director, the individual who has the highest responsibility and authority for climate-related issues, delegates responsibility for climate-related issues to the director of the Sustainability Promotion Office (an executive officer and board member), and the director of the Sustainability Promotion Office manages climate change initiatives, including TCFD.



Strategy

Epson has determined that "advancing the frontiers of industry" and "achieving sustainability in a circular economy" are material matters in its value creation story. To achieve these, we will further reduce greenhouse gas (GHG) emissions by leveraging our efficient, compact, and precision technologies to drive innovation.

Scenario Analysis of Climate-Related Risks and Opportunities

Epson identified and evaluated scenarios in the categories of transition risk, physical risk, and opportunity to evaluate the importance of climate-related risks and opportunities. Nine risks and opportunities were singled out for evaluation. We evaluated the business impact and financial impact of each on the basis of the scenarios corresponding to temperature rises of 4℃ and 2℃ presented by the United Nations Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA), respectively, as well as on the basis of internal and external information.


Climate-Related Risks and Opportunities in a 2℃ Scenario

The results of evaluating climate-related risks and opportunities based on scenario analysis are as follows.

Category Evaluated risks & opportunities Actualization Business impact Financial impact
Transition Risk Market changes Paper demand Mid-term Business impact
  • Although demand for printed information will decrease, risks will be limited because overall demand for paper will increase due to an increase in packaging applications. (The rate of increase will lower than in the 4°C scenario.) Concrete business impacts will be evaluated in FY2020.
-
Crude oil prices Mid-term Business impact
  • Higher transportation costs due to rising crude oil prices
  • Higher costs for procuring plastic raw materials
Dealing with risks
  • Miniaturize products, increase their service life, and expand resource recycling
  • Expand the printing subscription business
  • Transition to solution businesses
Moderate
Plastic raw materials
Governmental policies, laws, regulations Zero carbon Mid-term Business impact
  • Higher operating costs due to application of a carbon tax and rising crude oil prices
Dealing with risks
  • Reduce GHG emissions based on SBT measures
  • Consider introducing CCUS (carbon capture, utilization, and storage) technology and BECCUS (bio-energy carbon capture utilization and storage) technology
Moderate
Physical Risks Acute risk Damage to business sites due to floods, etc. Long-term Business impact
  • We evaluated 36 sites (17 domestic and 19 overseas) and concluded that future changes in Epson's operational risk due to floods (overflowing rivers) and tidal waves will be limited.
  • Short-term climate change risks to the supply chain will be addressed in line with our business continuity plans.
Small
Chronic risk Damage to business sites due to rising sea levels
Opportunities Products & services Achieve sustainability in a circular economy Development of a paper cycle Mid-term Assumed scenarios
  • Paper recycling costs will increase due to rising waste paper prices and higher costs for collecting and processing confidential documents.
  • The paper recycling practices will further advance due to higher environmental awareness, higher confidentiality management awareness, a shift to distributed processing systems, and the evolution of recycling technology.
Business opportunities
  • Paper recycling costs will increase and the spread of paper recycling habits will increase sales opportunities for the PaperLab office papermaking systems.
  • Expand the paper cycle to industrial fields and create a new business model.
Moderate
Advance the frontiers of industry Advances of inkjet in existing fields Short-term Assumed scenarios
  • Demand for low power consumption will increase due to the introduction of a carbon tax and soaring electricity prices.
  • Higher waste disposal costs will increase the need for products that produce less waste from consumables.
Business opportunities
  • Sales opportunities will increase due to the cost advantages of inkjet systems, which consume less power and produce less waste.
Large
Advances of inkjet in new application fields Mid-term Assumed scenario
  • The need for environmentally friendly products and services will increase due to the introduction of a carbon tax, soaring electricity prices, rising waste disposal costs, sustainable production amounts, and reduced resource use.
Business opportunity
  • There will be more opportunities to expand inkjet application fields due to cost advantages in all industrial fields.
-

Actualization Short term: ≤ 10 years Medium term: 10-50 years Long term: > 50 years
Impact Small: ≤ 1 billion yen Medium: 1-10 billion yen Large: >10 billion yen -: To be evaluated in future

Risk Management

As the environment in which we operate grows more complex and uncertain, effectively dealing with risks that could have a significant impact on corporate activities will be essential in order to carry out business strategies and business objectives.

Epson sees climate-related issues as risks that could significantly impact management and manages them appropriately.


Indicators and Targets

We are actively working to reduce environmental impacts throughout the value chain by leveraging our efficient, compact, and precision technologies to improve the environmental performance of our products, utilizing renewable energy, and enhancing our business activities in order to achieve "Environmental Vision 2050" and the medium- and long-term greenhouse gas (GHG) emission reduction targets validated by a joint international SBT initiative.

GHG Reduction Targets Validated by the SBT Initiative

Scopes 1 & 2 Reduce GHG emissions by 19% compared to FY2017 by FY2025.
Scope 3 Reduce GHG emissions as a percentage of business profit by 44% in categories 1 &11 compared to FY2017 by FY2025.
Category 1: Purchased goods & services
Category 11: Use of sold products

Scope 1: Direct emissions from the use of fuel, etc., by the reporting company
Scope 2: Indirect emissions from purchased energy
Scope 3: Emissions from the reporting company's value chain



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