Climate-Related Financial Disclosures
Responding to TCFD Recommendations
Climate change is greatly impacting society and Epson sees it as a significant societal problem. The goal of the Paris Agreement is to achieve decarbonization and limit the global average temperature to well below 2℃ above pre-industrial levels and try to limit the temperature increase to 1.5℃. To achieve this, Epson is working to reduce total emissions in line with a 1.5℃ scenario1 by 2030. Furthermore, Epson coordinated the revision of Environmental Vision 2050 with the announcement of the Epson 25 Renewed Corporate Vision. To attain our goals of becoming carbon negative and underground resource free2 by 2050, we are working to decarbonize and to close the resource loop. We are also providing products and services that reduce environmental impacts and developing environmental technologies.
Since Epson declared its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in October 2019, it has disclosed information (on governance, strategy, risk management, and metrics and targets) based on the TCFD framework so as to enable good communication with shareholders, investors, and a broad spectrum of other stakeholders. Epson has decided to disclose the level of financial impact in 2021 in a quantitative manner for the first time.
1 Target for reducing greenhouse gas emissions aligned with the criteria under the Science Based Targets initiative (SBTi)
2 Non-renewable resources such as oil and metals
Scenario Analysis Findings
We analyzed scenarios based on the TCFD framework to quantitatively assess the financial impact of climate-related risks and opportunities on Epson's strategy. In a 1.5℃ scenario in which there is rapid decarbonization of society, we found that there is transitional risk of an increase in operating costs due to market changes, policies, and legislation, but we expect to limit the financial impact by strengthening products and services based on inkjet technology and paper recycling technology.
Epson will spend 100 billion yen over a period of 10 years ending in 2030 to accelerate decarbonization, close the resource loop, and develop environmental technology. The solution to climate-related risks aligns with the materialities we have set of achieving sustainability in a circular economy and advancing the frontiers of industry and will lead to opportunities for business expansion with Epson's low environmental impact products and services that save electricity and reduce waste. These products and services will help to mitigate customers' environmental impact and control climate change.
Based on the results of these analyses, Epson will continue to try to maximize its opportunities while addressing recognized risks in order to achieve decarbonization, 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 additional measures, we found that the impact of physical risks on our domestic and overseas sites due to the damages arising from 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 after deliberations by the Sustainability Strategy Council, which formulates medium- to long-term strategy for the Epson Group's sustainability activities and reviews the status of implementation as the president's advisory body.
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 Sustainability Director, who heads the Sustainability Promotion Office and manages and promotes climate change initiatives, including TCFD.
Main Climate Change Initiatives
| FY2019 | FY2020 | FY2021 |
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Strategy
Epson has determined that achieving sustainability in a circular economy and advancing the frontiers of industry 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. Six 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 increase of 1.5℃ presented by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) as well as on the basis of internal and external information. The results of the evaluation of climate-related risks and opportunities based on this scenario analysis are as follows:
Climate-Related Risks and Opportunities in a 1.5℃ Scenario
The results of evaluating climate-related risks and opportunities based on scenario analysis are as follows.
| Category | Evaluated risks & opportunities | Actualization | Business impacts | Financial impact | |
|---|---|---|---|---|---|
| Transition risks | Market changes Policy & laws and regulations | Paper demand | Short-term | Impact
|
Small |
| (Initiatives in Environmental Vision 2050) - Decarbonization - Closed resource loop - Environmental technology development |
Short-term | Impact
|
Invest a total of approximately ¥100.0 billion by 2030 | ||
| Physical risks | Acute | Damage to business sites due to floods, etc. | Long-term | Impact
|
Small |
| Chronic | Damage to business sites due to rising sea levels | ||||
| Opportunities | Products and services | (Initiatives in "Environment Vision 2050") - Customer environmental impact mitigation |
Short-term | Assumed scenarios
|
Large CAGR of 15% is expected in growth areas until 2025 |
| Environmental business | Short-term | Assumed scenarios
|
Medium | ||
Actualization Short term: ≤ 10 years Medium term: 10-50 years Long term: > 50 years
Financial Impact Small: ≤ 1 billion yen Medium: 1-10 billion yen Large: >10 billion yen
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.
Climate-Related Risk Identification, Assessment and Management Process
| 1. Study | 2. Identify & assess | 3. Manage |
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Metrics and Targets
Under Environmental Vision 2050, in order to achieve the medium- and long-term greenhouse gas (GHG) emission reduction targets validated by the Science Based Targets initiative (SBTi), we are actively working to reduce environmental impacts throughout the value chain. We are doing so primarily by improving the environmental performance of our products, utilizing renewable energy, and enhancing our business activities, based on our efficient, compact, and precision technologies.
GHG Reduction Targets (an approximation of an ambitious total emissions reduction target aligned with the 1.5℃ scenario)
| Scopes 1, 2, 3 | Reduce GHG emissions by 55% compared to FY2017 by FY2030. |
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* The current 2025 fiscal year target has been approved as an SBT 1.5℃ target. We plan to apply for approval of the 2030 fiscal year target by March 31, 2022.
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
