Climate-Related Financial Disclosures
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 well 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 its support for 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 metrics 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.
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 general administrative manager 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.
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 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 impacts||Financial impact|
|Transition risks||Market||Paper demand||Mid-term||Business impacts
|Crude oil prices||Mid-term||Business impacts
|Plastic raw materials|
|Policy and legal||Zero carbon||Mid-term||Business impacts
|Physical risks||Acute||Damage to business sites due to floods, etc.||Long-term||Business impacts
|Chronic||Damage to business sites due to rising sea levels|
|Opportunities||Products and services||Achieve sustainability in a circular economy||Development of a paper cycle||Mid-term||Assumed scenarios
|Advance the frontiers of industry||Advances of inkjet in existing fields||Short-term||Assumed scenarios
|Advances of inkjet in new application fields||Mid-term||Assumed scenario
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 -: To be evaluated in future
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|
Metrics 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 the Science Based Targets initiative.
GHG Reduction Targets Validated by the SBTi
|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