Materiality and progress

Materiality

Epson’s corporate management is rooted in the concept of materiality. Materiality is identified based on the impact of societal issues. We consider Epson’s business activities to be a means of directly addressing these issues. Epson sees achieving sustainability in a circular economy, advancing the frontiers of industry, improving the quality of life and fulfill our social responsibility as key themes for solving societal issues.

  • Achieve sustainability in a circular economy
    This entails initiatives aimed at driving sustainable economic activities by achieving closed-resource-loop systems through effective use of resources such as electricity, energy and water as well as reduction in usage of underground resources to control climate change.
  • Advance the frontiers of industry
    This entails initiatives aimed at transforming conventional processes to contribute to the resolution of social issues. It is intended to help to make improvements to environmental pollution, labor and other issues by converting manufacturing processes from analog techniques to digital, for example.
  • Improve the quality of life
    This entails making contributions on the health front to help people lead a healthy life, and making educational contributions relating to people’s growth and maturity. We will enable people to select diverse lifestyles through products and services offered by Epson, and promote initiatives that contribute to an abundant and colorful life.
  • Fulfill our social responsibility
    This means that Epson is committed to fulfilling its corporate responsibility required to achieve sustainability and enrich communities. It entails initiatives that help to realize the ideal state expected of a company by society, such as dialogue with diverse stakeholders, environmental and social responsibility related to materials procured and suppliers, respect for human rights and promotion of diversity, and capabilities to ensure business continuity.

Deciding Materiality

Epson has analyzed social issues and megatrends defined by SDGs, ISO26000 and others, examined its own strengths that can lead to social impact, and identified four materialities that are highly important issues for Epson to address to solve challenges in society.

Material Trends and Frameworks Referenced

  • The Sustainable Development Goals (SDGs)
  •  Task Force on Climate-related Financial Disclosures (TCFD)
  • Macro trends in the social and economic fields, including climate change (European Green Deal Policy, Paris Agreement, etc.)
  • Global Japan: 2050 Simulations and Strategies
  • GRI Standard
  • SASB Standard
  • ISO 26000
  • Socially Responsible Investing (SRI) survey items
  • Responsible Business Alliance (RBA) Code of Conduct

Key Sustainability Topics, KPI, and FY2023 Results

Key Sustainability Topics

To increase effectiveness with which we can address the materialities, we mapped 12 key sustainability topics to the materialities, considered how we could contribute to solving societal issues, set concrete key performance indicators (KPIs), and then got to work.

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Key Sustainability Topics, KPI, and FY2023 Results

The table below summarizes the key sustainability topics, key performance indicators (KPI), and FY2023 results. In FY2022, some of the KPIs were incorporated in evaluations used to determine executive management compensation, thereby clarifying management responsibility for sustainability.

1. Materiality: Achieve sustainability in a circular economy

Key Sustainability Topics RS
Index1		 Initiative Topics Key Performance Indicators (KPI) FY2023
Targets 		FY2023
Results		 FY2024
Targets
Decarbonization initiatives ● Using energy-saving equipment and facilities, removing greenhouse gases, engaging suppliers, and pursuing carbon-free logistics to become carbon negative by 2050 Scopes 1 and 2 GHG emissions reduction ratio Reduce by 65% compared to FY2017 (SBT：FY2025 Target 34%) Reduced by 80% compared to FY2017 Reduced by 80% compared to FY2017  (SBT：FY2025 Target 34%)
● Scope 3 GHG emissions (per unit of business profit) reduction ratio Reduced by 45% compared to FY2017 (SBT：FY2025 Target 44%) Reduced by 17% compared to FY2017 Reduced by 35% compared to FY2017 (SBT：FY25 target 44%)
  Using renewable electricity to achieve RE100 Renewable electricity adoption ratio Achieve 100% globally Achieved adoption ratio of 100% globally Maintain adoption ratio of 100% globally
Closed Resource Loop Initiatives   Becoming underground resource2 free by 2050:
  • Using resources efficiently by reducing size and weight, using recycled materials, etc.
  • Establishing closed-loop production systems that minimize production losses
 Ratio of sustainable resources3 27% 32% 35%
  Final landfilled rate4 ≤1% 0.6% ≤1%
Customer environmental impact mitigation   Maximizing avoided emissions with products and services that have a lower environmental impact5 Emissions avoided through products & services Commence the calculation based on a new calculation logic and determine target values - Started calculating the reduction contribution of A3 color inkjet printers using the new calculation logic.
- FY23 Results: 15.1 thousand t-CO2e 6		 Exceeding the previous year
Environmental technology development   Eliminating virgin plastics and closing resource loops by using Dry Fiber Technology to produce recycled materials and natural materials.
  • Packaging materials
  • Housing materials
 Progress of development process Expand the scope of practical application - Packaging: Development aimed at expanded use (cotton scraps)
- Housings: Development of composite plastic materials (improved performance of materials)		 Expand the scope of practical application
  Establishing high-added-value recycling technology for used metal Progress of development process Technology for high-value-added metal powders (molding material) for practical application Completed the development of elemental technology as a molding material, with  PoC7 in progress Technology for high-value-added metal powders (molding material) for practical application

1 Compensation (Restricted Stock) evaluation indicator
2 Non-renewable resources such as oil and metals
3 Ratio of sustainable resources (renewable resources + closed loop resources + less-depletable resources) to raw materials
4 Ratio of landfilled amount of production resources against the volume of resources injected
5 Quantified the contribution of products and services toward GHG emissions reductions
6 Based on the calculation method confirmed by Mizuho Research & Technologies Co., Ltd., the value obtained by multiplying the difference between the weighted average of the publicly disclosed lifetime CO2 emissions of major laser printers in the global market and the lifetime CO2 emissions of our A3 color inkjet printers by the number of Epson A3 color inkjet printer units sold in the relevant fiscal year.
7 PoC (Proof of Concept): A process to verify the feasibility and actual effect, etc. of a new technology, etc.

2. Materiality: Advance the frontiers of industry

Key Sustainability Topics RS index1 Initiative Topics Key Performance Indicators (KPI) FY2023
Targets 		FY2023
Results		 FY2024
Targets
Increasing productivity through digitization and automation   Leading the digitization of commercial and industrial printing with inkjet technology and diverse solutions, to create clean, space-efficient workplaces, reduce environmental impact, and improve productivity Sales growth rate of commercial and industrial inkjet printers compared to the previous year 10% 1% 3%
Improving working environment and educational environment   Reducing environmental impact and improving productivity with inkjet technology and open solutions, to lead the evolution of home study and distributed office printing Sales growth rate of high-capacity inkjet printers for SOHO and home users compared to the previous year 5% (9%) 5%
  Eliminating labor shortages through automation using robots Number of labor shortages eliminated8 28,000 persons 25,000 persons 29,000 persons
  Providing a fair, natural, and comfortable communication environment without boundaries, combining the real and remote, with both a sense of presence and information content Number of co-creation and collaboration projects, or number of partners (FY2023) Number of adopting companies, or number of partners (FY2024 after) Number of partners: 2 Number of partners: 2 Continuing + new: ≥2 companies
  Creating equal learning opportunities through smart, portable displays that enable large-screen communication in a compact form, to mitigate learning disparities stemming from differences in regional and social conditions Number of local demonstration programs through co-creation and collaboration 20 programs 29 programs 40 programs（Total）
Number of countries with PoC verifying mitigation of learning disparities in general education and awareness of societal issues. ー Selected countries with PoC programs Countries with PoC programs: 2 

1 Compensation (Restricted Stock) evaluation indicator
8 Calculated based on the effectiveness of Epson’s internal projects

3. Materiality: Improve the quality of life

Key Sustainability Topics RS index1 Initiative Topics Key Performance Indicators (KPI) FY2023
Targets 		FY2023
Results		 FY2024
Targets
Proposing diverse lifestyles   Enriching the diverse lifestyles of people through lifestyle-related disease prevention and helping people improve their sports performance by providing personalized value in an easy-to-understand visual manner using proprietary sensing technology and algorithms Percentage of revenue that the data business in sensing business sales9 

 20% 22% 28％
Realizing an abundant and colorful life   Providing attractive and high-quality products with our efficient, compact, and precision technologies and our artisanal skills, to enrich the diverse lifestyles of our customers. Sales growth rate of attractive, high-quality products compared to the previous year 4% 4% 12%

1 Compensation evaluation indicator
9 Business model that provides value by converting data based on algorithmse

4. Materiality: Fulfil our Social Responsibility

Key Sustainability Topics RS index1 Initiative Topics Key Performance Indicators (KPI) FY2023 
Targets		 FY2023
Results		 FY2024
Targets
Increasing stakeholder engagement   Responding to needs and social demands by strengthening dialogue with stakeholders Social support activities, monetary value of support ≥0.1% of sales ≥0.1% of sales ≥0.1% of sales
  Number of dialogs with shareholders and investors and reflecting opinions on management ≥200 times 240 times ≥200 times
  Evaluation indices of external evaluation agencies Acquired high recognition10​ Acquired high recognition Acquire high recognition
Realizing responsible supply chains   Reinforcing supply chain BCM Impact on customers due to disruption and stagnation in supply chain (Aiming to have no impact on sales in FY2024) Achieve no impact on sales due to disruption in supply chain to the extent possibl Impact of supply chain disruption: None Zero sales impact
● Realizing responsible supply chains CSR risk levels of suppliers  (Direct materials)
- 0% high risk,
- ≤4% middle risk 
 (Indirect materials)
- 0% high risk		 (Direct materials)
- High risk: 0%
- Middle risk: 4.2%
(Indirect materials)
- High risk: 0%		 (Direct materials)
- High risk: 0%
- Middle risk: ≤2%
(Indirect materials)
- High risk: 0%
- Middle risk:≤20％
  Realizing responsible sourcing of minerals Conflict-free (CF) ratio of products Release CF information for CF strategic products Preparation for the disclosure of the result of CF information New products that are conflict-mineral free
Survey response ratio11 100% 100% 100%
Respecting human rights and promoting diversity   Creating a free and open organizational culture Organizational climate assessment score for "strength to work in teams"  Motivation cloud
  • Engagement rating: BB
  • Number of workplaces with D rating: 31
  Motivation cloud
  • Engagement rating: BB
  •  Number of workplaces with D rating: 45
  Motivation cloud
  • Engagement rating: BBB
  • Number of workplaces with D rating: 15
  Number of high risk workplaces with "general health risk" in the mental health check12 Reduce the number of high risk workplaces from the previous year, heading toward zero The number of high-risk workplaces increased compared to FY2022 Reduce from the FY2023
  Implementation of harassment prevention measures (education and training, case sharing, appointment process, etc.), ensuring to report cases to the head office
  • Revise training content based on social trends, incidents and common issues
  • Hold training for those at consultation contact points on a periodic basisf
 Made progress as planned for planned training, including the renewal of content
  • Continued harassment prevention training at different echelons
  • Regular training for advisory service staff
  • Identify company-wide trends
  • Confirm common operations and verify whether contact points with high operational burden should be outsourced partially
 Completed the selection of consultation contact points to be outsourced and prepared for the operation
  • Start outsourcing advisory services and conduct a review
  • Consider introducing external advisory services at domestic affiliates
  Respect for human rights through dissemination of the new "Human Rights Policy" within the Group

Embedding and improving the commitment for respecting human rights, human rights due diligence (DD) and relief mechanism

 Establishing and improving the PDCA cycle for respecting human rights.
  • In Japan: Build a system for coordinating with various consultation contact points
  •  Overseas: Develop a system for consolidating information and grasping the situation by clarifying reporting rules from contact points at respective local subsidiaries
 (PDCA cycle)
  • Continued activities for respecting human rights using RBA’s scheme
  • Re-assessed the risk of violating human rights and conducted human rights DD
(Remediation mechanisms)
  •  In Japan: Built cooperative structures for internal consultation points, and began using JaCER13 as a consultation point for those outside the Company.
  • Overseas: Started to pull together information on this project
 Establishing and improving the PDCA cycle for respecting human rights.
  • Regular review of human rights policy
  • Continuing and improving human rights due diligence through RBA schemes, etc.
  • Understanding and establishing the system and situation of advisory services overseas.
● Utilizing human resources in a way that respects diversity Female manager ratio (the Company)
  •  Female manager ratio: 5%
  • Female supervisory position ratio: 8%
  •  Female manager ratio: 4.7%
  • - Female supervisory position ratio: 7.7%
  •  Female manager ratio: 6%
  • - Female supervisory position ratio: 9%
1 or more female executive officers by FY2025 (in Japan) ー ー ー
Fulfil our Social Responsibility ● Reinforcement of compliance management platform Number of serious compliance violations14​ 0 cases 0 cases 0 cases
  Enhancement of Group compliance level Implementation ratio of compliance training (e-learning) to all Group employees Completion rate in Epson Group: 100% Completion rate in Epson Group: 100% Completion rate in Epson Group: 100%
  Maintenance and strengthening of governance structure to realize transparent, fair, prompt and decisive decision-making
  • Ratio of outside directors on the board of directors
  • Ratio of outside directors on the nomination & compensation committees​ 
  • Maintain the ratio of Outside Directors on the board at ≥1/3
  • Maintain the ratio of Outside Directors on the Nomination & Compensation Committees at ≥80%
  • Maintain the ratio of Outside Directors on the board at ≥1/3
  • Maintain the ratio of Outside Directors on the Nomination & Compensation Committees at ≥80%
  • Maintain the ratio of Outside Directors on the board at ≥1/3
  • Maintain the ratio of Outside Directors on the Nomination & Compensation Committees at ≥80%
Number of serious information security incidents 0 cases 0 cases 0 cases

1 Compensation (Restricted Stock) evaluation indicator
10 Sustainalytics: Low; FTSE: 4 or higher; Top 50 or higher in "Toyo Keizai CSR ranking"
11 Ratio of suppliers who submitted answers to supplier survey requests
12 Target-value control is performed for workplaces with 10 or more respondents.
13 JaCER: Japan Center for Engagement and Remedy on Business and Human Rights
14 Violation that correspond to timely disclosure matters

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