Materiality and progress

Materiality
Deciding Materiality
Key Sustainability Topics, KPI, and FY2023 ResultsDeciding Materiality

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 ^{Index ¹}	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	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	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%
Closed resource-loop initiatives			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-CO2e⁶	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
Environmental technology development		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	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.	-	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 ^{Index ¹}	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 sales ⁹	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%

Key Sustainability Topics

^{Index ¹}

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 sales ⁹

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

12%

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

4. Materiality: Fulfil our Social Responsibility

Key Sustainability Topics	RS ^{Index ¹}	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 meetings with shareholders & investors	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 possible	Impact of supply chain disruption: None	Zero sales impact
	●	Realizing responsible supply chains	CSR risk levels of suppliers	CSR risk ranks of main 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
		Realizing responsible sourcing of minerals	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 the number of high risk workplaces with “general health risk” from the previous year, heading toward zero
			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	Embed and improve 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 JaCER^*13 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)	-	-	-
			1 or more female executive officers by FY2025 (in Japan)	-	-	-
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 employees¹³	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	- Maintain the ratio of Outside Directors on the board at ≥1/3	- Maintain the ratio of Outside Directors on the board at ≥1/3	- Maintain the ratio of Outside Directors on the board at ≥1/3
			Ratio of outside directors on the nomination & compensation committees	- Maintain the ratio of Outside Directors on the Nomination & Compensation Committees at ≥80%	- Maintain the ratio of Outside Directors on the Nomination & Compensation Committees at ≥80%	- Maintain the ratio of Outside Directors on the Nomination & Compensation Committees at ≥80%
		Strengthening information security	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