Response to TNFD Recommendations

Governance
Strategy
Risk Management
Indicators and Targets
Related Information

In June 2024, Epson expressed its support for the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD). We evaluated the Group's dependence and impact on natural capital and analyzed the associated risks and opportunities in accordance with the LEAP approach¹ recommended by the TNFD². We organized the results in line with the TNFD framework. We made our first disclosures in FY2025 and expanded the results of the assessment and analysis of the upstream processes in the value chain in FY2026. Based on this analysis, we will contribute to the realization of a sustainable society by minimizing our negative impact on nature and biodiversity and further harmonizing with local ecosystems.
¹ The LEAP approach is a framework for assessing nature-related dependencies, impacts, risks, and opportunities.
² Scenario analysis was conducted in FY2024 based on the long-term strategic vision "Epson 25 Renewed," the final year of which was FY2025.

Epson and natural capital

Epson's business activities and employees' lives are supported by the gifts of nature (ecosystem services) (see the figure on the right: dependency). In turn, our activities have both direct and indirect impacts on nature (see the figure on the right: impact). The global loss of natural capital poses a significant threat to our business operations and daily lives. To prevent further degradation of natural capital, we must mitigate the negative impacts we have on nature. At the same time, as awareness of the risks associated with natural capital continues to grow, we believe that Epson's technologies can contribute to addressing these challenges. This also presents a business opportunity for Epson.

Governance

The Sustainability Department and Environmental Management Department are responsible for drafting and implementing the company-wide environmental strategy, including the response to nature-related issues.
Material management topics that involve the entire Epson Group, including those related to nature, are deliberated by the Management Strategy Council, an advisory body to the president, and are periodically reported to the Board of Directors to ensure appropriate oversight.

Strategy

Identification of priority regions

We assessed the risks to ecosystems, water, and other areas at 42 Group sites and identified 11 sites in North America, East Asia, and Southeast Asia as priority areas. To respond appropriately to these risks, we interviewed people to gather information about the situation. We found that in the priority areas, there are localized issues related to ecosystem degradation, water resources, and water quality. We also confirmed that actions are being taken to address these issues, such as maintaining protected areas, preserving green spaces, conducting reforestation activities, improving water use efficiency, and managing wastewater. In some regions, we observed that watershed and regional environmental conservation programs are being implemented in collaboration with government agencies, industrial park operators, and other stakeholders. We will continue to work closely with Epson sites in priority areas to enhance the effectiveness of initiatives tailored to their particular needs.

Priority locations (sites) for direct operations

Dependence and impact on natural capital

Epson conducted an evaluation and analysis to identify the organization's significant dependencies and impacts on nature and thus gain a clearer understanding of its nature-related risks and opportunities. We identified the business activities in each process within the value chain that depend on and impact natural capital, as well as the nature of significant dependencies and impacts, as shown below. Upstream in the value chain, we evaluated the top six materials categories¹ that account for 84.1% of the amount of resources used and organized their dependencies and impacts by major category.

¹ The assessment covered the six procurement categories with the largest purchasing volumes, which together account for 84.1% of total resource use. These categories are based on Epson's proprietary classification of procured resources aligned with the IDEA database and include general-purpose plastics, paper and pulp, steel materials, specialty plastics, engineering plastics, and glass/optical products. In the figure below, general-purpose plastics, engineering plastics, and specialty plastics are collectively presented as "plastics."

Upstream value chain, direct operations, and downstream value chain process dependency and impact analysis

^* The dependency and impact of business activities were analyzed using the visualization and evaluation tool ENCORE and rated on a five-point scale (VH, H, M, L, VL).
^* If there are multiple evaluation items, the evaluation is based on the item with the greater dependency or impact.
^* Disruption: activities that cause noise or light pollution that could harm living organisms
^* Upstream: Analysis was conducted for the sections defined in ENCORE Economic Activities that correspond to each stage of the raw material lifecycle. The results were then consolidated and evaluated.
² Includes engineering plastics and other/specialty resins in addition togeneral-purpose plastics.

Nature and biodiversity-related risks and opportunities / response

We first identified risks and opportunities that are caused by, or depend on, nature. We then evaluated the importance of these risks and opportunities based on the likelihood of their occurrence and the degree of impact they would have. We identified ten risks and two opportunities as material. The table below shows how we are responding to them.

Category		Value Chain	Risks/Opportunities			Response	Actualization ¹
Risk	Transition/Regulation	Upstream	Resource use	Supply constraints and cost increases due to suppliers being subject to stricter regulations		Use of recycled materials and biobased materials in products Design for Environment Supplier engagement (sharing procurement policies, ensuring traceability, etc.)	Mid-term
	Transition/Market		Resource use	Decline in corporate brand value due to the procurement of raw materials that have a significant impact on natural capital			Mid-term
	Transition/Acute		Resource use	Reduced supply and higher prices due to sudden natural disasters			Short-term
	Transition/Chronic		Resource use	Reduced supply and higher prices due to gradual changes in nature			Mid-term
	Physical/Chronic	Direct operations	Water	Reduction and depletion of water resources Lower production volumes due to limited water availability		Improve water use efficiency at production sites in the medium term. Mitigate risk at sites located in regions with water risks (drought, water quality)	Mid-term
	Physical/Chronic		Water and soil pollution	Water pollution, soil pollution Environmental degradation caused by other stakeholders			Mid-term
	Transition/Regulation		Water and hazardous substances	Stronger regulations on water source conservation, water intake, and pollution		Strictly control pollution at production sites Reduce water consumption at production sites. Analyze site water consumption and usage. Implement reduction measures tailored to each site. Share case studies.	Short-term
	Transition/Market		Water	Higher costs for improving water and energy efficiency			Short-term
	Transition/Regulation		Resources and hazardous substances	Rules making mandatory the use of low-impact raw materials and stronger restrictions on the use of chemical substances		Comply with environmental regulations. Circulate resources. Refurbish and reuse ink bottles and cartridges. Use recycled and bio-based materials and practice design for environment. Expand products & services that have a lower environmental impact	Short-term
	Transition/Market	Downstream	Environmental impact	Lower customer preference for products with high environmental impact			Short-term
Opportunities	Corporate, nature and social perspectives	Downstream	Environmental impact & resources	Product & corporate value enhancement		Develop lower-carbon products Extend product life (reuse & recycle) Use more recycled materials and biomaterials in products	Mid-term
				Company perspective Increased product competitiveness and customer value Enhanced corporate brand value Lower transportation costs	Nature & society perspective Lower GHG emissions during product manufacturing and use (miniaturization, weight reduction, energy savings) Achieve sustainability in a circular economy		Mid-term
				Increasing need for solutions to environmental issues		Expand products & services that have a lower environmental impact	Mid-term
				Company perspective Secure new sources of revenue and diversify and stabilize management	Nature & society perspective Provide solutions to environmental issues		Mid-term

¹ Short-term: by 2030. Medium-term: by 2050. Long-term: 2050 or beyond

Risk Management

As the environment in which companies operate becomes more complex and uncertain, Epson must effectively address risks that could materially impact corporate activities in order to execute its management strategies and business objectives.

Process to Identify, Assess and Manage Nature-Related Risks

1. Research	2. Identify and assess	3. Manage
Research the material nature-related dependencies and impacts at major sites in Japan and overseas. (Tools used ¹: ENCORE, IBAT, Aqueduct, etc.)	Qualitatively assess the seriousness of nature-related risks and opportunities to the organization in terms of their likelihood and impact.	Management the risks through the Management Strategy Council and the Board of Directors

¹ Evaluation and analysis tools for assessing dependencies and impacts on natural capital and environmental risks, as recommended by TNFD.

Indicators and Targets

The Taskforce on Nature-related Financial Disclosures (TNFD) has recommended core global disclosure indicators. Epson found as a result of assessments that water and chemical substances are key nature-related risks. Resource circulation was also identified asa priority theme and is the reason we have launched efforts to use resources sustainably. We set these as nature-related targets.The results for FY2025 are summarized below.

Theme		Related TNFD core indicator No.	Epson's Metrics	FY25 Targets	FY25 Results
Water	Water use	C3.0	Water use per unit of revenue (thousand m³/100 million yen)	0.73 1% reduction from FY17-22 average	0.59
Water	Water quality	C2.1	Number of incidents in which legal limits were exceeded	0 incidents/year	0
Chemical substances (soil & air)		-	Number of environmental law violations at business sites	0 incidents/year	0
Resources		C2.2, C2.3, C3.1	Sustainable resource rate¹	38%	39%

¹ The ratio of sustainable resources (renewable resources + circulated resources + less-depletable resources) to raw materials.