Evaluation Methods -Environmental Accounting FY2004-

The ratios of eco profit and eco effect, important indicators when measuring the effects sustainable environmental management activities have on cost, dropped about 10% in fiscal 2004 from the previous fiscal year's levels (see graph (1)). This is because environmental conservation cost increased by approximately 7% compared to that in the previous fiscal year, and the economic benefits, particularly incidental effects of pollution prevention activities, decreased significantly. Incidental effects, however, lead to lower costs in implementing measures to avoid risks when the risks of pollution diminish due to the advancement of pollution prevention activities. On the other hand, if the ratios are compared to those at the start of the current environmental action plan (results in fiscal 2001), the ratio of eco profit increased by about 50% and ratio of eco effect about 3% (see graph (1)).
The Eco Index, which indicates the level of sustainable environmental management for the entire business of the Ricoh Group, dropped slightly in fiscal 2004 from that in the previous fiscal year. This is because although total environmental impact decreased marginally, gross profit on sales declined 1.4% compared to the previous year's level. In terms of efficiency, however, in fiscal 2004 it improved approximately 45% compared to that in fiscal 2001, indicating that the level of sustainable environmental management for the entire business significantly rose over the past three years (see graph (2)).

Corporate environmental accounting data show that in environmental conservation costs, business area costs and administration costs remained unchanged in fiscal 2004 from those in the previous year. This implies that environmental management costs at business sites are stabilizing. Meanwhile, product recycling costs have increased over the past few years, surging in fiscal 2004. The cost of research and development in reducing environmental impact has expanded as well. These figures show that various costs are incurred in sustainable environmental management activities involving products.
Although it is becoming difficult to reap the economic benefits of environmental conservation activities carried out by business sites, the economic benefits of product recycling have substantially grown in the past few years. Consequently, the economic benefits of sustainable environmental management activities related to products now account for more than 50% of the total benefits, and this trend is likely to become more pronounced in the future.
However, when it comes to the effects of environmental conservation, the total amount of substances that have an impact on the environment have not decreased significantly, and this is true for all kinds of substances. CO₂ emissions, in particular, have increased by more than 2% due to production expansion and an extremely hot summer, which remains a challenging issue in the prevention of global warming in the future.
Currently, the Ricoh Group is promoting sustainable environmental management activities by improving the manufacturing process through innovations in energy/resource conservation. At Fukui Plant, for example, costs and the amount of materials and energy used were aggregated, and measures were taken to reduce loss and environmental impact by improving the production process. It was estimated that approximately ¥123 million in raw materials and direct expenses was cut per year thanks to these initiatives. We strive to further reduce the environmental impact of our business operations, thereby intensifying our efforts to promote sustainable environmental management.

• *Monetary units are indicated in billions of yen unless otherwise indicated.

• *The reduction in payment for consumed power supply and CO₂ emissions is the annual benefit brought from eight hours of operation per day, 20 days of operation a month. Internal benefits refer to benefits on gross profits in sales results in fiscal 2004.

• *Social effect refers to the cost of waste disposal that customers no longer have to pay.