Environmental Indicators and Calculation Formulas
The Ricoh Group aims to establish an environmental accounting system that can serve as an effective tool for evaluating economic and environmental efficiencies so as to assist performance and decision-making regarding sustainable environmental management.
Environmental Management Indicators
Environmental management indicators must accurately evaluate the status of sustainable environmental management and facilitate further improvement. To this end, indicators should be set based on the three elements shown below:
Economic Benefits of Environmental Conservation Activities
Indicating whether activities in environmental conservation are economically rational
Activities in sustainable environmental management can be considered economically rational if the quotient is one or greater (i.e., the economic benefits are equal to or greater than the environmental conservation costs).
Activities in environmental conservation can be considered economically rational if the quotient is one or greater (i.e., the sum of economic benefits and social cost reduction is equal to or greater than the environmental conservation costs).
This equation is used to evaluate the efficiency of environmental improvements made by the project/investment activity concerned.
Environmental Efficiency of Business Activities
Indicating the environmental impact of business activities and whether those activities respond to public needs and expectations is justifiable.
This equation is used to evaluate the environmental impact and whether it is appropriate in relation to the size of the business.
This equation is used to determine whether the business activity generates an appropriate level of profit in relation to its environmental impact.
Indicating whether environmental management processes, such as internal audits, site reporting, development of environmental technologies, environmental labelling, and green procurement, are appropriate or not.
Objectives of environmental accounting include functioning as a tool to measure the economic efficiency of environmental conservation activities and the environmental efficiency of business activities, as mentioned above. The Ricoh Group's corporate environmental accounting system is designed and operated as an effective tool to evaluate such efficiency levels throughout the Group.
Environmental Accounting Indicators
The Ricoh Group has developed and adopted indicators to evaluate, analyze, and disclose the environmental conservation efficiency of business activities, both individually and collectively. Our progress in environmental impact reduction can be quantified with the Eco-Improvement (EI) value and the Eco-Improvement Index (EII). The EI value shows how much environmental impact (itemized) is reduced by the environmental conservation cost of 100 million yen, while the EII represents the efficiency of environmental impact reduction activities.
Eco-improvement value (EI Value) = Environmental impact reduction amount/environmental conservation costs (ton/hundred million yen)
To determine how much environmental impact per ¥100 million in environmental conservation costs is reduced for each environmental impact item
Eco-ratio = Gross profit/environmental impact amount (ton/hundred million yen)
To determine the amount of value-added from business activities obtained per one-ton equivalent of environmental impact discharged
Eco-improvement index (EII) = Total environmental impact reduction amount (1)/Total environmental conservation cost amount (thousands of yen)
Improvement ratio of social cost (IRS) = Total social cost reduction amount (2)/Total environmental conservation cost amount (thousands of yen)
To determine whether the reduction in ((1) environmental impact/(2) social cost) is efficient
Eco-index = Gross profit (thousands of yen)/total environmental impact amount (1)
Ratio of profit to social cost (RPS) = Gross profit/total social cost (2)
To determine whether any profit is made when a company conducts business activities at the appropriate level ((1) environmental impact/(2) social cost)
Eco-efficiency index (EEI) = Sales (thousands of yen)/total environmental impact amount (1)
Ratio of sales to social cost (RSS) = Sales/total social cost (2)
To determine whether a business activity at the appropriate level ((1) environmental impact/(2) social cost) is suitable for its scale
Ratio of eco effect (REE) = Environmental effect (total economic benefit + total social cost reduction amount)/total environmental conservation cost
Ratio of eco profit (REP) = Total economic benefit/total environmental conservation cost
To determine whether an environmental conservation activity is conducted in an economically rational way
Scope of Collection
Environmental impact and environmental accounting data are collected from Ricoh's production and non-production sites and Ricoh Group companies that have established their own sustainable management systems.
- Ricoh production sites:
- Atsugi Plant, Hatano Plant, Numazu Plant, Gotemba Plant, Fukui Plant, Ikeda Plant, Yashiro Plant
- Ricoh non-production sites:
- Head Office, Ohmori Office, Ricoh System Center, Shin-Yokohama Office, Ricoh Service Parts Center*1, Research and Development Center, Toda Technical Center, Applied Electronics Laboratory, Technology Center, Katsuta Plant
- Ricoh Group major manufacturing subsidiaries:
- Tohoku Ricoh Co., Ltd.; Hasama Ricoh, Inc.; Ricoh Unitechno Co., Ltd.; Ricoh Optical Industries Co., Ltd.; Ricoh Keiki Co., Ltd.; Ricoh Microelectronics Co., Ltd.; Ricoh Elemex Corporation; Ricoh Printing Systems, Ltd.; Yamanashi Electronics Co., Ltd.*1
- Ricoh Group major non-manufacturing subsidiaries:
- Ricoh Logistics System Co., Ltd.; Ricoh Japan Corporation; Ricoh Technosystems Co., Ltd.; Ricoh IT Solutions Co., Ltd.; Ricoh Business Expert, Ltd.; Part Component System Co., Ltd.*2; Ricoh Leasing Co., Ltd.; Ricoh San-ai Service Co., Ltd.*1
- Manufacturing subsidiary:
- Ricoh Electronics, Inc. (U.S.A.)
- Non-manufacturing subsidiaries:
- Ricoh Americas Corporation (U.S.A.)
Ricoh Canada Inc. (Canada) *1
Ricoh Latin America, Inc. (U.S.A.) *1
- Manufacturing subsidiaries:
- Ricoh UK Products Ltd. (U.K.)
Ricoh Industrie France S.A.S. (France)/dd>
- Non-manufacturing subsidiaries:
- Ricoh Europe PLC (U.K.) and other sales subsidiaries in the region
- Manufacturing subsidiaries:
- Ricoh Asia Industry (Shenzhen) Ltd. (China)
Shanghai Ricoh Facsimile Co., Ltd. (China)
Shanghai Ricoh Digital Equipment Co., Ltd. (China)
Ricoh Thermal Media (Wuxi) Co., Ltd. (China)*1
- Non-manufacturing subsidiary:
- Ricoh Asia Pacific Pte. Ltd. (Singapore) and other sales subsidiaries in the region
- *1Environmental impact data only
- *2Environmental accounting data only
Costs refer to expenditure on environmental conservation activities (in a broad sense), and consist of environmental investments and environmental costs (in a narrow sense).
These investments correspond to "Investments in fixed assets" in financial accounting. The amount of environmental investments is distributed as environmental costs over the service life of fixed assets in accordance with depreciation procedures.
These environmental costs correspond to the "period cost" in financial accounting. (Depreciation cost of environmental investments is included.)
Economic benefits refer to benefits that were obtained by environmental conservation activities and which contributed to the profits of the Ricoh Group in some form. Economic benefits are classified into five categories as follows:
- Substantial effect :
- This means economic benefits that fall into either of the following two cases:
1) Cash or cash equivalent is received as a benefit. This corresponds to "realized gain" in financial accounting.
2) The amount of savings in such costs that would have occurred if environmental conservation activities had not been conducted. This amount is not recognized in financial accounting.
- Estimated substantial effect :
- Substantial contributions to sales or profits whose value cannot be measured without estimation. They include improving the environmental performance of a product, which leads to an increase in sales or profit.
- Secondary effect :
- The expected amount of contribution in the case that expenditure on environmental conservation activities is assumed to have contributed to profits for the Ricoh Group. If environmental conservation costs are assumed to be costs that are indispensable for the Ricoh Group to conduct its operations, for example, it can be safely said that such costs contribute to profit in some form. In practice, out of the effects generated by environmental conservation activities, those which do not appear as an increase in sales or profit or a reduction in costs are represented in monetary value calculated by the formula specified for each item.
- Incidental effect :
- Expenditure on environmental conservation activities can help avoid the occurrence of environmental impact. Therefore, it can be safely said that the expenditure contributed to the avoidance of such damage of environmental impact that would have taken place without the expenditure. In practice, the incidental effect is computed by multiplying the expected amount of damage by an occurrence coefficient and impact coefficient.
- Social effect :
- Social effect means such effect that is generated by expenditure on environmental conservation activities not for the Ricoh Group but for society. In practice, social effect means the amount of reduction in the expense of electric power and waste disposition that is enabled through environmentally-friendly products for customers.
Effect Calculation Method
Principal methods for effect calculation are shown below.
Formula of substantial effects
- Reduction in heat, light, and water cost
- Heat, light, and water expenses in the previous year - heat, light, and water expense in the current year
- Reduction in waste disposal cost
- Waste disposal expenses in the previous year - waste disposal expenses in the current year
- Sales value of valuable materials
- Sales value of valuable materials sorted from discharged matter
- Sales of recycled products and parts
- Sales of recycled products and parts
- Environmental subsidies from the government, etc.
Formula for estimated substantial effects
- R&D profit contribution amount
- Product gross margin x gross margin contribution rate calculated using environmentally-friendly points
Formula for secondary effects
- Contribution to value-added production
- Gross profit on sales x environmental conservation costs / selling, general and administrative expenses, etc.
- Effects on media coverage
- Area of newspaper advertisement / newspaper page area x advertisement cost per page
- Effects of environmental education
- Number of people attending internal environmental education seminars x seminar fee for outside participants
- Publicity from environmental advertisements
- Number of visitors to environmental Web site x unit price of the sustainability report
Formula of incidental effects
- Amount of incidental effects
- Standard amount x occurrence coefficient x impact coefficient x continuance coefficient
- Items to be calculated
- Areas of improvement to prevent pollution
- Standard amount
- Amount set aside for lawsuits, suspension of operations, and restoration
- Occurrence coefficient and impact coefficient to be set according to occurrence frequency and affected extent
Formula for social effects (economic benefits from use of products by customers)
- Total electric power
- Electric power consumption of a product x number of products sold
- Electric power cost reduction effect
- (Total electric power for old models - total electric power for new models) x electric power unit cost
- Waste disposal cost reduction effect
- (Weight of collected products - weight of final waste) x outside disposal unit cost