Environmental Accounting

As a tool for environmental management

With a view to promoting environmental management, Toshiba Group is working to introduce an environmental accounting approach aimed at collecting accurate data on investments and costs required for its environmental conservation initiatives and analyzing the collected data in order to reflect investment effects and cost-efficiency in managerial decision making.

Environmental costs are calculated in accordance with the Ministry of the Environment's Environmental Accounting Guidelines 2005. As for environmental benefits, Toshiba Group's environmental accounting assumes four basic concepts: prevention of potential environmental risks, competitive advantages, internal benefits and external benefits. We classify benefits into four categories based on combinations of these concepts to develop a comprehensive approach to environmental accounting: customer benefits due to reduced power consumption of products, assumed economic benefits estimated to result from reductions in air pollutant emissions, benefits resulting from preventing potential risks, and actual economic benefits resulting from reductions in the amount of waste and energy consumed. These categories provide useful indices for environmental management.

Environmental accounting as a tool for environmental management

Environmental costs and benefits

Total environmental costs decreased by 1.0% from the previous year to 54.7 billion yen. Of the different business sections, the electronic device section accounted for the largest percentage of total environmental costs, followed by the home appliance section.

Total investments decreased by 6.4% from the previous year to 9.5 billion yen, with environmental investments accounting for 2.8% of total investments.

The total amount of environmental benefits was 82.6 billion yen: 11.9 billion yen for actual benefits, 25.9 billion yen for assumed benefits, 44.4 billion yen for customer benefits, and 0.4 billion yen for risk prevention benefits. The increase in actual and assumed benefits was a result of the reduction in the amount of pollutants emitted due to the reduction in production caused by the Great East Japan Earthquake and floods in Thailand.

Breakdown of environmental costs by business segment (FY2011)

Environmental costs and benefits (FY2007-FY2011)

Cost benefits of environmental management measures

The figure below shows the changes in the cost benefits of measures for climate change mitigation and waste disposal over the past three years. We compared the costs incurred in taking measures to mitigate climate change and dispose waste against the total amount of reductions in payments related to energy consumption and waste disposal compared to the previous year as well as sales of valuables during the current year. In the table, costs are expressed as business area costs and benefits as actual benefits.

In FY2011, the costs incurred taking measures to mitigate climate change were more than the reductions in payments related to energy consumption. On the other hand, measures to dispose waste brought larger benefits than the costs incurred taking them.

The major issue to be addressed going forward is how to overcome two conflicting problems: an increase in emissions of environmental pollutants as a result of business expansion and the need for cost reductions. Toshiba Group will also analyze the cost benefits and other financial aspects of environmental management measures in more detail.

Cost benefits of measures for climate change mitigation and waste disposal

Attempt at a new kind of environmental accounting: internalization of external diseconomies

Toshiba's current environmental accounting is basically an initiative aimed at minimizing external diseconomies, in which data on costs required for environmental conservation activities is collected to analyze effects on investments. However, environmental impacts due to business activities cannot be reduced to zero. For this reason, we are considering visualizing external diseconomies by assessing final environmental impacts as monetary values and to recognize (or internalize) them as required costs for environmental renewal.

Perception of external diseconomies

The figure below shows a conversion of environmental impacts caused by industrial waste discharged by Toshiba Group over the past three years into monetary values. The amount of external diseconomies for FY2011 was computed to be 10.3 billion yen. Moving forward, we will consider a system to compensate or reduce external diseconomies by examining effects on customers that contribute to environmental conservation at customer sites as well as initiatives that will bring about positive effects on the environment, such as biodiversity conservation and social contribution activities, among others.

Calculation of external diseconomies

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Targeted environmental impacts:
• Total GHGs (CO₂, PFC, SF₆, HFC, other)
• Emissions to atmosphere (soot, NOx, SOx)
• Emissions to hydrosphere (BOD, COD, suspended matter, total nitrogen, other)
• Final waste disposal amount (scrap metal, cinders, sludge, waste paper, waste acid, waste plastics, other)
• Chemical substances (covered by PRTR)

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The Life-cycle Impact assessment Method based on Endpoint modeling (LIME) was used for conversion into monetary values. .

Environmental costs (FY2011)

Unit: million yen

Category	Description	Investments	Costs
Business area costs	Reduction in environmental impact	8,201 (1,333)	21,916 (-1,380)
Upstream/downstreamcosts	Green procurement, recycling, etc.	564 (-1,172)	3,266 (357)
Administration costs	Environmental education, EMS maintenance, tree planting on factory grounds, etc.	255 (-181)	5,217 (-373)
R&D costs	Development of environmentally conscious products, etc.	439 (106)	21,056 (3,770)
Public relations costs	Support for local environmental activities, donations, etc.	2 (-16)	59 (-53)
Environmental damage restoration costs	Restoration of polluted soil, etc.	46 (-717)	3,199 (-2,844)
Total		9,507 (-647)	54,713 (-524)
		Total investments during the period: 338.5 billion yen	Total R&D costs during the period: 319.9 billion yen

Figures in parentheses represent increases or decreases from the previous year.

Environmental benefits (FY2011)

Unit: million yen

Category	Description	Amounts	Calculation method
(A)Actual benefits	Benefits that are represented as monetary values, such as reductions in electricity and water charges	11,913 (2,379)	The amount of money, such as electricity charges and waste disposal costs, that was saved compared with the previous year, plus earnings from the sale of objects with value.
(B)Assumed benefits	Reductions in environmental impact that are converted into monetary values	25,894 (148,748)	The amount of money was calculated by multiplying the cadmium equivalent value of each substance obtained from environmental standards and the American Conference of Governmental Industrial Hygienists Threshold Limit Value (ACGIH-TLV) by damage compensation for cadmium pollution. This method of calculation provides a means of showing reductions in environmental impacts on the atmosphere, hydrosphere and soil and makes it possible to compare the environmental impacts of different substances using the same standard by converting the impacts into monetary values.
(C)Customer benefits	Reductions in environmental impact during the use of products that are calculated in terms of monetary values	44,441 (-10,078)	Environmental impact reduction benefits during product use are evaluated in physical quantity units and monetary units. Energy-saving benefits are calculated by using the following equation: Benefits (yen) = Σ [(Annual power consumption of the previous product model - Annual power consumption of the current product model) × Number of products sold annually × Benchmark unit price of electricity]
(D)Risk prevention benefits	Reductions in environmental risks compared with conditions prior to investments that are calculated in terms of monetary values	378 (-513)	Benefits accruing from investments in environmental structures designed to prevent the pollution of soil and groundwater are computed as benefits of preventing potential risks using the following equation: Risk prevention benefits = Quantity of chemical substances safely stored × Standard amount of money required for purification and restoration × Number of potential accidents. The standard amount of money required for purification and restoration and number of potential accidents are calculated using our own standards.
Total*		82,626 (140,716)

Figures in parentheses represent increases or decreases from the previous year.

Note: Reductions in environmental impacts represent differences between FY2011 and FY2010.