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.

The figure below shows an outline of the environmental accounting of Toshiba Group. Our 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 of environmental management.

Environmental accounting as a tool for environmental management

Environmental costs and benefits

The environmental accounting for FY2010 covers Toshiba and 498 consolidated subsidiaries. Environmental costs are categorized and calculated in accordance with the Environmental Accounting Guidelines 2005 of the Ministry of the Environment. Meanwhile, environmental impact reduction benefits are calculated in terms of both physical quantities and monetary values.

Total environmental costs increased by 1.7% from FY2009 to 55.2 billion yen. While costs required for climate change mitigation decreased in general, those for the restoration of environmental damage increased substantially because Toshiba Corp.’s Himeji Operations and group companies reported costs for restoring contaminated soil. Environmental research and development costs account for 5.4% of the total R&D costs during the fiscal year (5.8% in FY2009). Of different business sections, the electronic device section, which manufactures semiconductors and liquid crystal devices, accounts for the largest percentage (42%) of total environmental costs, followed by the social infrastructure section, which accounts for 27% of the total.

Total investments increased by 27% from FY2009 to 10.2 billion yen, with environmental investments accounting for 4.4% of total investments (3.8% in FY2009).

The total amount of environmental benefits decreased greatly, by 163%, from the previous fiscal year to -58.1 billion yen. The largest reason for this decrease is that emissions of environmental pollutants increased upon Sigma Power Ariake’s expansion of its thermal power generation business, rendering the assumed economic benefits negative. Since thermal power generation emits an extremely large amount of pollutants compared to other business segments, we also chose to show the assumed economic benefits excluding the effects of the power generation business in the lower part of the chart below. Those benefits decreased by 10% compared to the previous year, to 31.1 billion yen, while actual benefits were down by 38%, to 9.5 billion yen. The reason these decreases for FY2010 are less compared to FY2009 is due to the increase in the amount of pollutants emitted due to the expansion of production. On the other hand, customer benefits grew by 37% to 54.5 billion yen. Growth in sales of products, including energysaving home appliances such as air conditioning systems and LED lamps, which greatly reduce power consumption, contributed to the increase in customer benefits.

We will continue to develop environmental conservation strategies aimed at increasing environmental benefits based on a careful analysis of environmental costs.

Environmental costs and benefits (FY2006-FY2010)

Breakdown of environmental costs by business segment (FY2010)

Cost benefits of environmental management measures

The figure on the right 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. The cost benefits for FY2008 were negative partly due to an increase in energy payments of 1.3 billion yen compared to the previous year. On the other hand, this figure indicates that in FY2009 and FY2010, the sum of cost reduction effects and sales of valuables exceeded the costs incurred.

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

Environmental costs (FY2010)

Unit: million yen

Category	Description	Investments	Costs
Business area costs	Reduction in environmental impact	6,868 (494)	23,296 (-1,475)
Upstream/downstreamcosts	Green procurement, recycling, etc.	1,736 (1,103)	2,909 (404)
Administration costs	Environmental education, EMS maintenance, tree planting on factory grounds, etc.	436 (135)	5,590 (-1,894)
R&D costs	Development of environmentally conscious products, etc.	333 (-322)	17,286 (-1,349)
Public relations costs	Support for local environmental activities, donations, etc.	18 (-1)	112 (-77)
Environmental damage restoration costs	Restoration of polluted soil, etc.	763 (763)	6,043 (5,309)
Total		10,154 (2,172)	55,236 (918)
		Total investments during the period: 231 billion yen	Total R&D costs during the period: 319.7 billion yen

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

Environmental benefits (FY2010)

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	9,534 (-5,914)	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	-122,854 (-157,304) 31,069 (-3,381)	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 year-on-year reductions in the environmental impact on the atmosphere, hydrosphere and soil and makes it possible to compare the environmental impact of different substances using the same standard by converting the impact into monetary values.
(C)Customer benefits	Reductions in environmental impact during the use of products that are calculated in terms of monetary values	54,519 (14,632)	Environmental impact reduction benefits through the life cycle of products are evaluated in physical quantity units and monetary units (amounts of money). The life cycle of a product includes (1) procurement of materials, (2) manufacturing, (3) transportation, (4) use, (5) shipment, (6) recycling, and (7) proper disposal. Toshiba’s environmental accounting focuses on environmental impact reduction benefits during the use of products. 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	891 (-1,134)	Benefits accruing from investments in environmental structures, such as dikes, designed to prevent the pollution of soil and groundwater are evaluated as benefits of preventing potential risks. Risk prevention benefits are calculated for each capital investment item 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. Values calculated using our own standards were used for the calculation of the standard amount of money required for purification and restoration and potential accidents in order to assess risks resulting from chemical leaks.
Total*		-58,090 (-149,900) 96,013 (4,203)

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

Note: Reductions in environmental impact represent differences between FY2009 and FY2008. Due to rounding errors, sums of individual figures may not equal the totals.

*

For assumed benefits, upper figures and lower figures stand for data on Toshiba Group and data excluding Sigma Power Ariake and Sigma Power Tsuchiura, respectively.