Evaluation Methods -Environmental Accounting FY2007-

The Ricoh Group disclosed its environmental accounting for the first time in 1999. Subsequently, the Group introduced corporate environmental accounting to determine the status of sustainable environmental management and disclose related information, as well as segment environmental accounting etc., that are used to prepare environmental action plans, select measures, and verify achievements. Thus efforts are being made to establish environmental accounting as a tool for sustainable environmental management.

Corporate Environmental Accounting

The Ricoh Group calculates and announces the cost spent in its business activities for environmental conservation, as well as their conservation and economic effects, as quantitatively as possible. The Ricoh Group prepares such data in compliance with the Environmental Accounting Guidelines set by the Japanese Ministry of the Environment, by taking the necessary portion from the Eco Balance data and calculating the cost and effect (in quantity and monetary value) of its environmental conservation activities based on its own formulas and indicators. The calculated results are verified by a third-party organization. In fiscal 2007, the Group started disclosing environmental impact from a viewpoint of Eco Balance, in addition to direct environmental impact (environmental impact at business sites).

Segment Environmental Accounting

This is an environmental accounting tool to forecast the costs and environmental conservation/economic effects of individual investment activities and projects for environmental conservation from among all processes of operations and to evaluate their results, in order to judge the effectiveness of respective measures.

Material Flow Cost Accounting

This is a method used to detect processes that can be improved cost-effectively by analyzing loss in each process of the material flow of products. The Ricoh Group has introduced this accounting into some of the business areas on a trial basis and found that it is particularly effective in sectors with large amounts of material loss.

Environmental accounting is designed to present the costs incurred for environmental conservation activities during a given period in comparison to the resulting benefits. Such costs and benefits represent how well the environmental impact reduction activities by the Ricoh Group and across the entire life cycle of its products were performed. We therefore began presenting the environmental conservation effect and environmental impact by our upstream and downstream operations, together with those by the Ricoh Group from this year, so that the readers can understand and compare the environmental conservation effects and environmental impact by the Group and those generated throughout the product life cycle. When we look at the overall trend, we see a continuing improvement since fiscal 2006 in the Eco Index, while our business is expanding. This means that the Ricoh Group is able to reduce its environmental impact in proportion to the added value of its business activities (see graph (2)). The Ratio of Eco Profit, an indicator of the cost effectiveness of sustainable environmental management activities, and the Ratio of Eco Effect, an indicator that takes into account the social cost reduction values, improved over the figures for fiscal 2006. This means that we have been able to improve our cost-effectiveness (see graph (1)). When we look at the environmental accounting data by item, we see a decrease in business area costs (including those of pollution prevention, global environmental conservation, and resource circulation) and social activity costs (including those of preparing environmental reports and advertisements), and an increase in the R&D costs for future environmental impact reduction. Among economic benefits, there is a substantial increase in those from products and parts recycling activities. This continuing trend from the previous period contributes to boosting of the overall economic benefits.

Changes in the Ricoh Group's sustainable environmental management indicators The Ricoh Group's Sustainable Environmental Management Indicators (fiscal 2007)

The Ricoh Group's Sustainable Environmental Management Indicators (fiscal 2007)	Results in fiscal 2007	Calculation formula
REP: Ratio of Eco Profit	2.20	Total economic benefit (39.51) / Total environmental conservation cost (17.99)
REE: Ratio of Eco Effect	2.34	[Total economic benefit (39.51) + Social cost reduction values (0.22+2.43)] /Total environmental conservation cost (17.99)
Eco Index	2,636.8	Gross profit on sales (¥927,700,000 thousand) / Total environmental impact (351,831)
RPS: Ratio of Profit to Social Cost	151.0	Gross profit on sales (927.7) / Total social cost (6.14)

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

Sustainable environmental management indicators of the entire product life cycle (fiscal 2007)

Sustainable environmental management indicators of the entire product life cycle (fiscal 2007)	Results in fiscal 2007	Calculation formula
REP: Ratio of Eco Profit	2.20	Total economic benefit (39.51) / Total environmental conservation cost (17.99)
REE: Ratio of Eco Effect	2.34	[Total economic benefit (39.51) + Social cost reduction values (2.43+0.12)] /Total environmental conservation cost (17.99)
Eco Index	41.91	Gross profit on sales (¥927,700,000 thousand) / Total environmental impact (22,137,468.7)
RPS: Ratio of Profit to Social Cost	2.4	Gross profit on sales (927.7) / Total social cost (386.58)

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

Ricoh Group's Corporate Environmental Accounting in fiscal 2007 (195kb)

Segment Environmental Accounting of Product Energy Conservation (Benefit on cost in color QSU product development)

Costs			Effects
			Economic benefits		Effect on environmental conservation
Item	Main costs	Costs	Internal benefits	Customer benefits
R&D cost	Cost of developing energy-saving units, parts, etc.	¥647.7 millon	Sales contribution ¥945.3 million	Reduction in payment for consumed power supply ¥238.2 million	Reduction in CO2 emissions 3,914.0 (t)

• *The reduction in payment for consumed power supply and CO₂ emissions is the annual benefit brought from 8 hours of operation per day, 20 days of operation a month. Internal benefits refer to benefits on gross profits in sales results in fiscal 2007.

Segment Environmental Accounting of the Product Recycling Business (Japan)

Costs		Effects
		Economic benefits		Effect on environmental conservation
Items	Costs	Items	Benefits
Product recycling cost	¥732 million	Sales	¥11,977 million	Amount of resource recovery: 28,669 (t) Down 2,761 (t) from that in the previous year	Amount of final disposal: 163 (t)
Collection/resource recovery cost	¥2,545 million
		Social effect	¥2,294 million
Total cost	¥3,277 million

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

Segment Environmental Accounting of Energy Conservation Activities at Business Sites (The Entire Ricoh Group)

Costs			Effects
			Economic benefits		Effect on environmental conservation
Item	Main cost	Costs	Item	Benefits	Reduction item	Amount
Business area cost	Cost of global warming prevention	¥296.3 million	Reduction in lighting and heating expenses	¥1,113.4 million	CO2 emissions	38,260.0 (t)

• *The amount of reduction in CO₂ emissions is the total of reductions realized through measures taken by respective sites to prevent global warming (including the effects of measures taken in the past).

Segment Environmental Accounting of Pollution Prevention Activities at Business Sites (The Entire Ricoh Group)

Costs			Effects
			Economic benefits		Effect on environmental conservation
Item	Main cost	Costs	Item	Benefits	Reduction item	Amount
Business area cost	Resource circulation cost	¥242.4 million	Reduction in social cost	¥210.3 million	NNOx SOx BOD PRTR substances (Calculated with the conversion potential)	8.6 (t) 0.6 (t) 3.4 (t) 33.4 (t)
			Amount of risk avoidance effect (incidental effect)	¥2,069.5 million

• *PRTR substances refer to the Ricoh target substances for reduction.