An Overview of Our Progress and Achievements in Corporate Social Responsibility

Corporate Strategy & Operating Risks

Strategic Focus Areas

Given the changing operating environment developing from the progress of technological innovation, we continue to actively advance our business transformation in both the Japan business and the International business with a focus on strengthening our core business and expanding business domains. To achieve these objectives we are taking determined steps to pursue the necessary business investments for driving our transformation.

In the Japan business we are promoting our working environment reform, placing priority on thorough compliance with laws and regulations, the eradication of excessive overtime work, and improvement of the working environment.
We are reviewing our overall corporate function and the Group in Japan is making an all-out effort to improve the corporate infrastructure so as to ensure our employees' physical and mental health while simultaneously realizing sustainable growth.

Through these initiatives and others, the Dentsu Group aims to become “a company that creates the value that society and clients truly need.”

Issues to be Addressed

1. Working environment reforms

We take the court ruling on the Company’s violation of Japan’s Labor Standards Act very seriously and apologize to all stakeholders.

As a member of society, we deeply regret that we could not fulfill our social responsibilities. The Company is undertaking fundamental reforms to ensure thorough compliance with laws and regulations, eradication of excessive overtime work, and improvement of the working environment. The Company is promoting working environment reforms to achieve both reduced working hours and improved operational quality so as to restructure the overall functions of the corporate infrastructure. Working environment reforms are inextricably linked with the Company’s business transformation.

With “Thorough enforcement of time management and enhanced care for employees,” “Work-Diet through the thorough review of workflows,” and “Development of Smart Work Styles” as the pillars of reform efforts in 2017, we worked on a range of improvement and reform measures. Moreover, the Company established the Independent Advisory Committee for Labor Environment Reform Activities consisting of external experts. The committee oversees and provides advice on the Company’s working environment reform measures, and verifies their efficacy. As a result of these measures, total work hours per employee decreased to 2,031 hours, below the 2017 target of 2,100 hours set forth in the Working Environment Reform Plan and the usage rate of paid-holiday per employee increased from 56.0% in the previous year to 64.0%. Going forward, the Company will thoroughly implement working environment reforms and the Group aims to become an enterprise that regains the confidence of its employees, clients, shareholders and investors, and in society at large.

2. Business transformation in the Group

1) Japan business

Although the Group’s Japan business saw decreases in both gross profit and underlying operating profit in fiscal year 2017 compared with the previous year in the aftermath of the record-high profit achieved in the previous year and owing to the impact of working environment reforms, gross profit of the Japan business was the second highest in the Company’s history.

The Company will continue to strengthen competitiveness in order to achieve sustainable growth of the Japan business. In line with the technological innovation centering on digital technology, everything is changing—clients, the advertising industry, and consumer behavior. Increasingly, clients emphasize the return on advertising investment. The Group considers it is necessary to continuously refine its integrated planning methodology based on technology and data.

As an example of specific reforms, in the digital sector, in order to further enhance functions of “People-Driven Marketing™,” an integrated planning platform launched by the Group in the previous fiscal year, the Group is promoting its standard implementation through reshaping the Group’s structure, while at the same time vigorously promoting collaboration and tie-ups with partners that have a high degree of specialization. Through enrichment of functions, vigorous collaboration with external parties, investment and other initiatives, the Group aims to further strengthen competitiveness in the marketing and communication sectors. As business issues of clients become increasingly sophisticated and complex, it is important to offer solutions that also address the inherent business issues of clients. Thus, the Group is expanding the service line in the business design sector, such as clients’ management and business development. In addition to several thousands of clients, the Group has diverse points of contact with media, platformers, etc. By deepening collaboration with them and by combining the Group’s capabilities with those of partners, the Group will address initiatives that go beyond the conventional business sectors. To evolve into clients’ “best partner for realization of business transformation,” the Group will promote various measures and implement business transformation of the Group itself.

2) International business

With the completion of the acquisition of Aegis Group plc (current Dentsu Aegis Network Ltd.) in March 2013, the Dentsu Group has evolved into a truly global network, and has since continued with its vigorous promotion of the international business. In fiscal year 2017, the Group faced new challenges as many clients overhauled conventional marketing and shifted toward more data-driven marketing tailored to the digital era.
In anticipation of these changes, the Group implemented numerous M&A transactions that will contribute to acquiring resources and strengthening competitiveness required to create future foundations for growth and worked to improve its capabilities and quality of service in the digital sector. As a result, fiscal year 2017 was a record year for net new business, generating 5.2 billion dollars in media billings. We intend to maintain this momentum and continue investment in the data sector. In particular, in the data marketing sector, Merkle Group Inc. (Merkle), which the Group acquired in fiscal year 2016, is spearheading the Group’s efforts to implement “M1,” a data platform developed by Merkle, so that it can be utilized globally throughout the Group to create synergy and achieve higher growth. Furthermore, to achieve long-term business growth, the Group is investing for the purpose of establishing common corporate infrastructure and shared services that contribute to standardization of operations, swift decision-making, and improvement of operational efficiency. Going forward, the Group will strive to establish and expand a global network that is competitive throughout the world and promote business transformation overseas as well.

Measures are also in place to strengthen CSR activities on a global scale.
The Group is promoting activities with 2020 as the target year in four key areas, including environment, based on the “Dentsu Group Medium-term CSR Strategy 2020” defined in 2015. Also, as part of the “Common Ground” campaign to work toward Sustainable Development Goals (SDGs) in cooperation with five major global advertising groups, the Group is engaged in an initiative supporting NGOs with the aim of eliminating malaria and tuberculosis. In the fiscal year under review, the Group started updating the current Medium-term CSR Strategy. The Group will seek opinions of employees, such as about selection of key CSR issues, creating an opportunity for not only management but also employees to consider relationships between their work and society so that the Group will fulfill its social responsibilities more than ever through its business activities.
Moving forward, the Group will strengthen activities worthy of a global leading group in the communications sector and continue to improve its corporate value.

For details on individual activities, see the Dentsu Integrated Report.

Operating Risks

The operating results, share price and financial position of the Dentsu Group are subject to various risks, as described below. Any forward-looking statements in the following discussion are based on management's assumptions and beliefs in light of information available as of March 29, 2018.

  1. Industry-related Risk (risk related to fluctuations in the economic and business environments, technological innovation and structural changes in the media, shortfalls in financial targets and other goals, and common business practices)
  2. Competition-related Risk (risk related to competition among advertising agencies, and competition from new market entities and adjacent industries)
  3. Risk Related to Advertisers and Media Companies
  4. Risk Related to Efforts to Reinforce Domestic Service Capabilities (risk related to the development of information technology processes and databases, investments in media and internet advertising, and expansion of the promotion business)
  5. Risk Related to Content Business
  6. Risk Related to Global Business (risk related to international business development, and impairment losses on goodwill and other intangible assets)
  7. Risk Related to Maintaining and Developing Human Resources
  8. Risk Related to Reliance on Information Technology Systems
  9. Risk Related to Legal or Regulatory Changes
  10. Risk of Litigation