44

Introduction
Human Resources

Environment

Value Creation by the Septeni Group

Building an Advanced Governance System
to Support Discontinuous GrowthManagement

Response to Climate Change—Reinforcing Our
Management Foundation—

Business Activities
Reinforcing Our Management Foundation

45

Corporate Governance

47

Message from an Outside Director

Governance52

Corporate Profile

Response to Climate Change

45

Response to Climate Change

Costs arising from carbon taxes, etc.

MediumShort tomedium term

Technology

Increased costs due to delays in adapting to
low-carbon technologies

Small

Medium tolong termMarketIncreased costs due to rising electricity prices

Small

Short tolong term

Reputation

Loss of trust from clients, investors, and employees
and decrease in corporate value due to delays inclimate change measures

MediumMedium tolong term

Operational stoppage of services and impact oninternal infrastructure due to intensification ofabnormal weather and frequent natural disasters

LargeLong term

Self-restraint/reduction in advertising due to disasters

LargeLong term

Chronic

Increased costs for air conditioning, etc. due tochanges in weather patterns

Small

Medium tolong term

Products/Services

Acquisition of new business opportunities due tomajor changes in industry and society

Small

Medium tolong termMarketIncrease in advertising due to expanding demand forenvironmentally friendly products/services

Small

Medium tolong term

Resilience

Changes in work styles due to dispersion of residences
accompanying changes in weather patterns

MediumShort tolong term

AcutePhysical Risks

Group Risk Management
Committee
Coordinate

Request for
adviceAdviseSustainability Committee(Note) The image is an excerpt from the governance structure diagram.
Please refer to the full diagram below.
https://www.septeni-holdings.co.jp/en/company/governance.html

Opportunities*Short-term: to 2025

Mid-term: 2025 to 2030

Long-term: 2030 to 2050

Corporate Profile

Policy/Regulation

Reinforcing Our Management Foundation

Occurrence
Time*

Business Activities

ImpactLevel

Human Resources

Transition Risks

Assumed Main Risks and Opportunities

Value Creation by the Septeni GroupClassification of Risks andOpportunities based on
TCFD Recommendations

Governance Structure Regarding Climate Change
Board of Directors*In scenario analysis, we refer to reports from the Intergovernmental Panelon Climate Change (IPCC) and the International Energy Agency (IEA), etc.

Results of Scenario Analysis

1. Governance
As an advisory body to the Board of Directors, theSustainability Committee, chaired by the Group CEO,discusses and examines sustainability activities andclimate-related issues. The committee’s activities are
regularly reported to the Board of Directors, andresolutions are sought at the Board of Directors forparticularly important themes.

opportunities that could potentially impact our business.
Based on this scenario, we aim to enhance resilience by
mitigating risks and expanding opportunities.

Management

Given that a sustainable and sound Earth and society are
prerequisites for business operations, we have identified
the response to climate change as a materiality.
Against this backdrop, we endorsed the Task Forceon Climate-related Financial Disclosures (TCFD)
recommendations in October 2023 and will disclose
information related to the response to climate change
based on the TCFD framework.

We recognize the risks, measures, and opportunities
brought about by climate change as follows at thepresent time. In scenario analysis, we assumed a world
with a temperature rise of 2˚C and 4˚C*, and evaluatedthe importance of climate-related risks andIntroduction

2. Strategy

Disclosure of information based on
TCFD recommendations

46

Response to Climate Change

FY2021

FY2022

FY2023*2

Ratio
(%)

Emissions(t-CO2)

Ratio(%)

Emissions(t-CO2)

Ratio(%)

Emissions(t-CO2)

Ratio(%)

Scope 1

5.5

0.1

6.9

0.1

7.3

0.1

7.0

0.1

Scope 2

768.5

15.9

719.6

14.8

817.0

12.8

940.6

9.1

Scope 3*1

4,071.1

84.0

4,138.1

85.1

5,548.6

87.1

9,386.9

90.8

Total

4,845.1

4,864.6

6,372.9

10,334.5*1 Category 1 (Purchased goods & services), Category 2 (Capital goods), Category 3 (Fuel & energy-related activities), Category 6 (Business travel), Category 7(Employee commuting), Category 8 (Leased assets (upstream))*2 Due to the irregular fiscal year, the figures cover a period of 15 months.

Please refer to the link at right for more details.

https://www.septeni-holdings.co.jp/en/ir/esg.html

Please refer to the link below for more details.
https://note.com/septeni_group/n/n6ce1c7430296(Only available in Japanese)

Corporate Profile

Emissions(t-CO2)

Reinforcing Our Management Foundation

FY2020We participated in the community activity “OneDay for Change,” which the Dentsu Group is
engaged in globally, and conducted office areaclean-up activities in Tokyo, Sapporo, andMiyazaki. Approximately 60 participants took partin the Tokyo location, fostering interaction within
the Group and providing an opportunity to learn
about social issues.

Business Activities

Change in GHG Emissions• Participation in “One Day for Change”

Human Resources

We have set a goal to reduce the GHG emissions of
Scope 1+2 by 70% by fiscal year 2030 compared tofiscal year 2023.
The actual GHG emissions are as follows. In thefiscal year ended December 2023, the GHG emissionsof the relevant department increased due to theincrease in business trips and commuting resulting
from the implementation of a hybrid work style thatleveraged the benefits of both remote work and office
work, as well as the opening of a new location. Goingforward, we will continue to explore initiatives toreduce emissions.

Our Environmental Policy advocates “reduction of
printing paper,” “proactive green purchasing,”and “implementation of resource and energy
saving measures and promotion of recycling.” AGroup-wide volunteer project, “ECHO by Septeni
Group,” plays a central role in our environmental
initiatives, working to raise environmental
awareness within the Group by sharing
information through email magazines for
employees and by organizing in-house events
such as online seminars on renewable energy.

Value Creation by the Septeni Group

4. Metrics and targets

Other Environmental Activities

Management

throughout the Group to achieve sustainable growth.
We are also working on promoting risk management incollaboration with the Group Risk Management
Committee and the Sustainability Committee in orderto manage risks related to climate change in an
integrated manner with other risks of the Group.

Introduction

3. Risk management
The Sustainability Promotion Department, which serves
as the secretariat for the Sustainability Committee,
evaluates and determines the importance of risks andopportunities related to climate change based on theirimpact on our businesses. In the evaluation, we
conduct hearings with related group companies anddepartments as necessary.
We have established the “Group Risk Management
Rules” in order to recognize significant events that
affect our business management, identifies, analyzes,
and evaluates risks that hinder the development andgrowth of our business, and implement measures suchas risk avoidance, reduction, and transfer. Furthermore,
under the common policy of our Group, we haveestablished the Group Risk Management Committee as
an institution to oversee and manage risk management
activities in an integrated and effective manner. We arebuilding a PDCA cycle of risk management activities
and working on promoting risk management

47

Corporate Governance
We have been appointing female executives since 2013 and outside directors since 2014.
Directors/auditors

2014

2015

2017

2018

2021

2022

2023

11

11

12

10

11

9

11

12

Of which
2 females

Of which
1 femaleCompositionof the Boardof Directors
Of which
1 female

Of which
2 females(Note) At the end of the General Meetings of Shareholders in each year. Only years where there were changes in the composition of the Board of Directors are listed.

• Systematization of governance for greater
effectiveness• Introduction of Performance-Linked Share
Compensation Plan for Directors and Officers• Establishment of the Financial Results andDisclosures Committee• Outside directors become the majority of the Boardof Directors• Introduction of effectiveness evaluation to enhance
the functioning of the Board of Directors• Abolition of anti-takeover measures• Creation of Corporate Governance Guidelines• Establishment of Sustainability Committee andformulation of sustainability policy• Establishment of Nomination and Remuneration
Advisory Committee

Corporate Profile• Establishment of Group Risk Management
Committee• Separation of execution and monitoring through theintroduction of an entrustment-type executive system

Reinforcing Our Management Foundation

Measures Implemented from 2015 Onwards to Improve GovernanceBusiness Activities

Compositionof the Boardof Company
Auditors

Human Resources

2013

Value Creation by the Septeni Group

Number of
directors/
auditors

Outside directors/auditors

Management

We have identified the efforts in corporate governanceas a materiality, recognizing the need for an advanced
governance structure to fulfill our obligations as a listedcompany and to aim for the pursuit of discontinuous
growth and the realization of a “nameraka” future.
Since around 2015, we have been advancing
governance reforms, positioning the first three years as
a promotion phase, where we implemented various
measures to improve governance and introduced new
systems. Since 2018, we have been striving to establish
an effective governance structure that goes beyond
mere formality and focusing on improving theapplication and operation of the introduced systems.
In the fiscal year ended December 2023, we madeprogress in formulating our sustainability policy within
the Sustainability Committee. Additionally, as anadvisory body to the Board of Directors, weestablished a Nomination and Remuneration Advisory
Committee. In the committee, which is chaired by anoutside director and consists of a majority of outside
directors, we ensure independence, objectivity, andaccountability in the deliberation process, and discuss
topics such as succession plans and the selection of thenext generation of management.

Changes in Composition of Directors/Auditors

Introduction

Progress of governance reforms

48

Corporate Governance5

Directors/Auditors

General Meetings of Shareholders

FemaleDirectors

Appoint and dismiss

Appoint and dismiss

2

Audit
operations

Board of Directors

Board ofDirectors’Meetings Held:

Auditors:

4*

Average AttendanceRate of Directors

Attendance
19 Average
99 %Rate of Auditors

OutsideAuditors

Board ofAuditors’Meetings Held:
Average
AttendanceRate of Auditors:

17
98 %

ReportRequest forinvestigation

Whistleblower
hotlineCoordinate

Requestfor advice

Sustainability Committee
AdviseAppoint and supervise

Notify and report

Coordinate

AdviseRequestfor advice

Coordinate

Nomination andRemuneration Advisory
Committee

ReportGroup President and Chief Executive Officer
Report andconsult

ReportFinancial Results andDisclosures Committee

Coordinate
ReportInternal Auditing
OfficeGroup Executive Officer (Group Management Meeting)Group companies and departments

Please refer to the link below for an overview of the corporate governance system.
https://www.septeni-holdings.co.jp/en/company/governance.html

Accounting
Auditors

Internal audit

Audit accounting

Corporate Profile3*As of March 2024

100 %Board of Auditors

Reinforcing Our Management Foundation

Group Risk
Management Committee

Appoint and dismiss

Business Activities

OutsideDirectors

Human Resources

8

Outside Directors/Auditors*

Value Creation by the Septeni Group

Corporate Governance System (as of April 2024)

Governance Highlights (FY2023/12)
Directors:

The Group is managed under a holding company
structure in which the Company is a holding company
and its group companies are operating companies. By
separating the function of administering its overallbusiness from executing its individual businesses, theGroup has been working to facilitate the delegation of
authority and strengthen the Company’s function ofmonitoring the Group’s businesses.
The Board of Directors shall consist of a majority, at
the minimum, of highly independent Outside Directors.
The Board consists of eight Directors, five of whom areManagement

The corporate governance of the Company is based on
the development and operation of a system to ensurethat actions are based on the company’s corporate
philosophy and decisions are made in a transparent,
fair, and efficient manner, and compliance with laws andregulations and appropriate supervision (monitoring) ofcorporate performance are carried out under the
mission of “To inspire the world with entrepreneurship.”Outside Directors, as of March 2024. It determines
matters prescribed by laws and regulations and the
Articles of Incorporation and matters concerning theexecution of important business and oversees theexecution of business. Furthermore, as part ofstrengthening of its corporate governance system, theCompany introduced an executive officer system inJanuary 2017. Under this system, the authority formaking decisions and executing business operation isdelegated to Executive Officers to the extent
permitted by relevant laws and regulations, in order for
the Board of Directors to mainly focus on the oversight(monitoring) of the Group Executive Officers who areresponsible for the execution of business (monitoringmodel-oriented).

The outline ofcorporate governance structure

Introduction

Basic approach to corporate governance49

Corporate Governance• Revision of officer compensation system

Meetings attended only by the Outside Directors(Executive Session) are held once a month in principle,• M&A

Yuichi Kouno• Partial amendment of insider trading
prevention regulations
Executive
Session• Formulation of sustainability policy• Share repurchase, etc.
• Disclosure of human capital• Transition to an Innovation Board

Yusuke Shimizu• Revision of materiality

Etsuko Okajima• Restructuring of the Nomination andRemuneration Advisory Committee

Yoshiki Ishikawa• Renewal of core systems• Change in dividend policy

Mio Takaoka• Transfer of shares of JNJ INTERACTIVE INC.

Makoto Shiono
Tadashi Kitahara• Overseas advertising business• Transfer of shares of COMICSMART INC.

Corporate Profile

Akie Iriyama

Reinforcing Our Management Foundation

The Company has established a Group Risk Management
Committee that supervises risk management of theGroup, a Sustainability Committee that promotes• Revision of share issuance regulations

Composition of Committees, etc.
Nomination
andSustainability
Remuneration
Committee
Advisory
Committee• Consideration of IR measures

Business Activities

Committees

FY2023/12 (from October 2022 to December 2023)(excluding regularly scheduled agenda items)

Executive Sessions

Board of Auditors
The Company has adopted a company auditor system.
Under the system, there are currently four Company
Auditors including three highly independent Outside
Auditors. Each Company Auditor audits the execution ofbusiness by the Directors, in accordance with theauditing policy, audit plans and so forth determined by
the Board of Company Auditors.

Major agenda items at the Board of
Directors meetings

Human ResourcesGroup Management Meeting has been established, as asystem regarding decision-making on the execution ofbusiness, with the functions of supporting
decision-making by the Group President and Chief
Executive Officer and of considering importantmanagerial matters of the Group.

thereby securing a place for information exchange andshared awareness from objective standpoints. Outside
Auditors, external accounting auditors and otherindependent outside persons may attend suchmeetings, thereby providing a place for promoting
cooperation among independent outside persons.

Value Creation by the Septeni Group

Group Management Meetings

sustainability activities to enhance the corporate value,
and a Financial Results and Disclosures Committee that
reviews and evaluates financial results information. In
doing so, the Company has put in place a system thatclarifies authority and responsibilities and enables
prompt and appropriate decision-making. On the other
hand, Nomination and Remuneration Advisory
Committee, the majority of which consists of Outside
Directors, has been established as an optional
committee of the Board of Directors to handle
personnel matters regarding the Group’s management
team (appointment, removal etc. of Directors of theCompany, Group Executive Officers and others), in
order to ensure the independence, objectivity andaccountability of the deliberation process.

Management

The Group Executive Officers are responsible for the
execution of business of the Company, that of thebusiness companies in its group or that across several
business companies. The Board of Directors appoints
Group Executive Officers in charge of respective areas ofbusiness operation, and the Group President and Chief
Executive Officer who concurrently serves as
Representative Director oversees the execution ofbusiness operations by the Group Executive Officers.
Moreover, matters to be resolved by meetings of theBoard of Directors, those regarding which authority is tobe delegated to the Group Executive Officers and thoseto be reported by the Group Executive Officers to theCompany’s Board of Directors are clearly stipulated in
the regulations of the Board of Directors.

Introduction

Board of Directors

50

Corporate GovernanceRisk management

BIP Trust

Total amount of remuneration, etc. by type
Number ofpayeesTotal amount of officers’
remuneration, etc.

Basic remuneration

Performance-linked
remuneration, etc.
Non-monetary
remuneration, etc.

6(5)261,066 thousand yen(90,000 thousand yen)

254,670 thousand yen(90,000 thousand yen)

6,396 thousand yen(–)

Company Auditors(of whom Outside Auditors)

3(3)

30,000 thousand yen(30,000 thousand yen)

30,000 thousand yen(30,000 thousand yen)–(–)

The risk of harm to officers and employees and impact
on operations resulting from natural disasters, etc.

Corporate Profile

Please refer to the link below for supplementary information on remuneration of Directors and Auditors.
https://www.septeni-holdings.co.jp/en/company/governance.html#directors-compensation

The risk of inadequate supervision of external contractors,
including the handling of information

Reinforcing Our Management Foundation

Directors(of whom Outside Directors)

Priority Risks

Business Activities

Category

Human Resources

Director and Auditor Remuneration (FY2023/12)

Value Creation by the Septeni Group

This is a performance-linked share compensation planthat aims to establish a clearer relationship between
remuneration for Directors, etc. and the value of theGroup’s share. The Company’s shares are purchasedfrom the market as officer compensation, kept in a trust
account and delivered in accordance with therecipient’s position and degree of achievement of theperformance targets in the Midterm Business Policies.

In order to recognize significant events that may affect
the Group’s business management, to identify, analyze
and assess risks that may harm the growth anddevelopment of the business and to make responses tothe risks such as aversion, mitigation, transfer andothers, the Group shall establish the “Group Risk
Management Regulations.” In addition, it set up the“Group Risk Management Committee” as a body tooversee and manage such risks in an integrated andeffective manner under the common policy as theGroup. It constructs the PDCA cycle of risk management
operations and promotes risk management in the Group
as a whole to achieve sustainable development.
“In the fiscal year ended December 2023,
considering social trends, the Company selected thefollowing risks as priority risks among those that arecommon across the Group, and has been actively
addressing them.”

Management

In the fiscal year ended September 2017, the Group
introduced a new compensation plan (a board
incentive plan (BIP) trust) to more clearly define therelationship between the remuneration of theCompany’s directors (excluding outside directors andnon-residents of Japan) and executive officers(excluding non-residents of Japan; collectively,“Directors, etc.”) and the Group’s business results inthe medium-to-long term as well as the Company’s
shareholder value, while creating a sound incentive toenhance business results and corporate value in themedium-to-long term. As a result, remuneration for

directors of the Company consists of monthly
compensation and share compensation, andremuneration for outside directors who are
independent from business execution consists ofmonthly compensation only.

Introduction

Officer compensation plan

51

Corporate Governance• One director and one auditor (part-time auditor)
will be appointed by Dentsu Group Inc.
• Even after the capital and business alliance, themajority of our directors shall be independent
outside directors, and our representative director
shall be a director who is not an outside director
and who is not appointed by Dentsu Group Inc.

Cooperation in Management Autonomy
and Maintaining Listing• Dentsu Group Inc. will not acquire any additional
shares of ours without obtaining our priorwritten approval.

Reinforcing Our Management Foundation

Handling of SharesBusiness Activities• Even after the execution of various transactions
associated with the capital and business alliance,
the Dentsu Group Inc. shall respect our autonomy,
act in such a manner as not to violate the delisting
standards to maintain our listing, and cooperatewith us to a reasonable extent.

Human Resources
Corporate Profile

The Company’s parent company is Dentsu Group Inc.
One of the Company’s directors concurrently serves as
an executive officer of Dentsu Japan Network of theDentsu Group Inc. and an executive officer of Dentsu
Inc., a subsidiary of Dentsu Group Inc. However, thisdirector is in a position to supervise the execution ofbusiness in order to enhance its corporate value as a
non-executive director of the Company. In addition, withrespect to transactions with the parent company,
management support fees are determined byagreements between the parties taking into account thecontent of operations, and interest rates on fundtransactions are determined in the same manner as ingeneral transactions with reference to market interest
rates. Through these various measures, the Company
believes that its business operations are sufficiently
independent from the parent company, etc. As a publicly
traded company with the parent company, the Company
has agreed to maintain its autonomy and independence
in the relationship with the parent company under anagreement between the parties. In addition, the majorityof the Company’s Board of Directors is independent
outside directors, and decisions concerning its
management are made through discussions based on
the viewpoint of protecting minority shareholders. As aresult, the Company does not anticipate any harm to theinterests of itself or its minority shareholders.

Appointment of Directors andMember Structure

Value Creation by the Septeni Group

Policy on measures to protect minority
shareholders in conducting transactions
with controlling shareholder

Governance since the Capital andBusiness Alliance with the Dentsu Group Inc.

Management

With the aim of enhancing the function of the Board of
Directors, the Company conducts analysis, evaluationand follow-up examinations of issues on the effectivenessof the Board of Directors once a year in principle. The
Company also conducts large-scale and detailed surveys
by external third-party institutions once every 3 years.
With an external third-party survey conducted in thefiscal year ended September 2022, the Company
confirmed that the Board of Directors completed thetransition to a monitoring board type, enablingadvanced and lively discussions. In addition, in terms ofoperation, practical measures such as devising theagenda of the Board of Directors, providing materials in
advance, creating opportunities for discussions throughcamps, and strengthening cooperation among outside
directors through executive sessions had already been
sufficiently carried out, and that effectiveness has been
confirmed. On the other hand, it was also confirmed thatwith the substantial reform of the Board of Directors, acommon awareness of issues has emerged, such as how
to think of the innovation board, which lies ahead of themonitoring board, how to realize the “co-creation ofvalue between supervision and execution,” and how tothink of the succession of the Board of Directors.
In response to this, in the fiscal year ended
December 2023, the transition to the innovation board
was discussed at the Board of Directors and the officer
camp on an ongoing basis, and as part of measures toco-create value between supervision and execution,
the Company revised organizational and divisional
structures and regulations. Also, in response to someadvice by the Nomination and Remuneration Advisory
Committee, which has been discussing succession
plans to realize sustainable growth, the Company

resolved to reform its management structure. Bybuilding and promoting a new collective leadershipsystem, the Company aims to further increase its
corporate value, and will continue initiatives toenhance the effectiveness of the Board of Directors.

Introduction

Evaluation of the effectiveness of
the Board of Directors

Message from an Outside Director

Reinforcing Our Management Foundation

strengths and experience in collaborative
management. These selections envisage a division ofrole in which Mr. Kouno, as President, will be
responsible for external communications withshareholders and other stakeholders, while Mr. Shimizu,
as Executive Vice President, will be responsible forinternal communications, including improving theengagement of employees, who are extremely
important human capital for the Company.
We have high expectations that Mr. Kouno and Mr.
Shimizu will provide strong leadership to achieve thediscrete growth represented by “10X,” and we will doour utmost to support the new executive structure. The
Committee believes that this renewal of the
management structure is a very positive way to pass on
the baton.

Business Activities
Corporate Profile

made to reform the management structure byestablishing a collective leadership structure, based on
the concept of replacing the current generation with a
new generation that will “create a new era,” as statedin the Group vision, and the Committee has beenleading the selection process.
Specifically, the Committee created a pool ofcandidates and, through a dialogue process that
included numerous interviews and presentations,selected Yuichi Kouno as Representative Director,
Group President and Chief Executive Officer andYusuke Shimizu as Director, Group Executive Vice
President and Executive Officer, based on acomprehensive assessment of the clarity of theirstrategy to realize “10X” and their leadership toaccelerate digital marketing, the core of our Group.
Mr. Kouno and Mr. Shimizu have complementary

Human Resources

The Group is continuously working to strengthen its
governance to maximize corporate value. As part ofthis process, the Nomination and Remuneration
Advisory Committee (hereinafter referred to as “theCommittee”), which was established in July 2023 andconsists of outside directors and the Group President
and CEO, received a request from former CEO Satoto resign after completing his term, and for theCommittee to appoint a new management team.
Mr. Sato led the Group as a whole for some 15 years,
showing strong leadership to enhance our corporate
value. Given his excellent managerial skills, hispresence will be hard to replace, and the Committee
has been discussing whether this is the optimal timing
for the succession with respect to our stakeholders.
As a result, in order to respond ahead of time tofuture changes in the environment, the decision was

Value Creation by the Septeni Group

Etsuko Okajima

Chair of the Nomination andRemuneration Advisory Committee
Outside Director

Management

High expectations for the leadership ofthe new management team in realizing “10X”

Introduction

Message52