Dentsu Group Inc.

TCFD Report
2024

Issued July 2024

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TCFD REPORT 2024

Contents
INTRODUCTION

2ENABLING EFFECTIVE CLIMATE GOVERNANCE

3

BOARD OVERSIGHT OF OUR CLIMATE-RELATED APPROACH

3

MANAGEMENT’S ROLE IN OUR CLIMATE-RELATED APPROACH

4

OUR INTEGRATED APPROACH TO RISK MANAGEMENT

6OUR PROCESSES FOR IDENTIFYING AND ASSESSING CLIMATE-RELATED RISKS ANDOPPORTUNITIES7OUR STRATEGIC APPROACH

8

OUR CLIMATE STRATEGY

8

PROCESSES USED TO DETERMINE CLIMATE-RELATED RISKS AND OPPORTUNITIESTHAT COULD HAVE A MATERIAL IMPACT
CLIMATE-RELATED ISSUES THAT INFORM OUR STRATEGIC APPROACH

8
11

THE IMPACT OF MATERIAL CLIMATE-RELATED ISSUES ON OUR STRATEGY AND
PLANNING

12OUR RESILIENCE TO CLIMATE-RELATED RISKS AND OPPORTUNITIES19

OUR METRICS & TARGETS

22

OUR TARGETS FOR MANAGING CLIMATE-RELATED IMPACTS

22

THE METRICS WE USE TO ASSESS OUR CLIMATE-RELATED PERFORMANCE23

SCOPE 1, 2, AND 3 GREENHOUSE GAS EMISSIONS

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Introduction
At Dentsu Group Inc. (“dentsu”), we believe climate change will have an impact on
businesses over the short, medium, and long term as we anticipate that it may
significantly impact clients, suppliers, consumers, and other stakeholders. For thisreason, we are committed to helping reduce greenhouse gas (GHG) emissions
throughout our value chain to realize long-term business growth. We also support the
Task Force on Climate-related Financial Disclosures (TCFD) and promote Group-wide
information disclosure in line with its recommendations. We actively manage climaterelated risks, encompassing both physical and transition risks, within our operations as
we recognize the growing threat posed by extreme weather events and the evolving
landscape towards a low-carbon economy.
In acknowledging the increasing frequency and severity of extreme weather occurrencessuch as floods, storms, typhoons, and heatwaves, we conduct thorough assessments tounderstand the vulnerability of our physical assets, and the potential impact on our
employees and supply chains. Additionally, as we shift towards a low-carbon, global
economy, we have identified transition risks arising from regulatory changes, market
shifts, and technological advancements.
Our purpose is to create new solutions and beginnings for the sustainable developmentof our clients and society by connecting diverse talents within and beyond ourorganization: an invitation to the never before. To support this, in 2024 we updated our2030 Sustainability Strategy, identifying five material issues across three core themes:
People, Planet, and Innovation. More information is available on our strategy in therelated section of this report, our Integrated Report, and our website.
We have committed to achieving a net zero target aligned with limiting global
temperature rise to 1.5°C above pre-industrial levels to prevent the worst impacts ofclimate change, including a near-term target to reduce absolute emissions by 2030
across Scope 1, 2 and 3 and a long-term deep decarbonization target to reduce absolute2

TCFD REPORT 2024

emissions across our entire value chain by 2040. For more information on our targets,refer to the related section of this report.
During 2023, we have been working on integrating the recommendations of the TCFD
within our strategy and reporting.
This reporting year, we have enhanced our processes for identifying, assessing, andmanaging our climate-related risks and opportunities. These include:•

Adopting cross-functional collaboration among our teams in the development ofrobust mitigation and adaptation plans at global, regional, and local levels. Our
strategies include regular risk assessments, scenario analyses and exercises,business continuity planning, and safety protocols to protect our assets andemployees during extreme weather events.

•

Working closely with our suppliers to strengthen risk management practices. Our
efforts are guided by a team of experts across our markets, incorporating local
insights and best practices into our strategies.

In the sections to follow, we outline the outcomes of our work to address our climate
responsibilities across the four pillars of the TCFD and IFRS S2.

Enabling Effective Climate Governance
Board oversight of our climate-related approach
Our ability to manage climate-related risks rests on strong governance structures andboard-level processes that integrate climate-risk effectively. In 2023, the Grouptransitioned to a global management structure under One Management Team, and 2024
sees the introduction of the One dentsu Operating Model, a common business
management model across all four business regions (Japan, Americas, EMEA, and APAC).
Under this model, the Group will continue striving to ensure sustainable growth andenhance medium- to long-term corporate value through swift, resolute, and transparent
decision-making as well as effective use of management resources.

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Management’s role in our climate-related approach
A description of our governance groups and their responsibilities can be seen in Table 1
below, with below illustrating our overall corporate governance structure.
Table 1

Dentsu governance groups and roles

GovernanceGroup/Role

Description

Board of Directors

Our Board of Directors (BoD) has assigned climate-related
responsibilities to our Representative Executive Officer, President &Global Chief Executive Officer (Global CEO) and our Global Chief
Sustainability Officer (Global CSO).

Global Chief
Executive Officer

Our Global CEO reports directly to the BoD and is responsible formonitoring progress against our climate-related targets and integratingclimate-related issues into our strategy.

Global Chief
Sustainability
Officer

Our Global CSO chairs the Group Sustainability Committee (GSC) and is
responsible for managing annual budgets for climate mitigation activities,
integrating climate-related issues into the strategy, monitoring andmanaging our ESG performance and reporting material sustainability andclimate-related issues to the Group Management Board (GMB).

Group
Management
Board

The Group Management Board (GMB) is organized as the decisionmaking body for the Group on the executive side, facing the Board of
Directors. The GMB meets in conjunction with the BoD to resolve
budgetary and investment decisions, medium-term management plans,appointments, and regulatory considerations.
The GMB consists of representative directors and executive officers,
including executive directors. The GMB has responsibility for reporting
important climate- and sustainability-related matters (including majorrisks), identified by the Group Sustainability Committee (GSC), to theBoard of Directors.

Group Risk
Committee

Our Group Risk Committee seeks to cover short- to medium- term
strategic risks as well as any significant risks arising from the four
Regional Risk Committees’ risk registers. Through an Enterprise Risk
Management (ERM) approach, the Group Risk Committee uses a fourstep process to ensure that material risks, including climate-relatedrisks, are effectively managed and monitored. This process incorporates
oversight from and reporting to the GMB. More information of the risk
management process can be found in the “Risk Management” section ofthis report.

Group
Sustainability
Committee

Our Group Sustainability Committee, chaired by the Global CSO, meetsfour times a year to monitor and evaluate our progress against our 2030
Sustainability Strategy and any material climate-related risks andopportunities. The committee comprises of eight members with diverse
expertise and regional backgrounds and provides progress updates tothe BoD twice a year. In 2024, the GSC finalized our 2030 Sustainability
Strategy, which includes action plans and KPIs around Climate Action andother material issues for the Group.

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Figure 1

Dentsu’s governance structure

Since 2022, we have tied our incentive scheme for Executive Officers to the company’s
ESG performance on GHG emission reduction. This movement is part of the alignment ofour 2030 Sustainability Strategy and our commitment to achieve net-zero emissions by2040. The performance metrics are tied to the absolute reduction in Scope 1 and 2
emissions compared to the baseline year (2019). The thresholds for this bonus arereviewed annually and apply to all Executive Officers across our Group.

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Our Integrated Approach to Risk Management
The Group Risk Committee, responsible for overseeing risks that could hinder future
management objectives, identifies and assesses significant risks to dentsu using anEnterprise Risk Management (ERM) approach that includes climate-related risks. The
Committee meets bi-annually, with the chairman reporting key climate-related issues tothe Board of Directors through the Group Management Board, aiding the Board's
oversight of climate-related matters.
The ERM approach followed by the Group Risk Committee comprises four main stages
which are detailed in Table 2 below.
Table 2

The Dentsu Group ERM approachStage

Description

1. Risk
Identification

Supported by Risk Committees across various regions, markets, andlines of business, the Group Risk Committee identifies potentiallysignificant risks and records them in a risk register. "Sustainabilityrelated risks" have been highlighted as a major concern that could
influence investor decisions, with climate-related risks included in thiscategory. The Group Risk Committee appoints risk sponsors for eachidentified risk. Sponsors are responsible for monitoring each risk,
enabling them to confirm that the controls are operating effectively,
adjusting controls as required, ensuring response plans were deliveredagainst committed dates and outcomes, and identifying changes to
impact and likelihood of the risk as well as escalating as necessary.

2. Risk Assessment

When risks are identified, the Group Risk Committee collaborates withrisk sponsors to conduct regular assessments of their impact andlikelihood.

3. Risk Response

Risk sponsors identify the necessary actions, assign action owners,
and set due dates for managing each risk. They also provide regularprogress reports.

4. Risk Monitoring
and Reporting

The Group Risk Committee monitors the progress of actions
implemented by risk sponsors and reports to the GMB. If a significant
risk escalates, risk sponsors gather information on the situation androot causes, report to the Group Risk Committee (and subsequently
the GMB) and develop and implement follow-up plans. Risk
Committees across the Group meet at bi-annually to ensure timely
capture, tracking, and sharing of risk information.

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Our processes for identifying and assessing climate-related risks andopportunities
In 2023, we undertook a detailed process to identify the key climate-related risks andopportunities facing the business. A similar process has been repeated in 2024, withdentsu performing a scenario analysis focusing on how climate change could impact ourcurrent and future exposure to risks and opportunities.
First, we performed an assessment that considered climate-related risks posed byextreme weather under current and future projected climatic conditions (physical risks),
and the business’ exposure to climate-related risks and opportunities associated with thetransition to a low-carbon economy (transition risks and opportunities). As a part of thisprocess, each identified physical risk was assigned a consequence of impact rating,which represented the potential damage and/or associated loss of business, and aprobability/likelihood rating, which represented the likelihood of a climate hazard/event
occurring. This produces an overall risk rating that is classified as a Low, Medium, or
High.
Transition risks and opportunities were assessed in alignment with the risk andopportunity categories outlined by the TCFD (including current regulations, emerging
regulations, technology, legal, market, and reputation) and considered the potential time
horizons associated with each identified risk/opportunity.
The outputs of this were then used to inform the scenario analysis, with the results ofthis available in the Strategy section of this report.

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Our Strategic Approach
Our climate strategy
As discussed in the “Risk Management” section, we recognize the importance ofintegrating climate-related risks and opportunities into our wider risk management
framework. This enables us to better understand how material climate-related issues canimpact our strategy and business planning, and in turn, how best to ensure that our
strategy remains resilient, agile, and relevant. The section below details the processes
we use to determine material climate-related risks.
Processes used to determine climate-related risks and opportunities that
could have a material impact
To identify climate-related risks and opportunities that could have a material impact on
dentsu, we used a combination of internal interviews, interactive workshops, and internal
engagement with our stakeholders. Through this process, we assigned each identified
risk a likelihood, severity, and financial impact score to determine which climate-relatedrisks and opportunities were most material.
The analysis also considered the magnitude of impact for each identified risk andopportunity item. Our impact thresholds can be seen in Table 3 below, with
Low/Medium/High describing the extent to which the impact might affect our business.
The impact on operating profit of any given risk or opportunity in any given year within
the quantitative aspect of the scenario analysis is assigned an ‘impact threshold’, basedon a minimum Japanese Yen (¥) change in operating profit.

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Table 3

Dentsu impact thresholds

Impact Threshold

Impact on Operating
Profit (¥)

Dentsu equivalent global
criteria (financial)

Very high risk-¥18 billion or higher

4 (Major) / 5 (Fundamental)

High risk-¥9 billion

3 (Moderate)

Low/medium risk-¥4.5 billion

2 (Minor)

Normal business±¥1.8 billion

1 (Insignificant) or lower

Low/medium opp.

¥4.5 billion

Inverse of 2 (Minor)

High opp.

¥9 billion

Inverse of 3 (Moderate)

Very high opp.

¥18 billion or higher

Inverse of 4 (Major) / 5(Fundamental)

Three physical risks and eight transition risks and opportunities were short-listed as
those that were most materially relevant to our business.
We consider the following time horizons to be relevant to our business:•

Short-term: 0-1 years. This is the timeframe that we see as critical andreflective of the fast-paced environment we operate in.

•

Medium-term: Between 1 to 3 years. In this timeframe, we see more strategic
and financial planning to be achieved.

•

Long-term: Between 3 to 15 years. This timeframe reflects our long-term visionof achieving net zero by 2040.

Table 4 below provides a description of the timelines and physical and transition scenariosthat were used to conduct the scenario analysis.

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Table 4

Physical and transition scenarios used for scenario analysis
Physical Scenarios

Transition Scenarios1

High-carbon
Emissions
Scenario

IPCC SSP5-8.52 Follows a ‘business as usual’
High-carbon Current Policies Assumes that only currently
trajectory, assuming no additional Emissions(CP) / Statedimplemented policies are maintained
climate policy and seeing CO2
Scenario
Policiesand preserved. The end of century
emissions triple by 2100. Warming
Scenario
global warming is estimated to be
expected to be >3.8°C by end of(STEPS)+3°C, leading to high physical climate
century.
risks.

Low-carbon
Emissions
Scenario

IPCC SSP1-2.6

Stays below 2°C warming by 2100, Mediumaligned to current commitments
carbonunder the Paris Agreement. NetEmissions
zero emissions in the second half of Scenario
the century.

Time Horizons Baseline, 2030 and 2050

DelayedTransition /Announced
PledgesAssumes that global annual emissions
do not decrease until 2030. Post-2030
new climate policies are implemented,
and the level of actions differs acrosscountries and regions based on
currently implemented policies. End of
century global warming is estimatedto be +1.6°C.

Low-carbon
Emissions
Scenario

Net Zero
Limits end of century global warming
Emissions 2050 to +1.5°C due to stringent climate/ Net Zeropolicies, innovation, and reaching net
Emissions byzero CO2 emissions by 2050.
2050 (NZE)Time
Horizons

2030, 2040 and 2050

1 The transition assessment was undertaken using three forward-looking climate scenarios from the 2023 Network for Greening the Financial System(NGFS). Data from the International Energy Agency (IEA) World Energy Outlook (WEO) and the Stated Policies (STEPS), Announced Pledge Scenario(APS) and Net Zero Emissions by 2050 (NZE) scenarios were used to supplement the assessment.
2 Shared Socioeconomic Pathways (SSPs) are climate change scenarios of projected socioeconomic global changes as defined in the IPCC Sixth
Assessment Report on climate change.
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Climate-related issues that inform our strategic approach
Informed by our processes determining material climate-related risks, our main climaterelated risks and opportunities are summarized below. This includes information on therisk or opportunity item, its type, and a description of its potential impact.
Table 5 and Table 6 below provide a summary of the identified physical and transition
risks and opportunities and their projected impacts to dentsu at the various timehorizons.
Table 5

Summary of dentsu’s physical risks

Baseline

Hazard Type

SSP1-2.6
2030

SSP5-8.5

2050

2030

2050

Extreme Heat
Extreme Cold
River Flooding
Pluvial Flooding
Coastal & Offshore
Extreme Winds & Storms
Rainfall-Induced Landslides
Water Stress & Drought
Wildfires

Risk score key for physical risks
MinimalTable 6Low

ModerateHigh

Very High

Summary of dentsu’s transition risks and opportunities

Transition Risks
1

Decreased revenue resulting from global economicchanges2

Increased regulation and disclosure

3

Shift in consumer behavior/preferences

2030

2040

2050

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4

Sector exposure

5

Inability to attract and retain top talent for workforce

Transition Opportunities
6

Access to new markets

7

Emerging sectors

8

New technologies

2030

2040

2050

Opportunity/risk score key for transition risks
Higher Opp.

Moderate
Opp.

Low Opp.

Limited
Risk/Opp.

Low Risk

Moderate
Risk

HigherRisk

The impact of material climate-related issues on our strategy and planning
Our climate-related scenario analysis assessed material climate-related risks andopportunities across dentsu’s global operations. This enabled us to understand andreview the related impacts on dentsu’s strategy, business operations, and the financial
implications on our revenue and operational and capital expenditures.
The process has also helped us to further inform our business model and strategic
considerations. For example, we are aiming to enable consumers to embrace low-carbon
lifestyles, and to support brands to develop strategies and campaigns to meet the needsof a more conscientious consumer.
In line with this, we have updated our 2030 Sustainability Strategy and committed toachieving net zero by 2040, expanding our SBTi-approved targets for our international
operations to include our operations in Japan. We are adapting our operations in line withthese targets through our commitment of powering our operations with 100% renewableenergy by 2030, focusing on our real estate strategy to implement energy efficiency
initiatives to reduce energy consumption, and developing programs to reduce our Scope
3 emissions.

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Table 7 below provides a summary of the financial implications for dentsu from each of the eight transition risks and opportunities andthree physical risks, in each of the scenarios used in the scenario analysis.
Table 7

Summary of implications for dentsu from climate-related risks and opportunities

Risk/ Opportunity

Implications for dentsu under climate scenarios
Current Policies (CP):Delayed Transition:

Net Zero (NZ):

Decreased revenue
resulting from global
economic changes

In the Current Policies scenario,
there is a projection of industrial
growth in the technology sector,
which may indirectly affect theadvertising sector potentiallycausing increases in energy costs
as the energy infrastructure
updates take place (e.g. increased
demand for data centers andservers for digital advertising).
The increased demand for coolingand heating systems may also put
pressure on dentsu’s commitment
to achieving net zero by 2040 as
the company is highly dependent
on EACs (Energy AttributeCertificates) to reduce its Scope 2
emissions.

There could be potential forenergy price volatility after 2030
due to a surge in demand to
install renewables capacity andevolve the energy infrastructure.
Dentsu may face an increase inenergy costs as rapid transition
takes place between 2030 to2050.

In a Net Zero scenario, energy
prices may decline in the next
decade as the installation ofrenewables comes online. It is
likely there may be increase indemand for critical minerals
causing a potential spike in prices
as the development of low-carbon
technologies advances. Data
centers use critical minerals fortheir components, therefore dentsu
may face an increase in passthrough costs.

Increased regulationand disclosure

There is slow evolution of the
global regulatory landscape wherecompanies are expected todisclose the impact of someclimate-related risks andopportunities.

In the Delayed Transition
scenario, there is a more abrupt
shift towards stricter climate
regulations, indicating that dentsu
and its clients will need to rapidly
address implementation of the

In the Net Zero scenario, changes
towards a low-carbon economy will
be more dramatic, indicating thatdentsu and its clients may face
more rigorous climate-related
regulations and disclosure

Transition Risks

1

2

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Risk/ Opportunity

3

4

Shift in consumer
behavior/preferences

Sector exposure

Implications for dentsu under climate scenarios
Current Policies (CP):Delayed Transition:

Net Zero (NZ):

new reporting standards.
Investment will be needed tounderstand how to capture newsustainability data types, how tostore this new data in current or
new databases, and how
sustainability data is fused
together with financial
information for disclosure.

requirements. Dentsu’s operationalcosts to adhere to such regulations(and potential requirements fromclients) could increase, as dentsu
may incur additional operationalcosts to report comprehensive andtransparent sustainability practices
promptly. Risks due to compliancecosts and ‘greenwashing’ may also
increase as the regulations become
stricter.

Consumption patterns remain
stable with minimal changes in
preference towards climatefriendly products and services(consumers might favor brands
with clear green strategies, but ona lower level compared to otherscenarios). Dentsu may face lesspressure from clients andconsumers to transition quickly.

Increased demand for low-carbon
goods and services may generatehigh demand for advertising in adelayed transition. Dentsu willneed to invest in programs ofwork to be in a state of readinessto capture market demand
including ensuring the company
has identified the right talent andinvested in upskilling colleagues.

In the Net Zero scenario there is asignificant shift in consumer
behavior towards climate-friendly
products and services. Dentsu’sclients must proactively adopt andcommunicate climate-related
practices to meet ever-evolving
consumer expectations. If dentsu’sclients successfully advertise their
low-carbon products, then this
could create a revenue uplift fordentsu.

The impact of a slow transition will
minimally impact dentsu’s
reputation as a climate leader.

In a delayed transition, dentsu’sclients will have a mixed
transition depending upon the
sector in which they operate.
Heavy-emitting sectors will needto plan investment in newtechnologies to reduce emissions.
A delayed or slow pace inIn the Net Zero scenario, efforts totransition to a low-carbon economy
arise from stricter regulations
and/or market pressures. Shifts in
sector exposure can occur based on
the decline of heavy-emitting
industries/manufacturers and thedevelopment of cleaner emerging

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Risk/ Opportunity

5

Inability to attract andretain top talent for
workforce

Implications for dentsu under climate scenarios
Current Policies (CP):Delayed Transition:

Net Zero (NZ):

transitioning of these clients may
impact dentsu’s reputation as aclimate leader and thus it’srevenue. Investments in capacity
building to address climaterelated topics across different
sectors (e.g. food and drink,electric vehicles) may increase
operational costs.

sectors. Dentsu may be exposed tofinancial and reputational risks if a
relevant share of its clients isclassified as being in high-emission
industries/sectors. Dentsu may also
have operational costs associatedwith upskilling its employees on
climate-related topics for different
and new sectors, monitoring
emerging sectors and consistently
addressing changes in its
sustainability strategy to stay
relevant.

Under a slow transition, dentsu
may experience minimal risks interms of attracting and retaining ahighly qualified workforce due toindividuals’ climate concerns.

Dentsu will need to continue toinvest in attracting top talent andupskilling colleagues on theimpact of climate change post
2030 as rapid decarbonization
across the economy takes place.
This will create additional
operating costs for dentsu.

Dentsu will need to develop andinvest in a long-term program ofwork to ensure the global teamhave the right skill sets to enable
the transition to net zero andsupport clients.

Development of new business andemergence of new sectors will belimited as emissions continue togrow. Dentsu can access newmarkets through expanding its
current commercial strategy.

A global transition to reducing
emissions will not take place until
2030. Accelerated global policychanges and fast-paced market
changes post 2030 create thepotential for working with newclients through the emergence of
new markets and sectors.

The low-carbon transition createsawareness of the effort andinvestment needed to move to net
zero. New clients may seek to workwith dentsu to advertise their lowcarbon products and services,
creating an uplift in revenue.
Dentsu may focus on growing

Transition Opportunities

6

Access to new markets& emerging sectors

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Risk/ Opportunity

Implications for dentsu under climate scenarios
Current Policies (CP):Delayed Transition:

Net Zero (NZ):
markets such as electric vehicles,
consumer brands and food &beverages as they look toaccelerate their transition.

7

New technologies

Investment in new technologies
that support reducing theemissions associated with media
content is expected to remain low.
As energy-efficient technologies
become more prevalent, dentsu
could gradually integrate newtechnologies/bespoke tools thatenhance operational efficiency andreduce costs.

Dentsu may adopt energyefficient technologies and provide
bespoke tools that can help
clients to monitor/manage
emissions from media content.
However, dentsu may need todelay developing/offering thetechnology until the market isready.

In the Net Zero scenario, there is a
global shift towards developing andinvesting in energy efficiency.
Dentsu’s clients will most likely be
developing low-carbon transition
plans and rollout new low-carbon
products and services in the shortterm. Dentsu can support its
current and new client base in
implanting new technologies toreduce emissions from advertising.

Physical Risks

1

Risks

High-carbon emissions scenario (IPCC SSP5-8.5)

Low-carbon emissions scenario (IPCC SSP1-2.6)

Impact of extreme
weather on dentsu’s
operations

Impacts of extreme weather have been consideredby two approaches: aggregating acute hazards toinfer the impact on dentsu’s operations in realestate (i.e. offices) and consolidating chronic
hazards to assess the longer-term shifts in climate
patterns.
In the case of acute hazards, increasing risks havebeen identified for extreme events such as winds &storms and wildfires, ranging from ‘high’ to ‘veryhigh’. Extreme wind & storms can impact offices’operations, damaging physical assets (e.g.

Projections for the low emissions scenario follow
similar patterns, enhancing risks already projected in
the baseline scenario. Extreme events such as winds& storms are projected to increase to ‘high’ risk
across both time horizons, while risks associated withwildfires increase to ‘moderate’.
Similar OpEx costs mentioned in a high emissions
scenario may also be seen under the low-carbon
emission scenario. Although direct impacts have beenminimal from flooding, and are forecasted to beminimal across all scenarios, there may be impacts on

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Physical Risks
Risks

2

Disruption to supply
chain due to extreme
weather events such as
storms, tropical
cyclones, and flooding

High-carbon emissions scenario (IPCC SSP5-8.5)

Low-carbon emissions scenario (IPCC SSP1-2.6)

buildings, vehicles) and causing human injury, andpossibly increasing OpEx and CapEx associated withmaintenance. Wildfires can indirectly disrupt
operations due to respiratory illnesses andevacuation exercises due to smoke and reduced air
quality. The most exposed office sites are situated inTokyo, Dubai, and Taipei. For chronic hazards,
dentsu’s operations are at ‘high’ risk due to extreme
heat and water stress, with Jakarta, Indonesia being
the most exposed office.
In relation to chronic hazards, risks associated withextreme heat and water stress & drought events areprojected to increase, with the highest level of risk
projected for the high-emissions scenario by 2050.
Risks associated with extreme heat are projected to
impact all the items assessed, and particularly toaffect dentsu’s sites in India, Spain, Italy, Thailand,
and Indonesia. Risks associated with water stress &drought are projected to be particularly high forTokyo, Pune, Chennai, Bengaluru, Madrid, Jakarta,
and New York.

areas surrounding the offices, causing disruptions todentsu’s operations and resulting in revenue
reductions. OpEx costs with additional precautionary
actions, alongside repairs and replacement ofdamaged equipment/infrastructure may be necessary.
In addition, for chronic hazards associated with heat
and water stress, risks will be ‘moderate’ under this
scenario. Additional OpEx costs for cooling systems
and water supply may increase in the long term. Most
exposed office sites include Bengaluru and Jakarta.

Given the sector dentsu represents, its operations
rely on digital and cloud services, and hence data
center efficiency and reliability are a key componentof dentsu’s supply chain.

Projections for the low emissions scenario follow
similar patterns, and risks in the baseline scenario areenhanced albeit not at the same extent as in a highcarbon emissions scenario. Risks from winds andstorms are projected to increase to ‘high’ across boththe 2030 and 2050 time horizons.

Similar to risk item 1 above, in the high emissions
scenario, risks for acute physical hazards such as
winds, storms, and wildfires are increasing andrange from ‘high’ to ‘very high’. The damage that
this could cause to dentsu’s suppliers’ physicalassets could result in delayed delivery of dentsu’s

As such, many of the financial implications discussed
in the high-carbon emissions scenario are also
relevant here, to a lesser extent.

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Physical Risks
Risks

High-carbon emissions scenario (IPCC SSP5-8.5)

Low-carbon emissions scenario (IPCC SSP1-2.6)

purchased goods and services, and data centersupplier sites needing to be closed or limited in theiruse. This could result in reductions in dentsu’s
operative capacity, and a loss of revenue. Extreme
winds and storms or flooding can also cause supply
chain disruptions across transport routes, potentiallyleading to increased OpEx to source alternative
suppliers or supply routes. Extreme heat may also
lead to failures in vital data center infrastructure,
which could lead to increased OpEx for dentsu tooutsource to other data centers.

3

Compound risk ofextreme weather
impacts andearthquakes

Due to dentsu’s HQ (and therefore reporting requirements) being in Japan, the compound risk of extreme
weather impacts and earthquakes is a potential area of concern for the company with Japan exposed to highrisks of earthquakes due to its location on the Pacific Ring of Fire. However, earthquakes are a geophysicalhazard, caused by the movement of tectonic plates beneath the Earth's surface and are not consideredinherently a climate-related natural hazard. The compounding effect of an earthquake occurrin g immediately
preceding or after a climate-induced natural hazard may result in business disruptions lasting for a longer
period of time, limitations to risk management and recovery and increased financial implications for dentsu’s
business. This could result in significant additional physical damage to dentsu’s offices and physical assets,
severe impacts to employees' health and well-being, including economic and physical displacement, andsignificant delays and disruptions to dentsu’s operations, potentially leading to reputational impacts if dentsu
is unable to deliver their services frequently or for a significant amount of time.

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TCFD REPORT 2024

Our resilience to climate-related risks and opportunities
Upon interpreting the results of our scenario analysis and its implications on dentsu’s
strategy and financial position, we recognize that the projected implications fromphysical and transition climate risks have the potential to impact us materially.
Through our established ERM framework, which includes sustainability risks, we canidentify, report, monitor, and mitigate risks at the regional and Group level.
Beyond this, we also understand that taking steps to transition our business to a lowcarbon economy is necessary to meet the expectations of our stakeholders, including
clients and employees. As such, we have mitigation strategies in place to adapt andbuild resilience to the various risks and opportunities presented to dentsu by thetransition to a low-carbon economy. Table 8 below outlines the mitigation strategies
that will enable us to reduce our exposure to the most material transition andphysical risks, while also capturing the benefits brought about by the transition
opportunities.

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TCFD REPORT 2024

Table 8Resilience and mitigation strategies pertaining to dentsu’s material risks and opportunities

Material Transition and Physical Risks

Resilience & Mitigation Strategies

Transition Risks
1

Decreased revenue resulting from global economicchangesDevelopment and transition to include sustainability into the core of thebusiness model, building resilience to a downturn in global economic changes.
Our continued effort to decarbonize our business and our value chain is
amplified through encouraging our clients and supply chain to also follow suitthrough our third-party assurance and client management activities.

2

Increased regulation and disclosure

We are continuing to invest in our ESG reporting capabilities alongsidedeveloping our climate and nature strategies.
We are developing a suite of products and services to support clients who are
reducing their advertising emissions as they transition to a low-carbon economy
to reduce and report their emissions. We maintain dedicated resources tosupport demonstrating and evidencing our mitigation of physical risk tointerested parties.

3

Shift in consumer behavior/preferences

Consumers are becoming more climate conscious, which is being reflected
through their purchasing decisions. We recognize our role to support clients ingenerating consumer demand for low-carbon products and services.

4

Sector exposure

We work across multiple sectors, which includes working with some emissionsintensive sectors, providing support and guidance where possible as theynavigate their transition to more sustainable, low-carbon business practices.

5

Inability to attract and retain top talent for workforce

Investing in and retaining our staff is a key component of our strategy. We aremaking investments to upskill our staff to support our own climate transitionand crucially to support clients in delivering their own sustainability
commitments.

Transition Opportunities
6

Access to new markets & emerging sectors

As the low-carbon transition gathers pace, we are looking to enter new markets
where the emergence of new business models will deliver new, low-carbon
products and services at speed.

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7

New Technologies
We have developed proprietary technologies to support clients to identify and lower
their emissions, notably with media and production decarbonization calculators.
We will continue to monitor development of digital technologies that enableemissions reduction.

Physical Risks
8

Impact of extreme weather on dentsu’s operations.

A climate risk assessment has been undertaken to understand the impact thepotential impact of physical climate risk on dentsu’s assets across multiple time
horizons and scenarios. This informs our “Resilience Management System”, and
we also partner with Everbridge who provide real-time alerts to monitor andassess threats to our people and assets.

9

Disruption to supply chain due to extreme weather
events such as storms, tropical cyclones, and flooding.

Our supply chain primarily relies on services rather than physical products,
positioning us as lower direct risk from the impacts of climate change compared tosupply chains dependent on tangible goods. However, we recognize that theassociated risks are embedded within our supply chain and indirect operations, andwe remain vigilant in addressing these challenges.
We are working with our supply chain to understand the risks posed by extreme
weather events to understand the impact of business disruption. Digital
capabilities have enhanced resilience to ways of working. We will continue tomonitor and encourage the decarbonization of the supply chain.

10

Compound risk of extreme weather impacts andearthquakes could significantly disrupt infrastructure,supply chains, and operations.

We continue to assess the risk of natural disasters impacting the business. In
the rare event of a geophysical hazard such as an earthquake happening at thesame time as an extreme weather event, we are monitoring the impact of thesafety of our employees and limit disruption to business continuity.

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TCFD REPORT 2024

Our Metrics & Targets
Our targets for managing climate-related impacts
To drive climate action and achieve a sustainable future for all, we have set a number ofbusiness- and climate-relevant targets to help dentsu accelerate the low-carbon
transition. These include to:-Achieve net-zero greenhouse gas (GHG) emissions by 2040 (Scope 1-3)-

Achieve a 46.2% absolute reduction in GHG emissions by 2030 (Scope 1-3)
compared to a 2019 baseline.

-

Achieve 100% renewable energy3 by 2030

We will achieve net-zero GHG emissions across our value chain across our global value
chain by 2040. To do so, we will reduce our total Scope 1, 2 and 3 GHG emissions by atleast 46.2% by 2030 and by at least 90% by 2040 (compared to a 2019 baseline). We
will neutralize the remaining emissions (<10%) through credible and verifiable GHG
removal projects.
We are committed to procuring 100% renewable energy in all markets by 2030 from incountry sources where it is possible to do so, and working with partners to overcome
policy and market barriers in countries where it is not. This supports our ongoingmembership of and commitment to the RE100 initiative, comprised of companies aiming
to use 100% renewable electricity in their operations.
The TCFD outlines several markers for good targets. These are presented in Table 9, andour adherence is indicated against our targets.

3 Renewable energy in the context of dentsu’s sustainability strategy and commitments refers toelectricity generated from renewable sources. This definition aligns with RE100.
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Table 9Sub targets aligned with TCFD target markers
NEAR-TERMTARGET

NET ZEROTARGET

RENEWABLE
ENERGY TARGET

Absolute or
intensity based

Absolute

Absolute

Not applicable

Time tied targets

By 2030

By 2040

By 2030

Clear baseline
year from which
progress ismeasured

2019

2019

No baseline(Ongoing target tosource 100%
renewable energy
yearly)KPIs used toassess progress% reduction
compared tobaseline% reduction
compared tobaseline% of renewableenergyThe metrics we use to assess our climate-related performance
We have metrics associated with our targets for GHG emissions reduction and the use ofrenewable energy in our operations. In addition, we have also compiled ESG-related
metrics as part of our annual Integrated Report and ESG Data Book.
Our strategy for GHG emissions reduction is calculated following the WRI GHG Protocol(in metric tons CO2e), and it is aligned with the SBTi guidance. Our electricity
consumption is calculated using location-based and market-based approaches, utilizing
government published emission factors where available and sourcing from theInternational Energy Agency (IEA) for grid emission factors. In accounting for renewableenergy consumed, we validate our renewable energy claims through the verified
purchases of renewable electricity certificates in line with RE100, GHG Protocol, and SBTi
requirements, and through the use of green tariffs where available. We also track water
consumption and waste disposal, however, we currently have no targets associated withthem.
Scope 1, 2, and 3 greenhouse gas emissions
Our total Scope 1, 2, and 3 marked-based GHG emissions in 2023 were 440,911 tCO2e.

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The majority of our emissions sit in Scope 3 (approx. 96% of total emissions). This isdue to purchased goods and services accounting for around 76% of Scope 3, andbusiness travel emissions of around 15%.
Our Scope 1, 2 and 3 emissions for 2023, against previous years and a 2019 baseline,
are presented in Table 10.
Table 10 Dentsu's GHG emissions from 2019-2023
Category

2019 GHG
emissions(tCO2e)2020 GHG
emissions(tCO2e)2021 GHG
emissions(tCO2e)2022 GHG
emissions(tCO2e)2023 GHG
emissions(tCO2e)Scope 1

4,888

3,540

3,195

3,267

2,942

Scope 2
(marketbased)

29,074

23,41520,908

12,771

15,318

Scope 3374,884

55,374360,325

377,456

422,651

Total(Scope1+2+3)

408,846

82,329384,428

393,494440,911

We have achieved significant reductions in Scope 1 and 2 emissions between 2019 and2023. These changes are attributed to efforts including:•switching to 100% renewable electricity where it is currently possible to do so;•

investing in energy efficiency initiatives to reduce our overall energy
consumption;•

promoting office rationalization strategies as we reduce the number of buildings
in which we operate; and•transitioning to hybrid and electric vehicle (EV) company cars.

With good progress on our operational footprint, we now increase our focus on Scope 3
emissions and are committed to driving emission reductions across our full value chain.

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