The theme of day three, the final day of Investor Update FY2023, was “Prosper Together,” which is Recruit Group’s sustainability strategy. Recruit Holdings’ Director, Executive Vice President and COO Ayano “Sena” Senaha, who leads this initiative, spoke with external members of the Sustainability Committee — Aron Cramer, Yves Serra, and Keiko Honda (who also serves as an independent director of the Board) about what kinds of discussions occur during their twice-yearly committee meetings that aim to refine our sustainability strategy and strengthen governance, and what challenges Recruit Group should tackle in the years ahead.
Committee Discussions Based on Global Trends and Implementation of Group-Wide Business Initiatives
At this session, which took the form of a panel discussion, Sena first asked the three external committee members to name what they felt were the most impressive discussions that occurred at Recruit Holdings' Sustainability Committee meetings.
Yves Serra, chairman of the board of Georg Fischer, answered first. Georg Fischer is a company based in Switzerland that manufactures piping systems used to transport water and other materials worldwide, and ranks ninth in the world on the Wall Street Journal's “Most Sustainable Companies” list in 2020. Yves cited discussions on the scope of Recruit’s goal of helping 30 million people facing barriers in the labor market get hired ― barriers that include education, criminal records, disability, military experiences and others and said: “Back in November last year, I mentioned that for Recruit to make a greater positive contribution to the world, you need to incorporate the refugees category into this initiative. At our March committee meeting this year, you were already prepared to consider incorporating this category as part of the goal of helping 30 million job seekers facing barriers.”
He added that this proved that committee discussions are very open, and that people pay true respect to the opinions of external committee members. Sena thanked him for his advice, adding that Recruit Group could reorganize several existing initiatives and start discussing how to incorporate refugees into our goal to help 30 million job seekers facing barriers.
Yves Serra, an external member of Recruit Holdings’ Sustainability Committee
Next up was President and CEO Aron Cramer of BSR —BSR is a nonprofit organization that provides sustainability consulting services on ESG-related issues to top executives from over 300 BSR member companies worldwide. Aron raised the discussion about Recruit’s goal of achieving carbon neutrality across our entire value chain. Although he knows greenhouse gas (GHG) emissions at Recruit Group are not as large as at manufacturing companies, he commented: “One thing that I’ve found particularly important is the discussion around carbon credits. Many companies use carbon credits, but there are serious questions about the availability, price and integrity of these credits. The goal should be absolute emissions reductions, ultimately transcending the need for such credits.”
Aron also cited ESG ratings as another key topic. “If you track Recruit Group's performance over the last several years, you’ll see that the company has improved its scores in many ratings, which is very impressive,” he said. He emphasized that Recruit Holdings ranked high in many ratings, praising the company for focusing on a wide range of ratings with no cherry picking. He also cited the fact that the company committed the entire Group to the initiatives.
Aron Cramer, an external member of Recruit Holdings’ Sustainability Committee
Keiko Honda, both an external member of the Sustainability Committee and an independent director of Recruit Holdings, then provided her perspective. Keiko worked for a foreign financial institution and McKinsey & Company before becoming the vice president and CEO of the World Bank Group’s Multilateral Investment Guarantee Agency, or MIGA. She is now an adjunct professor and adjunct senior research scholar on ESG investing at Columbia University.
Keiko said the most impressive aspect was reviewing Recruit Group’s achievements over the past three years. “Recruit Group has made progress on all five goals. I think this is amazing,” she commented.
In response, Sena said: “During the Fireside Chat we held last July, we openly shared the specific challenges we were facing and how we were addressing them to meet the goals that we were somewhat behind on. As a result, one investor commented: ‘Recruit sets goals with high aspirations, so there should be difficult areas. You are open about what is going well, as well as what is difficult. I like your down-to-earth and honest style, and look forward to seeing progress on these initiatives.’ That encouraging comment remains with me.”
Keiko Honda, an independent director and an external member of Recruit Holdings’ Sustainability Committee
Strengthening the Link between Sustainability Goals and Business Growth, Dealing with Information Disclosure Regulations and Leveraging AI Are Vital Agenda Items
Next, Sena asked the three external committee members what sustainability themes Recruit Group should focus on in the future.
First, Keiko raised linking sustainability initiatives to improving corporate value as a core theme. “Sustainability has not been defined properly yet. Many companies interpret it in their own way, and often talk about it from the perspective of what they can do that is good for society. I expect Recruit Group to go one step further and take the lead. Among the initiatives that Recruit can launch, I’d like you to focus on something that can be linked to improving corporate value right in the middle of the business.”
In particular, regarding Recruit Group’s social impact goal of reducing the time it takes to get hired by half, she pointed out some massive potential. “If job seekers do not work for three months, their household finances become difficult and some will fall below the poverty line. Since labor shortages have become a major global problem, employers become unable to operate their businesses or lose profits due to lack of staff. If Recruit can achieve a breakthrough in this area, you can make a difference in both developed countries and even developing countries.”
Sena responded: “Halving the time it takes to get hired means doubling the efficiency of matching, so hopefully the opportunities for monetization will also double, or even more than double. That was one of the motivations to set this goal. She added: “We’re making progress on this, and are looking forward to updating everybody in May.”
Aron then raised two themes: responses to international sustainability information disclosure regulations and the intersection of artificial intelligence (AI) and human rights. First, he stated that responding to the regulations will take some years to work out, and mentioned: “It will be crucial for Recruit to understand and be ahead of the regulations, and to be ready for a world with these regulations. [...] Of course, complying with laws and regulations is essential, but I'd say while it is necessary, it is insufficient. Recruit Group is already and will continue to consider not just adjusting to the changes of the laws but to their spirit as well — about how working within these regulations can actually strengthen your ambition and inform your strategies.”
Sena replied: “I think that point is critical. We do need to comply, but we also need to understand the intentions behind the regulations so that we can act appropriately as corporate citizens.”
Aron then moved on to the theme of AI. “It’s something that is already on the Sustainability Committee’s agenda and that of the company. It’s also relevant for Indeed’s business, since it creates an opportunity to deliver better products to help more people and employers.”
Sena responded: “We have unique data sets. Especially at Indeed, where we operate in over 60 countries. We have data from both job seekers and employers and we use them to better match job seekers with jobs. We will keep having open dialogue on this topic with stakeholders.”
Finally, Yves echoed the other two committee members saying “The key is how to monetize while achieving these goals,” and “as regulations on sustainability information disclosure and AI become stricter, especially in Europe, it is also essential to respond appropriately.”
Sena concluded by saying: “We’ve received a variety of comments about AI and regulatory compliance today as well as during the committee meetings. The question is how to prioritize and focus our energy and time on things that are most crucial to us. I think this is a core point. How can we continue to evolve our products while creating an impact on society as we refine our business? How can we grow in the medium to long term by doing so? I’d like to keep this at the forefront of the discussion.”
Director, Executive Vice President and COO Ayano ”Sena” Senaha of Recruit Holdings
Q＆A
A Q&A session followed. The following is a digest of the answers to questions from investors by Senaha and the Sustainability Committee.
Q. Responsible AI use is becoming a hot topic, and Europe has resolved to implement an AI Act. Aron mentioned earlier that this topic was also discussed at your Sustainability Committee meetings. How is Recruit Group responding to this in terms of policy and structure?
Sena: Because technology is advancing at such a pace, simply complying with the rules will not be sufficient. We have to discuss this topic carefully, and from multiple perspectives. That is why we discuss AI at the Risk Management Committee as well as the Sustainability Committee. Based on the result, we then take it to the Board of Directors meeting for further discussion. These are the steps that we currently take.
Based on our human rights policy, for example, Indeed creates its own AI principle. Recruit Co., Ltd. implemented an AI utilization policy as well. Setting AI-related principles and policies that are relevant to each of the businesses is one of the advancements we made this fiscal year. We are also seeing positive signs that AI may be less biased compared to humans. In the test with AI in the placement business in Japan, for example, the result indicated that AI was less biased than humans when matching job seekers with jobs in terms of age. In conjunction with this responsible way of leveraging AI, it is hopeful that we may actually be able to lessen the bias as a result. This is a theme that we want to continue learning about through practical exploration.
Aron: For Recruit, as for any company, it is essential to consider an approach that involves three different elements. First, what can you do as an individual company? I’m sure this will be an ongoing topic of discussion with your investors. The second is to create industry ecosystems without being bound by competitive relationships. Other companies should also have an interest in setting guidelines and principles.
The third element is being an active participant in the public policy setting. Governments may not have the same understanding of the technology that the developers of those technologies do. Business therefore has a pivotal role to play in terms of how to establish principles and guidelines that are flexible and meet societal expectations.
Q. Are the independent directors and external members able to speak up and contribute at the Board of Directors and respective committee meetings? And since there are many former executives and current executives, is there any risk that they get too focused on the execution and not serve as an oversight function? What contributions are the independent director and external members making to increase corporate value?
Sena: First of all, because they are people experienced in business and corporate management in other companies, they can offer advice and criticisms that are meaningful for us. Another thing is that while we do not talk about this too much externally, we place a lot of value on these board advisory committees. We have members of the Sustainability Committee here with us today, but in our Nomination Committee and Compensation Committee as well, each chairperson is an independent board member, while the majority of members of these committees are also independent directors, which means the executives are on the minority side. We do this on purpose. From an executive perspective, they have their eyes very wide open as they monitor and oversee us.
Keiko: There are two big differences between Recruit’s Board of Directors and those of other major companies in Japan. First, there are not many CPAs or lawyers among the board members here as at other companies. Second, both the executive and independent board members are diverse. For both executive and independent directors, gender and nationality are diverse. Age is also relatively varied. For some major companies listed in the Tokyo Stock Exchange’s prime section, it is common that their directors’ ages range from their sixties to eighties. At Recruit, the range is from the forties to seventies. Educational background is also very different.
Recruit does not have like-minded members, and there’s a lot of discussion before they come to a decision. Therefore, I think it’s really hard, especially for the administrative side, but there are plenty of heated exchanges going on and candid opinions given, which I believe investors would feel assured to hear.
Sena: Because there is a diversity of opinions, the discussions can range all over the place when our opinions do not agree. This cost of communication is probably the cost of being diverse. There may be a lot of different views, but once we make a decision, we support it together. I believe to be able to do this even at the board level is an essential element; our secret sauce.
Q. Indeed’s Pay per Application (PPA) has been terminated. PPA was introduced as an initiative that contributes to your social impact target, halving the time it takes to get hired. Will this have an impact on you achieving your goal?
Sena: As one of our initiatives designed to shorten the hiring process, we were testing a model where you pay for each application, which we called PPA. The test result was pretty positive, and this was why we expanded the scope of the test. How PPA was utilized, unfortunately, was not what we expected, so we phased it out.
The time did get shorter for those customers who used the service, which by the way was supposed to contribute toward our sustainability commitments.
I believe your question was if there were any issues with ending the service. We conduct about 500 A/B tests all the time, and PPA was one of these, and was one of the major tests. We will continue to evolve our products and services by conducting many tests, and pick those that yield good results through trial and error to conduct a larger test. We think this is the best possible way to evolve our products, so at some point we will share the outcome of these tests. We look forward to sharing the results with you at a future date.
Keeping an Eye on the Progress of Sustainability Initiatives and Their Contribution to Business Growth
At the end of the event, we asked each external committee member about key points to focus on in Recruit Group’s initiatives.
Aron: Recruit will, I believe, stay ambitious, stay humble, and stay focused on business relevance.
Yves: In a short period, Recruit Group was able to successfully integrate sustainability into its business strategy, and the entire company is moving toward achieving this goal. Congratulations. I hope they will continue in this way.
Keiko: Employment is essential from the perspective of earning income, but I also think it is extremely important for people’s self-realization. Recruit Holdings is one of the few companies that realizes how such a key social factor can positively affect its corporate value. I'm therefore really looking forward to Recruit’s progress.
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