Top Management Commitment
- The Gunze Group's Sustainability
- Gunze's 125th Anniversary
- The Present Economic Environment
- Looking back on FY2020 and the Challenges We Face
- Key Strategies for FY2021
- Target Management Indicators
Striving to address social issues on a medium- to long-term basis through sustainable management
The Gunze Group's Sustainability
The Gunze Group carries out customer-centered business operations by living up to its three corporate principles: people-oriented approach, commitment to quality, and harmonious coexistence. Based on these principles, the Gunze Group is committed to continuously providing customers with a “Feeling of Comfort” through our products and services in various business segments. With this firm determination, the Gunze Group is striving to become a company that fulfills the needs of society and that grows sustainably alongside society. To sustainably enhance the group’s corporate value, we are continuously seeking to strengthen and maintain appropriate relationships with all our stakeholders, including investors, customers, business partners, employees, and local communities.
In 2015, the 2030 Agenda for Sustainable Development, which lists “Sustainable Development Goals (SDGs)” consisting of 17 goals and 169 targets set to be achieved by 2030, was adopted at the United Nations General Assembly. With the aim of taking actions based on social issues, the Gunze Group was quick to incorporate the SDGs into its medium-term management plan, “CAN20.” At the same time, in order to put our action plans into practice as speedily as possible, we identified those sustainability issues that have a significant impact on our corporate management, and specified them as “Gunze’s important challenges” that we need to tackle with particular urgency as we work toward resolving social issues through our business.
In our next medium-term management plan, which is scheduled to begin in FY2022, our policy is to set sustainable goals targeting the 2030-2050 period in response to the need to resolve social issues over the medium to long term. This policy is intended to promote activities aimed at achieving sustainable development both for the Gunze Group and for society as a whole. The COVID-19 pandemic has drastically changed the social structure, while global-scale environmental problems are escalating more and more. Under this situation, we believe our own paradigm shift is essential in order for the Gunze Group to continue growing and contributing to society. Moving forward, we will design the Gunze Group’s vision based on bold ideas with the future in mind.
Gunze's 125th Anniversary
Gunze was founded in 1896 by Tsurukichi Hatano in the district of Ikaruga (now Ayabe City) in Kyoto. Instead of prioritizing on corporate profits alone, the founder had an enthusiastic determination to contribute to the development of his hometown community through the promotion of the local silkworm industry. He believed this should serve as a policy of Ikaruga, so he named his company Gunze Silk Manufacturing Co., Ltd. (later renamed Gunze Limited), with “Gunze” meaning the “policy of the district” in Japanese. Since then, Gunze has steadily evolved by flexibly responding to changes in society and the economic climate over the past 125 years. From now on, we will hold fast to our founding philosophy, which remains an expression of our unchanging values, as we endeavor to contribute to the sustainable development of society through our business.
The Present Economic Environment
In the previous fiscal year, the Japanese economy suffered from considerable restrictions on social and corporate activities caused by the spread of COVID-19, which also resulted in a significant drop in personal spending. This situation arose out of the Japanese government’s requests for business suspension, as well as for people to exercise self-restraint in going out. Regarding corporate performance, companies in the grocery supermarket sector as well as mail order catalog companies and other digital retailers performed strongly, supported by the growing consumer demand for products to be used while staying at home. The impressive performance of IT-related companies also stood out as a result of their being able to correctly meet the capital investment demand from businesses that eagerly promoted the digitalization required by the COVID-19 situation. As these examples illustrate, those who correctly met the needs arising out of the so-called “new normal” and speedily responded to change enjoyed steady business growth. Conversely, the department store, transportation, and travel sectors were adversely affected by COVID-19. Performance gaps widened, not only between industries but among individual companies as well. As for the economic outlook for 2021, both personal spending and real GDP are expected to make a modest recovery.
Looking back on FY2020 and the Challenges We Face
The challenges the Gunze Group experienced in FY2020 were rather exceptional in terms of degree. Because of the impact of the COVID-19 pandemic on the group’s business performance, we had to postpone the announcement of our full-year forecast for FY2020 to August, although it usually occurs in May along with the announcement of the business results for the past fiscal year. Moreover, we extended the period of the second phase of CAN20, which had originally been scheduled to end in FY2020, for an additional year up to FY2021. Despite these setbacks, we responded to the COVID-19 situation throughout the year by taking advantage of new business opportunities that arose from changes in the social structure, lifestyles, and consumer awareness. To this end, we transformed our development, sales, and production systems in such a way as to keep up with the needs of the times and implemented initiatives designed to lead to future success.
Looking back on the past year, our in-house situation was split between those divisions that enjoyed a recovery by responding to changing market needs more effectively than our competitors and other companies in our industry, and those divisions that were unable to achieve satisfactory results because their responses to the business environment were insufficient. As for our full-year results, we suffered from year-over-year decreases in both sales and operating income. Regarding results by business segment, our functional solutions business was adversely impacted by the spread of COVID-19 in various business fields. In the apparel business, although the Gunze Group worked hard to promote sales on the fast-growing e-commerce channel, the sales increase in this channel was not enough to offset the slump in in-store sales. The lifestyle creation business was also heavily affected by temporary closures of shopping centers and sports clubs. In view of this situation, we will need to review our business activities and aggressively adapt to changes in the business environment as we implement specific measures that are essential for attaining our goals.
Key Strategies for FY2021
our business environment is expected to undergo radical changes in FY2021, we will strive to adapt to the new normal while also enhancing the binding force that unites all members to raise the Gunze Group’s overall competitiveness. In so doing, we will endeavor to meet our end goals as we wrap up the second phase of CAN20.
① Aiming for sales growth
To make FY2021 the year when we achieve a turnaround and once again adopt an aggressive approach, the Gunze Group will develop new products and services that meet changing market needs. At the same time, we will establish sales and negotiation systems based on non-contact, non-face-to-face communication, while swiftly responding to the accelerating proliferation of e-commerce as we aim to expand sales. To make this happen, we will organize a concerted group-wide effort to aggressively implement the necessary initiatives relating to digitalization, resources, M&A, and external competitiveness.
② Production innovation
The Gunze Group will continuously strengthen its production structure with a view to reinforcing its ability to respond to needs in the rapidly changing market environment. We will also accelerate technological innovation at our production sites through digital transformation as we seek to promote production innovation through the employment of IoT, AI, and other digital technologies in order to enhance our competitive strength.
③ Cost of capital-based management
Although our cost of capital-based management was adversely impacted by the COVID-19 pandemic in FY2020, we will continue to concentrate on transforming the mindset of the group’s executives and employees. In addition, we will implement business evaluation based on the Gunze Value Added (GVA) metric to assess the degree of improvement we make compared to the previous fiscal year. This will help us to achieve an ROE of 5% or higher, which is one of the goals for the second phase of CAN20. We will continue to make efforts to boost profitability and reduce assets toward our goal of achieving a positive GVA value during the next medium-term management plan period.
④ Sustainable management
Over the past year, in the interests of realizing a sustainable society, there has been a growing call for businesses to help resolve social issues. Along with this, more and more companies are now taking a proactive attitude toward addressing social issues. In view of this situation, we have changed the name of “CSV (Creating Shared Value) management,” a concept that the Gunze Group has been promoting, to “sustainable management.” As such, when drawing up our next medium-term management plan, we will formulate specific group-wide plans in response to the requirement for medium- to long-term solutions to social issues. In the course of our planning, we will also take into consideration linkage with business activities and inter-divisional collaboration. As for specific work style reforms that are adaptable to the new normal, we will promote teleworking, encourage the taking of paid holiday leave, and put in place a system of staggered work hours in order to assist our employees in enjoying self-fulfillment through the enhancement of their work-life balance. Furthermore, as part of our human resources development, we will make more effective use of diverse talent, including the empowerment of women, as we aim to foster people who are capable of working self-reliantly on their own initiative and of setting and meeting their own challenges. Through the implementation of these initiatives, including the enhancement of our risk response capability, we will seek to cultivate a corporate culture that will lead to the sustainable development of the Gunze Group.
Target Management Indicators
Our consolidated financial forecasts for FY2021, which is the final year of the second phase of CAN20, are as follows: 135 billion yen in net sales, 8 billion yen in operating income, and 5.6 billion yen in net income attributable to owners of the parent. FY2021 will be a year during which we will be making an all-out effort toward ensuring the achievement of these forecasts. In FY2021, we will be formulating our next medium-term management plan, and for this reason it is an important year for the Gunze Group in its endeavor to design a new vision for the future. For the planning process, an advisory board made up of members selected from among young managerial-class employees across the Gunze Group has been established to reflect the opinions of a wider range of age groups. The formulation of the plan is now underway with the main focus on the social issues that need to be addressed over the medium to long term, such as the achievement of SDGs set for 2030 and the realization of carbon neutrality by 2050. While proceeding with the planning process, we are also keeping in mind the two pillars of our management practices, namely sustainable management and cost of capital-based management.
We greatly appreciate the continued cooperation and patronage of our customers, business partners, and other stakeholders in supporting the Gunze Group’s activities.
The relationship between the Philosophical Structure and the Medium-term
Basic stance in formulating the next medium-term management plan