Issue Relating to Inappropriate Accounting Practices
This year, Fuji Xerox found that two of its overseas affiliates had employed inappropriate accounting practices over a period of several years in the past. We would like to express our sincerest apologies to our customers, suppliers, employees, shareholders, investors, and all other stakeholders for the tremendous concern and trouble this issue has caused.
FUJIFILM Holdings Corporation set up an Independent Investigation Committee to verify the appropriateness of accounting practices at Fuji Xerox’s overseas affiliates, and on June 12, 2017, the committee released its investigation report. The report was extremely critical of certain inappropriate accounting practices employed at Fuji Xerox New Zealand Limited and Fuji Xerox Australia Pty. Ltd., and of corporate governance (in relation to internal controls) at Fuji Xerox. Fuji Xerox has for a long time advocated the principle that CSR is synonymous with corporate management and has cherished its Mission Statement and Shared Values, striving to put them into practice in its day-to-day business operations. Regrettably, however, such efforts have proved to be inadequate, and those of us in senior management positions at Fuji Xerox are keenly aware of our responsibility for that.
We are therefore taking this incident extremely seriously. We reorganized our management team in June, and implemented a range of other measures to prevent similar issues from recurring and to regain trust (see the section headed "Issue Relating to Inappropriate Accounting Practices" on pages 58). Both in Japan and globally, we are ensuring that our senior management teams face the situation head-on, demonstrating responsibility and determination so that the business operations they lead conform to governance and compliance requirements. At the same time, we are educating all our employees about these requirements so that they each feel a strong sense of responsibility and ethics as corporate representatives and perform their roles in accordance with the rules that must be observed.
We learned a valuable lesson from this accounting issue, and we are now pulling together as a company to once again ensure open, fair, and clear business operations as advocated in the Fujifilm Group’s vision. By making such an approach integral to our corporate culture, we hope to win back the trust of all our stakeholders.
Fuji Xerox’s Medium-term Aims as Part of the Fujifilm Group
This incident is a powerful reminder to us of the need to go beyond a focus on short-term profits. We realized how important it is that we seriously ask ourselves what types of value Fuji Xerox should provide to society in order to justify its own existence over the medium to long term, and then take the necessary action.
In August 2017, Fujifilm Group announced its new medium-term management plan, VISION2019, and its long-term CSR plan, FUJIFILM Sustainable Value Plan 2030 (SVP2030). SVP2030 is positioned as the basis for the medium-term management plan and describes a vision of what the Group aims to achieve by 2030. It illustrates how Fujifilm Group will realize sustained growth by helping to resolve social issues via its business operations based on a robust management foundation. The plan’s overarching aim is to empower the Group to spearhead the transformation necessary to create a sustainable society.
Within this context, Fuji Xerox, as the operator of the Group’s Document Solutions segment, will aim to make greater contributions to solving customers’ management issues, as well as social issues. This aim is drawn from our business philosophy "Better Communications", which entails building an environment for the creation and effective utilization of knowledge, as our Mission Statement advocates. This means we will be striving toward a society where people can demonstrate creativity and engage in fulfilling work by helping to achieve the eighth United Nations Sustainable Development Goal (SDG), which calls for decent work and economic growth.
In specific terms, we will dramatically improve productivity by means of work process automation employing document technologies. Simultaneously, we will support the creativity of the human intellect by using technologies such as artificial intelligence (AI) and big data analysis to extract and exploit valuable information. In the long term we will use groundbreaking communication technologies to help transform the way society works (the “social ecosystem”) in terms of healthcare, education, stimulation of SME-based business, regional revitalization, and other aspects. Since last year, Fuji Xerox’s senior managers have been discussing what our CSR management should aim to achieve by 2020 or 2030 in line with our Mission Statement. In light of these discussions, we will continue integrating CSR into our business operations on two fronts: our efforts to solve social issues through our business, and our business processes.
Achieving Fuji Xerox’s Own Medium-term Management Goals
Fuji Xerox will embody the concept of Smart Work Gateway announced in October 2016, providing a communication environment in which every member of society can safely and easily use the information they need in the optimal format and share it with anyone, anytime and anywhere.
We are addressing market opportunities that offer growth potential by enhancing our expertise to respond to the needs of customers and society at large. To that end, at the beginning of fiscal 2017 we established new specialist units including the New Business Creation Department, the Security Business Department, the Healthcare Business Department, the Tourism & Cloud Business Department, and the Regional Revitalization Sales Department. As we create new value and supply products and services to the market, our firm partnerships with FUJIFILM Holdings Corporation and Xerox Corporation will provide a foundation enabling us to generate synergies in our Production Services business domain’s inkjet business and elsewhere to expedite our business growth on a global scale. For this purpose, we introduced a division-based organization in April 2017 to allow us to understand our customers’ expectations more thoroughly and respond to them promptly. Furthermore, we intend to go beyond simply boosting our competitive edge using the R&D, procurement, and production resources we already command as a manufacturer. We will also undertake focused investments for the future that will enable us to supply products, solutions, and services offering higher added value that promote new work styles and reduce environmental impact.
By implementing these measures, we aim to achieve the following management goals in fiscal 2019: consolidated revenue of 1,100 billion yen, operating income of 95 billion yen (with an operating income ratio of 8.6%), and zero increase in CO2 emissions (compared with fiscal 2013).
Our Promise to Stakeholders
During fiscal 2016, we pushed ahead with transforming our business structure, placing greater emphasis on solutions and services, and pursued a range of measures to develop businesses aimed at solving social issues. In our efforts to provide solutions for customers, we made progress with initiatives to facilitate changes in the way our customers work. One such initiative was our innovative promotional campaign using direct mail, which earned plaudits, winning a Gold Award in the 31st All-Japan Direct Marketing Awards organized by Japan Post Co., Ltd. In another initiative, our document handling software solution, DocuWorks, reached a cumulative total of 5 million licenses sold in Japan. Fuji Xerox also received the Minister’s award in the Japanese Ministry of Economy, Trade and Industry’s New Diversity Management Selection 100 project for fiscal 2016. In addition, Fuji Xerox earned the further accolade of being identified in the J.D. Power Asia Pacific customer satisfaction study as the first company in the industry to rank highest in customer satisfaction for eight successive years.
Our corporate direction in fiscal 2017 is expressed by the phrase “Turnaround Toward New Sustainable Growth.” In addition to bolstering our business on the financial front, we are also targeting nonfinancial aspects to strengthen our environmental, social, and governance (ESG)-related CSR foundation throughout our entire supply chain to address such areas as the environment, human rights, and ethics.
We intend to enhance Fuji Xerox’s ability to deliver unique value to society by going beyond the strong, kind, interesting company described in our Good Company Concept. We will generate innovations to guide future members of society toward more fulfilling ways of working, viewing the changes that AI and other technological innovations bring to society and the economic structure as the expansion of market opportunities.
We promise that we are ready and determined to take Fuji Xerox right back to basics in order to recreate it as a new company that can be trusted by the public and grow sustainably in tandem with society.