Engineering for the Future

Engineering for the Future

02

SANKI REPORT 2020

SANKI REPORT 2020

03

CONTENTS
Learn about Sanki Engineering’s growth strategies
Introduction

Business ReportManagement Philosophy and Long-Term Vision

P. 06

History of Sanki Engineering

P. 08

Business Overview by Segment

P. 10

Financial and Non-Financial Highlights

P. 14

Message from the President

Learn about Sanki Engineering’s business activities

P. 16

Facilities Construction
Business

Plants & Machinery
Systems Businessand business foundation
ESG Initiatives

P. 32

P. 36

Environment

SocialFinancial Report and Corporate Information

P. 42

P. 50

Sanki Engineering’s Value Creation
Our Value Creation Process

P. 20

Addressing Social Issues throughout
the Value Chain

P. 22

Sanki Techno Center

P. 24

R&D Center

P. 26

Status of Business Progress
Medium-Term Management Plan“Century 2025” Phase 2 (FY2019–2021)

P. 28

Real Estate Business

P. 40

Governance

Financial Report

P. 90

Corporate Information,
Business Locationsand Group Companies

P. 98

Share Information

P. 100Third-Party Opinion

P. 101

P. 71

Editorial Policy▶ Boosting Understanding of the Sanki Engineering GroupWe have positioned the SANKI REPORT, the annual
report of Sanki Engineering, as a key, integrated
communication tool for reaching all our stakeholders.
We hope it will boost understanding of the SankiEngineering Group’s business activities and future
direction and welcome feedback for enhancing ouroperations and information disclosure. Listed at rightare new approaches we adopted in compiling the 2020
report.

• We created an overview page for the Group’s business areas and the state of business bysegment in a format that is easy to understand (pages 10 to 13).
• We designated fiscal 2021 targets for continuously monitoring progress in our initiatives
under the ESG Policy of the Medium-Term Management Plan (page 30 and the top sectionof each chapter on ESG).
• Major information that was newly added to our disclosure includes:
Average monthly overtime hours (consolidated and non-consolidated) (page 65)▶ Reference Guidelines• “International IR Framework” of the International Integrated Reporting Council• Ministry of Economy, Trade and Industry’s “Guidance for Integrated Corporate Disclosure andCompany-Investor Dialogues for Collaborative Value Creation”• GRI Sustainability Reporting Standards 2016, 2018, and 2019

▶ Organizations Covered by the Report• Financial information shows consolidated Group figures.
• Non-financial information is based on non-consolidated figures for Sanki Engineering
Co., Ltd. When the information concerns the Group, organizations covered by the data
are specified in the text, list, or graph.

• Ministry of the Environment’s “Environmental Reporting
Guidelines 2018”• ISO 26000▶ Reporting Period
April 2019–March 2020 (Some information from outside this period has also
been included.)▶ Publication Date
September 2020 (previous issue: September 2019; scheduled release of next
issue: September 2021)

Precaution on Performance Outlooks, etc.
In addition to past and present information concerning the Sanki Engineering Group, this report includes the targets, plans, outlooks,
strategies, forecasts of future performance and other information drawn from our long-term vision “Century 2025,” Medium-termManagement Plan “Century 2025” Phase 2 (FY2019–2021), and other sources. Please be aware that these forecasts are the best
estimates by Sanki Engineering management and based on the information available at the time, and actual performance may differ
significantly from these forecasts, owing to changes such as in economic conditions, market trends, and exchange rates.

04

SANKI REPORT 2020

SANKI REPORT 202005

Sanki Engineering Group Philosophy

Local
Communities
NGOs,
NPOs,
and Citizens’GroupsThe Sanki Engineering Group marked the start of its journey toward the centenary of its
founding in 2025 by formulating the Management Vision and the Sanki Engineering GroupManagement Philosophy, which carries the spirit of the Group’s former Corporate Credo,
in December 2015.
The Management Philosophy is a comprehensive statement of the Sanki EngineeringGroup’s purpose in society and presents three values. The Sanki Engineering Group ispursuing sustained growth by ensuring all Group executive officers and employees upholdthese shared values and is contributing to the creation of a sustainable society. Under
the Sanki Engineering Group Compliance Declaration, which summarizes issues related
to corporate ethics and legal compliance, all Group executive officers and employees will
strive to create value for stakeholders and society at large by performing their daily job
duties in accordance with the Sanki Engineering Group Code of Conduct, which lays out
the basic principles of appropriate conduct, and the more specific Sanki Engineering Group
Action Guidelines.

Government
andAdministrative
Authorities

Value Creation
throughBusiness Activities

Employees

Shareholders
and Investors

Customers

Partners
Business
Partners

Sanki Engineering Group Compliance Declaration
Sanki Engineering Group Code of Conduct
and Action Guidelines

Sanki Engineering GroupManagement Philosophy
Sanki Standard

Sanki Engineering Group Management Philosophy
Sanki Standard

We create comfortable environments through engineering andwidely contribute to social development.
We will refine our skills and wisdom with the aim of increasing client satisfaction.
We will place significance on communication and mutual respect.
We will remain aware that we are a member of society and will act accordingly.

Increased reliability willencourage more stakeholders tochoose our company.

Phase 3

(FY2022–2025)4-year period to become
the company of choice

Superior quality generates stakeholders
satisfaction, and stakeholders satisfaction
and confidence leads to reliability.

Phase 2

(FY2019–2021)

Long-Term Vision“Century 2025”
The Company of Choice
The Sanki Engineering Group values customers, not only theshareholders and customers from whom we directly receive
orders but all our stakeholders. They include owners of facilities,
end users, subcontractors, suppliers and students, all as
customers. Over the next ten years, we will strive to become thecompany of choice for all of them.

Medium-Term Management Plan

3-year period toenhance reliability

Phase 1

(FY2016–2018)

3-year period toenhance quality
FY2016“Century 2025” Phase 2

The Company
of Choice
We will strive over the next ten
years to become the companyof choice for stakeholders byfurther enhancing the quality andreliability we provide.

Please refer to pages 28 through 30 for more information.

We will enhance quality by refining ourskills and wisdom and developing ourhuman resources as a foundation forresponding to change.

FY2019FY2022

FY2025Sanki Engineering’s 100th Anniversary

06

SANKI REPORT 2020

SANKI REPORT 2020

07

100

┃ Introduction ┃2025 Toward the 100th Anniversary

History of Sanki Engineering
Sanki Engineering has developed its business in step with the modernization of Japanese industry over the past nine
decades. Under the Sanki Engineering Group Management Philosophy, “We create comfortable environments throughengineering and widely contribute to social development,” the Company will continue to forge ahead in Japan’s new
Reiwa era with the power of technology toward its 100th anniversary in 2025.

Origin of Our
Corporate
Name
Sanki Engineering
has its origins
in the former
Machinery
Division of Mitsui &Co. and was named
by taking one
Chinese characterfrom “Mitsui” and“Machinery.”◦Advances network systems, including LAN,building monitoring and automated control.
◦Provides air conditioning, plumbing and an open
BA system (automated control, BEMS) for the Roppongi Hills
building and other construction work.

◦Establishes the Energy Solution Center to promote and develop theenergy-saving business and provide sales support.
◦Develops and begins sale of clean conveyor facilities
in response to growing demand for liquid crystal
displays and organic EL panels.

◦Concludes sales contracts for machinery used in mining-related chemistrywith U.S.-based Dorr Inc. and Oliver, Inc.
◦Completes work on the main building of the Dai-ichi Life Insurance Company,
Japan’s first building with the special high- voltage power reception of 22 kV.

◦Provides heating, plumbing, steel frame construction,and building materials for two major construction
projects: the Shiga manufacturing plant of Toyo Rayon(currently Toray Industries, Inc.) and the refrigerated
warehouse of Aomori Seihyo.
◦Installs Japan’s first centralized air conditioning system
for an entire structure at Mitsui’s main building.

1950s

1995
Great Hanshin
Earthquake

A Proactive Approachto TechnologicalInnovation

1986
Japan’s Equal Employment
Opportunity Law◦Completes work on
Japan’s first all-fluorescent lighting system in the Taisho Marine
and Fire Insurance Building.
◦Becomes involved in night-soil treatment plant disposal facilities
in response to urban hygiene needs.
◦Delivers a roller conveyor to the Japanese
Antarctic Research Expedition II.

1930s

Diversified and Expanded
Businesses Lead to Greater
Technological Competence“Sanki – From Past
to Future”

Meeting the Needs of a Rapidly
Advancing Information Society◦Launches the facility systems
business to deal with office integrationand moving.

◦Starts manufacturing conveyors.

Laying the Base for TechnologicalCompetence by Meeting the Needsof the Era

Sanki Engineering’s
PR video (Japanese
only)

1980s

◦Launches the information andcommunications business.

Sanki’s Advanced Technology
Bolsters a Construction Boom

1920s

2000s

Rising to the Challenge of
New Businesses

1940s

1964
Tokyo Olympics◦Develops and installs a proprietary incinerator
for facilities in the Sanshin Building.
◦Establishes Toyo Carrier Industries together
with U.S.-based Carrier Engineering andlaunches the air conditioning business.
◦Completes work on the Tokyo Office of Nippon
Life Insurance Company (currently Takashimaya
Nihonbashi department store).

1960s1945 End of World War II

1970
Japan World
Exposition, Osaka
1972
Reversion of Okinawa

A Manufacturer that
Responds to the Needs of
the Times

2008
Lehman Brothers
bankruptcy
1997
Adoption of the Kyoto Protocol

1970s

Wide Range ofTechnological Innovations

1958
Opening of Tokyo Towerth◦Completes work on Japan’s first largescale clean room at NEC’s Sagamihara
plant.
◦Develops the world’s first completely
unmanned automatic sorting system
and airport baggage handling system.

2019
Start of the Reiwa era
in Japan

2015
Adoption of the Sustainable
Development Goals
2011
Great East Japan
Earthquake strikes

2010s

1991
Collapse of Japan’s
bubble economy

Contributing to a Sustainable
Society by Bolstering the LCE
Business

1990s◦Promotes the LCE Business, whichis intended to sustain the life cycle ofbuildings and facilities, from planning,
design and construction work tomaintenance, operation/management,
renovation and reconstruction.

Driving Progress inEnvironmental andInformation Technologies◦Develops environment-related
technology, including an ice thermal
storage system, sewage advanced
treatment systems, and gasification andmelting furnaces.

◦Wins order for the DBO project, abulk contract encompassing design,
construction,
management andmaintenance.
◦Completes hygiene
facility for the Tokyo
Midtown Hibiya
building.
◦Completes the HVAC,
central monitoring
and automatedcontrol systems for
the Toranomon Hills
Business Tower.

◦Provides HVAC equipment for satellite
communication ground stations in the
Middle East and other regions andbuilds automotive testing equipment in
Russia.

◦Completes work on air conditioning, plumbingand electrical systems for Japan’s firstskyscraper, the Kasumigaseki Building.
◦Develops the standardized “6S sash” andgains the top market share among steel sash
manufacturers.

1923 Great Tokyo Earthquake◦Completes work on air conditioning andplumbing for the Yoyogi National Stadium.

April 22, 1925

1931

1950

1963

1971

1982

2000

2011

2018

Sanki Engineering isestablished.
Capital of 500,000 yen
and 12 employees.

Moves the head office to Hibiya

The Japanese economy
takes a favorable turn, andthe expansion in demandfor building construction andequipment results in a dramatic
improvement in the Company’sbusiness performance.
Lists shares on the Tokyo Stock
Exchange.

Completes Sagami
plant (currently
the Sanki Yamato
Site), which
tailors production
equipment for
conveyor mass
production.

Sets up theEnvironmental
Administration office.

Builds the TechnicalResearch Laboratory.

Opens the Shonan
Training Center.

Moves the head
office to Tsukiji.

2005

2015

Begins operations
at all facilities of the
Sanki Techno Center.

Moves the head office to
Nihonbashi.

90th Anniversary.

1935
Celebrates the 10th anniversaryof its founding, with fivebranches, six field offices,
three affiliates and around 300
employees.

1958

1973
Spins off the sash
business.

2016
Launches the longterm vision “Century
2025.”

2019
Begins operations at
the Yamato ProductCenter.

Capital exceeds 1 billion yen.

08

SANKI REPORT 2020

SANKI REPORT 202009┃ Introduction ┃Business Overview by Segment(year ended March 2020)

Facilities Construction
Business

Our Facilities Construction Business is conducted in ways that are friendly to both people and theenvironment and through systems that are convenient, comfortable and efficient and also saveenergy. We are engaged in wide-ranging fields, including designing HVAC and plumbing systems
for buildings, an industrial HVAC system, and electrical systems and developing smart building
solutions and facility systems.
Main Sales Items◦ Plumbing andDrainage Systems• Electrical systems• P lumbing system for• Telecommunicationwater supply andsystems
drainage• Communication-related• F ood service
facilities
equipment• Electrical civil•D isaster preventionengineeringsystems◦Electrical Systems◦HVAC Systems• Freezing and• HVAC systems• Industrial HVAC systems refrigeration• District heating and• Clean rooms
cooling plants• Environmental control• Nuclear powersystems• Pharmaceutical and food related facilities
manufacturing facilities

Facility Systems BusinessWe serve the needs of offices and other workplaces by providing design and project management
for construction and relocation as well as strategic and operational consulting services.

Net sales

171.5

Main Sales Items
billion yen*

Net Sales
Composition Ratio

83◦Facility Systems◦Smart Building Solutions• Design for fit-out and relocation of
offices and workplaces• Consulting for project management• Central monitoring and automated control systems• ICT systems• Crisis management (BCP) solutions• IP phone systems• Security systems%

Plants &Machinery Systems
Business

Machinery Systems Business

Net Sales
Composition
Ratio

We provide material handling systems and conveyance systems thatmeet customer needs and challenges in supply chain management.

5%

Main Sales Items◦Conveyance Systems◦Material Handling Systems• Lightweight conveyors• Distribution-related conveyors• Sorting devices• Automated warehouse• Medical handling systems• FA systems
 andling information control• Clean conveyance systems • H
systems• Material handling systems• Airport baggage and cargohandling systems

Environmental Systems BusinessWe develop unique facilities and systems for water and sewage treatment
and waste treatment to enhance living environments while conserving
energy and reducing CO2 emissions.

Net sales

34.4

11

%

Main Sales Items
billion yen*

16

Net Sales
Composition Ratio

10

Net Sales
Composition
Ratio

SANKI REPORT 2020%

◦Waste Treatment◦Water Treatment• Waste incineration facilities• Landfill wastewater
treatment facilities• Sludge incineration facilities• Water and sewage treatment • Industrial wastewater andfacilities
waste gas treatment facilities• General and industrial waste• P lant facilities for the fooddisposal and recycling facilities and chemical industries• Sludge recycling facilities

Organization (as of April 1, 2020)
Group Companies

Major Projects

Board of Directors

Facilities Construction BusinessPresident◦Sanki Techno Support Co., Ltd. ◦Sanki Construction Engineering (Shanghai) Co., Ltd.
◦THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.

Building HVAC andPlumbing BusinessIndustrial HVAC
Business

Board of Company Auditors

Management Meeting
Secretarial OfficeElectrical Systems
Business

Management Planning Office

Fukuoka High Court, District Court, Family Court and Summary Court
building

Sanki Techno Center

Sales Administration Division

Labor Safety, Health, Quality
Management & Environment
Promotion Office

Technical Administration
Division

CSR Promotion Division
Chief Cost Inspector Office

Smart Building
Solutions BusinessInformation Systems Office

Abeno Harukas

Facility Systems
Business

Mechanical & Electrical
Contracting Headquarters

General Affairs and Human
Resources Division

Procurement Division
Engineering Integration OfficeInternational Business
Administration DivisionTokyo Branch

Legal Affairs Office

Yokohama Branch
OfficeAccounting Division

Kanto Branch Office

Technical Research &Development Center

Chiba Branch Office
Ibaraki Branch Office

Tokyo Midtown Hibiya

NISSAY Logistics Center YOKOHAMA-MACHIDA

Kansai Branch
Kyoto Branch Office
Kobe Branch Office
Shikoku Branch OfficeGroup Companies

Major Projects

Machinery Systems
Business

Environmental Systems Business◦Sanki Sangyo Setsubi Co., Ltd.

◦Sanki Kako Kensetsu Co., Ltd.

Chubu Branch
Shizuoka Branch Office
Toyota Branch Office
Mikawa Branch Office◦Sanki Kankyo Service Co., Ltd.

Kyushu Branch Office◦AQUACONSULT Anlagenbau GmbH

Hokkaido Branch Office◦AEROSTRIP Corporation◦Sendai Kankyo Hozen Co., Ltd.

Chugoku Branch Office
Tohoku Branch Office
ASKUL Value Center Hidaka

Machinery Systems Business

Minami-Gamo Purification Center

Environmental Systems Business

Hokuriku Branch Office
Facility Systems Division
Plants & Machinery
Systems Headquarters
Machinery Systems
Administration Division
Environmental Systems
Administration Division
Real Estate Business Office

U.S. Forces Yokota Air Base Cargo Handling System

SANKI REPORT 2020

Clean Hill Tenzan

11

SANKI REPORT 202012

Page 32
Facilities Construction BusinessIndustrial
HVAC
Business

Building HVAC
and Plumbing
Business

34 %

33 %

Net Sales
Fiscal 2019
売for
上高

207.6

billion yen*

Electrical
Systems Business
Machinery Systems
Business

11 %Environmental
Systems Business

5%

11 %
Facility Systems
Business

5%

Plants & Machinery Systems
Business*Includes items not listed in thegraph such as 0.9 billion yen inother net sales and 1.39 billion
yen in elimination of inter-segment
transactions.

Real Estate Business 1%

Page 36

Page 4 0

Real Estate Business

Our Real Estate Business includes operations in the areas of real estate leasing and building
management. We are striving to expand into higher value-added real estate while taking
advantage of our current technology.
Main Sales Items◦Real Estate Leasing◦Building Maintenance and Management• Land leasing• Building leasing• Facility maintenance and upgrades

Net sales

2.2

billion yen*
Net Sales
Composition Ratio

1%

SANKI REPORT 202013

┃ Introduction ┃Financial and Non-Financial Highlights

Financial Data (Consolidated)

Non-Financial Data

Orders Received and Net Sales

Gross Profit Margin■ Orders Received

194.0

207.6

Down 10.6%
year-on-year

billion yen

183.2 178.9● Gross Profit Margin■ Net Sales

185.8

2015

191.1

168.5

2016

billion yen

217.0 212.3
170.1

2017

15.5

Down 2.2%
year-on-year

194.0 207.6

2018

（FY）

2019

%

13.4

2015

2016

14.9

14.7

Ratio of Annual Paid Leave Taken

Consolidated

Consolidated

2,501

Up 0.6 points
year-on-year

12.8

Number of Employees

15.5

14
349

2017

2018

2019 （FY）

To t a l

57.4

86
2,152

Female

Male

%

%

Male

%

Female54.3
76.3

As of March 31, 2020

Ordinary Income and Profit Attributable to Owners of Parent

Rate of Reinstatement afterChildcare Leave

Equity Ratio

11.2

Up 0.2%
year-on-year■ Profit Attributable to Owners of Parent● Equity Ratio

7.5

48.2

Down 16.2%
year-on-year

3.経常利益／親会社株主に帰属する当期純利益
billion yen
billion yen

8.1
5.3

6.8
4.6

7.4

2016

2017

2015

%

11.2

11.2
9.0

2015

48.6

45.8

Members of Subcontractor
Groups2019● ROE
Unchanged
year-on-year%

8.6

Down 1.7 points
year-on-year

%
120

5.5

4.5

4.1

4.3

2016

2017

6.0

（FY）

2015

2016

2017

■ Special Dividend■ Ordinary Dividend● Payout Ratio

95

73.8

Up 35 yen
year-on-year

yen

2018

FY20192019 （FY）

31.6

Up 33.8 points
year-on-year

%
73.8

55.5

8.6

35.8

6.0

12
18
2018

%

Up 3.4points yearon-year

Year-on-Year Comparison of
Problems during Construction
2018

2019

（FY）

2015

40.0

40.6

20
10
20
2016

15
20
2017

25
70

40

2018

2019

（FY）

%
FY2019Industrial Accidents
Frequency Rate*1 andSeverity Rate*2
Severity rate

Scope: Sanki Engineering construction sites(Sanki Engineering Co., Ltd. and business partners)

880

companies

2019

34.3

hours

As of March 31, 2020

FY2019Contribution to CO2 Reductions at Customers
through Sanki Products and Technologies(for Ordered Projects)

Recycling Ratio of Industrial Waste
at Sites where Sanki Engineeringis the Prime Contractor

Consolidated

Non-consolidated

27,624

Up 33.4%
year-onyear

t-CO2
FY2019Test and R&D Expenditures

1.11 0.03
Frequency rate

Average Monthly Overtime
Work per Person
Consolidated

48.2

3.9

10.3

4.7

51.5

Annual Dividend per Share and Payout Ratio

● ROA

6.3

49.8

7.5

ROA and ROE

6.0

97.2

Up 2.4 points
year-on-year%

FY2019Consolidated■ Ordinary Income

%

1.43

Down 1.4%
year-onyear

billion yen

FY201997.2%

Down 0.6
point yearon-year

FY2019ICT Investment

1.14

Up 7.5%year-onyear

billion yen

FY2019*1 Frequency rate of accidents in the construction site per one million working hours; this figure indicates the frequency with which accidents occur.
*2 Severity rate is calculated as the number of lost workdays caused by accidents in the construction site per one thousand working hours; this figure indicates the severityof the accidents.

14

SANKI REPORT 2020

SANKI REPORT 202015

┃ Message from the President ┃We will meet stakeholder expectations witheven greater reliability toward becoming thecompany of choice.
Upon My Appointment as President

Upholding the Management Policy to Realize Our Long-Term Vision
I was appointed president in April 2020—the halfway point on our journey to thecentenary of our founding under the long-term vision “Century 2025.” The SankiEngineering Group is striving to attain the goal of this vision, to become the companyof choice for customers over the course of a decade. I received the baton from current
Chairman Hasegawa in the midst of our efforts to strengthen our reliability by enhancing
corporate value, and I have recognized the gravity of my mission and responsibility witha sense of determination.
Since joining the company 30 years ago, I have gained experience in design,
construction management, sales and other jobs associated with construction facilities.
For the past two years I was general manager of the Management Planning Office andengaged in formulating the Medium-Term Management Plan “Century 2025” Phase 2(fiscal 2019 to 2021). I believe it is my job as president to ensure that the company
achieves sound growth along with its employees by executing the measures andaccomplishing the goals of Phase 2, and to lead the way toward becoming the companyof choice by 2025.

ReferenceLong-Term Vision “Century
2025”
Pages 06–07
A long-term vision covering theten-year period from fiscal 2016
to fiscal 2025, which in turn isdivided into three periods.

Reference
Medium-Term Management
Plan “Century 2025” Phase 2(fiscal 2019 to 2021)
Pages 28–30
Second step of the long-term
vision “Century 2025”

Business Environment and Results for Fiscal 2019

Attained All Numerical Targets for the First Year of Phase 2 due to a
Favorable Business Environment
In fiscal 2019, the Japanese construction market enjoyed a steady flow of businesscentered on urban redevelopment projects and capital investment by manufacturers.
The economy deteriorated rapidly toward the end of the fiscal year, following a decline
in corporate profit caused by the global economic slowdown and an increase in the
consumption tax rate as well as the impact of the COVID-19 pandemic. Nevertheless,the business environment remained on the whole favorable.
In this environment, the Sanki Engineering Group launched its Medium-Term
Management Plan “Century 2025” Phase 2 (fiscal 2019 to 2021). Although we slightly
underperformed in the previous fiscal year, in terms of orders received and net sales,
we reported a growth in profits and maintained high levels of gross profit, operating

Business Performance (Billions of Yen)

183.2
178.9

217.0

185.8
168.5

8.1
5.3

2015

16

SANKI REPORT 2020

191.1
170.1

4.6

2016

194.0

212.3
11.2

11.2
9.0

7.4

6.8

207.6

Hirokazu
IshidaPresident● Orders received● Net sales■ Ordinary income■ Profit attributable toowners of parent

7.5

3.9

2017

2018

2019

（FY）

17

┃ Message from the President ┃income and ordinary income comparable to the previous fiscal year. Furthermore, wewere able to attain all our financial performance targets for the first year of Phase 2 (netsales of 200 billion yen, gross profit of 30 billion yen, gross profit ratio of 15.0%, ordinary
income of 9 billion yen and an ordinary income ratio of 4.5%). The growth in profits was
the result of a steadfast effort in cost management and improvement in operational
efficiency as well as the fruition of our ongoing pursuit of enhanced quality from theprevious medium-term management plan.
The impact of the COVID-19 pandemic on our fiscal 2019 performance was not
significant. Our performance is being supported by a substantial level of ongoing
construction work, and at present we do not expect any dramatic decline. We will,
however, continue to monitor the rapidly changing trends in society and be prepared torespond quickly.

Progress and Future Outlook for the Medium-Term Management Plan“Century 2025” Phase 2

Enhancing Quality Cultivated under Phase 1 to Strengthen Reliability*1 Smile Site Plan: A
subcommittee dedicated toreforming work styles.
*2 Building Information
Modeling (BIM): A conceptthat involves the constructionof a database comprising a
3D model and attribute dataof a building on a computer
and the application of that
information across the entire
process, from design andexecution to progress andmanagement.

Reference
Yamato Product Center
Page 37*3 Life Cycle Engineering (LCE):
A business concept of the
Sanki Engineering Group.
Throughout the life cycle of abuilding, we provide services
from new construction,
repair, and maintenance torenewal and reconstruction.
*4 Design Build Operate (DBO):
A process through which thedesign, building, operation,and maintenance of a projectis awarded to a private
enterprise as a bulk order.
*5 STeP Project: The Sanki
Techno Park Project is
intended to redevelop theland and buildings owned
by Sanki Engineering at the
Sanki Yamato Site in Yamato
City, Kanagawa Prefecture.

Reference
Sanki Techno Center
Pages 24–25

Reference
R&D Center
Pages 26–27

18

SANKI REPORT 2020

The Medium-Term Management Plan “Century 2025” Phase 2 (fiscal 2019 to 2021)
covers the second step of the long-term vision “Century 2025.” We will continue toenhance the quality of our technology and human resources cultivated in Phase 1, andwe will raise our corporate value by striving to disclose financial and capital policies
and ESG policies and reinforce information transmission in addition to our efforts tostrengthen core business, promote growth strategies and enhance the Sanki brand.
In terms of strengthening our core business in the Facilities Construction Business,
we will first strive to improve construction productivity and profits through an ongoing
optimization of operational processes that precede order acceptance and construction
work. We will follow that up with the promotion of the Smile Site Plan*1, dedicatedto reforming onsite work styles. I believe we can make further progress by efficiently
allocating human assets and advanced job management based on ICT and BIM*2. In
the Facility Systems Business, we have set up a dedicated organization for promoting
the promising business of consultancy and have begun developing new services. In
the Machinery Systems Business, our new plant, the Yamato Product Center, began
full operations in September 2019. In the future, we will address the important themeof positioning the plant at the core to promote the development of hybrid systems thatcombine robots with conveyance systems. Meanwhile, in the Environmental Systems
Business, significant progress was made in model projects for our LCE*3 business, as
we completed construction and began managing the operation of a waste treatment
facility based on the DBO*4 method. In addition to these initiatives, we intend to bolster
our core business by integrating the diverse technologies that represent the SankiEngineering Group’s competitive edge in total engineering and exploring new business
opportunities in niche areas that lie between our businesses.
With regard to promoting growth strategies, the above-mentioned Yamato ProductCenter became fully operational following the completion of the Sanki Techno Centerand the R&D Center in 2018, thus completing the STeP Project*5, which had beenlaunched in fiscal 2016 as the cornerstone of our strategies. These facilities willcomprise the Sanki Techno Park, and we plan to utilize its functions during Phase 2 asa major technological center of the Sanki Engineering Group in order to strengthen our
reliability.
Meanwhile, we will combine our efforts for enhancing the Sanki brand throughinitiatives aimed at reinforcing information transmission, a target added in Phase 2.
Although we are a company built on the B-to-B model, in the future we must be
more conscious of becoming a B-to-B-to-C company that ultimately serves individual
consumers. In our world today, there is a growing interest in how companies address
ESG. To ensure sustainable growth for the Sanki Engineering Group, it is importantto operate a cycle in which we actively transmit information. This
includes the disclosure of financial and capital policies and ESG
policies and also achieving growth by responding to feedback fromour stakeholders. Against this background, from fiscal 2020 webegan monitoring the progress of individual measures under Phase 2
by analyzing and categorizing the actions required for achieving thegoals of the medium-term management plan and have created amechanism that ensures the steady operation of our PDCA cycle.
In addition, I would like to touch upon a key approach we adopted in Phase 2 to set
the numerical target for net sales at 200 billion yen for the three-year period. Behind thisdecision lies the fact that we had become extremely busy after the launch of Phase 1.
I am familiar with the experience myself, but being too busy can render you incapableof providing adequate construction management, which in turn can have a damaging
effect on profits. For this reason, we fixed the net sales target for Phase 2 and havebeen pursuing strategies for raising profit margins within that scope. In fiscal 2019,
revenues fell 2.2% year-on-year, but ordinary income exceeded the previous year, and inthat sense, everything went as planned. In fiscal 2020, we will continue to work on eachmeasure to achieve our goals for Phase 2.

Contributing to Society through Our Business

In Pursuit of Total Engineering for Addressing Social Issues
As Sanki Engineering develops its businesses to become the company of choice in
2025, it must demonstrate an even greater commitment to addressing social issues
through management that pays due consideration to ESG and contributing to theachievement of the SDGs. Sanki Engineering has continued to grow as a company thatserves society by creating comfortable environments, and it could enhance its corporate
value by delving deeper into this direction. For example, in the current COVID-19 crisis,
people have begun to pay closer attention to the importance of controlling air flow inmedical sites, while the need to avoid human contact is expected to lead to a rise indemand for labor-saving products. Our fundamental role is to apply our technologies toeffectively address such social needs.
Meanwhile, companies in the construction industry need to establish new work
styles in anticipation of future labor shortages. Sanki Engineering has been developing
working environments that cater to the needs of diverse workplaces through its work
style reform. I believe we can ensure our sustainability only after addressing social
issues that are inherent to our own operations.
Established in 1925, Sanki Engineering is a company with a long history. I foundan interesting comment in a column in the “Sanki Monthly,” the in-house newsletter
published soon after the company’s founding. “Stretch out ‘Sanki’ with your lips curved
a little and you get ‘Sankyu,’ which, of course, is a word expressing gratitude (thankyou).” The point being made here is to always be grateful in your work. I respect ourpredecessors for having that sensitivity in the earliest days of the company’s founding
and have been moved by how it has been passed down over the years to today’s SankiEngineering as part of its corporate DNA.
Today, the business we are developing with our total engineering competency allows
us to realize our contribution to society. Sharing with all employees the sense of being
grateful for what we do provides a valuable guide for achieving sustainable growth. We
will continue to benefit society through our business and always embody a heartfelt
thankfulness for our stakeholders to evolve into a company of choice that offers both
quality and reliability.

Reference
ESG Policies
Page 30

ReferenceContribution to SDGs
Page 30SANKI REPORT 202019┃ Sanki Engineering’s Value Creation ┃Our Value Creation Process
Guided by the “Sanki Standard” management philosophy, the Sanki Engineering Group strives to fulfill
its mission of realizing all types of comfortable environments and contributing to the development of asustainable society by creating value at each step of the business process and in every business area.

Social Needs

Business Activities

Key Initiatives (Phase 2)

iness that Leverages To
tal E
of Bus
e
g
ngin
an
R
eer
d
a
o
ing
Br
The Four Drivers

Driver 1

Value Created (Fiscal 2019)

Large-scale construction work*2

21 projects

Driver 2

Pass on and develop
technical skills

CO2 reduction based on our proposals(for ordered projects)

27,624 t-CO2
181 cases

Provide optimal solutions
based on LCE

Stakeholder Expectations

Facilities Construction
BusinessStrengthen Core Businesses

Building the HVAC and Plumbing BusinessIndustrial HVAC BusinessElectrical Systems Business
Facility Systems BusinessAnnual dividends pershare

95 yenDriving Forcefor Value Creation

Promote Growth Strategies

Flexible, sophisticatedresponse to customers
Competent engineers andresearchers
Wide-ranging technologicalexpertise
Subcontractor groups with 880
member companies
Sound financial base

➡Page 85

Sanki Techno
CenterRenovation andRenewalMachinery Systems Business
Environmental Systems Business

Procurement

Me
Driver 4

Promote open
innovation

Construction

etin
g th
e Ne
eds throu

Disclose financial and capital
policies, and ESG policies

15.5% (FY2018: 14.9%)
Average monthly overtime
work per person

34.3 hours
Industrial accidents
frequency rate*3

Operation andManagementaltire V
gh LCE*1 across the En

Continuous
enhancement ofcorporate value

Gross profit margin

Reinforce Information
Transmission

Maintenanceand Inspection

DesignContribution
to SDGs

Enhance the Sanki Brand➡Page 24

Human Resources
×Technology

Plants &Machinery Systems Business

Planning and
Basic Design

Creation of
comfortableenvironments

Customer Satisfaction
Survey upon Completionof Construction
High rating: around 90%

A better,sustainable
society

1.11
n
hai
ue C

Number of registered patents*4451 cases

Driver 3

Pass on our safety
cultureSocial issues
Climate change
Declining population
Infrastructure maintenanceand upgrades
Work style reform

20

SANKI REPORT 2020

Phase 2Phase 1Long-Term Vision

Century 2025

Management Philosophy

Sanki Standard➡ Pages 28 to 30

Phase 3

*1 A business concept of the Sanki Engineering Group. Throughout the life cycle of a building, we
provide services from new construction, repair, and maintenance to renewal and reconstruction.

➡Pages 06 and 07➡ Page 06*2 Construction projects of over 1 billion yen each.
*3 Scope of data: Sanki Engineering construction sites (Sanki Engineering Co., Ltd. and business
partners)*4 As of March 31, 2020

SANKI REPORT 202021

┃
三機工業の価値創造
Sanki Engineering’s Value Creation ┃Addressing Social Issues throughout
the Value Chain
The Sanki Engineering Group addresses various social issues along its value chain by promoting LCE (life cycle
engineering), in which we are responsible for the entire process from the planning of a facility, design, andconstruction to aftercare, maintenance, and management.

● Related to society

Social Issues● Labor shortage● Work style reform● Aging facilities and social infrastructure● Disaster prevention, mitigation, and resilience● Supply chain risks● Fair procurement● Safety first● Quality assurance● Labor shortage● Human rights risks● Labor shortage● Improving productivity● Safety first● Waste issue● CO2 emissions● Related to the environment● Aging facilities and social
infrastructure● Renovation costs● Ensuring information security●D isaster prevention, mitigation
and resilience● Spread of the novel coronavirus pandemic● Shift to a decarbonized society ● Limited resources

Planning and
Basic Design

DesignProcurement● ● Open Innovation Led by the Sanki Techno Center

AddingSanki’sStrength
to Create
Value● One-stop solution● Optimal proposals that accurately serve customers and society by meeting
sophisticated and diversified needs● Proposal and design for reducing costs● Technological proposal and design for disaster prevention and mitigation● Proposal and design for reducing environmental impact, such as energy
saving and energy creation, and resource saving● Higher efficiency oftransactions through online
procurement● Collaboration with business
partners and support for
stable management● Procurement of energy-saving,highly efficient equipment

Relevance to SDGs

● ● U tilization of ICT
and BIM*

Enhance and raise efficiency of design quality

Relevance to SDGs

Raise efficiency and the level ofOperation/
Management

Construction

Advanced Technology

Diverse Human Resources● Introduction of new technology
and an improvement inconstruction methods● Automation and labor savingin construction work
● E nhanced quality throughquality improvement activities● Fast, constructive response to
problems and claims
Relevance to SDGs

● Waste generated during
disassembly

Maintenance/
Inspection

Group Companies

Renovation andRenewalSubcontractors●A utomation, labor saving, productivity, and greater comfort andconvenience● Response to high-level information security requirements● P revention of nosocomial transmission and response to the need forcontact-free means of human interaction● L ife-extension and long-life facilities as well as reduced running cost
● Efficient preventive maintenance based on fault prediction

Other Industries and Fields● Enhanced comfort andconvenience● Labor saving construction● Further reduction ofenvironmental impact● Reduced environmental impact through energy saving, reuse, andrecycling
Relevance to SDGs

procurement and construction

Relevance to SDGs

Raise efficiency and level of operational tasks● Thorough adherence to COVID-19 response policies and reinforcement of the BCP system

Minimizing
Negative
Impact● Appropriate management of customer information, protection of
personal information● Centralized management using common Company-wide sales tools● Fair and transparent transaction
on an equal footing●● CSR procurement
Relevance
to SDGs● Prevention of problems and complaints● Health and safety activities, onsite hazard prediction● Collaboration with subcontractors● Response to human rights issues
Relevance
to SDGs● Energy-saving initiatives● Proper disposal and reduction of waste● Compliance with environmental regulations
Relevance to SDGs

*The Building Information Modeling concept involves the construction of a database comprising a 3D model and attribute data of a building
on a computer and the application of that information across the entire process, from design and execution to progress and management.

22

SANKI REPORT 2020

SANKI REPORT 202023

┃ Sanki Engineering’s Value Creation ┃Sanki Techno Center

Training Area

Comprehensive Training and Research Facility
for Refining and Enhancing the Quality of Our
Technology and Human Resources
The Sanki Techno Center is a research, training, and study facility for developing and imparting the advanced
technical skills of the Sanki Engineering Group. It plays a key role in the Medium-Term Management Plan“Century 2025” Phase 2 (FY2019–2021) as the cornerstone of our strategy for enhancing the quality of ourhuman resources and technology. Since fiscal 2020, the technical divisions of the Facilities Construction
Business as well as the Machinery Systems Administration Division and Environmental Systems
Administration Division, not to mention Group companies Sanki Sangyo Setsubi Co., Ltd. and Sanki Kako
Kensetsu Co., Ltd., have been aggregated at the site. We intend to continue enhancing its functions as amajor technology base for the Sanki Engineering Group.

To become thecompany of choice

Acquiring Empirical Knowledge Only
Obtainable in the Construction Site
We provide practical training in the Technology and
Skills Training area and the Safety Experience area in
addition to personnel training, courses for obtaining
qualifications, and other classroom lectures.
In the Technology and Skills Training area, trainees
gain practical technological and other skills typically only
acquired onsite, by using mock-ups of actual
construction sites andreal equipment. In the
Safety Experience area,
participants gain empiricalknowledge by getting aphysical sense of safety
through experiencing
everyday construction siterisks, including the use
Technological skills training usingof dummies for checking
real equipment

unsafe actions and using virtual reality to simulate
working on scaffolding.
Staff at Group companies and subcontractors
can also participate in the various training programs.
Moreover, we seek to maximize the effect of training
through diverse opportunities that include joint training
with Sanki Engineering employees or with a group ofcontractors, programs for individual subcontractors
and for staff at the same level of qualifications, andprograms for each branch and branch office. We havealso maintained our efforts to train lecturers to address
the expected increase in the number of participants.
In fiscal 2019, we held 91 internal and external training
sessions, including those at Group companies, over anaggregate total of 342 days, that were attended by atotal of 12,700 participants.

Techno Plaza Showroom
R&D Center

Introducing Our Social Responsibility and Potential
Based on the SDG Concept

Facilities tocontribute to the
local community

esources

Accommodation Facilities andAmenities
Providing Facilities that Encourage
Thorough and Comfortable Training andResearch

ou

a
qu

lit

Accommodations

Showroom

an r

Sanki
TechnoCenterThe Sanki Engineering Group’s total engineering is on display at four booth
exhibits under the themes of “Comfort,” “Industry,” “Energy Saving,” and“The Environment” based on the concept of the SDGs, which are common
global goals. In collaboration with the R&D Center, the Techno Plaza serves asTechno Plaza Showroom
a showroom for conveying our unique technologies and future potential to thegeneral public. Furthermore, we organize customer tours to combine their needs with our technological concepts. In
fiscal 2019, we held 206 of these for 1,883 visitors.

um

fo
yo

Technology
trainingand safety
education
facilitiesrhur technologies➡ Page 26

De

v

o
el

p

Enh

an

ce
t

he

Value Generated by the Sanki Techno Center

01

02

03

04

Passing on and further
developing technical skills

Fostering oursafety culture

Improving construction
work productivity

Developing human resources
across a broad range of fields

The center serves as a strategic
base for passing on to the next
generation the technical skills that
represent the backbone of value
created by Sanki Engineeringand for further advancing ourtechnology.

We will foster Sanki Engineering’s
long-standing safety culture byraising employee awareness ofsafety and cultivating their ability
to identify risks.

We will improve the productivity of
our construction work and increase
profitability by demonstrating
advanced technical skills.

We will develop human resources
across the Group by improving
our technical skills as well as byproviding finely tuned training thatcovers a broad range of topics,
including engineering ethics andmanagement competencies.

The center has a variety of areas for communication,
including a cafe and large tatami floor room, to encourage
lively interaction between training participants andresearchers. In addition to offering ample accommodations
with 141 guestrooms that ensure comfort during long stays,
the center houses a gym
and other facilities. In
fiscal 2019, 58 overnight
seminars were held andthe facility was used by
11,447 participants.

Regional Contribution
Responding to Local Needs in the
Event of a DisasterAs a facility that reaches
out to the local community,
the center is prepared
to provide temporary
shelter for those unable
to return home in thewake of a disaster, under
Large room for sheltering people unable toreturn home in the wake of a disasteran agreement that SankiEngineering concluded with
Yamato City in 2013. It also serves the local community in ways
such as creating opportunities for local citizens and technical staffof the Yamato City government to participate in various seminars
on safety management and other topics. The Sanki Environmental
Garden adjacent to the center is also open to the public.

Guest room

24

SANKI REPORT 2020

SANKI REPORT 202025

┃ Sanki Engineering’s Value Creation ┃R&D Center

R&D Base that Combines Our Accumulated Knowledge
and Advanced Technology to Meet Emerging Needs
We set up the R&D Center to open up new horizons for Sanki Engineering’s research and development. As a
total engineering company, we possess diverse component technologies related to air, water, heat, electricity,machinery, and information. We will fully deploy these technologies to promote R&D aligned with our pursuit ofdiverse businesses and toward providing solutions with high added value that help create a sustainable society.

03

Accelerating R&D through Closer In-house Collaboration
The R&D Center collaborates with each business division to pursue R&D for new technologies, refine
and upgrade proprietary technologies, conduct basic research, and investigate new technologies. In
fiscal 2020, the technical divisions of the Facilities Construction Business as well as the Machinery
Systems Administration Division and the Environmental Systems Administration Division wererelocated to the Sanki Techno Center in order to facilitate meetings and exchanges of information as we
strive to accelerate the pace of R&D.

Experimentationa n d Te s t i n g

Int

ell
Pro ectuape
rty lCustomers

Promoting Innovation through the Open Lab
We set up the Open Lab to encourage companies from a broad range of sectors, including ourcustomers, universities, and research institutes as well as Sanki Engineering’s business divisions to get
together with an open mind and generate innovation that integrates their knowledge and technologies.
Two of the ten ongoing projects have already been commercialized, while five more are in the trial stage
for verification.
We offer ample facilities to facilitate open innovation, including large, multi-purpose testing rooms,
collaboration areas for lively interaction and discussions, and mock-up areas where full-size prototypes
can be created. In fiscal 2019, we steadfastly continued to enhance our research facilities by installing
mockups and direct expansion HVAC testing equipment for regenerative medicine.

Broad rangeof businesssectors

Open Lab

Cloud Platform
for Accelerating
the Pace ofDevelopment

Using the Cloud to Accelerate the Pace of R&D
We have vastly accelerated the pace of our R&D by using the S-Cloud®, our proprietary virtual
information system platform incorporating the latest AI and IoT technologies, which has enabled
us to automate massive measurement data and raise efficiency. We are also using the platform
to verify the AI-based prediction system built into high-spec virtual machines as well as a nextgeneration high-speed communication system based on 5G and Wi-Fi6. Looking ahead, we willcontinue to take on the challenges of new technologies.

Test and R&D Expenditures

1.43
451

R&D Centerbillion yen

Number of Registered Patents

patents(as of March 31, 2020)

SANKI REPORT 2020

Prom

o

g
tin

O

n
pe

Sanki Techno
CenterSocial Needs

・Energy conservation
・Cost reduction
・Product life extension
・Resource conservation
・Acceleration
・Shorter construction period
・Space saving
・Energy creation
・Comfort
・Safety・Reliability
・Labor saving
・Higher productivity
・Disaster prevention,
mitigation, and resilience

In

v
no

a

n
o
i
t

Inhousebusiness
departments

Universities
andeducational
institutions

Publicresearch
institutions

Clo

ud

tS
ha d Ptes an
ogi gs,lonnDiverseTech Buildi
Component,srea
for Urban A
Big data(FY2019)26

nd
is a nsyaltio
An alua
v
E

AI
us
, Io
t
a
T
ro in
du In
cti fras
on
tru
ctur
e

02

Areas of Research◦Comfortable air conditioning technology◦Specialized environmental
technology◦Information communications and control
technologies◦Logistics and conveyancetechnologies◦Water treatment and incineration technologies◦ICT-in-construction technologies◦Energy-saving technology

5G,

Characteristics of the R&D Center

01

Synergy andInnovation

Major R&D Results in Fiscal 2019
Goal

Resulting Product

Comfort, higher productivity

Development of AI control
system for perimeter air
conditioning

Labor-saving construction work

Automated robotic air flow
meter

Space saving and labor saving

Reverse Sorter compact sorting
deviceEnergy creation, energy
conservation

Highly efficient biomass power
generator
SANKI REPORT 202027

┃ Sanki Engineering’s Value Creation ┃Status of Business Progress
Medium-Term Management Plan“Century 2025” Phase 2 (FY2019–2021)

Long-term Vision“Century 2025”

Under the Medium-Term Management Plan “Century 2025” Phase 2 (FY2019–2021), we will launch new initiatives forenhancing reliability while also maintaining the initiatives for Phase 1 (FY2016–2018), a three-year period for enhancing
the quality of our technology and human resources.
Under
Medium-Term
ManagementofPlan
Phase(FY2019–2021),
in fiscalwe
We willthe
seek
to deepen understanding
the “Century
Group by 2025”
disclosing
our 2financial
and capitallaunchedpolicies and
ESG2019,
policies
will
new initiatives
for increasing
reliabilityto
whilealso maintaining
initiativesof Phase 1 (FY2016–2018),
and pursue
by reinforcing
our transmissionof information
enhancethe reliabilitytheof theSanki EngineeringGroup for diverse
astakeholders
three-year period
forenhancingthequalityofourtechnologies
and
human
resources.
Also, we will seek totoward our goal of becoming the company of choice in the next phase.
deepen understanding of the Group by disclosing our financial and capital policies and ESG policies and by
reinforcing our transmission of information to enhance the reliability of the Sanki Engineering Group fordiverse stakeholders toward our goal of becoming the company of choice in the next phase.

Becoming the company of choicefor our stakeholders

Phase 3 (FY2022−2025)(FY2019−2021)

Enhance reliability andbecome the company ofchoice for stakeholders

Improve component
technologies andachieve stable
growth(FY2016−2018)

Refining technicalskills and humanresources to enhancequalityReinforce Information
Transmission

Improve construction productivity
Meet energy saving and labor reduction needs
Promote technological R&D
Continue to receive orders for stock projects

Enhance the
Sanki Brand

Pursue future growthin the areas oftechnology andbusiness

Disclosure of Financial
and Capital Policies,
and ESG Policy

Further pursue quality

Key
Initiatives
Promote Growth
Strategies

Key Initiative

Enhance Reliability

Strengthen Core
Businesses

Phase 1Company of Choice

Phase 2

Details

Create better work conditions
Improve internal communication

Develop humanresources that possess
the Sanki spirit

Enhance Quality

Phase 2 Targets and Results
FY2019 targets

FY2019 results

200.0 billion yen◦Facilities Construction Business

FY2020 targets

207.6 billion yen
32.1 billion yen (15.5%)

31.0 billionp27
yen (15.5%)
32.0 billion
yen (16.0%)
Phase2
業績目標

Ordinary income (%)

9.0 billion yen (4.5%)

11.2 billion yen (5.4%)

9.5 billion yen (4.8%)

5.0% or higher (final fiscal year)

5.4%

Dividend

Annual dividend per share of
60 yen or higher

Annual dividend: 95 yen

About 5 million shares (in 3 years)

About 1.95 million
shares70% or higher

111.4%■ Extra dividend (yen)

20
10
20

SANKI REPORT 2020

8.0% or higher (final fiscal year)

8.6%

15
20
2017

Phase 1

70

2019

◦Plants & Machinery Systems Business

Environmental Systems Business:◦Conducted activities to receive orders for DBO projects◦Maintained and expanded energy saving and energy creating businesses

40

2018

◦Rolled out new services led by organizations set up to promote
specialized consulting◦Expanded business in the construction division
Machinery Systems Business:◦F ull-scale launch of the Yamato Product Center◦Promoted development of next-generation technologies such as
hybrid systems

25■ Regular dividend (yen)

2016

ROE

10.0 billion yen (5.0%)

Strengthen
Core
Businesses

Dividend per share

FY2019 Results

Operating profit ratio

Total return ratio

28◦Facility Systems Business200.0 billion yen

30.0 billion yen (15.0%)

Phase 2 (FY2019–2021)
Management Targets◦Improved pre-ordering and pre-construction operational processes◦Implemented next-generation site management systems◦Improved construction quality through efficient personnel allocation

FY2021 results

Gross profit (margin)

Acquisition of treasury
stock

ESG
PolicyReinforce Information
Transmission

Page 88

Page 30

Page 87

Results of Key Initiatives and Policies for Fiscal 2020
FY2019 Results

Sales

Financial and Capital
Policies（FY）

Phase 2

FY2020 Policy◦Facilities Construction Business◦B olster Company-wide construction and sitesupport systems◦S ecure construction quality, improve health andsafety, and enhance productivity◦Facility Systems Business◦Expand consulting services led by new specializedorganizations◦Plants & Machinery Systems Business
Machinery Systems Business:◦Improve productivity and cut cost of conveyors◦Expand the product lineup for hybrid systems
Environmental Systems Business:◦Increase orders for large-scale projects◦C ontinue receiving orders for a woody biomass
power generation system

PromoteGrowthStrategies◦Completed the STeP project◦Creation of next-generation technologies led by the
R&D Center and Yamato Product Center◦S teady development of overseas business andrestructuring of the Food Service Equipment Business◦Promote stock-based business for the future

Enhance the
Sanki Brand◦Established the Smile Work Guidelines◦Enhance quality of technology and develop humanresources by expanding various training programs◦P romote work style reforms by stimulating inhouse communication

SANKI REPORT 202029



┃ Sanki Engineering’s Value Creation ┃Status of Business Progress Medium-Term Management Plan “Century 2025” Phase 2 (FY2019–2021)

Details▶ESG Policies (Create Sustainable Social Value)

ESG Initiatives
Pages 41 to 88

To implement sustainable management, we will pursue initiatives based on our ESG policies toward creating asustainable society and achieving sustainable corporate growth. In fiscal 2020, we designated targets for promoting
ESG initiatives under Phase 2.
FY2021 KGI

KPI(Indicators for Evaluating FY2021 Results)(Indicators for Evaluating Progress)

E• Develop products
and technologies that
contribute to realizing adecarbonized society• Reduce the environmental
impact of businessactivities◦Number of orders received based on CO2
reduction proposals under the SANKI YOU
Eco Contribution Point system◦50% or more of total number of proposal◦Sanki Engineering’s CO2 emissions (resultof business activities) (2020 and 2021)◦Reduce by 1% year-on-year◦Number of CO2 reduction
proposals under the SANKI YOU
Eco Contribution Point system◦300 or more per yearS•C
 ontribute to building
sustainable infrastructure•C ollaborate and engage
with the local community•C reate work environmentsthat are safe and easy towork in•P romote diversity toenhance human resources◦Reduction rate for number of problems andcomplaints during construction◦Reduce by 5% year-on-year throughdivisional collaboration◦Reduction rate for number of accidents◦Technical training and seminars
for preventing problems, claims,
and accidents◦25 times per year
◦Designate targets for the Smile
Project◦Quantify work-life balancethrough monitoringG• Reinforce the governancesystem◦Construct a better governance system inline with the changing times

Policies

Environment

SocialGovernance◦Achieve the goals of the Smile Project*◦Average monthly overtime work per person◦Paid leave ratio per person

Learn about Sanki Engineering’s businessactivities and business foundation

Business Report
32 F acilities Construction

Business
36 P lants & Machinery Systems
Business
40 Real Estate Business◦Continuous reduction in SankiEngineering’s CO2 emissions(result of business activities)◦Annual inspection of thegovernance system◦Implement measures inaccordance with the scores*The Smile Project was established in 2015 under the president’s leadership to promote work style reform unique to Sanki.

▶ Contributing to the SDGs

1 Amenity

2 Industry

3 Eco & Energy

4 Environment

Creating comfortable environments throughengineering

Four Sustainable
Initiatives for the
FutureOffering technological solutions to help
achieve decarbonization, energy saving,and energy creation

Applying our unique clean room technology andtransport technology to support cutting-edge industries

Building facilities for water processing and waste
disposal to help protect the environment andcreate a zero-waste society

Tenth Anniversary of the SANKI YOU Eco Contribution Point System

Addressing Social Issues through Businesses Based on Our ESG Policy◦Preventing global warming and helping realize a sustainable society through customer proposals◦Converting the reduction in CO2 emissions based on energy saving proposals into points anddonating the monetary equivalent to environmental organizations
Whenever a customer adopts our energy saving proposal, the reduction in CO2 emissions is converted into EcoContribution Points (100 yen per tonne), and we donate the equivalent monetary amount to subsidize environmental
conservation activities. The system celebrated its tenth anniversary in 2020. We established the system amid calls forcompanies to address climate change, and we have continued to promote it over the years as a means for sharing ouraspiration of stopping global warming with customers who adopt our proposals. Additionally, it gives our employees witha genuine sense that their work is directly linked to preventing global warming and protecting the environment. We intend
to continue reducing CO2 emissions through our products and technologies and contribute to preventing global warming
and realizing a sustainable society.

30

SANKI REPORT 202031┃ Business Report ┃Facilities Construction Business
Creating Comfortable Environments to
Sustain Future Society

Net Sales and Net Sales Composition Ratio for Fiscal 2019

Major Results for Fiscal 2019
◦Steadfastly implemented ongoing construction
projects and sought to ensure profit, which resulted
in stable orders and net sales centered on building
HVAC, plumbing, and electrical facilities.
◦Promoted the Smile Site Plan, designed to reduce
the workload of construction managers and raise
operational efficiency.
Director, Senior Executive Officer and General
Manager of the Mechanical & Electrical
Contracting Headquarters

Eiji Mitsuishi

Orders Received (Billions of Yen)

Net Sales (Billions of Yen)

171.5

billion yen

146.6

179.3
157.6

153.4

149.9

171.5

162.0

141.5 139.6

83%
2016

2017

2018

2019 （FY）

2015 2016 2017 2018 2019 2020 （FY）
Forecast

Market Conditions

Opportunities and Risks• Ongoing demand for construction, including replacement demand
and redevelopment for buildings constructed during Japan’s periodof rapid economic growth• Nationwide labor shortage resulting from a shrinking workforce• Changes in everyday living and corporate activity, associated with
the COVID-19 pandemic• Shrinking capital investments due to the stagnation of the global
economy• Change in social life leading to growing demand for ICT
facilities, and the need to enhance medical, pharmaceutical, andmanufacturing facilities• Rising concern that the decrease in trained workers associatedwith demographic trends will result in a labor shortage and social
demand for addressing such working conditions as long work hours

Key Initiatives of the Medium-Term Management Plan

Key
Initiative

Key
Initiative

32

1

Actively leverage customer information and closer collaboration among branches andbranch offices
We will further promote Company-wide sharing of customer information and collaboration among branches andbranch offices for sales activities that are one step ahead of customer needs.

2

Improve construction quality and promote the development of younger employees

3

Raise productivity by establishing a Company-wide construction system

We will improve and unify construction quality by utilizing the Sanki Techno Center to nurture constructionengineers while also raising the skills of each age group by reinforcing on-the-job training.

We will establish a construction system that ensures Company-wide collaboration to resolve regional gaps in theavailable labor force during the busy season and improve productivity.

SANKI REPORT 2020

◦Applied a next-generation site management system,
including work sharing, along with the widespread useof the New Octopus software for supporting sitedocumentation.

Yoyogi National Stadium 1st Gymnasium(photo courtesy of the Japan Sport Council)◦Improved productivity and reduced the number ofproblems during construction by expanding training ontechnology, skills, and safety management at the Sanki
Techno Center for employees and subcontractors.
Major Projects

2015

Key
Initiative◦Strengthened the pre-ordering and pre-construction
operational processes and improved construction
quality through efficient allocation of personnel.

Facilities Construction Business

182.5
152.4

Business Report

The Facilities Construction Business has contributed to social development by
harnessing Sanki Engineering’s component technologies to create comfortableenvironments essential for buildings across broad business areas, encompassing
HVAC, plumbing and drainage, electrical systems, smart building solutions, and facility
systems.
Under the policies of the Medium-Term Management Plan “Century 2025” Phase 2,
we are currently seeking to strengthen and develop our component technologies byimproving construction productivity and meeting energy saving needs. We hope to takethis one step further to create technologies and solutions for the future that transcendorganizational and corporate boundaries. We will actively pursue our businesses as
a company that possesses the means to build clean environments now and into the
future. Moreover, we will contribute to achieving the SDGs by providing solutions that
address social issues such as energy conservation and work style reform.

◦Yoyogi National Stadium 1st Gymnasium (HVAC, plumbing,and electrical systems for a renovation project)◦Toranomon Hills Business Tower (HVAC systems and smart
building solutions for new construction work)◦N ihon Shokken Holdings Co., Ltd. Schönbrunn Palace
Factory (HVAC systems for new construction work)◦Otemachi One Tower (HVAC systems/new construction work)
Nihon Shokken Holdings Co., Ltd. Schönbrunn Palace Factory

Status of Business Operations and Future Outlook toward Achieving Phase 2
Direction for Fiscal 2020 Based on Change in
Business Environment
We will improve order-taking and productivity with anemphasis on balancing quantity and quality. To that
end, we will bolster the Company-wide construction
and site-support systems while promoting the Smile
Site Plan to reduce the workloads of construction
managers and further improve construction quality
and occupational health and safety. In addition, we will
nurture younger employees through a Company-widesystem that includes on-the-job training to improve
individual skills.
Strengthening Core Businesses that Contribute toSocial Development
The Facilities Construction Business meets diverse
customer needs and contributes to re-solving issues byconstructing buildings and facilities that are comfortableand environmentally sound. Strengthening this businessis directly connected to our Management Philosophy,
under which “we create comfortable environments
through engineering and widely contribute to social
development.” In addition, we will seek to strengthen ourcore businesses by encouraging collaboration with thePlants & Machinery Systems Business and with the R&D
Center to harness our total engineering capabilities toward
generating new value for society.
Leveraging Shared Customer Data to Promote SalesIn April 2020, we transferred the Mechanical andElectrical Administration Office, set up to develop closer
collaboration and integrate functions among branches
and branch offices, to the Sales Administration
Division of the Mechanical & Electrical Contracting

SANKI REPORT 202033

┃ Business Report ┃ Facilities Construction Business

Facilities Construction Business

Facility Systems Business
Establishing a Robust Construction System by
Forging Closer Relationships with Subcontractors
We will renew our efforts to establish a systemfor ensuring safety at construction sites based oncooperation among the sites, subcontractors, andSanki Engineering through the Sanki Health and Safety
Cooperative Association. In addition, we will share
information through the association to establish aconstruction system that will also contribute to ensuring
quality and improving productivity.
Bolstering Site-Support Systems
With a widespread understanding of our system forsite-support, instilled by units such as the Design andEngineering Support Center and Technical Support
Center, we have seen an increase in situations in which
we were able to provide seamless site-support fromthe start of construction to completion. In fiscal 2020,
we will establish site-support systems at each branch
and branch office and expand the areas of support andinformation sharing.

Toranomon Hills Business Tower

34◦Reduced the environmental impact of an HVAC system◦Helped create a comfortable and highly productive office environment◦Introduced a global standard open system

SANKI REPORT 2020

• The need to improve productivity has grown ahead of the decline inJapan’s population, leading to an expansion in related investments• Technological progress and the spread of cloud services are
increasing opportunities for revising the operation of ICT
infrastructure• Expectations are growing for solutions that boost productivity bymaking use of 5G, AI, and IoT• The COVID-19 pandemic has sparked investment in improving officeenvironments and redesigning business spaces• Financial institutions are accelerating the pace of organizational
restructuring and revisions in branch operations• New work styles such as teleworking and working from homehave led to diverse office use, giving rise to efforts for maintaining
communication• Expectations are growing for merchandise and consulting services
that accurately meet new needs• Reinforced efforts in co-creation and collaboration across thecorporate framework and implementation of work style reforms

Key Initiatives of the Medium-Term Management Plan
Facility Systems
Provide a new consultancy service
Key Initiative1

Key Initiative2

Key Initiative3

We will reinforce sales for our consulting service
toward expanding the market for the PM andCM* businesses.
Bolster sales and production systems towardbusiness expansion
We will review our organization and strive toimprove our response to customers and thecompetitiveness of our services.
Strengthen existing business areas
We will enlarge our customer base throughalliances and other strategies.

Smart Building Solutions
Expand solution business
Key Initiative1

Key Initiative2

Key Initiative3

We will boost sales activities with a focus on theappeal of our consulting capabilities in projects
involving the installation or upgrading of central
monitor systems.
Strengthen existing businessWe provide system integration solutions from aneutral and fair standpoint for customer issues.
Innovation in productivity
We will promote joint work and work stylereforms with an eye on the new social situation
caused by COVID-19.

Major Results for Fiscal 2019

Unique Building Management and HVAC Technology that Contributes to Innovation

In January 2020, the Toranomon Hills Business Tower housing offices,
commercial facilities, and business facilities were completed in the Toranomon
Hills area, which has been expanding and evolving into a new international
capital and global business center. Sanki Engineering was responsible for theconstruction of the tower’s HVAC system and introduced several new proprietary
technologies in collaboration with the R&D Center.
The ARCH incubation center on the fourth floor specializes in new businessdevelopment, leads companies, and is where innovators from various fields
congregate. We installed the “selFort®” system, which enhances intellectual
productivity by meeting diverse air conditioning needs, and adopted air
conditioning control technology that mitigates the effects of sunlight nearwindows and the ambient temperature. For the central monitoring system,
which serves as the central nervous system, we collaborated with the Facility
Systems Business division and installed the SanBACS® building automation
system. This highly versatile system is built to global standards and can belinked to the operator’s own systems. Additionally, we incorporated our latest
technologies in various other areas to help create a comfortable and highly
productive office environment that is also environmentally sound.

Opportunities and Risks*Project management and construction management

Focus

Value deliveredby SankiEngineering

Market Conditions

Facilities Construction Business

Further Improving Construction Quality
The Quality Control Center set up within the Technical
Administration Division in April 2020 will spearhead
initiatives for avoiding the risks associated withconstruction quality at the earliest stage and based on ashared understanding with the construction site. It will dothis by widely sharing details about past incidents with
branches and branch offices to strengthen measures forpreventing problems and claims. As part of our work stylereforms under the Smile Site Plan, we will seek to reflect
the voice of engineers and others responsible for construction management to ensure construction quality andimprove productivity.
We set up the BIM Promotion Center in April 2019
to meet customer needs related to design, construction
work, maintenance, and management using theBIM which is expected to spread rapidly across theconstruction facility industry. The center will lead theinitiative for developing site-support systems for further

improving construction quality.

Business Report

Headquarters. Looking ahead, we will promote sales
activities by facilitating the sharing of nationwide
customer information to further tighten collaboration
among branches and branch offices.

Facility Systems

Smart Building Solutions◦We enjoyed a brisk flow of orders for large-scale
relocation projects and seized opportunities involving
capital investment projects for facility reallocation bycustomers revising their management strategies,
which resulted in robust growth in orders received,
sales, and gross profit margins.

◦In the area of building management solutions(instrumentation), progress was made in numerous
large-scale projects, resulting in favorable growth inorders received, sales, and gross profit margins.

◦Published Ee-NeWS* to distribute information on
work style reform consulting.

◦In the area of network solutions (ICT), our recent
efforts for boosting problem-solving capabilities
bore fruit in the form of record profits.

*Abbreviation of “everyone,” “ee” (the sound for “good” in Japanese), “next,” “work,” and “style”

Status of Business Operations and Future Outlook toward Achieving Phase 2

Toranomon Hills Business Tower

Facility Systems

Smart Building Solutions

In fiscal 2020, we expect the full-scale launch of a largescale relocation project we have been working on since theprevious fiscal year. There have also been clear trends toward
corporate reorganizations that transcend the boundaries offinancial institutions, which raise expectations for favorable
business.
Furthermore, we are developing new services under theleadership of the Consulting Promotion Department set up in2020 to specifically promote the consulting business.

We will aggressively promote our competitive edge inhighly versatile central monitoring and automated control
systems to meet the labor-saving and cost-cutting needsof large buildings and other structures.
Amid expectations for steady ICT investments, we willseek to meet the expectations for higher productivity at atime we must also coexist with COVID-19. We will do thisby actively pursuing sales activities that meet the growing
demand for data centers and other ICT facilities.

SANKI REPORT 202035

┃ Business Report ┃Plants & Machinery Systems
Business
Always Heeding the Voice of Customers to Deliver
Original Solutions that Contribute to Social Development

Net Sales and Net Sales Composition Ratio for Fiscal 201916%

Director, Senior Executive Officer
and General Manager, Plants &Machinery Systems Headquarters

Takashi Motomatsu

Machinery Systems Business
Environmental Systems Business

36.3

8.1

29.9

33.7 34.5

12.1

12.0

27.9

10.3

10.3

19.6

2015

30.6

2016

Net Sales (Billions of Yen)

24.2

2017

21.7

2018

24.2

2019 （FY）

26.4

29.1

9.2

8.1

18.7

18.2

32.2

9.2

19.9

34.4

11.7

20.4

36.0

11.1

11.0

23.2

25.0

2015 2016 2017 2018 2019 2020 （FY）
Forecast

Machinery Systems Business

Environmental Systems Business

Market Conditions

Market Conditions• Growing need for automation and labor saving solutions arisingfrom the decline in Japan’s working population• Advances in AI and IoT, and the proliferation of robots• Expansion in capital investments for logistics facilities• Social infrastructure investment in sewage works remains littlechanged, while investment in waste facilities gradually increases• Expanding need for decarbonization (energy creation) technologies
and technologies that utilize AI and IoT• Japanese government policy for promoting PPP and PFI*

Opportunities and Risks• Recruitment of engineers to keep up with advances in AI and IoT,
and promoting the introduction of robots• Decline in price competitiveness in the market• Need for unattended processes to prevent the spread of COVID-19

Key Initiatives of the Medium-Term Management Plan
Key Initiative1

Key Initiative2

Key Initiative

3

Developing New Markets for Material Handling
Systems for the Logistics Market
Strengthen sales activities focused on new products
targeting the logistics market.
Expanding Sales of Hybrid Facilities
Focus on increasing sales and expanding marketing
channels for hybrid facilities that combine conveyors
and robots.
Improving the Efficiency of Our Production System to
Improve Productivity
Establish a production management system at the
Yamato Product Center, our main production basefor conveyors, to improve productivity and quality
and promote next-generation technologies.

Opportunities and Risks• Slowing social infrastructure investment due to the declining
population and high coverage rate
•Price fluctuations and other unexpected events over the course oflong-term operation and management•Market expansion due to improved hygiene in developing countries

Key Initiatives of the Medium-Term Management Plan
Key Initiative1

Key Initiative2

Key Initiative

3

Seeking Further Expansion in Sales of Strategic Products
Refine and expand sales of core products that meetenergy saving and energy creating needs
Further Promoting the LCE BusinessConduct a collaborative Group effort to expand the
LCE business, such as upgrading, maintaining, andmanaging water treatment and waste treatment plants.
Developing New Business Areas
Explore new business areas in which we canleverage our proprietary technologies in theEnvironmental Systems Business, such as biomass
power generation plants and facilities for treating
pharmaceutical and medical wastewater.

◦While orders received for conveyance systems
fell in line with changing market conditions, there
was robust demand for automation due to thedeclining labor population, resulting in steady sales
growth for hybrid facilities that combine robots withconveyors.
◦The Yamato Product Center, our main production
base for conveyors, began full-scale operationsin September 2019. This marked the completed
aggregation of our Machinery Systems Businessat Sanki Techno Park, allowing us to integrate
the management of sales, technology, andmanufacturing functions.
◦We bolstered the conveyor marketing system topursue sales activities geared to local needs.

Yamato Product Center

Major Projects◦TOHAN Wako Center (relocation work for a shipping facility
and the design and construction of a new building)◦O saka Customs (design and construction of a customs
inspection instrument for international mail)Plants & Machinery Systems Business

34.4

Major Results for Fiscal 2019

Orders Received (Billions of Yen)
38.7

billion yen

Machinery Systems BusinessBusiness Report

The Plants & Machinery Systems Business, which comprises the Machinery
Systems Business and the Environmental Systems Business, contributes tosocial development by creating comfortable environments through engineering,which is the essence of our Management Philosophy. Since the completion of
the Sanki Techno Center as a comprehensive training and research facility, we havesought to concentrate the facilities and personnel of these two businesses at this site toestablish a major platform for our technology. Our next challenge is to vigorously exchange
technologies and ideas across business divisions and companies to meet the specific,
exacting needs of our customers. Always heeding their voices, we will contribute to resolvingsocial issues by focusing on attaining the goals of the Medium-Term Management Plan “Century
2025” Phase 2, which includes developing next-generation technologies and providing original
solutions to promote automation, save labor and energy, and efficiently generate energy.

Status of Business Operations and Future Outlook toward Achieving Phase 2
Establish a Production Management System for the
Yamato Product Center
To maximize the production capacity of the Yamato
Product Center as a new factory, we will optimize
the production management system to improve theefficiency of conveyor production and reduce costs.
Furthermore, we will enhance functions for verifying
the performance of conveyance systems, including
hybrid facilities and new products for improved quality
and stability. And we will use the Sanki Techno Centeradjacent to the plant as a center for innovation toaccelerate the pace of new product developmentby sharing information across business divisions incollaboration with the R&D Center.
Develop Packaged Deals and Broaden the ProductLineup for Hybrid Systems for Diverse Automation
Needs
We will use the Yamato Product Center as the corefacility to promote packaged deals for hybrid systems
and broaden our product lineup in response to thediverse automation needs of the food industry andmedical institutions.

Increase Sales of Logistics Equipment and Develop
New Products in Response to Market Expansion
In response to the expanded logistics market brought
about by the spread of e-commerce and accompanying
rise in labor saving and automation needs, wewill promote sales of logistics equipment such as
customized conveyor and sorting devices. In April
2020, we set up the Information Control Department
to provide production management systems. We will
also develop robotic materials handling systems for thediversifying needs of the logistics site.
Promote Sales Geared to Local Needs and Establish
New Sales Bases
We will seek to increase orders for standard conveyors
by promoting sales geared to local needs while at thesame time establishing new sales bases. Moreover, we
will use our sales networks for standard conveyors todevelop new customers for hybrid facilities.

*Public-private partnership, which provides public services through public-private sector collaboration, and private finance initiative, a major PPP method.

36

SANKI REPORT 2020

SANKI REPORT 202037┃ Business Report ┃ Plants & Machinery Systems Business

Focus

Environmental Systems Business◦Orders received increased as we won orders forlarge-scale waste treatment facilities and water supply
and drainage disposal plants. Sales growth was led bystrategic products such as our decanter centrifuge andultra-fine bubble air diffuser.

Value provided
by SankiEngineering◦We received a second order for a woody biomass
gasification power generation system, which we havebeen aggressively promoting.

◦The continuous heat sterilizer for treating medical andpharmaceutical wastewater, for which we received
the first order in fiscal 2018, commenced operation at
two locations.

Tsushima Clean
Center renovation
project

Major Projects◦Tenzan area energy recovery waste treatment facilities
construction work
◦Tsushima Clean Center renovation work for key facilities◦S endai Clean Center renovation work for key facilities◦Tokai City Purification Center construction work for a water
treatment facility

TOHAN Wako Center, a Shipping Base for New Titles that Supports the Culture of Publishing

Constructing a Shipping Facility that Saves Energy and Labor◦Considerable improvement in operational efficiency from the arrival of books to shipment◦ICT system that ensures thorough management of processes and risks◦HVAC facility that creates a comfortable working environment

In May 2019, the TOHAN Wako Center commenced
operations as the new shipping base for new titles at
Tohan Corporation, which distributes publications. SankiEngineering was responsible for relocating the shipping
facility to the TOHAN Wako Center as well as thedesign and construction of a new building.
The new shipping facility spans 1,800 meters. Allbooks that arrive from the publishers are sorted via
two lines into those destined for large stores and thosefor small- to medium-sized shops, and they are moved
into the inspection and shipping lines to be dispatchednationwide. We installed DAS* shipping equipmentwith digital displays in the sorting line for large
bookstores and adopted weight inspection machines forinspecting and shipping. The shipping line is equippedwith a system for sorting books by destination to saveenergy and labor. In addition, Sanki Engineering handled
the design and new construction of the ICT, HVAC,
and electrical systems, thus meeting comprehensive
customer needs as a total engineering company.

Plants & Machinery Systems Business◦We completed construction of the Tenzan area
energy recovery waste treatment facilities, a DBO
project including construction and management
operations that we had received as a bulk order.
Our Group company Sanki Kako Kensetsu Co., Ltd.,
responsible for operational management, repairs, andmaintenance, began a 20-year period of operations.

Business Report

Machinery
Systems
Business

Major Results for Fiscal 2019

Shipping conveyor for small- to medium-sized bookstores*Digital Assort System

Focus
Status of Business Operations and Future Outlook toward Achieving Phase 2
Increase Orders for Large Projects Including
Strategic Products
We expect consistent demand for infrastructure
upgrades primarily in major cities in response tochanges in society and the environment, such asa declining population. We will strive to increase
orders for large-scale projects by highlighting ourstrategic products, including the SANDEC G3 decanter
centrifuge, AEROWING II ultra-fine bubble air diffuser,
and turbo-charged fluidized bed combustion system. In
addition, we will maintain our efforts to bolster private
sector sales for products such as the continuous heatsterilizer used to treat medical and pharmaceuticalwastewater.
Bolster the LCE Business with a Focus on Energy
Conservation and Generation
We will actively engage in government initiatives
funded by the private sector, such as the PPP/PFI and
DBO projects. We will also ensure stable operations of
the DBO project Tenzan area energy recovery waste

treatment facilities through strong collaboration among
Group companies.
In our new business of woody biomass gasification
power generation systems, we will pursue new orders
through Group-wide collaboration to provide total
engineering and toward further expanding the LCE
Business with a focus on creating energy.
Expand Business Areas by Leveraging Proprietary
Technologies
We will deploy our diverse array of specialized
technologies that extend beyond our business, suchas at the R&D Center, to seize new opportunities
in a timely manner. Moreover, we will contribute toimproving hygiene in developing countries by leveraging
Sanki Engineering’s proprietary technologies, suchas the DHS-based wastewater treatment unit, whichhelps lower costs and save energy associated with
wastewater treatment.

Environmental
Systems
Business

Value provided
by SankiEngineering

Clean Hill Tenzan, Energy Recovery-type Waste Treatment Facilities with
Comprehensive Environmental Protection Features

First DBO Project for Construction and Management
Involving New Construction Work
◦Ensures efficient, long-term waste treatment◦Safe and secure facility that is resilient to disasters◦Contributes to developing the regional community and creating a zero-waste society by blending into thesurrounding environment

The Clean Hill Tenzan energy recovery-type waste
treatment facilities were completed in March 2020,
marking the start of a 20-year period of operational
management by Group company Sanki Kako KensetsuCo., Ltd. This was the first bulk order for construction
and management operations received by the SankiEngineering Group under the DBO method that involved
new construction work.
The order for Clean Hill Tenzan was placed by the
Saga Prefecture Tenzan Area Environmental Cooperative
as a project to build a common garbage incinerator for
Taku City and Ogi City in Saga Prefecture. The projectis intended to maintain proper treatment of generalwaste in a safe and secure manner and promoteenergy recovery toward the creation of a zero-waste
society. We installed the most advanced facilities andsystems centered on our proprietary water-cooled stoker
system to achieve a processing capacity of 57 tonnesof waste per day, and we used the recovered heat
energy to power the HVAC and other facility systems.
Looking ahead, we will continue environmentally soundoperations with a priority on safety and security.

Clean Hill Tenzan

38

SANKI REPORT 2020

SANKI REPORT 202039

┃ Business Report ┃Learn about Sanki Engineering’s businessactivities and business foundation

Real Estate Business

ESG Initiatives
42 Environment
50 Social

Net Sales and Net Sales Composition Ratio for Fiscal 2019

Net Sales (Billions of Yen)
2.2
1.9

2.0

1.7

2.2

billion yen

1%

1.5

1.5

Basic Strategies for
Fiscal 2020

71 Governance• Effective use of portfolio assets• Maintenance and management of
portfolio assets• Raise revenues from building stockbased business by accumulating
leasing operations

2015 2016 2017 2018 2019 2020 （FY）
Forecast

Market Conditions

Opportunities and Risks• Redevelopment continues in urban areas such as Tokyo and Osakaalong with steady demand for offices.
• Increase in third-place offices and other coworking spaces• Decline in rental fees and prolonged period of vacancies• Growing need to conserve energy and resources, extend the lifeof aging buildings, and ensure longer life for facilities• Need to improve office environments using advanced
technologies such as AI and IoT

Major Results for Fiscal 2019
◦Net sales rose from the previous fiscal year due togrowth in rental income following the start of tenant
operations centered on a portfolio asset in Yamato
City, Kanagawa Prefecture (Sanki Yamato Site).
◦The launch of full-scale operations of the Yamato
Product Center in September 2019 marked thecompletion of the STeP (Sanki Techno Park) project
for the Sanki Yamato Site, which we had been
implementing since fiscal 2016.

◦Completed renovating the interior of the Molive
shopping mall in Moriyama City, Shiga Prefecture◦Completed construction in October 2019 for the
NISSAY Logistics Center YOKOHAMA-MACHIDA,
the logistics facility of Nippon Life Insurance
Company at the Sanki Yamato Site, which wehave been renting out since May 2018. SankiEngineering was responsible for constructing the
HVAC, plumbing, and electrical systems.

◦Completed renovating the elevator and upgrading
the central monitoring system at the Sanki Yamato
Building.

Policy and Outlook for Fiscal 2020
In fiscal 2020, we will maintain our efforts to increase sales and profit for the Real Estate Business by applying SankiEngineering’s technologies and know-how to the maintenance and management of portfolio assets. At the Sanki
Yamato Building, we will seek to raise customer satisfaction by enhancing facilities in response to the increase in tenant
employees. We will continue to upgrade the elevator, rooftop air conditioning unit, and electrical substation. Facility
renovations at the Molive shopping mall, such as upgrading the escalator control systems, will also be continued tomaintain tenant satisfaction and a pleasant shopping experience.

40

SANKI REPORT 2020

Photography: conveyor and sorting device “Cross Belt Sorter CB II”

41

ESG Initiatives
Environment

SocialGovernance

Environmental Management at Sanki Engineering

1. We will strive to prevent environmental pollution and work further toward conserving resources and energy, reducing
industrial waste, promoting recycling, preserving biodiversity and protecting ecosystems.
2. We will actively develop proposals on resource and energy conservation when designing facilities.
3. We will comply with laws and regulations related to the environment and with external requirements agreed to by the
Sanki Engineering Group.

FY2021 Goals

Providing products and services to help reduce
CO2 emissions of customers

Reducing CO2 in business activities

Ta r g e t

Ta r g e t

CO2 reduction proposals in SANKI YOU EcoContribution Point System (consolidated)

CO2 emissions (actual results at our offices)(non-consolidated)

More than 300 proposals

1% lower than in previous fiscal year

Strengthen proposal-making capabilities
and increase proposals

Promote energy conservation in business activities

FY2019 Results
CO2 reduction proposals in SANKI YOU Eco Contribution Point System(consolidated)

181 27,624
Orders received:

Number of proposals: 405(FY2018: 183 orders received)

42

SANKI REPORT 2020

Contribution to reduction:

t-CO₂(FY2018: 20,699 t-CO2)

CO2 emissions (actual results at our offices)(non-consolidated)

9,177●● Major Activities in Fiscal 2019
We pursue our activities by having each section set environmental goals alignedwith their respective operations. Major policies for fiscal 2019 were: (1) Enhance
Environmental Aspects Assessment and (2) Improve the introduction rate ofdigital manifests.
No issues were reported regarding noise, dust, or odor at construction sites.
In May 2019, Sanki Engineering Co., Ltd. and Group company Sanki Kako
Kensetsu Co., Ltd. were found to have unlawfully altered the measured values
for two out of 31 data items required for disclosure at an incineration facility
constructed by Sanki Engineering. We addressed the issue by providing an
explanation at a meeting with local residents organized by the relevant regulatory
body, temporarily suspending the ISO 9001 certification of the Environmental
Systems Administration Division at Sanki Engineering and the ISO 14001
certification of Sanki Kako Kensetsu from September to October 2019, voluntarilysuspending the use of the ISO 9001 and 14001 certification by Sanki Engineeringand Sanki Kako Kensetsu from April to September 2020, taking disciplinary action
by cutting executive compensation, organizing ethics seminars for the relevant
departments, and formulating internal auditing checklists. In March 2020, we
implemented corrective work, verified the performance of the relevant facility, andreceived approval from a third-party institution and the owner of the facility. We areaware of the gravity of this incident and take full responsibility. We will bolster ourcompliance education and management system to prevent a recurrence.
●● Assessment and Response to Environmental Risks and Opportunities

Major Action Policy and Initiatives for FY2020

The 2015 version of the ISO standard calls for “visualization” as a requirement
listed under “Initiatives on Risks and Opportunities.” To address this, we use theJOB Environmental Aspects Assessment List to identify environmental issues
that are unique to each construction site, bylaws governing site location, regional
agreements and more. There is an infinite variety to type, scope and regulatory
requirements with respect to environmental risks, depending on the projecttype, such as medical institutions and commercial facilities, and the surrounding
environment, community and nature of construction work. The assessment list
consists of 10 aspects and around 60 items, and, prior to the start of construction,
we seek appropriate action by conducting an environmental risk assessment foreach project. In fiscal 2019, we revised the document format, such as categorization,
to clarify the connection between employee tasks and environmental impacts.
●● Developing Environmental Leaders

We encourage employees to acquire environment-related qualifications in responseto regulatory changes.

t-CO₂

Page 51

Our Contribution to the Global Environment

The Sanki Engineering Group recognizes environmental issues as key management issues and will actively
engage in protecting the working environment, local environment and global environment as a corporate
citizen. We have established our environmental goals and framework of action as follows.

Reference
Quality and Environmental
Management System

Environment

Established April 1, 2015
Revised April 1, 2020

Sanki Engineering Environmental Policy

ESG Initiatives

E

Our Contribution to the Global Environment
nvironment●● Environmental Management System
Under our system for implementing environmental management, headed by thepresident, each division reports on the status of its activities, and decisions onaction plans are made during ISO Promotion Meetings and company-wide EMS
and QMS secretariat meetings.

Environmental Aspects Assessed
under the JOB Environmental
Aspects Assessment List
1.	Use of resources andenergy2.	Reduction and proper
disposal of waste
3.	Abnormal situations andoutflow of contaminants
4.	Consideration for areas
surrounding construction
sites
5.	Consideration for uniqueenvironmental needs
6.	Natural disasters
7. Legal compliance
8. Other local bylaws
9.	Temporary materials andequipment, and office andother supplies
10. Other aspects■■Number of Employees with Environment-related Qualifications (as of April 1, 2020)

Qualification
Certified environmental measurer

Non-consolidated

Consolidated

8

9Supervisor of management of industrial waste subject to special control

177

194

Pollution prevention manager (cumulative total)

73

96

SANKI REPORT 2020

43

ESG Initiatives
Environment

Contributing through Our Products and Technologies■■Proposals for CO2 Reduction and Outcomes■■R&D Expenditures Related to Environmental Preservation

624.5

Numbers

Consolidated

345

Nonconsolidated

Numbers

56,205353

313

54,877

Consolidated

183

Nonconsolidated

168

Numbers

NumbersCO2
reduction

47,905411

50,072405

45,685

321

46,143370

45,531377

44,756

27,624

166

16,949183

20,699181

27,62427,319157

16,599163

16,608163

27,221

Orders received
Trans-Heat Container for delivering
thermal energy

Customers
1. Propose
energysaving
solutions(Millions of Yen)

610.5

Propose using energy-saving
equipment to reduce CO2 emissions

2019

（FY）

●● Registered ZEB Planner
Sanki Engineering is a registered ZEB Planner, which seeks to promote thewidespread introduction of ZEBs*1 introduced by Japan’s Agency for Natural
Resources and Energy, under the Ministry of Economy, Trade and Industry. As
a ZEB Planner, we act as the contact point for customers planning to adopt
ZEB in construction projects and play our part in developing a decarbonizedsociety by supporting ZEB planning. In fiscal 2019, we worked on theconstruction of a ZEB Ready*2 building equipped with highly efficient energy
saving facilities. Construction was completed in July 2020.
●● SANKI YOU Eco Contribution Point System
The Sanki Engineering Group’s SANKI YOU Eco Contribution Point System
contributes, along with our partners, to preventing global warming andrealizing a sustainable society. Under the system, when we propose anenergy-saving solution that reduces CO2 emissions to a customer and that
proposal is adopted, the amount of the achieved emissions reduction isconverted to Eco Contribution Points (100 yen per tonne), which are used
to subsidize environmental conservation activities. In fiscal 2019, customers
adopted 181 of our proposals, resulting in donations of 2,762,400 yen(equivalent to a 27,624 t-CO2 reduction), raising the overall total of donations
since the start of the program in fiscal 2010 to 21,203,200 yen, withapproximately 17,000 trees planted, equivalent to an area of 5 hectares.
The system celebrated its tenth anniversary in fiscal 2020.

2.	Proposal
adoptedSanki Engineering
3.	Convert each tonne of
reduced CO2 to 100 yen

2018

The logo of the SANKI YOU EcoContribution Point System expresses
our aspiration to contribute to social
development and create harmony with
the natural environment.
ECO2: We reduce CO 2 emissions throughour Contribution to ecology■■SANKI YOU Eco Contribution Point System

214.1

2017

FY2019CO2
reduction

Proposal

Woody biomass gasification plant

2016

FY2018CO2
reduction

424.8

2015

FY2017CO2
reduction

Our Contribution to the Global Environment

675.5

FY2016(CO2 Reduction Unit: t-CO2/Year)

Environment

The Sanki Engineering Group seeks to help customers save and generateenergy to reduce CO2 emissions and cut lifecycle costs through its businessactivities by enhancing functionality and comfort through the products andtechnologies offered by each of its businesses. In our LCE business, weseek to reduce environmental impact across the entire product lifecycle, fromplanning and design in facilities construction to operational maintenance after
completion and also renovation. This assists in shifting to a decarbonized,
zero-waste society as well as environmental preservation. Our MediumTerm Management Plan designates numerical targets for the number of CO2
reduction proposals we present customers. We will also strive to expand
the business field of saving and creating energy, such as biomass power
generation plants, and pursue resource circulation through wastewater
treatment facilities and waste treatment facilities.

Governance

ESG Initiatives●● Contribution to Decarbonization and the Creation of a Zero-Waste Society

Social4.	Donate theannual total

Environmental
conservation activity*1 Net-Zero Energy Buildings maintaincomfortable environments while
reducing annual energy consumption
to as close to zero as possible byenhancing energy saving performanceusing solar power generation and othermeasures.
*2 ZEB Ready applies to buildings thatmeet the requirement of reducing
primary energy consumption by atleast 50% from benchmark primaryenergy consumption without using
renewable energy sources.

• Donations to Tree-planting Projects
Recipients of donations were selected from the framework of global
environmental preservation activities mainly handled by private non-profit
organizations. In fiscal 2019, we donated to three projects in which our
employees participated.
■■Donation History for Tree-planting Projects (FY2019)

Recipient

Project

Donation

Silva Association

Tree planting for a forest surrounding Shonan
Village (Yokosuka City, Kanagawa Prefecture)

860,000 yen

Shinwa Gakuen

Tree planting for a forest surrounding Shonan
Village (Yokosuka City, Kanagawa Prefecture)

860,000 yen

NPO Mori wa Umi no Koibito

Tree planting for the Hikobae Forest on Mt.
Yagoshi (Ichinoseki City, Iwate Prefecture)

819,700 yen

Reference
Tenth anniversary of the SANKI
YOU Eco Contribution Point System
page 30

Employees planting trees

44

SANKI REPORT 2020

SANKI REPORT 2020

45

ESG Initiatives
Environment

SocialGovernanceInitiatives for Saving Energy and Resources in
Business Activities●● Initiatives for all Corporate Activities■■CO2 Emissions at Construction Sites (Derived by Energy Consumption)

Sanki Engineering seeks to reduce its CO2 emissions by compiling andmanaging emissions generated by its business activities. We set numericaltargets for CO2 emission reductions in the Medium-Term Management Plan.

ESG Initiatives• Initiatives at Construction Sites
We strive to limit CO2 emissions generated by our business activities bycompiling and managing the emissions discharged at construction sites where
Sanki Engineering is the prime contractor.
(Unit: t-CO2)

746
537

525

2015

2016

465

430

2018

2019

Environment■■CO2 Emissions in All Business Activities (Derived by Energy Consumption)(FY2019, non-consolidated)

Real Estate Leasing

4,913 t-CO2

Offices*

Total Emissions

9,177 t-CO

*Scope of data: head office, other offices,and construction sites

4,264 t-CO2

Proper Disposal of Waste●● Current State of Industrial Waste
With respect to industrial waste discharged at our construction sites, we seek
to understand the current status by compiling data on waste discharged atsites where Sanki Engineering is the prime contractor.
We have maintained the recycling rate for industrial waste, excluding
waste disposed at final landfill sites, at high levels above 90%, and the rate
was 97.2% in fiscal 2019. We will continue to promote proper disposal bymonitoring and analyzing the discharge of industrial waste. In fiscal 2019, thewaste disposal cost for construction sites was 496,554,000 yen. Furthermore,
we have been properly disposing waste CFC and halons, the cost of whichwas 37,803,000 yen in fiscal 2019.
In addition, following the revision of the Waste Management and Public
Cleansing Act, we created and distributed posters to disseminate the revisions
in storage and disposal procedures for waste containing mercury. We also
prepared a flow chart for the proper disposal of asbestos in order to addressneeds arising from an increase in renovation work.

■■Energy Consumed by Offices (Crude Oil Equivalent)■ Group companies (kl)■ Sanki Engineering Co., Ltd. (kl)

1,800
104
1,696

2016

1,696
115

2,133
107

1,581

2,026

2017

2018

2,356
121

2,235

2019

（FY）

Energy Saving Systems Installedat Group Facilities■■CO2 Emissions Generated by Energy Consumption at Offices■ Group companies (t-CO2 )■ Sanki Engineering Co., Ltd. (t-CO2 )

3,174

3,589
212

3,377

2015

2016

3,281
221

3,060

2017

4,012
199

3,813

2018

◦ Sanki Techno Center

4,488
224

• EcoSearcher®, a real-time heatsource optimization system(proprietary technology)• selFort®, a smart air conditioning
system for offices (proprietary
technology)

2019

（FY）

• periloop, a thermal stratification
air conditioning system(proprietary technology)• Solar photovoltaic panels

Sanki Techno Center■ Discharge by Group companies (t) ■ Discharge by Sanki Engineering Co., Ltd. (t)Recycling rate* for Sanki Engineering Co., Ltd. (%)

20000
20mm

96.9

98.7

98.0

17,9642,060

17,025

14,424

15,904

2015

46

SANKI REPORT 2020

Explanation for handling CFC
during HVAC inspections■■Waste Discharged at Sites where Sanki Engineering is the Prime Contractor and at the◦ Yamato Product Center

4,264

Our Contribution to the Global Environment• Campaign to Reduce Copy Paper
We have consistently engaged in activities to reduce copy paper use in our
offices. To some extent, we have been effective in making a reduction, andthe campaign is now well established at each office. Throughout the SankiEngineering Group, we will continue reducing paper use by utilizing IT devices
to save resources.

• Energy Conservation Activities
In fiscal 2019, energy consumption was 2,235 kl, and CO2 emissions
generated by energy use was 4,264 t-CO2 on a non-consolidated basis. Energy
consumption rose by 10% in fiscal 2018, as that year we began full-scale
operations at the Sanki Techno Center and Yamato Product Center, which areessential for improving Sanki Engineering’s technology and promoting humanresource development. We strive to reduce energy use at these facilities by
incorporating several energy-saving systems, including those that apply our
proprietary technologies.

2015

（FY）

2

●● Initiatives for Energy Conservation

1,589

2017

2016

1,003
16,022

2017

97.8
18,482
1,971

16,511

2018

97.2
17,321986
16,3352019（FY）

Poster: “How to handle mercurylaced industrial waste”*Target rate: 90% or higher

SANKI REPORT 2020

47

ESG Initiatives
Environment

Dispatching Engineers to the Japanese Antarctic Research Expedition
Installing a New HVAC and Plumbing Facility in the Basic Observation Building and Providing Repairs and Maintenance(Unit: %)Rate of Introduction of Digital Manifests (%)

TargetTarget rate

88.4
68.5

VOICE

Environment■■Rate of Introduction of Digital Manifests (Non-consolidated)

Governance

ESG Initiatives●● Introduction of a Digital Manifest
With the aim of ensuring the proper disposal of industrial waste, in fiscal
2018, we completed a system for introducing digital manifests, which is now
available to all departments. The rate of introduction of digital manifests to thetotal number of manifests issued was 96.0% against the target of 95.0% on
a non-consolidated basis in fiscal 2019. To comply with regulatory revisions
obligating the use of digital manifests, we will raise our target to 100% on a
non-consolidated basis by fiscal 2020. To achieve this goal, we will continue
to reinforce our system for accurately monitoring the status of disposal andrecommend that business partners who have yet to connect to the digitalmanifest system do so.

Social

91.4

96.0

100

67.9

47.2

Our Contribution to the Global Environment

No. 5 Air-conditioning & Plumbing
Field Engineering Department,
Toyota branch office

2014

2015

2016

2017

2018

2019

2020

Hiroaki Kurashima(FY)(Photograph taken by Mr. Kurashima)

TopicsConserving the Global Environment with Sanki Technology

Saving Energy with the EcoSearcher® Real-Time Heat Source Optimization Service
Sanki Engineering participates in the ESCO project*currently underway at the Kamihama Campus of Mie
University. Our goal is to save energy by installing
the EcoSearcher®, real-time heat source optimization
service, in the campus energy center for optimal
management of the heat source and conveyor system.
The use of EcoSearcher® is intended to minimize theoverall energy consumed by the heat source system of
an HVAC facility. Unlike conventional methods basedon predetermined estimates, EcoSearcher® measuresreal-time data for each unit of equipment under control
to improve the accuracy of calculations and expand
control functions, thereby enabling optimal operations
with a high level of accuracy and efficiency. Our
technology reduces energy consumption by 3.8% and
CO2 emissions by 918 tonnes a year.
*In an Energy Service Company project, the costs of energy-saving renovations are offset by resulting reductions in the costs of light, heating, andwater utilities.

48

SANKI REPORT 2020

Sanki Engineering’s relationship with the Japanese
research expedition to Antarctica began in 1957,
when we delivered roller conveyors for the second
expedition. Since the Protocol on Environmental
Protection to the Antarctic Treaty was adopted in
1991, we have been seconding engineers to the
National Institute for Polar Research, who were thendispatched to the Showa Base as staff responsible
for environmental conservation. The expedition iscomposed of roughly 60 members divided into either
the summering or wintering parties. To date, SankiEngineering has dispatched 15 members, including
myself. Waste and wastewater are generated by
the Showa Base as members live there each day.
Starting with a survey of actual conditions at thebase, Sanki engineers have been surveying waste,taking measurements, and surveying wastewater
volume and quality as well as delivering, launching,
maintaining, and managing the wastewater

Aurora over the skies of Antarctica (Photographtaken by Mr. Kurashima)processing facility.
In November 2018, I set off for Antarctica asa member of the wintering party of Japan’s 60th
research expedition. I spent about 14 months at theShowa Base in Antarctica, beginning in mid-December
2018, where I worked on the construction of the
HVAC and plumbing facility for the Basic Observation
Building, which was completed in November 2019. I
also provided repairs and maintenance for the HVAC,
plumbing, and fuel facilities in the main building thatserves as the living quarters. Repair and maintenanceof infrastructure in Antarctica is a vital responsibility
on which the lives of expedition members depend.
Being able to apply my skills and experience tosupport the Antarctic research was an extremely
valuable experience. Looking ahead, the SankiEngineering Group will continue to support Antarctic
research with total engineering and contribute to theconservation of the global environment.

Repairing and maintaining infrastructure (Photographtaken by Mr. Hirota of 60th research expedition)

Getting to know the local penguins(Photograph taken by Mr. Kurashima)

SANKI REPORT 2020

49

ESG Initiatives
Environment

SocialGovernanceInitiatives to Ensure Quality

Basic Principle■■Framework for Promoting the Quality and Environmental Management System

Top Management (President)
ISO Promotion Conference

Reports on Company-wide activities anddecisions on plans
Held in September 2019

FY2021 Goals

Approves annual policy
on QMS and EMS

General Manager of the Quality and Environmental Management Office
Company-wide QMS and EMS Office
Conference
Held in February 2020

Reduce the number of problems and complaints
during construction

Introduce new labor-saving construction
technology

Ta r g e t

Ta r g e t

Reduction rate for number of problems andcomplaints during construction (consolidated)

Number of sites introducing new labor-saving
construction technologies

Reduce by 5% year-on-year through divisional collaboration

Management MeetingEachdivision

Company-wide QMS and EMS Office(Labor Safety, Health, Quality Management& Environment Promotion Office)◦ ISO 14001

3 companies:
Sanki Engineering Co., Ltd.
Sanki Kako Kensetsu CO., Ltd.
Sanki Kankyo Service Co., Ltd.

◦ ISO 9001

2 companies:
Sanki Engineering Co., Ltd.
Sanki Kankyo Service Co., Ltd.

Our Response to ISO 9001 and
14001 Noncompliance◦ Voluntary suspensionof ISO 9001 and 14001
certifications◦ P enalty for directors(reduced compensation)

Ensuring Quality and Enhancing Technologies

To fully demonstrate the Sanki Engineering Group’s comprehensive capabilities and proposal-making
capabilities, we have been strengthening the functions of our sales organization at the head office byintegrating operations to boost sales management, planning, development, support, and sales capabilities
related to the Facilities Construction Business. We will meet the increasingly sophisticated and diversified
needs of customers and thereby continue to earn their trust and appreciation.

Group Companies withISO Certification

SocialEnsuring Quality and Enhancing Technologies
ocial

Since April 2017, we have been operating an integrated quality management
system based on the ISO 9001 (QMS) and ISO 14001 (EMS) standards.
In fiscal 2019, we held discussions focused on creating mechanisms
and cultivating human assets to raise the quality of internal audits during
the Company-wide QMS and EMS Office Conference. That same year, thequality management of a Sanki Engineering Group project was found to beout of compliance. An extraordinary audit held on September resulted in thetemporary suspension of ISO 9001 certification at the relevant division and of
ISO 14001 certification at the relevant Group company. The suspensions werelifted following another extraordinary audit on preventive measures in October.
In response to the incident, Sanki Engineering has voluntarily suspended theuse of its ISO 9001 and ISO 14001 certifications for six months starting with
April 2020. We will take further action to ensure the stringent execution of ourquality management system.

ESG Initiatives

S●● Philosophy on Quality and the Quality Management System◦ C onducted ethics seminars
for relevant divisions

Reference
Major Activities in Fiscal 2019,
Environment
Page 43

Divisional Managers (heads of sections, general managers of the headquarters,
general managers of research centers, heads of business divisions, presidents ofbranches and branch offices)
Divisional Management Review

Reports on divisional activities andformulation of plans (twice per year)

Quality and Environmental Management Officer
Divisional QMS and EMS Office

Sales, Design, Production, Construction and Office Duties

WEB
ISO 9001 Scope of Accreditation
https://www.sanki.co.jp/en/csr/
stakeholder/

Major Action Policy and Initiatives for FY2020
Conduct training and seminars toward preventing
problems and complaints

Encourage employee proposals for labor-saving ideas
in the construction process

FY2019 Results
Reduction rate for number of problems and complaints during
construction (consolidated)

Down

31.6

% from FY2018(FY2018: down 14% from FY2017)50

SANKI REPORT 2020

Number of sites introducing new labor-saving
construction technologies

11

sites

●● Quality Management Activities
We advance construction quality with an emphasis on improving
communication. Enhancing our support for construction sites and offering
rapid, constructive responses to problems and complaints are areas in which
we consistently seek to raise our standards.
●● Understanding Customer Satisfaction and Utilizing Feedback
In our work to improve construction quality, we conduct a customer
satisfaction survey at the completion of construction work and reflect the
feedback in our operations. In fiscal 2018, we received highly positive
feedback from about 90%* of the 861 respondents. The content was revised
by some divisions, and we began applying the new format in fiscal 2019.
Looking ahead, we will continue to incorporate customer opinions into ouroperations to enhance construction quality.

*Calculated by regarding the following
options in responses deemed as“highly positive feedback:” “Somewhat
satisfied” or above for the Facilities
Construction Business, “High” or above
for the Plants & Machinery Systems
Business, and 70 points or above for theEnvironmental Systems Business

SANKI REPORT 2020

51

ESG Initiatives
Environment■■Customer Satisfaction Survey (FY2018)

Normal:9%Highly satisfied:
51%

Low: 8%

Facilities
Construction
Business*1
Medium: 27%

64 points or lower:
0%
65 to 69 points:
17%

80 points or
higher: 35%

Environmental
Systems
Business*3

70 to 79 points:
48%

*1 C
 ompiled from customer satisfaction
data based on the final handover report.
*2 C ompiled from customer satisfaction
survey for each process.
*3 C ompiled from customer satisfaction
data based on the construction work
performance rating●● Sharing Information and Preventing the Occurrence of Problems and Complaints
復旧忘れにご用心！！

休日工事明け、電話等の復旧忘れにより、トラブルが発生するケースが多発しています。

休日工事明け、電話等の復旧忘れにより、トラブルが発生するケースが多発しています。

休日工事明け、電話等の復旧忘れにより、トラブルが発生するケースが多発しています。

■■Site Support System

Targeted Site

52

SANKI REPORT 2020

Design Support
CenterDesignArea of support:

Quality Control
CenterDesignA new version of poster for raisingawareness of preventing problems
and claims is created each month anddisplayed at worksites.

Start of construction

Procurement
Division

Technical Support
CenterArea of support:

Area of support:

Procurement

Technology

Area of support:

Quality

Site support organization at eachbranch office (Engineering Section)
Area of support:

Documentation

Construction
Completion●●  Providing Operational Support for Construction Sites
To reduce the workload on construction managers and enable them to spend
more time on construction work and quality management, and to maintainhigh quality, we provide operational support from the perspectives of site
operations and design, technology and quality. We will also implement various
measures under the Smile Site Plan to reduce the workload of construction
managers, raise operational efficiency and enhance quality.

●● Supporting Design and Technical Operations
The Design Support Center provides design and technical assistance. In fiscal
2019, we expanded the scope of support, which led to an increase in thenumber of cases in which continuous support was provided from design tocompletion. In fiscal 2020, the center will continue to pursue higher design
quality by broadening the scope of support and providing information.
The Technical Support Center seeks to reduce the burden on construction
managers by allocating operations preceding construction work to each relevant
department. In fiscal 2019, we sought to bolster support for site launches at theSupporting Organizations and Areas of Support

Planning

Contracts

Initiatives on Quality Based on Support for Construction Sites●● Support for Site Operations
The support sections of each branch and branch office, as well as the Technical
Administration Division, Procurement Division and Information Systems Office,have taken action to reduce the administrative burden at a construction site. We
are also raising the efficiency of our operational processes by sorting, reducing,and digitizing documents used at construction sites.
In fiscal 2019, we reviewed and improved the Web registration process atmajor sites to strengthen the management system.

Quality check by quality assurance
administrator

Ensuring Quality and Enhancing Technologies

We accumulate and share our quality-related experiences across the Company
by means of technical documents in order to prevent the occurrence ofincidents and complaints related to quality or, in the event they do occur, tohandle them quickly and effectively.
Information about problems and complaints are distributed to constructionengineers through a flash bulletin, the “weekly bulletin” (a weekly meetingof the Problems and Claims Evaluation Committee, which is also attended byGroup companies), and the “monthly bulletin,” which discusses the causes ofissues, corrective measures, and preventive measures. We have been seeking
to reduce the number of problems and complaints by setting qualitative
targets and in fiscal 2019 reduced them by 31.6% year-on-year thanks tovarious measures related to providing onsite support. Looking ahead, we will
focus on bolstering our support to raise customer satisfaction.

SocialSomewhatsatisfied:39%

Machinery
Systems
Business*2

High:
65%

five branch offices and technical support during the busy season.
In fiscal 2020, we established the Quality Control Center to clarify the
responsibility of our quality management and strengthen the activities of quality
assurance administrators and technical experts, who are highly skilled former officemanagers. They visit construction sites to conduct construction audits and quality
reviews as a means of improving quality and preventing problems and complaints,
while also mentoring junior employees. Moreover, we set goals each year to reduce
problems and complaints as an ongoing initiative while also thoroughly disseminating
information across the Company by issuing and sharing technical memos.
Such support has enabled us to reduce the number of problems and complaints
by 31.6% from the previous fiscal year, even though the number of construction
projects is on the rise. We will bolster the system of support and continue todevelop an environment that helps with the management of construction sites.

Governance

ESG Initiatives

Highlydissatisfied: 0%
Somewhatdissatisfied: 1%

SocialUse of Digital Tools to Enhance Quality Control
We hope to raise the level of construction quality by using digital tools suchas ICT and BIM, which we apply to automate processes used in design,
construction and acceptance inspections. Furthermore, in April 2019, weestablished the BIM Promotion Center to launch our initiative for medium- tolong-term use of BIM.
Site Documentation System(Octopus)◦ A new version was
deployed in October 2018
◦ E lectronic approval of
inhouse documents◦ U nification of document
format◦ Visualization of circular
reporting route

Digital tools developed by the
Sanki Engineering Group◦ Automatic wind power
measurement system withAGV
◦ Heat shock monitoring
systemEnhancing Our Technologies●●  Technical Awards for Improving Construction Methods andOperational Processes
In fiscal 2017, we began presenting awards for excellent ideas that improve
operational processes, such as raising efficiency, in addition to ideas that improve
construction work. As a result, we received 1,893 applications in fiscal 2019.
●●  Fostering Human Resources to Sustain Our Technological Level
The Sanki Techno Center fosters human resources by helping employees
acquire basic skills, brush up on skills, and attain qualifications. New
employees receive four and a half months of basic training and safety training.
The company conducts training for construction managers every three
years, and the content is based on how many years of experience themanager has in their role. As for the skills of our engineers, we develop themthrough hands-on practice and drills using actual machinery and facilities at the
Sanki Techno Center.

Training for new employees

SANKI REPORT 2020

53

ESG Initiatives

ESG Initiatives

Environment

SocialGovernance

Environment

SocialGovernance■■Number of Personnel with Quality-Related Qualifications (Totals as of April 1 for Each Fiscal Year)

FY2019Nonconsolidated
97
1,134

Professional engineer
Project management technician(civil works/construction/electricalconstruction/pipe-laying work)

FY2020Consolidated

Nonconsolidated

Consolidated

104

98

106

1,272

1,142

1,327

42

46

40

45

214

228

215

227

Electrical engineer

154

208

158

228

Chief electrical engineer

27

37

27

37

First class instrument engineer

295

305

298

309

Fire protection engineer
Qualified managing engineer

677

752

685

762

1,672

1,891

1,666

1,924

S

Securing Health and SafetyocialSocialArchitect
Facilities construction architect

Note: Cumulative figures are shown for all
qualifications.

Health and Safety Policy and Structure■■Major Skill Development Activities for Fiscal 2019

Initiatives

Training

Details of Training

Training for new employees

Initiatives at the
Sanki Techno
CenterInitiatives forpassing ontechnology

Results• Exam preparation for employees whowant to be construction managing
engineers and fire protectionengineers•2 to 3 sessions of 3 to 5 days of
training held at 3-year intervals• Standardized group-based training
Training based on operational
according to operational experience
experience*
Third year in construction work • Technical training using actual
Sixth year in construction work
equipment and mock-ups
Ninth year in construction work • Training in essential skills to prevent
problems and complaints related toconstruction management

118 participants

Initiatives for Safety
WEB https://www.sanki.co.jp/en/csr/safety/
7 sessions
172 participants• Practical on-the-job training offeredby technical experts selected fromall branches who participate in onsite
commencement discussions andconstruction audits

21 technical experts
3,004 site visits(cumulative total)

Conference on electricalconstruction quality for all
branches•T est of practical skills for electrical
technicians from subcontractors of
all branches, written exam based on
past cases. Participants receive theinternally certified qualification, SankiEngineering-certified Class A ElectricalEngineer

15 subcontractors
17 participating technicians• Introduce cases at briefings andliaison meetings held at branches andbranch offices

Number of sessions
Tokyo branch: 6
Kansai branch: 20
Chubu branch: 9
Kyushu branch office: 3
Hokkaido branch office: 2
Chugoku branch office: 3
Tohoku branch office: 2
Hokuriku branch office: 4

Explanation of problems andcomplaints*Started the training for the ninth year inconstruction work in FY2019

FY2021 Goals

On-the-job training
by technical experts

Initiatives forGroup companies
and subcontractors

The Sanki Engineering Group was one of the first in the construction facilities industry to introduce an occupational
health and safety management system (Sanki OHSMS) in 2001 and has since engaged in activities in partnership with
subcontractors. Under the Sanki Engineering Group Basic Health and Safety Principles, we formulate a Companywide health and safety activities plan based on the Safety Guidelines for each year. Also, we seek to visualize our
PDCA cycles, including the analysis of risk factors and implementation of remedial and preventive actions.

65 participants

Reduce the number of accidents
Ta r g e t

Reduce by 20% year-on-year
through cooperation among
divisions (Sanki Engineering Co.,
Ltd. and business partners)

To the Aluminium Plumbing Equipment Association (APEA) we provided construction
instructions for the Aluminger®* aluminum refrigerant piping method we developed.
By promoting the adoption of our method, which reduces labor by 25% compared toconventional methods, we are contributing to standardizing environmentally soundtechnology across the entire industry.
Moreover, we support the cause of the “IP Open Access Declaration against
COVID-19,” launched at the initiative of companies and universities to preventthe spread of the novel coronavirus, and participate in this initiative. We are also
promoting the use of our HVAC systems and other proprietary technologies as
our contribution to ending the pandemic.

SANKI REPORT 2020

Implement the Accident Prevention
Measures for Subcontractors

Continuation of the Healthand Safety Training

Ta r g e t

Ta r g e t

Visits to subcontractors

Promote health and safety
training sessions
for employees andsubcontractors

Ratio of accidents
Involving inexperienced workers

Major Action Policy and Initiatives for FY2020

18th conference on electrical construction
quality for all branches

Preventive measures and training
for reducing accidents

Collaborating in the Industry through Open Technology

54

Securing Health and Safety

Correspondence course forattaining qualifications

ESG Initiatives

Qualification*A new construction method whereby
lightweight aluminum pipes are usedinstead of copper pipes, and they areconnected with specialized tools to savelabor.

Measures for preventing accidents
involving inexperienced workers

Continuation of the Health and
Safety Training

FY2019 Results
Number of accidents:(Sanki Engineering Co., Ltd.
and business partners)

11(FY2018: 1 accident)

Ratio of accidents
involving inexperienced workers:

41%(FY2018: 44%)

Promote training and guidance on topics
such as the use of ICT

227

Health and
SafetyTraining for
employees andsubcontractors(FY2018: 178 sessions)sessions

SANKI REPORT 2020

55

ESG Initiatives
Environment

Initiatives in Fiscal 2019

Type

Policy of the Central Safety and Health Committee Chairperson

Key Actions
Safety 1. Deploy measures to achieve zero accidents• Educate inexperienced workers about safety rules• Foster safety awareness among new employees during
introductory training and education• Produce safety and health handbook and educational video fornewcomers• Share best practices for safety and health acrosssubcontractors, construction sites and site supervisors• Develop a video on accident prevention by category• Develop initiatives by involving the Sanki Health and Safety
Cooperative Association• Improve operational manual for risk assessment

2. Bolster site-support system• Support input and operational procedures for creating worksafety documents• Discuss policy on communicating disaster updates and news on
safety and health
3. Continue health and safety training• Systematically enroll foremen and safety managers in training
for bolstering leadership skills• Promote special training sessions using full harness-type equipment• Promote safety and health education using the Sanki Techno Center

Number of Participants (from Subcontractors)

Special education and other courses

2,874 (2,031)

Health and safety training for foremen

296 (200)In-house health and safety training

247 (–)

Training with virtual reality technology

Other client-focused training

1,363 (1,282)

Total

4,780 (3,513)■■Number of Accidents, Frequency Rate*1, and Severity Rate*2■ 災害件数● Frequency rate for Sanki Engineering ● Average frequency rate for the general construction industry◆ Severity rate for Sanki Engineering ◆ Average severity rate for the general construction industry■ Number of accidents

0.92
0.69

0.74

0.64
0.11

0.06
8

0.03
7

Number of accidents: interrupted work for
one day or longer

1.09

1.11

Source for average frequency rate andseverity rate for the general constructionindustry: Survey on Industrial Accidents,
Ministry of Health, Labor and Welfare

0.30

0.29

0.86
0.81
0.18

0.10
8

0.02

2015

Every year in June, the preparatory month for National Safety Week, SankiEngineering holds safety and quality conventions at each branch, branch officeand division at nine domestic sites and two overseas sites. In fiscal 2019,as in other years, the president and Central Safety and Health Committee
chairperson attended the convention for all offices to share his stance andthoughts on safety. We also conduct special joint safety patrols, during which
the president and directors tour 39 construction sites in the summer andbefore and after year-end.

Safety patrol by the president

2016

2017

Scope: Sanki Engineering construction
sites (Sanki Engineering Co., Ltd. andbusiness partners)

1.69

0.00

*1	Frequency rate: calculated as thenumber of deaths and injuries causedby accidents in the construction site
per one million working hours; thisfigure indicates the frequency withwhich accidents occur.

0.03
11

1

●● Safety and Quality Conventions and Safety Patrols*Limited to training by in-house
instructors, not including training at
designated educational institutions●● Accidents in 2019
In 2019, 19 accidents occurred (11 lost workday accidents, 8 with no lost
workdays), increasing in number as well as severity. According to our analysis,
these were due to inadequate work plans and procedures on the part of managers
as well as to workers paying less attention to hazards as they became familiar
with the tasks and lack of experience. We must respond by promoting thoroughcompliance with the rules and raise the level of our activities by sharing information.

0.21

Health 1. Initiatives for preventing health disorders
2. Initiatives for mental health

Securing Health and Safety

Video on preventive measures for eachaccident category

Slogan “Pursue safe operations to raise reliability. Together, let’s create a new era – Always check first! Safety and health is our top priority.”

SANKI REPORT 2020

Reference material for hazard prediction
based on case studies■■Number of Participants in Health and Safety Training (Fiscal 2019)*●● Key Items Implemented in Fiscal 2019
In 2018, there were occurrences of “cuts/abrasion” accidents, in addition toaccidents in the “falls/tumbles” and “caught/pinched” categories and traffic
accidents, which have been occurring with greater frequency every year. Manyof them have involved inexperienced workers and primary subcontractors
who were not members of the Cooperative Association. We therefore
implemented preventive measures for each category of accident and total
improvement of our safety education system by streaming an instructional
video on accident prevention by category and sharing best safety practices
across subcontractors and construction sites.

56

SocialThe construction industry has been relatively unscathed by the COVID-19
pandemic, although strict adherence to measures for preventing infections
at construction sites has become a major issue. Meanwhile, the worsening
labor shortage is increasing the urgency for securing engineers and skilledworkers, raising operational efficiency, and addressing the risks of industrial
accidents, long working hours, and mental health issues associated with thelabor shortage and a decline in experienced workers. From here on, an influxof workers from other industries is expected due to higher unemployment
caused by the economic downturn and the protracted period of self-imposedbusiness suspensions. It is therefore important to reinforce health and safety
management addressing new workers, including those who are elderly.

Governance

ESG Initiatives●● Health and Safety Training
For our own employees and for staff employed by subcontractors, SankiEngineering provides training led by in-house instructors or at designatedtraining institutes. In view of the regulatory revisions, we particularly focused on
conducting special training sessions using full harness-type equipment with theaim of preventing falls. For newcomers to the construction site, we distributehealth and safety handbooks and organize joint training sessions with the Sanki
Health and Safety Cooperative Association.
The Ministry of Land, Infrastructure and Transport launched the Construction
Career Up System, for the purpose of securing and cultivating competentpersonnel, in April 2019. Consequently, in fiscal 2019 we held 17 briefings on
the system for subcontractors. In addition, we produced operational manuals
for our employees and subcontractors and held eight briefings on operational
instructions for using the system.

Health and Safety Environment of the Construction Industry

Outline of Activities in Fiscal 2019Social2018

2019(year)*2	Severity rate: calculated as the numberof lost workdays caused by accidents
in the construction site per one
thousand working hours; this figure
indicates the severity of the accidents.

●● Action Policies for Fiscal 2020
In view of the latest developments in society and industry, relevance to the
SDGs and the types of accidents that occurred in 2019, we are focusing on
the following key action areas for safety in fiscal 2020: (1) Prevent accidents
associated with repetitious tasks, (2) Enhance partnerships, and (3) Provide
education for raising reliability. We will utilize the Sanki Techno Center as weundertake these actions.

SANKI REPORT 2020

57

ESG Initiatives
Environment

SocialGovernance

Building Fair, Equal and Transparent Business Relationships

Supply Chain Management

ocial

FY2021 Goals

Further enhancing procurement
efficiency

Exchanging opinionswith business partners

Strengthening cooperation throughsubcontractor groups

Ta r g e t

Ta r g e t

Ta r g e t

Exchange opinionswith business partners(twice a year)

Expand the scope of participation
for the nationwide
liaison meeting

Digitize operations

Major Action Policy and Initiatives for FY2020
Enhance the entire
Procurement Web system

Continue exchanging opinionswith business partners

Percentage of digitized operations(non-consolidated)

Number of companies we exchanged opinionswith (non-consolidated)

Expand the scope of participation
for the Sanki Health and Safety
Cooperative Association

FY2019 Results

88%(FY2018: 85%)

SANKI REPORT 2020

26

(FY2018: 45 companies)

Number of participants in the Sanki Healthand Safety Cooperative Association

38 23
in Julyin December(FY2018: 19 participants)●● Thoroughly Ensuring Fair and Transparent Transactions
To build and maintain equal, fair, and transparent relationships with ourbusiness partners, we develop and distribute an order procedure manualthat prohibits the abuse of a superior bargaining position and strive to ensure
thorough compliance by providing employee education each year. Upon
starting business with a new company, such as a construction subcontractor,
materials manufacturer, agent, or expense-related business partner, we assign
a business partner code based on objective standards covering various areas,
including the registration status of quality and environmental management
systems, financial conditions, procurement track records, delivery, pricing, andresponse to problems and complaints. In addition, the provisions of a basic
sales contract include product safety, quality control, intellectual property,
legal compliance, and the exclusion of anti-social forces.

Supply Chain Management

The Sanki Engineering Group Code of Conduct and Action Guidelines stipulate that we engage in fairtransactions with all business partners. We promote free market competition and conduct business ingood faith and in accordance with the relevant laws and individual contracts. We also uphold the SankiEngineering Environmental Policy to promote environmentally sound procurement activities, including green
procurement, as part our environmental management. Under these principles, we endeavor to build trustwith our business partners to jointly provide high-quality systems and services to customers.

SocialThe procurement cost of materials and equipment used by Sanki Engineering
for construction work is approximately 33.5 billion yen, with domestic suppliers
representing the source for nearly all procurement. Delivery delays that occurredat the onset of the novel coronavirus pandemic have now been resolved, andthe impact on procurement has been negligible (as of August 2020).

Basic Principle

58

ESG Initiatives

S●● Overview of Procurement●● Handling Anti-social Forces
Sanki Engineering is committed to eliminating anti-social forces from its
procurement activities. We clearly state this as a precondition for doing
business with us and request that business partners submit a letter pledging
to sever any ties with anti-social forces. As of March 31, 2020, we havereceived pledges from 3,823 companies.
●● Execution of Action Plans
Reducing costs and improving our profit ratio are important initiatives in our
new medium-term management plan, and to this end we helped negotiate
prices for all offices and manage procurement-related information for them aswell through centralized purchasing and the sharing of our findings throughprice surveys in-house. We began digitizing the ordering process in fiscal
2017 and claim forms for completed work in fiscal 2018 at divisions related
to technology and procurement at all offices. Upon digitizing the forms forordering and completed work claims, we held an introduction briefing forour business partners and created an instruction manual. We continued to
expand digitization by following up with our business partners in fiscal 2019.
As a result, the number of digitally processed forms now accounts for about
88% of all orders. We also began using iPads for acceptance inspections
in February 2020. Looking ahead, we intend to continue raising efficiency,
establishing procurement policies, and approaching our business partners.
●● Exploratory Visits to Business Partners
We exchange views with Procurement Web users at our major business
partners. In fiscal 2019, our procurement department staff visited 26 specialty
contractors and suppliers and exchanged views on topics that included
management conditions, confirmation of delivery dates, BCPs, response to thelack of engineers, and work style reforms. Going forward, we will continue todevelop an optimal procurement environment.

Instruction manual on digitization
for business partners

Briefing on invoice digitization

An exploratory visit to a business partner

SANKI REPORT 2020

59

ESG Initiatives
Environment●● Seminars and Training for Procurement Staff
We organize seminars and training as needed to promote appropriate
procurement activities and enhance the purchasing and negotiating skills of
procurement staff. In addition, we encouraged procurement staff to obtainregistered qualifications for Certified Procurement Professionals (CPP),
construction business accountants, and fundamental information technology
engineers, among others, to enhance their skills and knowledge.

Basic knowledgeof accounting

Content

Results• Basic knowledge about specialty construction• Evaluation checklist for specialty construction

13 sessions
68 participants• Basic knowledge about accounting• Compliance• How to read financial statements

4 sessions
60 participants

As part of our environmental management, Sanki Engineering procures goods
that comply with Japan’s Act on Promotion of Procurement of Eco-Friendly
Goods and Services by the State and Other Entities (Green Purchasing Act), andconfirms the aggregate results.
●● Providing Assessment Feedback to Business Partners

Page 78

Major Regulation-Compliant Goods
Procured by Sanki Engineering◦ Lighting equipment◦ Transformers andcondensers◦ A ir conditioning equipment

To raise quality and improve operations across the supply chain, we annually
survey the status of our business partners and, as part of this initiative, conduct
an assessment of their safety management. We visit and provide them withfeedback on the assessment results and exchange information on improvements
as needed to enhance their safety management capabilities.
●● Joint Improvement Activities with Subcontractor Groups
Sanki Engineering has established subcontractor groups at each branch, branch
office, and division as part of our effort to bolster our construction system. In
addition to monthly liaison meetings, we implement joint labor-saving projects
and hold seminars to enhance technical skills and thoroughly enforce quality
management and supervision of safety and health at construction sites.
Moreover, we review the status of safety and health management and offer
guidance by organizing safety and health education as well as courses on
obtaining qualifications led by Sanki Engineering employees, and by conducting
joint patrols. In fiscal 2018, we began holding the Sanki Health and Safety
Cooperative Association twice a year. Led by subcontractors directly involvedin construction, the meeting is expected to raise awareness about disasterprevention. The July meeting was attended by 20 employees from our Group and
46 from subcontractor groups, and the December meeting was attended by 24
employees from our Group and 23 from subcontractor groups. Sanki Engineering
directors, including our chairman and president, also attended the meetings

60

SANKI REPORT 2020

14

◦ FY2019

18

Number of Sanki Best Partner
Award Recipients◦ FY2018

129◦ FY2019

145

Reference
Whistleblowing System

Strengthening Cooperation with Business Partners●● Promoting Green Procurement◦ FY2018●● Support System for the Acquisition of Qualifications
To support subcontractors in upgrading their technical skills, we subsidize theacquisition of qualifications, and we have been publicizing the system during
Central Safety and Health Committee meetings to encourage its use.

Supply Chain Management●● Operation of Internal Whistleblowing Hotlines
We operate the Corporate Ethics Hotline to prevent any improper transactions.
Also, we are striving to conduct fair transactions with our business partners byproviding them with information on how to use the hotline and asking them inletters for their cooperation in ensuring that business activities are sincere and fair.

Number of Sanki Super Meister
Award Recipients

Social●● Awards Programs
We established the Sanki Super Meister System, to certify and commend
foremen of Group subcontractors whose superior construction techniques
have significantly contributed to elevating the quality of our construction work,and the Sanki Best Partner Program, to commend subcontractors who havesignificantly contributed through their superior levels of management andconstruction skills, and for having consecutive years of zero accidents. We
also provide subsidies designed to encourage further quality improvements to
subcontractors to which the foremen belong, from the standpoint of promoting
consistent contributions to quality improvements at construction sites.
The Sanki Techno Center is a comprehensive training and research facility
available for use by our subcontractors. By sharing and developing
Sanki Engineering’s high-quality training, we will improve technology,
construction quality, and safety and also strengthen mutual cooperation.

ESG Initiatives

Theme

Governanceand stressed the importance of maintaining and improving safety awarenessthroughout the Group, including business partners.

■■Outline of Main Training Sessions (FY2019)

Generalprocurement

Social●● Receiving Technical Guidance from Subcontractors
Our new employee training also provides technical guidance fromsubcontractors. Moreover, skill training from subcontractors for new
employees is offered at the Sanki Techno Center. This collaborative approach
to training helps us to maintain cooperative relationships with subcontractors.
●● Providing Support to Stabilize the Management of Subcontractors
As of March 2020, we are making all our payments in cash to subcontractors
with capital of less than 40 million yen by modifying the payment terms.
In addition, in view of the impact of COVID-19, we signed a line of credit
agreement in May 2020 with a financial institution that enables flexible andstable borrowing and repayment of funds toward improving the cash flowof subcontractors that constitute important stakeholders. Also, we support
the stable management of subcontractors to pursue sustainable growth
together.

VOICE
Seminar for trainees
from a Thai subcontractor

Participation in Practical Training to Acquire Useful Onsite Knowledge
In January 2020, I participated in a two-day training program for mid-career employees and specialists at
subcontractors with around three years of experience at the excellent facilities of the Sanki Techno Center,along with a group of 16 colleagues, including ten duct workers, four insulation workers and two other staff.
The training sessions expanded the scope of my knowledge of onsite construction work throughpractical courses on duct and insulation work, drawing facility construction drawings, and training
in the Safety Experience area. I was also impressed by the worksite episodes shared by the Sanki
Meisters and gained valuable advice on site management. In fact, there are three Sanki Meisters at ourcompany. I hope to be counted among them one day and work in a friendly rivalry at Sanki Engineering’s

Mr. Junya Takezawa

construction sites.

Shinei Duct Kogyo K.K.

Liaison Meeting for Subcontractor Groups

SANKI REPORT 2020

61

ESG Initiatives
Environment

SocialGovernance

Promoting Diversity

Our Commitment to Employees

FY2021 Goals

Improve internal communication

Improve work-life balance through the Smile ProjectTa r g e t

Ta r g e tStrengthen the system
for gathering employee feedback

Monitor and take action according to the situation
Average monthly overtime work per person
Paid leave ratio per person

Major Action Policy and Initiatives for FY2020
Continue monitoring and consider additional measures

We seek to bring on board human resources that differ in gender andnationality as well as in talent and personality. Staff from the sales, design,technology, and other divisions join the Human Resources Department toensure fairness based on multiple perspectives. As of April 1, 2020, 24 people(6 women and 18 men) are working with us from 7 countries: China, Peru,
South Korea, Thailand, Vietnam, the U.K., and Russia. Under our mediumterm management plan, we will continue to hire foreign nationals so that we
steadily develop our overseas operations and promote diversity.
●● Promoting Women’s Careers

We believe that creating opportunities in which our female employees
can further demonstrate their talents would lead to the sustainable growthof the Company and in turn boost our corporate value. In addition, we haveformulated an action plan to create an environment in which our female
employees can continuously develop their careers based on the Act ofPromotion of Women’s Participation and Advancement in the Workplace—commonly referred to as the Act for Promoting Women’s Careers—and are
pursuing various measures to promote women’s careers. Through these
efforts we are steadily achieving results.

FY2019 Results

Planning
CCU held

10
9

ESG CCU
held

62

SANKI REPORT 2020

times with total oftimes with total ofparticipants
participants

participants

Goals

Average monthly overtime work
per person(consolidated)

Paid leave ratio per person(consolidated)

34.3 57.4
hours(FY2018: 57.1%)%

Reference
Compliance Awareness Survey
Page 80

Measures for Promoting
Women’s Careers

FY2014

Joined the Action Plan on
Women’s Active Participationin the Workplace advocated by
the Keidanren (Japan Business
Federation) and published
our voluntary action planon the promotion of female
executives and managers.

FY2015

Launched and continued
diversity training for generalmanagers and department
managers.

FY2016

Held a roundtable discussion
for working mothers.

FY2017

Plan period: April 1, 2016 to March 31, 2021

38
100
81

Page 78●● Respecting Diversity in Employment■■Action Plan Based on the Act for Promoting Women’s Careers

Sanki Ladies’ Roundtable

Reference
Whistleblowing System

Improving the Value of Human Resources and Creating a Comfortable Working Environment

Guided by our management philosophy, “We place significance on communication and mutual respect,”
we endeavor to create a working environment and a corporate culture in which all employees grow with theCompany, respect individuality, and are able to succeed and thrive. We know that the technical capabilities
and skills of our employees are valuable assets and that each employee is an invaluable human resource. We
are therefore creating a comfortable working environment that fosters the development of human resources
based on our unique Sanki spirit, which enables them to work to their full potential. In January 2020, weestablished the Smile Work Guidelines, which outline the basic policies for our workplace environment andhuman resource development.

●● Respect for Human Rights
We declare our respect for human rights in the Sanki Engineering Group
Code of Conduct and Action Guidelines, which prohibits discrimination basedon nationality, gender, age, and disability. We also endeavor to instill respectfor human rights across the Company through various means, including
educational programs. We have set up guidelines for preventing harassment, asystem offering consultation on harassment, and other workplace issues. And
we have a counter staffed by qualified external counselors and the Women’s
Hotline, through which callers can consult with female advisors. Additionally,
we seek to incorporate results of our compliance awareness survey whenmonitoring human rights issues.

SocialImproving the Value of Human Resources andocial Creating a Comfortable Working Environment

Consider measures to strengthen the system forgathering employee feedback

ESG Initiatives

S

The Sanki Engineering Group believes that creating working environments inwhich various personnel are able to demonstrate their particular capabilities
will raise the value of our company. With this in mind, we are cultivating a
corporate culture that respects the diversity of employees and establishingvarious programs toward our goal of creating a working environment that iseven more pleasant for employees.

Progress (as of April 1, 2020, non-consolidated)

1

Increase the average length of service for womenby 20% or more from now.

2

Double the current ratio of female career-track
employees in the sales department.

9.9% (1.5 times)

3

Raise the ratio of women in managerial positions*to the construction industry average of 1%.

0.6%

13.4 years (up 8.9%)●● Career Change System

In 2019, we established new career types, namely career-track position and operational• Opened the Women’s Hotline,
which accepts consultations.
• Held a roundtable meeting forfemale engineers.

FY2019Due to the abolishment ofregional positions, the numberof employees switching
to career-track positions
increased.
*Calculated by using the number excluding
the section chief, and therefore differingfrom the “number of managers” referred
to on page 67.

SANKI REPORT 2020

63

ESG Initiatives
Environment

In technical training, we actively use the Sanki Techno Center to provide
practical training using real equipment as well as classroom lectures.
In fiscal 2020, we conducted all new recruit training sessions online for
two to three months to prevent the spread of COVID-19.
■■Training Systems●● Creating Workplaces for Persons with Disabilities

Younger Employees

In President CCU online, all new recruits weredivided into small groups that each exchanged
opinions with the president.

Qualification training
Safety experiential training
Corporate ethics training

Corporate Ethics Training

Mid-career staff training
Qualification training
Technical experiential training
New recruit training

Facilities Construction
Equipment Division

Third-year construction
work training
Sixth-year construction
work training
Ninth-year construction
work training

Improving the Value of Human Resources and Creating a Comfortable Working Environment

Group work in a classroom
learning program

SocialSANKI REPORT 2020

Section chief training

New recruit training

Technical Training

64

Management candidate training

Fifth-year training

Safety Training

Qualification training

Plant & Machinery
Systems Divisions

New recruit training
Inspector education
Training on our products and systems

Quality & Environment
System training

Developing and Evaluating Human Resources

We maintain training systems associated with each career path, such as
management training, technical training, and training by field of expertise in orderto strengthen specialized skills, technical skills, and management skills and boost
personal growth. In fiscal 2019, we conducted a nine-month technical training
program for new recruits in the Facility Construction Business to bolster theirdesign skills and on-the-job training.

Executives
Department manager training

Seventh-year training

Seeking to provide employment opportunities for older employees withadvanced skills and expertise, we led the industry by introducing a system for the
reemployment of employees following retirement. In fiscal 2019, we reemployed
240 retired employees on a consolidated basis, compared with 232 in fiscal 2018.

●● Education and Training Systems

Second-year training

Management Training●● System for Reemploying Workers Following Retirement

Our personnel system ensures equal opportunity as well as fair evaluation andtreatment for all employees while also supporting employee initiatives for selfdirected career development.
In our personnel system, we introduced an early career system for
employees in their 20s to provide them with experiences in different jobs
early on in their career development. In fiscal 2019, we introduced individualinterviews by personnel managers for employees in their third and fifth yearsof service. And once a year all employees fill in a Career Development Sheetand receive feedback through an interview with their supervisors. To collect
their opinions, we have another system that allows employees to bypass theirsuperiors and speak directly with the Human Resources Department through,for example, an interview with this division, depending on the content of the
sheet. These measures are offered separately from the evaluation system. As
for treatment, we raised base pay and also provided executives with allowancesin April 2018 with the aim of securing talented young human resources andimproving the treatment of employees.

Mid-career Employees
Leadership position training

New recruit training

We continue to hire persons with disabilities and are working to create anenvironment in which they can work comfortably over long periods. As of June
2020, the employment ratios of persons with disabilities are 1.97% and 1.94%
on a non-consolidated and consolidated basis, respectively.
In recruiting activities, we expanded our recruitment routes while at thesame time matched applicants with each department, leading to positive results.
Also, in order to retain human resources, we hold problem-solving seminars,
opinion exchange sessions, and management training for employees who arehearing-impaired to promote workplace management so that all employees
can thrive. In an effort to establish a safe working environment, all offices havebeen installed with lamps that bear evacuation instructions for hearing-impaired
employees in the event of a disaster.

●● P ersonnel and Treatment Systems for Workplaces Where People Can Grow

Governance

ESG Initiatives

position, and introduced a system that allows employees to change their career
type to either. Job relocation is excluded from the requirements for the career-track
position, and the system is designed to enable a wider range of employees to thrive.
As of April 1, 2020, there are 62 instances of employees changing their career typefor a work style that better suits their particular stage in life.

Social

ISO 9001/ISO 14001
New recruit training
Mid-career staff training

Education to develop internal auditors

Promoting Work Style Reform
FY2019 Average Educational
Training Cost per Capita(Consolidated)

90,000yen/year●● Promoting Work-Life Balance
We have been augmenting our programs in response to employee requests forbroad support of a healthy balance of work and personal life so both male andfemale employees can continue to work with a sense of security while attending
to various life events. In fiscal 2019, we introduced a full-scale telecommuting andtelework system to create a working environment that is beneficial for employees
raising children or caring for the elderly. During the state of emergency declared
due to the spread of COVID-19, we responded to the government’s request by
expanding the use of telecommuting and implementing new recruit training online.

FY2019 Average Monthly
Overtime Work per Person(Consolidated)

34.3■■Number of Employees on Leave, and Work Hours

FY2015

Childcare leave
Reinstatement afterchildcare leave (%)
Nursing care leave

Paid leave ratio (%)
Average monthly
overtime work(hours per person)

FY2016FY2017

Total

Male

FemaleTotal

Consolidated

2

8

10

1

15

16

2

18

20

7

11

18

9

27

Nonconsolidated

1

6

7

1

12

13

2

14

16

7

9

16

7

24

31

─

100.0

100.0

100.0

100.0

88.9

93.8

100

96.3

97.2

─

100.0

100.0

100.0

100.0

88.9

93.8

100

100

100

0

0

0

0

1

0

1

1

1

2

0

0

0

Nonconsolidated─Consolidated

─

0

0

Nonconsolidated

─

0

0

Consolidated

─

─

Total

Male

FemaleFY2019Female─FemaleFY2018

Male

Consolidated

Male

hours

Total

Male

Female

Total
36

0

0

0

0

0

0

0

─

54.0

76.1

57.1

54.3

76.3

57.4

Nonconsolidated

38.8

62.1

41.8

47.6

69.5

50.5

49.9

78.2

53.7

53.0

74.2

55.9

51.9

74.4

55.1

Consolidated

─

─

─

─

─

─

─

─

─

─

─

─

37.4

14.7

34.3

Nonconsolidated

31.9

16.5

29.8

30.6

13.8

28.3

31.2

13.3

28.6

35.0

14.7

32.0

34.5

13.6

31.3

SANKI REPORT 2020

65

ESG Initiatives
Environment■■Major Programs Supporting Work-Life Balance (Non-consolidated) (as of April 2020)

Area

Details
Five consecutive days of leave for each five-year period of employment using employee’s reserved leave.
Three consecutive days of leave after staying at a construction site for more than six months or before moving to another site.

Half-day/hourly off

Paid leave for half a day or by the hour.

Anniversary leave

A planned paid leave on special dates for employees or their families, requested at the start of the fiscal year.

Sanki Smile Day

The Company’s own Premium Friday, a scheme based on that launched by the Japanese government. Employees areencouraged to take a full or half day of paid leave on monthly payday and avoid overtime.

Reserved leave

The use of reserved days off for childcare, nursing, or volunteer activities.

Telecommuting andtelework system

A system for employees who have been working for more than one year and are unable to continue daily commuting due
to childcare, nursing care, or personal health reasons.

Sliding work hours
Return to Work programChildcare leave
Childcare
Nursing leaveandnursing Shortened work hours
care
Support for childcare leave andreinstatement
Special childcare/nursing leave

Employees can slide the start and end times forward or back for business or non-business reasons insofar as this does notinterfere with their work.
Employees who have left the Company for unavoidable reasons such as childbirth, childcare, nursing care, or a spouse’stransfer can apply for reinstatement.
Can be obtained for the requested period of time up to when the child turns one year old.
Can be obtained five times for up to 180 days per person on nursing leave.
Employees caring for children or other family members can apply for shortened or sliding work hours. In the case ofchildcare, the program applies to children up to the third grade of elementary school.

FY2015We are promoting flexible work styles by reviewing our work and leave
programs. As a result, the average rate of paid leave taken in fiscal 2019
increased by 0.3 points year on year.
●● Promoting the Smile Project

Sanki Engineering launched the Company-wide Smile Project, led by thepresident, in fiscal 2015 to promote work style reform. We have been
implementing initiatives across the Company to create a better working
environment. In fiscal 2017, we set up the Smile Site Plan, a committee
dedicated to construction sites. In addition, we are working on efforts to lessen
the operational load of construction managers and enhance capabilities andquality at our construction sites.
As a result of these efforts, we were certified as 3.5 of 5 stars in the 3rd
NIKKEI Smart Work Management Survey, which selects advanced companies thatchallenge the productivity revolution through work style reform. Looking ahead, we
will continue to promote our work style reform under the employee-first principle.

Number of employees

Average age

City of Nagoya
certification forcompanies supportingchildcare

Average years of service
Number of new recruits
Number of rehired employees
after retirement

Measures Introduced in FY2020◦ Shorter work hours◦ Partial increase of paid days
FY2019 Average rate of paid
leave taken (consolidated)

57.4

Employmentof people
withdisabilities*

Number ofpeople withdisabilities
Nonconsolidated
ratio ofpeople withdisabilities (%)

Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated

Female

2,022
(637)
1,677
(550)
–

FY2016FY2017FY2018FY2019

Total

Male

Female

Total

Male

Female

Total

Male

Female

Total

Male

Female

Total

287
(5)
249
(3)
–

2,309
(642)
1,926
(553)
–

2,041
(653)
1,678
(572)
–

298
(5)
255
(3)
–

2,339
(658)
1,933
(575)
–

2,079
(664)
1,698
(586)
–

305
(5)
271
(5)
–

2,384
(669)
1,969
(591)
–

2,072
(602)
1,694
(528)
44.5

322
(5)
273
(3)
38.2

2,394
(607)
1,967
(531)
43.7

2,152
(646)
1,705
(526)
44.7

349
(7)
287
(3)
38.3

2,501
(653)
1,992
(529)
43.8

43.7

36.1

42.7

43.8

36.5

42.8

43.8

36.3

42.8

43.9

37.1

43.0

44.1

37.6

43.2

–

–

–

–

–

–

–

–

–

17.3

13.0

16.7

17.3

12.9

16.7

18.8

12.9

18.1

19.0

13.3

18.2

18.8

13.2

18.0

19.0

13.9

18.3

19.3

14.1

18.5

111

20

131

81

20

101

105

21

126

106

17

123

102

28

130

75

18

93

60

16

76

88

21

109

75

11

86

74

23

97

234

2

236

235

5

240

217

5

222

223

9

232

229

11

240

188

2

190

183

4

187

164

3

167

161

5

166

169

8

177

–

–

–

–

–

–

–

–

–

–

–

44

–

–

46

–

–

32

–

–

30

–

–

32

–

–

36

–

–

37

–

–

–

–

–

–

–

–

–

–

–

1.89

–

–

1.94

–

–

1.80

–

–

1.69

–

–

1.78

–

–

1.93

–

–

1.97

Nonconsolidated*As of June 1 of each fiscal year

Figures in parentheses indicate the number of managers.

■■Employees by Age (as of March 31, 2020)

%

30s

40s

Consolidated10s
0435 (92)561 (103)660 (105)559 (37)272 (11)14 (1)

2,501 (349)

Nonconsolidated

0392 (87)456 (83)

480 (80)462 (29)

193 (7)9 (1)1,992 (287)Main Measures Implemented◦ A llocation of iPads to field
personnel◦ C ooperation on work
schedules at computer login time
◦ E stablishment of Smile
Work Guidelines

20s

50s

60s

70s

Total

Figures in parentheses indicate the number of female employees.

VOICE

Acquiring Design and Construction Management Skills to Eventually
Contribute to Overseas Business

In April 2015, I joined the Company because I was interested in Japanese construction technology, which in myhome country of Thailand I was unable to learn much about. Construction sites involve a lot of people, such as
prime contractors and cooperating companies as well as my colleagues. And I had to remember many technical●● Maintaining and Improving Employee Health

We introduced a 24-hour toll-free health consultation service to offer advice on
health, medical, nursing, and childcare issues for employees and their families.
The service was set up outside the Company, and caller privacy is strictly
protected. We have also been working to prevent employees from developing
mental health issues by conducting checkups for stress-related symptoms, even
before they became legally mandated in 2014.

Nonconsolidated

Male

Improving the Value of Human Resources and Creating a Comfortable Working Environment●● Promoting Flexible Work Styles

Consolidated

The Kuruminmark for supportof raising nextgeneration children

The 4th Sanki Ladies’ Roundtable, with thepresident taking part in the discussion■■Employee Data (as of March 31 of Each Fiscal Year)Can be obtained multiple times and up to 20 days in total for childcare and nursing care.

by the City of Nagoya
In 2015 we were granted an update for the Kurumin mark, a certificate grantedby the Tokyo Labor Bureau of the Ministry of Health, Labour and Welfare andbased on the Act on Advancement of Measures to Support Raising NextGeneration Children, for meeting certain criteria as a company supportingchildcare. In 2014 the Chubu Branch became the first construction equipment
company to be recognized by the City of Nagoya as a company supportingchildcare, and the certification was updated in 2017.

SANKI REPORT 2020●● Sound Employer-Employee Relationships
The Human Resources Department and employees union at Sanki Engineering meetmonthly to discuss improvements in the workplace environment and the development
and operation of Company systems. Also, we provide the employees union with
opportunities to present their proposals or requests to management.

An interview is held with the supervisor before and after applying for childcare leave.

●● Acquiring the Kurumin Mark and Recognition for Supporting Childcare66●● Gathering Employee Feedback
Since fiscal 2016, we have continually held Century Communication Up (CCU)
discussion events in accordance with the Century 2025 long-term vision. In fiscal
2019, we held the 4th Sanki Ladies’ Roundtable to support the creation of a network
through which female employees can consult with each other. We also held “CCU
with Planning Departments” and “CCU on ESG” events; in the latter each department
shared their information on sustainability. The opinions and proposals gathered havebeen applied toward making improvements in our operations and systems.

SocialRefresh leave
Consecutive leave forconstruction managers

Governance

ESG Initiatives

Work

ProgramSocialterms, so there were times I had difficulty communicating with people in different positions. Considerately, mysupervisors and other senior staff supported me in a range of both work- and life-related issues, and I worked
day in and day out to meet their expectations. I am currently involved in construction site operations and in
charge of constructing infrastructure while also acquiring the skills required in such areas as safety, quality, andCertified as 3.5 stars in the NIKKEI Smart
Work Management Survey

process control. Looking ahead, I hope to apply my design and construction management skills gained in Japan
to contribute to the Company’s overseas business and to Thai Sanki Engineering & Construction Co., Ltd.

Kasemchai
Chaiprasobphol

Air-conditioning & Plumbing Field
Engineering Department, Toyota
branch office

SANKI REPORT 2020

67

ESG Initiatives
Environment

SocialGovernance

Afforestation Activities at the Sanki Forest

Socialocial

ESG Initiatives

S

Coexistence with Local Communities

In October 2019, we held a weeding event at the Sanki Forest in Kai City,
Yamanashi Prefecture, where we had planted a thousand trees in October
2015 to commemorate the 90th anniversary of our founding. Since then, we
have continued our conservation activities. With the help of staff from the local
forestry cooperative, 37 of our employees used sickles to clear underbrush as
volunteers.
Weeding event participant

Coordination with Local Communities●● Agreement for the Provision of Facilities in Times of Disaster and Other

Our Approach to Local Communities

FY2021 Goals

Contribute to regional
disaster prevention

Support cultural activities
for the next generation

Contribute to conservationof the local environment

Ta r g e t

Ta r g e t

Ta r g e t

Total number of regional disasterprevention activities

Support cultural activities

Participate in environmental
beautification activities

Major Action Policy and Initiatives for FY2020
Participate in regional disasterprevention activities

Plan and implement support for
cultural activities

Participate in environmental
beautification activities

Conducted activities at

Held a Great East Japan Earthquake
reconstruction concert called“Kizuna”

41

sites

(FY2018: 37sites)

68

SANKI REPORT 2020

A space in the Sanki Techno Center for
sheltering people unable to return homein the wake of a disaster●● Cleanup and Environmental Beautification Activities
Each branch, branch office, and Group company participates in cleanup
activities in areas around their offices or construction sites as well as
environmental beautification activities organized by local governments. In
fiscal 2019, employees of Group company Sanki Kako Kensetsu Co., Ltd.
conducted a cleaning campaign along roads near the waste treatment facility,
which the company operates and manages. In addition, employees of Sanki
Kankyo Service Co., Ltd. cleaned the streets near water treatment and otherfacilities. On a Group-wide basis, we carried out activities in more than 41 local
communities.

Earthquake Reconstruction Project

FY2019 Results

Carried out activities under thelarge-scale disaster agreement
between Yamato City and the Yamato
Engineering Center

Coexistence with Local Communities

As stated in the Sanki Engineering Group Code of Conduct and Action Guidelines, “We seek to contributeto society in order to aid in the development of local communities as a good corporate citizen andmember of society,” and our activities reflect this principle. Looking ahead, we will participate in local
activities and help develop communities while maintaining active communication with stakeholders in
the areas where we operate.

Activities
In fiscal 2013, Sanki Engineering, which maintains a business site in Yamato
City, Kanagawa Prefecture, concluded an agreement with the city to provide
its facilities as a temporary shelter for those unable to return home in thewake of a disaster. We currently offer the Sanki Techno Center, which openedin October 2018, as a temporary shelter. The center functions to serve regional
disaster prevention such as by stockpiling supplies, including emergency foodand Japanese-style futon bedding.
Furthermore, the Company has concluded an agreement with Yamato City
on the emergency recovery of water supply and sewage facilities. Under theagreement, we will work to restore the functions of the city’s water quality
management centers promptly in the event they are damaged by a disaster.

In May of the year following the Great East Japan Earthquake in 2011, SankiEngineering launched the Earthquake Reconstruction Project, a Companywide action team within the Tohoku Branch. Since then, it has developed
proposals for putting its comprehensive engineering capabilities toward theearly reconstruction of local social infrastructure. Initially focused on current
business, the project has involved the management and support departments
while also engaging new businesses and in social contribution activities.
In fiscal 2019, we held the Kizuna concert at Suntory Hall in Tokyo. We also
conducted the Kitasanriku Tour to preserve the memory of the earthquake
disaster, and we held “Ganbaransho, Fukushima,” a reconstruction support
event that offered dishes featuring ingredients from the prefecture at the
Sanki Techno Center’s cafeteria. Going forward, we will continue to provide
reliable recovery support as a corporate citizen.

Held a Great East Japan Earthquake
reconstruction concert “Kizuna”

SANKI REPORT 2020

69

ESG Initiatives
Environment

SocialGovernanceSupporting the Development of the Next Generation

overnance

Children playing at Sanki Environmental Garden

We established the Sanki Engineering Corporate Governance Guidelines
to clarify the Sanki Engineering Group’s basic philosophy and policy
on corporate governance. Once a year, we review the status of ourcompliance with the Corporate Governance Code and revise it as needed.
We will continuously seek to enhance our corporate governance under
the guidelines in order to achieve sustainable growth for the Group andstrengthen its corporate value over the medium to long term.
WEB

https://www.sanki.co.jp/en/corporate/governance/guideline.html

Corporate Governance System

Japan’s Deaf Rugby national team●● Corporate Governance System
We adopted a Company with Board of Company Auditors system withdedicated, full-time auditors as our form of corporate governance. Under thisstructure, the auditors and the Board of Auditors exercise oversight over the
execution of duties by directors, the accounting auditors auditing the financial
statements and other documents as well as the Board of Directors responsible
for making decisions on material issues. In addition, to increase management
efficiency and simultaneously speed up the decision-making process,we employ an executive officer system in which we divide management
functions between the Board of Directors, responsible for decision-making andsupervision functions, and executive officers, responsible for the execution ofbusiness affairs.

Number of
Persons

Donations and Contributions

70

SANKI REPORT 2020

◦ T he Advisory Committee
on Nomination andRemuneration consists
solely of external directors.
◦ T he chair of the Boardof Directors attends
Management Meetings.

Sanki Engineering Corporate Governance Guidelines■■Summary of the Corporate Governance System (as of June 25, 2020)

We extend donations to universities and research institutes and sponsor
cultural activities by the Japan Philharmonic Orchestra, the Japan ChamberMusic Foundation, and other institutions. We also support the training of guide
dogs by continuously collecting donations for this cause and encourage our
employees to give blood donations at the head office. Moreover, our branches,branch offices, and Group companies each take part in a variety of activities inwhich anyone can get involved, such as by donating used stamps and cards.
We also contribute to Mitsui Group social contribution activities through our
support for the Mitsui Volunteer Network, which promotes the voluntary
efforts of retired, former employees of Mitsui Group companies.

◦ An external director(independent officer) is
appointed chair of the Boardof Directors.

Social Studies Tour at Imakane Elementary School

Support for Sports Promotion and Revitalization
Since February 2018, we have been an official sponsor of Yamato Sylphid,a women’s soccer team in Yamato City, Kanagawa Prefecture, where
the Sanki Techno Center is located. In September 2019, we sponsoreda game at Yamato Nadeshiko Stadium as part of our contribution to thecommunity, and many of our employees were there to cheer for the team.
In addition, as a gold sponsor of the non-profit organization, Japan Deaf
Rugby Football Union (Deaf Rugby), we help disseminate information
to raise awareness of the sport. Going forward, we will continue tocontribute to society by supporting sports while at the same time creatinga working environment that encourages employees to actively engage
with the local community.

Points for Strengthening the System
in FY2020 Based on Corporate
Governance Guidelines

Corporate Governance Guidelines

Corporate Governance●●  Sanki Kankyo Service Welcomes Social Studies Tours by Local Schools
Our Group company Sanki Kankyo Service Co., Ltd. actively invites elementary
school children for field trips at its offices and water purification plant.
In May 2019, 43 students from Imakane and Tanekawa Elementary
Schools participated in tours at the Imakane office in Hokkaido. In September,the Suttsu office in the same prefecture received 16 students from Suttsu
Elementary School and 6 from Oshoro Elementary School. In addition,
the Ryotsu office in Niigata Prefecture welcomed 18 students from Yoshii
Elementary School in September, 34 from Kamo Elementary School in
November, and 18 from Kawasaki Elementary School in December. The
students learned about the role and workings of the sewerage system. We
also organize facility tours for people living in the neighborhood.

Corporate Governance

Governance

The Sanki Environmental Garden, which is attached to the Sanki Techno
Center, is open to the local community at all times, and many children visit
from neighboring daycare centers. In June 2019, we held Fireflies DanceNight, an event for viewing fireflies that had been grown using our DHS water
purification technology. Around 570 local residents visited the garden, andchildren expressed their curiosity about fireflies, which they were seeing forthe first time. In fall 2019, we planted persimmon and chestnut trees. We
expect that the Sanki Environmental Garden will continue to be used as aplace in the community to relax and to nurture the next generation over thelong term.

ESG Initiatives

G●● Opening the Sanki Environmental Garden to the Local Public

Yamato Sylphid women’s soccer team on Sanki
Match Day

Chairman of the Board of Directors
Directors (women)
External directors (independent directors)
Executive officers (women)
Those also serving as directors
Auditors (women)
External auditors (independent auditors)

WEB
Corporate Governance Report(in Japanese)
https://www.sanki.co.jp/corporate/
governance/report.html■■Frequency of Major Meetings (FY2019)

Meeting

Average Attendanceof External Officers

Frequency

External Directors
10 (0)

Board of Directors

12

94%

Board of Auditors

8

100%

Management Meeting

29–(attended by onlyinternal officers)

3 (3)37 (0)
5
5 (0)
3 (3)

SANKI REPORT 2020

71

ESG Initiatives
Environment

SocialGovernance

ESG Initiatives●● Compliance with the Corporate Governance CodeThe principles required to be disclosed in the Corporate Governance Code aresummarized in the following sections.

■■Framework of the Corporate Governance System (as of June 25, 2020)

General Shareholders’ Meeting
Appointment/Dismissal

Board of Company Auditors
One substitute auditor

Accounting auditing

Board of Directors

10 directors*1 including 3 external directors
Exchange of opinions,establishing common awarenessConsultation

Liaison Meeting of External Officers
Appointment to/removalfrom office

3 external directors
3 external auditors

Executive Officer Committee

Discussion
and reporting(Ernst & Young ShinNihon LLC)
ReportArticle 10—●

Procedures for related party transactions

Article 9.3
Article 18.4—●

Business principles and business plans

—

●

●

Basic views and guidelines on corporate
governance

Article 2—●

Policies and procedures for determining
the remuneration of directors and auditors

Article 31—●

Policies and procedures for nominating
directors and auditors

Article 18
Article 20
Article 21
Article 22
Article 24
Article 25—●

Reasons for nominating directors andauditors

Article 23—●

Article 18—●(Appendix)
Independence
standards forexternal officers—●

Supplementary
Concurrent positions of external officers
Principle 4-11.2

Article 26—●

Supplementary Evaluating the effectiveness of the Board
Principle 4-11.3 of Directors

Article 29—●

Supplementary
Training policy for directors and auditors
Principle 4-14.2

Article 30—●

Policy on system development and efforts
to promote constructive dialogue withshareholders

Article 32—●

Principle 1-4
Principle 1-7

Principle 3-1
Full DisclosureManagement Meeting
Corporate Ethics Committee

Discussion, andreporting onimportant matters

Internal Finance Control
Committee

ReportingExecutive Officers

Policy Meeting

Leadership and supervision

Monitoring, guidance, support and education

Internal Audit Department
Auditing

Sections, centers, headquarters, research institute, business division,business departments, branches and branch offices, subsidiaries

Matters to be resolved by the Board ofSupplementary
Directors and scope of matters delegatedPrinciple 4-1.1
to management
Principle 4-9*1 The Articles of Incorporation stipulate that the number of directors shall not exceed 16.
*2 One of the auditors possesses a considerable degree of knowledge of finance and accounting.

● Business Execution System
Board of Directors
The Board of Directors holds a meeting led by the chairman,
elected by and from among the directors, at least once a month todecide on important matters and supervise the status of executionof business affairs.
Management Meeting
The meeting consists of directors and executive officers nominatedby the president and, in principle, meets twice a month. As adecision-making body for fundamental and key matters related
to the execution of business affairs, the meeting deliberates andmakes decisions from the standpoint of overall management.
Policy Meeting
Risk Management Committee → See page 82.
Executive Officer Committee
Consisting of executive officers and presidents of the Group
companies, the committee meets at least four times a year
to communicate the policies expressed by the president andexecutive officers responsible for departments, report on thestatus of business execution by each executive officer and Group
company president, and discuss initiatives for achieving the
medium-term management plan.
Corporate Ethics Committee
The meeting consists of executive officers and is chaired by thepresident. The executive officers responsible for corporate ethics
and nominated by the president oversee all matters related tocorporate ethics. The committee meets twice a year to deliberate
on plans for the implementation and observance of the Code of
Conduct and Action Guidelines.

72

SANKI REPORT 2020

Internal Finance Control Committee
This committee consists of chairman, president and executive
officers. It is chaired by the president and meets four times ayear. Its central role is Group-wide control, including review anddecision-making concerning important matters regarding internal
controls for financial reporting.
Advisory Committee on Nomination and Remuneration
This committee, which meets as needed, consists solely of
external directors and deliberates on matters including thenomination of candidates for directors and the system for andlevel of remuneration.

● Auditing System
Board of Company Auditors
The board consists of auditors, by and from whom a chairperson
is selected, and meets at least six times a year to monitor the
status of governance and audits the execution of duties bydirectors as an independent body entrusted by shareholders.
Members attend board and other important meetings, review thestatus of operations and assets, and maintain close contact withthe accounting auditors, the Internal Audit Department, and theinternal controls departments. A supplementary external auditor
has been appointed to fill any future external auditor vacancies.
Internal Audit Department
This department conducts internal audits of the execution ofoperations by business divisions in accordance with the Auditing
Plan for that fiscal year. It verifies the internal management system
including its appropriateness and efficiency. As necessary, thedepartment exchanges opinions with or makes proposals concerning
the improvement or correction of a problem to the internal controls
departments and reports the results of its audits to the president andauditors.

Principle 5-1

Independence standards for external
officers*1 Company’s Corporate Governance
Guidelines*2 Company’s website*3 Company’s Corporate Governance
ReportCorporate Governance

Report*3

ReportingPresident and Representative Director

Disclosed Location
Website*2

Basic policy on cross-shareholdings andvoting rights

Advisory Committee on
Nomination and Remuneration

Election, dismissaland supervision

Leadership andsupervision

Risk Management Committee

Accounting Auditors

Guideline*1

Principle

Appointment/Dismissal

Governance

5 auditors *2 including 3 external auditors

Appointment/Dismissal

Business auditing
Accounting auditing

WEB
Sanki Engineering Corporate Governance
Guidelines
https://www.sanki.co.jp/en/
corporate/governance/guideline.html
Corporate Governance Report (in Japanese)
https://www.sanki.co.jp/corporate/
governance/report.html●● Strengthening the Effectiveness of the Governance System
We are strengthening our system in line with the Sanki Engineering Corporate
Governance Guidelines.

Efforts in Fiscal 2020
Strengthening of the Transparency and Supervisory Function of the Board of Directors
An external director (independent officer) was appointed as the chair of the Board of Directors toenhance the transparency and oversight function of the Board of Directors.
Revision of the Composition of the Advisory Committee on Nomination and Remuneration
To enhance the transparency and neutrality of the Advisory Committee on Nomination andRemuneration, we revised the composition to include only external directors, from one groupconsisting of the president and external directors (the chairperson and majority of committee
members are external directors).

SANKI REPORT 2020

73

ESG Initiatives
Environment

Efforts to Date■■External Officers’ Terms in Office and Reasons for Selection

Name

Independent Years
Officer
ServedResponse to the Revised Corporate Governance Code

Yukiteru
Yamamoto

The maximum number of directors was changed from 12 to 16, given that the diversity of the

●

2
years

Mr. Kazuhiko Kashikura has served as an executive officer of
Sumitomo Mitsui Banking Corporation and has managed several ofits group companies as a top executive, and he thus has abundant
experience and broad insight in corporate management. The
Company selected Mr. Kashikura as an external director for his
experience and insight developed through this background.

2
years

Mr. Shozo Fujita has expertise as a public prosecutor andattorney-at-law as well as abundant experience and wideranging insights through experience including that acquired
as representative director and president of the Resolution
and Collection Corporation and as a director who serves as
an audit and supervisory board member at other companies.
The Company selected Mr. Fujita as an external auditor for his
experience and insight developed through his background to audit
the Company.

1year

Mr. Yutaka Atomi has long been engaged in education andresearch at universities, serving in positions including presidentof Kyorin University, and he thus possesses deep insight andabundant experience regarding university management. The
Company selected Mr. Atomi as an external auditor for his
experience and insight developed through this background toaudit the Company from an objective and fair standpoint.

1year

Mr. Toshiaki Egashira has served in positions including
representative director and president of Mitsui Sumitomo
Insurance Company, Limited, and he thus possesses abundant
operational experience and wide-ranging knowledge regarding
corporate management. The Company selected Mr. Egashiraas an external auditor for his experience and insight developed
through this background to audit the Company from an objective
and fair standpoint.

Board of Directors and the balance between execution and supervision will be necessary toestablish a more sophisticated governance system and work to improve corporate value overthe medium to long term.
Review of Discussion Standards for Board of Directors’ Meetings and Management Meetings
The discussion standards for the Board of Directors’ meetings and management meetings

External
Directors*

were reviewed to improve the effectiveness of the governance system.

MakotoNukaga●Liaison Meeting of External Officers
A liaison meeting, comprising external directors and auditors, is held once every quarter to
openly exchange views, thereby sharing necessary information and developing a common
awareness of such information.
Training for Officers

Kazuhiko
Kashikura

We provide newly appointed directors and auditors with information on Sanki Engineering,●

including our history, achievements, and future business plans as well as legal, financial, andIndependence Standards for External
Officers (Attachment for the SankiEngineering Corporate Governance
Guidelines)
https://www.sanki.co.jp/en/
corporate/governance/guideline.html*All external directors and external
auditors are independent.

Corporate Governance

4
years

Mr. Makoto Nukaga worked at the Bank of Japan for many years
and served in managerial positions in key departments in addition
to serving as director and president of Chibagin Research InstituteCorporation and president of the Organization for Workers’
Retirement Allowance Mutual Aid, etc., and he thus possesses
abundant operational experience and wide-ranging knowledge.
The Company selected Mr. Nukaga as an external director for his
experience and insight developed through this background.

not implementing each principle regarding four items were newly disclosed.

WEB

Governance

6
years

Mr. Yukiteru Yamamoto has served in positions including
representative director and president of Mitsui Life Insurance
Company Limited (currently Taiju Life Insurance Company Limited)
and was active as an executive member of the Policy Board of
the Japan Business Federation from August 2013 to March 2017,and he thus possesses abundant operational experience andwide-ranging knowledge regarding corporate management. The
Company selected Mr. Yamamoto as an external director for his
experience and insight developed through this background.

The Sanki Engineering Corporate Governance Guidelines were updated, and the reasons for
Change in Articles of Incorporation

Reasons for Selection

Governance

ESG Initiatives

Position

Socialaccounting information. During their terms in office, we continue to offer regular opportunities
for obtaining knowledge related to the supervision and auditing of management.

●● Assessing the Effectiveness of the Board of Directors
The directors conduct an annual self-assessment to verify their deliberation
process and identify possible improvements as well as to analyze and evaluate
the effectiveness of the process toward improving the board’s effectivenessand disclosing a summary of the results. In fiscal 2019, instead of using theconventional questionnaire, we conducted individual interviews by external
third parties and shared their analytical results at a Board of Directors meeting.

Shozo Fujita

External
Auditors*

YutakaAtomi●●■■Overview of FY2019 Effectiveness Assessment

Theme

Main Opinion

Improvement
related to pastissues• Improved material for the Board of Directors and stipulated when and how the
information should be provided to them
• A preliminary explanation was understood well
• Strengthened our provision of information regarding discussions in management
meetings (ongoing)

Atmosphere of
Board of Directors• Directors provided varied opinions stemming from experience and knowledge• Their skills and backgrounds were sufficiently diverse

Looking to the
future• Matters for further discussion: medium-term management plan, company direction/
medium- to long-term strategy, management issues, our role in the industry, how the
Board of Directors should operate• Enhanced monitoring functions

Corporate
governance ingeneral• Internally developed the skills of female director candidates for gender diversity in the
Board of Directors• Improved our officer training●● Appointment of Directors and Independence of External Officers

Our officers possess a wealth of work experience and knowledge as well as
deep insight and ethical understanding.
The Advisory Committee on Nomination and Remuneration considers
candidates for directors and submits the results to the Board of Directors
for deliberation. Appointments are finalized by a resolution at the generalshareholders’ meeting. We have established standards on the independenceof external officers to raise the objectivity of their oversight of management.

74

SANKI REPORT 2020

ToshiakiEgashira●●● Officer Remuneration

Sanki Engineering has established the Advisory Committee on Nomination andRemuneration under the Board of Directors, to nominate candidates for directors
and to deliberate on matters including the system and level of remuneration. In
order to strengthen the transparency and neutrality of the Committee, we revised
the composition in fiscal 2020, from a structure consisting of the president andrepresentative director and external directors to one of external directors only.
The remuneration for directors comprises, within the limits adopted by ourgeneral shareholders’ meeting, of fixed remuneration, bonus, and stock options.
Each fiscal year, we decide amounts, with due consideration for balancing eachof the following elements, in order to raise the level of motivation for maximizing
corporate value in tandem with the long-term interests of shareholders.

Composition of the Advisory
Committee on Nomination andRemuneration◦Persons who explain in thecommittee:•P resident andrepresentative director•D irectors appointed
by the president andrepresentative director
and committee members
as necessary◦Committee (report):
External directors (all)SANKI REPORT 2020

75

ESG Initiatives
Environment■■Elements and Procedures for Remuneration for Directors and Auditors (as of June 25, 2020)

Fixed
Remuneration

Bonus

Stock Options

Directors(excluding external
directors)◯◯◯
Excludingnon-executive officers

◯

◯

－

◯

◯

－

External auditors

◯

◯

－

Determined by the Board of
Directors following deliberationby the Advisory Committee on
Nomination and Remuneration
Determined through consultation
among auditors■■Remuneration for Directors and Auditors in Fiscal 2019

Category

Persons Receiving
Payment

Directors (external directors)

12 (3)

634,753 (39,600)

Auditors (external auditors)

7 (5)116,900 (39,600)◦B onus: portion linked toperformance during theperiod◦S tock options: granted
according to rank as along-term incentive

Representative Director andChairman

Representative Director andPresident

Director

Director

Director

Hirokazu Ishida

Eiji Mitsuishi

Takashi Motomatsu

Masayuki Kudo

Joined the Company in 1975.
He has many years of experiencein the division management of the
Facilities Construction Businessand Sales Administration Division.
Since assuming the post ofrepresentative director andpresident in 2015, he has been in
his current position since 2020.

Joined the Company in 1983.
He engaged in the Facilities
Construction Business formany years. In 2018 he servedin the key post of generalmanager of the Management
Planning Office. He wasappointed to his current
position in 2020.

Joined the Company in 1972. He
has many years of experiencein operation and division
management of the Facilities
Construction Business. Since 2017
he has served as general managerof the Mechanical & Electrical
Contracting Headquarters. He
also leads the Labor Safety,
Health, Quality Management &Environment Promotion Office.

Joined the Company in1976. He has many years ofexperience in the operationand division management of
the Environmental Systems
Business. Since 2014 he has
been General Manager of the
Plants & Machinery Systems
Headquarters.

Joined the Company in1985. He has served as an
officer responsible for the
Information Systems Office, theInternational Business Office,the Facility Systems Division,and the Real Estate Business
Office.

Director

Director

External Director

External Director

External Director

Joined the Company in 1982.
He amassed a wide range
of operational experience asan engineer in the Facilities
Construction Business. Thereafter,
he served as a manager
responsible for the technology
development departments.
After serving as a full-time Audit& Supervisory Board member
starting in 2016, he has been in
his current position since 2020.

Joined the Company in 1984.
He engaged in accounting
and finance-related operations
and the promotion of internal
control. He has also served asa manager responsible for theadministration departments
including general affairs andhuman resources. He currently
serves as general manager ofthe Accounting Division.

Served in positions including
representative director andpresident of Mitsui Life
Insurance Company Limited andwas also active as an executive
member of the Policy Board of
the Japan Business Federation.
Since June 2014 he has been
an external director of theCompany.

Worked at The Bank of Japanfor many years and servedin managerial positions in
key departments in addition
to director and president of
Chibagin Research InstituteCorporation. He has been
an external director of theCompany since June 2016.

Served as an executive officer
of Sumitomo Mitsui Banking
Corporation and top executives
at the same group companies.
Since 2018, he has been
an external director of theCompany.

Full-time Auditor

Full-time Auditor

External Auditor

External Auditor

External Auditor

Joined the Company in 1970.
He served in the accounting andfinance departments for many
years. In 2007, he became
general manager of Internal
Audit Office and, in 2013,
director of Sanki Kankyo Service
Co., Ltd. He has been in his
current position since 2018.

Joined the Company in 1974.
He engaged in the technical fieldof the Facilities Construction
Business. He has had experiencein department management andserved as the manager of technicaladministration departments in the
Facilities Construction Business.
He has been in his current position
since April 2020.

Became a prosecutor in 1976
and registered as a lawyer in
2011. He served in positions
including representative director
and president of The Resolution
and Collection Corporation andas a director who is an audit andsupervisory committee member ofanother company. He has been in
his current position since 2018.

Long involved in education andresearch at a university, he hasserved as president of Kyorin
University since 2010 and iscurrently its honorary president.
In 2019 he became an external
auditor of the Company.

Has served in positions includingpresident and chief executive
officer of Mitsui Sumitomo
Insurance Company, Limited. He
has been in his current position
since 2019. He concurrently
serves as a special advisor to
Mitsui Sumitomo Insurance
Company, Limited.

Tsutomu Hasegawa

Reference
Whistleblowing System
Page 78

Corporate Governance• Ensuring the Reliability of Financial Reporting
The Internal Finance Control Committee meets four times a year to conduct our
financial reporting in accordance with the internal control framework stipulated
based on the Financial Instruments Exchange Act of Japan. Moreover, we
promote the establishment and appropriate management of an internal control
system to safeguard the reliability of our financial reporting by having thecommittee deliberate on the assessment and response with respect to thefinancial risks within each department and Group company. A report is produced
in adherence with the internal control reporting system to ensure that internal
controls related to financial reporting are being exercised effectively. In the reportfor fiscal 2019, accounting auditors expressed their opinion that our financial
reports were presented in an appropriate manner in terms of all material aspects.

SANKI REPORT 2020●● Directors

Total Payment(Thousands of Yen)●● Internal Controls• Basic Policy and Systems for Internal Controls
Under its Basic Policy on Internal Control System, Sanki Engineering isdeveloping and operating a system to ensure the legality, soundness, andtransparency of its operational execution. Moreover, we have established awhistleblowing system that comprises contact points for corporate ethics ingeneral, dedicated contact points for reporting violations of the Anti-Monopoly
Act, and a system for reporting to the fulltime auditor as efforts to stringently
enforce compliance.
The Board of Directors makes decisions on matters stipulated in laws,
regulations, and the Articles of Incorporation as well as on matters related tothe execution of operations. The Management Meeting is held to ensure theeffective execution of duties in accordance with the rules for discussion andreporting. Moreover, for the free exchange of opinions, the Liaison Meetingof External Officers, consisting of external officers, is convened to exchange
necessary information and share awareness of such information.
To ensure effective auditing, the auditors attend important meetings, offer
their opinions as necessary, receive reports from accounting auditors and theInternal Audit Department, instruct that this department investigate and reporton its findings if needed, and discuss matters as required.
In addition, the full-time auditor serves as the auditor of Group companies
and seeks to ascertain the status of internal controls across the Group by
regularly exchanging opinions with the internal audit department and Group
company presidents, receiving reports from the accounting auditors, andexchanging opinions.

76◦F ixed remuneration:
rank and scope of
responsibilities

Executives of the Sanki Engineering Group (as of June 25, 2020)

Governance

External directors
Auditors (excluding
external auditors)

Composition of Officer
Remuneration

Procedure

Governance

ESG Initiatives

Category

SocialChair of the Board of Directors

Hirotoshi Fukui

Yoshio Kawabe

Yukiteru Yamamoto

Makoto Nukaga

Kazuhiko Kashikura●● Auditors

Etsuji Hitomi

Kazuo Saito

Shozo Fujita

Yutaka Atomi

Toshiaki Egashira

SANKI REPORT 2020

77

ESG Initiatives
Environment

will not be placed at a disadvantage for consulting or reporting to the hotline.
We are also distributing a corporate ethics hotline card to raise awareness of thesystem throughout the entire Group. The hotline is also available to business
partners, and the Company provides contact information.
In addition, we began operating the Fair Trade Hotline in fiscal 2016 for reportingof violations of the Anti-Monopoly Act. No violations were reported in fiscal 2018.
Since fiscal 2018, a summary of reports has been disclosed within the Group.

Thorough Compliance

Reference
Women´s Hotline
Page 63

Governanceovernance

Governance

ESG Initiatives

G

Social■■Whistleblowing System

Full-time auditor

Board of Directors
ReportReportOfficers responsible forcorporate ethics

Basic Philosophy

ReportWEB
WEB

Sanki Engineering Group Compliance Declaration, Sanki Engineering Group Conduct Standards

Secretariat (CSR Promotion Division)

ReportIf the person wants to report
External hotline(consulting attorney)

https://www.sanki.co.jp/en/csr/policy/compliance.html#etc02
Sanki Engineering Group Code of Conduct and Action Guidelines
https://www.sanki.co.jp/en/csr/policy/conduct-code.html

Harassment Consulting Office(external expert counsellor)

Corporate Ethics Hotline

Women´s Hotline

Fair Trade Hotline

Compliance Promotion System
We have established a Corporate Ethics Committee, chaired by the president,
who nominates officers responsible for corporate ethics to oversee thecommittee’s activities. In principle, it meets twice a year to review, monitor,and provide guidance with respect to compliance guidelines and action plans
for the entire Group.

Page 72■■Number of Persons Submitting Compliance Confirmation Sheets (Fiscal 2020)

Sanki Engineering(Target Employees)
Compliance confirmation sheets
concerning performance of duties*1●● Whistleblowing System

Compliance confirmation sheets*

SANKI REPORT 2020

Report and Consultation●● Compliance Confirmation Sheets from All Executives and Employees
In order to refresh the awareness of all Group executives and employees of
the responsibilities they must fulfill in their respective positions and roles,
compliance confirmation sheets covering items such as observance of theCode of Conduct and Action Guidelines, and eliminating anti-social forces, aresubmitted at the beginning of each fiscal year.

Compliance Promotion Activities
We set up the Corporate Ethics Hotline for reporting on compliance-related
issues and a Fair Trade Hotline for reporting on violations of the Anti-Monopoly
Act as well as the Women’s Hotline, which accepts consultations within andoutside the Company. The internal hotline goes to the full-time auditor and
CSR Promotion Division, while the external hotline goes to our consulting
attorney’s office. We act swiftly to resolve the issues that are reported,with due consideration for the protection of anyone seeking consultation orproviding information in accordance with the Corporate Ethics Regulations.
All of the reported information is presented to the executives responsible
for corporate ethics, and important information is reported to the Board of
Directors. In fiscal 2019, there were 13 reported incidents (10 internally and 3
externally), and all incidents were handled appropriately.
The names of individuals who report to the Corporate Ethics Hotline will behandled in secrecy by the executives responsible for corporate ethics and will
not be disclosed to others without the reporter’s prior consent. The reporter

78

Reference
Framework of the Corporate
Governance System

Thorough Compliance

The Sanki Engineering Group strives to maintain legally compliant behavior based on corporate ethics
across all aspects of its operations by upholding the Sanki Engineering Group Compliance Declaration,
the Sanki Engineering Group Code of Conduct and Action Guidelines, and the Sanki Engineering Group
Conduct Standards.

43

Group companies(Target Employees)(43)

1,978 (1,997)

2

37

(37)

448 (450)*1 Compliance confirmation sheets
concerning performance of duties are
submitted by directors and executive
officers.
*2 Individuals who have not submitted
compliance confirmation sheets areon maternity leave, receiving medical
treatment, etc.

●● Corporate Ethics Training
Sanki Engineering conducts corporate ethics training for all employees on aregular basis in order to ensure thorough compliance with the Code of
Conduct and Action Guidelines. We also hold training on the Anti- Monopoly
Act for newly assigned sales staff.
■■Results of Corporate Ethics Training (Fiscal 2019)

Theme

Code of Conduct and Action
Guidelines, and compliance with
the Anti-Monopoly Act

Compliance with the AntiMonopoly Act

TargetAll Group executive officers
and employees

Frequency and Participation (Attendance Rate)
40 sessions
2,437 employees(98.5%)*

Mid-career hires

15 employees(100%)

Newly assigned sales staff

16 employees(100%)*Follow-up training was conductedat later dates for those who had notattended.

SANKI REPORT 2020

79

ESG Initiatives
Environment●● Compliance Awareness Survey
We conduct an annual awareness survey on issues such as compliance andCSR targeting all executive officers and employees. The survey questions
include those related to harassment in the workplace, customers, andbusiness partners.
Survey results are disclosed to all Group executive officers and employees
and used to monitor and improve the effectiveness of our CSR activities andidentify human rights risks.
We noted feedback and issues concerning harassment in the results of
the questionnaire and from the current state of reports, and we are taking
action to prevent and eradicate any harassment by consistently carrying out
preventive education through corporate ethics training and division training.

Strengthening Compliance with the Anti-Monopoly Act●● Ongoing Promotion of Recurrence Prevention Measures

The following are key stepped-up measures we undertook between fiscal 2013
and fiscal 2019. Applying the results of the compliance awareness survey, we
will continue our Group-wide effort to prevent violations of the Anti- Monopoly
Act in fiscal 2020.
Policies and Manuals• Formulated the Sanki Engineering Group Compliance Declaration and Sanki EngineeringGroup Conduct Standards.
• Issued and revised the Compliance Handbook.
*1 These were the top three answers.

53%

I’m leaning toward “no” here.

4%• Resolved to establish a comprehensive, Group-wide Anti-Monopoly Act Compliance
Program at a meeting of the Board of Directors and ran/implemented the program.
• Assigned a compliance manager in each department and began supervising the process
for deciding the bid amount for public works and operating a system of advance application
and reporting when attending a meeting with any companies in the same industry.
• Introduced regular rotations for sales staff assignments.
• Established a Compliance Risk Subcommittee within the Risk Management Committee.

Q Did you know that it is a violation of the Anti-Monopoly Act forbusinesses to consult with each other in advance of public or private
works to determine prospective contractors and order amounts?
Yes, I know.

96%

No, I did not know.

2％ *2

Q Please answer all of the following that apply to your current working
environment. (Multiple answers are allowed.)
I think that personal relationships in the workplace are relatively good.

75%

It seems easy to take various kinds of leaves.

63%

Your supervisor is willing to listen to opinions and suggestions.

58%●● Compliance Audit
The Internal Audit Department conducts compliance audits and seeks tostrengthen compliance by providing guidance on legal compliance and throughmonitoring. In fiscal 2019, internal audits were carried out at 22 worksites
including 16 domestic worksites and those of 4 domestic subsidiaries and 2
overseas Group companies. In addition, to raise awareness at our construction
sites, we conduct onsite hearings with site managers to gain a better
understanding of the situation.

Anti-Bribery Efforts

Thorough Compliance42%• Clearly stipulated breaches of laws such as the Anti-Monopoly Act as grounds for

Structural Reinforcements

Q Do you think that compliance behavior (social responsibility-conscious
people) has permeated our company?

Somewhat.

• Issued and revised an Anti-Monopoly Act Compliance Manual.
disciplinary action.

Participants: all Group executive officers and employees

Yes.

Governance

Survey period: May 2020

Governance

ESG Initiatives

Excerpted Results of a Questionnaire Regarding Compliance Awareness for 2020*1

Social• Reconsidered membership in outside groups.
• Began an in-house leniency system (voluntary reporting system).
• Established the Fair Trade Hotline for reporting on violations of the Anti-Monopoly Act andsought awareness among employees.
*2 W
 e seek to develop a deeper
understanding of the Anti-Monopoly
Act by introducing examples ofviolations during Corporate Ethics
Training, held each year.

Training and Education• Submitted compliance commitment letters.
• Raised awareness of compliance-related hotlines.
• Top management visited all business bases to hold corporate ethics training sessions
through direct exchange with all Group executives and employees.
• Held training on the Anti-Monopoly Act for newly assigned sales staff and mid-careerhires.

Respecting Human Rights
Along with globalization, social demands for response to corporate humanrights issues are not only being made on employees but also on the entire
value chain of business.
The Sanki Engineering Group endeavors to understand international
standards such as the Universal Declaration of Human Rights and the Guiding
Principles on Business and Human Rights. In addition, it is working tocomply with specific items regarding human rights as stipulated in the SankiEngineering Group Code of Conduct and Action Guidelines.

WEB
Sanki Engineering Group Code of
Conduct and Action Guidelines
https://www.sanki.co.jp/en/csr/
policy/conduct-code.html

We are working to prevent corruption under the Sanki Engineering Group
Action Guidelines, which prohibits the provision of profits such as bribery
and excessive entertainment to public employees. In addition to a bribery
program as part of our corporate ethics training, we conducted training for theInternational Business Division and three overseas subsidiaries in fiscal 2019.

80

SANKI REPORT 2020

SANKI REPORT 2020

81

ESG Initiatives
Environment

SocialGovernanceRisk Management Activities

Risk Management
overnance

Basic Philosophy

Risk Management Promotion System
We set up the Risk Management Committee, chaired by a risk management
officer, to centrally manage Group-wide risks and implement an organizedresponse. The committee monitors important risks throughout the Group,
formulates a control plan, and monitors risks reported by subcommittees anddivisions. To enhance the effectiveness of our risk assessment and control,
we have set up the Risk Management Subcommittee to address specific risks
under the Risk Management Committee. In July 2019, we reorganized thesubcommittee and launched others, including the Quality Subcommittee, tocreate a 10-subcommittee system. Moreover, the Internal Audit Department
conducts regular audits to check the status of risk management at each divisionand verify the appropriateness of risk management.

President
Management Meeting
Discussion on policy torespond to important risks

ReportInternal Audit Department

ReportRoles:
Audit

MonitorConvenes:

Divisions
Risk management division
All departments, centers, divisions,business divisions, businessdepartments, branches and branch
offices, and Group companies

Report findings of deliberations

Risk Management Committee
Chairperson:
Members:

MonitorReport status

Risk management executive (president)
Management meeting constituent members and persons
nominated by the chairperson
1. Monitor important risks and formulate a control plan
2. Monitor risks reported by subcommittees and divisions
Once a quarter in principle and additionally as required

Subcommittees

ReportMonitorMonitorCommittees and Management System

Customer (credit)

Overseas

Supplier (credit)

ComplianceCorporate Ethics Committee

Legal and labor

Quality

Financial

SafetyManagement(public relations)Internal Finance Control Committee

Information security

Countermeasures

Customer credit• Analyzed the portfolio based on performance at the end of March and September

Supplier credit• Activated an alarm using bankruptcy predictions every month.
• Developed a supplier information database for use in times of natural disaster.

Operational• Set up the COVID-19 Task Force and took action for prevention.
• Implemented measures to correct overwork.

Information security• Revised social media guidelines.

Overseas• Took action to prevent the spread of COVID-19 overseas.

Compliance•	Identified department-specific risks through questionnaires and took preventive
measures.

•E nvironmental Systems
Business- Changes in market conditions- Long-term business risks◦F inancial and other risks- Customer credit risk
- Stock market fluctuations-R isk due to legal regulations, etc.
- Seasonal fluctuations inbusiness performance- Legal violations- Natural disasters(earthquakes, typhoons,climate change)- Leakage of confidential andpersonal information- System failure

Responding to Disaster Risks with a BCP■■Framework of the Risk Management System (as of June 25, 2020)

Report•P lants & Machinery Systems
Business-D eteriorating competitiveness■■Major Risk Countermeasures in Fiscal 2019

Risks

Central Disaster Countermeasures Committee◦Business operation risks•C ommon to all construction
business- Securing human resources- Increase in materials andlabor costs- Overseas business risks- Accidents and disasters
during construction- Unprofitable construction• F acilities Construction Business- Declining capital investment

Risk Management

The Sanki Engineering Group has established a Group-wide risk management system based on its
Risk Management Rules to comprehensively identify risks that pose an obstacle to conducting normal
business operations and prevent such risks from materializing, and also to minimize loss in the case thatit does occur.

◦Risks requiring an
emergency response
Challenges to business
continuity and health problems
associated with the spread of
the novel coronavirus

Governance

Each fiscal year, the Risk Management Committee identifies risks that affectbusiness activities and stipulates priority risk items for the next fiscal year.
The committee receives reports from the risk management subcommittees tomonitor risks and consider necessary countermeasures, provides instructions,and confirms the status of progress.
In fiscal 2019, the committee convened four times to review some of themonitoring indicators and prepare for more quantitative risk management,
and also to review the system to ensure that risk management operations arealigned with current conditions.
In addition, the committee discussed and responded to various issues suchas risks linked to climate change, confirmation of safety in times of disaster,and risks associated with the Olympics and Paralympics.

ESG Initiatives

G

Major Business RisksWEB

The Sanki Engineering Group’s business continuity plan (BCP) aims toensure the safety of all related persons, including employees, through the
integrated efforts of all divisions and employees. The Company has also built
a framework to contribute to customers and society through swift business
restoration in collaboration with business partners. We have sought tomaintain our system under normal conditions and clearly establish the codesof action and division of roles for times of disaster in order to ensure that
restoration activities can be implemented more promptly. To date, we haverelocated the directors’ offices from the upper floors to the lower floors toensure the functionality of the emergency response headquarters, conducteda drill on the assumption that the head office sustained damage and anotheroffice served as an alternative headquarters after a major disaster, modified
the way we operate our safety confirmation system, and expanded the use of
the disaster information sharing tool throughout the Group.
In fiscal 2019, we: 1. Handed out the initial response handbook during alarge-scale disaster, 2. Provided emergency communication training for all
Group officers and employees, 3. Considered using the Sanki Techno Centeras a backup office in the event of a large-scale disaster, and 4. Established the
COVID-19 Task Force and implemented related measures.

Annual Securities Report for the 96th
Business Term (from April 1, 2019 toMarch 31, 2020)
Business and Other Risks Section(pages 11–13) (in Japanese)
https://www.sanki.co.jp/ir/library/doc/securities_R1-4q.pdf

Initial response
handbook for
employees in theevent of a disaster

Management review of EMS and QMS
Central Safety and Health Committee
BCP drill

82

SANKI REPORT 2020

SANKI REPORT 2020

83

ESG Initiatives
Environment

SocialGovernanceIn the wake of the spread of the novel coronavirus, we launched the COVID-19 Countermeasures Project inJanuary 2020 and gradually stepped up our response. Afterward we set up the COVID-19 Task Force in April
2020 and implemented appropriate measures as the situation developed.

System• Set up the COVID-19 Task Force•	Considered and implemented measures in line with our policy based on the guidelines of the
Ministry of Land, Infrastructure, Transport and Tourism and Keidanren (Japan Business Federation)

Customers/
Society•	Consulted with customers to implement thorough safety control measures, and suspended orresumed work as necessary• Participated in the Open COVID-19 Declaration*•	Posted financial results briefing materials on the website instead of gathering in person at a venue• Held online employment briefing sessions and recruitment interviews

Business
partners•	Reviewed the concentration and diversification of purchasing that we have long been working on•	Concluded commitment line contracts to help stabilize the business of subcontractors (change
from bill payment to cash payment) and to secure funds

Employees• Implemented teleworking, sliding work hours, and teleconferences•	Kept employees informed about preventing infection and managing health, and distributed handsanitizers and masks• Provided remote training for new employees

We have formulated the Risk Management Manual for Overseas Operations
for the head office and overseas bases as well as the Manual to Ensure Safety
in Foreign Countries for overseas employees, those traveling overseas on
business, and their families, which are revised each year. In fiscal 2018, we
worked to improve our Group management system, including overseas sites,
to enable our auditors to concurrently serve as auditors of Group companies.

Initiatives to Ensure Information Security
We have established the Information Security Risk Subcommittee within
the Risk Management Committee to control information security measures
Company-wide and manage risks. In fiscal 2019, we held two subcommittee
meetings. In addition, we use checklists in a thorough assessment of
the status of information security measures during onsite inspections bysupervisors at each branch and branch office.
■■Key Information Security Measures

Type

ActionDissemination ofrules• E-learning course for all Group executive officers and employees•	Corporate ethics training, submission of compliance confirmation sheets (once a year)•	Continuously sending alerts on information security• Status review of information security countermeasures during onsite inspections (8 sites)

Information device • Encryption of information terminals• Regular inventory reviews (conducted once)
management

84

Prevention ofunauthorized use• ID and password management, and security measures for entering and exiting rooms• Confirmation using asset management tools• Preventing non-Company-owned PCs brought into the office from being connectedto the in-house network

Measures against
external threats• Antivirus measures and automatic updating of security patches (once a month)• Web filtering and countermeasures against unsolicited emails• Monitoring of illegal outbound data streams

Measures forsocial media• Instill an understanding among Group employees using guidelines• Improving the level of security regarding social media

SANKI REPORT 2020

G

WEB
Website for this declaration
https://www.gckyoto.com/
covid-2

Open COVID-19 Declaration

Risk Management Manual for
Overseas Operations◦Response rules andprocedures for the head officeand overseas bases for use
during crises overseas◦Risk to body and life, theviolation of laws, responding
to the mass media, dealing
with litigation, and so on

Promoting CSR Activities●● Promoting CSR Activities
We promote CSR activities through a Group-wide effort based on our Codeof Conduct and Action Guidelines, and deliberation and review of importantmatters concerning CSR are conducted by the Corporate Ethics Committee. In
fiscal 2019, we set up an ESG CCU to share information and exchange opinions
on ESG and SDGs once a month. Under the system, we pursue our CSR
initiatives in each phase of our value chain while ensuring communication withdiverse stakeholders and reflecting societal demands in our business activities.

◦Actions required in the event ofa terrorist attack or disaster, theprevention of damage from crimeand other risk, compliance with
anti-corruption and other laws,
personnel/labor management oflocally employed staff, religion,and other related matters

Information Security Rules andStandards◦Information Security
Management Rules◦Information System Usage
Standards◦Information Security Risk
Management Standards◦Information Security Risk
Countermeasure Standards

Management Planning Office, CSR
Promotion Division, General Affairs
and Human Resources Division,
Legal Affairs Office, Accounting
Division, R&D Center, Mechanical &Electrical Contracting Headquarters,
Machinery Systems Administration
Division, Environmental Systems
Administration Division(15 participants)

Reference
Corporate Ethics Committee
Page 72■■Key Stakeholders of the Sanki Engineering Group

Outline of Stakeholders

Main Responsibilities of the SankiEngineering Group

Major Methods of Engagement

Customers

Office buildings, factories,
airports, distribution centers,
research institutes, data centers,
hospitals, schools, etc.

We construct buildings and facilities andprovide systems and technical services for abroad range of social infrastructure projects.

•	Resolve issues for customers and society at large•	Provide construction and technical services withhigh added value•	Enhance customer satisfaction in terms of quality,
delivery, and cost•	Dialogue through sales activities andmeetings•	Websites and showrooms•	Exhibition at trade shows and exchange ofviews

Shareholders
and Investors

Number of shareholders: approx.
4,216 (as of March 31, 2020)

Sanki Engineering has approx. 60 million
shares outstanding. Financial institutions
account for about 42% of ownership,
foreign corporations for about 28%, andindividuals and others for about 17%.

•	Enhance corporate value, a stable return ofprofits and appropriate allocation of management
resources•	Conduct timely and adequate disclosure ofcorporate information•	General shareholders meeting, results
briefings, one-on-one IR interviews, andresponse to inquiries•	IR website, and SANKI REPORTBusiness
Partners

Subcontractors, generalcontractors, material/ machinery
manufacturers, building
maintenance companies, etc.

Business partners offer crucial support toGroup operations through the Subcontractor
Group system, based on relationships of trust
fostered over many years.

•	Build fair, equal, and transparent business
relationships•	Ensure occupational safety and create goodworking environments•	Respect human rights•	Dialogue through daily procurement activities•	Collaboration through the SubcontractorGroup•	Corporate Ethics Hotline

Partners

Universities, research institutions,architecture offices, etc.

Collaboration with these partners constitutes
a key element of the Group’s technologicalcapacity.

•	Pursue open innovation•	Build equal and fair relationships•	Industry-university collaboration•	Dialogue at the Open Lab

Employees

Number of employees
Consolidated: 2,501
Non-consolidated: 1,992 (as ofMarch 31, 2020)

The Group derives its competence fromthe individual abilities of its diverse humanresources characterized by the Sanki Spirit.

•	Ensure equal opportunity and fair evaluation•	Cultivate human resources, develop capabilities,
and promote diversity•	Ensure occupational safety and create goodworking environments•	Respect human rights•	Interviews with supervisors and training•	Various reporting and consulting channels•	Labor-Management Council•	Website

Local
Communities

Areas around construction sites
and offices

We develop our business activities in various
areas both in Japan and overseas.

•	Develop social infrastructure•	Pay due consideration to local communities andthe environment•	Disclose information•	Branch and branch office counters•	Briefings related to construction work•	Dialogue on contributions to society

We operate under the supervision of central
and local governments, which are also
customers of the Group.

•	Comply with laws, regulations, and administrative
guidance, and pay taxes•	Develop social infrastructure•	Contribute to local disaster prevention•	Branch and branch office counters•	Briefings and reports related to constructionwork•	Dialogue through industry associations

Manual to Ensure Safety
in Foreign Countries◦A practical guide on risk
avoidance and emergency
response for employees
working overseas

Divisions Participatingin the ESG CCU

Risk Management / CSR Management

Strengthening Risk Management in Overseas Operations*A declaration stating that for a certain
period of time, patents, utility models,designs, and copyrights will not
be asserted against any activities
solely intended to stop the spread of
COVID-19.

CSR Management
overnance

Governance■■Main Measures for Preventing the Spread of the Novel Coronavirus (as of the end of July 2020)

ESG Initiatives

Measures to Prevent the Spread of the Novel Coronavirus

Governments
andAdministrative
BodiesCentral and local governments
Water supply and drainage
disposal plants, and waste
disposal facility sites

SANKI REPORT 2020

85

ESG Initiatives
Environment

SocialGovernance

Information Disclosure Based on Disclosure Policy

Dialogue with Shareholders and Investors

Basic Philosophy
We clarified our basic approach to issues, including ensuring the rights and equal treatment of shareholders,appropriate disclosure of information and transparency, and dialogue with shareholders, in the SankiEngineering Corporate Governance Guidelines, established in December 2015. We are resolved to fulfill our
responsibilities to shareholders and investors by following these guidelines.
WEB

WEB
Medium-Term Management Plan“Century 2025” Phase 2 (FY2019–2021)
https://www.sanki.co.jp/en/
ir/library/doc/century_2025_
phase2_2019.pdf

Sanki Engineering Corporate Governance Guidelines

https://www.sanki.co.jp/en/corporate/governance/guideline.html

FY2021 Goals

Hold more IR meetings

Providing consistent, steady returns to shareholders

Ta r g e t

Ta r g e t

15 more than in FY2018

Total return ratio: 70% or more

Major Action Policy and Initiatives for FY2020
Provide return to shareholders based on theMedium-Term Management Plan

Hold IR meetings for new shareholders

FY2019 Results
IR meetings56

sessions(FY2018: 50 sessions)86

Disclosure Policy
https://www.sanki.co.jp/en/ir/
disclosure/

Dialogue with Shareholders and Investors●● Reinforce Information Transmission
We are working to improve our IR activities as part of our basic policy of reinforcing
information transmission laid out in the Medium-Term Management Plan “Century
2025” Phase 2. We will seek to increase recognition of the Sanki brand and instilla deeper understanding of the company by disclosing our ESG policy in addition to
our financial and capital policies and by creating more opportunities for dialogue withshareholders and investors to reinforce our information transmission. Furthermore,
we facilitate the effective exercise of voting rights by shareholders through efforts
such as releasing the convocation notice of shareholders’ meetings well in advanceand posting information at an early date on our corporate website, in English andJapanese.

WEB

Governanceovernance

ESG Initiatives

G

Sanki Engineering strives to disclose required corporate information in an easyto-understand, fair, speedy, timely, and appropriate manner pursuant to the
stipulations of our Disclosure Policy. We proactively disclose information beyond
legal mandates when we deem such information to be useful to shareholders
and investors, in order to ensure management transparency.

SANKI REPORT 2020

Annual dividend

Acquisition of treasurystock

95 1.95
yenmillionshares(FY2018: 60 yen)

(FY2018: 1 million shares)

Total return ratio

111.4(FY2018: 52.9%)●● Communication with Shareholders and Investors
We engage our investors by holding results briefings for analysts andinstitutional investors twice a year. In fiscal 2019, 55 individuals participated. 56
IR meetings were also held, which we convene as needed throughout the year.
We are actively increasing opportunities for dialogue with individual investors bycontinually exhibiting at IR events for individual investors and conducting surveys
to better understand their needs. We also address the needs of overseas
investors by maintaining an English language version of our corporate website.
In an effort to prevent the spread of COVID-19, we conducted our briefing on
consolidated results for fiscal 2019 by distributing reference materials on our
website instead of convening an in-person meeting.
With regard to the general meeting of shareholders, we provided early
notices on the exercise of voting rights and requested that shareholders refrainfrom attending the actual meeting. On the actual day of the meeting, we
implemented measures for preventing infection, such as by providing handdisinfectant, installing partitions to stop respiratory droplets, and reducing thenumber of seats while also limiting the number of participating directors andstaff and shortening the meeting’s duration.
●● Exhibiting at the Nikkei IR Fair 2019 for Individual Investors
In August 2019, we exhibited for the third time at the Nikkei IR Fair 2019
for individual investors. We were able to explain our businesses, financial
performance, and ESG initiatives by directly communicating with over 1,200
shareholders and Individual investors.
●● Obtained an AA Rating in the ESG/SDGs Assessment Loan Scheme%

Investor Relations Website

Sanki Engineering obtained an AA rating, the second highest on a seven-point scale,for an ESG/SDGs Assessment Syndicated Loan scheme in which the Sumitomo
Mitsui Banking Corporation extends loans based on an independent corporate
evaluation conducted by the Japan Research Institute. We will continue to actively
disclose information to increase our recognition further as a company that excels in
its initiatives and disclosure related to ESG and to realizing the SDGs.

Sanki booth at the IR fair

Sumitomo Mitsui Banking Corporation ESG/
SDGs Assessment Loan

SANKI REPORT 2020

87

ESG Initiatives

ESG Initiatives

Environment

SocialGovernance

Environment

SocialGovernance

Financial Report
and Corporate
Information

Basic Policy on Financial and Capital Management
Sanki Engineering is working to strengthen its corporate value over the medium
to long term in accordance with financial and capital policies established under
the Medium-Term Management Plan “Century 2025” Phase 2.

90 F inancial Report
98 C orporate Information,■ Financial and Capital Policies

Initiatives

Reference

Investments in the future•	Strengthen investments for future growth such as R&D, capital
investments, and education

Return of profits to stakeholders•	Set the total return ratio as targets and return profits to shareholders
in a stable and continuous manner•	Return funds to business partners by improving payment terms andother means

Improved capital efficiency•	Continuously reduce strategic shareholdings•	Review the composition of equity capital and ensure the flexibility
and maneuverability of capital policies

Overview of the Medium-Term
Management Plan

100 S hare Information

Page 28

Reference
Supply Chain Management

101 T hird-Party Opinion

Page 58

Returning Profits to Shareholders
For fiscal 2019, we paid a full-year dividend of 95 yen, up 35 yen fromthe previous year. In addition, we strived to enhance shareholder returns
and improve capital efficiency by retiring 2,000 shares of treasury stock in
August 2019 and acquiring another 1,958 shares of Company stock, worth
approximately 2.89 billion yen.

Business Locations andGroup Companies

Shareholder Return Targets(Fiscal 2019 to 2021)◦Dividend: annual dividend of
60 yen or more per share◦Treasury stock to be acquired:approximately 5 million
shares◦Total return ratio: 70% or more

■ Dividend Payments per Share

100（円）■ Year-end dividend (yen)■ Interim dividend (yen)Payout ratio (%)

60
73.8

55.5

40

40.6
20

20

10
2016

2017

35

20

15

2018

2019

（FY）

(Notes)

FY2016FY2017FY2018FY2019

30

35

60

95

Interim dividend (yen)

10

15

20

35

Year-end dividend (yen)

20

20

40

60

Payout ratio (consolidated) (%)

40.6

55.5

40.0

73.8

Total return ratio (%)

40.6

148.9

52.9

111.4

Acquisition of treasury stock(thousand shares)

Of the year-end dividend for FY2018, 20 yen
was an extra dividend.

–

3,000

1,000

1,958

Of the year-end dividend for FY2019, 25 yen
was an extra dividend.

Retirement of treasury stock(thousand shares)

–

3,000

1,000

2,000

Annual dividend (yen)

88

40.0

SANKI REPORT 2020

Of the year-end dividend for FY2016, 10 yen
was an extra dividend.
Of the interim dividend for FY2017, 5 yen
was an extra dividend.
Of the year-end dividend for FY2017, 10 yen
was an extra dividend.

89┃ Financial Report and Corporate Information ┃Financial Report

Financial Report and Corporate Information

11- year Consolidated Financial Summary（Millions of yen）

Year ended March 31,
2010

Year ended March 31,
2011

Year ended March 31,
2012

Year ended March 31,
2013

Year ended March 31,
2014Year ended March 31,
2015

Year ended March 31,
2016

Year ended March 31,
2017Year ended March 31,
2018Year ended March 31,
2019Year ended March 31,
2020

Fiscal year
Orders received

143,348

147,129

175,291

165,800

168,295

173,398

183,270

185,880

191,113217,096

194,018

Balance carried forward

77,641

72,976100,272

111,414108,219

102,019

106,388

123,756

144,712

149,495

136,163
207,684

Net sales

159,273

151,794

147,994

154,658

171,496

179,598

178,901

168,512170,157

212,314Selling, general and administrative expenses

15,41915,763

15,712

15,19915,60415,015

16,41916,526

18,466

21,046

21,436

Operating income or loss

5,027

3,843

2,525

2,391

2,818

2,951

6,509

6,012

6,593

10,637

10,674
11,224

Ordinary income or loss

5,456

4,239

2,268

2,680

3,146

3,809

8,135

6,880

7,434

11,204

Profit (loss) attributable to owners of parent*

3,141

2,124

176

△ 4,992

1,763

2,461

5,327

4,698

3,906

9,046

7,576

Cash flows from operating activities

1,294

11,554△ 2,697

9,729△ 9,403

△ 139

5,220

10,845

6,306

6,786

11,940Cash flows from investing activities△ 1,664

2,610△ 1,046△ 9,481△ 3,506

3,440

5,520

△1,644△2,510△3,775△303

Cash flows from financing activities△ 2,936△ 1,883△ 280△ 1,028△ 4,152△2,901△ 1,826△2,458

1,814△5,215△8,95532,82545,13541,09740,36723,51023,66732,501

39,18744,866

42,61245,946

Cash and cash equivalents at end of fiscal year
As of end of fiscal year under review

163,307

158,501

163,120

166,477

170,181

176,382

169,423

166,612

177,014

195,321

180,805

80,49879,833

79,662

76,932

74,91784,86984,55785,961

86,191

89,77287,364

Number of employees

2,272

2,316

2,289

2,246

2,283

2,282

2,309

2,339

2,384

2,394

2,501

Financial Report

Total assets
Net assets

Per share information
42.86

29.67

2.46

△ 71.04

26.46

38.30

83.84

73.91

63.02

150.02128.51

1,119.40

1,115.41

1,113.70

1,106.32

1,142.74

1,334.65

1,328.60

1,350.08

1,419.77

1,502.53

1,510.59

15.00

15.00

15.00

15.00

15.00

20.00

30.00

30.00

35.00

60.00

95.00

Equity ratio (%)

49.3

50.3

48.8

46.2

44.0

48.1

49.8

51.5

48.6

45.8

48.2

Return on assets (%)

3.2

2.6

1.4

1.6

1.9

2.2

4.7

4.1

4.3

6.0

6.0

Return on equity (%)

3.9

2.7

0.2

△ 6.4

2.3

3.0

6.3

5.5

4.5

10.3

8.6

Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)Other information*The revised Accounting Standard for Business Combination and other standards have been applied since fiscal 2015.
Accordingly, “Profit (loss) attributable to owners of parent,” as listed in fiscal 2015 and after, is equivalent to “Net income”
listed for the consolidated fiscal years between fiscal 2009 and fiscal 2014.

(left axis) ● Orders received● Sales(right axis) ■ Operating income■ Ordinary income■ Profit (loss) attributableto owners of parent

Orders received and sales

300,000
250,000(Millions of yen)
Profit20,000■ Change in Dividend Per Share and Consolidated Payout Ratio(left axis) ■ Annual dividend per share(right axis) ■ Consolidated payout ratio

(Yen)

100
15,000200,000
10,000580
60
80

100,000
5,000
50,000

40

40
20

0

0
-50,000-5,000-100,000

90

60

20

0

-150,000

600

80

150,000

(%)

620

2009

SANKI REPORT 2020

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 （FY）

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

0
（FY）

*The payout ratio was not calculated for fiscal 2012 since the Company reported a net loss.

-10,000

SANKI REPORT 202091┃ Financial Report and Corporate Information ┃Consolidated Balance Sheet(Millions of yen)
As of March 31, 2019

(Millions of yen)

As of March 31, 2020

Assets

As of March 31, 2019

As of March 31, 2020

¥68,286¥52,489

6,874

6,869

Liabilities and Net Assets

Current assets:

Liabilities:¥44,946

Notes and accounts receivable on completed construction contracts and other

85,24371,739Notes and accounts payable on construction contracts and other

Electronically recorded monetary claims

6,562

5,063

Short-term loans payable

Securities

2,000

2,999

Lease obligations

Inventories:
Costs on uncompleted construction contracts
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets

Income taxes payable
2,049

2,589

558

542

2,316

2,901

(0)

(17)

141,342

130,765

Noncurrent assets:
Property, plant and equipment:
42,214

42,837

Accumulated depreciation(32,840)(32,841)

Buildings and structures, net

9,373

9,996

Buildings and structures

Machinery, equipment, vehicles, and tools, furniture and fixtures
Accumulated depreciation

Lease assets

1,967

2,007

(1,601)(1,528)

365

478

3,450

3,107

712

634

Accumulated depreciation

(319)

(349)

Lease assets, net

392

284

Construction in progress

747

89

14,32913,957688

679

Total property, plant and equipment

392

189

2,510

1,505

Advances received on uncompleted construction contracts

3,395

7,493

Provision for bonuses

4,180

4,088

Provision for directors’ bonuses

242

242

Provision for warranty costs

360

411

480

50

Other

4,594

6,363

Total current liabilities

91,31779,705

5,220

3,850

Provision for loss on construction contracts

Noncurrent liabilities:
Long-term loans payable
Lease obligations
Liability for retirement benefits

280

292

3,120

3,465

Provision for directors’ retirement benefits

52

39

Provision for loss on business of subsidiaries and associates–

300

Provision for compensation for damages

190

190

Deferred tax liabilities

40

30

5,328

5,568

14,232

13,735105,549

93,440

Other
Total noncurrent liabilities
Total liabilities

Financial Report

Machinery, equipment, vehicles, and tools, furniture and fixtures, net
Land

Current liabilities:

Financial Report and Corporate Information¥ 42,612

Cash and deposits

Net assets:
Shareholders’ equity:

Intangible assets

Investments and other assets:
Investment securities
Long-term loans receivable

24,017

111

101

Asset for retirement benefits

4,411

3,407

Lease and guarantee deposits

1,479

1,462

336

626

1,264

2,372

Insurance funds
Deferred tax assets

8,105

8,105

4,181

4,181

Retained earnings

73,25074,155

Treasury stock(3,700)(4,187)

Total shareholders’ equity

81,83682,254

9,450

7,274

Accumulated other comprehensive income:Unrealized gains on available-for-sale securities

(94)

(179)

Retirement benefits asset and liability adjustments(1,652)(2,286)

Total accumulated other comprehensive income

7,704

4,807

Foreign currency translation adjustment

Other

5,559

5,379

Allowance for doubtful accounts(2,082)(1,963)

Total investments and other assets

38,96135,403

Subscription right to shares

53,97950,040Total net assets¥195,321¥180,805

Total noncurrent assets
Total assets

92

27,879

Capital stock
Capital surplus

SANKI REPORT 2020

Total liabilities and net assets

231

302

89,77287,364¥ 195,321¥180,805

SANKI REPORT 202093┃ Financial Report and Corporate Information ┃Consolidated Statement of Income and Comprehensive Income

Consolidated Statement of Changes in Net Assets(Millions of yen)

Year ended March 31, 2019Year ended March 31, 2020

¥ 210,245¥205,247

For the year ended March 31, 2019

(Millions of yen)

Net sales:
Net sales of completed construction contracts

Cost of sales of completed construction contracts

179,255

174,023

Cost of sales on real estate business and other

1,375

1,550

180,630

175,574

30,99031,224694

886

31,684

32,110

Employees’ salaries and allowances

7,058

7,580

Provision for bonuses

1,785

1,732

Provision for directors’ bonuses

242

242

Retirement benefit expenses

775

494

Depreciation

888

1,060

Other

10,297

10,324

Total selling, general and administrative expenses

21,046

21,436

10,637

10,674

Interest income

20

19

Dividends income

596

598

Other

374

419

Total nonoperating income

991

1,038

142

126

Repair expenses for construction contracts

33

148

Other

248

211

Total nonoperating expenses

424

487

11,204

11,224–274

Cost of sales:

Total cost of sales
Gross profit:
Gross profit on completed construction contracts
Gross profit on real estate business and otherTotal gross profit
Selling, general and administrative expenses:

Operating income
Nonoperating income:Nonoperating expenses:
Interest expense

Ordinary income
Extraordinary income:Gain on sales of noncurrent assets
Gain on sales of investment securities
Subsidy income
Penalty income
Total extraordinary income

1,516

477

–

100

601

–

¥2,118¥851

Extraordinary loss:
¥808

¥55

Loss on sales of noncurrent assets

62–

Loss on retirement of noncurrent assets

Impairment loss

165

68

Loss on tax purpose reduction entry of noncurrent assets–

100

Loss on sales of investment securities

–

38

–

60

Environmental expenses

178

69

Office transfer expenses

15

96

Loss on valuation of shares of subsidiaries and associates–

174

Loss on valuation of investment securities

197

–

–

300

Loss on support to subsidiaries and affiliates

379–

Provision of allowance for doubtful accounts

190–

Loss on valuation of investments in capital of subsidiaries and affiliates
Provision for loss on business of subsidiaries and associates

1,996

962

11,326

11,114

Income taxes-current

4,385

3,490

Income taxes-deferred(2,105)

46

2,279

3,537

¥ 9,046¥7,576¥ 9,046¥7,576¥–¥–¥ (2,237)¥ (2,176)

Total extraordinary losses
Profit (loss) before income taxes
Income taxes:

Total income taxes
Profit (loss)
Profit (loss) attributable to:
Owners of parent
Non-controlling interests

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital stock¥ 8,105

Capital surplus¥4,182Retained earnings¥67,844

Treasury stock
Total shareholders’ equity¥ (3,736)¥76,395(2,423)9,046(3)(1,213)

1,213(2,423)
9,046(1,191)
10
–
–

5,406
¥73,25036¥ (3,700)

5,441¥81,836(1,191)
14

(4)
3

–
¥ 8,105(1)¥4,181

Accumulated other comprehensive income
Unrealized gains onavailable-for-salesecurities
Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Foreign currencytranslation
adjustment¥11,687¥ (12)(2,237)(2,237)¥9,450Total accumulated Subscription rights toothersharescomprehensive
income¥9,616¥179

Retirement
benefits asset andliability adjustments¥ (2,058)

(81)
(81)
¥ (94)406
406¥ (1,652)(1,912)(1,912)¥7,70452
52¥231

For the year ended March 31, 2020

Total net assets¥86,191(2,423)
9,046(1,191)10––(1,860)3,581¥89,772

Financial Report

2,437
207,684

Total net sales

Financial Report and Corporate Information

2,069
212,314

Net sales of real estate business and other

Shareholders’ equity(Millions of yen)
Shareholders’ equity

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Retirement of treasury stock
Change in scope of consolidation
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Capital stock¥ 8,105

Capital surplus¥4,181Retained earnings¥73,250

Treasury stock¥ (3,700)

Total shareholders’ equity¥81,836(4,469)7,576(2,899)2,412(2,412)210–¥ 8,105–¥4,181

905¥74,155(487)¥ (4,187)(4,469)7,576(2,899)–210418¥82,254

Accumulated other comprehensive income

Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Retirement of treasury stock
Change in scope of consolidation
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period

Unrealized gains onavailable-for-salesecurities

Foreign currencytranslation adjustment

Retirement benefits
asset and liability
adjustments¥9,450¥ (94)¥ (1,652)(2,176)(2,176)¥7,274

(6)
(79)
(85)
¥ (179)

(634)
(634)
¥ (2,286)

Total accumulated
othercomprehensive
income¥7,704(6)(2,890)(2,896)¥4,807

Subscription rights
to shares

Total net assets¥231¥89,772

71
71
¥302

(4,469)7,576(2,899)–204(2,819)(2,407)¥87,364

Other comprehensive income:Unrealized gains on available-for-sale securities
Foreign currency translation adjustment

(81)

(79)

Remeasurements of defined benefit plans

406

(634)

Total other comprehensive income
Comprehensive income(1,912)(2,890)¥ 7,134¥4,686¥ 7,134¥4,686¥–¥–Comprehensive income attributable to:
Owners of parent
Non-controlling interests

94

SANKI REPORT 2020

SANKI REPORT 202095┃ Financial Report and Corporate Information ┃Consolidated Statement of Cash Flows(Millions of yen)
Year ended March 31, 2019Year ended March 31, 2020

Profit (loss) before income taxes¥11,326¥11,114

Depreciation and amortization

1,340

1,643

Impairment loss

808

Loss on retirement of noncurrent assets

165(Millions of yen)
Year ended March 31, 2019Year ended March 31, 2020

Cash flows from financing activities:

Cash flows from operating activities:

14(1,390)(1,390)55

Purchase of treasury stock(1,191)(2,899)68

Proceeds from exercise of stock options–

100

Repayments of lease obligations

Office transfer expenses

15

96Cash dividends paid

(2,423)(4,469)Environmental expenses

178

69

Net cash (used in) provided by financing activities(5,215)(8,955)

Loss on valuation of investments in capital of subsidiaries and affiliates

Loss on tax purpose reduction entry of noncurrent assets

0

–

(191)

(211)

197

–

Loss on valuation of shares of subsidiaries and associates–

174

Effect of exchange rate changes on cash and cash equivalents

(48)

(45)

Increase (decrease) in provision for loss on business of subsidiaries and associates–

300

Net decrease (increase) in cash and cash equivalents(2,254)

2,636

44,866

42,612

Loss on support to subsidiaries and affiliates

379–

Cash and cash equivalents at beginning of period

Increase in provision for compensation for damages

190–

Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation

Increase (decrease) in allowance for doubtful accounts

(21)

(28)

Increase in provision for bonuses

1,525

(91)

Increase in liability for retirement benefits

1,171

395

(9)

(13)

Decrease in provision for directors’ retirement benefits
Increase (decrease) in provision for loss on construction contracts

(578)

(429)

Interest and dividends income

(617)

(618)

Interest expense

142

126

Profit (loss) on sales of property, plant and equipment

62

(274)

(1,516)

(439)

–

60

Gain on sales of investment securities
Loss (gain) on valuation of investment securities

(601)

–

Subsidy income

–

(100)

(21,467)

15,321

Increase in notes and accounts receivable on completed construction contracts and other

(197)

(429)

18,912(16,009)

Decrease (increase) in advances received on uncompleted construction contracts

(42)

4,025

Increase in other current liabilities

124

1,480

Other

20

(398)

11,507

16,198

Increase in costs on uncompleted construction contracts
Increase in notes and accounts payable on construction contracts and other

SubtotalInterest and dividends received

615

619

Interest paid

(143)

(126)
(4,516)

Income taxes paid

(5,542)

Penalties received

601–

Payments for office transfer expenses

(62)

(48)

Payments for environmental expenses

(190)

(184)

Net cash provided by operating activities¥6,786¥11,940(16,000)

698¥42,612¥45,946

Financial Report

Penalty income

Cash and cash equivalents at end of period–

Financial Report and Corporate Information(19)

Repayments of long-term loans payable

Net decrease (increase) in short-term loans payable

Cash flows from investing activities:
Purchase of securities(19,000)

Proceeds from redemption of securities

20,200

16,100Purchase of property, plant and equipment(6,447)(1,839)Proceeds from sales of property, plant and equipment
Payments for retirement of property, plant and equipment

812
(58)

(30)

(284)

Proceeds from sales of investment securities

2,198

1,041

Execution of loan

(376)

(10)

Purchase of investment securities

Collection of loans receivable

15

20

Subsidies received–

20

Proceeds from maturity of insurance funds

296

30

Other

(84)

(136)

(3,775)(303)

Net cash used in investing activities

96

51
(599)

SANKI REPORT 2020

SANKI REPORT 202097┃ Financial Report and Corporate Information ┃Corporate Information, Business Locationsand Group Companies (as of April 1, 2020)

Corporate Information

Domestic Business Locations

Representative Offices and Group Companies Overseas

Company nameSanki Engineering Co., Ltd.

● Representative officeGroup company

Date of establishment
April 22, 1925

Hokkaido
branchofficeStated capital
8,105.18 million yen
Representative
Hirokazu Ishida, President

Hokuriku branch office
Toyota branch office

Chugoku branch office
Kyoto branch
officeIbaraki branch office

Sanki Sangyo Setsubi Co., Ltd.
Established: May 1, 1980
Capital: 20 million yen
Business areas:• Installation, relocation, removal and altering of generalequipment (production, transportation, etc.)• Electrical wiring, instrumentation work and computer
software changes

98

SANKI REPORT 2020

AEROSTRIP
Corporation
Sale of aeration systems

Chiba branch office

Kyushu branch office

Head office
Tokyo branch
Yokohama branch office

Mikawa branch
officeShikoku branch officeKansai branch
Kobe branch
officeSanki Techno Center
R&D Center
Yamato Product Center
Shizuoka branch office

Consolidated Subsidiaries
Sanki Techno Support Co., Ltd.
Established: April 1, 1980
Capital: 100 million yen
Business areas:• Design, construction, operation/management, repair andmaintenance of HVAC, plumbing and electricity work
• Energy saving diagnosis and consulting• Building IP phone systems, call center systems andnetworks

Facility design, construction,
maintenance and consulting

Kanto branch office

Offices
Branches: 3
Branch offices: 15
Training Center:1
Laboratory
Factory: 1
Head office
8-1 Akashi-cho, Chuo-ku, Tokyo

Sanki Construction Engineering(Shanghai) Co., Ltd.

Tohoku branch office

Chubu branch

Corporate Information, Business Locations and Group Companies

Principal lines of business
Facilities construction, plant and machinery
systems, real estate
Number of employees (as of March 31, 2020)
Consolidated: 2,501
Non-consolidated: 1,992

Financial Report and Corporate Information

The Sanki Engineering Group aims to build a comfortable environment for people and the Earth by leveraging“total engineering competency” in a wide range of regions and business domains. Together with our customers,
we will strive as a group to contribute to the realization of a sustainable society.

Sanki Kako Kensetsu Co., Ltd.
Established: September 1, 1980
Capital: 80 million yen
Business areas:• Design, construction, operation/management,
maintenance, upgrading and improving of waste
treatment facilities• Manufacture, sale and installation of solid-liquid
separators• Design, construction and maintenance/
management of water/wastewater treatment
facilities
Sanki Kankyo Service Co., Ltd.
Established: June 29, 1990
Capital: 50 million yen
Business areas:• Design, construction, management and work
contracting of environmental protection facilities,
including water supply and sewage facilities andwaste treatment facilities, etc.
• Operation, maintenance and management, andsale of chemical products for these facilities

Sanki Partners Co., Ltd.
Established: August 1, 1980
Capital: 10 million yen
Business areas:• Insurance agency, leasing and temporary staffing
Sanki Construction Engineering (Shanghai) Co., Ltd.
Established: July 20, 2005
Capital: 3.80 million U.S. dollars
Business areas:• Facility design, construction, maintenance and consulting
AQUACONSULT Anlagenbau GmbH
Acquired a controlling interest in September 2006
Capital: 18 thousand euro
Business areas:• Manufacture and sale of aeration systems
THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Established: May 6, 2008
Capital: 16 million baht
Business areas:• Facility design, construction, maintenance and consulting

Austria Office
AQUACONSULT
Anlagenbau GmbH
Manufacture and saleof aeration systems

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.
Facility design, construction,
maintenance and consulting

Non-consolidated Subsidiaries

Affiliate Not Accounted for by the Equity Method

Tomakomai Netsu Service Co., Ltd.
Established: July 20, 1971
Capital: 165 million yen
Business areas:• Heat supply to multi-unit housing, and operation and maintenance of cleaning
center facilities

PFI Okubo Techno Resource Co., Ltd.
Established: December 3, 2004
Capital: 10 million yen
Business areas:• Updating, maintenance, management and operation of wastewater treatment
facilities and emergency generators at the Okubo Water Purification Plant,
Saitama Prefecture
Period of business:• 3 years and 4 months for design and construction; 20 years for operation,
maintenance and management

AEROSTRIP Corporation
Acquired a controlling interest in September 2006
Capital: 100 U.S. dollars
Business areas:• Sale of aeration systems
Sendai Kankyo Hozen Co., Ltd.
Established: November 7, 2016
Capital: 100 million yen
Business areas:• Management of operation and maintenance for the renovation work for key
facilities of the Sendai Clean Center

SANKI REPORT 202099┃ Financial Report and Corporate Information ┃Share Information

Third-Party Opinion

on Nomination and Remuneration is now

Fiscal year

April 1 to March 31 of the following year

Annual general meetingof shareholders

Late June each year

Trading unit

100 shares■   O wnership Statistics

Individuals and other: 3,827
10,436 thousand shares(17.20%)Treasury stock: 1
3,026 thousand shares(4.99%)

received for CO2 reduction proposals under

As in previous fiscal years, many otherthis system has been adopted as bothcommendable actions have been reported,

KGI and KPI targets for the Group’s ESG

such as the establishment of an ESG CCU.

policy as key benchmarks for ESG-mindedmanagement. Aggregate total donations
since launch in fiscal 2010 have exceeded

Number of authorized shares

192,945,000

Number of issued shares

60,661,156

Number of shareholders

4,216

1. Advances in ESG-minded Managementcompanies can demonstrate significant

Transfer agent and special
account management institution

Sumitomo Mitsui Trust Bank, Limited 1- 4-1,
Marunouchi, Chiyoda-ku, Tokyo

ESG-minded corporate management is

progress under their ESG policy, and Sanki

essential for creating a sustainable society.

Engineering Group has done so. This year,

Stock exchange listing

Tokyo Stock Exchange

The Sanki Engineering Group has been

the Group began quantitatively reporting on

Securities code

1961

promoting this approach by upholding its

the status of its action plan under the Act for

ESG policy as a key initiative since the launch

Promoting Women’s Careers while disclosingof its “Century 2025” long-term vision.

average educational training cost per capita,

Under the Medium-Term Management Planin human resource development, andWith regard to the breach of standard

Phase 2, which began in fiscal 2019, concrete

overtime work hours, both on a consolidated

values that occurred at a waste

targets were set for each ESG policy,

basis. The Group is consistently striving toincineration facility of Sanki Engineering

further reinforcing the progress of related

improve disclosure every year.

and its Group company, the latest SANKI

Securities companies: 28
1,086 thousand shares(1.79%)■   M ajor Shareholders

Meiji Yasuda Life Insurance Company

Number of Shares Held(Thousand Shares)

5,700

Shareholding Ratio
(%)

9.89

initiatives. This is an explicit commitment

3,724

6.46

Nippon Life Insurance Company

3,365
3,038

5.84
5.27

Sanki Kyoueikai

2,796

4.85

Japan Trustee Services Bank, Ltd. (Trust account)

2,442

4.24

State Street Bank and Trust Company 505001

1,367

2.37

Sanki Engineering Employee Shareholding Association

1,228

2.13

Japan Trustee Services Bank, Ltd. (Trust account 9)

975

1.69

DFA International Small Cap Value Portfolio

965

1.67

Notes:•A
 lthough the Company holds 3,026 thousand shares of treasury stock, it is excluded from the list of major shareholders. Calculation of shareholding ratio excludes
treasury stock.
•The list covers beneficial shareholders whose shareholdings as of the end of the fiscal year under review had been confirmed by the Company.

SANKI REPORT 2020strong external recognition. I hope theGroup will continue this effort for many
years to come.

4. Breach of Standard Values at a Waste
Incineration Facility

REPORT promptly reported the facts

to implementing the plan under ESG-

systems, a sliding work hour program wasand corrective measures and adopted aminded management and a major step in

introduced to provide flexible working hours

resolute response that included reducing

practicing the integrated thinking that clearly

options that enable employees to shift either

directors’ salary and voluntarily suspending

demonstrates the Sanki Engineering Group’s

their starting or finishing times. They are

its ISO certification. Such issues canapproach to management for realizing aalso allowed to take paid leave in hourly

considerably damage public trust in asustainable society.

units, making it easier for working parents tocompany and require a steadfast effort to

While there is room for further

apply. These work style reforms have been

stringently prevent recurrence.

considering the validity of each target,

highly regarded, as evidenced by the Third

various improvements are apparent in the

Nikkei Smart Work survey, in which Sanki

result of its ESG policy. For example, supply

Engineering received 3.5 stars.

5. Challenges Ahead
Meeting the statutory requirement foron stabilizing relatively smaller suppliers
by offering payments in cash, which helps

The Master Trust Bank of Japan, Ltd. (Trust account)or 5 hectares, have been planted, earning

In terms of improvements in internal

chain management efforts have focused
Taiju Life Insurance Company Limited

20 million yen, and about 17,000 trees,

establish a sustainable supply chain.

Share Information / Third-Party Opinion

Financial institutions: 36
25,294 thousand shares(41.70%)

Other corporations: 124
3,743 thousand shares(6.17%)Name of Shareholder

2. Multifaceted Developments in Work Style Reform
Work style reform is another area in which

Foreign corporations and other: 200
17,073 thousand shares(28.15%)100

Research Expedition. A number of orders

entirely composed of external directors.

Yoshinao Kozuma
Professor Emeritus,
Sophia University

Financial Report and Corporate Information

Share Information (as of March 31, 2020)

the employment ratio of persons with
3. Tenth Anniversary of the SANKI YOU EcoContribution Point Systemdisabilities remains a major challenge. The
Value Chain Map of business processes

In the area of governance, an independent

The SANKI YOU Eco Contribution Point

is still incomplete and also needs

external director has been appointed

System, which marked its tenth anniversary

improvement. Moreover, understanding thechairperson of the board, thereby separatingin 2020, is another distinctive social

Group’s Scope 3 emissions poses anotherthe functions of supervision and business

contribution along with the dispatch of

key challenge to taking action against

execution, while the Advisory Committee

engineers to the Japanese Antarctic

climate change across the value chain.

Response to Third-Party Opinion
We are sincerely grateful for the valuable insights you have provided on the SANKI REPORT 2020.
This is the ninth fiscal year for publishing an integrated report, and we appreciate your evaluation of our advances in ESG
management and multifaceted developments in work style reforms. We will continue to strengthen these efforts and implement
concrete actions.
Taking our cue from the breach in required values at our waste incineration facility, we will reinforce our compliance educationand quality control systems. With regard to attaining the statutory employment ratio of persons with disabilities and understanding
our Scope 3 emissions, which you have pointed out over several years, we recognize these pressing issues and will strive harder toimprove the situation and disclose even more information.
We are resolved to make the best use of the SANKI REPORT to further advance our business activities and help realize asustainable society.

Takeshi Terazaki

Executive Officer and General Manager, Management Planning Office

SANKI REPORT 2020101