Supply Chain
Basic Philosophy

Sanki Engineering Group Procurement Policy

Multi-Stakeholder Policy

Sanki Engineering Group Human Rights Policy

Sanki Engineering Group Environmental Policy

https://www.sanki.co.jp/en/csr/social/scm/
https://www.sanki.co.jp/en/csr/social/human-rights/

https://www.sanki.co.jp/en/csr/governance/multistakeholder/
https://www.sanki.co.jp/en/csr/environment/management/

Building Fair, Equal, and Transparent Business Relationships⨋ Overview of Our Procurement Structure for Materials and Equipment

and Our Procurement Management System⨋ Operation of Internal Whistleblowing Hotlines

In order to prevent improper transactions, we operate a Corporate Ethics Hotline that isavailable for anyone to use. Information is provided on the Company website.

Major Components of thePartnership Building Declaration

Supply Chain⨋ Thoroughly Ensuring Fair and Equitable Transactions

We engage in fair, equitable, and transparent transactions with all business partners
in accordance with the Sanki Engineering Group Procurement Policy. Moreover,in the Multi-Stakeholder Policy, the representative director and president declares
his commitment to the Partnership Building Declaration. In the fiscal 2022 tradeenvironment shaped by marked increases in labor, raw material, and energy costs,
we strengthened risk management by appropriately reflecting costs to suppliers andpreventing violations of the Antimonopoly Act concerning the “abuse of dominantbargaining position.” Furthermore, our basic contract includes provisions on productsafety, quality control, intellectual property, legal compliance, and the exclusion of antisocial forces.

1. Fair Market Competition andTrading
2. Protection of the Global
Environment
3. C ontribution to Society throughBusiness Activity
4. Respect for Human Rights
5. Information Security RiskManagement6. Development of Partnerships

SocialThe procurement cost of materials and equipment used by Sanki Engineering
for construction work is approximately 46.0 billion yen, with domestic suppliers
representing the source for nearly all procurement.
The role of the procurement department includes contributing to profit by reducing
costs and supporting orders, building and managing procurement databases, andcollecting and disclosing information on material and equipment price trends anddelivery dates. As the prices of materials and equipment surged and delivery delays
continued due to global factors, including the COVID-19 pandemic and semiconductor
shortage, the department raised the level of coordination with construction sites,
thereby facilitating advance order placement and prompt in-house sharing of delivery
information, among other efforts that have helped prevent or mitigate procurement risks.

Procurement Policies (excerpt)

Foundation of Sustainability Management

The Sanki Engineering Group Code of Conduct and Action Guidelines stipulate that we promote free market competitionand engage in fair, equitable, and transparent transactions with all business partners. Moreover, under the Procurement
Policy, Human Rights Policy, Multi-Stakeholder Policy, and Environmental Policy, we endeavor to build trust with ourbusiness partners to jointly provide high-quality systems and services to customers.

• Co-existence and co-prosperity
across the entire supply chainand collaborations beyond scaleand affiliation- S trengthening of relationship via
the Health and Safety Cooperative
Association- O pening of the training facility for
public use and support for humanresource development• Compliance with the Act on thePromotion of Subcontracting
Small and Medium-sizedEnterprises- A ppropriate determination ofprice, and negotiations- Considerations for payment terms- N ot demanding the free transfer ofintellectual property rights- P reventing any negative impact
associated with work-style reformor other factors

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Whistleblowing System⨋ Promoting Green Procurement

As part of our environmental management, Sanki Engineering procures goods thatcomply with Japan’s Act on Promotion of Procurement of Eco-Friendly Goods andServices by the State and Other Entities (Green Purchasing Act) and confirms theaggregate result.

Major Regulation-Compliant Goods
Procured by Sanki Engineering• Lighting equipment• Transformers and condensers• HVAC equipment

SANKI REPORT 202361︱Foundation of Sustainability Management ︱Social︱Occupational Health and Safety⨋ R aising the Efficiency of Procurement Operations⨋ Training for Procurement Staff⨋ Exchange of Views with Business Partners

We visit our major business partners and hold meetings to exchange opinions. We
select the partners we visit each year according to their relative importance to ourbusiness and the monetary value of transactions. In fiscal 2022, we visited 26 equipment
and materials manufacturers and specialized construction companies to exchange
opinions. The discussions covered a wide range of topics, including sustainability
initiatives, price and delivery date information, and their requests to Sanki Engineering,which will be incorporated into future procurement activities.

Main Themes of Online Study
Sessions, Frequency, andCumulative Participation(Fiscal 2022)• Basics of procurement,
accounting, and sustainability
issues including theenvironment and human rights
Frequency: 21 sessions
Participation: 357 (100%*)• Critical thinking and selfdevelopment, communication skills
improvement, and business skills
Frequency: 40 sessions
Participation: 274 (100%*)

Total

Frequency: 61 sessions
Participation: 631 (100%*)*Attendance rate among targetemployees

Main Topics in the Opinion
Exchange Meeting (FY2022)• T rends in prices and projectdelivery schedules• Requests to distributors• T ransactions withSanki Engineering, etc.

⨋ Providing Assessment Feedback to Business Partners⨋ 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 holdseminars to enhance technical skills and thoroughly enforce quality management andsupervision of safety and health at construction sites. Moreover, we review the statusof safety and health management and offer guidance by dispatching employees to62

SANKI REPORT 2023

We established the Sanki Super Meister System to certify and commend foremen of Group
subcontractors whose superior construction techniques have significantly contributed toelevating the quality of our construction work and also the Sanki Best Partner Program
to commend subcontractors who have significantly contributed through their superior
levels of management and construction skills, and for having consecutive years of zeroaccidents. We provide subsidies designed to encourage further quality improvements tosubcontractors to which the certified foremen belong, from the standpoint of promoting
consistent contributions to quality improvements at construction sites.
⨋ I nitiatives for Maintaining and Upgrading the Technical Skills ofSubcontractors
To support subcontractors in the development of 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. We have promoted thecreation of a mechanism for enhancing technical skills based on collaboration between
Sanki Engineering and subcontractors, in which the Sanki Techno Center is also used totrain new hires and mid-career employees of subcontractors. Furthermore, as part ofour technical training program, new hires at Sanki Engineering receive guidance fromemployees of subcontractors.

P. 60

Governance

Number of Sanki Super Meister
Award Recipients• FY2021: 9• FY2022: 8
Number of Sanki Best PartnerRecipients• FY2021: 168• FY2022: 164

Awards ceremony

Technical skills training by a subcontractor⨋ P roviding Support to Stabilize the Management of Subcontractors

We revised the terms of payment to subcontractors with capital of under 40 million
yen in fiscal 2019 and switched to making all payments in cash. Additionally, we haveshortened the payment site for electronically documented payables for suppliers,
including subcontractors with capital of at least 40 million yen from 120 days to 60 days
starting in fiscal 2022. This is one of the financial and capital policies in the Medium-Term
Management Plan “Century 2025” Phase 3.

VOICE

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, assess their safety
management. We pay visits to provide them with feedback on the assessment results
and exchange information on improvements as needed to enhance their safety
management capabilities.

Social⨋ Awards Programs• CSR procurement• Sustainability initiatives

Environment

Supply Chain

Strengthening Cooperation with Business Partners*A system in which a procurement
department handles everything from pricenegotiations to ordering operations.

GSocial

We provide monthly learning and presentation opportunities for procurement staff topromote appropriate procurement activities and enhance their purchasing, negotiating,and management skills. We also strive to develop their competence and knowledge
through support as needed for the obtaining of registered qualifications for certified
procurement professionals, construction business accountants, and fundamental
information technology engineers, apart from education on fair trading and respect forhuman rights among other compliance and sustainability issues.

Procurement WEB

provide safety and health education as well as courses on obtaining qualifications and byconducting joint patrols.
In July 2022, the Sanki Health and Safety Cooperative Association held block
meetings, with the association divided into eastern (seven cooperatives) and western(four cooperatives) blocks. It also held a national conference in January 2023. These wereattended by a total of 26 employees from the Group and 31 from subcontractor groups.
Sanki Engineering directors, including our chairman and president, also attended themeetings and stressed the importance of maintaining and improving safety awarenessthroughout the Group, including business partners. Led by subcontractors directly involvedin construction, the meeting is expected to raise awareness about disaster prevention.

SFoundation of Sustainability Management

As part of our work style reform initiatives, the Procurement Division is focusing on
raising the efficiency of procurement operations in the procurement and technicaldepartments at each site of the Facility Construction Business by encouraging
the adoption of a centralized ordering method based on exchanging data withmajor business partners and with a one-stop work-sharing* system that handles
everything from price negotiations to ordering operations. In fiscal 2022, theProcurement Division widened the range of its centralized order placement andapplied the one-stop work-sharing system to more business bases, thereby further
easing workloads and improving productivity at construction sites.
Moreover, we digitized some operations by introducing online systems for
placing orders to suppliers and allowing them to issue progress billings. Group
companies began using these functions in fiscal 2022. As we had previously
moved our own billing system for suppliers to the cloud for greater convenience,
this meant that by fiscal 2022, 95% of all orders made by Sanki Engineering Co., Ltd.
were processed electronically.
We continue to promote digital transformation for more efficient procurement.

EGeneral Level of Safety Management Skills Raised
Sanki Engineering has been continuously and proactively supporting the activities of the Sanki
Health and Safety Cooperative Association across Japan. We feel that the visualization of Three as
One, a key safety practice that we place particular importance on at construction sites, has beenrealized through close cooperation between onsite workers, subcontractors, and Sanki Engineering.
In response to construction site requests, Sanki Engineering has been organizing a workshop on first
response to accidents, helping workers raise their safety management skills across the board.
Mitsuhisa Takayama

Chairman, Hokkaido Sanki Health and Safety Cooperative Association President, Pipetech, Inc.

Health and Safety Training

SANKI REPORT 202363